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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the Transition period from to
Commission File Number 0-8693
TransNet Corporation
(Exact name of registrant as specified in its charter)
Delaware 22-1892295
(State of other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
45 Columbia Road, Branchburg, New Jersey 08876-3576
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 908-253-0500
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Indicated by check mark whether the registrant [1] has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and [2] has been subject to such
filing requirements for the past ninety days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this From 10-K or in any amendment to
this Form 10-K.
[ ]
The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant was approximately $23,835,498 on
September 29, 1995 based upon the closing sales price on the NASDAQ System as of
said date.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
The number of shares of the registrant's common stock outstanding on
September 29, 1995 was 5,216,804 shares (exclusive of Treasury shares).
PART I
ITEM 1. BUSINESS
TransNet Corporation ("TransNet" or the "Corporation") was incorporated in
the State of Delaware in 1969. TransNet, a computer dealer, is engaged in the
sale and technical support and service of local area networks and personal
computer systems and peripheral equipment, software, and supplies. The sale of
products and the promotion of technical services, the primary focus of the
Corporation, are conducted through its own sales and service departments. In
addition to its principal business activities, the Corporation operates one
retail computer store. As used herein, the term "Corporation" shall refer to
TransNet and where the context requires, shall include TransNet and its
subsidiary.
Description of Business
Products, Sources, and Markets: The sale of computer and related equipment
for local area networks ("LAN's") and personal computers ("PC's") accounted for
the significant portion of the Corporation's revenues. The principal markets
for the Corporation's products are commercial, governmental, educational, and
individual customers. These markets are reached by direct sales conducted
through the corporate sales department based in Branchburg, New Jersey. The
retail market, which is primarily comprised of small businesses, individual
customers, and educational users, is reached through the TransNet Computer Store
located in Lebanon, New Jersey.
The Corporation is selective in choosing the products that it markets and
its product mix is geared primarily to the requirements of its business
customers. The products sold by the Corporation include business and personal
desktop computer systems manufactured by International Business Machines
("IBM"), Apple Computer, Inc. ("Apple"), Compaq Computer Corporation ("Compaq"),
NEC Technologies, Inc. ("NEC"), AST Research ("AST"), Hewlett Packard Company
("Hewlett Packard"), Sun Microsystems, Inc. ("Sun") and Toshiba American
Information Systems, Inc. ("Toshiba"); related peripheral products such as
network products of Compaq, Novell, Inc. ("Novell"), and Banyan Systems, Inc.
("Banyan"); selected software products; wireless communication products; and
supplies produced by other manufacturers. The Corporation does not manufacture
or produce any of the items it markets.
The Corporation is currently an authorized dealer for Apple, AST, Compaq,
Hewlett Packard, IBM, NEC, Sun Microsystems, and Toshiba, Lotus Development
Corporation ("Lotus"), Microsoft Corporation ("Microsoft"), Banyan Systems, Inc.
("Banyan"), Novell, and 3COM. The Corporation recently received dealer
authorization as an Airdata solutions provider for AT&T wireless services. In
addition, the Corporation offers a variety of products manufactured by other
companies including Okidata, and Hayes Microcomputer Products, Inc.
Occasionally, the Corporation will order specific products to satisfy a
particular customer requirement. The Corporation evaluates its product line and
new products internally and through discussions with its vendors and customers.
Software sold by the Corporation includes software designed for general
business applications as well as specialized applications such as research,
pharmaceuticals, and education; software for desktop publishing; integrated
packages; and entertainment software, such as video games.
The Corporation maintains an inventory of its product line to provide
shipments to customers. Back orders are insignificant. Shipments are made from
the Corporation's warehouse in Branchburg, New Jersey primarily through common
carriers.
Customers of the retail store take delivery upon purchase.
The marketing of computers is generally not seasonal in nature, although
retail sales may increase in the Christmas holiday season.
Technical Support and Service: The Corporation provides a wide variety of
network services, personal computer support, repair and standard equipment
maintenance. These services include LAN and PC hardware support, systems
integration services, help desk services, asset management, relocation services,
and installation or installation coordination. The Corporation's staff of
specially trained system engineers and service technicians provide on-site or
on-call support for file servers, personal computers, laptop computers, printer
and other peripheral equipment. The Corporation employs experienced technicians
to whom it provides authorized manufacturer training on an on-going basis.
TransNet is an authorized service dealer for the following manufacturers: Apple,
AST, Banyan, Compaq, Dell, Epson, Hewlett Packard, IBM, NEC, Novell, and Sun.
In addition to the above-referenced services, the Corporation's in-house
technical staff performs system configurations to customize computers to the
customers' specifications. The Corporation also provides authorized warranty
service on the equipment it sells.
The Corporation's technical services are available to business and
individual customers located within 100 miles of the Corporation's Branchburg,
New Jersey office. Through a variety of alternatives, the Corporation offers
repair or maintenance service at the customer site or on the Corporation's
premises. Maintenance and service contracts are offered to maintain and/or
repair computer hardware. Technical support and service contracts are offered
on an annual basis and are available for a variety of services related to
products marketed by the Corporation. In connection with its "TechNet" program,
pursuant to which the Corporation assigns service personnel to the customer's
location on a full-time basis, the Corporation has entered into individual
agreements with several large corporate customers to provide support and repair
and maintenance services. These agreements usually are for terms of one or two
years and contain provisions allowing for termination prior to the expiration of
the agreements. Although the agreements contain renewal terms, there is no
assurance that the agreements will be renewed.
Repair and maintenance services are also available on a "time and
materials" basis. The repair services usually consist of diagnosing and
identifying malfunctions in computer hardware systems and replacing any
defective circuit boards or modules. The defective items are generally
repaired by in-house bench technicians or returned to the manufacturer for
repair or replacement.
The Corporation also operates a "walk-in/while-you-wait" repair center at
its Lebanon, New Jersey computer store.
In addition to servicing its own customers within its service area, the
Corporation has been selected as a member of the Intelligent Systems Group
("ISG"), a group of dealers selected from Intelligent Electronics dealers. ISG
members provide service to customers of other ISG members in instances in which
a customer has locations outside the dealer's respective service areas, but
within an ISG member's geographic area. Through this arrangement, TransNet
can also assure its customers quality technical service at customer locations
nationwide.
Service operations are not a material source of revenues, although they
contribute to profits, as discussed in "Management's Discussion and Analysis."
Training: The Corporation established a Training Center at its
headquarters, which provides training at the Center or at the customer site.
The Corporation offers comprehensive training on hardware and software,
including a wide variety of DOS, Windows, Macintosh and UNIX systems and network
applications, operation, and maintenance. The Center has its own dedicated
network and each instructor is certified to teach the classes. The
Corporation's Training Center is an Apple Computer authorized training center
and is also authorized for training on all Microsoft, Lotus, Quark, FrameMaker
and Macromind products. The training activities of the Corporation are not a
significant source of revenues.
