April 27, 2000
TRANSFORMATION PROCESSING INC (TPII.OB)
Quarterly Report (SEC form 10QSB)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the Company's first quarter ended unaudited financial statements and notes thereto dated October 31, 1999 and 1998.
FINANCIAL CONDITION
The following is a discussion of the material changes in financial condition from July 31, 1999 to October 31, 1999.
Current assets at October 31, 1999 were $0 as compared to $33,949 at July 31, 1999. The basis for this decrease in current assets is as follows. Accounts receivable totaled $0 at October 31, 1999 as compared to $33,949 at July 31. The decrease was the result of the Company's aggressive collection of outstanding receivables as of the year end and a discontinuation of revenue generation in the quarter.
The Company recorded material changes to Accounts payable and accrued expenses. Accounts payable at October 31, 1999 was $895,166 as compared to $1,023,028 at July 31, 1999. The decrease is due to the Company's repayment of certain Accounts payable and accrued expenses.
Deficit accumulated through October 31, 1999 totaled $(9,884,241) as compared to $(7,812,254) at October 31, 1998. The discussion of losses incurred for the periods are outlined in the Results of Operations below.
RESULTS OF OPERATIONS
The following is a discussion of the material change in results of operations for the three-month periods ending October 31, 1999 and 1998.
NET LOSSES
For the quarters ended October 31, 1999 and 1998, the Company incurred net losses of $141,252 and $727,165, respectively. Explanations of these results are set forth below. The Company expects to continue to incur operating losses until such time that the Company is acquired or operations are ceased.
REVENUE
For the quarter ended October 31, 1999 the Company recorded revenue of $0 as compared to $191,069 for the quarter ended October 31, 1998. During the period ended October 31, 1999, the Company had no revenue as it had ceased operations in August 1999. Conversion Services, the Company's core business accounted for $0 of gross revenue for the three-month period ended October 31, 1999, as compared to $39,558 for the same period in 1998. GroupWare accounted for $0 of gross revenue for the three-month period ended October 31, 1999, as compared to $83,390 for the same period in 1998. Year 2000 accounted for $0 of gross revenue for the three-month period ended October 31, 1999 as compared to $90,276 for the same period in 1998.
EXPENSES
For the quarters ended October 31, 1999 and 1998, cost of consulting services accounted for $0 and $16,392, respectively. During the period ended October 31, 1999, the Company had no cost of consulting services as it had ceased operations in August 1999. Cost of software transformation services accounted for $0 of total expenses for the quarter ended October 31, 1999. Comparatively, the Company spent $151,433 for the quarter ended October 31, 1998.
Software development accounted for $0 of total expenses for the quarter ended October 31, 1999. Comparatively, the Company spent $110,292 for the quarter in 1998.
General and administrative expense accounted for $141,252 of expenses for the quarter ended October 31, 1999. Comparatively, the Company spent $475,382 for the quarter in 1998. The Company's general and administrative expenses consisted primarily of salaries, rent, consulting fees, advertising and legal costs associated with running a publicly traded company.
General and administrative
General and administrative costs consist of management and administrative staff, professional services, office and occupancy costs. Significant costs are attributed to the Company becoming a public company. This status will increase audit and legal costs significantly. In relation to the Company becoming a public company, the cost of corporate relations will also increase as quarterly reports and other investor information is required.
Liquidity and Capital Resources
The Company has funded its activities through October 31, 1999 primarily from the net proceeds of private placement of its securities and, to a lesser extent, from cash flow from operations.
At October 31, 1999, the Company had an accumulated deficit of ($9,884,241), current assets of $0 and current liabilities of $905,326. The Company did not incur any additional long-term debt. The company has funded its activities to October 31, 1999 primarily through private placements of securities and the issuance of convertible debentures. A significant portion of the total liabilities consists of convertible debt previously issued by the Company to raise capital. The Company will continue to raise capital through these vehicles to fund operating activities and other capital requirements. Failure to obtain such equity capital could have a material adverse impact on the Company. There can be no assurance that equity capital will be available to the Company on acceptable terms or at all.
The Company has no current arrangements with respect to, or sources of, additional financing, and it is not contemplated that its existing stockholders will provide any portion of the Company's future financing requirements. There can be no assurance that any additional financing will be available to the Company on acceptable terms, or at all. The inability of the Company to obtain financing when needed will have a material adverse effect on the Company.
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