SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A1
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-21645
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Tellurian, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 22-3451918
- ---------------------------------------------------- ---------------
(State or other jurisdiction(I.R.S. Employer
of incorporation or organization)Identification No.)
15 Industrial Avenue
Upper Saddle River, New Jersey 07458
- ---------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code:(201) 818-6767
--------------
None
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report)
Indicate 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 90 days. Yes _x_ . No ___.
The number of shares issued of the Registrant's Common Stock, as of December 16,
1996 was 3,025,000 shares of Common Stock.
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page
Number
------
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets.......................................................................................3
September 30, 1996 (Unaudited) and
December 31, 1995
Consolidated Statements of Operations.............................................................................4
Three and Nine Months ended September 30,
1996 and September 30, 1995 (Unaudited)
Consolidated Statements of Cash Flows.............................................................................5
Nine Months Ended September 30, 1996 and
September 30, 1995 (Unaudited)
Notes to Financial Statements (Unaudited).........................................................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.....................................................................................10
PART II. OTHER INFORMATION..............................................................................15
SIGNATURES.......................................................................................................16
EXHIBIT 27 .....................................................................................................17
</TABLE>
2
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TELLURIAN, INC
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31
ASSETS 1996 1995
(unaudited) (a)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 6,276 $ 39,130
Restricted Cash 9,199 --
Accounts Receivable 134,362 5,000
Inventories 168,570 87,218
Prepaid Expenses and Other Current Assets 3,500 7,811
----------- -----------
Total Current Assets 321,907 139,159
----------- -----------
Property and Equipment--at cost
less accumulated depreciation 40,502 32,711
----------- -----------
Other Assets
Deferred Offering Costs 312,839 50,765
Security Deposits 5,125 925
----------- -----------
TOTAL ASSETS 680,373 223,560
=========== ===========
LIABILITIES
Current Liabilities
Accounts Payable 128,169 29,321
Accrued Expenses 280,951 144,131
Payroll Payable 313,186 212,302
Payroll Taxes Payable 65,139 241,749
Consulting Fees Payable 208,032 255,693
Notes Payable--Related Parties 554,076 670,921
Interest Payable--Related Parties 336,859 293,604
Note Payable--Other -- 500
Security Deposits 1,563 --
Deferred Revenue 156,448 156,448
----------- -----------
Total Current Liabilities 2,044,423 2,004,669
----------- -----------
Long-Term Debt 895,000 192,000
----------- -----------
Commitments and Contingencies -- --
EQUITY
Stockholders' Deficiency:
Common Stock--$.01 par value
Authorized--10,000,000 shares
Issued and Outstanding--1,600,000 shares 16,000 16,000
Additional Paid in Capital 135,265 107,265
Accumulated Deficit (2,410,315) (2,096,374)
----------- -----------
Total Stockholders' Deficiency (2,259,050) (1,973,109)
----------- -----------
TOTAL LIABILITIES AND EQUITY 680,373 223,560
=========== ===========
</TABLE>
(a) The balance sheet at December 31, 1995 has been derived from the audited
financial statement at that date.
3
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TELLURIAN, INC
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES $ 812,572 $ 439,691 $ 270,288 $ 128,530
COST OF GOODS SOLD $ 106,349 $ 231,858 $ 24,290 $ 61,020
---------- ---------- ---------- ----------
GROSS PROFIT $ 706,223 $ 207,833 $ 245,998 $ 67,510
OPERATING EXPENSES:
Research and Development $ 567,740 $ 338,130 $ 292,710 $ 102,003
Selling $ 66,432 $ 72,202 $ 13,301 $ 3,312
General and Administrative $ 311,576 $ 158,827 $ 131,679 $ 61,757
---------- ---------- ---------- ----------
$ 945,748 $ 569,159 $ 437,690 $ 167,072
---------- ---------- ---------- ----------
LOSS FROM OPERATIONS: $ (239,525) $ (361,326) $ (191,692) $ (99,562)
---------- ---------- ---------- ----------
OTHER INCOME AND EXPENSES:
Other Income $ 13,397 $ 500 $ 4,686 $ --
Interest Expense $ (44,389) $ (18,047) $ --
Interest Expense-Related Parties $ (43,424) $ (48,267) $ (13,878) $ (15,567)
---------- ---------- ---------- ----------
$ (74,416) $ (47,767) $ (27,239) $ (15,567)
---------- ---------- ---------- ----------
NET LOSS $ (313,941) $ (409,093) $ (218,931) $ (115,129)
========== ========== ========== ==========
NET LOSS PER COMMON SHARE $ (0.20) $ (0.29) $ (0.15) $ (0.07)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,600,000 1,400,000 1,450,000 1,600,000
========== ========== ========== ==========
PRO FORMA INFORMATION:
Net loss as presented $ (409,093) $ (115,129)
