<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1999
Commission file number: 000-26047
TVTRAVEL.COM, INC.
(Exact name of Small Business Issuer as Specified in Its Charter)
Florida 65-0609891
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
428 West Sixth Avenue
Vancouver, British Columbia V5Y 1L2
(Address of Principal Executive Offices)
604-801-5566
(Issuer's Telephone Number, Including Area Code)
Realm Production and Entertainment, Inc.
4950 West Prospect Road
Fort Lauderdale, Florida 33309
(Former Name, Former Address and Former
Fiscal Year, if Changed Since
Last Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [CHECK MARK] No
---- ------------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: November 11, 1999: 8,286,026 shares
of common stock, $.005 par value per share.
<PAGE>
TVTRAVEL.COM, INC. AND SUBSIDIARIES
INDEX
Page
PART I - FINANCIAL INFORMATION ----
Item 1 - Financial Statements
Consolidated Balance Sheets (Unaudited)
as of June 30, 1999 and December 31, 1998 .............................3
Consolidated Statements of Operations (Unaudited) For the Six
Months and Three Months Ended June 30, 1999 and 1998...................4
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 1999 and 1998........................5
Notes to Consolidated Financial Statements...........................6-8
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................................9
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings.................................................11
Item 2 - Changes in Securities and Use of Proceeds.........................11
Item 3 - Defaults Upon Senior Securities...................................11
Item 4 - Submission of Matters to a Vote of Security Holders...............11
Item 5 - Other Information.................................................11
Item 6 - Exhibits and Reports on Form 8-K..................................11
Signatures.................................................................11
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TVTRAVEL.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
ASSETS June 30, December 31,
1999 1998
------------ ---------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 2,496 $ 68,261
Accounts Receivable (Net of Allowance for Doubtful
Accounts of $36,000 for June 30, 1999 and $41,000
for December 31, 1998) 127,905 155,182
Prepaid Expenses and Other 15,760 11,165
------------ -----------
Total Current Assets 146,161 234,608
------------ -----------
Property and Equipment, at Cost (Net of Accumulated
Depreciation of $202,752 for June 30, 1999 and $73,752
for December 31, 1998) 1,101,759 1,216,629
OTHER ASSETS:
Security Deposits 26,680 26,680
Goodwill 21,971 --
Capitalized Production Costs 1,081,439 1,161,605
------------ -----------
1,130,090 1,188,285
------------ -----------
Total Assets $ 2,378,010 $ 2,639,522
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Portion of Loans Payable $ 1,065,496 $ 877,496
Notes Payable - Related Parties 135,556 145,431
Current Portion of Capital Lease Obligations 107,829 120,931
Film Costs Payable 100,000 100,000
Accounts Payable and Accrued Expenses 402,407 456,034
Accrued Salaries 13,424 50,000
------------ -----------
Total Current Liabilities 1,824,712 1,749,892
CAPITAL LEASE OBLIGATIONS 30,968 62,556
LOANS PAYABLE 10,188 14,801
------------ -----------
Total Liabilities 1,865,868 1,827,249
------------ -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock ($.01 Par Value; 2,000,000
Shares Authorized)
Convertible Preferred Stock - Series A
($.01 Par Value; 375,000 Shares Authorized;
No Shares Issued and Outstanding) 0 0
Convertible Preferred Stock - Series B
($.01 Par Value; 375,000 Shares Authorized;
No Shares Issued and Outstanding) 0 0
Common Stock ($.005 Par Value; 10,000,000
Shares Authorized; 3,050,000 Shares Issued
and Outstanding) 15,246 14,681
Additional Paid-in Capital 2,351,835 2,190,403
Accumulated Deficit (1,854,939) (1,392,811)
------------ -----------
Total Stockholders' Equity 512,142 812,273
------------ -----------
Total Liabilities and Stockholders' Equity 2,378,010 $ 2,639,522
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-3-
<PAGE>
TVTRAVEL.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------------------- -------------------------------------
1999 1998 1999 1998
-------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
REVENUES $ 303,494 $ 0 $ 685,518 $ 0
COST OF SALES 22, 374 0 46,497 0
-------------- -------------- ------------- --------------
GROSS PROFIT 281,120 0 639,021 0
-------------- -------------- ------------- --------------
OPERATING EXPENSES
Amortization of Production Costs 100,000 48,384 100,000 48,384