Suppliers: In July 1990, in order to reduce its costs for computer and
related equipment, the Corporation entered into a buying agreement with
Connecting Point of America, Inc., a subsidiary of Intelligent Electronics, one
of the largest computer aggregators in the United States. Intelligent
Electronics recently reorganized its structure and the Corporation's current
agreement is with the Intelligent Systems Group. Under the agreement, the
Corporation is able to purchase equipment of various manufacturers at discounts
currently unavailable to it through other avenues. The agreement provides that
the Corporation may terminate the arrangement upon sixty days notice. During
fiscal 1995, the majority of the revenues generated by the Corporation from
product sales were attributable to products purchased by the Corporation from
Intelligent Electronics pursuant to the Agreement. The balance of the
Corporation's product sales were attributable to products purchased from a
variety of sources on an as needed order basis. Management fully anticipates
that Intelligent Electronics will be a major supplier during fiscal 1996.
Customers: The majority of the Corporation's corporate customers are
commercial users located in the New Jersey - New York City metropolitan area.
During fiscal 1995 and 1994, one customer accounted for approximately 34%
and 17%, respectively of the Corporation's revenues. Such customer accounted
for 11% of the Corporation's revenues in fiscal 1993. No other customer
accounted for more than 10% of the Corporation's revenues in fiscal 1995.
Competition: The sale and service of personal computer systems is highly
competitive and may be affected by rapid changes in technology and spending
habits in both the business and institutional sectors. The Corporation is in
direct competition with any business which is engaged in the sale and technical
support and service of networks, personal computers and related peripherals.
Management believes that the increasing complexity of personal computer systems,
the use of personal computers in the workplace and the widespread utilization of
personal computer networks have created an environment in which commercial
customers require significant levels of sophisticated support services such as
those provided by the Corporation. Management believes that TransNet's ability
to combine competitive pricing with sophisticated support services allows it to
compete effectively against a wide variety of alternative microcomputer sales
and distribution channels, including independent dealers, direct mail and
telemarketing, superstores and direct sales by manufacturers (including some of
its own suppliers), and with respect to the retail sector, the Corporation
competes with department stores and retail chains. The Corporation competes
with numerous larger and longer established companies possessing substantially
greater financial resources and substantially larger administrative, technical,
marketing and servicing staffs, facilities and equipment.
Technological advances occur rapidly in computer technology and new
products are often announced prior to availability, sometimes creating demand
exceeding manufacturers' expectations and thereby resulting in product
shortages. When this occurs, resulting product constraints intensify
competition, depress revenues because customers demand the new product, and
increase order backlogs. In the Corporation's experience, these backlogs have
been immaterial.
In the past several years, there have been frequent reductions in the price
of computers. As a result, competition has increased and the Corporation lowered
its prices to remain competitive. In addition, businesses able to purchase in
larger volume than the Corporation have received higher discounts from
manufacturers than the Corporation. These factors have resulted in a lower
profit margin on the Corporation's equipment sales. As a result of its buying
agreement with Intelligent Electronics, the Corporation is able to purchase
equipment at discounts otherwise unavailable to it, enabling the Corporation to
be more price competitive. In a cost-effective marketing approach, the
Corporation now targets larger customers with more diversified product needs for
its marketing efforts in order to sell a greater number and variety of products
and services at one or a limited number of locations, thereby improving its
gross profit margins.
The Corporation does not believe that it is a significant factor in any of
its fields of activity.
Trademarks: Other than the trademark of its name, TransNet holds no
patents or trademarks.
Employees: As of September 26, 1995, the Corporation employed 131
full-time and one part-time employee. None of its employees are subject to
collective bargaining agreements.
ITEM 2. PROPERTIES
The Corporation's executive, administrative, corporate sales offices, and
service center are located in Branchburg, New Jersey, where the Corporation
leases a building of approximately 21,000 square feet. This "net-net" lease,
which currently provides for an approximately $13,700 monthly rental, expires in
February 1996, but provides the Corporation with three five-year renewal
options. The building is leased from W Realty, a partnership consisting of
John J. Wilk, Chairman of the Board and Raymond J. Rekuc, a Director, at terms
which management believes are as favorable as available from unaffiliated third
parties.
The Corporation's Lebanon, New Jersey Computer Store, is located on leased
premises of approximately 5,000 square feet. The "net-net" lease providing for
a monthly rental of approximately $4,800 expired in February 1994. The lease is
currently in effect on a month-to-month basis at a monthly rental of
approximately $4,800. The premises are leased from Annette and Mark Stanoch,
officers of the Corporation on terms which management believes are as favorable
as those available from unaffiliated third parties.
See Note 6 of the Notes to Consolidated Financial Statements with respect
to the Corporation's commitments for leased facilities.
The Corporation owns a 6.7 acre plot in Mountainside, New Jersey, which was
purchased in 1979 to construct a proposed twin building office complex. To
date, no construction activities have taken place and none are currently
planned. There can be no assurance that any construction will commence or that
the Corporation will not attempt to sell this site without commencing
construction. Even if construction is undertaken, the Corporation may elect not
to move any of its operations onto the premises but may elect to rent or sell
the developed property. At the present time, there are no plans to commence
construction.
ITEM 3. LEGAL PROCEEDINGS
The Corporation is not currently a party to any legal proceeding which it
regards as material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
There were no matters submitted by the Corporation during the quarter ended
June 30, 1995 to a vote of securityholders.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITYHOLDERS MATTERS
TransNet's common stock is quoted and traded in the NASDAQ National Market
System under the symbol "TRNT." The following table indicates the high and low
closing sales prices for TransNet's common stock for the periods indicated based
upon information supplied by the National Quotation Bureau Incorporated.
Calendar Year Closing Sales Prices
High Low
1993
First Quarter 1 5/16 5/8
Second Quarter 1 13/32 1 1/8
Third Quarter 1 7/16 1
Fourth Quarter 1 1/4 7/8
1994
First Quarter 2 11/16 7/8
Second Quarter 2 7/16 1 15/16
Third Quarter 2 9/16 1 11/16
Fourth Quarter 2 1/2 1 3/4
1995
First Quarter 1 15/16 1 9/16
Second Quarter 3 1/16 1 3/4
As of September 29, 1995, the number of holders on record of TransNet's
common stock was 3,997. Such number of record owners was determined from the
Company's shareholder records and does not include beneficial owners whose
shares are held in nominee accounts with brokers, dealers, banks and clearing
agencies.
TransNet has not paid any dividends on its common stock since its
inception.
ITEM 6.
