SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended January 31, 2000
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 00-18140
ADEN ENTERPRISES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 87-0447215
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
13314 "I" STREET 68137
OMAHA, NEBRASKA (Zip Code)
(Address of principal executive offices)
(402) 334-5556
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 No X
--------- ---------
Number of shares outstanding of the issuer's common stock, as of
March 28, 2000
Common Stock 231,579,980
---------------------------------------- -----------
Class Number of shares outstanding
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Aden Enterprises, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
January 31, 2000 and April 30, 1999
Assets
Unaudited
January April
31, 2000 30, 1999
--------------- -------------
Current Assets
Cash in Bank ............................. $ 30,766 $ 0
Accounts Receivable Officer .............. 0 5,756
Prepaids ................................. 503,407 0
Other Receivables ........................ 269,463 296,700
Receivable from Synergy Media ............ 1,403,615 0
----------- -----------
Total Current Assets ................. 2,207,251 302,456
Property & Equipment
Furniture & Fixtures - Cost .............. 236,066 34,395
Less Accumulated Depreciation ............ ( 28,740) ( 13,181)
----------- -----------
Net Property & Equipment ............. 207,326 21,214
Other Assets
Goodwill - Net ........................... 238,737 55,217
Non-Compete Agreement - Net .............. 73,098 0
Computer Network Software & Hardware - Net 3,271,354 0
Website Development - Net ................ 263,006 0
Investments .............................. 4,131,308 0
Deposits ................................. 5,000 0
Domain Name .............................. 27,168 0
----------- -----------
Total Other Assets ................... 8,009,671 55,217
----------- -----------
Total Assets ......................... $10,424,248 $ 378,887
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Consolidated Balance Sheets - Continued
January 31, 2000 and April 30, 1999
<TABLE>
Liabilities & Stockholders' Equity
<CAPTION>
Unaudited
January April
31, 2000 30, 1999
--------------- -------------
<S> <C> <C>
Current Liabilities
Cash in Bank Overdraft .......................... $ 26,971 $ 17,360
Accounts Payable - Trade ........................ 5,326,736 469,652
Accounts Payable - Employees .................... 92,132 137,834
Payroll Taxes Payable ........................... 1,007,750 628,409
Accrued Payables - Services ..................... 154,530 0
State Franchise Taxes Payable ................... 0 5,729
Accrued Interest Payable ........................ 2,481,604 2,589,254
Accrued Forbearance Fees Payable ................ 1,264,662 1,264,662
Notes Payable ................................... 3,308,753 3,453,574
Judgments Payable ............................... 1,860,001 1,906,939
Unissued Common Stock ........................... 3,727,922 518,000
Officer Payable ................................. 1,045,394 0
----------- -----------
Total Current Liabilities .............. 20,296,455 11,098,213
Stockholders' Equity
Common Stock, 100,000,000 Shares at No
Par Value Authorized;
98,285,575 Shares and 97,000,000 Shares
Issued and outstanding, Respectively ........ 12,026,758 4,055,293
Paid In Capital ................................. 2,948,882 723,002
Deficit Accumulated in the Development Stage .... ( 24,847,847) ( 15,497,621)
----------- -----------
Total Stockholders' Equity ............. ( 9,872,207) ( 10,719,326)
----------- -----------
Total Liabilities & Stockholders' Equity $10,424,248 $ 378,887
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Consolidated Statements of
Operations Accumulated for the Period May 22,
1986 (Inception) to January 31, 2000
And the Three and Nine-Month Periods Ended
January 31, 2000 and 1999
<TABLE>
<CAPTION>
Unaudited Unaudited Unaudited Unaudited
Three Months Nine Months Three Months Nine Months
Ended Jan. Ended Jan. Ended Jan. Ended Jan.
Accumulated 31, 2000 31, 2000 31, 1999 31, 1999
----------- ------------ ------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Revenues
Travel Commissions ........ $ 241,670 $ 81,492 $ 143,530 $ 25,878 $ 74,605
Other Income .............. 157,979 0 75,487 0 0
------------- ------------- ------------- ------------- -------------
Total Revenues ... 399,649 81,492 219,017 25,878 74,605
Operating Expenses
Amortization & Depreciation 313,500 219,318 273,821 4,281 12,843
Warrants Issued Expense ... 2,959,245 772,582 2,236,243 178,176 178,176
Consultant Fees ........... 4,549,786 574,916 1,061,567 334,854 1,242,767
Interest .................. 3,584,073 261,762 701,679 166,381 499,143
Wages ..................... 1,164,635 565,600 973,554 27,876 49,010
Professional Fees ......... 1,516,975 388,084 880,187 5,556 5,556
Payroll Taxes & Penalties . 614,920 57,956 64,460 12,615 37,847
Forbearance ............... 2,559,903 622,250 1,819,837 21,000 63,000
Administrative &
General Expense ........... 1,819,511 608,085 1,123,330 77,067 231,201
Settlement Costs .......... 2,509,801 214,730 214,730 86,750 260,250
Investment Losses ......... 4,037,696 0 62,133 0 0
Tickets/Tours ............. 157,702 0 157,703 0 0
------------- ------------- ------------- ------------- -------------
Total Operating Expenses 25,787,747 4,285,283 9,569,244 914,556 2,579,793
------------- ------------- ------------- ------------- -------------
Loss from Operations ... ( 25,388,098) ( 4,203,791) ( 9,350,227) ( 888,678) ( 2,505,188)
Other Income
Interest Income ........... 152,251 0 0 0 0
Litigation Settlement ..... 388,000 0 0 0 0
------------- ------------- ------------- ------------- -------------
Total Other Income ..... 540,251 0 0 0 0
------------- ------------- ------------- ------------- -------------
Net Loss ............... ($ 24,847,847) ($ 4,203,791) ($ 9,350,227) ($ 888,678) ($ 2,505,188)
============= ============= ============= ============= =============
(Loss) Per Share ....... ($ 0.05) ($ 0.10) ($ 0.01) ($ 0.03)
============= ============= ============= =============
Weighted Average
Shares Outstanding .... 93,095,292 96,451,547 100,000,000 74,366,634
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
For the Period May 22, 1986 (Inception) to January 31, 2000
<TABLE>
<CAPTION>
Common Stock Paid In Accumulated
Shares Amount Capital Deficit
------ ------ ------- -------
<S> <C> <C> <C> <C>
Beginning Balance,
May 22, 1986 .............. 0 $ 0 $ 0 $ 0
Common Stock Issued for
Cash May 22, 1986 ......... 100,000 12,500
Cash Contributed by
Public Investors .......... 14,322
Net Loss for Year Ended
April 30, 1987 ............ ( 532)
----------------------------------------------------------
