FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the
Securities and Exchange Act of 1934
For Three Months Ended Commission File Number
January 31, 1996 33-4734-D
RILEY INVESTMENTS, INC.
------------------------------
(Formerly Pace Group International, Inc.)
(Exact Name of Registrant as Specified in its Charter)
OREGON 93-095078
- -------------------- ---------
State of Incorporation (Federal I.D. Number)
12725 S.W. 66th, Portland, OR 97223
- ------------------------------ -------
(Address of Principal Executive Offices) (Zip Code)
(503) 684-4111
- --------------
(Registrant's Telephone Number)
Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 of 15 (d) of the Securities Act of 1934 during the preceding
12 months (or for the 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 t NO
-----
The number of shares outstanding of each of the Issuer's classes of Common
Shares, as of the latest practicable date.
$.0001 Par Value 386,702 Common Shares
Common Shares Outstanding at January 31, 1996
(Class of Securities) (Outstanding Securities)
RILEY INVESTMENTS, INC.
(Formerly Pace Group International and Subsidiary)
CONTENTS
PART I: FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Condensed Balance Sheets: January 31,
1996 and 1995 2
Condensed Statements of Operations for each of
the three months ended January 31, 1996 and 1995 3
Condensed Statements of Stockholders' Equity
(Deficiency) for each of the three months ended
January 31, 1996 and 1995 4
Condensed Statements of Cash Flows for each of the
three months ended January 31, 1996 and 1995 5
Notes to condensed financial statements 6-10
Item 2. Management's Discussion and Analysis of
Financial Condition of Results of Operations 11
PART 11: OTHER INFORMATION
Exhibits and Reports on Form 8-K 12
RILEY INVESTMENTS, INC.
(Formerly Pace Group International and Subsidiary)
PART I: FINANCIAL INFORMATION
RILEY INVESTMENTS, INC.
(Formerly Pace Group International, Inc. and Subsidiary)
Condensed Balance Sheets
Unaudited
-----------------------------
ASSETS January 31, January 31,
1996 1995
------------ ------------
Current Assets
Cash $10 $106,102
Accounts receivable, net 0 219,808
Other 0 34,574
------------ ----------
Total current assets 10 360,484
------------ ----------
Property and equipment, at cost:
Furniture and equipment 0 2,663,512
Less accumulated depreciation 0 (2,471,435)
Net property and equipment 0 192,077
------------ ----------
Capitalized production costs 0 33,403
------------ ----------
Total assets $10 $585,964
============ ==========
LIABILITIES AND NET CAPITAL DEFICIENCY
Current Liabilities:
Notes payable $0 $20,000
Accounts payable 0 24,206
Accrued liabilities 0 61,759
Deferred revenues 0 284,611
Long-term debt due within one year 0 37,916
-------- ----------
Total current liabilities 0 428,492
-------- ----------
Long-term debt due after one year 0 60,244
Long-term debt due to related party 0 370,570
-------- ----------
Total liabilities 0 859,306
-------- ----------
Stockholder's Equity (Deficiency):
Common stock, $.0001 par value;
16,000,000 shares authorized, 386,702
issued and outstanding as of January
31, 1996; 5,800,531 issued and
outstanding January 31, 1995 39 580
Additional paid-in capital 544,131 543,580
Retained deficit (544,160) (817,502)
--------- ---------
Total stockholders' equity
(deficiency) 10 (273,342)
-------- ---------
Total liabilities and $10 $585,964
-------- ----------
stockholders' equity
See accompanying notes to financial statements.
RILEY INVESTMENTS, INC.
(Formerly Pace Group International, Inc. and Subsidiary)
Condensed Statements of Operations
Unaudited
-----------------------------
Three Months Ended
----------------------------
January 31, January 31,
1996 1995
------------ ------------
Revenues $0 $186,344
Cost of revenues 0 (144,681)
-------- ---------
Gross profit 0 41,663
-------- --------
Operating Expenses:
Marketing 0 20,748
General and administrative 0 65,702
Total operating expenses 0 86,450
-------- --------
Operating loss 0 (44,787)
-------- --------
Other Income (Expense):
Interest, net 0 (8,547)
Gain on transfer of assets and 353,228
-------- --------
liabilities
Total of income (expense) 353,228 (8,547)
Net loss $353,228 ($53,334)
======== =========
Net loss per share (retroactively
restated for 15 to 1 reverse stock $0.91 ($0.14)
------- -------
split)
See accompanying notes to financial statements.
RILEY INVESTMENTS, INC.
