UNITED STATES
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 Quarter Period ended March 31, 1997
Commission File Number 33-4734-D
GRAND ADVENTURES TOUR & TRAVEL PUBLISHING CORPORATION
(FORMERLY RILEY INVESTMENTS, INC.)
(Exact name of registrant as specified in charter)
Oregon 93-0950786
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1120 Capital of Texas Highway South, Bldg. 3, Suite 300, Austin, Texas 78746
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (512) 329-7250
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 X No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of June 1, 1997, the Company had
outstanding 9,509,024 shares of its common stock, par value $0.0001.
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PART I FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
GRAND ADVENTURES TOUR & TRAVEL PUBLISHING
CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
Unaudited
March 31, March 31,
1997 1996
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ASSETS
CURRENT ASSETS
Cash and cash equivalents - restricted (Note 2) $ 100,640 $ 12,370
Accounts receivable, net of allowance for doubtful accounts of $8,810 in
1997 (Note 2) 44,766 26,149
Prepaid hotel cost (Note 2) 451,718 157,912
Prepaid cruise and tour cost (Note 2) 722,537 880,125
Total Current Assets 1,319,661 1,076,555
PROPERTY AND EQUIPMENT, at cost, net of
accumulated depreciation (Notes 2 and 3) 58,480 76,849
OTHER ASSETS
Intangible assets, net of accumulated
amortization (Notes 2 and 5) 615,578 641,119
$ 1,993,719 $ 1,794,524
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 513,944 $ 25,614
Other current liabilities 374,407 24,351
Due to affiliate (Note 6) 78,121 326,196
Current portion of long-term debt (Note 7) 530,604 59,502
Deferred hotel revenue (Note 2) 580,089 317,972
Deferred cruise and tour revenue (Note 2) 758,126 1,156,752
Deferred subscription revenue 118,531 93,406
Total Current Liabilities 2,953,821 2,003,794
OTHER LIABILITIES
Long-term debt (Note 7) 254,223 300,267
Deferred discount (Note 9) 54,644 -
Total Other Liabilities 308,867 300,267
STOCKHOLDERS' (DEFICIT)
Preferred stock, no par value; authorized
10,000,000 shares; none issued and outstanding - -
Common stock $.0001 par value; authorized
30,000,000 shares; issued and outstanding
9,509,024 and 9,100,000 shares in 1997 and 1996,
respectively (Note 11) 951 1,000
Additional paid-in capital (deficit) 598,209 29,000
Accumulated deficit (1,868,130) (539,537)
Total Stockholders' (Deficit) (1,268,970) (509,537)
$ 1,993,719 $ 1,794,524
The accompanying notes are an integral part of these
consolidated financial statements.
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GRAND ADVENTURES TOUR & TRAVEL PUBLISHING
CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
====================================================================================================================
Unaudited
Three Months Ended
March 31, March 31,
1997 1996
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REVENUES
Hotel revenue $ 1,044,379 $ 915,177
Cruise and tour revenue 1,451,930 1,185,074
Magazine subscription and advertising revenue 60,152 72,569
Merchandise and other revenue 3,227 10,485
Total Revenues 2,559,688 2,183,305
COST OF SALES
Hotel cost 813,848 710,827
Cruise and tour cost 1,279,865 1,049,050
Magazine publishing cost 62,840 59,630
Merchandise cost - 1,555
Total Cost of Sales 2,156,553 1,821,062
Gross Profit 403,135 362,243
OPERATING EXPENSES
Selling, general and administrative expenses 229,133 265,096
Wages 238,304 251,416
Depreciation and amortization 11,020 9,276
Total Operating Expenses 478,457 525,788
Net Loss Before Income Taxes (75,322) (163,545)
Income Tax Expense - -
Net (Loss) $ (75,322) $ (163,545)
Net (Loss) Per Common Share (Note 2) $ (0.01) $ (0.02)
Weighted Average Common Shares Outstanding 9,509,024 9,100,000
The accompanying notes are an integral part of these consolidated
financial statements.
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GRAND ADVENTURES TOUR & TRAVEL PUBLISHING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
Three Months Ended
March 31, March 31,
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (75,323) $ (163,545)
Adjustments to reconcile net loss to cash provided by
operating activities:
Depreciation and amortization 11,020 2,098
Provision for losses on accounts receivable 0 -
Changes in operating assets and liabilities:
Accounts receivable (24,855) (26,148)
Prepaid hotel cost (199,374) (130,828)
Prepaid cruise and tour cost (143,622) (880,125)
Accounts payable (65,044) 25,614
Accrued expenses 194,540 17,565
Payable to affiliates and other (10,092) (149,415)
Deferred hotel revenue 194,237 276,848
Deferred cruise and tour revenue 134,411 1,156,752
Deferred subscription revenue 13,471 93,406
Deferred discount 0 0
------------------------------------
Net Cash Provided (Used) by Operating Activities 29,369 222,222
------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions 0 (575,128)
Purchase of property and equipment 0 (35,000)
Proceeds from sale of equipment 0 10,507
------------------------------------
Net Cash Provided (Used) by Investing Activities 0 (599,621)
------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 0 30,000
Proceeds from notes payable 40,000 359,769
Repayments of notes payable (11,969) 0
------------------------------------
Net Cash Provided by Financing Activities 28,031 389,769
------------------------------------
Net Increase (Decrease) in Cash 57,400 12,370
Cash at Beginning of Period 43,240 0
Cash at End of Period $ 100,640 $ 12,370
====================================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for interest $ 13,094 7,091
The accompanying notes are an integral part of these consolidated financial
statements.
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GRAND ADVENTURES TOUR & TRAVEL PUBLISHING
CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BUSINESS ACTIVITIES
The Company serves a portion of the travel industry known as "interliners".