TRANSNET CORPORATION AND SUBSIDIARY
SELECTED FINANCIAL DATA
Years ended June 30,
1995 1994 1993 1992 1991
Revenue $ 56,216,605 $ 40,342,165 $ 28,903,305 $ 28,791,420 $ 26,801,761
Net Income [Loss] $ 882,466 $ 393,870 $ 264,644 $ 80,785 $ (1,921,430)
Earnings [Loss]
Per Share $ .17 $ .08 $ .05 $ .02 $ (.38)
Weighted Average
Number of Shares 5,155,526 5,041,804 5,041,804 5,041,804 5,057,503
Total Assets $ 19,286,712 $ 13,289,915 $ 10,513,428 $ 9,989,642 $ 11,053,685
Long-Term
Obligations $ -- $ -- $ -- $ -- $ --
Working Capital $ 7,554,094 $ 7,225,788 $ 6,845,754 $ 6,518,088 $ 6,435,034
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Revenues for the fiscal year ended June 30, 1995 were $56,216,605 as
compared with $40,342,165 for the fiscal year ended June 30, 1994, and
$28,903,305 for the fiscal year ended June 30, 1993. Revenues for both fiscal
1995 and 1994 increased as compared to the respective prior year, as the result
of increased hardware sales and an increase in revenues from technical services
(technical repair and maintenance, support, network integration, and
outsourcing) and training services. Service related revenues, though not a
material source of the Corporation's revenues, typically generate higher
gross profit margins. Revenues generated by service and support operations
increased by approximately 26% in fiscal 1995 as compared to fiscal 1994, and by
approximately 40% in fiscal 1994 as compared to fiscal 1993 due to
management's focus on the promotion of technical service and support operations
and a number of agreements with large organizations for service and support (as
discussed below).
For fiscal 1995, the Corporation reported net income of $882,466, as
compared with net income of $393,870 for fiscal 1994, and $264,644 for fiscal
1993. In addition to reflecting increased sales volume, increased net income
for the years ended June 30, 1995, 1994 and 1993 are attributable to increased
service and support related revenues; management's concentration on sales of
network and system integration products which yield higher profit margins; the
Corporation's technical service and support programs; and continued adherence
to cost control measures. Service related revenues are significant in their
contributions to net income because these operations yield a higher profit
margin than equipment sales. Management anticipates that the technical support
and service segments of operations will continue to expand in the future. For
the fiscal years ended June 30, 1995 and 1994, the respective increases in
revenues from the provision of service, support, outsourcing and network
integration is largely the result of the Corporation entering into service
contracts with a number of large corporate customers to provide service and
support for their personal computers, peripherals and networks. Most of these
contracts are short-term, usually twelve months or less, and contain provisions
which permit early termination. Although the contracts generally contain
renewal terms, there is no assurance that such renewals will occur.
During the fiscal years discussed, the computer industry has experienced a
trend of decreasing prices of computers and related equipment. Management
believes that this trend will continue. Industrywide, the result of price
erosion has been lower profit margins on sales, which require businesses to sell
a greater volume of equipment to maintain past earning levels.
To counter these factors and to maximize the Corporation's profit margin,
management has modified its marketing strategy during these years and has
enforced expense controls. Management's current marketing strategy is designed
to increase sales of lower revenue/higher profit margin products related to
service and support operations. Management's efforts include targeting
commercial customers who provide marketplaces for a wide range of products and
services at one time, a cost-effective approach to sales. Management believes
it maximizes profits through concentration on sales of value-added applications;
promotion of the Corporation's service and support operations; and strict
adherence to cost-cutting controls. During fiscal 1993, management shifted its
emphasis to the promotion of its technical service, support, outsourcing and
network integration capabilities, and continued the aggressive pursuit of an
increased volume of equipment sales and promotion of its training services. In
addition, the Corporation's buying agreement with Intelligent Systems Group, a
subsidiary of Intelligent Electronics, enhances the Corporation's competitive
edge through discounts unavailable through other sources.
Selling, general and administrative expenses decreased as a percentage of
revenues to slightly below 10% of revenues in fiscal 1995 from 12% in fiscal
1994. This decrease was reflective of the increased volume of sales and cost
control measures. Similarly, selling, general and administrative expenses
during fiscal 1994 decreased as a percentage of revenues to 12% from 15% in
fiscal 1993 due to the increase in revenues and cost control measures.
Interest income in fiscal 1995 increased as compared to fiscal 1994 due to
the rise in interest rates. Interest income in fiscal 1994 decreased as
compared to fiscal 1993 due to the decline in interest rates and lower amount of
funds invested. Interest expense increased in 1995 over 1994 as a result of
financing costs associated with increased inventory, which in turn is due to
increased equipment sales.
Liquidity and Capital Resources
There are no material commitments of the Corporation's capital resources.
The Corporation currently finances the purchases of portions of its
inventory through floor planning arrangements under which such inventory secures
the amount outstanding. Inventory increased in 1995 as compared to 1994 to
accommodate the increased sales volume. Inventory increased in 1994 as compared
to 1993.
Accounts receivable and payable increased for the period ended June 30,
1995 as a direct result of an increase in revenues, and in 1994 due to an
increase in revenues during the fourth quarter.
For the fiscal year ended June 30, 1995, as in the fiscal years ended June
30, 1994 and 1993, the internal sources of the Corporation were sufficient to
enable the Corporation to meet its obligations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors of
TransNet Corporation
Somerville, New Jersey
We have audited the accompanying consolidated balance sheets of
TransNet Corporation and Subsidiary as of June 30, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three fiscal years in the period ended June 30, 1995.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
TransNet Corporation and Subsidiary as of June 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the period ended June 30, 1995, in conformity with
generally accepted accounting principles.
MORTENSON AND ASSOCIATES, P. C.
Certified Public Accountants.
Cranford, New Jersey
August 8, 1995
TRANSNET CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30,
1995 1994
Assets:
Current Assets:
Cash and Cash Equivalents $ 1,549,206 $ 2,015,355
Accounts Receivable - Net 10,201,044 6,251,090
Inventories 5,011,791 3,409,653
Other Current Assets 413,053 231,359
Total Current Assets 17,175,094 11,907,457
Property and Equipment - Net 529,096 629,512
Other Assets 1,582,522 752,946
Total Assets $ 19,286,712 $ 13,289,915
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $ 8,331,318 $ 3,392,755
Accrued Expenses 647,843 576,587
Deferred Income 328,100 528,157
Other Current Liabilities 313,739 184,170
Total Current Liabilities 9,621,000 4,681,669
Stockholders' Equity:
Capital Stock - Common, $.01 Par Value,
Authorized 15,000,000 Shares;
Issued 7,469,524 Shares in 1995 and
7,294,524 Shares in 1994 [of which
2,252,720 are in Treasury] 74,695 72,945
Paid-in Capital 10,686,745 10,513,495
Retained Earnings 5,121,915 4,239,449
Totals 15,883,355 14,825,889
Less: Treasury Stock - At Cost (6,217,643) (6,217,643)
Total Stockholders' Equity 9,665,712 8,608,246
Total Liabilities and
Stockholders' Equity $ 19,286,712 $ 13,289,915
See Notes to Consolidated Financial Statements.