Balance, April 30, 1987 ... 100,000 26,822 0 ( 532)
Net Loss for Year Ended
April 30, 1988 ............ ( 20,472)
----------------------------------------------------------
Balance, April 30, 1988 ... 100,000 26,822 0 ( 21,004)
Cash Contributed by Officer 0 10,691
Common Stock Issued for
Cash February 28, 1989 .... 240,600 71,428
Net Loss for Year Ended
April 30, 1989 ............ ( 89,362)
----------------------------------------------------------
Balance, April 30, 1989 ... 340,600 108,941 0 (110,366)
Net Income for Year
Ended April 30, 1990 ...... 194,573
----------------------------------------------------------
Balance, April 30, 1990 ... 340,600 108,941 0 84,207
Net Loss for Year Ended
April 30, 1991 ............ ( 85,269)
----------------------------------------------------------
Balance, April 30, 1991 ... 340,600 108,941 0 ( 1,062)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity - Continued
For the Period May 22, 1986 (Inception) to January 31, 2000
<TABLE>
<CAPTION>
Common Stock Paid In Accumulated
Shares Amount Capital Deficit
------ ------ ------- -------
<S> <C> <C> <C> <C>
Dividend of No Par Shares 340,600
Net Loss for Year Ended
April 30, 1992 ........... ( 57,653)
-----------------------------------------------------------
Balance, April 30, 1992 .. 681,200 108,941 0 ( 58,715)
Reverse Split of Shares
Outstanding One for Two .. (340,600)
Net Loss for Year Ended
April 30, 1993 ........... ( 37,074)
-----------------------------------------------------------
Balance, April 30, 1993 .. 340,600 108,941 0 ( 95,789)
Net Loss for Year Ended
April 30, 1994 ........... ( 21,520)
-----------------------------------------------------------
Balance, April 30, 1994 .. 340,600 108,941 0 ( 117,309)
Capital Contributed by
Stockholder .............. 17,917
Capital Contributed by
Default of Public Investor 128
Warrants Issued .......... 123,095
Net Loss for Year Ended
April 30, 1995 ........... ( 221,340)
-----------------------------------------------------------
Balance, April 30, 1995 .. 340,600 126,986 123,095 ( 338,649)
Shares Issued for Cash at
$0.333 Per Share ......... 600,000 200,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity - Continued
For the Period May 22, 1986 (Inception) to January 31, 2000
<TABLE>
<CAPTION>
Common Stock Paid In Accumulated
Shares Amount Capital Deficit
------ ------ ------- -------
<S> <C> <C> <C> <C>
Shares Issued for Note
Receivable $0.291 Per Share 1,082,143 315,000
Shares Issued for Cash at
$0.486 Per Share .......... 300,000 146,000
Shares Issued for Cash
at $0.50 Per Share ........ 1,100,000 550,000
Shares Issued for Services
at $0.35 Per Share ........ 100,000 35,000
Shares Issued for Services
at $0.162 Per Share ....... 460,845 75,000
Shares Issued for Debt
Reduction ................. 197,505 32,140
Shares Issued for Cash
$0.001 Per Share .......... 3,900,889 39,008
Shares Returned to
Company for
Contribution at $0.01
Per Share ................. ( 90,000)( 900)
Shares Issued for Services
at $0.01 Per Share ........ 1,110,000 11,100
Warrants Issued ........... 403,495
Net Loss for Year Ended
April 30, 1996 ............ ( 5,528,702)
----------------------------------------------------------
Balance, April 30, 1996 ... 9,101,982 1,529,334 526,590 ( 5,867,352)
Shares Issued for Cash at
$0.01 Per Share ........... 658,333 6,583
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity - Continued
For the Period May 22, 1986 (Inception) to January 31, 2000
<TABLE>
<CAPTION>
Common Stock Paid In Accumulated
Shares Amount Capital Deficit
------ ------ ------- -------
<S> <C> <C> <C> <C>
Shares Issued for Services
at $0.01 Per Share ....... 116,667 1,167
Shares Issued for Cash at
$0.05 Per Share .......... 5,000,000 250,000
Shares Issued for
Forbearance at $0.04
Per Share ................ 290,000 11,600
Shares Issued for
Forbearance at $0.04
Per Share ................ 2,622,087 104,883
Cost of Warrants Issued .. 8,339
Net Loss for Year Ended
April 30, 1997 ........... ( 2,736,925)
-------------------------------------------------------------
Balance, April 30, 1997 .. 17,789,069 1,903,567 534,929 ( 8,604,277)
Shares Issued for Services
at $0.032 Per Share ...... 15,000,000 480,000
Net Loss for Year Ended
April 30, 1998 ........... ( 3,087,763)
-------------------------------------------------------------
Balance, April 30, 1998 .. 32,789,069 2,383,567 534,929 ( 11,692,040)
Shares Issued to Acquire
Liberty Court Travel ..... 10,000,000 300,000
Shares Issued for Services
at $.03000 Per Share ..... 27,857,143 1,135,715
Shares Issued for Services
at $0.01248 Per Share .... 2,580,000 32,198
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity - Continued
For the Period May 22, 1986 (Inception) to January 31, 2000
<TABLE>
<CAPTION>
Common Stock Paid In Accumulated
Shares Amount Capital Deficit
------ ------ ------- -------
<S> <C> <C> <C> <C>
Shares Issued for Services
at $0.02 Per Share .......... 4,000,000 80,000
Shares Issued for Services
at $0.014960 Per Share ...... 14,773,788 221,016
Shares Issued for Stock at
$0.04056 Per Share .......... 5,000,000 202,800
Cost of Warrants Issued ..... 188,073
Net Loss for Year Ended
April 30, 1999 .............. ( 3,805,580)
--------------------------------------------------------------
Balance, April 30, 1999 ..... 97,000,000 4,055,296 723,002 ( 15,497,621)
Cost of Warrants Issued ..... 25,505
Shares Issued for Cash at
$0.11419 Per Share .......... 3,695,000 424,274
Shares Issued for Services at
$0.07306 Per Share .......... 500,000 36,530
Shares Issued for Services at
$0.02 Per Share ............. 1,000,000 20,000
Shares Issued for Domain Name
at $0.00567 Per Share ....... 3,000,000 12,168
Shares Issued for Forbearance
at $0.06992 Per Share ....... 390,000 27,269
Shares Issued for Forbearance
at $0.04 Per Share .......... 100,000 4,000
Shares Issued for Forbearance
at $0.03488 Per Share ....... 350,000 12,208
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity - Continued
For the Period May 22, 1986 (Inception) to January 31, 2000
<TABLE>
<CAPTION>
Common Stock Paid In Accumulated
Shares Amount Capital Deficit
------ ------ ------- -------
<S> <C> <C> <C> <C>
Shares Issued for Services
at $0.00493 Per Share ........ 2,100,000 10,363 ( 10,363)
Shares Returned to Company
by the Company's President ... ( 11,135,000)
Shares Returned to Company
by Various Individuals at
$0.01 Per Share .............. ( 786,726)( 7,867)
Net Loss for Quarter Ended
July 31, 1999 - Unaudited .... ( 954,622)
Balance July 31, 1999 ........ 96,213,274 4,594,238 738,144 ( 16,452,242)
----------------------------------------------------------------
Shares Issued for Government
Payment Services, Inc. .......
Acquisition at $.468 Per Share 1,500,000 170,430
Shares Issued for Corporate
Travel Consultants, Inc. .....
