FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Mark One
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE OF 1934
FOR THE QUARTERLY PERIOD ENDED: September 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO N/A
COMMISSION FILE NUMBER: 33-21239
TRAVEL DYNAMICS, INC.
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(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
NEVADA 810462569
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STATE OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION
NUMBER)
4150 North Civic Center Boulevard, Penthouse Suite SCOTTSDALE, AZ 85251
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (480) 949-9500
Indicate by check mark whether the Registration (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 files
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X YES _ NO
As of November 12, 1999, approximately 4,453,080 shares of common
stock ($.001 par value) were outstanding.
1
<PAGE>
TRAVEL DYNAMICS, INC.
INDEX
Page
PART I. Financial Information . . . . . . . . . . . . . . . . . . . 3
Item 1. Financial Statements (Unaudited) . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of
Analysis of Financial Condition and Results
of Operations. . . . . . . . . . . . . . . . . . . . 3
PART II. Other Information. . . . . . . . . . . . . . . . . . . . . 8
Item 2. Changes in Securities and Use of Proceeds. . . . . . 8
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . . 8
Item 5. Other Information. . . . . . . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 8
2
<PAGE>
[Inapplicable Items Have Been Omitted]
PART I. Financial Information
Item 1. Financial Statements. [Unaudited]
The Condensed Consolidated Financial Statements of Travel
Dynamics, Inc. for the three-month period ending September 30,
1999 are unaudited and are attached and incorporated by this
reference as Item 1.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Certain statements in this Form 10-QSB, including without
limitation information set forth under Item 2 entitled
'Management's Discussion and Analysis of Financial Condition and
Results of Operations" contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995 (the Act), including, without limitation, statements
regarding the Company's expectations, beliefs, estimates,
intentions, and strategies about the future. Words such as,
"anticipates," "expects," "intends," "plans," "believes," "seeks,"
"estimates," or variations of such words and similar expressions
are intended to identify such forward-looking statements, but
their absence does not mean the statement is not forward-looking.
The Company desires to avail itself of certain "safe harbor"
provisions of the Act and is therefore including this special note
to enable the Company to do so. Forward-looking statements in
this 10-QSB or hereafter included in other publicly available
documents filed with the Securities and Exchange Commission,
reports to the Company's shareholders and other publicly available
statements issued or released by the Company involve known and
unknown risks, uncertainties and other factors which could cause
the Company's actual results, performance (financial or operating)
or achievements to differ from the future results, performance
(financial or operating) or achievements expressed or implied by
such forward-looking statements and are not guarantees of future
performance. Similarly, statements that describe the Company's
future operating performance, financial results, plans, objectives
or goals are also forward-looking statements. Such future results
are based upon management's best estimates of current conditions
and the most recent results of operations. Such information
contained in such statements is difficult to predict; therefore
actual results may differ materially from those expressed or
forecasted. The forward-looking statements made herein are only
made as of the date of this Form 10-QSB and the Company undertakes
no obligation to publicly update such forward-looking statements
to reflect subsequent events or circumstances.
The accompanying condensed consolidated financial statements
include comparative data for the accounts of Travel Dynamics,
L.L.C. from July 1, 1998 through July 31, 1998 and the accounts of
Travel Dynamics, Inc. (now known as Travel Dynamic Services, Inc.)
from July 31, 1998 (inception) to September 29, 1998 (the date of
the reverse acquisition) and thereafter. The condensed
consolidated financial statements for comparative purposes also
include the accounts of Greenway Environmental Systems, Inc., (now
known as "Travel Dynamics, Inc.") from the date of the reverse
acquisition on September 29, 1998. These two entities (Travel
Dynamics, Inc. as the parent company and Travel Dynamics Services,
Inc. as the sole operating subsidiary) are collectively referred
to herein as "the Company."
3
<PAGE>
Three Months Ended September 30, 1999 Compared to Three Months
Ended September 30, 1998
The Company is a marketing firm that wholesales and
distributes educational and lifestyle products and materials to
independent sales agents, who resell the packages. These products
and materials are designed to educate and support individuals in
their development of income sources for home-based businesses.
The products include discount entertainment and travel packages
and tax planning and organization packages. The Company also
engages in the organization and hosting of various marketing,
training and motivational seminars. The Company is gaining
increasing revenues through various direct marketing activities,
including the Internet.
During the three months ended September 30, 1999, the Company
introduced several new products marketed to home-based businesses
that focus on home-based business tax issues and advantages. The
primary products introduced by the Company are the TruTax
Advantage System and the TruTax Conference Experience, as well as
other training products and seminars. The TruTax Advantage System
provides information on potential tax breaks for home-based
businesses, implementation strategies and tools to take advantage
of such tax breaks for state and federal income taxes purposes.