TRANSNET CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended
June 30,
1995 1994 1993
Revenue $56,216,605 $40,342,165 $28,903,305
Cost of Revenue 49,762,601 34,946,537 24,227,559
Gross Profit 6,454,004 5,395,628 4,675,746
Selling, General and
Administrative Expenses 5,642,915 4,969,490 4,411,670
Provision for Doubtful Accounts 55,000 50,000 58,000
Total 5,697,915 5,019,490 4,469,670
Operating Income 756,089 376,138 206,076
Other Income [Expense]:
Interest Income 53,775 46,975 61,980
Interest Expense (117,587) (29,243) (3,412)
Total Other [Expense] Income - Net (63,812) 17,732 58,568
Income Before Income Tax [Benefit] 692,277 393,870 264,644
Income Tax [Benefit] (190,189) -- --
Net Income $ 882,466 $ 393,870 $ 264,644
Income Per Common Share $ .17 $ .08 $ .05
See Notes to Consolidated Financial Statements.
TRANSNET CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Total
Common Stock Paid-in Retained Treasury Stock Installment Stockholders'
Shares Amount Capital Earnings Shares Amount Receivable Equity
Balance-June 30,1992 7,294,524 $72,945 $10,513,495 $3,580,935 (2,252,720) $(6,217,643) $(2,500) $7,947,232
Net Income -- -- -- 264,644 -- -- -- 264,644
Balance-June 30,1993 7,294,524 72,945 10,513,495 3,845,579 (2,252,720) (6,217,643) (2,500) 8,211,876
Net Income -- -- -- 393,870 -- -- -- 393,870
Reduction in Notes
Receivable - Stock -- -- -- -- -- -- 2,500 2,500
Balance-June 30,1994 7,294,524 72,945 10,513,495 4,239,449 (2,252,720) (6,217,643) -- 8,608,246
Exercise of Options 175,000 1,750 173,250 -- -- -- -- 175,000
Net Income -- -- -- 882,466 -- -- -- 882,466
Balance-June 30,1995 7,469,524 $74,695 $10,686,745 $5,121,915 (2,252,720) $(6,217,643) $ -- $9,665,712
See Notes to Consolidated Financial Statements.
TRANSNET CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended
June 30,
1995 1994 1993
Operating Activities:
Net Income $ 882,466 $ 393,870 $ 264,644
Adjustments to Reconcile Net
Income to Net Cash [Used for]
Provided by Operating Activities:
Depreciation and Amortization 172,612 184,272 163,303
Loss [Gain] on Sale of Equipment 1,054 -- (1,740)
Deferred Taxes (196,000) -- --
Provision for Doubtful Accounts 55,000 -- --
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (4,004,954) (2,187,092) (776,978)
Inventories (1,602,138) (1,162,350) 453,395
Other Current Assets (181,694) 97,562 243,504
Other Assets (675,448) (53,207) (10,093)
Increase [Decrease] in:
Accounts Payable
and Accrued Expenses 5,009,818 1,948,071 228,971
Other Current Liabilities 129,570 45,352 (7,023)
Other Liabilities (200,057) 386,694 37,194
Total Adjustments (1,492,237) (740,698) 330,533
Net Cash - Operating Activities (609,771) (346,828) 595,177
Investing Activities:
Capital Expenditures (31,378) (147,401) (91,448)
Proceeds from Sale of Equipment -- -- 3,000
Net Cash - Investing Activities (31,378) (147,401) (88,448)
Financing Activities:
Receipt of Installment
Receivable from Officer -- 2,500 --
Issuance of Common Stock 175,000 -- --
Net Cash - Financing Activities 175,000 2,500 --
Net [Decrease] Increase in Cash
and Cash Equivalents (466,149) (491,729) 506,729
Cash and Cash Equivalents -
Beginning of Years 2,015,355 2,507,084 2,000,355
Cash and Cash Equivalents -
End of Years $ 1,549,206 $ 2,015,355 $ 2,507,084
Supplemental Disclosures of Cash Flow Information:
Cash paid during the years for:
Interest $ 105,000 $ 47,000 $ 3,400
Income Taxes $ 6,400 $ -- $ --
See Notes to Consolidated Financial Statements.
TRANSNET CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[1] General
TransNet Corporation was incorporated in the State of Delaware in 1969.
TransNet, a computer dealer, is engaged in the sale and service of personal
computer systems and peripheral equipment, software, and supplies. The sale of
products and the promotion of technical services, the primary focus of the
Corporation, are conducted through its own sales and service departments. In
addition to its principal business activities, the Corporation operates one
retail computer store.
[2] Summary of Significant Accounting Policies
Consolidation - The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary, Century American Corporation.
Intercompany transactions and accounts have been eliminated in consolidation.
Cash and Cash Equivalents - Cash equivalents are comprised of certain highly
liquid investments with a maturity of three months or less when purchased.
Accounts Receivable - Accounts receivable have been reduced by an allowance for
doubtful accounts of $176,153 and $141,199 as of June 30, 1995 and 1994,
respectively.
Inventory - The Company's inventory is valued at the lower of cost [determined
on the average-cost basis] or market.
Property and Equipment, Depreciation and Amortization - Property and equipment
are stated at cost. Depreciation and amortization are computed by use of the
straight-line method over the estimated useful lives of the various assets
ranging from five to ten years. Leasehold improvements are amortized over the
shorter of the life of the lease or their estimated useful life.
Intangible Assets - Goodwill of $259,421 resulting from a business combination
in 1990 is being amortized over 20 years on the straight-line basis.
Accumulated amortization amounted to $41,358 and $31,975 at June 30, 1995 and
1994, respectively. Other intangibles are being amortized over five to twenty
years on a straight-line basis. Amortization expense amounted to $41,871,
$33,997 and $27,437 for the years ended June 30, 1995, 1994 and 1993,
respectively.
Earnings Per Share - Earnings per common share are based on 5,155,526 weighted
outstanding average shares for fiscal 1995 and 5,041,804 for 1994 and 1993.
Common stock equivalents are included if dilutive.
Concentrations of Credit Risk - The Company currently maintains a cash account
of $706,640 in a financial institution which is subject to credit risk beyond
FDIC insured limits.
The Company routinely assesses the financial strength of its customers and based
upon factors surrounding the credit risk of its customers establishes an
allowance for uncollectible accounts and, as a consequence, believes that its
accounts receivable credit risk exposure beyond such allowances is not
significant.