Acquisition at $.468 Per Share 1,400,000 170,352
Shares Issued for Services
at $.125 Per Share ........... 2,500,000 50,000
Shares Issued for Cash
at $.142857 Per Share ........ 230,000 32,858
Shares Return to Company
By the Company's President ... ( 16,803,314)
Shares Issued for Cash
At $.190477 Per Share ........ 300,000 57,143
Shares Issued for Cash
At $.16 Per Share ............ 16,489,380 2,638,301
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity - Continued
For the Period May 22, 1986 (Inception) to January 31, 2000
<TABLE>
<CAPTION>
Common Stock Paid In Accumulated
Shares Amount Capital Deficit
------ ------ ------- -------
<S> <C> <C> <C> <C>
Shares Issued for Cash
At $.114292 Per Share ...... 1,924,900 220,000
Shares Issued for Services
At $.06 Per Share .......... 6,111,112 346,379
Shares Issued for Cash
At $.08 Per Share .......... 3,333,336 240,000
Shares Issued for Cash
At $.35 Per Share .......... 100,000 35,000
Shares Issued for Cash
At $.11419 Per Share ....... 17,500 1,998
Shares Returned to Company
By Investor ................ ( 13,366,188)
Cost of Warrants Issued .... 1,438,156
Net Loss for Quarter Ended
October 31, 1999 - Unaudited ( 4,191,814)
----------------------------------------------------------
Balance October 31, 1999 ... 100,000,000 $ 8,564,701 $ 2,176,300 ($20,644,056)
Shares Issued for Cash
At $.16 Per Share .......... 715,000 114,400
Shares Issued for Cash
At $.12 Per Share .......... 7,316,430 877,971
Shares Issued for Cash
At $.20 Per Share .......... 9,254,445 1,850,886
Shares Issued for Cash
At $.40 Per Share .......... 2,000,000 800,000
Shares Issued for Services
At $.011 Per Share ......... 1,000,000 21,600
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity - Continued
For the Period May 22, 1986 (Inception) to January 31, 2000
<TABLE>
<CAPTION>
Common Stock Paid In Accumulated
Shares Amount Capital Deficit
------ ------ ------- -------
<S> <C> <C> <C> <C>
Shares Returned to Company
By Investor ................ ( 5,000,000)
Shares Returned to Company
By Investor ................ ( 17,000,000)
Cost of Warrants Issued .... 722,582
Net Loss for Quarter
January 31, 2000 - Unaudited ( 4,203,791)
-------------------------------------------------------------------------
Balance January 31, 2000 ... 98,285,575 $ 12,026,758 $ 2,948,882 ($24,847,847)
==========================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Accumulated for the Period May 22, 1986 (Inception) to January 31, 2000
And for the Nine-Month Periods Ended January 31, 2000 and 1999
<TABLE>
<CAPTION>
Unaudited-Nine Unaudited-Nine
Months Ended Months Ended
Accumulated Jan. 31, 2000 Jan. 31, 1999
------------- -------------- -------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net Loss ........................................... ($24,847,847) ($ 9,350,227) ($ 2,505,188)
Adjustments to Reconcile Net Loss to
Net Cash Used by Operating Activities:
Amortization & Depreciation .................... 313,500 273,821 12,843
Other Non-Cash Expenses ........................ 3,658,966 903,188 1,723,769
Warrants Issued ................................ 2,959,245 2,236,243 178,176
Changes in Operating Assets & Liabilities:
(Increase) Decrease in Accounts Receivable ....... ( 1,673,078) ( 1,376,378) ( 1,288)
(Increase) Decrease in Prepaid Expenses .......... ( 503,407) ( 503,407) 0
Increase (Decrease) in Accounts Payable Trade .... 5,326,736 4,857,084 16,599
Increase (Decrease) in Accounts Payable Employees 92,132 ( 45,702) 0
Increase (Decrease) in Payroll Taxes Payable ..... 1,007,750 379,341 37,848
Increase (Decrease) in Accrued Interest .......... 2,481,604 ( 107,650) 499,143
Increase (Decrease) in Accrued Forbearance ....... 1,264,662 0 63,000
Increase (Decrease) in Accrued Salaries .......... 48,000 48,000 0
Increase (Decrease) in Unissued Common Stock ..... 3,727,922 3,209,922 0
Increase (Decrease) in Franchise Taxes Payable ... 0 ( 5,729) 0
Increase (Decrease) in Judgements Payable ........ 1,860,001 ( 46,937) 0
------------ ------------ ------------
Net Cash (Used) Provided by Operating Activities ( 4,283,814) 471,569 24,902
Cash Flows from Investing Activities
Organization Costs ................................. ( 160) 0 0
Cash Portion of Acquisition of Rose Lancaster ...... ( 200,000) ( 200,000) 0
Purchase of Computer Network Software and Hardware . ( 3,443,530) ( 3,443,530) 0
Purchase of Equipment .............................. ( 236,006) ( 201,771) ( 20,318)
Purchase of Website Development .................... ( 310,775) ( 310,775) 0
Purchase of Domain Name ............................ ( 27,168) ( 27,168) 0
Investments ........................................ ( 4,136,308) ( 4,136,308) 0
------------ ------------ ------------
Net Cash (Used) by Investing Activities ........ ( 8,353,947) ( 8,319,552) ( 20,318)
Cash Flows from Financing Activities
Increase (Decrease) in Cash in Bank Overdraft ...... 26,971 ( 9,341) 0
Sale of Common Stock ............................... 8,287,409 6,968,835 0
Increase (Decrease) in Officer Payable ............. 1,045,394 1,045,393 0
Increase (Decrease) in Notes Payable ............... 3,308,753 ( 144,820) 0
------------ ------------ ------------
Net Cash Provided by Financing Activities ...... 12,668,527 7,878,749 0
------------ ------------ ------------
Increase (Decrease) in Cash & Cash Equivalents . 30,766 30,766 4,584
Cash & Cash Equivalents Beginning of Period .... 0 0 0
------------ ------------ ------------
Cash & Cash Equivalents End of Period .......... $ 30,766 $ 30,766 $ 4,584
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows - Continued
Accumulated for the Period May 22, 1986 (Inception) to January 31, 2000
And for the Nine-Month Periods Ended January 31, 2000 and 1999
<TABLE>
<CAPTION>
Unaudited-Nine Unaudited-Nine
Months Ended Months Ended
Accumulated Jan. 31, 2000 Jan. 31, 1999
------------- ------------- -------------
<S> <C> <C> <C>
Disclosures for Operating Activities
Cash Paid for:
Interest .................... $4,599,505 $ 809,329 $ 332,762
Taxes ....................... $ 5,729 $ 5,729 $ 0
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
January 31, 2000
NOTE 1 - ORGANIZATION AND BUSINESS
The original Company was organized on May 22, 1986 under the laws of the state
of Nevada. During August 1988, the Company merged with Aden Enterprises, Inc., a
California Corporation, changing the Company's corporate domicile to the state
of California.
The Company has commenced planned principal operations but is considered to be a
development stage enterprise because it has not produced any significant
revenues. The Company's principal business activity is investing in all forms of
investments or lawful business activities. See Note 17 for current activities.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation - The consolidated financial statements include the
accounts of Aden Enterprises, Inc. and all of its wholly-owned and
majority-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Basis of Accounting - The Company maintains its accounting records using the
accrual method and prepares its financial statements in accordance with
generally accepted accounting principles.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Revenue Recognition - Revenues and directly related expenses are recognized in
the period when the services are performed for the customer.