Provision for Income tax benefits Not Not
reflecting C corporation status Applicable $ -- Applicable $ --
---------- ----------
Pro forma loss $ (409,093) $ (115,129)
========== ==========
</TABLE>
4
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TELLURIAN, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (313,941) $ (409,093)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 78,111 38,999
Changes in assets and liabilities
Restricted Cash (9,199) --
Accounts Receivable (129,362) (14,750)
Inventories (81,352) 13,584
Prepaid expenses and other current assets 4,311 --
Security Deposits (4,200) (925)
Accounts Payable 98,848 (16,778)
Accrued Expenses 136,820 17,227
Payroll payable 100,884 47,801
Payroll taxes payable (176,610) 93,740
Consulting fees payable (47,661) 61,375
Security Deposits 1,563 --
Interest payable--related parties 43,255 47,217
Deferred revenue -- 6,000
---------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (298,533) (115,603)
---------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of property and equipment (24,132) (10,897)
---------- -----------
NET CASH USED IN INVESTING ACTIVITIES (24,132) (10,897)
NET CASH FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 100,000
Proceeds from issuance of warrants in connection
with private placement 28,000
Proceeds from notes payable--related parties 45,494 50,000
Repayments of notes payable--related parties (160,000) (6,866)
Proceeds from notes payable--other --
Repayments of notes payable--other (500)
Proceeds from long-term debt 703,000
Payments of deferred offering costs (326,183) (9,734)
---------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 289,811 133,400
---------- -----------
NET CHANGE IN CASH (32,854) 6,900
CASH-- beginning 39,130 79
---------- -----------
CASH-- ending 6,276 6,979
========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest -- 9,000
Cash paid for income taxes -- --
</TABLE>
5
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TELLURIAN, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
NOTE 1-- BASIS OF PRESENTATION
The attached summarized financial information does not include all disclosures
required to be included in a complete set of financial statements prepared in
conformity with generally accepted accounting principles. Such disclosures were
included with the consolidated financial statements of the Company at December
31, 1995, which were included in its Prospectus dated November 5, 1996. Such
statements should be read in conjunction with the data herein.
NOTE 2-- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Line of Business
Tellurian, Inc. (the "Company"), a South Carolina corporation, was
incorporated on August 10, 1988 for the purpose of designing and manufacturing
real time image generation equipment for training and simulation applications.
The Company also provides consulting and parts/repair services related to
computer image generator technology. These operations constitute a single
business segment. The Company sell its image generators to two types of
entities, those which are interested in training and simulation and those which
specialize in entertainment devices and games. In January 1996, the Company
formed a wholly-owned subsidiary in the State of Delaware and merged the Company
into such corporation on July 2, 1996. Pursuant to the merger, the holders of
all of the shares of common stock of the Company exchanged their 1,600,000
shares outstanding for 1,600,000 shares of the new corporation on a pro rata
basis.
Interim Consolidated Financial Statements
The consolidated balance sheet of the Company at September 30, 1996 and
the consolidated statements of operations for the nine and three months ended
September 30, 1996, and cash flows for the nine months ended September 30, 1996
and 1995 are unaudited but include all adjustments which, in the opinion of
management, are necessary for the fair presentation of the Company's financial
position and results of operations for the periods then ended. All such
adjustments are of a normal recurring nature. The results of operations for the
interim periods are not necessarily indicative of the results of operations for
a full fiscal year.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates.
6
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TELLURIAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
NOTE 2-- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Property and Equipment
Property and equipment is stated at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives of the assets as
follows:
Machinery and equipment - 5 years
Furniture and fixtures - 7 years
Expenditures for repairs and maintenance are charged to expense as
incurred.
Deferred Offering Costs
Deferred offering costs incurred in connection with the Company's
private placement agreement are being amortized over the respective terms of the
promissory notes issued.
Amortization expense amounted to $64,109 for the nine months ended
September 30, 1996 and $-0 for the year ended December 31, 1995.
Research and Development
Research and development costs are charged to expense in the period
incurred. For the nine months ended September 30, 1996 and 1995 (unaudited) and
for the years ended December 31, 1995 and 1994, research and development costs
amounted to $567,740, $338,130, $423,770 and $297,864, respectively.
