LOS ANGELES, CA , formerly Tag-It Pacific, Inc., a leading
global supplier of zippers, apparel fasteners, trim and interlining
products, reported financial results for the third quarter and nine
months ended September 30, 2007.
Sales for the three months ended September 30, 2007 were $9.0
million, reflecting a decline of approximately $4.4 million from
the same period of 2006. Sales for the nine months ended September
30, 2007 were $31.7 million, a decline from the same period in 2006
by $6.6 million. The sales decrease for both the quarter and nine
months from the prior year principally resulted from a decline in
waistband product sales as a result of the expiration of an
exclusive sales contract for these products in 2006.
Sales of waistband products were $43,000 for the three months
ended September 30, 2007 as compared to $3.6 million for the same
period in 2006, and waistband product sales for the nine months
ended September 30, 2007 were $681,000 as compared to $8.0 million
for the same nine month period in 2006. Sales of the waistband
products will continue to be minimal for the balance of 2007 as new
customer programs are continuing to be developed for future
production. Sales of waistband products for all of 2006 were
approximately $9.5 million.
"The Company was contractually prohibited from marketing
waistband products under the previous exclusive contract until that
contract expired in October of 2006," said Stephen Forte, chief
executive officer of Talon International, Inc. "Consequently, we
expected a sharp sales decline from this product group, until we
could initiate our marketing efforts, and begin to see the results
from these efforts. The sales cycle for products of this nature is
frequently 12 to 18 months. We are just now beginning to see some
tangible positive results as orders for these products are now
being received from several customers."
Talon zipper sales for the nine months ended September 30, 2007
were $17.5 million, reflecting a $4.1 million gain, or a 31%
increase, over the same nine-month period in 2006. For the three
months ended September 30, 2007 Talon zipper sales were $4.2
million, as compared to $4.1 million the same period in 2006. Sales
for the nine months ended September 30, 2007 increased over the
prior year as a result of the company's expansion into multiple
areas throughout China and Southeast Asia. Sales for the three
months ended September 30, 2007 as compared to the same period in
the prior year, increased at a lesser rate than for the nine months
due in part to additional China VAT taxes and export quotas imposed
on garment manufacturers during the quarter ended September 30,
2007, and which resulted in manufacturers accelerating some
requirements into the previous quarter and shifting production to
Asian factories outside China.
Forte added, "We believe the significant sales growth of our
Talon zipper products year-to-date is reflective of the growing
success of our core strategy to capitalize on the global
opportunities within the Talon brand. As the results reflect, we
are realizing significant favorable results as we rapidly expand
into new markets and team with apparel makers who welcome an
alternative global supplier of zipper products with a reputation
for superior quality."
Trim product sales for the nine months ended September 30, 2007
were $13.5 million as compared to $17.0 million for the same period
in 2006. Sales of Trim products for the three months ended
September 30, 2007 were $4.7 million as compared with $5.7 million
for the same period in 2006. The Trim product sales decline for the
nine months ended September 30, 2007 from the prior year is
primarily the result of the following: approximately $700,000 in
revenues recognized in 2006 that resulted from the restatement of a
2005 agreement; the result of approximately $2.0 million in sales
within Mexico during 2006, which operations we exited during the
third quarter of 2006; and from fewer and smaller programs with our
customers in 2007 as compared to 2006. Trim sales for the three
months ended September 30, 2007 declined from the same period in
2006 principally as a result of the decline in sales within Mexico
by approximately $700,000 and from fewer trim programs in 2007.
For the third quarter ended September 30, 2007, the company
reported a net loss of $3.7 million, or a net loss of $0.18 per
share, as compared to net income of $339,000, or $0.02 per diluted
share, for the same period in 2006. For the nine months ended
September 30, 2007, the company reported a net loss of $4.0
million, or a net loss of $0.21 per share, as compared to a net
income of $264,000, or $0.01 per share, for the same period in
2006.
The net loss for the three and nine months ended September 30,
2007 includes an impairment charge of $2.1 million for a note
receivable from 2006 that defaulted in September 2007. The net loss
for the three and nine months ended September 30, 2007 as compared
with the same periods in 2006 is principally attributable to the
decline in overall revenues, offset in part by improvements in
other components of gross margin.
