UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended October 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-8422
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TRANSACT INTERNATIONAL INC.
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(Exact name of small business issuer as specified in its charter)
CONNECTICUT 06-0732124
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
20 THORNDAL CIRCLE, DARIEN, CONNECTICUT 06820
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(Address of principal executive offices)
(203) 656-0777
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(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for
such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES x NO
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of November 15, 1995 was 6,123,235.
Transitional Small Business Disclosure Format YES NO x
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1
TRANSACT INTERNATIONAL INC.
FORM 10 QSB - Quarter Ended October 31, 1995
Index
PAGE
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets
October 31, 1995 (Unaudited) and April 30, 1995 3
Statements of Operations (Unaudited)
Three and Six Months Ended October 31, 1995 and
October 31, 1994 4
Statements of Cash Flows (Unaudited)
Six Months Ended October 31, 1995 and October 31, 1994 5
Notes to the Financial Statements (Unaudited) 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 8
SIGNATURES 9
2
PART I : FINANCIAL INFORMATION
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TRANSACT INTERNATIONAL INC.
BALANCE SHEETS
OCTOBER APRIL
31, 30,
1995 1995
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ASSETS (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 65,083 $ 140,950
Accounts receivable, net of allowance for
doubtful accounts of $72,500 and $40,000
respectively 932,911 1,809,440
Inventories 271,440 325,428
Costs and estimated earnings in excess of
billings on incomplete contracts 567,124 135,710
Prepaid expenses and other current assets 89,145 90,873
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TOTAL CURRENT ASSETS 1,925,703 2,502,401
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PROPERTY, PLANT AND EQUIPMENT, at cost 243,470 282,715
Less accumulated depreciation (192,259) (220,489)
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51,211 62,226
OTHER ASSETS 8,300 37,688
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TOTAL ASSETS $1,985,214 $2,602,315
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 150,000 $ -
Accounts payable 1,031,296 649,894
Accrued expenses 438,371 510,881
Current portion of long-term debt 111,283 135,137
Billings in excess of costs and estimated
earnings on incomplete contracts 26,041 653,317
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TOTAL CURRENT LIABILITIES 1,756,991 1,949,229
LONG-TERM DEBT 26,070 49,770
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TOTAL LIABILITIES 1,783,061 1,998,999
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STOCKHOLDERS' EQUITY
Preferred stock, no par value, authorized
2,000,000 shares, none issued - -
Common stock, no par value, authorized
12,000,000 shares, issued 6,201,735 852,541 852,541
Additional paid-in capital 5,224,726 5,224,726
Treasury stock, at cost: 78,500 shares (29,606) (29,606)
Deficit (5,845,508) (5,444,345)
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TOTAL STOCKHOLDERS' EQUITY 202,153 603,316
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 1,985,214 2,602,315
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SEE NOTES TO FINANCIAL STATEMENTS.
3
TRANSACT INTERNATIONAL INC.
STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
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10/31/95 10/31/94 10/31/95 10/31/94
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NET SALES $1,862,283 $2,218,721 $3,879,383 $4,093,941
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COSTS AND EXPENSES:
Cost of sales 1,758,115 1,840,856 3,435,800 3,429,685
Selling and administrative 405,188 479,499 839,951 932,975
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2,163,303 2,320,355 4,275,751 4,362,660
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LOSS FROM OPERATIONS (301,020) (101,634) (396,368) (268,719)
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OTHER INCOME (EXPENSE):
Interest expense (2,689) (2,584) (7,038) (9,169)
Other income 256 1,955 2,243 4,580
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(2,433) (629) (4,795) (4,589)
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NET LOSS $ (303,453) $ (102,263) $ (401,163) $ (273,308)
========== ========== ========== ==========
NET LOSS PER SHARE
OF COMMON STOCK $ (0.05) $ (0.02) $ (0.07) $ (0.05)
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,201,735 6,093,235 6,201,735 6,093,235
========== ========== ========== ==========
SEE NOTES TO FINANCIAL STATEMENTS.
4
TRANSACT INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
10/31/95 10/31/94
OPERATING ACTIVITIES:
Net loss $(401,163) $(273,308)
Adjustments to reconcile net loss to cash
(used in) provided by :
Depreciation of property, plant and equipment 17,305 16,831
Changes in assets and liabilities :
Decrease in accounts receivable 876,529 191,851
Decrease (Increase) in inventories 53,988 (98,589)
Decrease in other current assets 1,728 1,811
(Increase) decrease in costs and estimated
earnings in excess of billings on
incomplete contracts - net (1,058,690) 130,601
Decrease in other assets 29,388 25,059
Increase in accounts payable and accrued
expenses 308,892 258,083
NET CASH (USED IN) PROVIDED BY OPERATIONS (172,023) 252,339
INVESTING ACTIVITIES:
Capital expenditures (6,290) (26,977)
FINANCING ACTIVITIES:
Net proceeds - short-term borrowings 150,000 50,000
Repayment of debt (47,554) (84,139)
NET CASH PROVIDED BY (USED IN) FINANCING 102,446 (34,139)
NET (DECREASE) INCREASE IN CASH (75,867) 191,223
CASH, BEGINNING OF PERIOD 140,950 5,533
CASH, END OF PERIOD $ 65,083 $ 196,756
SUPPLEMENTAL CASH FLOW INFORMATION :
Cash paid during the year for:
Interest $ 7,038 $ 9,169
Income taxes - -
SEE NOTES TO FINANCIAL STATEMENTS.