Depreciation and Amortization 64,500 750 129,000 1,500
Salaries and Fringe Benefits 191,067 49,863 376,247 93,280
Legal and Accounting 19,307 3,347 38,867 8,574
Consulting Fees 30,923 5,000 85,441 18,750
Phones and Utilities 11,141 2,995 22,768 5,402
Rent 48,670 3,479 89,245 5,329
Other Selling, General and Administrative 75,032 9,066 190,114 17,600
Total Operating Expenses 540,640 122,884 1,031,682 198,819
-------------- -------------- ------------- --------------
LOSS FROM OPERATIONS (259,520) (122,884) (392,661) (198,819)
-------------- -------------- ------------- --------------
OTHER INCOME (EXPENSES):
Interest Income 4 2 64 3
Interest Expense (33,566) 0 (69,531) 0
(33,562) 2 (69,467) 3
-------------- -------------- ------------- --------------
NET LOSS $ (293,082) $ (122,882) $ (462,128) $ (198,816)
============== ============== ============= ==============
BASIC AND DILUTED:
Net Loss Per Common Share $ (0.10) $ (0.05) $ (0.16) $ (0.09)
============== ============== ============= ==============
Weighted Common Shares Outstanding 2,994,841 2,436,935 2,966,298 2,290,697
============== ============== ============= ==============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-4-
<PAGE>
TVTRAVEL.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
-----------------------------------------
1999 1998
------------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (462,128) $ (198,816)
Adjustments to Reconcile Net Loss to Net Cash Flows
Used in Operating Activities:
Depreciation 129,000 1,500
Amortization of Film Costs 100,000 48,384
Stock Issued for Services 90,026 612,000
(Increase) Decrease in:
Accounts Receivable 27,277 0
Prepaid Expenses and Other (4,595) 3,009
Increase (Decrease) in:
Accounts Payable and Accrued Expenses (53,627) 20,375
Accrued Salaries and Fringe Benefits 13,424 53,000
Due to Officer 0 (1,167)
-------------- --------------
Net Cash Flows (Used In) Provided by Operating Activities (160,623) 538,285
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Property and Equipment (14,130) 0
Increase in Capitalized Production Costs (19,834) (644,014)
-------------- --------------
Net Cash Flows Used in Investing Activities (33,964) (644,014)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock 0 214,000
Principal Repayments of Notes Payable - Related Parties (9,875) (10,828)
Principal Repayments of Capital Lease Obligations (44,690) 0
Proceeds from Issuance of Notes Payable 183,387 0
Principal Repayments of Notes Payable 0 (102,500)
-------------- --------------
Net Cash Flows Provided by Financing Activities 128,822 100,672
-------------- --------------
Net Decrease in Cash (65,765) (5,057)
Cash - Beginning of Period 68,261 5,786
-------------- --------------
Cash - End of Year $ 2,496 $ 729
============== ==============
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash Paid During Year for:
Interest $ 0 $ 0
-------------- --------------
Income Taxes $ 0 $ 0
-------------- --------------
Conversion of preferred stock to common $ 0 $ 200,000
-------------- --------------
Issuance of common stock in exchange for reduction in accrued salary $ 50,000 $ 0
-------------- --------------
Common stock issued in connection with acquisition $ 21,971 $ 0
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-5-
<PAGE>
TVTRAVEL.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared assuming
tvtravel.com, Inc. (formerly Realm Production and Entertainment, Inc.) and
Subsidiaries (collectively the "Company") will continue as a going concern. The
Company's need to generate cash from operations and obtain additional financing
raises substantial doubt about its ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty. While the Company is continuing to
monitor and reduce its operating expenses, including payroll, it is also
considering the sale of certain assets or operations as well as exploring other
alternatives.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. For further information, refer to
the Company's annual consolidated financial statements and footnotes. The
accompanying consolidated financial statements for the interim periods are
unaudited and reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the financial position and operating results for the periods
presented. These financial statements should be read in conjunction with the
financial statements for the year ended December 31, 1998 and notes thereto
contained in the Report on Form 10-SB, as amended, of TVTravel.com, Inc. (the
"Company") as filed with the Securities and Exchange Commission. The results of
operations for the six months ended June 30, 1999 are not necessarily indicative
of the results for the full fiscal year ending December 31, 1999.