Income Taxes
The Company previously had elected to be treated as an "S" corporation
for federal and South Carolina purposes whereby net income or loss is recorded
by the stockholders on their individual income tax returns. Effective July 2,
1996 the Companuy terminated its "S" election.
Loss Per Common Share
Net loss per common share is based on the weighted average number of
common shares outstanding during the period. The weighted average number of
share outstanding has been adjusted to reflect the recapitalization in
connection with the private placement as if it had occurred as of the beginning
of the period for which loss per share is presented.
7
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TELLURIAN, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
NOTE 3-- RESTRICTED CASH
Restricted cash represents funds held by the Company's attorney from
the proceeds of the note issued on June 27, 1996 net of payments for deferred
offering costs.
NOTE 4-- NOTES PAYABLE--RELATED PARTIES
The Company has borrowed funds from officers and stockholders to
finance its operations. The notes are due on demand (except as described below)
and bear interest at the rate of 10% per annum.
In October 1995, the Company agreed to repay a portion of its debt owed
to a stockholder as follows:
1. $100,000 upon completion of its private placement.
2. $121,000 from corporate receipts other than the private
offering.
As of September 30, 1996 (unaudited), the stockholder has been paid
$160,000.
At September 30, 1996, (unaudited), notes payable--related parties
amounted to $554,076 and accrued interest payable amounted to $336,859.
NOTE 5-- PAYROLL TAXES PAYABLE
The Company owed federal and New Jersey payroll taxes from the fourth
quarter of 1993 through the fourth quarter of 1995. Interest and penalties have
been accrued. In January 1996, the Company paid approximately $150,000 including
interest and penalties to the Internal Revenue Service and the State of New
Jersey and agreed to repay the balances owed from the proceeds of the proposed
public offering (see Note 8). As of September 30, 1996, such penalties and
interest continued to accrue.
In January and March 1996, the Internal Revenue Service filed tax liens
totalling $92,007 for unpaid payroll taxes for the quarters ended September 1994
through June 1995.
After completion of the Company's public offering (see Note 8), a portion of the
proceeds was used to release these liens.
8
<PAGE>
TELLURIAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(unaudited)
NOTE 6-- ROYALTIES
In connection with the acquisition of technology rights, the Company
was obligated to pay royalties based upon revenues at the rate of 4% of image
generator sales and 1% of other revenue, as defined. Such agreement stipulates
that the royalties paid shall not exceed $1,500,000. Royalty expense amounted to
$5,329, $21,530, $8,573 and $15,889 for the nine months ended September 30, 1996
and 1995 (unaudited) and for the years ended December 31, 1995 and 1994,
respectively.
In July and August 1996, the Company entered into agreements to
terminate two-thirds of all future royalty payments as of the respective dates
of the agreements. These agreements call for total payments of $150,000 as well
as a payment of $10,529 for unpaid royalties as follows:
1. $88,029 within ten business days from the closing of the Company's
proposed public offering (see Note 8) but no later than
March 31, 1997.
2. $72,500 will be due and payable one year after the initial
payments.
Due to the nature of these expenditures, the Company has elected to include the
affect of these agreements in its Research and Development costs for the quarter
ended September 30, 1996.
After completion of the Company's public offering (see Note 8), a portion of the
proceeds was used to complete the Company's obligation for the payment of
$88,029.
NOTE 7-- CUSTOMER DEPENDENCY
The Company has been dependent upon a small base of customers for the
generation of its revenue. During the nine months ended September 30, 1996 two
customers accounted for 85% of the Company's revenue. During the year ended
December 31, 1995, three customers accounted for 67% of the Company's revenue.
NOTE 8-- PUBLIC OFFERING
The Company filed a registration statement on Form SB-2 under the
Securities Act of 1933, as amended, for the purpose of registering its
securities for sale to the public.
Pursuant to the registration statement, the Company offered 1,400,000
shares of $.01 par value common stock for $7,000,000 and 1,850,000 five-year
warrants (to purchase 1,850,000 shares of $.01 par value common stock at $6.00
per share) for $462,500. In addition, 450,000 shares have been sold by certain
existing stockholders for $2,250,000. The Company had not received any proceeds
from the sale of these shares as of September 30, 1996.