Operating expenses for the nine months ended September 30, 2007
were $12.0 million (which included the impairment charge of $2.1
million), or approximately $2.0 million more than the operating
expenses for same period in 2006. Operating expense for the three
months ended September 30, 2007 were $5.6 million (including the
impairment charge of $2.1 million), which was approximately $2.1
million more than the operating expenses for the same period in
2006. "Operating costs are closely controlled and we concentrate
our spending increases to support our expansion plans and
continually seek cost reductions in our service and administrative
costs worldwide," said Forte.
Net cash provided by operating activities for the nine months
ended September 30, 2007 was $1.3 million despite the year to date
net loss, and cash for the first nine months decreased from
December 31, 2006 by $613,000 to $2.3 million at September 30,
2007. During the three months ended September 30, 2007, the company
paid in full $12.5 million in previously outstanding convertible
notes after completing a $14.5 million credit facility in June 2007
designed to retire these notes and provide additional funds for the
company's growth. In November, 2007 the company amended the $14.5
million credit facility to provide for more flexibility under
certain performance covenants in the agreement and to expand the
Revolver borrowing base available to the company during the next
two quarters to ensure ample operating capital to fund its growth
and operations. In exchange these amendments, the company agreed to
issue to its lender 250,000 shares of our common stock and to
reduce the exercise price of warrants previously issued to the
lender to $0.75 per share.
Conference Call
Talon International will hold a conference call later today to
discuss its third quarter financial results. Talon's CEO Stephen P.
Forte and CFO Lonnie D. Schnell will host the call starting at 4:30
P.M. Eastern Time. A question and answer session will follow their
presentation.
To participate in the call, dial the appropriate number 5-10
minutes prior to the start time, request the Talon International
conference call and provide the conference ID.
Date: Monday, November 19, 2007
Time: 4:30 pm Eastern (1:30 pm Pacific)
Domestic callers: 1-800-322-9079
International callers: 1-973-582-2717
Conference ID#: 9483352
Internet Simulcast: http://viavid.net/dce.aspx?sid=00004903
If you have any difficulty connecting with the conference call
or webcast, please contact the Liolios Group at 949-574-3860.
A replay of the call will be available later that evening and
will be accessible until December 3, 2007. The replay call-in
number is 1-877-519-4471 for domestic callers and 1-973-341-3080
for international. The conference ID is # 9483352.
About Talon International, Inc.
Talon International, Inc. is a global supplier of apparel
fasteners, trim and interlining products to manufacturers of
fashion apparel, specialty retailers, mass merchandisers, brand
licensees and major retailers. Talon manufactures and distributes
zippers and other fasteners under its Talon� brand, known as the
original American zipper invented in 1893. Talon also designs,
manufactures, engineers, and distributes apparel trim products and
specialty waist-bands under its trademark names, Talon, Tag-It and
TekFit, to more than 60 apparel brands and manufacturers including
Levi Strauss & Co., Juicy Couture, Ralph Lauren, Victoria's
Secret, Target Stores, Wal-Mart, and Express. The company has
offices and facilities in the United States, Hong Kong, China,
India and the Dominican Republic and is expanding into Eastern
Europe, Indonesia and Vietnam.
Forward-Looking Statements
This news release contains forward-looking statements made in
reliance upon the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are not
guarantees of future performance and are inherently subject to
uncertainties and other factors which could cause actual results to
differ materially from the forward-looking statement. These
statements are based upon, among other things, assumptions made by,
and information currently available to, management, including
management's own knowledge and assessment of the company's
industry, competition and capital requirements, and the potential
for growth in zipper sales. Factors which could cause actual
results to differ materially from these forward-looking statements
include our ability to manage an international expansion, the level
of acceptance of the company's products by retailers and consumers,
pricing pressures and other competitive factors and the
unanticipated loss of major customers. These and other risks are
more fully described in the company's filings with the Securities
and Exchange Commission, including the Company's most recently
filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q,
which should be read in conjunction herewith for a further
discussion of important factors that could cause actual results to
differ materially from those in the forward-looking statements. The
company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
TALON INTERNATIONAL, INC.
(Formerly Tag-It Pacific, Inc.)