(Formerly Pace Group International, Inc. and Subsidiary)
Condensed Statements of Stockholders' Equity (Deficiency)
for the three months ended January 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional Net
------------------------------
Issued
and
Outstanding $
------------- ------------
Paid-in Capital Retained DeficitCapital Deficiency
--------------- ----------------------------------
<S> <C> <C> <C> <C> <C>
Balance at November 1, 1994
5,800,531 $580 $543,580 ($764,168) ($220,008)
Net loss (53,334) (53,334)
-------------- ------------- ------------- ----------- -----------
Balance at October 31, 1995
5,800,531 $580 $543,580 ($817,502) ($273,342)
========== ========== ========== =========== ===========
Balance at November 1, 1995
5,800,531 $580 $543,580 ($897,388) ($353,228)
Net income from transfer of
substantially all assets
and liabilities to former
majority shareholder 353,228 353,228
15 to 1 reverse stock split (5,413,829) (541) 541 0
Additional capital
----------- -------------
contribution 10 10
----------- ---------- ----------
Balance at January 31, 1996
386,702 $39 $544,131 ($544,160) $10
========== ========== ========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
RILEY INVESTMENTS, INC.
(Formerly Pace Group International, Inc. and Subsidiary)
Condensed Statements of Cash Flows
Unaudited
-----------------------
Three Months Ended
-----------------------
January 31, 1996uary 31, 1995
-----------------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $353,228 ($53,334)
Adjustment to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 0 26,268
Changes in assets and 0 68,868
liabilities:
Accounts receivable
Other assets 0 (2,506)
Capitalized production costs 0 19
Accounts payable 0 (6,951)
Accrued liabilities 0 20,851
Assets and liabilities
transferred to former majority (353,228) 0
---------- --------
shareholder not affecting
operations
Net cash provided by 0 53,215
------- --------
operating activities
CASH FLOWS FROM INVESTING
ACTIVITIES:
Transfer of cash assets to (36,562)
-------- --------
former majority shareholder
CASH FLOWS FROM FINANCING
ACTIVITIES:
Additional capital contribution 10
Principal payments on long-term (8,931)
-------- ---------
debt
Net cash provided by (used 10 (8,931)
------- ---------
in) financing activities
Net increase (decrease) in cash (36,552) 44,284
Cash, beginning of period 36,562 61,818
------- --------
Cash, end of period $10 $106,102
======= ========
See accompanying notes to financial statements.
RILEY INVESTMENTS, INC.
(Formerly Pace Group International and Subsidiary)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JANUARY 31, 1996
RILEY INVESTMENTS, INC.
(Formerly Pace Group International, Inc. and Subsidiary)
Notes to Condensed Financial Statements
1. Significant Accounting Policies
-------------------------------
The Company and Description of Business
Riley Investments, Inc. (the Company) was incorporated in October, 1987 in
the State of Oregon under the name Pace Group International, Inc. On November
1, 1995 the name of Pace Group International, Inc. was changed to Riley
Investments, Inc.
Prior to November 1, 1995 the Company owned 100% of Pace International
Research (PIR) and produced, developed and finished English-Language-Training
programs for worldwide sale, distribution or licensing in the form of
audio/video tapes and desktop publishing text materials as well as post
production services for commercial and industrial enterprises.
Effective November 1, 1995, substantially all of the Company's assets and
liabilities, consisting of the common stock in PIR, the corporate name and
goodwill associated therewith were transferred to the former majority
shareholder of the Company, Edwin T. Cornelius, Jr. Also, on November 1, 1995,
Mr. Cornelius and others sold shares of common stock to Bridgeworks Capital to
enable Bridgeworks Capital to have majority control of the Company.
The assets and liabilities transferred to Mr. Cornelius were recognized at
their estimated fair market value and a gain of $353,228 on the transfer was
recognized by the Company in the financial statements for the quarter ended
January 31, 1996.
RILEY INVESTMENTS, INC.
(Formerly Pace Group International, Inc. and Subsidiary)
Notes to Condensed Financial Statements
1. Significant Accounting Policies, continued
The Company and Description of Business, continued
Following is a summary of the assets and liabilities transferred:
Liabilities, consisting primarily of a note
payable to Mr. Cornelius for $370,570$615,028
Current assets, consisting primarily of
cash of $36,562 and accounts receivable
of $75,865, at cost which approximates
fair market value (144,473)
Property and equipment, at cost (fair
market value was $470,555) (117,327)
Gain on transfer $ 353,228
After the transfer of assets and liabilities, the Company has no operations
and is basically a "shell" corporation.