5
TRANSACT INTERNATIONAL INC.
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
1. The balance sheet as of October 31, 1995, the statements of operations
for the three and six months ended October 31, 1995 and 1994 and the
statements of cash flows for the six months ended October 31, 1995 and
1994 have been prepared by the Company, without audit. In the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, the
results of operations and cash flows at October 31, 1995 and all periods
presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's April 30, 1995
annual report to stockholders. Seasonality is not a major factor in the
Company's operations. The results of operations for the three and six
month periods ended October 31, 1995 are not necessarily indicative of
those for a full fiscal year.
2. Inventories consist of raw materials and manufacturing supplies at
October 31, 1995 and April 30, 1995.
3. Amounts per share have been computed using the weighted average number
of common shares outstanding during each period. No effect has been
given to shares issuable pursuant to outstanding options as their effect
would be antidilutive.
4. There was no benefit for income taxes in the three and six month periods
ended October 31, 1995 and 1994, as the loss generated cannot be carried
back to offset income in prior years.
The Company has operating loss carryovers and investment tax credit
carryforwards for tax return purposes of approximately $5,600,000 and
$104,000 respectively, expiring in 1996 through 2009.
The tax effects of temporary differences giving rise to the Company's
deferred tax assets at October 31, 1995 are as follows :
Net operating loss carryforward $2,170,000
Investment tax credit carryforward 104,000
Other reserves and liabilities 153,000
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2,427,000
Valuation allowance 2,427,000
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$ ---
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Due to the Company's cumulative losses, management does not consider
that enough support to overcome the "more likely than not" criteria
existed at October 31, 1995 to record a deferred tax asset. As a result,
for financial reporting purposes, deferred tax assets are fully reduced
by a valuation allowance.
5. As of October 31, 1995 the Company was in default of the debt to worth
covenant in its line of credit agreement with its bank. The bank waived
this default.
6
TRANSACT INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Sales for the three and six months ended October 31, 1995 decreased 16.1%
and 5.2% respectively from the comparable periods of last year. Revenue
from sales of transfer balls and spare parts for the three months ended
October 31, 1995 compared to 1994 declined approximately $780,000 and
$64,000 respectively, which was partially offset by an increase in project
revenues of approximately $452,600. Gross profit percentages for the three
and six months ended October 31, 1995 and 1994 were 5.6%, 11.0%, 17.0% and
16.2% respectively. The decrease in gross margins in 1995 were primarily
due to (i) a decline in sales of transfer balls and spare parts which have
a higher gross profit percentage than projects, and (ii) cost overruns in
the three months ended October 31, 1995 for a project that represented
approximately 27% of such revenues. This project was completed in November
1995.
The Company reduced its selling and administrative expenses, primarily
payroll and related costs.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's working capital decreased $385,460 in the first six months of
fiscal 1996. The Company's backlog at October 31, 1995 was approximately
$4.9 million. The Company is exploring various ways to obtain additional
working capital during the second half of 1996 in order to meet its future
financing needs. This can be accomplished by profitable operations, or the
sale of certain product lines. Though the current backlog is good and there
is interested parties exploring the purchase of certain product lines there
is no assurance that the Company will obtain additional working capital
during the second half of 1996. It is the Company's practice to have its
subcontractors subject to the same payment terms as the Company has with its
customer. Thus portions of the Company's sales contracts are financed by its
subcontractors and not the Company.
7
PART II: OTHER INFORMATION
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TRANSACT INTERNATIONAL INC.
Item 4. Submission of Matters to a Vote of Security Holders
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(a) The 1995 Annual Meeting of Shareholders was held on October
11, 1995.
(b) John K. McQuade withdrew as a nominee for election to the
Board of Directors prior to the Annual Meeting of Shareholders. The Board
of Directors currently consists of the five nominees listed below.
(c) The following matters were voted upon at the meeting and the
numbers of votes cast for, against, abstained or withheld, are as follows:
Election of the following individuals to the Board of Directors:
NAME FOR WITHHELD
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Frank B. Carder 5,199,783 102,154
Axel Coelln 5,186,963 114,974
Bruno S. Frassetto 5,199,783 102,154
John E. McConnaughy, Jr. 5,201,383 100,554
Randall Sweeney 5,202,483 99,454
Appointment of Deloitte & Touche LLP as independent auditors for
the year 1996: 5,259,301 for, 35,604 against, 7,032 abstained.
(d) Not applicable.
Item 6. EXHIBITS AND REPORTS OF FORM 8-K.
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(a) Exhibits - 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSACT INTERNATIONAL INC.
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Registrant
/s/ BRUNO S. FRASSETTO
DATE: DECEMBER 12, 1995 ---------------------------------------
----------------------- BRUNO S. FRASSETTO
President
/s/ AXEL COELLN
DATE: DECEMBER 12, 1995 ---------------------------------------
------------------------ AXEL COELLN
Executive Vice President
(Chief Financial and Accounting Officer)
9