Cash Equivalents - The Company considers all short-term, highly-liquid debt
instruments that are readily convertible, within three months, to known amounts
as cash equivalents. The Company currently has no cash equivalents.
Inventory - The Company accounts for inventory at its identified cost.
Property and Equipment/Depreciation - The cost of property and equipment is
depreciated over the estimated useful lives of the related assets. The cost of
leasehold improvements is depreciated (amortized) over the lesser of the length
of the related lease or the estimated lives of the assets. Depreciation is
computed on the straight-line method for both financial reporting purposes and
tax purposes. When property and equipment are retired or otherwise disposed of,
the related cost and accumulated depreciation are removed from the respective
accounts, and any resulting gain or loss
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements - Continued
January 31, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
on disposition is reflected in operations. Repairs and maintenance are expensed
as incurred; expenditures for additions, improvements and replacements are
capitalized.
Amortization - The cost of the agreement not to compete is being amortized over
the term of the agreement. Goodwill and website costs are being amortized over
ten years and three years, respectively.
Earnings per Share - Primary earnings per share amounts are based on the
weighted average number of shares outstanding at the date of the financial
statements. Fully diluted earnings per share shall be shown on stock options,
warrants and other convertible issues that may be exercised within ten years of
the financial statement date. When fully diluted earnings per share are
antidilutive, they are not presented.
Forbearance Amounts - The Company has certain financial obligations which are
currently in default. During the course of its business activities, the Company
negotiated forbearance agreements with certain creditors. For financial
statement purposes, the forbearance amounts are stated at 10-20% of the
indebtedness.
Statement of Cash Flows - The methodology used to prepare the statement of cash
flows for the nine months ended January 31, 2000 differs from that used for the
six months ended October 31, 1999. This has no effect on the previously reported
net cash used by operating activities for the six months ended October 31, 1999.
Computer Network Software and Hardware - This network software and hardware are
classified under Other Assets, because, as of the date of this report, the
network is not operational. They will be classified under Property and Equipment
at the time the network becomes operational.
NOTE 3 - PROPERTY, EQUIPMENT AND DEPRECIATION
Capitalized amounts are depreciated over the useful life of the assets using the
straight-line method of depreciation. At January 31, 2000 and April 30 1999, the
Company had property and equipment as follows:
<TABLE>
<CAPTION>
Cost Cost Accumulated Depreciation Expense Accumulated
-----------------------
January 31, April 30, Depreciation April 30, January 31, Depreciation
Assets 2000 1999 Life January 31, 2000 1999 2000 April 30, 1999
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Computer Equipment $ 161,737 $ 20,318 3-5 $ 18,127 $ 10,366 $ 5,471 $ 10,366
Furniture & Fixtures 74,329 14,077 2 10,613 2,815 3,058 2,815
----------- ----------- -------- ------------- ----------- ----------- -----------
Total $ 236,066 $ 34,395 $ 28,740 $ 13,181 $ 8,529 $ 13,181
=========== =========== ============= =========== ============ ============
</TABLE>
NOTE 4 - CONSOLIDATION
The Company issued 10,000,000 shares of its common stock to its President to
acquire Liberty Court Travel. During the year ended April 30, 1999, Liberty
Court Travel operated as a wholly-owned subsidiary of Aden Enterprises, Inc.
Subsequent to April 30, 1999, Liberty Court Travel operations were incorporated
into the Company's internet travel business. It had limited operations during
the the nine months ended January 31, 2000. The discounted value of the stock
exchanged exceeded the net book value of the assets of Liberty Court Travel by
$59,161. This amount has been recorded as goodwill and is being amortized over a
period of ten years.
Effective May 1, 1999 the Company acquired the assets of Rose Lancaster Tours
for $300,000, and its assets, liabilities, revenues and expenses are included in
the consolidated financial statements of Aden Enterprises, Inc. as of January
31, 2000 and the nine months then ended. The purchase price exceeded the net
book value of the assets of Rose Lancaster Tours and the value of the
non-compete agreement by $200,000. This amount has been recorded as goodwill and
is being amortized over 10 years.
NOTE 5 - NOTES PAYABLE
The Company has notes payable to twenty-eight individual lenders (a commercial
bank and twenty-seven individuals on April 30, 1999) as follows:
January 31, April 30,
2000 1999
-------------- ----------
Commercial Bank, Due August 21, 1995, Interest Rate 10.5% $ 0 $165,732
Individual #1, Interest Rate 15%, Due August 12, 1996 ... 300,000 300,000
Individual #2, Interest Rate 15%, Due October 31, 1996 .. 259,852 395,101
Individual #3, Interest Rate 15%, Due January 15, 1996 .. 145,000 145,000
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements - Continued
January 31, 2000
NOTE 5 - NOTES PAYABLE - Continued
January 31, April 30,
2000 1999
------------- ---------
Individual #4, Interest Rate 22%, Due April 15, 1997 345,000 345,000
Individual #5, Interest Rate 11%, Due on Demand .... 37,500 37,500
Individual #6, Interest Rate 12%, Due on Demand .... 81,330 81,330
Individual #7, Interest Rate 12.5%, Due on Demand .. 82,200 82,200
Individual #8, Interest Rate 12%, Due on Demand .... 7,100 7,100
Individual #9, Interest Rate 15%, Due on Demand .... 5,000 5,000
Individual #10, Interest Rate 15%, Due on Demand ... 160,000 160,000
Individual #11, Interest Rate 10%, Due on Demand ... 350,000 350,000
Individual #12, Interest Rate 12.5%, Due on Demand . 0 20,000
Individual #13, Interest Rate 11%, Due on Demand ... 10,000 10,000
Individual #14, Interest Rate 11%, Due on Demand ... 5,000 5,000
Individual #15, Interest Rate 11%, Due on Demand ... 8,000 8,000
Individual #16, Interest Rate 11%, Due on Demand ... 5,000 5,000
Individual #17, Interest Rate 11%, Due on Demand ... 8,000 8,000
Individual #18, Interest Rate 11%, Due on Demand ... 5,000 5,000
Individual #19, Interest Rate 10%, Due on Demand ... 0 100,000
Individual #20, Interest Rate12%, Due on Demand .... 109,279 109,279
Individual #21, Due on Demand ...................... 0 5,000
Individual #22, Interest Rate 12%, Due on Demand ... 232,000 257,000
Individual #23, Due on Demand ...................... 0 150,000
Individual #24, Interest Rate 7%, Due on Demand .... 100,000 100,000
Individual #25, Interest Rate 12%, Due on Demand ... 0 104,286
Individual #26, Interest Rate 12%, Due on Demand ... 420,992 420,992
Individual #27, Interest Rate 15% Due on Demand .... 0 72,054
Individual #28, Interest Rate 9% Due on Demand ..... 20,000 0
Individual #29, Interest Rate 15%, Due on Demand ... 12,500 0
Individual #30, Due on Demand ...................... 50,000 0
Individual #31, Due on Demand ...................... 50,000 0
Individual #32, Due on Demand ...................... 100,000 0
Individual #33, Due on Demand ...................... 50,000 0
Individual #34, Due on Demand ...................... 100,000 0
Individual #35, Due on Demand ...................... 100,000 0
Individual #36, Due on Demand ...................... 150,000 0
---------- ----------
Total ..................................... $3,308,753 $3,453,574
========== ==========
NOTE 6 - LITIGATION
On October 16, 1998, the Company was named as a co-defendant in an action
brought in the District Court of Douglas County, Nebraska, captioned Copper
Canyon Ventures, L.L.C., Plaintiff, vs. Michael S. Luther, Aden Enterprises,
Inc. and Capstone Group, Inc., Defendants, Doc. 976 No. 824. The action seeks to
recover on a promissory note, effective January 1, 1998, with interest thereon
at 12.5% per annum. On September 25, 1999, the parties entered into a settlement
agreement under which certain payments will be made in exchange for the release
and dismissal of all claims against the Company and the other defendants. As of
the date of this report, such payments have not been made and the action remains
pending.