Basis of Consolidation
Through October 31, 1995, the financial statements included the accounts of
the Company and its wholly owned subsidiary, PIR. All significant intercompany
accounts and transactions have been eliminated.
Depreciation
Depreciation of furniture and equipment through October 31, 1995 has been
computed using straight-line and accelerated methods over estimated useful lives
of five to seven years.
RILEY INVESTMENTS, INC.
(Formerly Pace Group International, Inc. and Subsidiary)
Notes to Condensed Financial Statements
1. Significant Accounting Policies, continued
Capitalized Production Costs
Costs associated with the production of video, audio and printed English-
Language-Training products are capitalized as either inventory or capitalized
production costs. Capitalized production costs are generally amortized in the
same ratio that current gross revenues bear to anticipated total gross revenues
for each product. In some instances the original estimates of gross revenues
may be revised as the sale pattern evolves.
Revenue and Cost Recognition
Revenues from sales of products through October 31, 1995 were recognized at
the time products were delivered. Revenues from services rendered were
recognized as they were performed. Through October 31, 1995, the Company also
received royalties on the sale of educational materials pursuant to the terms of
certain licensing agreements. Royalties were recognized as income when earned
pursuant to the agreements.
Licensees also pay paid a fee for the right to distribute the Company's
products in designated territories. Recognition of income from these payments
were deferred until the period in which the materials were delivered and
accepted by the licensee in accordance with the terms of the license agreement.
Income (Loss) Per Share
Net income (loss) per share has been computed based on the weighted average
common shares outstanding of 386,702, retroactively reflecting a 15 to 1
reverse stock split effective January 31, 1996 (Note 2).
RILEY INVESTMENTS, INC.
(Formerly Pace Group International, Inc. and Subsidiary)
Notes to Condensed Financial Statements
2. Reverse Stock Split
Effective January 31, 1996, the Board of Directors approved a 15 to 1
reverse stock split of the Company's issued and outstanding common shares.
Accordingly, the total number of issued shares prior to the reverse stock split
was 5,800,531; the number after the split is 386,702.
3. Sales and Operating (Loss)
Through October 31, 1995, the Company developed, produced and finalized
English-Language-Training (ELT) programs and also provided audio/video post-
production services. The following table includes the relative amounts of net
sales and operating loss of the Company by ELT products and post-production
services for the three months ended January 31, 1995.
Net Sales
Post-production services $176,484
ELT products:
Books and audio/video tapes 99,860
----------
Total net sales $ 186,344
---------
Operating Loss
Post production services $ (9,917)
ELT products (34,870)
----------
Total operating loss $ (44,784)
----------
It is not practical to present the aggregate carrying amount of
identifiable assets by audio/video post-production services and ELT products.
The Company is unable to provide ELT programs without the use of the assets in
the post-production operation. Management believes it has no practical way of
allocating such costs for determining asset utilization.
RILEY INVESTMENTS, INC.
(Formerly Pace Group International, Inc. and Subsidiary)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
JANUARY 31, 1996
LIQUIDITY AND CAPITAL RESOURCES AND RESULTS OF OPERATIONS
Effective November 1, 1995, the Company, formerly Pace Group International,
Inc., changed its name to Riley Investments, Inc. and transferred substantially
all of its assets and liabilities to its former majority shareholder, Edwin T.
Cornelius, Jr. Additionally, on November 1, 1995 Mr. Cornelius and certain
others relinquished control of the Company through the sale of common shares to
Bridgeworks Capital.
For the quarter ended January 31, 1996, the Company incurred a gain on the
transfer of net assets and liabilities of $353,228. Since the Company
essentially had no assets and liabilities after November 1, 1995, the Company
had no liquidity, capital resources or results of operations during the quarter
ended January 31, 1996. The Company is now basically a shell corporation.
Accordingly, meaningful comparisons of liquidity, capital resources and
results of operations as of and for the three months ended January 31, 1996 as
compared to January 31, 1995 is not practical.
RILEY INVESTMENTS, INC.
(Formerly Pace Group International, Inc. and Subsidiary)
PART II: OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The following form 8-K has been filed subsequent to October 31, 1995, and
is by reference incorporated herein:
DATE OF REPORT ITEMS FILED
November 1, 1995 Item 1. Change in Control of
Registrant
Item 2. Disposition of Assets
Item 5. Other Events- Change In
Name of Registrant
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.
RILEY INVESTMENTS, INC.
(Registrant)
Dated: May 3, 1996 By: /s/ Mark T. Waller
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