NOTE 2- LOSS PER SHARE
Basic earnings per share is computed by dividing net loss, after adding back
preferred stock dividends accumulated during the period, by weighted average
number of shares of common stock outstanding during each period. Diluted loss
per share is computed by dividing net loss by the weighted average number of
shares of common stock, common stock equivalents and potentially dilutive
securities outstanding during each period. Diluted loss per common share is not
presented because it is anti-dilutive.
NOTE 3- SHAREHOLDERS' EQUITY
Common Stock
During the six months period ended June 30, 1999, the Company converted accrued
salaries amounting to $85,500 into 69,517 shares of common stock at per share
prices ranging from $.95 to $2.125 per share.
During March 1999, the Company issued 5,000 shares of common stock in exchange
for professional services rendered. These shares were valued at $3.375 per
share, the fair value, and charged to operations.
-6-
<PAGE>
TVTRAVEL.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(UNAUDITED)
NOTE 3- SHAREHOLDERS' EQUITY (Continued)
Common Stock (Continued)
During April 1999, the Company issued 1,000 shares of common stock in exchange
for professional services rendered. These shares were valued at $3.00 per share,
the fair value, and charged to operations.
During May 1999, the Company issued 32,357 shares of common stock in exchange
for professional services rendered. These shares were valued at approximately
$.96 to $1.125 per share, the fair values, and charged to operations.
During March 1999, the Company agreed to exchange 5,859 shares of its common
stock for 7.5% of BRT Video, Inc. See Note 6.
NOTE 4 -COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income." This pronouncement sets forth requirements for
disclosure of the Company's comprehensive income and accumulated other
comprehensive items. In general, comprehensive income combines net income and
"other comprehensive items," which represent certain amounts that are reported
as components of stockholders' equity in the accompanying balance sheet,
including foreign currency translation adjustments. For the six months ending
June 30, 1999, the Company had no comprehensive income.
NOTE 5 - FUTURE EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" was issued in June 1997. This statement changes the way public
companies report information about segments of their business in their annual
financial statements. This statement is effective for the Company's fiscal year
ending December 31, 1999. However, information is not to be presented for
interim financial statements in the first year of implementation. Adoption of
SFAS No. 131 is not expected to have a material effect on the Company's
financial statement disclosure.
NOTE 6 - ACQUISITION
The Company entered into a stock purchase agreement with BRT Video Inc. On
October 1, 1998, the Company exchanged 50,000 shares of its common stock for
3,760 shares (72.5%) of BRT Video, Inc. During March 1999, the Company exchanged
5,859 shares of its common stock for an additional 7.5% of BRT Video, Inc. The
Company is accounting for this additional acquisition of 7.5% using the purchase
method of accounting. The purchase price exceeded the fair value of net
liabilities assumed by approximately $21,942. The excess has been applied to
goodwill and is being amortized on a straight-line basis over five years.
-7-
<PAGE>
TVTRAVEL.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(UNAUDITED)
NOTE 6 - ACQUISITION (Continued)
The following unaudited pro forma consolidated results of operations of the
Company assumes the acquisition had occurred January 1, 1998.