The Company has been a defendant in legal proceedings at various times in the
past and has outstanding balances as follows:
<TABLE>
<CAPTION>
January 31, April 30,
2000 1999
-------------- ----------
<S> <C> <C>
Judgment in the United States District Court of Nebraska,
Douglas County, Doc. #97, No. 465, Invest L' Inc.,
Plaintiff vs. Aden Enterprises, Inc., Et Al.,
Petition filed September 23, 1997 ............................ $ 437,924 $ 437,924
Judgment in the United States District Court of Nebraska,
Douglas County, Doc. #97, No. 465, Invest L' Inc.,
Bridge Fund Plaintiff vs. Aden Enterprises, Inc., Et Al.,
Petition Filed September 23, 1997 ............................ 398,970 398,970
Judgment in the District Court of Nebraska,
Douglas County, Doc. #964, No. 98, Fredrick W. Weidinger
Plaintiff, vs. Aden Enterprises, Inc., Defendant,
Petition Filed August 18, 1997 ............................... 88,600 88,600
Judgment in the District Court of Nebraska,
Douglas County, Doc. #959 No. 864, Russell Barger
Plaintiff vs. Aden Enterprises, Inc., Et. Al., Petition Filed
April 2, 1997 ................................................ 72,994 119,932
Judgment in the District Court of Nebraska,
Douglas County, Doc. #956, No. 36, Matthew A. Gohd
Plaintiff vs. Aden Enterprises, Inc., Et. Al., Petition Filed
November 27, 1996 ............................................ 200,000 200,000
Judgment in the District Court of Nebraska,
Douglas County, Doc., 958, No. 177, Value Partners LTD.,
Plaintiff vs., Aden Enterprises, Inc., Et. Al., Petition Filed
February 12, 1997 ............................................ 482,773 482,773
Judgment in the United States Eighteenth Judicial Circuit,
</TABLE>
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements - Continued
January 31, 2000
NOTE 6 - LITIGATION - Continued
<TABLE>
<S> <C> <C>
County of Du Page State of Illinois, Doc., 0256,
Primary Resources, Inc., Plaintiff vs. Aden Enterprises, Inc.,
Et. Al., Filed March 8, 1996 ................................. 178,740 178,740
---------- ----------
Total .................................................. $1,860,001 $1,906,939
========== ==========
</TABLE>
These amounts have been personally guaranteed by the Company's president.
NOTE 7 - PAYROLL TAXES
Resulting from a failed acquisition in 1996 the Company has been identified as a
responsible party by the Internal Revenue Service for unpaid payroll taxes of
$311,020 and Aden and its affiliate have $453,926 in unpaid payroll taxes.
Penalties and interest of $242,804 have been accrued on these taxes as of
January 31, 2000. These amounts have been personally guaranteed by the Company's
president.
NOTE 8 - UNISSUED COMMON STOCK
In 1999, $3,727,922 was received for payment of approximately 14,312,150 of
shares of common stock. The Company has directed its transfer agent to issue the
shares.
NOTE 9 - INTEREST PAYABLE
During the nine months ended January 31, 2000 the Company paid $667,111 of the
accrued interest on the notes payable presented in Note #5. Interest at the debt
rate and penalty interest have been accrued and represent $2,481,604 at January
31, 2000 and $2,589,254 at April 30, 1999. These amounts have been personally
guaranteed by the Company's president.
NOTE 10 - FORBEARANCE FEES PAYABLE
The notes payable, as disclosed in Note 5, have all been defaulted upon by the
Company. The Company has made commitments to the note holders for additional
amounts to be repaid for an extension of the payment of accrued interest and
principal of the notes. These forbearance fees commitments are $1,264,662 at
January 31, 2000 and April 30, 1999.
NOTE 11 - INCOME TAXES
The Company has adopted FASB 109 to account for income taxes; however the
Company currently has no issues that create timing differences that would
mandate deferred tax expense. Net operating losses would create possible tax
assets in future years. Due to the uncertainty as to the utilization of net
operating loss carryforwards a valuation allowance has been made to the extent
of any tax benefit that net operating losses may generate.
The Company has incurred losses that can be carried forward to offset future
earnings if conditions of the Internal Revenue Codes are met. These losses are
as follows:
Year of Loss Amount Expiration Date
------------ ------ ---------------
1991 $ 1,062 2006
1992 57,653 2007
1993 37,074 2008
1994 21,520 2009
1995 221,340 2010
1996 5,528,703 2011
1997 2,736,925 2017
1998 3,087,763 2018
1999 3,805,580 2019
Nine months ended January 31, 2000 9,350,227 2020
Nine Months Year Ended
Ended April 30,
Jan. 31,2000 1999
------------ -----------
Deferred Tax Asset Balance Beginning of Period $ 0 $ 0
Net Operating Loss Carryforwards ............. 24,847,847 15,537,620
=========== ===========
Tax Benefit at Current Rate ................ $ 8,448,268 $ 5,282,791
Valuation Allowance ........................ ( 8,448,268) ( 5,282,791)
----------- -----------
Net Deferred tax Asset ................. $ 0 $ 0
=========== ===========
Deferred Tax Liability ................. $ 0 $ 0
=========== ===========
NOTE 12 - STOCKHOLDERS' EQUITY
Common Stock
The total authorized stock of the Corporation is 100,000,000 shares of
common stock with no par value. All stock when issued is deemed fully
paid and non-assessable. No cumulative voting on any matter to which
stockholders shall be entitled to vote shall be allowed for any
NOTE 12 - STOCKHOLDERS' EQUITY - Continued
purpose. Shareholders have no pre-emptive rights to acquire unissued
shares of stock of the Corporation. See Note 17 regarding the increase
in the number of authorized shares.
Common Shares Issued for Non-Cash Investing and Financing Activities
The Company issued shares for non-cash investing and financing
activities as follows:
04-30-96 Issued 1,082,143 Shares for a Note Payable of $315,000
04-30-97 Issued 116,667 Shares for Services of $1,167
04-30-97 Issued 2,912,087 Shares for Forbearance Expense of $116,483
04-30-98 Issued 15,000,000 Shares Valued at $480,000 to the President of the
Company for Personal Guarantee of the Notes Payable, Related Interest
Accrued and Forbearance Fee Outstanding
04-30-99 Issued 10,000,000 Shares Valued at $300,000 to the Company's President
for 100% of the Outstanding Shares of Liberty Court Travel, Inc
04-30-99 Issued 2,580,000 Shares to a Consultant for Services Valued at $32,198
04-30-99 Issued 4,000,000 Shares to Two Consultants for Services Valued at
$80,000
04-30-99 Issued 5,000,000 Shares to a Consultant for Web Page Address Services
Valued at $202,800, (subsequent to July 31, 1999, the Consultant returned
the shares as part of a negotiated settlement of a dispute).
