<PAGE> 1
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 QUARTERLY PERIOD ENDED MARCH 31, 2000
COMMISSION FILE NUMBER 33-4734-D
---------
GRAND ADVENTURES TOUR & TRAVEL PUBLISHING CORPORATION
(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.)
211 EAST 7TH STREET, 11TH FLOOR, AUSTIN, 78701
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (512) 391-2000
--------------
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 April 26, 2000, the Company had
outstanding 3,024,883 shares of its common stock, par value $0.0001.
<PAGE> 2
ITEM 1. FINANCIAL STATEMENTS
GRAND ADVENTURES TOUR & TRAVEL PUBLISHING CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
Unaudited Audited
March 31, December 31,
2000 1999
-------------- --------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 203,842 $ 273,189
Available for sale securities 350,828 1,123,037
Cash restricted 221,500 221,500
Accounts receivable, net of allowance for doubtful
accounts of $29,108 and $29,108 in 2000 and 1999 968,657 563,755
Due from affiliate, net of allowance for reserve
for impairment of $163,046 and $163,130 in 2000 and 1999 114,879 128,405
Accrued investment income 16,971 5,206
Other prepaid expenses 304,935 43,833
Rooms/cabins held for sale 2,744,563 2,425,525
Prepaid hotel cost 251,842 47,576
Prepaid cruise and tour cost 232,208 92,835
-------------- --------------
Total Current Assets 5,410,226 4,924,861
-------------- --------------
Property and equipment, at cost, net of
accumulated depreciation 1,458,826 1,240,418
Other Assets
Other assets 11,680 11,680
Intangible assets, net of accumulated amortization 617,607 615,687
-------------- --------------
$ 7,498,340 $ 6,792,647
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 713,680 $ 532,595
Other current liabilities 121,109 125,224
Current portion of long-term debt 375,000 783,675
Deferred hotel revenue 920,273 445,808
Deferred cruise and tour revenue 288,934 102,774
Deferred WeddingTrips revenue 20,345 --
Deferred subscription revenue 13,112 13,112
-------------- --------------
Total Current Liabilities 2,452,454 2,003,188
-------------- --------------
Other Liabilities
Long-term debt 1,939,970 1,852,634
-------------- --------------
Total Liabilities 4,392,425 3,855,822
-------------- --------------
Stockholders' Equity
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
3,024,883 shares in 2000 and 1999, respectively 302 302
Additional paid-in capital 6,610,474 6,610,474
Accumulated deficit (3,504,861) (3,673,951)
-------------- --------------
Total Stockholders' Equity 3,105,915 2,936,825
-------------- --------------
$ 7,498,340 $ 6,792,647
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
2
<PAGE> 3
GRAND ADVENTURES TOUR & TRAVEL PUBLISHING CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Unaudited
---------------------------
Three Months Ended
---------------------------
March 31, March 31,
2000 1999
------------ ------------
<S> <C> <C>
Revenues
Travel revenue $ 8,054,837 $ 5,583,993
Publishing revenue 1,156,966 365,573
Interest income 16,678 32,303
Other revenue 33,858 8,202
------------ ------------
Total Revenue 9,262,340 5,990,071
------------ ------------
Cost of Sales
Travel cost 6,448,313 4,602,923
Publishing cost 761,010 252,091
------------ ------------
Total Cost of Sales 7,209,323 4,855,014
------------ ------------
Gross Profit 2,053,017 1,135,057
Operating Expenses
Selling, general and administrative expense 665,764 336,604
Salaries 1,137,796 730,357
Depreciation and amortization 80,367 42,860
------------ ------------
Total Operating Expenses 1,883,927 1,109,821
------------
Net Income Before Income Tax 169,090 25,236
Income Tax Expense -- --
------------ ------------
Net Income $ 169,090 $ 25,236
============ ============
Average Common Equivalent Shares
Basic 3,024,883 3,024,883
============ ============
Diluted 3,624,883 3,024,883
============ ============
Net Income per Common Share
Basic $ 0.06 $ 0.01
============ ============
Diluted $ 0.05 $ 0.01
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE> 4
GRAND ADVENTURES TOUR & TRAVEL PUBLISHING CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited
----------------------------
Three Months Ended
----------------------------
March 31, March 31,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from Operating Activities:
Net Income $ 169,090 $ 25,235
Adjustments to reconcile net income/(loss)
to cash provided by operating activities:
Depreciation and amortization 80,367 42,860
Changes in operating assets and liabilities:
Accounts receivable (404,902) 9,793
Rooms/cabins held for sale (319,038) (22,111)
Other prepaid expenses (261,102) (70,051)
Accrued investment income (11,765) (11,605)
Prepaid hotel cost (204,266) (371,031)
Prepaid cruise and tour cost (139,373) (85,858)
Other assets (25,133) --
Accounts payable 181,087 (157,681)
Accrued expenses (4,115) (12,367)
Receivable from affiliates and other 13,526 (4,626)
Deferred hotel revenue 474,465 419,707
Deferred cruise and tour revenue 186,160 113,792
Deferred weddingtrips revenue 20,345 --
Deferred subscription revenue -- (2,553)
------------ ------------
Net Cash Used by Operating Activities (244,654) (126,496)
------------ ------------
Cash Flows From Investing Activities:
Sale of marketable short-term investments 772,209 (14,112)
Business acquisitions -- 4,254
Purchase of property and equipment (275,562) (57,843)
------------ ------------
Net Cash Used by Investing Activities 496,647 (67,701)
------------ ------------
Cash Flows From Financing Activities:
Proceeds from leases payable 25,844 --
Net proceeds (payments) from notes payable (347,183) --
------------ ------------