Three Months Six Months
Ended June 30, Ended June 30,
1998 1998
----------------- --------------------
Net Sales $ 397,650 $ 541,700
Net Loss $ (29,000) $ (312,000)
Net Loss per Common Share $ (.01) $ (.14)
Pro forma data does not purport to be indicative of the results that would have
been obtained had these events actually occurred at the beginning of the periods
presented and is not intended to be a projection of future results.
NOTE 7 -SUBSEQUENT EVENT
During September 1999, the Company's Board of Directors approved the
distribution to its shareholders as of September 29, 1999 of 100% of the stock
of its subsidiary, VidKid Distribution, Inc. The transaction is expected to be
completed during the fourth quarter of 1999 and is pending relevant agreements
and approvals.
During September 1999, the Company's Board of Directors declared a one-for-ten
reverse stock split whereby each share of common stock issued and outstanding on
September 27, 1999 was reclassified and changed to one-tenth of one share of
common stock, rounded down to the nearest whole share.
On October 22, 1999, pursuant to the terms of that certain Agreement and Plan of
Merger and Reorganization, (the "Merger Agreement"), dated as of September 17,
1999, by and among Realm Production and Entertainment, Inc., Realm Acquisition
Corp., a wholly-owned subsidiary of the Company ("Merger Sub") and
emailthatpays.com ("email"), Merger Sub was merged (the "Merger") with and into
email. Pursuant to the Merger, the shareholders of email received one share of
the Company's common stock in exchange for each share of email's common stock,
or an aggregate of 6,572,000 shares (post reverse-split) of the Company's common
stock.
In connection with the Merger, the Company issued 393,016 shares (post
reverse-split) of its common stock in full satisfaction of certain indebtedness
amounting to $432,318 and issued 300,000 shares (post reverse-split) of common
stock to a third party in exchange for the assignment to the Company of a
$500,000 obligation owed to this third party. Also in connection with the
Merger, the Company issued an aggregate of 525,000 shares (post reverse-split)
of its common stock as an investment banking fee.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This report on Form 10-QSB contains forward-looking statements which are made
pursuant to the safe harbor provisions of the Securities Litigation Reform Act
of 1995 and which are subject to risks and uncertainties which could cause
actual results to differ materially from those discussed in the forward- looking
statements and from historical results of operations. Among the risks and
uncertainties which could cause such a difference are those relating to the
Company's dependence upon certain key personnel, its ability to manage its
growth, and the risk of economic and market factors affecting the Company or its
customers.
Results of Operations
Six and three months ended June 30, 1999 compared to six and three months ended
June 30, 1998, respectively.
Net sales for the six and three months ended June 30, 1999 were $685,518 and
$303,494, respectively, as compared to sales for the six and three months ended
June 30, 1998 of $0. This increase is attributable to the fact that on October
1, 1998, the Company purchased 72.5% of BRT Video, Inc. (See Note 6).
Cost of sales is attributable to BRT Video, Inc. and was $46,497 or 7% of sales
for the six months ended June 30, 1999.
Amortization of production costs for the six and three months ended June 30,
1999 was $100,000 as compared to $48,384 for the six and three months ended June
30, 1998. This increase is due to management's continuing assessment and
write-off of intellectual properties in various stages of development.
Salaries and fringe benefits were $376,247 and $191,067 for the six and three
months ended June 30, 1999 as compared to $93,280 and $49,863 for the six and
three months ended June 30, 1998, respectively. The increase was directly
attributable to the acquisition of BRT Video, Inc.
Legal and accounting fees were $36,054 and $16,494 for the six and three months
ended June 30, 1999 as compared to $8,574 and $3,347 for the six and three
months ended June 30, 1998, respectively. The increase is attributable to an
increase in accounting and auditing fees, primarily attributable to the
acquisition of BRT Video, Inc.
Consulting fees were $85,441 and $30,923 for the six and three months ended June
30, 1999 as compared to $18,750 and $5,000 for the six and three months ended
June 30, 1998. The increase is primarily attributable to the acquisition of BRT
Video, Inc. and investment banking fees.