07-31-99 Issued 3,600,000 Shares to Three Consultants for Services Valued at
$66,713.
07-31-99 Issued 3,000,000 Shares to a Consultant for Domain Name Valued at
$12,168.
07-31-99 Issued 840,000 Shares to Two Individuals for Forbearance Expense at
$43,477.
10-31-99 Issued 6,111,112 Shares to Four Consultants for Services Valued at
$346,379.
10-31-99 Issued 1,500,000 Shares to an Individual for Partial Payment on
Government Payment Service Valued at $170,430.
10-31-99 Issued 1,400,000 Shares to Four Individuals for Partial Payment on
Corporate Travel Services, Inc. Valued at $170,352.
10-31-99 Issued 2,500,000 Shares to a Consultant for Services Valued at $50,000.
01-31-00 Issued 1,000,000 Shares to a Consultant for Services Valued at $21,600
The price of the shares issued was computed as follows:
The market quote price on the day of the transaction multiplied by a
financial risk and liquidity risk discount of 50% prior to January 1, 1999,
40% after January 1, 1999 and 30% after January 1, 2000 and a lack of
marketability risk discounts of 34%. The Company used an outside valuation
service to obtain the two discounts described above.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements - Continued
January 31, 2000
NOTE 12 - STOCKHOLDERS' EQUITY - Continued
Warrants
The Company has issued warrants to purchase shares of its stock at
various prices over a two-year period from the date of issue. The
warrants have been valued at the difference between the stock price on
the date of issue and the present value on a 5% discount for two years
multiplied by the valuation study discount of 50% prior to January 1,
1999, 40% after January 1, 1999 and 30% after January 31, 2000 for
financial risk and liquidity and 34% for lack of marketability. The
resultant cost has been expensed to the operations in the year the
warrants were issued, and paid-in-capital in the stockholders' equity
section of the balance sheet has been correspondingly increased. Upon
issue of the shares, the paid-in-capital will be relieved of the
warrant cost and the value of the no par stock will be increased. If
the warrants are not exercised they remain as paid in capital, and no
reduction to warrant expense will be made.
Warrants Issued are as follows:
<TABLE>
<CAPTION>
Warrants Expiration
Fiscal Year Ended Issued Date Expense
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
04-30-96 9,725,334 04-30-98 $ 526,590
04-30-97 2,150,000 04-30-99 8,339
04-30-99 88,179,527 04-30-01 188,073
05-01-99 to 1-31-00 135,635,441 06-28-01 to 01-25-02 2,236,243
--------------- -----------------
Total 235,690,302 $ 2,959,245
============== ==================
Subsequent Issued
04-30-2000 0 $ 0
</TABLE>
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements - Continued
January 31, 2000
NOTE 13 - SEGMENT ACCOUNTING
Segment disclosure for the Company and its wholly-owned subsidiaries as of
January 31, 2000 and the nine months then ended are as follows:
<TABLE>
<CAPTION>
Aden Liberty
Enterprises, Inc. Court Travel CheapFares.com
----------------- ------------ --------------
<S> <C> <C> <C>
Total Current Assets $ 2,165,571 $ 0 $ 14,709
Property & Equipment - Net 161,055 19,093 27,178
Other Assets 7,591,675 0 417,996
--------------- ------------- --------------
Total Assets $ 9,918,301 $ 19,093 $ 459,883
=============== ============= ==============
Current Liabilities $ 20,086,002 $ 183,482 $ 0
=============== ============= ==============
Total Revenues $ 6,336 $ 20,801 $ 191,880
Operating Expenses 8,916,238 45,387 607,619
--------------- ------------- --------------
Loss from Operations ($ 8,909,902) ($ 24,586) ($ 415,739)
================ ============== ===============
</TABLE>
NOTE 14 - LEASE OBLIGATION
At January 31, 2000, the Company was obligated under two operating leases with
terms in excess of one year which require lease payments as follows:
Year End Amount
April 30, 2000 $ 40,650
April 30, 2001 162,600
April 30, 2002 117,300
April 30, 2003 73,050
April 30, 2004 75,225
Thereafter 38,175
-------------
Total $ 507,000
=============
NOTE 15 - GOING CONCERN
The accompanying financial statements of Aden Enterprises, Inc., have been
prepared on a going-concern basis, which contemplates profitable operations and
the satisfaction of liabilities in the
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements - Continued
January 31, 2000
NOTE 15 - GOING CONCERN - Continued
normal course of business. There are uncertainties that raise substantial doubt
about the ability of the Company to continue as a going concern, as shown in the
statements of operations. In addition the Company may not have sufficient assets
with which to conduct profitable operations and has an inordinately high amount
of current debt. These items raise substantial doubt about the ability of the
Company to continue as a going concern.
In the fiscal year ended April 30, 1999 the Company commenced new operations in
the electronic commerce industry where it will sell, or facilitate the sale, of
travel services through the internet utilizing the Company's proprietary
technology in a web site. The Company presently is working on an improved
version of the web site systems.
The Company's continuation as a going concern is dependent upon its ability to
satisfactorily meet its obligations, generate cash flows from operations for
current operating costs and to raise capital to fund the planned ventures. From
May 1, 1999 through the date of this report, the Company has received
subscription proceeds in the amount of $11,347,405.
The Company's President has personally guaranteed the Company's current debt and
accumulated interest.
The financial statements do not include any adjustments that might result from
the outcome of these uncertainties.
NOTE 16 - ACQUISITION AND RESCISSION
On September 4, 1998, the Company issued an 8-K announcing the acquisition of a
two-year marketing agreement with SelectSoft, LLC, an Arizona Limited Liability
Corporation. The Company issued 10,000,000 shares of its common stock. On
February 26, 1999 the Company issued an 8-K announcing the rescission of its
agreement with SelectSoft, LLC and received its 10,000,000 shares back.
On January 13, 1999, the Company announced that is had entered into an agreement
with Government Payment Services, Inc., and Synergy Media, Inc., to assume 100%
ownership of Government Payment Services, Inc. Subsequently, the Company elected
not to proceed with the transaction and no stock was issued. However, the
Company has made advances to Government Payment Services, Inc. on behalf of
Synergy Media, Inc.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements - Continued
January 31, 2000
NOTE 16 - ACQUISITION AND RESCISSION - Continued
On January 11, 1999, the Company announced that it has expanded the services it
will market to consumers on the Internet to include long distance and local
telephone service, electricity and gas services. These services will be offered
in certain geographic regions through an agreement with Massachusetts-based
TelEnergy, Inc. At the date of this report, the Company has not actively pursued
this agreement, although it is still in effect.