Interliners are the active employees and retirees of the airline industry, who
may fly on many carriers for free or at a very significantly reduced fare, along
with their families and the friends to whom they pass along their allotments of
no-cost or low-cost flying privileges. Interliners are generally able to procure
hotel or resort accommodations in destination locations, berths on cruise ships
and other travel products at rates representing a courtesy of up to 50% off of
established rates, primarily because interliners have a high propensity to
travel and tend to travel during off-peak periods when "stand-by" space is
available at hotels and resorts and on cruise ships. These factors have led the
travel industry to view interline bookings as incremental revenue that
supplements normal marketing revenue.
The Company serves both interline travelers and operators (hotels, resort,
cruise lines and others) segments of the interline industry through three
distinct business units: Interline Adventures, a publication formerly titled
Airfair Magazine: Interline Travel, which markets hotel-resort space to
interliners and specializes in Mexican and Caribbean locations: and Interline
Representatives, Ltd., which markets cruise and escorted tour packages to
interliners.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
- -------------------
Travel revenue is recognized on a "booked, paid, traveled" basis. This means
that all client funds received and all funds paid to travel suppliers prior to
the travel date are deferred for income recognition until such time as the
client has traveled and the Company has completed its commitment to the client
and the travel suppliers. Subscription sales are deferred for income recognition
until magazines are delivered to subscribers. (See Note 8.)
The assets "Prepaid Hotel Cost" and "Prepaid Cruise and Tour Cost" represent
expenses paid for tours and cruises which have been booked but not yet taken by
the customer. The liabilities "Deferred Hotel Revenue" and "Deferred Cruise and
Tour Revenue" represent payments received for tours and cruises booked but not
recognized as revenue until the customer completes the tour or cruise.
Cash and Cash Equivalents
- -------------------------
Substantially all of the balance in the cash account consists of an escrow
deposit required by Bank One as a reserve for credit card processing. The
Company has agreed to establish an escrow balance of $125,000 to be funded by
depositing amounts equal to 5% of the prior week's gross sales deposit activity
on a weekly basis commencing September 9, 1996, for a six week period.
Commencing the 7th week, the Company agreed to deposit $5,000 per week for a
4-week period, and commencing the 11th week, a deposit of $10,000 per week until
the reserve is fully funded. As of March 31, 1997, the Company had funded the
escrow account to a balance of $100,376.
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GRAND ADVENTURES TOUR & TRAVEL PUBLISHING
CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)-
Cash and Cash Equivalents (continued)
- -------------------------
The Company considers all highly liquid instruments purchased with a maturity at
the time of purchase of less than three months to be cash equivalents.
Allowance for Uncollectible Accounts
- ------------------------------------
The Company provides an allowance for accounts receivable which are doubtful of
collection. The allowance is based upon management's periodic analysis of
receivables, evaluation of current economic conditions, and other pertinent
factors. Ultimate losses may vary from the current estimates and, as additions
to the allowance become necessary, they are charged against earnings in the
period in which they become known. Losses are charged and recoveries are
credited to the allowance.
Income (Loss) Per Share
- -----------------------
The computation of primary income (loss) per share of common stock is based on
the weighted average number of common shares outstanding during the period plus
(in periods in which they have a dilutive effect) the effect of common shares
contingently issuable from stock options and exercise of warrants.
Depreciation and Amortization
- -----------------------------
Property and equipment are stated at cost. Depreciation is computed on the
straight-line method for financial statement purposes. Estimated useful lives
range from 5 to 7 years. Intangibles, consisting of "excess of cost over net
assets acquired" and non-compete covenants are stated at cost and are being
amortized over 40- year and 3-year periods, respectively.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary Airfair Publishing Company, Inc. All intercompany
transactions have been eliminated.
Income Taxes
- ------------
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the basis of certain assets and
liabilities for financial and tax reporting. The deferred taxes represent the
future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or settled.
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GRAND ADVENTURES TOUR & TRAVEL PUBLISHING
CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)-
Stock-Based Compensation
- ------------------------
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No.123, Accounting for Stock-Based Compensation.
The Company currently accounts for its stock-based compensation plans using the
accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees. Since the Company is not required to adopt the
fair value based recognition provisions prescribed under SFAS No. 123, it has
elected to comply with the disclosure requirements set forth in the Statement,
which includes disclosing pro forma net income as if the fair value based method
of accounting had been applied. (See Note 14.)
Estimates and Assumptions
- -------------------------
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from the estimates that were assumed in
preparing the financial statements.
3. PROPERTY AND EQUIPMENT
Property and equipment at March 31, 1997 and 1996 is as follows:
1997 1996
Property and equipment $93,795 $93,795
Less accumulated depreciation (35,315) (16,946)
Net property and equipment $58,480 $76,849
Depreciation expense for the quarters ending March 31, 1997 and 1996 was $4,590
and $3,001, respectively.
4. ACQUISITIONS
On December 1, 1994, Inventory Merchandising Services, Inc. (IMS) (a wholly
owned subsidiary of Barter Exchange, Inc. (BEI)), acquired the net assets of a
business owned by Lou and Claudia Nackos (Nackos) for the assumption of certain
liabilities in the amount of $144,394. This resulted in a new operating division
called Interline Travel (Interline).
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GRAND ADVENTURES TOUR & TRAVEL PUBLISHING
CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. ACQUISITIONS (Continued)-
Assets acquired from Nackos consist of the following:
Cash $ 814
Excess of cost over net assets acquired 74,278
Furniture and fixtures 69,302
Total assets acquired $144,394
Airfair Publishing, Inc. (Airfair) is a Delaware corporation formed on January
6, 1996. Immediately subsequent to incorporation of Airfair, the assets and
liabilities of Interline were transferred by IMS into Airfair. Additionally,
existing shareholders of BEI received four shares of Airfair for each share held
in BEI, resulting in 8,500,000 shares issued. An additional 600,000 shares were
authorized by the Board of Directors and issued to two shareholders, resulting
in a total of 9,100,00 shares issued pursuant to the spin-off of the Interline
division in IMS to Airfair. Capital of $30,000 was contributed to Airfair by
BEI.