Revenue Recognition - Income is recognized at time of shipment on equipment sold
directly to customers. Maintenance service contracts are billed periodically
and revenue is recognized ratably over the terms of the contracts.
Reclassification - Certain items from prior year's financial statements have
been reclassified to conform to current year's presentation.
TRANSNET CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
[3] Repurchase Agreements
Repurchase agreements included in cash equivalents as of June 30, 1995 and 1994
consisted of:
Cost Fair Value
June 30, 1995:
Repo 5.45%, 7/3/95 $ 677,929 $ 677,929
This security is backed by $737,040 of Federal Home Loan Mortgage Corporation
Bonds maturing in November 2023 with an interest rate of 5.20%.
Cost Fair Value
June 30, 1994:
Repo 3.3%, 7/1/94 $ 1,286,647 $ 1,286,647
This security was backed by $1,379,653 of Federal Home Loan Mortgage Corporation
Bonds maturing in September 2006 with an interest rate of 5.25%.
Effective July 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities, which requires certain securities to be recorded at
fair value or amortized cost. In accordance with this Statement, the Company
has classified its investments, classified as cash equivalents, as
available-for-sale securities. Available-for-sale securities are carried at
fair value with unrealized gains and losses recorded, net of tax, in
stockholders' equity. Held-to-maturity securities are carried at amortized cost.
Prior to July 1, 1994, these securities were carried at the lower of cost or
market. Adoption of this Statement did not materially impact the Company's
financial position and had no impact on operating results. At July 1, 1994,
there were no unrealized gains or losses associated with available-for-sale
securities.
[4] Inventories
Inventories consist of:
June 30,
1 9 9 5 1 9 9 4
Finished Goods $ 4,418,118 $ 2,783,342
Spare Parts 593,673 626,311
Totals $ 5,011,791 $ 3,409,653
[5] Property, Equipment, Depreciation and Amortization
Property and equipment and accumulated depreciation as of June 30, 1995 and 1994
are as follows:
June 30,
1 9 9 5 1 9 9 4
Machinery and Equipment $ 515,339 $ 554,011
Furniture and Fixtures 418,082 434,777
Leasehold Improvements 330,608 328,820
Totals 1,264,029 1,317,608
Less: Accumulated Depreciation
and Amortization 734,933 688,096
Property and Equipment - Net $ 529,096 $ 629,512
Total depreciation expense amounted to $130,741, $150,275 and $135,866 for the
years ended June 30, 1995, 1994 and 1993, respectively.
TRANSNET CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
[6] Description of Leasing Arrangements and Related Parties
The Company leases office and warehouse space, a retail store and an automobile
under various operating leases, which expire through 1996. During fiscal 1991,
the Company entered into a five year lease with three five year renewal options
with W. Realty, an affiliate of the Chairman of the Board and a director, for
its primary office and warehouse facility. In addition, the Company leases
space for its retail store from certain officers of the Company on a
month-to-month basis.
Total rent expense was $244,511, $228,605 and $247,609 for the years ended
June 30, 1995, 1994 and 1993, respectively.
The following is a summary of rental commitments:
1996 $ 126,020
Thereafter --
Total $ 126,020
[7] Income Taxes
The provision for income taxes is summarized as follows:
Y e a r s e n d e d
J u n e 3 0,
1 9 9 5 1 9 9 4 1 9 9 3
Federal:
Current $ 208,050 $ 155,859 $ 104,259
Deferred (151,900) (21,943) (14,280)
Totals 56,150 133,916 89,979
Less: Net Operating Loss
Carryforward Benefit 208,050 (133,916) (89,979)
Net Federal Provision $ (151,900) $ -- $ --
State:
Current $ 61,311 $ 45,841 $ 30,664
Deferred (44,100) (6,454) (4,200)
Totals 17,211 39,387 26,464
Less: Net Operating Loss
Carryforward Benefit (55,500) (39,387) (26,464)
Net State Provision $ (38,289) $ -- $ --
Total Provision $ (190,189) $ -- $ --
Effective July 1, 1993, the Corporation adopted Financial Accounting Standards
Statement No. 109, "Accounting for Income Taxes" ["SFAS 109"]. Under SFAS 109,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities, and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. The Company's temporary differences include
depreciation, and net operating loss carryforwards. Adoption of SFAS 109 had no
material effect on the financial statements. Prior to the adoption of SFAS 109,
income tax expense was reported pursuant to Statement of Financial Accounting
Standards No. 96.
TRANSNET CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
[7] Income Taxes [Continued]
The Corporation has a deferred tax asset of $1,436,000 based on net operating
loss carryforwards of approximately $2,900,000. Realization of the tax asset is
dependent upon future events effecting utilization of the net operating loss
carryforwards. A valuation allowance has been provided against this deferred
asset.
The net deferred tax asset in the accompanying consolidated balance sheets
include the following components:
June 30,
1 9 9 5 1 9 9 4
Deferred Tax Asset - Net Operating Loss $ 1,436,000 $ 1,520,000
Valuation Allowance (1,172,450) (1,520,000)
Deferred Tax Asset 263,550 --
Deferred Tax Liabilities - Depreciation (67,550) --
Net Deferred Tax Asset $ 196,000 $ --
Unused net operating loss carryforwards at June 30, 1995 are as follows:
Year of Unused Operating
Expiration Loss Carryforwards
2005 $ 1,100,000
2006 1,800,000
Total $ 2,900,000
The following is a reconciliation of income taxes [benefit] at the U.S.
statutory tax rate to the taxes actually provided:
Y e a r s e n d e d
J u n e 3 0,
1 9 9 5 1 9 9 4 1 9 9 3
U.S. Statutory Rate
Applied to Pretax Income $ 235,375 $ 133,915 $ 89,980
State Taxes 5,800 45,841 30,664
Amortization of Goodwill 14,236 11,560 9,330
Net Operating Loss Carryforward (98,050) (191,316) (129,974)
Decrease in Valuation Allowance (347,550) -- --
Totals $ (190,189) $ -- $ --
[8] Pension Plans
The Company maintains a defined contribution pension plan which covers
substantially all of the Company's employees. The contribution amount is
determined at the discretion of management. There was no expense for the plan
for the years ended June 30, 1995, 1994 and 1993.
Effective January 1, 1995, the Company adopted a defined contribution [401(k)]
plan covering all eligible employees. Under the terms of the Plan,
participating employees deposit a percentage of their salaries in the Plan. The
Company matches up to a certain percentage of the employees' contribution.
Expense for the year ended June 30, 1995 was $5,285.