Net Cash Provided by Financing Activities (321,339) --
------------ ------------
Net Increase (Decrease) in Cash (194,197) (69,347)
Cash at Beginning of Period 273,189 236,452
------------ ------------
Cash at End of Period $ 203,842 $ 42,255
============ ============
Supplemental Cash Flow Information
Cash paid during the period for interest $ 54,908 $ 12,317
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Company had net non-cash transactions for the three months ended March 31,
2000 in the amount of $546,143 which represents the net change between
utilization of room credits used during the quarter and new room credits
acquired under advertising agreements. For the three months ended March 31, 1999
the net change in the room credits was $(51,033).
4
<PAGE> 5
GRAND ADVENTURES TOUR & TRAVEL PUBLISHING
CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
1. GENERAL
The accompanying unaudited financial statements have been prepared in conformity
with the accounting principles stated in the audited financial statements for
the year ended December 31, 1999 and reflect all adjustments which are, in the
opinion of management, necessary for a fair statement of the financial position
as of March 31, 2000 and the results of operations for the periods presented.
These statements have not been audited or reviewed by the Company's independent
certified public accountants. The operating results for the interim periods are
not necessarily indicative of results for the full fiscal year.
The notes to the financial statements appearing in the Company's Annual Report
on form 10-KSB for the year ended December 31, 1999 filed with the Securities
Exchange Commission should be read in conjunction with this Quarterly Report on
Form 10-QSB. There have been no significant changes in the information in those
notes other than from normal business activities of the Company.
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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 is qualified in its entirety by, the financial
statements of the Company included elsewhere herein.
GENERAL
In the quarter ended March 31, 2000, the Company started to realize the results
of actions that it took in 1998 and 1999, including increased marketing
activities, the acquisition of other Interline travel companies, the formation
of the WeddingTrips division and the launch of Destination Weddings & Honeymoons
magazine.
Specifically, gross revenue for the quarter ended March 31, 2000 increased 55%
over the comparable quarter for 1999. The Company realized gross revenue of
approximately $9.3 million and net income of $169 thousand as compared to gross
revenue of $6 million and net income of $25 thousand for the prior year quarter.
Gross earned revenues for all product lines registered significant increases
over the comparable first quarter of 1999. Travel sales increased 44% and
advertising sales increased 216% when compared to the first quarter of 1999.
A summary of the significant first quarter developments includes the following:
o In December 1999, the Company launched and published the premiere
issue of Destination Weddings & Honeymoons magazine. In March 2000,
the Company published the second issue of Destination Weddings &
Honeymoons magazine. Management anticipates that advertising revenue
from the magazine will continue to increase throughout the second
quarter and the remainder of 2000.
o In January 2000, the Company established "WeddingTrips", a separate
reservation center for wedding and honeymoon travel. Since the Company
does not recognize the revenue from wedding and honeymoon travel until
after the travel has occurred, the first quarter financial results do
not include any significant revenue from the WeddingTrips division.
Management anticipates the revenue from this division will increase
significantly in the second half of 2000.
o On February 1, 2000, the Company closed the acquisition of Non-Rev
International, LLC an Atlanta, Georgia based Interline company. During
February and March 2000, the company successfully completed the
transfer of client records, phone lines, reservations and supplier
agreements to its offices in Austin, Texas. This acquisition is
expected to add approximately $2 million to annual travel sales.
o In November 1999, the Company completed the acquisition of Weissman
Sales & Marketing, Inc., a California based Interline cruise sales
company. During November and December 1999, the Company successfully
completed the integration of the Weissman business. This acquisition
contributed to improved sales in the first quarter and is expected to
add approximately $2 million in annual travel sales.
o During the first three months of 2000, the Company experienced
significant increases in phone call volume, web site transactions and
advertising contracts negotiated through the end of first quarter
2001. As a result, the Company added new personnel primarily in the
reservations and advertising areas in order to accommodate this
increase in business. The Company had 105 full-time employees at March
31, 2000 and 26 part time or temporary employees.
o New travel bookings (either paid in full or under deposit) were
approximately $10.2 million for the first three months of 2000 and new
advertising contracts for the Company's publications were
approximately $3.9 million. The Company requires a deposit at the time
of booking with full payment due before travel. Most of the
advertising contracts are twelve-month commitments and therefore are
recognized into income over the contract period. Expenses associated
with generating these bookings and advertising contracts were expensed
as incurred.