On September 24, 1998, the Company announced that it had entered into a letter
term sheet setting forth the terms and conditions whereby Luther & Company, or
its Designee, would provide Alcohol Sensors International, Ltd., with principal
offices located in Islandia, New York, prepaid royalties and other consideration
set forth in such letter term sheet in exchange for an exclusive worldwide
three-year license for the Company's product(s) and three year's warrants. An
affiliate of the Company provided funds to ASI on behalf of the Company in the
amount of $40,000. These funds are due and payable to the Company, but are
deemed to be uncollectible as ASI has entered into Chapter 11 proceedings.
During the first quarter of the fiscal year, the Company entered into an
agreement to purchase several Internet domain names for the Kingdom of Tonga
from a resident of Colorado, which included the domain name Cheapfares.to. Terms
of this agreement called for an initial payment of $50,000 with a subsequent
payment of $250,000 and the issuance of 5,000,000 shares of the Company's common
stock and warrants to purchase an additional 5,000,000 shares of common stock.
Owing to a dispute which arose between the seller and the Company, this
transaction was not consummated and litigation ensued. The parties reached a
settlement whereby the seller was paid an additional $50,000 on August 31, 1999,
the warrants were canceled and the shares of common stock were returned to Aden
in December, 1999.
In October of 1999, the Company caused the formation of Navlet.com, Inc.,
("Navlet") under the laws of the state of Delaware. Navlet is engaged in
developing and licensing certain intellectual property rights and internet
applications related to electronic commerce. The Company will hold a majority
interest in Navlet's voting stock. As of the date of this report, no stock has
been issued.
NOTE 17 - SUBSEQUENT EVENTS
The Company entered into a license agreement with MercExchange LLC
(MercExchange) whereby the Company obtained a perpetual, exclusive right to use
the MercExchange patent, pending patents and proprietary plans and strategies,
(collectively the MercExchange intellectual property), for the travel services
industry subject to certain restrictive terms and conditions. In addition to the
license agreement, Aden purchased a ten percent (10%) ownership interest in
MercExchange, LLC and the Company acquired an option to purchase an additional
five percent (5%). In October 1999, the
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements - Continued
January 31, 2000
NOTE 17 - SUBSEQUENT EVENTS - Continued
Company entered into a revised agreement with MercExchange whereby it obtained a
right to enforce the MercExchange intellectual property in the travel service
industry and a right to non-exclusively license the MercExchange intellectual
property to other business opportunities that the Company may pursue. Subject to
the terms of the revised agreement and the issuance of certain warrants for the
Company's stock, MercExchange acquired a substantial financial and equity
interest in Aden. During the quarter ending January 31, 2000, the Company paid
$750,000 towards this obligation. At the present time, the Company does not have
the financial resources necessary to perform its rights and obligations under
the agreement or to perfect its ownership interest in the MercExchange, LLC.
The Company has entered into a letter of intent to acquire another traditional
travel agency, Corporate Travel Consultants II, Inc., based in Miami, Florida.
The letter of intent was accompanied by a payment of $50,000 and the issuance of
1,000,000 shares of the Company's common stock. In August, 1999 the Company
issued an additional 1,400,000 shares of its own stock. Management anticipates
that this acquisition will be completed during the fiscal year ending April 30,
2000, although there can be no assurance the Company will have the funds to
fulfill the agreement.
The Company has formed a Nevada Corporation under the name Leftbid.com, Inc
("Leftbid"). At formation, Leftbid was a wholly-owned subsidiary. Leftbid is
engaged in the establishment of websites which will sell artworks, antiques and
related merchandise to buyers on the internet. As of the date of this report,
Leftbid has conducted only limited business operations. After issuance of shares
of Leftbid's stock to MercExchange for its licenses, management and outside
investors, Aden anticipates it will own 69.6% of Leftbid's issued and
outstanding capital stock.
In April of 1999, the Company entered into an agreement to acquire all of the
capital stock of Azumano Travel, Inc., ("Azumano"). The transactions
contemplated in this agreement have not been consummated, and the Company is
renegotiating the terms of this agreement. As of the date of this report, the
parties have agreed, subject to execution of a definitive amendment to the
agreement under which the Company will deliver to the selling shareholders a
promissory note in the principal amount of $3,000,000 (secured by a pledge of
Azumano capital stock acquired by the Company), payable in two installments of
$1,000,000, due and payable 30 days following execution of the note, and the
balance due and payable 90 days following execution of the note. In addition,
the Company will issue and deliver to the selling shareholder 33,500,000 shares
of the Company's capital stock, subject to the Company's articles of
incorporation being amended to increase the number of authorized shares of
common stock.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements - Continued
January 31, 2000
NOTE 17 - SUBSEQUENT EVENTS - Continued
In order to issue shares of common stock with respect to certain commitments
made to various third parties, the Company borrowed an additional 150,000 shares
of its common stock from Mr. Luther subsequent to January 31, 2000. Mr. Luther
received no compensation in exchange for this transaction.
On February 2, 3 and 15, 2000, the Company issued 9 1/2% notes to the Company
president in the amounts of $1,600,000, $7,417,100 and $150,000, respectively,
payable on demand, evidencing monies loaned to the Corporation. These funds were
advanced for certain company obligations and advances to related companies.
On February 18, 2000 shareholders of the Company approved amending the Company's
Articles of Incorporation to increase the authorized common stock from
100,000,000 to 750,000,000 shares.
As of October 30, 1999, the Company signed an agreement with Data Duplicating
Corporation ("DDC"), (a Nebraska electronic media duplicating operation), and
all of its stockholders to acquire all of the 21,006 outstanding shares of DDC
stock in exchange for 7,622,491 shares of the Company's stock, deliverable at
closing on November 15, 1999. The Company also agreed to contribute $700,000
capital to DDC at the closing date. The agreement was amended to change the
closing date to December 31, 1999 and to defer the delivery of the Company's
stock until after its authorized shares of stock were increased to an amount
sufficient to issue to referenced shares. However, the agreement did not close
until February 3, 2000.
NOTE 18 - RELATED PARTY TRANSACTIONS
The Company has issued stock to officers, directors and others for various
services as follows:
Michael S. Luther, an officer and director of the Company
- 25,000,000 shares in consideration of his guaranteeing $4,000,000 of
the Company's indebtedness and for the assumption and indemnification
of the Company's liabilities arising from certain litigation claims.
See Notes 6, 7 and 15.
- 2,000,000 shares in consideration of unspecified services to the
Company.
Judith E. Sundberg, an officer and director of the Company
- 1,714,286 shares in consideration of services rendered.
Donald E. Rokusek, a director of the Company
- 1,142,857 shares in consideration of services rendered.
Daniel A. Koch
- 13,366,188 shares in consideration of his arranging a $100,000 loan to
the Company, repaying such loan and paying $40,000 of additional
expenses on behalf of Liberty Court.
The Company has paid commissions to Quaestus Ltd. for sale of the Company's
stock. Anders Ulegard, who is a significant stockholder of the Company, is a
principal in Quaestus, Ltd.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The matters discussed in this report contain forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended, that involve
risks and uncertainties. All statements other than statements of historical
information provided herein may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes", "anticipates", "plans",
"expects" and similar expressions are intended to identify forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed in this section and elsewhere in this
report, the risks discussed in the "Forward-Looking and Cautionary Statements"
section included in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission (the "SEC") on January 26, 2000 (the "1999
Report"), and the risks discussed in the Company's other filings with the SEC.
