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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
Commission file number 1-9206
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ENTOURAGE INTERNATIONAL, INC.
(Name of Small Business Issuer in its charter)
Texas 76-0118305
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
32240 Paseo Adelanto
Suite A
San Juan Capistrano, CA 92675
- ----------------------- -----
(Address of Principal executive offices) (Zip Code)
Issuer's telephone number, including area code (714) 488-2184
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Securities registered pursuant to section 12(b) of act: None
Securities registered pursuant to section 12 (g) of act: None
Common stock $.001 par value.
Check whether the issuer (1) filed all reports required to be filed by
Section 13 of 15 (d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
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As of February 28, 1998, there were 22,893,074 shares outstanding of the
issuer's common stock, $.001 par value.
1
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ENTOURAGE INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Index to Condensed Financial Statements
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Page
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Condensed Balance Sheets
December 31, 1997 and September 30, 1997 3
Condensed Statements of Operations
For the Three Months Ended December 31, 1997
and December 31, 1996 4
Condensed Statements of Cash Flows
For the Three Months Ended December 31, 1997
and December 31, 1996 5
Notes to be Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION 8
2
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ENTOURAGE INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31 September 30
1997 1997
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<S> <C> <C>
ASSETS
Current Assets:
Cash $ 0 $ 0
Trade accounts receivable, net 37,392 9,377
Inventory 105,417 77,302
Other current assets 17,696 2,122
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Total current assets $160,505 $ 88,801
Property and equipment, net 76,848 77,493
Intangible assets, net 342,436 277,725
Other assets 24,106 26,110
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Total Assets 603,895 470,129
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 186,292 $ 112,795
Notes payable 67,083 86,609
Current portion of long-term debt 35,585 25,315
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288,960 224,719
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Long-term debt 197,370 99,337
Stockholders' Equity:
Common stock, $.001 par value. Authorized
25,000,000 shares; issued and
outstanding 22,893,074 shares at December
1997 and at September 1997 $ 22,893 $ 22,893
Additional paid-in capital 3,797,592 3,797,592
Accumulated deficit (3,702,920) (3,674,412)
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Total stockholders' equity 117,565 146,073
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Total Liabilities and Stockholders' Equity $ 603,895 $ 470,129
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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ENTOURAGE INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Three
Months Months
Ended Ended
December 31 December 31
1997 1996
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<S> <C> <C>
Net sales $308,247 $268,700
Cost of sales 53,723 59,122
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Gross margin 254,524 209,578
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Expenses:
Selling and G & A 234,206 192,681
Advertising 28,705 18,531
Depreciation and amortization 15,921 4,165
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Total expenses 278,832 215,377
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Operating income (loss) (24,308) (5,799)
Interest expense (4,209) (917)
Other income (expense) 9 1,835
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Gain (loss) from operations (28,508) (4,881)
Income tax expense 0 0
Net income (loss) (28,508) (4,881)
========= =========
Net income (loss) per common share (.002) (.001)
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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ENTOURAGE INTERNATIONAL, INC.
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Three
Months Months
Ended Ended
December 31 December 31
1997 1996
---- ----
<S> <C> <C>
Net cash provided by (used in)
operating activities $(11,072) $(11,073)
Net cash provided by (used in)
investing activities (77,705) 0
Net cash provided by (used in)
financing activities 88,777 30,653
-------- --------
Net increase (decrease) in cash 0 19,580
Cash at beginning of period 0 0
Cash at end of period $ 0 $ 19,580
======== ========
</TABLE>
5
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ENTOURAGE INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Forward-looking statements in this report, including without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties including without limitation the following: (i) the Company's
plans, strategies, objectives, expectations and intentions are subject to change
at any time at the discretion of the Company; (ii) the Company's plans and
results of operations will be affected by the Company's ability to manage its
growth and inventory; (iii) the Company's business is highly competitive and the
entrance of new competitors into or the expansion of the operations of existing
competitors in the Company's markets and other operations in the retail climate
could adversely affect the Company's plans and results of operations; and (iv)
other risks and uncertainties from time to time in the Company's filings with
the Securities and Exchange Commission.
INTERIM FINANCIAL STATEMENTS. The accompanying financial statements have been
- ----------------------------
prepared in accordance with the instructions to quarterly reports on Form 10-
QSB. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and changes in cash flows at December 31, 1997 and for all
periods presented have been made. Certain information and footnote data
necessary for fair presentation of financial position and results of operations
in conformity with generally accepted accounting principals have been condensed
or omitted. It is therefore suggested that these statements be read in
conjunction with the summary of significant accounting policies and notes to
financial statements included in the Company's annual Form 10-KSB. The results
of operations for the period ended December 31, 1997, are not necessarily
indicative of operating results for the full year.