On November 8, 1996 the Company completed its public offering and
received net proceeds of $6,369,426 after deduction of various offering
expenses.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY AND
ITS SUBSIDIARIES
INTRODUCTION
Tellurian, Inc. ("Tellurian" or the "Company") was founded in 1988 as a
South Carolina corporation by Drs. Ronald and Richard Swallow, and Mr. Charles
Powers to design, manufacture, and sell computer image generators for use in
flight and other simulation training. Since 1992, the Company's principal
product has been its second generation unit, the AT-200, a specialized computer,
which is largely used in simulators for training aircraft and ship pilots.
Since 1994, the Company has been designing and engineering its latest
image generation product known as the "EAGLE", a specialized computer which is
specifically designed for the virtual reality entertainment market. In July
1996, Tellurian delivered its first production units of the EAGLE pursuant to
purchase orders. The Company intends to utilize a portion of the net proceeds
from its recently completed offering to purchase production tooling necessary to
produce the Eagle products in higher volume. The Eagle which is available in
multiple resolution formats, is faster and less expensive to produce than the
AT-200. It is also different from the AT-200 in that it is being tailored for
entertainment use. Each unit is composed of proprietary hardware and software
which when combined with motion and sound simulate a full-immersion experience.
The "EAGLE" is intended for use at amusement/theme parks, video arcades, family
fun centers, and other Location Based Entertainment Centers ("LBE'S").
The Company expects that substantially all of its immediate future
revenues will be dependent upon the sales of the EAGLE image generator and the
development and introduction of its complementary products. The Company has
invested significant resources in product research, development, and engineering
activities, and has incurred significant losses while completing the EAGLE.
In January 1996, Tellurian signed a Technology Transfer Agreement with
Voyager pursuant to which Tellurian granted Voyager an irrevocable, exclusive,
assignable, fully paid license (the "License") to be the exclusive supplier of
the EAGLE Image Generator in various Asian and middle east countries. In
consideration of the License and technology transfer, Voyager agreed to pay
Tellurian $1,500,000, of which Tellurian has agreed that Voyager will pay
$650,000 to two parties unrelated to Tellurian for their services in connection
with such contract resulting in a net amount of $850,000 to Tellurian. As of
September 30, 1996, Tellurian has recognized revenues totaling approximately
$660,000 of the above referenced $850,000 from Voyager. Under the contract,
Tellurian will be entitled to receive royalties of 2% of Voyager's net sales of
the products and derivative products sold pursuant to the License.
10
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Plan of Operation
The Company plans to focus its efforts on the following three areas:
(I) increasing revenues through marketing efforts of its new EAGLE product; (ii)
developing its virtual reality helmet and motion system and establishing a
virtual reality showplace for demonstrations of Tellurian's products; and (iii)
entering into joint ventures or revenue sharing agreements with third parties
for the purpose of owning, operating and/or having an interest in one or more
LBE's for the sale and/or use of its virtual reality game units.
Marketing of the new EAGLE image generator will be accomplished by
directing efforts towards three different customer groups: (I) the training and
simulation market where Tellurian has been selling its AT-200 unit; (ii)
pursuing the Virtual Reality ("VR") game developer market through trade show
exhibits, advertisements and newsletters; and (iii) pursuing the inter-active
thrill-ride market. The Company intends to expand its current customer list as
several manufacturers move into this new type of themed adventure. Trade shows,
marketing brochures, and personal contacts will be used to gain customers.
To effectively market Tellurian's products, it is planning to have a
complete virtual reality showplace ready for demonstrations in the second
quarter of 1997. The Company's range of VR devices which includes modern fighter
cockpits, dune buggies, spacecraft and full immersion helmet experiences will be
displayed at the game room; but the centerpiece of the facility will be the six
cockpit "Battle of the Bulge" simulation. The Showplace will consist of
approximately 3,000 square feet in a retail zoned area of Orlando, Florida or
another suitable resort destination. The units will act as a marketing tool for
sales, and also as a very controlled environment for the introduction of new
experiences. Although this facility is expected to be geared to testing and
market response, it is anticipated to have a revenue stream.
The Company is engaged and intends to continue to engage in ongoing
research and development efforts to expand and enhance the technical
capabilities, design features and range of uses of its products. The Company
currently employs fifteen persons, nine of which are engineers. Due to the
increasing competition and rapid technological change in the VR marketplace, the
Company believes that it must continue to improve and refine its products. The
Company has recently hired two additional full time engineers and intends to
hire an additional two persons.