TRANSNET CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
[9] Commitments
The Company is currently financing its inventory through floor planning
arrangements with Deutsche Financial Services, whereby the suppliers'
inventories and TransNet's accounts receivable have been pledged as collateral
against the outstanding balances due them. The outstanding balances for the
inventory and accounts receivable credit lines at June 30, 1995 were
$5,516,409 and $1,800,000, respectively. The unused portion of the credit lines
at June 30, 1995 was $1,983,591 and $1,200,000, respectively. Interest is
applied to the average daily outstanding balance under the lines of credit at a
rate of the greater of 6% or the daily prime rate per annum. The prime rate was
7.5% at June 30, 1995.
[10] Stockholders' Rights Plan
On February 6, 1990, the Board of Directors adopted a Stockholder Rights Plan,
which entitles the Right holder, upon the occurrence of specified triggering
events, i.e., the acquisition by a person or group of beneficial ownership of
20% or more of outstanding shares; the commencement of a tender offer for 20% or
more of outstanding shares [unless an offer is made for all outstanding shares
at a price deemed by the Continuing Board to be fair and in the best interest of
stockholders] and the determination by the Board that a person is an "Adverse
Person," as defined in the Rights Agreement [except an Acquiring Person or
Adverse Person] to purchase one share of common stock at an exercise price of
$7.50 per share, or in certain "take over" situations, common stock equal in
value to two times the exercise price. Subsequent to a triggering event, if the
Company is acquired in a merger or other business transaction in which the
Company is not the surviving corporation [unless Board approved], or 50% or more
of the Company's assets or earning power is sold or transferred, each holder of
a Right shall have the right to receive upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right. The Rights may be redeemed by the Company for $.01 per Right at any time
prior to the determination of the Board that a person is an Adverse Person
or ten days following a public announcement of the acquisition of, or
commencement of a tender offer for, 20% of the outstanding common stock. The
Rights expire on February 6, 2000, unless earlier redeemed.
[11] Stock Options
In connection with the Company's acquisition of Round Valley Computer Center,
the Company granted the three selling stockholders [two of whom are currently
officers] five year options expiring in 1995 to purchase an aggregate 175,000
shares of the Company's stock at $1.00 per share. All such options were
exercised during the year ended June 30, 1995.
[12] Segments of Business
The Company is engaged in one line of business - the sale and service of
computers, related equipment and software.
[13] Significant Customer
During the years ended June 30, 1995, 1994 and 1993, the Company derived 34%,
17% and 11%, respectively of its revenue for each year from one major customer.
TRANSNET CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
[14] New Authoritative Pronouncements
The Company adopted Statement of Financial Accounting Standards ["SFAS"] No.
109, "Accounting for Income Taxes," issued by the Financial Accounting Standards
Board ["FASB"] in July 1993. Since that implementation, the FASB has issued
thirteen new authoritative accounting pronouncements [SFASs] including SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity, including
goodwill, be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Most of
these new pronouncements either do not apply to the Company, or will be
implemented when the Company engages in applicable transactions. None of these
potentially applicable FASB accounting pronouncements is anticipated to have a
material impact on the Company's financial statements. In addition, the American
Institute of Certified Public Accountants has issued Statement of Position
["SOP"] 94-6, "Disclosure of Certain Significant Risks and Uncertainties." The
Company does not anticipate any substantial expansion of its note disclosures
as a result of this SOP.
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY SCHEDULES
To the Stockholders and Board of Directors of
TransNet Corporation
Somerville, New Jersey
Our report on the consolidated financial statements of TransNet
Corporation and Subsidiary is included on page F-1 of this Form 10-K. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule, Valuation and Qualifying Accounts.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
MORTENSON AND ASSOCIATES, P. C.
Certified Public Accountants.
Cranford, New Jersey
August 8, 1995
TRANSNET CORPORATION AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Balance at Charged Charged Deductions Balance at
Beginning Against to Other from Close
of Year Income Accounts Reserves of Year
For the year ended June 30, 1993:
Deducted from Related Assets
Allowance for Doubtful
Accounts $ 124,490 $58,000 $ -- $ 35,851 [A]$146,639
For the year ended June 30, 1994:
Deducted from Related Assets
Allowance for Doubtful
Accounts $ 146,639 $50,000 $ -- $ 55,440 [A]$141,199
For the year ended June 30, 1995:
Deducted from Related Assets
Allowance for Doubtful
Accounts $ 141,199 $55,000 $ -- $ 20,046 [A]$176,153
[A] Uncollectible accounts written off.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There were no disagreements on accounting and financial disclosure between
the Corporation and its independent public accountants nor any change in the
Corporation's accountants during the last fiscal year.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of the Corporation are as follows:
Name Age Position
John J. Wilk (a) 67 Chairman of the Board and Treasurer
Steven J. Wilk (a) 38 President and Director
Jay A. Smolyn 39 Vice President, Operations and Director
Mark Stanoch (b) 43 Vice President, Sales
Annette Stanoch (b) 42 Vice President, Planning
Vincent Cusumano (c)(e) 60 Secretary and Director
Earle Kunzig (c)(f) 56 Director
Raymond J. Rekuc (d)(e) 50 Director
Susan Wilk (a) Director
(a) Steven J. Wilk and Susan Wilk are respectively, the son and daughter of
John J. Wilk.
(b) Mark Stanoch and Annette Stanoch are husband and wife.
(c) Member of the Audit Committee.
(d) Chairman of the Audit Committee.
(e) Member of the Compensation Committee.
(f) Chairman of the Compensation Committee.
The Audit Committee reviews, evaluates and advises the Board of Directors
in matters relating to the Corporation's financial reporting practices, its
application of accounting principles and its internal controls. In addition,
the Audit Committee reviews transactions regarding management remuneration or
benefits."
The Compensation Committee reviews, evaluates and advises the Board of
Directors in matters relating to the Corporation's compensation of and other
employment benefits for executive officers. The Board established its
Compensation Committee in December 1994. Prior to that time compensation
decisions were subject to oversight by the entire Board of Directors. The items
reviewed by the Compensation Committee are disclosed in Item 11, "Executive
Compensation."
The Corporation does not have an Executive Committee. The term of office
of each director expires at the next annual meeting of stockholders. The term
of office of each executive officer expires at the next organizational meeting
of the Board of Directors following the next annual meeting of stockholders.
The following is a brief account of the business experience of each
TransNet director during the past five years.
John J. Wilk was president, a director and chief executive officer of
TransNet since its inception in 1969 until May 1986, when he was elected
Chairman of the Board.
Steven J. Wilk was elected a vice president of TransNet in October 1981 and
in May, 1986 was elected President and Chief Executive Officer. He was elected
a director of TransNet in April 1989.
Jay A. Smolyn has been employed at TransNet since 1976 and in April 1985
became Vice President, Operations. He was elected a director of TransNet in
January 1990.