The Company believes this increase in business was a direct result of increased
marketing efforts including expansion of the number of field representatives
distributing the Company's marketing materials to airline personnel around the
world and increasing the number of publications distributed. The Company has
continued to focus on the development of its product base resulting in an
increased number of properties and destinations available to its clients. In
addition, the Company's web site experienced a substantial increase in the
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<PAGE> 7
number of requests for travel information. The Company believes that the
benefits of these efforts will not be limited to the periods in which these
efforts were made but will provide a foundation for continued future growth.
FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION
Total current assets increased $485 thousand during the quarter to $5.4 million
and current liabilities increased approximately $449 thousand to $2.5 million.
The primary cause for the increase in current assets and current liabilities
resulted from an increase in prepaid hotel and cruise costs as well as deferred
hotel and cruise revenue. Due to the increase in advertising contracts
negotiated during the quarter, the total value of room inventory increased by
approximately $546 thousand. A substantial number of hotel vendors exchange room
or person night credits for advertising space in the Company's publications.
Total cash and investment securities, net of related short-term borrowings,
decreased approximately $375 thousand during the current quarter. This decrease
in net cash balances was the result of the increase in rooms/cabins held for
sale, increased number of publications issued during the quarter and the
purchase of equipment necessary to handle the increase in business. The
restricted cash balance of $222 thousand represents a portion of the Company's
certificates of deposit pledged as a reserve for charge backs against the
Company's Visa/MasterCard credit card processing and also pledged against
various letters of credit to hotel/cruise vendors. The letters of credit serve
as security for the vendors to allow the Company to make last minute bookings
with these vendors without having to pay in advance of travel. None of these
letters of credit have been drawn on to date.
Accounts receivable balances are comprised primarily of cash advertising revenue
due from vendors that advertised in the Company's Publications as well as
commissions due from cruise lines and hotels. The balance due from affiliates is
secured by a short-term promissory note bearing interest and collateralized by
shares in a publicly traded company. The agreement calls for the shares to be
sold on the open market over time with the proceeds being used to pay off the
balance due the Company. During March and April 2000 the Company sold
approximately $40,000 of the shares and has applied the proceeds to the amount
due from affiliates.
RESULTS OF OPERATIONS
Overall Operating Results
The Company had net income for the quarter ended March 31, 2000 of $169
thousand, as compared to $25 thousand for the comparable prior year quarter. Net
income for the quarter resulted from increased traveled revenue and advertising
sales associated with the expansion of its marketing distributions. The Company
believes that the benefits of this expansion were not fully realized in 1998 and
1999 when significant funds were expended in all of these areas, and will
continue to be realized in subsequent periods. The amount of travel booked,
travel revenue and advertising sales for the first three months of 2000 were
substantially in excess of comparable quarter in 1999.
Revenue
Gross revenue for the quarter ended March 31, 2000 increased $3.3 million or 55%
over the comparable 1999-quarter levels. Travel sales increased $2.5 million, or
44%, over the first quarter 1999. In addition, as a direct result of the
introduction of Destination Weddings & Honeymoons magazine and the continued
growth of Interline Adventures magazine, advertising and subscription revenues
increased $791 thousand, or 216%, over this same time frame. A substantial
number of these advertising contracts call for the Company to receive a number
of room or person nights credits in lieu of cash payment. Management anticipates
that both travel and advertising sales will continue to grow with the aid of a
stronger distribution network for its publications and a consistent and
increased publishing schedule. Management also believes that the revenues from
the publishing and travel portions of its business are integrally tied to one
another - improved hotel sales, for example, facilitate sales of advertising to
hotels and increased hotel advertising improves the likelihood of sales of rooms
within the hotels that advertise. The Company grossed $194 thousand in air and
rail revenue in the first quarter of 2000.
The Company sells advertising over a given number of issues and advertising
revenues are recognized as the applicable publications are printed and
distributed. In the case of annual advertising contracts, revenue is recognized
pro-rata over the term of the contract.