Tellurian intends to utilize the EAGLE technology to build its own
complete game units and use these units to establish one or more TEC's or LBE's
to be owned by Tellurian or jointly with others. Depending upon the cash
requirements of the entertainment center, Tellurian may finance it utilizing a
portion of the proceeds of its recently completed offering or Tellurian may
enter into joint venture or revenue sharing agreements with third parties such
as existing owners and operators of such centers. In some cases, the Company may
provide the equipment for the center and assist in the designing, developing,
construction and theming of the center. The Company has no experience in
owning, financing and operating such centers, and is likely to be dependent in
11
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such areas upon third parties to assist it or participate with it in
establishing such centers. There can be no assurances that Tellurian will be
successful in establishing or entering into revenue sharing agreements for one
or more such centers and deriving operating profits from such operations.
The Company has estimated the net proceeds from its recently completed
offering together with revenues from operations will be sufficient to meet the
Company's cash requirements for a period of between 12 and 15 months following
the date hereof. However, there can be no assurance that unexpected future
developments may result in the Company requiring additional financing and that
if required, additional financing will be available to the Company.
Results of Operations
Nine Months Ended September 30, 1996 vs. September 30, 1995
- -----------------------------------------------------------
Tellurian's net sales for the three months ended September 30, 1996
were $270,228, an increase of $141,758 or approximately 110.3% over the
comparable period of the prior year. Such increase was primarily derived from
Tellurian's license agreement with Voyager. For the three months ended September
30, 1996, the Company's gross profit was $245,998 as compared to $67,510 for the
comparable period of the prior year. Such increase in gross profit is primarily
due to revenues received from Voyager. Revenues derived from the sale of image
generators and ancillary software increased by $111,058 for the three months
ended September 30, 1996 as compared to the comparable period of the prior year.
Such increase was primarily due to the delivery of a large order to a maritime
training and simulation facility.
Tellurian's net sales for the nine months ended September 30, 1996 were
$812,572, an increase of $372,881 or approximately 84.8% over the comparable
period of the prior year. Such increase was primarily derived from Tellurian's
license agreement with Voyager. For the nine months ended September 30, 1996,
the Company's gross profit was $706,223 as compared to $207,833 for the
comparable period of the prior year. Such increase in gross profit is primarily
due to revenues received from Voyager. Revenues derived from the sale of image
generators and ancillary software decreased by $149,762 for the nine months
ended September 30, 1996 as compared to the comparable period of the prior year.
Such decrease was due to the delay in completing the production of the Company's
EAGLE. As a result of this delay, Tellurian filled purchase orders for EAGLE
with delivery of the AT-200 at prices which are substantially lower than the
normally quoted sales prices for its AT-200.
Tellurian's research and development activities for the three and nine
months ended September 30, 1996 were $292,710 and $567,740, respectively,
representing an increase of $180,707 and $229,610, over the respective
comparable periods of the prior year. The increases in research and development
12
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activities related to Tellurian's development of the "EAGLE," Tellurian's new
image generator product specifically designed for the virtual reality
entertainment market. Research and development activities include costs of the
Company's product design, quality insurance, engineering support activities and
microcode consulting. Also included in research and development are the costs of
purchasing certain royalty rights for the "flat shaded" technology.
Selling, general and administrative expenses for the three months ended
September 30, 1996 were $144,980, an increase of $79,911 or approximately 122.8%
from the comparable period of the prior year. Selling, general and
administrative expenses for the nine months ended September 30, 1996 were
$378,008, an increase of $146,979 from the comparable period of the prior year.
The increases in selling, general and administrative expenses were substantially
due to interest and penalties on unpaid payroll taxes, rent, employee medical
plan and amortization of discount on certain notes.
Selling, general and administrative expenses expressed as a percentage
of sales was approximately 53.6% for the three months ended September 30, 1996,
a decrease of approximately 3.0% from the comparable period of the prior year.
Selling, general and administrative expenses expressed as a percentage of sales
was approximately 46.5% for the nine months ended September 30, 1996, a decrease
of approximately 6.0% from the comparable period of the prior year. These
decreases were due to the sharp increase in sales derived from Voyager.
For the three months ended September 30, 1996, interest expense was
$31,915 as compared to $15,567 for the comparable period of the prior year. For
the nine months ended September 30, 1996, interest expense was $87,813 as
compared to $48,267 for the comparable period of the prior year. These increases
were due to Tellurian's long-term indebtedness of $895,000, $192,000 of which
was issued on December 27, 1995, $528,000 was issued on January 22, 1996 and
$175,000 issued on June 27, 1996.
Tellurian's net loss for the three months ended September 30, 1996 was
$218,931 as compared to $115,129 for the comparable period of the prior year.