INVENTORY NOTE AGREEMENT. The company negotiated an inventory note arrangement
- -------------------------
with Arizona Natural Resources (ANR), its primary supplier, to provide the
Company inventory financing in the form of a line credit of $44,000 on invoiced
amounts to the Company. The line of credit bears an interest rate of 10% per
annum. The amount of one sixth (1/6) of the principal balance outstanding on the
line of credit, plus any accrued interest thereon, shall be due and payable
commencing January 15, 1998, and continuing on the 15th day of each successive
month until the line of credit has been fully paid. The amount outstanding on
the line of credit was $43,922 as of December 31, 1997.
SETTLEMENT AGREEMENT. On December 5, 1997, the Company entered into a Settlement
- ---------------------
Agreement and Mutual Release of All Claims with the franchisee of the Atlanta,
Georgia store, closed in April 1997. In consideration, the Company issued the
franchisee a $59,855 non-interest bearing note and warrant to purchase 85,000
shares of the Company's common stock for $.08 per share. The note is due in 30
monthly installments of $1,995 from January 1998 through June 2000 and the
warrant is exercisable at anytime prior to its expiration on December 5, 2000.
6
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ENTOURAGE INTERNATIONAL, INC.
MANAGEMENT DISCUSSIONS AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's liquidity shortage showed some improvement but continued to
be severe during the quarter ending December 31, 1997. The Company had current
liabilities in excess of current assets of $128,455 as of December 31, 1997,
compared with current liabilities in excess of current assets of $135,918 as of
September 30, 1997.
On September 1, 1997, the Company obtained a $50,000 operating line of
credit, against which $3,000 in borrowings as of December 31, 1997. However the
Company must still rely primarily on operating cash flow and cash management to
sustain its operations. The Company's 1998 operating plan contemplates improved
operating results and cash flow.
Cash remained at $0 as of December 31, 1997, and September 30, 1997.
The Company increased inventory levels from $77,300 to approximately
$105,500 during the quarter ended December 31, 1997 primarily as a result of a
higher warehouse inventory level established in anticipation of a new
advertising campaign.
Accounts payable and accrued liabilities have been increased from
approximately $113,000 as of September 30, 1997 to $186,200 as of December 31,
1997, primarily due to accruals for 1997 audit fees, a new catalog and
professional fees.
RESULTS OF OPERATIONS - QUARTER ENDED DECEMBER 31, 1997 COMPARED WITH QUARTER
- -----------------------------------------------------------------------------
ENDED DECEMBER 31, 1996.
- ------------------------
The net loss for the quarter ended December 31, 1997, was $28,508 ($.002
per share), compared to the net loss of $4,881 ($.001 per share).
Net sales, for operations, for the quarter ended December 31, 1997 were
$308,250 compared with net sales of $268,700 for the quarter ended December 31,
1996. The increase in net sales was primarily due to increased advertising in
the form of a new catalog for the period .
Gross margin was 82.5% for the quarter ended December 31, 1997 and 78% for
the quarter ended December 31, 1996.
Operating expenses for the quarter ended December 31, 1997 were about
$279,000 compared with about $215,000 for the quarter ended December 31, 1996.
Overall, the company believes that current operating expenses are at a minimum
level to allow the Company to improve its sales volume during fiscal year 1998.
7
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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There are no significant changes to the information reported in the
Form 10-KSB for the year ended September 30, 1997.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a vote of Security Holders
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None.
Item 5. Other Information
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None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
( a ) Exhibits
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Exhibit 27 - Financial Data Schedule
( b ) Reports on Form 8-K
-------------------
Announcement of acquisition of Biogime Franchise Services,
Inc. (USA) as of January 31, 1997.
8
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SIGNATURES
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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.
ENTOURAGE INTERNATIONAL, INC.
-----------------------------
(registrant)
Date: April 22, 1998 By: /s/ John C. Riemann
--------------------
John C. Riemann
Chief Executive Officer
(Responsible Financial Officer)
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 37,392
<ALLOWANCES> 0
<INVENTORY> 105,417
<CURRENT-ASSETS> 160,505
<PP&E> 231,609
<DEPRECIATION> 154,761
<TOTAL-ASSETS> 603,895
<CURRENT-LIABILITIES> 288,960
<BONDS> 0
0
0
<COMMON> 22,893
<OTHER-SE> 94,672
<TOTAL-LIABILITY-AND-EQUITY> 603,895
<SALES> 308,247
<TOTAL-REVENUES> 308,256
<CGS> 53,723
<TOTAL-COSTS> 287,929
<OTHER-EXPENSES> 44,626
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,209
<INCOME-PRETAX> (28,508)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (28,508)
<EPS-PRIMARY> (.002)
<EPS-DILUTED> 0
</TABLE>