On January 13, 1996, (Closing Date) [effective December 31, 1995 (Effective
Date)] Airfair acquired certain assets and assumed certain liabilities of
Interline Representatives Ltd. and Airfair Publishing Corp. (IRL/APC) for
$593,791.
Assets acquired from IRL/APC consist of the following:
Furniture and equipment $ 35,000
Covenant-not-to compete 30,000
Excess of cost over net assets acquired 528,791
Total assets acquired $593,791
Liabilities (unadjusted) assumed from IRL/APC consist of the following:
Subscription, prepaid advertising, and tour ledger $204,326
Net assets acquired $389,465
Payment for the net assets acquired from IRL/APC is as follows:
Cash $ 30,000
Note payable #1 (see below) 201,879
Note payable #2 (see below) 157,586
Total payments (unadjusted) $389,465
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GRAND ADVENTURES TOUR & TRAVEL PUBLISHING
CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. ACQUISITIONS (Continued)-
Both of the promissory notes described above, have identical terms (except as
specified) as follows: The annual interest rate on unpaid principal is 12% per
annum. Interest only will be due on the unpaid balance on January 31, 1996,
February 29, 1996, and March 31, 1996. Thereafter, principal and interest shall
be due and payable in monthly installments of $5,593 on Note #1 and $4,366 on
Note #2, each payable on the last day of each month, beginning April 30, 1996,
until December 31, 1999, when the entire principal and accrued interest
remaining unpaid, shall be due and payable in full.
The purchase method of accounting was used to account for the above
transactions.
Effective July 19, 1996, Riley Investments, Inc. (Riley) and Airfair executed an
Agreement that provided for the merger of MergerCo, a newly-created,
wholly-owned subsidiary of Riley, with and into Airfair, which became the
surviving corporation, and the conversion of the issued and outstanding Airfair
stock into shares of Riley stock on the basis of one share of Riley stock for
each share of Airfair stock outstanding on the Effective date. On October 7,
1996, articles of amendment were filed on behalf of Riley wherein the name was
changed to Grand Adventures Tour & Travel Publishing Corporation (the Company)
with authority to issue 10,000,000, no par, preferred shares and 30,000,000
common shares with a par value of $.0001. The transaction was accounted for as a
reverse acquisition.
5. INTANGIBLE ASSETS
Intangible assets at March 31, 1997 and 1996 are as follows:
As explained in Note 4 to the financial statements, on December 31, 1994, IMS
acquired the net assets of a business owned by Nackos (referred to herein as
Interline) and assumed certain liabilities. Of the $144,394 total purchase
price, $74,278 represented the excess of the cost over the fair value of net
assets acquired. The excess of cost over net assets acquired is amortized on a
straight-line basis over 40 years.
As explained in Note 4 to the financial statements, on January 13, 1996,
(Closing Date) [effective December 31, 1995 (Effective Date)] Airfair acquired
certain assets and assumed certain liabilities of Interline Representatives Ltd.
and Airfair Publishing Corp. (IRL/APC) . Of the $593,791 total purchase price,
$528,791 represented the excess of the cost over the fair value of net assets
acquired and $30,000 represented a covenant-not-to compete. Also amortizable are
$16,336 of additional legal and acquisition costs. The excess of cost over net
assets acquired is amortized on a straight-line basis over 40 years and the
covenant is amortized over 3 years.
At March 31, 1997 and 1996, the unamortized cost consists of the following:
1997 1996
Cost $649,405 $649,405
Less accumulated amortization ( 33,827) ( 8,286)
Net $615,578 $641,119
Amortization expense for the quarters ended March 31, 1997 and 1996, was $6,430
and $6,275, respectively.
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GRAND ADVENTURES TOUR & TRAVEL PUBLISHING
CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. DUE TO AFFILIATE
The Company entered into a Management Services Agreement with BEI and IMS
whereby BEI agreed to permit the Company to use office space and certain
computer and telephone equipment leased by the Company, BEI and IMS agreed to
provide to the Company certain services including accounting, payroll, services,
and the services of certain executive officers and personnel who perform
services for Airfair, BEI, and IMS. The Company agreed to pay to BEI and IMS,
collectively, a cash sum equal to 1/2% of the Company's gross cash receipts
during any month in which the Agreement remains in effect.
The Company and IMS have also entered into an Inventory Marketing Agreement
whereby the Company sells certain IMS inventories. The Company is required to
make monthly payments to IMS equaling (i) the cash value of the inventory sold
plus (ii) 25% of the collected revenue generated from such sales less such cash
value.
In order to provide short-term financing for the Company's operations, BEI has
advanced certain amounts to the Company for the above services. At March 31,
1997 and 1996, the Company owed BEI $78,121 and $326,196, respectively.