Rent expense was $89,245 and $48,670 for the six and three months ended June 30,
1999 as compared to $5,329 and $3,479 for the six and three months ended June
30, 1998, respectively. The increase was directly attributable to the
acquisition of BRT Video, Inc. and the fact that the Company and BRT relocated
into their new production facility.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
General and administrative expenses, which includes contract labor, travel and
entertainment, insurance and other expenses, were $190,113 and $75,032 for the
six and three months ended June 30, 1999 as compared to $17,600 and $9,066 for
the six and three months ended June 30, 1998, respectively. The increase is
primarily attributable to the acquisition of BRT Video, Inc.
As a result of the foregoing factors, the Company incurred losses of
approximately $462,128 or ($.16) per share for the six months ended June 30,
1999 as compared to a loss of approximately $198,816 or ($.09) per share for the
six month period ended June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company had stockholders' equity of approximately
$512,000. Since its inception, it has incurred losses of approximately
$1,852,000. The Company's operations and growth have been funded by loans from
third parties, the sale of common stock with gross proceeds of approximately
$1,000,000 and the issuance of preferred stock which resulted in net proceeds to
the Company of approximately $375,000. These funds have been used for working
capital, capital expenditures, and the acquisition of the "Howdy Doody" library
consisting of 130 episodes.
The Company has no other material commitments for capital expenditures. The
Company believes that it has sufficient liquidity to meet all of its cash
requirements for the next twelve months and that subsequent cost reductions and
increased marketing efforts will provide sufficient cash flows to meet their
operating needs and grow its regional market share. The Company believes,
however, that additional funding will be necessary to expand the production
business.
RISK OF YEAR 2000 ISSUES
The Company believes it does not utilize software within its business processes
that may be impacted by the year 2000 issue. The year 2000 issue exists because
many computer systems and applications currently use two digit date fields to
designate a year. Data sensitive systems may recognize the year 2000 as 1900, or
not at all. This inability to properly treat the year 2000 could cause systems
to process critical financial and operational information incorrectly.
-10-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not involved in any material litigation.
Item 2. Changes in Securities and Use of Proceeds.
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) Furnish the exhibits required by Item 601 of Regulation S-B.
27 Financial Data Schedule
(b) Reports on Form 8-K.
There were no current reports on Form 8-K filed by the Company during
the six months ended June 30, 1999.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
TVTRAVEL.COM, INC.
Dated: November 12, 1999 By: /s/ Daniel Hunter
----------------------------
Daniel Hunter
Chief Executive Officer
-11-
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------ ----------- --------
27 Financial Data Schedule *1
- ------------
*1 Filed electronically pursuant to Item 401 of Regulation S-T.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
TVTRAVEL.COM, INC. AND SUBSIDIARIES FORM 10-QSB FINANCIAL STATEMENTS FOR THE SIX
MONTHS ENDED JUNE 30, 1999
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,496
<SECURITIES> 0
<RECEIVABLES> 163,905
<ALLOWANCES> (36,000)
<INVENTORY> 0
<CURRENT-ASSETS> 146,161
<PP&E> 1,304,511
<DEPRECIATION> (202,752)
<TOTAL-ASSETS> 2,378,010
<CURRENT-LIABILITIES> 1,824,712
<BONDS> 0
0
0
<COMMON> 15,246
<OTHER-SE> 496,896
<TOTAL-LIABILITY-AND-EQUITY> 2,378,010
<SALES> 685,518
<TOTAL-REVENUES> 685,518
<CGS> 46,497
<TOTAL-COSTS> 46,497
<OTHER-EXPENSES> 1,031,682
<LOSS-PROVISION> (392,661)
<INTEREST-EXPENSE> 69,531
<INCOME-PRETAX> (462,128)
<INCOME-TAX> 0
<INCOME-CONTINUING> (462,128)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (462,128)
<EPS-BASIC> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
