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, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
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)
22 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)
20 Thorndal Circle, Darien, Connecticut 06820
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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, 1996 was 6,123,235.
Transitional Small Business Disclosure Format YES NO X
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TRANSACT INTERNATIONAL INC.
FORM 10-QSB - QUARTER ENDED OCTOBER 31, 1996
INDEX
PAGE
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets
October 31, 1996 (Unaudited) and April 30, 1996 3
Statements of Operations (Unaudited)
Three and Six Months Ended October 31,
1996 and October 31, 1995 4
Statements of Cash Flows (Unaudited)
Six Months Ended October 31, 1996 and October 31, 1995 5
Notes to the Financial Statements (Unaudited) 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 9
Item 6 Exhibits and Reports on Form 8-K 9
SIGNATURE 10
2
PART I : FINANCIAL INFORMATION
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TRANSACT INTERNATIONAL INC.
BALANCE SHEETS
OCTOBER 31, APRIL 30,
1996 1996
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ASSETS (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 55,928 $ 287,986
Accounts receivable, net of allowance
for doubtful accounts of $110,000
and $92,000, respectively 1,252,873 1,021,320
Inventories 232,342 406,750
Costs and estimated earnings in
excess of billings on
incomplete contracts 325,363 329,063
Prepaid expenses and other current assets 44,180 68,263
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TOTAL CURRENT ASSETS 1,910,686 2,113,382
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PROPERTY, PLANT AND EQUIPMENT, AT COST 283,861 277,727
Less accumulated depreciation (233,373) (215,648)
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50,488 62,079
OTHER ASSETS 2,300 2,300
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TOTAL ASSETS $1,963,474 $2,177,761
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Short-term borrowings $ 150,000 $ 150,000
Accounts payable 1,249,954 1,555,119
Accrued expenses 451,427 368,311
Current portion of long-term debt 56,768 82,352
Billings in excess of costs and estimated
earnings on incomplete contracts 192,477 209,707
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TOTAL CURRENT LIABILITIES 2,100,626 2,365,489
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STOCKHOLDERS' DEFICIENCY
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 (6,184,813) (6,235,389)
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TOTAL STOCKHOLDERS' DEFICIENCY (137,152) (187,728)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $1,963,474 $2,177,761
=========== ===========
SEE NOTES TO FINANCIAL STATEMENTS.
3
TRANSACT INTERNATIONAL INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
---------------------- ---------------------
10/31/96 10/31/95 10/31/96 10/31/95
-------- -------- -------- --------
NET SALES $2,357,443 $1,862,283 $4,783,560 $3,879,383
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 1,968,248 1,758,115 4,031,636 3,435,800
Selling and
administrative 344,591 405,188 690,191 839,951
----------- ----------- ----------- -----------
2,312,839 2,163,303 4,721,827 4,275,751
----------- ----------- ----------- -----------
INCOME (LOSS) FROM
OPERATIONS 44,604 (301,020) 61,733 (396,368)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (6,836) (2,689) (11,916) (7,038)
Other income 79 256 759 2,243
----------- ----------- ----------- -----------
(6,757) (2,433) (11,157) (4,795)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 37,847 $ (303,453) $ 50,576 $ (401,163)
=========== =========== =========== ===========
NET INCOME (LOSS) PER
SHARE OF COMMON STOCK $ .01 $ (.05) $ .01 $ (.07)
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,123,235 6,123,235 6,123,235 6,123,235
=========== =========== =========== ===========
SEE NOTES TO FINANCIAL STATEMENTS.
4
TRANSACT INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
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10/31/96 10/31/95
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OPERATING ACTIVITIES:
Net income (loss) $ 50,576 $ (401,163)
Adjustments to reconcile net income
(loss) to cash (used in) provided by:
Depreciation of property, plant and
equipment 17,725 17,305
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable (231,553) 876,529
Decrease in inventories 174,408 53,988
Decrease in other current assets 24,083 1,728
(Increase) in costs and estimated
earnings in excess of billings
on incomplete contracts - net (13,530) (1,058,690)
Decrease in other assets --- 29,388
Increase (decrease) in accounts
payable and accrued expenses (222,049) 308,892
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NET CASH (USED IN) OPERATIONS (200,340) (172,023)
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INVESTING ACTIVITIES:
Capital expenditures (6,134) (6,290)
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FINANCING ACTIVITIES:
Net proceeds - short-term borrowings --- 150,000
Repayment of debt (25,584) (47,554)
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NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (25,584) 102,446
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NET DECREASE IN CASH (232,058) (75,867)
CASH, BEGINNING OF PERIOD 287,986 140,950
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CASH, END OF PERIOD $ 55,928 $ 65,083
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 11,916 $ 7,038
Income taxes --- ---
SEE NOTES TO FINANCIAL STATEMENTS.