7. LONG-TERM DEBT
At March 31, 1997 and 1996 long-term debt consisted of the following:
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1997 1996
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Notes payable to shareholders, due September 30, 1997 including accrued
interest at 14% per annum, collateralized by marketable securities and other
property pursuant to a Security-Agreement Pledge executed by BEI in favor of the
lenders ........................................................................ $ 400,000 $ --
Note payable at $1,163 per month, including
interest at 14% per annum, convertible into common stock at the conversion price
of $1.00 principal amount for each share of common
stock, subordinated to senior indebtedness ..................................... 48,239 --
Note payable with a payment schedule based on
sales of advertising room credits, including interest
at 12% per annum, maturity date is May 15, 1997 ............................... 36,625 --
Note payable (acquisition of IRL/APC - see Note
4) at $5,593 per month, including interest at
12% per annum, collateralized by assets acquired ............................... 168,462 202,183
Note payable (acquisition of IRL/APC - see Note
4) at $4,366 per month, including interest at
12% per annum, collateralized by assets acquired ............................... 131,500 157,586
784,827 359,769
Less current portion ........................................................... (530,604) (59,502)
Total .......................................................................... $ 254,223 $ 300,267
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GRAND ADVENTURES TOUR & TRAVEL PUBLISHING
CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. DEFERRED SUBSCRIPTION REVENUE
Subscription sales are deferred as unearned income at the time of sale. Magazine
customers normally pay for a one-year or two-year subscription in advance. As
magazines are delivered to subscribers, the proportionate share of the
subscription price is taken into revenue. Magazine subscription selling expenses
are deferred and charged to operations over the same period as the related
subscription income is earned.
9. DEFERRED DISCOUNT
In April of 1996, the Company entered into an agreement with a telephone
long-distance service provider wherein the Company receives a discount (credit)
against its telephone charges provided that its annual volume of telephone usage
is equal to at least $240,000 for a period of three years. If the Company fails
to meet the minimum usage requirement, the discount will be forfeited.
The discount credit balance as of March 31, 1997 is $54,644.
10 . INCOME TAXES
The components of the provision for income taxes at March 31, 1997 and 1996 are
as follows:
1997 1996
Current tax expense $ - $ -
Deferred tax expense - -
Income tax expense $ - $ -
The tax effects of temporary differences and carryforwards that give rise to
significant portions of deferred tax assets and liabilities consist of the
following:
1997 1996
Deferred tax assets:
Accounts receivable $ 2,995 $ -
Net operating loss carryforwards 299,517 -
Gross deferred tax assets 302,512 -
Valuation allowance (290,770) -
Total deferred tax assets 11,742 -
Deferred tax liabilities:
Fixed assets 4,513 -
Intangible assets 7,229 -
Total deferred tax liabilities 11,742 -
Net deferred tax asset (liability) $ - $ -
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GRAND ADVENTURES TOUR & TRAVEL PUBLISHING
CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
There are no reconciling items between the statutory U.S. federal rate and
effective rates for the years ended March 31, 1997 and 1996.
At March 31, 1997, Interline has a net operating loss carryforward totaling
approximately $880,000 that may be offset against future taxable income. If not
used, the carryforward will expire in 2011.
11. COMMON STOCK
Riley Investments, Inc. was incorporated as Pace Group International, Inc.,
("Pace") in October, 1987 under the laws of the State of Oregon. On September
20, 1995, the stockholders approved a name change of the Company to Riley
Investments, Inc. As of November 1, 1995, after the effects of the transaction
described below, the Company had no operating assets and was dormant.
On May 23, 1995, the Chairman of the Board, Edwin T. Cornelius, Jr.
("Cornelius"), the Secretary/Treasurer, Joanne Cornelius, and two sons of Mr.
and Mrs. Cornelius entered into an option agreement to sell 2,905,486 common
shares of Pace they owned to Bridgeworks Capital. The above shareholders,
together with another shareholder who was also the son of Mr. and Mrs.
Cornelius, owned an aggregate of 3,984,000 common shares of Pace. The option
agreement, among other provisions, was subject to shareholder approval of a
1-for-15 reverse stock split of the outstanding shares of Pace common stock and
an exchange of substantially all net assets of Pace, including its ownership of
100% of the outstanding common stock of Pace International Research, Inc., for
notes payable and unpaid accrued interest thereon owed to Cornelius which
approximated $422,000 as of October 31, 1995. The above transaction was approved
by the shareholders on September 20, 1995 and became effective November 1, 1995.
Prior to the consummation of the option agreement, Cornelius also transferred
450,000 shares of Pace common stock to two investors who had previously advanced
the Company $525,000 in 1987 pursuant to profit-sharing agreements. Under the
term of those profit-sharing agreements, the investors were to be paid in full
from certain Pace profits. As of October 31, 1995, those investors had not been
repaid for their advances.
The remaining Pace common stock owned by the Cornelius family, which aggregated
628,514 shares, were returned to the Company and 588,674 shares were canceled as
of December 31, 1996.
Airfair Publishing, Inc. (Airfair) is a Delaware corporation formed on January
6, 1996. Immediately Subsequent to incorporation of Airfair on January 6, 1996,
the existing shareholders of BEI received four shares of Airfair for each share
held in BEI, resulting in 8,500,000 shares issued. An additional 600,000 shares
were authorized by the Board of Directors and issued to two shareholders,
resulting in a total of 9,100,000 shares issued pursuant to the spin-off of the
Interline division in IMS to Airfair. (See Note 4.) Capital of $30,000 was
contributed to Airfair by BEI.
In September of 1996, 25,000 shares of common stock were issued for $25,000.
<PAGE>
GRAND ADVENTURES TOUR & TRAVEL PUBLISHING
CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Effective July 19, 1996, Riley and Airfair executed an Agreement that provided
for the merger of MergerCo, a newly-created, wholly-owned subsidiary of Riley,
with and into Airfair, which became the surviving corporation, and the
conversion of the issued and outstanding Airfair stock into shares of Riley
stock on the basis of one share of Riley stock for each share of Airfair stock
outstanding on the Effective date. Airfair shares outstanding on the Effective
date totaled 9,125,000. On October 7, 1996, articles of amendment were filed on
behalf of Riley wherein the name was changed to Grand Adventures Tour & Travel
Publishing Corporation with authority to issue 10,000,000, no par, preferred
shares and 30,000,000 common shares with a par value of $.0001.
