EX-99 2 ex99-1ee.txt EX 99.1 Exhibit 99.1 FOR IMMEDIATE RELEASE TALON INTERNATIONAL, INC REPORTS THIRD QUARTER 2007 RESULTS ZIPPER SALES INCREASE 31% FOR THE FIRST NINE MONTHS OF 2007 LOS ANGELES, CALIF. -- NOVEMBER 19, 2007 -- Talon International, Inc. (AMEX: TLN), 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. # # # 2 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: Tuesday, 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(R) 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. COMPANY CONTACT INVESTOR RELATIONS Talon International, Inc. Scott Liolios or Scott Kitcher Rayna Long Liolios Group, Inc. Tel (818) 444-4128 Tel (949) 574-3860 rlong@talonzippers.com 3 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 ============ ============ ============ ============
4 TALON INTERNATIONAL, INC. (FORMERLY TAG-IT PACIFIC, INC.) CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) September December 31, 30, 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 ============ ============ 5