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2007 2006 2007 2006
============ ============= ============ =============
Net sales $ 9,013,135 $ 13,366,945 $ 31,670,234 $ 38,251,248
Cost of goods sold 6,486,659 9,218,539 22,422,412 27,132,880
------------ ------------- ------------ -------------
Gross profit 2,526,476 4,148,406 9,247,822 11,118,368
Selling expenses 722,447 910,996 2,161,666 2,131,515
General and
administrative
expenses 2,731,665 2,606,936 7,749,445 7,903,435
Reserve for
impairment of
note receivable 2,127,653 - 2,127,653 -
------------ ------------- ------------ -------------
Total operating
expenses 5,581,765 3,517,932 12,038,764 10,034,950
Income (loss) from
operations (3,055,289) 630,474 (2,790,942) 1,083,418
Interest expense,
net 647,514 236,500 1,138,088 752,705
------------ ------------- ------------ -------------
Income (loss)
before income
taxes (3,702,803) 393,974 (3,929,030) 330,713
Provision for
income taxes (20,972) 54,857 57,652 66,357
------------ ------------- ------------ -------------
Net income
(loss) $ (3,681,831) $ 339,117 $ (3,986,682) $ 264,356
============ ============= ============ =============
Basic income
(loss) per share $ (0.18) $ 0.02 $ (0.21) $ 0.01
============ ============= ============ =============
Diluted income
(loss) per share $ (0.18) $ 0.02 $ (0.21) $ 0.01
============ ============= ============ =============
Weighted average
number of common
shares outstanding:
Basic 20,041,433 18,440,927 19,060,664 18,347,509
============ ============= ============ =============
Diluted 20,041,433 19,279,648 19,060,664 18,719,531
============ ============= ============ =============
TALON INTERNATIONAL, INC.
(Formerly Tag-It Pacific, Inc.)
Condensed Consolidated Balance Sheets
(unaudited)
September 30, December 31,
2007 2006
-------------- --------------
Assets
Current assets:
Cash and cash equivalents $ 2,318,712 $ 2,934,673
Accounts receivable, net 3,866,355 4,664,766
Note receivable, net - 1,378,491
Inventories, net 2,710,051 3,051,220
Prepaid expenses and other current assets 449,743 541,034
-------------- --------------
Total current assets 9,344,861 12,570,184
Property and equipment, net 5,418,095 5,623,040
Fixed assets held for sale 826,904 826,904
Note receivable, less current portion - 1,420,969
Due from related party 736,557 675,137
Intangible assets, net 4,110,751 4,139,625
Other assets, net 592,971 437,569
-------------- --------------
Total assets $ 21,030,139 $ 25,693,428
============== ==============
Liabilities and Stockholders? Equity
Current liabilities:
Accounts payable $ 5,363,432 $ 4,533,145
Accrued legal costs 226,507 427,917
Other accrued expenses 2,246,344 2,832,363
Demand notes payable to related parties 85,176 664,970
Current portion of capital lease
obligations 383,090 432,728
Current portion of notes payable 294,259 1,107,207
Secured convertible promissory notes - 12,472,622
-------------- --------------
Total current liabilities 8,598,808 22,470,952
Capital lease obligations, less current
portion 247,763 474,733
Notes payable, less current portion 925,104 1,061,514
Revolver note payable 3,807,806 -
Term note payable, net of discount 7,289,480 -
Other long term liabilities 83,651 -
-------------- --------------
Total liabilities 20,952,612 24,007,199
-------------- --------------
Commitments and contingencies - -
Stockholders? Equity:
Preferred stock Series A, $0.001 par
value; 250,000 shares authorized; no
shares issued or outstanding - -
Common stock, $0.001 par value,
100,000,000 shares authorized;
20,041,433 shares issued and
outstanding at September 30, 2007;
18,466,433 at December 31, 2006 20,041 18,466
Additional paid-in capital 54,394,342 51,792,502
Accumulated deficit (54,357,221) (50,124,739)
Accumulated other comprehensive
income-foreign currency 20,365 -
-------------- --------------
Total stockholders? equity 77,527 1,686,229
-------------- --------------
Total liabilities and stockholders? equity $ 21,030,139 $ 25,693,428
============== ==============
Company Contact Talon International, Inc. Rayna Long Tel (818)
444-4128 Email Contact Investor Relations Scott Liolios or Scott
Kitcher Liolios Group, Inc. Tel (949) 574-3860
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