Existing shareholders in Riley at the date of conversion held 384,024 shares.
12. LEASING ARRANGEMENTS
As part of the Management Services Agreement with BEI (see Note 6), the Company
is allowed access and use of (i) approximately 8,000 square feet of space leased
by BEI and (ii) all common areas within the building to which BEI is permitted
access. The fees for usage are included in the management services fee
calculation under the Management Services Agreement.
13. SUBSEQUENT EVENTS
Subsequent to the end of the March 31,1997 quarter, the Company has also raised
funds through additional long-term borrowings. The bridge loans of $400,000 were
restructured in a transaction whereby the loanholders agreed to the release of
the pledged equity securities in exchange for the following: (1) payment of all
accrued interest through April 10, 1997, which was paid in the amount of
approximately $29,000, (2) the loan broker received a fee of $20,000, (3) 40,000
Company common stock warrants were issued to the loan broker and 20,000 stock
warrants were issued to a principal of the loan broker, all exercisable at $1.00
per share, (4) the bridge loans were converted to 3-year notes bearing 12%
annual interest , with principal and interest payable monthly, beginning in May,
1997, the outstanding principal balance is convertible (at note holders' option)
into Company common stock at $.50 per share, and no prepayment penalties. With
the release of the equity securities, the Company obtained a margin loan of
$185,000 with the stock as collateral with the Principal Financial Group in
April, 1997. Also in April and May, 1997, the Company raised an additional
$500,000 from ten investors through the issuance of three-year convertible
debentures. The debentures carry an annual interest rate of 7%. Interest and
principal are due and payable in annual installments on each anniversary. At the
option of the Company, interest payments due prior to the maturity date may be
made in shares of common stock of the Company at the rate one share for each
$0.50 of interest accrued and payable. The debenture holder has the right at any
time prior to maturity to convert all or any portion of the then outstanding
principal balance into fully paid and non-assessable shares of common stock of
the Company at a conversion price of $0.25 per share of such outstanding
principal amount, subject to adjustment from time to time as provided for in the
debenture. The holders of these debentures were also granted warrants to
purchase of up to 1,000,000 shares of the Company's common stock at an exercise
price of $1.00 per share. These warrants must be exercised prior to the 95th day
after delivery by the Company of audited financial statements for the Company's
1997 fiscal year (ending December 31, 1997). The Company also extinguished (in
April, 1997) the $306,796 of notes payable that were incurred in connection with
the acquisition of the cruise and magazine division for a cash settlement of
$75,000.
<PAGE>
GRAND ADVENTURES TOUR & TRAVEL PUBLISHING
CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. STOCK OPTION PLAN
The Company has a long-term stock incentive plan (LTSIP) that authorizes an
aggregate of 1,000,000 shares of common stock for future grants. Options to
purchase shares of Airfair common stock granted under the previous Airfair stock
option plan were exchanged for comparable options granted under the LTSIP for an
equivalent number of shares pursuant to the terms of the Merger as explained in
Note 4 to the financial statements. Under the plan, the exercise price of each
employee option is $1.00 and the exercise price of options granted to
shareholders range from $.50 to $1.00. An option's maximum term is five years.
Employee options were granted on August 1, 1996 and vest in three years. Other
options are fully vested. The fair value of each option grant is estimated on
the grant date using an option-pricing model with the following weighted-average
assumptions used for grants in 1996: risk-free interest rate of 6%, and expected
lives of 5 years for the options.
A summary of the status of the Company's stock option plan as of March 31, 1997
is presented below:
Outstanding Options Exercisable Options
-------------------------- ------------------------------
Weighted-
Average
Number Remaining Weighted- Number Weighted-
Range of Outstanding Contractual Average Exercisable Average
Exercise 3/31/97 Exercise at 3/31/97 Exercise
Prices Price Price
$1.00 1,014,466 4 years $ .94 1,014,466 $ .94
1.00 305,000 4 years 1.00 101,667 1.00
---------- ----------
1,319,466 1,116,133
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
The financial information set forth in the following discussion should be read
in conjunction with, and qualified in its entirety by, the financial statements
of the Company included elsewhere herein.
On December 1, 1994, IMS, a subsidiary of BEI, acquired from an unrelated third
party the net assets that resulted in the IT division in consideration of the
assumption of $144,394 in liabilities. BEI formed Airfair as a subsidiary on
January 5, 1996, in which to consolidate its interline industry activities. On
January 13, 1996, Airfair acquired certain assets and assumed certain
liabilities that became the IRL and Magazine divisions of Airfair in
consideration of the assumption of $593,791 in liabilities, effective December
31, 1995. Following the organization of Airfair, IMS transferred the IT division
to Airfair, effective January 1, 1996. Effective October 10, 1996, Airfair
merged into a newly created, wholly-owned subsidiary of Grand Adventures Tour &
Travel Publishing Corporation (formerly Riley Investments, Inc.). Airfair became
the surviving operating corporation following the merger . In view of the
foregoing acquisitions and merger and its new management team, operating
strategies, expansion plans, resources, and other factors, management does not
believe that a discussion of the operations of the prior operating entity
(Riley) would be meaningful.