These risks and uncertainties could cause actual results to differ materially
from those reflected in the forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which reflect
management's analysis, judgment, belief or expectation only as of the date
hereof. The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date hereof.
(a) Overview
During the fiscal year ended April 30, 1999, the Company did not engage in
any significant operations. The Company's management has decided to engage in
the electronic commerce area, primarily as it relates to the sale or
facilitation of the sale of travel services. For accounting purposes, the
Company is a development stage enterprise. As such the Company's planned
principal operations have not commenced or, having commenced, have not generated
significant revenue. Therefore, the reported financial information is not
necessarily indicative of the Company's future operating results or of its
future financial condition. There are substantial doubts as to whether the
Company is a going concern (i.e., that the Company will remain in operation long
enough to carry out all of its current plans). See Note 15 to "Financial
Statements."
The Company believes that over the short-term a substantial majority of its
revenues will be derived from airline ticket transactions. Airline ticket
commissions are determined by individual airlines and billed and collected
through the Airline Reporting Corporation, an industry-administered
clearinghouse. As is customary in the travel industry, travel suppliers are not
obligated to pay any specified commission rate for bookings made through our
websites. The Company anticipates that commission revenues will be recognized
when the reservation is made, net of allowances for cancellations.
<PAGE>
Cost of revenues will consist primarily of fees paid to the Company's
fulfillment vendors for the costs associated with issuing airline tickets and
related customer services, fees paid to third party vendors for use of their
computer reservation and information services systems, allocated and direct
costs for the operation of the Company's data operations and costs related to
insertion of banner and other advertisements.
The Company's direct product development expenses consist primarily of
compensation for personnel. Its direct sales and marketing expenses consist
primarily of personnel-related costs as well as advertising, distribution and
public relations expenses.
The Company has incurred and expects to continue to incur substantial
losses and negative cash flows on both an annual and interim basis. In
particular, the Company intends to increase its focus and spending on brand
development, sales and marketing, product development, website content and
strategic relationships. Additionally, the Company's revenues are impacted by
the seasonality of the travel industry, particularly leisure travel. These
factors could adversely affect the Company's future financial condition and
operating results.
The Company's fiscal years end on April 30 of each year. References to a
fiscal year, such as fiscal 1999, are to the twelve months ended April 30 of
that year.
(b) Three Months and Nine Months Ended January 31, 2000 Compared to Three
Months and Nine Months Ended January 31, 1999
Net Revenues (Losses). Gross revenues increased 215% from $25,878 in the
three months ended January 31, 1999, to $81,492 in the three months ended
January 31, 2000. Revenues increased 194% from $74,605 in the nine months ended
January 31, 1999, to $219,017 in the nine months ended January 31, 2000. This
increase was attributable to increased travel commissions and other income.
Nevertheless, owing to increased operating expenses, we experienced net losses
for these periods. Net losses for the three months ended January 31, 2000,
increased 373% to $4,203,791 from $888,678 for the three months ended January
31, 1999, and for the nine months ended January 31, 2000, increased 273% to
$9,350,227 from $2,505,188 for the nine months ended January 31, 1999.
Cost of Revenues. The cost of revenues (which was $0) remained unchanged
during the periods indicated.
<PAGE>
Operating Expenses. Operating expenses increased 369% from $914,556 in the
three months ended January 31, 1999, to $4,285,283 in the three months ended
January 31, 2000. Operating expenses increased 262% from $2,579,793 in the nine
months ended January 31, 1999, to $9,350,227 in the nine months ended January
31, 2000. This increase was primarily attributable to expenses associated with
the issuance of warrants and forbearance fees.
Income Taxes. The Company files consolidated returns for federal income tax
purposes with its subsidiaries. In certain states it may file unitary or
combined tax returns with its subsidiaries. The Company will realize certain tax
benefits stemming from its net operating losses to date.
(c) Liquidity and Capital Resources
Historically, the Company financed its activities through private
placements of its securities or borrowing from individuals or private
organizations. The Company had negative working capital and had an accumulated
deficit of $24,847,847 at January 31, 2000. This includes $3,308,753 for notes
payable, $1,860,001 for outstanding judgments and $1,007,750 for collected, but
unpaid, employment taxes. See "Legal Proceedings" and Notes 5 and 6 to
"Financial Statements".
The Company anticipates that its liquidity needs over the next twelve
months will be met with proceeds generated from private offerings of its
securities or those of its subsidiaries. There can be no assurances that the
proceeds of such offerings will be adequate to meet the Company's needs. The
Company does not have a credit facility and is not currently negotiating with
any party to obtain a credit facility.
The Company has had no net cash available for operations. At January 31,
2000, the Company had no material commitments for capital expenditures, but the
Company expects a substantial increase in capital expenditures for the remainder
of fiscal 2000. The Company also expects a substantial increase in merger and
acquisition related costs for the fourth quarter of fiscal 2000 and fiscal 2001.
(d) Year 2000 Compliance
The Company and its subsidiaries have not experienced any material problems
with network infrastructure, software, hardware and computer systems relating to
the inability to recognize appropriate dates related to the Year 2000. The
Company and it subsidiaries do not anticipate incurring material expenses or
experiencing any material operational disruptions as a result of any Year 2000
issues.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Registrant hereby incorporates by this reference the information set
forth in Part I, Item 3 of the 1999 Report .
Item 2. Changes in Securities and Use of Proceeds
During the fiscal quarter ended January 31, 2000, the Company issued shares
of its Common Stock which were not registered under the Securities Act of 1933,
as amended (the "Securities Act"), which are described as follows:
On December 17, 1999, the Registrant issued 1,000,000 shares of its Common
Stock in consideration for services. Such shares had a fair market value of
$0.0216 per share.
On January 6, 2000, the Registrant issued in the aggregate 715,000 shares
of its Common Stock for a total cash purchase price of $114,400.
On January 6, 2000, the Registrant issued in the aggregate 7,316,430 shares
of its Common Stock for a total cash purchase price of $877,972.
On January 6, 2000, the Registrant issued in the aggregate 9,254,445 shares
of its Common Stock for a total cash purchase price of $1,850,888.
On January 24, 2000, the Registrant issued 2,000,000 shares of its Common
Stock for a total cash purchase price of $800,000.
The issuance of securities described above in this Item 2 were deemed
exempt from registration under the Securities Act in reliance on Section 4 (2)
of the Securities Act as transactions by an issuer not involving any public
offering. Such securities are subject to the restrictions of Rule 144 under the
Securities Act.
The foregoing securities were valued in accordance with the method
described at Part II, Item 5 of the 1999 Report, which is hereby incorporated by
this reference. All such valuations were made as of the date the underlying
transaction was agreed to and not as of the date stock certificates were issued.
<PAGE>
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to the registrant's security holders for a vote
or otherwise during the fiscal quarter ended January 31, 2000.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
27.1 Financial Data Schedule
(B) Reports on Form 8-K
The registrant filed with the Commission no reports under Form 8-K during
the fiscal quarter ended January 31, 2000.
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.
ADEN ENTERPRISES, INC.
BY: /s/ Michael S. Luther
--------------------------
MICHAEL S. LUTHER
Chairman and Chief Executive Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
Date: April 7, 2000
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ADEN
ENTERPRISES, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JANUARY 31,
2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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