Tellurian's net loss for the nine months ended September 30, 1996 was $313,941
as compared to $409,093 for the comparable period of the prior year. The
decreases in the net loss were primarily due to increases in revenues derived
from Voyager.
Liquidity and Capital Resources
From inception through March, 1995, cash flow from financing activities
principally came from Charles Powers, a founder of the Company, who was then a
principal stockholder of the Company prior to his transfer of his stockholdings
in October 1995 to a family member, and to a lesser extent, from monies borrowed
from officers, directors and their family members. In March 1995, the Company
sold 600,000 shares of Common Stock at a purchase price of $100,000. Between
December 1995 and January 1996 the
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Company raised $750,000 in gross proceeds from the sale of promissory notes in
the principal amount of $720,000 and 3,000,000 warrants which are automatically
convertible into 3,000,000 warrants identical to those sold in Tellurian's
public offering. In June 1996 the Company received gross proceeds of $175,000
from the sale of its promissory notes in the principal amount of $175,000,
$25,000 of which automatically converted into 25,000 shares of the Company's
Common Stock upon the completion of its public offering in November 1996.
In November 1996, the Company sold 1,400,000 shares of its Common Stock
at an offering price of $5.00 per share and 2,127,500 Common Stock Purchase
Warrants at an offering price of $.25 per share. The Warrants are exercisable
over a period of five years expiring November 8, 2001 at an exercise price of
$6.00 per share. The Company received net proceeds of approximately $6,300,000
from the offering. The Company believes that the proceeds of such offering
combined with cash from operations will be sufficient to meet its cash and
liquidity needs over the next twelve to fifteen months.
During the nine months ended September 30, 1996 and 1995, net cash of
$298,533 and $115,603, respectively, was used in operating activities. During
the nine months ended September 30, 1996 and 1995, net cash of $24,132 and
$10,897, respectively, was used in investing activities to purchase property and
equipment. During the nine months ended September 30, 1996 and 1995, net cash
was provided by financing activities totaling $289,811 and $133,400,
respectively. During the nine months ended September 30, 1996, the Company
received $703,000 in proceeds from long-term debt and $45,494 in proceeds from
notes to related parties and retired $160,000 in notes payable to related
parties. During the nine months ended September 30, 1995, the Company received
proceeds from the sale of its Common Stock of $90,266.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings: None
------------------
Item 2. Changes in Securities: None
----------------------
Item 3. Defaults Upon Senior Securities: None
--------------------------------
Item 4. Submission of Matters to a Vote of Security Holders:
----------------------------------------------------
None
Item 5. Other Information: None
------------------
Item 6. Exhibits and Reports on Form 8-K:
---------------------------------
(a) Exhibits
11 - Earnings per Share (See note 2.)
27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter
ended September 30, 1996.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELLURIAN, INC.
--------------------
(Registrant)
Dated: May 14, 1997 /s/Stuart French
--------------------------------
Stuart French, President and
Director
/s/Michael Hurd
--------------------------------
Michael Hurd, Vice President of
Administration and Finance
and Chief Accounting Officer
and Director
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S BALANCE SHEETS AS OF DECEMBER 31, 1995 AND SEPTEMBER 30, 1996
(UNAUDITED) AND STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE THREE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-1-1996 JAN-1-1996
<PERIOD-END> SEP-30-1996 DEC-31-1995
<CASH> 6,276 39,130
<SECURITIES> 0 0
<RECEIVABLES> 134,362 5,000
<ALLOWANCES> 0 0
<INVENTORY> 168,570 87,218
<CURRENT-ASSETS> 321,907 139,159
<PP&E> 101,372 84,446
<DEPRECIATION> 60,870 51,735
<TOTAL-ASSETS> 680,373 223,560
<CURRENT-LIABILITIES> 2,044,423 2,004,669
<BONDS> 0 0
0 0
0 0
<COMMON> 16,000 16,000
<OTHER-SE> (2,275,050) (1,989,109)
<TOTAL-LIABILITY-AND-EQUITY> 680,373 223,560
<SALES> 812,572 477,311
<TOTAL-REVENUES> 812,572 477,311
<CGS> 106,349 339,220
<TOTAL-COSTS> 106,349 339,220
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 87,813 64,356
<INCOME-PRETAX> (313,941) (669,665)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (313,941) (669,665)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (313,941) (699,665)
<EPS-PRIMARY> (0.02) (0.48)
<EPS-DILUTED> (0.20) (0.48)
</TABLE>