Financial Condition and Changes in Financial Condition
The Company had a negative working capital of $1,634,160 as of March 31,1997, as
compared to a negative working capital of $927,239 at March 31,1996. The primary
causes for this large decrease in working capital were the loss from operations
of $784,433 for the twelve month interim period from March 1996 to March 1997
and the payment of certain liabilities assumed in the IRL and Magazine purchase
previously mentioned. The Company ended the first quarter with $2,953,821 in
current liabilities as compared to $2,003,794 for the prior year comparable
quarter. This was a result of not being able to generate enough cash funds
during the year to adequately sustain the acquisitions and management's intent
to grow sales through increasing the number of publications, size, distribution
and quality of the magazine. The largest components of current liabilities are
accounts payable of $513,944 (of which $416,491 are greater than 60 days past
due); accrued expenses of $374,407; due to affiliates (BEI/IMS, the former owner
of Airfair) of $78,121; current portion of notes payable of $530,604, and
deferred revenues relating to hotels, cruises and tours and magazine
subscriptions of $1,456,746. A large portion of accounts payable are made up of
amounts due for telephone services, publication of the magazine and attorneys'
fees incurred in connection with the aforementioned merger. The Company has been
diligently working with its primary vendors to work out payment schedules.
Subsequent to year end, the two largest publication vendors have agreed to
convert to longer term notes payable. Accrued expenses of $374,407 are comprised
mainly of payroll, vacation , commissions , note interest , negative cash
balances, and general administrative expenses. The amount due BEI/IMS is the net
balance due at the end of the quarter for various transactions that occurred
during the year, such as management fees. Deferred revenues for hotels and
cruises represent the moneys received from passengers that are deferred for
revenue recognition purposes until the passenger has completed travel. Amounts
deferred for hotels were $580,089 and for cruises $758,126 at March 31, 1997.
Deferred subscription revenue of $118,531 represents subscription moneys
received but not earned at quarter end. Magazine subscriptions are normally paid
in full in advance for the one- or two-year subscription period. Revenue is
earned on a prorata basis as the magazines are printed and shipped to the
subscribers. Total notes payable of $784,827 is a combination of eight notes
totaling $400,000 due shareholders of the Company, two notes incurred in
connection with the previously mentioned acquisition of the cruise and magazine
divisions totaling $299,962, a $48,239 note from a potential future investor and
a short-term note of approximately $37,000 borrowed in order to publish and mail
an advertising update during the first quarter. The holder of the acquisition
notes agreed to a substantially discounted payoff on these notes in April, 1997.
The Company completely extinguished this debt through the payment of $75,000 in
cash in April, 1997. The discount amounted to a reduction of $231,796 in the
debt balance with the offset being a reduction in the amount
<PAGE>
of goodwill created in the acquisition. Of the total of $784,827 in notes, the
current portion amounts to $530,604 and the long term portion equals $254,223.
Included in other liabilities besides the long term debt is a deferred discount
of $54,644 that was received as a service discount from the Company's long
distance telephone carrier in 1996 upon the execution of a long term agreement.
The agreement requires the Company to use a minimum of $240,000 in annual long
distance services for a period of three years. If the Company fails to utilize
the required minimum usage, the discount will be forfeited. The Company
anticipates that it will exceed the annual requirements and will earn all
discounts by the end of the agreement term.
The Company had $1,993,719 in total assets at March 31, 1997 compared to assets
of $1,794,524 at the end of March 31, 1996. Substantially all of the balance in
the cash account of $100,640 consists of an escrow deposit required by the
Company's bank as a reserve for Visa/Mastercard credit card processing. The
deposit agreement requires the Company to fund a total of $125,000 to this
account over time. The Company has funded $105,376 to this account to date.
Subsequent to March 31,1997 , the Company was notified by the bank that it will
not process the Company's credit cards after June 10, 1997. The bank made a
determination that the travel industry in general and the Company's financial
condition at December 31, 1996 were not strong enough to warrant the risk for
the bank. The bank will return all excess funds over $50,000 to the Company on
June 10, 1997, and will return the remainder of the funds at the end of 10
months ( April 1998 ) providing that the Company continues to honor any
chargebacks during that period. The Company has had a history of minimal
chargebacks. The Company has contracted with a another credit card processor (
subsequent to quarter end ) to continue credit card processing. The new
processor is charging a discount rate of 2.95% which is 1 percent higher than
the previous processor and is requiring a six month rolling reserve of 5% of
monthly credit card receipts. Approximately 70% of the Company's hotel and
resort sales are generated through credit cards. The accounts receivable of
$44,766 is comprised primarily of advertising revenue from vendors that
advertised in the magazine and updates. Prepaid tour cost and prepaid cruise
cost of $451,718 and $722,537, respectfully, represent funds paid to hotels and
cruise lines as of March, 1997 for travel dates that occur after that date.
Results of Operations
Overall Operating Results
The Company experienced a net loss for the quarter ended March 31, 1997 of
$75,323 as compared to a net loss of $163,545 for March 1996 quarter. One of the
causes for the larger loss in 1996 were expenses related to the acquisition of
the cruise and magazine divisions in January, 1996. The Company incurred
approximately $34,000 in relocation expenses in moving personnel from Florida to
the Company's home office in Austin, Texas. In addition, the Company also had an
increase in gross sales of approximately $400,000 for the quarter as compared to
the 1996 quarter. This resulted in a increase in travel related margins of
$62,000 to apply against publications and expenses. Operating expenses decreased
$47,000 from the previous year quarter as a result of management's efforts of
reducing overhead. Management also set a goal in 1996 of increasing sales
through increasing the size, quality and distribution of the magazine. The
magazine's production schedule was increased to every two months as opposed to
every three months before the Company's acquisition. The magazine also produces
an update brochure promoting hotel and cruise specials in the months in which
the magazine is not produced. Management believes that increased circulation
will increase the value of the publications to both advertisers and subscribers.
The Company intends for the magazine division to increase both advertising and
subscription revenue to the point where this division will at least break even
in 1997. The anticipated value of these publications should be felt through
increased sales in both the hotel and cruise and tour divisions.