Cost of Goods Sold
The gross margin for travel sales for the quarter ended March 31, 2000 was 19.9%
which represents approximately a 2.3 point increase over the 1999 first quarter
margin of 17.6%. Margins for travel sales can fluctuate depending on a
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<PAGE> 8
number of factors relative to the products being sold including, but not limited
to, competition, location, and availability of supply. Publishing cost which
includes the costs associated with pre-production, printing, paper and delivery
of the Company's Publications grew as a result of the increase in the number of
publications being distributed and the addition of Destination Weddings &
Honeymoons magazine. Publishing margin for the current quarter was a positive
34% as compared to 31% for the prior year quarter. The major turnaround in
margin was attributable to the growth in advertising revenue. The Company
anticipates that the number of magazines and publications issued in the future
will continue to increase as the Company increases its airline employee database
and as it expands its WeddingTrips division.
Operating Expenses
Operating expenses for the current quarter increased 70% over the prior year
quarter. The primary increases in expenses relate to increased staffing at both
the support and reservation personnel levels. A portion of this increased
staffing relates to the establishment of the WeddingTrips division. Over the
past eighteen months the Company added reservation, sales, marketing,
accounting, and information services personnel in order to service both the
increase in telephone and web site inquiries. The Company has an interactive,
searchable web site (http://perx.com) containing information and rates for the
majority of the properties offered to interliners.
Due to the increase in booking volume, the Company also experienced a
significant increase in credit card fees, telephone, postage and delivery
charges. The revenue associated with these expenditures will be recognized when
travel has occurred which may or may not be in the same quarter as the expense.
With the anticipated increase in sales, the Company believes that the following
types of operating expenses will vary with travel sales and generally increase
as travel sales increase: reservation personnel costs, credit card fees,
telephone, and postage and delivery expenses. The actual levels of these
expenses will be a function of numerous factors including but not limited to the
experience, closing capabilities and product knowledge of the reservation staff.
NEW ACCOUNTING PRONOUNCEMENTS
FASB Statement 131 presents new standards for disclosures about segment
reporting. The Company does not believe that this accounting standard applies to
the Company as all operations of the Company are integrated for financial
reporting and decision making purposes.
In January 2000, the Financial Accounting Standards Board, Emerging Issues Task
Force, issued EITF 99-17, "Accounting for Barter Advertising Transactions". EITF
99-17 is effective for transactions occurring after January 20, 2000. This
pronouncement requires that revenues and expenses should be recognized from
advertising barter transactions at the fair value of the advertising surrendered
or received only when an entity has a historical practice of receiving or paying
cash for similar advertising transactions. The Company does not believe that
EITF 99-17 applies to the Company.
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.
FOREIGN CURRENCY RISK
The Company has entered into contracts with certain hotels/resorts located
primarily in Europe which stipulate conversion of U.S. dollars into different
foreign currencies at time of travel. The Company is currently evaluating its
foreign currency risk in regard to these contracts. To date, the amount of
Company sales of these properties has been immaterial to the Company's financial
operations and the Company has not experienced any erosion of margins on sales
of these properties due to currency conversion rates. There can be no assurance
given that foreign currency risk will not have a material adverse affect on
future foreign travel sales.
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
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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.
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PART II OTHER INFORMATION
SIGNATURES
In accordance with Section 13 or 15(d) 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
-----------------------------------
By /s/ Joseph S. Juba
-----------------------------------
Joseph S. Juba, President/Chief
Operating Officer
Date May 11, 2000
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Robert R. Roe
-----------------------------------
Robert R. Roe, Chief Financial
Officer/Vice President
Date May 11, 2000
By /s/ Matthew O'Hayer
-----------------------------------
Matthew O'Hayer, Chairman of the
Board and Chief Executive Officer
Date May 11, 2000
By /s/ Robert Sandner
-----------------------------------
Robert Sandner, Director
Date May 11, 2000
By /s/ Robert Rader
-----------------------------------
Robert Rader, Director
Date May 11, 2000
By /s/ Duane K. Boyd
-----------------------------------
Duane K. Boyd, Director
Date May 11, 2000
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 425,342
<SECURITIES> 350,828
<RECEIVABLES> 1,275,690
<ALLOWANCES> 192,154
<INVENTORY> 2,744,563
<CURRENT-ASSETS> 5,410,226
<PP&E> 1,745,406
<DEPRECIATION> (275,663)
<TOTAL-ASSETS> 7,498,340
<CURRENT-LIABILITIES> 2,452,454
<BONDS> 1,500,000
0
0
<COMMON> 302
<OTHER-SE> (3,504,861)
<TOTAL-LIABILITY-AND-EQUITY> 7,498,340
<SALES> 9,211,803
<TOTAL-REVENUES> 9,262,340
<CGS> 7,209,323
<TOTAL-COSTS> 7,209,323
<OTHER-EXPENSES> 1,883,927
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 169,090
<INCOME-TAX> 0
<INCOME-CONTINUING> 169,090
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 169,090
<EPS-BASIC> 0.06
<EPS-DILUTED> 0.05
</TABLE>