Vincent Cusumano, who was elected a TransNet director in April 1977, is,
and for the past five years has been, president and chief executive officer of
Cusumano Perma-Rail Corporation of Roselle Park, New Jersey, distributors and
installers of exterior iron railings. Mr. Cusumano is not actively engaged in
the business of the Corporation.
Earle Kunzig, who was elected a TransNet director in November 1976, is Vice
President of Sales and a principal of Hardware Products Sales, Inc., Wayne, New
Jersey, a broker of used computer equipment and provider of computer maintenance
services. Prior to that he was director of hardware operations for Computer
Maintenance Corporation, a business computer servicing organization in Secaucus,
New Jersey, from 1978 through July 1985. Mr. Kunzig is not actively engaged in
the business of the Corporation.
Raymond J. Rekuc, who was elected a TransNet director in August 1983, is
currently the principal in Raymond J. Rekuc, Certified Public Accountant, an
accounting firm located in Rivervale, New Jersey. He was a partner with Hess,
Keeley & Company, Accountants and Auditors, Millburn, New Jersey from October
1980 until September 1986, when he became treasurer of Royalox International,
Inc. of Asbury, New Jersey, an importer of luggage and luggage hardware. Mr.
Rekuc provided financial consulting services to TransNet in 1990 through
1993. Mr. Rekuc is a member of the American Institute of Certified Public
Accountants and the New Jersey Society of Certified Public Accountants, and is
not actively engaged in the business of the Corporation.
Susan Wilk joined TransNet in November 1987. Prior to that time, she was a
Senior Attorney with the U. S. Securities and Exchange Commission, Washington,
D.C., and then the Office of General Counsel of The Federal Home Loan Bank
Board. She was elected a director of TransNet in January 1990.
The two executive officers of the Corporation who are not directors, Mark
Stanoch and Annette Stanoch, were the founders of Round Valley Computer Center,
Inc. ("RVCC") in 1984. RVCC was engaged in marketing personal computers of
several manufacturers including IBM, Apple and Hewlett Packard, and providing
support and service from its two facilities at Branchburg and Lebanon, New
Jersey, at the time of its acquisition by TransNet on March 6, 1990. At the
time of the acquisition, Mark Stanoch and Annette Stanoch were respectively
elected Vice President, Sales and Vice President, Planning of TransNet.
None of the Corporation's directors are directors of any other Corporation
with a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934 or subject to the requirements of Section 15(d) of that
Act.
Compliance with Section 16(a) of the Exchange Act
Based solely on a review of Forms 3 and 4 and any amendments thereto
furnished to the Corporation pursuant to Rule 16a-3(e) under the Securities
Exchange Act of 1934, or representations that no Forms 5 were required, the
Corporation believes that with respect to fiscal 1995, its officers, directors
and beneficial owners of more than 10% of its equity timely complied with all
applicable Section 16(a) filing requirements, with the exception of Mark Stanoch
who did not timely file his Form 4 for June 1995.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
or accrued by the Company during the three years ended on June 30, 1995, to its
Chief Executive Officer and each of its other executive officers whose total
annual salary and bonus for the fiscal year ended June 30, 1995, exceeded
$100,000. All of the Company's group life, health, hospitalization or medical
reimbursement plans, if any, do not discriminate in scope, terms or operation,
in favor of the executive officers or directors of the Company and are generally
available to all full-time salaried employees.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Name and Year Ended Other Annual Options Restricted LTIP All Other
Principal Position June 30, Salary Bonus Compensation SARs Stock Awards Payouts(a) Compensation
Steven J. Wilk 1995 $195,000 $25,400 $0 0 0 $0 0
President and Chief 1994 $190,000 $23,033 $0 0 0 $0 0
Executive Officer 1993 $175,000 $8,434 $0 0 0 $0 0
Mark Stanoch 1995 $110,000 $2,533 $0 0 0 $31,200 0
Vice President 1994 $107,500 $18,688 $0 0 0 $18,977 0
Sales 1993 $100,000 $937 $0 0 0 $11,246 0
Annette Stanoch 1995 $110,000 $2,533 $0 0 0 $31,200 0
Vice President 1994 $107,500 $18,688 $0 0 0 $18,977 0
Planning 1993 $100,000 $937 $0 0 0 $11,246 0
Jay Smolyn (b) 1995 $110,000 $15,200 $0 0 0 $0 0
Vice President 1994 $105,000 $18,688 $0 0 0 $0 0
Operations
(a) On March 6, 1990, in connection with its acquisition of all of the
issued and outstanding capital stock of Round Valley Computer Center, Inc.
("RVCC") from RVCC's sole stockholders, Mark Stanoch, Annette Stanoch and a
third individual, the Corporation agreed pursuant to the Acquisition Agreement
to pay the three RVCC stockholders a percentage of TransNet's consolidated
pre-tax profits (including RVCC's) varying from 10% to 12% in the aggregate with
respect to each fiscal year from 1990 through 1995.
(b) For the fiscal year 1993, Mr. Smolyn's compensation was less than
$100,000.
Employment Agreements with Executive Officers
TransNet had employment contracts in effect with Steven J. Wilk and Jay A.
Smolyn which expired on June 30, 1995. Pursuant to the employment contracts,
Steven J. Wilk's annual salary was "at least" $100,000 and Jay A. Smolyn's
salary was "at least" $70,000 or, in each case, such greater amount as may be
approved from time to time by the Board of Directors. The contracts also
provided for additional incentive bonuses to be paid with respect to each of the
Corporation's fiscal years based upon varying percentages of the Corporation's
consolidated pre-tax income exclusive of extraordinary items (3% of the first
$500,000, 4% of the next $500,000, 5% of the next $4,000,000 and 6% of amounts
in excess of $5,000,000 for Steven J. Wilk and 2% for Jay A. Smolyn). Both
employment contracts provided for a continuation of salary payments in the event
of illness or injury (full amount for 6 months and 50% of the full amount for
the remainder of the term for Steven J. Wilk; and 50% of the full amount for 6
months for Jay A. Smolyn). In addition, the two employment contracts contained
provisions providing in the event of a hostile change of control of the
Corporation and a resultant termination of the employee's employment prior to
expiration of the employment agreement, the employee would receive a lump sum
payment equal to 80% of the greater of his then current annual salary or his
previous calendar year's gross wages including the additional incentive
compensation multiplied by the lesser of five or the number of years remaining
in the agreement, in the case of Steven J. Wilk and by two or the number of
years remaining in the agreement, whichever is less in the case of Jay A.
Smolyn. Steven J. Wilk's employment agreement also provided for a similar lump
sum payment in the event the Corporation terminated his employment for any cause
(other than the commission of criminal acts) except that in such event, the 80%
amount would be multiplied by the lesser of three or the number of years through
the termination date of the employment agreement.