5
TRANSACT INTERNATIONAL INC.
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
1. The accompanying financial statements have been prepared assuming that
Transact International Inc. (the "Company") will continue as a going
concern. The Company's ability to continue as a going concern is
uncertain based on the matters discussed in the next three sentences.
The Company has a stockholders' deficiency and working capital deficiency
of $137,152 and $189,940, respectively, at October 31, 1996. The
Company's sales backlog is $3.8 million at October 31, 1996 and the
Company is seeking additional orders and exploring the sale or licensing
of certain product lines that would enable the Company to continue as a
going concern. However, there is no assurance that the Company will be
successful in attaining additional profitable orders or in selling or
licensing certain product lines.
The balance sheet as of October 31, 1996, the statements of operations
for the three and six months ended October 31, 1996 and 1995 and the
statements of cash flows for the six months ended October 31, 1996 and
1995 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, 1996 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, 1996
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, 1996 are not necessarily indicative of
those for a full fiscal year.
2. Inventories consist of raw materials and manufacturing supplies at
October 31, 1996 and April 30, 1996.
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 provision for income taxes in the three and six month
periods ended October 31, 1996, as the Company utilized its available
operating loss carryovers.
There was no benefit for income taxes in the three and six month periods
ended October 31, 1996 and 1995, 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 $6,100,000 and
$104,000 respectively, expiring in 1997 through 2010.
6
The tax effects of temporary differences giving rise to the Company's
deferred tax assets at October 31, 1996 are as follows:
Net operating loss carryforward $2,250,000
Investment tax credit carryforward 104,000
Other reserves and liabilities 128,000
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2,482,000
Valuation allowance 2,482,000
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$ ---
==========
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, 1996 to record a deferred tax asset. As a result, for
financial reporting purposes, deferred tax assets are fully reduced by a
valuation allowance.
5. The Company's bank extended the maturity of its $150,000 borrowing until
January 15, 1997. The Company will attempt to develop an extension and/or
repayment plan acceptable to the bank prior to January 15, 1997.
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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, 1996 increased $495,160
(26.6%) and $904,177 (23.3%), respectively from the comparable periods last
year. Sales from ramp equipment decreased in 1996 from 1995 but such decrease
was more than offset by increased sales of transfer balls of $649,202 and
$1,090,976 for the three and six months ended October 31, 1996 respectively.
Gross profit percentages for the three and six months ended October 31, 1996
and 1995 were 16.5%, 15.7%, 5.6% and 11.4% respectively. The increase in
gross margins in 1996 were primarily due to (i) an increase in sales of
transfer balls which have a higher gross profit percentage than projects and
ramp equipment, 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.
For the three and six months ended October 31, 1996 the Company reduced its
selling and administrative expenses $60,597 and $149,760, respectively,
primarily compensation and employee benefit costs.
The Company's sales backlog as of October 31, 1996 is approximately $3.8
million. This compares to a $4.9 million backlog at October 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES:
During the six months ended October 31, 1996, the Company used approximately
$200,000 of cash in its operations, primarily resulting from an increase in
accounts receivable and a decrease in accounts payable, net of a decrease in
inventories. At October 31, 1996 the Company has a working capital deficiency
of $189,940.
The Company's ability to continue in business is dependent upon its ability to
increase profitability and/or sell or license certain product lines. The
Company's sales backlog is $3.8 million at October 31, 1996 and the Company is
seeking additional orders and exploring the sale or license of certain product
lines that would enable the Company to continue as a going concern. However,
there is no assurance that the Company will be successful in attaining
additional profitable orders or in selling or licensing certain product lines.
8
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 1996 Annual Meeting of Shareholders was held on
October 9, 1996.
(b) The Board of Directors currently consists of the four
nominees listed below.
(c) The following matter was 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
---- --- --------
Frank B. Carder 5,311,159 129,843
Bruno S. Frassetto 5,311,559 129,443
John E. McConnaughy, Jr. 5,315,559 125,443
Randall Sweeney 5,315,264 125,738
(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
9
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
Date: December 11, 1996 /s/ Bruno S. Frassetto
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Bruno S. Frassetto
President and Acting Chief Financial
Officer
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