<PAGE>
Revenue
Gross revenue for the quarter ended March 31, 1997 was $2,559,688 an increase of
$376,383 over March, 1996 revenues of $2,183,305. Hotel sales increased 14% for
the March 1997 quarter from $915,177 at March 1996 to $1,044,379 in 1997. This
increase in hotel sales was primarily caused by the Company being able to better
advertise its products and services in the magazine and update publications
purchased at the beginning of 1996. The marketing department also substantially
increased the number of available properties to sell to the interline market
during the year. Gross cruise and tour revenue equaled $1,451,930 for 1997
quarter, an increase of $266,856 over 1996's first quarter. The Company also
began selling cruise bump protection insurance to passengers as a auxiliary
product. The Company recognizes hotel and cruise revenues on a "booked, paid,
traveled" basis, (i.e. revenue is not earned until the passenger has completed
travel).
Cost of Goods Sold
The overall gross margin for the first quarter of 1997 was $403,135, or 16% of
overall gross sales. This compares to a gross margin of $362,243 or 16.5% of
gross sales, for the 1996 quarter. The decrease in the gross margin percentage
is due primarily to the addition of the cruise division during the prior year.
While cruises typically have a much higher dollar value per sale, the margin
percentages are lower on the average than hotel sales. The hotel division had
cost of sales of $813,848 on sales of $1,044,379 for the current quarter
producing a gross margin of $230,531, or 22.1% of sales. The comparable 1996
quarter hotel cost of sales were $710,827 generating a gross margin of $204,350,
or 22.3% of sales of $915,177. The margins on hotel sales have remained very
consistent. The cruise division generated a gross margin of $172,065 or 11.9% on
sales of $1,451,930 for the quarter ended March 31, 1997. This compares to a
prior year quarterly margin of $136,024 or 11.5% on sales of $1,185,074. Average
margins on cruises can range from 10% to 18% depending on which cruise line is
booked. The magazine division produced a negative margin of $2,688 for the
current year quarter. The Company only recognizes those publishing costs
directly associated with the subscriber and advertising commitments as cost of
goods sold. Any publishing cost for excess production and distribution is
recorded as Company advertising expense as it for the benefit of the hotel and
cruise sales.
Operating Expenses
Operating expenses for the quarter ended March 31, 1997 were $478,458 as
compared to $525,788 for the 1996 quarter. This resulted in a decrease of
$47,000 over the previous year quarter. One of the major causes for the large
1996 expenses were associated with the acquisition and operating of the cruise
and magazine divisions at the beginning of 1996. Total interest expense for the
first quarter of 1997 equaled $27,748 on notes payable. Interest expense for the
1996 quarter was $10,754. Management anticipates that interest expense will
increase materially in 1997. The largest expense item for the Company is
salaries which equaled $238,304 for March 1997 as compared to $251,416 for the
previous year quarter. This decrease is attributable to management's efforts to
keep operating expenses under control. The Company reduced salary expenses as of
January 1, 1997 through the reduction of personnel and attrition. The last major
expense area were management fees. Airfair entered into a management agreement
with BEI and IMS effective March 1, 1996. Under this agreement, BEI permits
Airfair to use office space and certain equipment leased by BEI, and BEI and IMS
provide Airfair insurance, payroll services, office supplies and other minor
office services. IMS and BEI charge Airfair a management fee equal to 0.5% of
Airfair's gross revenue per month for these services. In addition, pursuant to
the terms of the management agreement, IMS, BEI, and Airfair agreed that Airfair
would reimburse BEI for a portion of the direct payroll expenses of certain
members of management who serve BEI, IMS, and Airfair (the "Shared Management
Members"). The proportion is intended to correspond with the amount of time
expended by the Shared Management Members on the business matters of Airfair.
These management fees and the payroll reimbursements for Shared Management
Members totaled $53,025 for the quarter ended March 31, 1997 as compared to a
$95,880 credit for the first quarter of 1996.. Prior to the management
agreement, all general and
<PAGE>
administrative expenses of BEI were allocated to Airfair and IMS on a ratio
basis. In February 1996, BEI incurred a large one-time gain which exceeded its
expenses. As such, both Airfair and IMS were the beneficiaries of an expense
credit for that month.
Airfair's portion of that allocation was a credit of approximately $142,000.
Liquidity and Capital Resources
Since Airfair's inception, it has financed its business growth through
internally generated revenue, borrowings from its former sole stockholder, BEI,
and borrowings from new stockholders subsequent to its spin-off from BEI. The
Company owed BEI/IMS $78,121 on March 31, 1997. In September, 1996, the Company
borrowed $400,000 from seven shareholders ("bridge loans") that were
collateralized with 130,868 shares of equity securities that are owned by BEI.