At the March 6, 1990, closing of its acquisition of RVCC, TransNet entered
into employment contracts effective through June 30, 1995, employing Mark
Stanoch and Annette Stanoch as Vice President, Sales and Vice President,
Planning, respectively, at annual salaries of "at least" $100,000 each, together
with a percentage share of up to 1/3 of 2% of consolidated profits for each
individual. A third former RVCC stockholder was entitled to a similar
percentage share of consolidated profits. Each of these contracts provided for
a lump sum payment to the employee if his or her employment was terminated due
to a hostile takeover.
Management anticipates renewing the agreements between the above-named
officers and the Corporation in the near future.
Director's Compensation
During fiscal 1994, the Company paid $5,000 in directors' fees to each of
its three outside directors.
Stock Options
No options to acquire TransNet Corporation stock were held by the
Corporation's executive officers at June 30, 1995.
1995 Fiscal Year-End Options Values
Option Exercises
during 1995 Fiscal Year
Shares Acquired Number of Unexercised Value of Unexercised
Upon Exercise In Value Options Held at In-the Money Options
Officer Fiscal 1995 Realized(1) June 30, 1995 at June 30, 1995
Mark Stanoch 70,000 $43,750 - 0 - - 0 -
Annette Stanoch 70,000 $43,750 - 0 - - 0 -
(1) Based upon the difference between the closing sale price for the Common
Stock on NASDAQ on February 24, 1995, the date of exercise and the option
exercise prices.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of September 29, 1995 , the number of
shares of TransNet's common stock owned beneficially to the knowledge of the
Corporation, by each beneficial owner of more than 5% of such common stock, by
each director owning shares and by all officers and directors of the Corporation
as a group.
Name of Beneficial Amount of Shares Percent of
Owner Beneficially Owned Class
Directors
Steven J. Wilk (a) 393,500 shs 8%
John J. Wilk (a) 241,550 shs 5%
Jay A. Smolyn (a) 85,000 shs 2%
Susan Wilk (a) 85,500 shs 2%
Vincent Cusumano (a) 15,000 shs ----
Earle Kunzig (a) 5,000 shs ----
Raymond J. Rekuc (a) 0 shs ----
All officers and directors 1,071,500 shs (b) 21%
as a group (nine persons)
(a) The address of all directors is 45 Columbia Road, Branchburg, New
Jersey 08876.
John J. Wilk and Steven J. Wilk, chairman of the board of directors and
president of the Corporation as well as beneficial owners of 5% and 8%
respectively, of TransNet's common stock may be deemed to be a "parent" of the
Corporation within the meaning of the Securities Act of 1933.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Item 2 herein as to the leasing by the Corporation of its principal
facility in Branchburg, New Jersey from a partnership consisting of its Chairman
of the Board and an outside Director and its leasing of the premises utilized by
its Lebanon, New Jersey computer store from two of its officers.
PART IV
ITEM 14. EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Independent Auditor's Report.
Consolidated Balance Sheets as of June 30, 1994 and June 30, 1993.
Consolidated Statements of Operations for the Years Ended June 30,
1994, 1993 and 1992.
Consolidated Statements of Stockholders' Equity for the Years
Ended June 30, 1994, 1993 and 1992.
Consolidated Statements of Cash Flows for the Years Ended June 30,
1994, 1993 and 1992.
Notes to Consolidated Financial Statements
2. Supplementary Schedules
(b) Reports on Form 8-K
The Corporation did not file any reports on Form 8-K with respect to
or during the quarter ended June 30, 1992.
(c) Exhibits Incorporated by Reference to
3.1(a ) Certificate of Incorporation, Exhibit 3(A) to Registration
as amended Statement on Form S-1 (File No. 2-
42279)
3.1(b) October 3, 1977 Amendment Exhibit 3(A) to Registration
to Certificate of Incorporation Statement on Form S-1 (File No. 2-
42279)
3.1 (c) March 17, 1993 Amendment
to Certificate of Incorporation
3.2(a) Amended By-Laws Exhibit 3 to Annual Report on Form
10-K for year ended June 30, 1987
3.2(b) Article VII, Section 7 of the Exhibit to Current Report on
By-Laws, as amended Form 8-K for January 25, 1990
Exhibits Incorporated by Reference to
4.1 Specimen Common Stock Exhibit 4(A) to Registration
Statement Certificate on Form S-1
(File No. 2-42279)
10.1 March 1, 1991 lease agreement Exhibit 10.1 to Annual Report on
between W. Realty and the Form 10-K for year ended June 30,
Corporation for premises at 1991
45 Columbia Road, Somerville
(Branchburg), New Jersey
10.2 Employment Agreements effective Exhibits 10.1 to Annual Report on
February 24, 1987 with Steven J. Form 10-K for year ended June 30,
Wilk and Jay Smolyn (extended 1987
to June 30, 1995)
10.3 Cancellation and Consulting Exhibit 10.1 to Annual Report on
Agreement effective June 30, Form 10-K for year ended June 30,
1989 with John J. Wilk 1989
(extended to June 30, 1995)
10.4 Form of Rights Agreement dated Exhibit to Current Report on Form
as of February 6, 1990 between 8-K for January 25, 1990
TransNet and The Trust Company
of New Jersey, as Rights Agent
10.5 Acquisition Agreement dated Exhibit to Current Report on Form
March 6, 1990 between 8-K for March 6, 1990
TransNet and Selling
Stockholders of Round Valley
Computer Center, Inc.
10.6 Stock Subscription Agreements Exhibit 10.2 to Annual Report on
as of April 29, 1987 with Form 10-K for year ended June 30,
Steven J. Wilk and Jay A. Smolyn 1987
10.7 December 18, 1990 amendment to Exhibit 10.7 to Annual Report on
Stock Subscription Agreements Form 10-K for year ended June 30,
of Steven J. Wilk and Jay A. 1991
Smolyn
(22) Subsidiaries - The following table indicates the sole wholly-owned
active subsidiary of TransNet Corporation and its state of incorporation.
Name State of Incorporation
Century American Corporation Delaware
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Registrant: TransNet Corporation
Date: 10/12/95 By /s/ Steven J. Wilk
Steven J. Wilk
Chief Executive Officer
Date: 10/12/95 By /s/ John J. Wilk
John J. Wilk
Chief Financial and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
By /s/ Steven J. Wilk Date: 10/12/95
Steven J. Wilk, Director
By /s/ John J. Wilk Date: 10/12/95
John J. Wilk, Director
By /s/ Jay A. Smolyn Date: 10/12/95
Jay A. Smolyn, Director
By /s/ Raymond J. Rekuc Date: 10/12/95
Raymond J. Rekuc, Director
By /s/ Susan M. Wilk Date: 10/12/95
Susan M. Wilk, Director