BEI executed a Security Pledge Agreement in favor of the lenders. In November,
1996, the Company initiated a private placement to qualified investors and
offered up to 2,000,000 shares of its common stock at a price of $1.00 per
share. The Company has not raised any funds through this offering as of this
filing. Thereafter, management has taken a different strategy in raising and
conserving funds needed for operations in 1997 and thereafter. Since January 1,
1997, management has reduced expenses by approximately $40,000 per month through
a reduction in nonessential personnel, changing to a lower priced package
delivery service, obtaining more services such as small printing jobs on a trade
basis and reducing any other expenses that are not considered absolutely
necessary to the ongoing needs of the operation. Subsequent to the quarter end,
the Company has also raised funds through additional long-term borrowings. The
bridge loans were restructured in a transaction whereby the loanholders agreed
to the release of the pledged equity securities in exchange for the following:
(1) payment of all accrued interest through April 10, 1997, which was paid in
the amount of approximately $29,000, (2) the loan broker received a fee of
$20,000, (3) 40,000 Company common stock warrants were issued to the loan broker
and 20,000 stock warrants were issued to a principal of the loan broker, all
exercisable at $1.00 per share, (4) the bridge loans were converted to 3-year
notes bearing 12% annual interest , with principal and interest payable monthly,
beginning in May, 1997, the outstanding principal balance is convertible (at
note holders' option) into Company common stock at $.50 per share, and no
prepayment penalties. With the release of the equity securities, the Company
obtained a margin loan of $185,000 with the stock as collateral with the
Principal Financial Group in April, 1997. The Company has subsequently repaid
this loan. Also in April and May, 1997, the Company raised an additional
$500,000 from ten investors through the issuance of three-year convertible
debentures. The debentures carry an annual interest rate of 7%. Interest and
principal are due and payable in annual installments on each anniversary. At the
option of the Company, interest payments due prior to the maturity date may be
made in shares of common stock of the Company at the rate one share for each
$0.50 of interest accrued and payable. The debenture holder has the right at any
time prior to maturity to convert all or any portion of the then outstanding
principal balance into fully paid and non-assessable shares of common stock of
the Company at a conversion price of $0.25 per share of such outstanding
principal amount, subject to adjustment from time to time as provided for in the
debenture. The Company also extinguished (in April, 1997) the $306,796 of notes
payable that were incurred in connection with the acquisition of the cruise and
magazine division for a cash settlement of $75,000 (See Financial Condition and
Changes in Financial Condition above). As a result of the above, the Company has
been able to expand the distribution and number of publications advertising the
Company's hotel and cruise and tour packages which should substantially increase
sales in both areas. Management has and is continuing to negotiate with its
accounts payable vendors in order to work out acceptable payment schedules for
all parties.
As a result of the transactions described in the preceding paragraph, management
believes that its existing working capital levels, supplemented by cash expected
to be generated by existing operations and cash generated through stock sales or
other financing arrangements, will be sufficient to fund the Company's needs
over the next 12 months. Management's belief is based on a number of assumptions
including, without limitation, that increased gross sales will result from
increased distribution (both in terms of frequency and number of issues) of the
Company's publications and that the Company can continue to operate effectively
at reduced levels of operating expenses. There can be no assurance that the
foregoing assumptions and the other assumptions relied
<PAGE>
upon by management will prove accurate and any such inaccuracy may cause the
Company to need working capital. Moreover, there are no assurances that the
Company will be able to procure any such capital should it be needed and any
such inability may have an adverse effect on the Company's business, financial
condition and future operating results.
Inflation
The Company's results of operations have not been affected by inflation and
management does not expect inflation to have a significant effect on its
operations in the future because of the short time frame between reservation
bookings and the dates of travel.
Forward -Looking Information
From time to time, the Company or its representatives have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but not limited to, press releases, oral
statements made with the approval of an authorized executive officer or in
various filings made by the Company with the Securities and Exchange Commission.
Words or phases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project or projected", or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 ("the Reform Act"). The Company
wishes to ensure that such statements are accompanied by meaningful cautionary
statements, so as to maximize to the fullest extent possible the protections of
the safe harbor established in the Reform Act. Accordingly, such statements are
qualified in their entirety by reference to and are accompanied by the following
discussion of certain important factors that could cause actual results to
differ materially from such forward-looking statements.
Management is currently unaware of any trends or conditions other than those
previously mentioned in this management's discussion and analysis that could
have a material adverse effect on the Company's consolidated financial position,
future results of operations, or liquidity.
However, investors should also be aware of factors that could have a negative
impact on the Company's prospects and the consistency of progress in the areas
of revenue generation, liquidity, and generation of capital resources. These
include: (i) variations in the mix of hotel, cruise, and magazine revenues, (ii)
possible inability to attract investors for its equity securities or otherwise
raise adequate funds from any source should the Company seek to do so, (iii)
increased governmental regulation, (iv) increased competition, (v) unfavorable
outcomes to litigation involving the Company or to which the Company may become
a party in the future and, (vi) a very competitive and rapidly changing
operating environment. Furthermore, reference is also made to other sections of
this report that include factors that could adversely impact the Company's
business and financial performance.
The risks identified here are not all inclusive. New risk factors emerge from
time to time and it is not possible for Management to predict all of such risk
factors, nor can it assess the impact of all such risk factors on the Company's
business or the extent to which any factor or combination of factors may cause
actual results to differ materially from those contained in any forward-looking
statements. Accordingly, forward-looking statements should not be relied upon as
a prediction of actual results.
<PAGE>
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
b. Reports on Form 8-K
None
<PAGE>
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.
(Registrant) Grand Adventures Tour & Travel Publishing Corporation
Date July 8,1997 By /s/ Joseph S. Juba
Joseph S. Juba, President/ Chief Operating Officer
Date July 8, 1997
By /s/ Darrell W.Barker
Darrell W. Barker, Chief Financial Officer
Date July 8, 1997
By /s/ Matthew O'Hayer
Matthew O'Hayer, Chairman of the Board
and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit Description
27.1 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from Balance Sheet at
3/31/97, Statement of Income and Accumulated Deficit at 3/31/97 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 100,640
<SECURITIES> 0
<RECEIVABLES> 53,576
<ALLOWANCES> (8,810)
<INVENTORY> 0
<CURRENT-ASSETS> 1,319,661
<PP&E> 93,795
<DEPRECIATION> (35,315)
<TOTAL-ASSETS> 1,993,719
<CURRENT-LIABILITIES> 2,953,821
<BONDS> 0
0
0
<COMMON> 951
<OTHER-SE> (1,269,921)
<TOTAL-LIABILITY-AND-EQUITY> 1,993,719
<SALES> 2,559,688
<TOTAL-REVENUES> 2,559,688
<CGS> 2,156,553
<TOTAL-COSTS> 2,156,553
<OTHER-EXPENSES> 478,458
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,248
<INCOME-PRETAX> (75,323)
<INCOME-TAX> 0
<INCOME-CONTINUING> (75,323)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (75,323)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.00)
</TABLE>