The package includes but is not limited to an audio presentation,
workbook, planner system, tax consultation by phone, audit
protection for 12 months and a tax preparation kit, among other
features. The TruTax Conference Experience is currently conducted
by experienced tax personnel, is designed to assist home-based
business owners in understanding and implementing tax breaks
available to home-based business and qualifies as continuing
education for certified public accountants.
Net sales for the three months ended September 30, 1999 and 1998
were $1,417,485 and $281,990, respectively, which is an increase
of $1,135, 495 or approximately 403%. This increase was primarily
attributable to the Company having dramatically increased its
customer base over the past year. For the three months ended
September 30, 1998, the Company was essentially a start-up company
and in the early stages of its current form of operations and had
a minimal customer base from which to generate revenues.
Gross margin for the three months ended September 30, 1999 was 59%
and represents an increase of 18.4% in the gross margin percentage
as compared to the three months ended September 30, 1998. The
increase relates to the entertainment and travel packages and
executive seminar products being sold at higher margins as a
result of volume purchasing and an increase in volume of higher
margin supplemental marketing products in the three months ended
September 30, 1999. During the three months ended September 30,
1998, the margins on the entertainment and travel packages and
executive seminars were lower than during 1999 due to higher costs
and the lack of supplemental marketing products.
Selling and general and administrative expenses for the three
months ended September 30, 1999 and 1998 were $740,658 and
$179,100, respectively, which represents an increase of $561,558,
or 314%. The increase primarily relates to the Company adding
personnel and systems to the infrastructure to keep up with the
rapid rate of growth the Company experienced over the year. A
large portion of the increase was due to an increase of $189,941
related to salaries of key personnel who were hired in October
1998 and January 1999, and relate to the addition of full time
employees serving as the Chief Executive Officer, Vice President
of Marketing, Compliance Director, Marketing Communications
Director and Chief Technical Officer.
4
<PAGE>
The Company's interest expense for the three months ended
September 30, 1999 was $81,206, compared to the three months ended
September 30, 1998, during which the Company did not incur any
significant interest expense. This increase was primarily
attributable to the interest expense associated with the
convertible debenture offering completed June 30, 1999. The
convertible debenture offering is described in greater detail in
the Company's 10-KSB for the fiscal year ended June 30, 1999,
filed October 1999 and incorporated herein by reference. The
Company was required to recognize as interest expense the
difference between the $1.00 per share conversion price for the
debentures to be converted into the Company's common stock and the
market value per share of the Company's stock on the day the
debentures were granted, which difference was $.27 per share. The
Company recognized $63,250 of interest expense due to the
beneficial conversion feature of the debentures for the three
months ended September 30, 1999. An additional $16,943 was
attributable to interest accrued on the debentures during the
three months ended September 30, 1999.
The net results of operations for the three months ended
September 30, 1999 and 1998 was $14,888 net income and $372,666
net loss, respectively, which represents an increase of $387,554,
or 104%. The increase in net income for this period is primarily
attributable to the increased sales activity and resulting revenue
as compared to the prior period coupled with the absence of one
time merger and reorganization expenses of approximately $307,983
the Company incurred in the three months ended September 30, 1998.
The Company continues to experience increased sales activity and
expects improving net results over the next several quarters as
compared to the previous year's quarters.
Liquidity and Capital Resources
The Company's primary source of cash during the three months
ended September 30, 1999 has been provided by cash flow from
operations and approximately $250,000 from the issuance of the
convertible debentures described above. The Company has
experienced an increase in its cash flow from operations and
management anticipates the cash generated from operations will be
sufficient to satisfy substantially all of the Company's working
capital needs.
Operating activities for the three months ended September 30, 1999
and 1998 used $138,217 and provided $40,363, respectively. The
difference in cash generated from operations is mainly
attributable to changes in operating assets and liabilities
related to the significant increase in customers and customer
transactions.
Expenditures for property and equipment and other assets totaled
$84,292 for the three months ended September 30, 1999.
Expenditures for property and equipment and other assets include
$65,839 in office equipment that relate the Company moving into
new, larger offices and increasing the number of personnel, and
$18,453 in software for internal use.
5
<PAGE>
Plan of Operations
Management estimates that the cash flows from operations over the
next 12 months, as well as the proceeds from the offering of
certain convertible debentures will be sufficient to continue the
Company's operations and to cover its operational expenses.
Management reasonably believes that sales will be sufficient to
maintain the Company' cash-flow requirements. Nevertheless, the
Company reserves the right to raise additional proceeds or incur
debt or take such other actions to expand or sustain its
operations. However, as of the fiscal quarter ended September 30,
1999, the Company did not specifically anticipate raising any
additional funds through debt or equity offerings of securities.
The Company has projected broadening its product and service
line through electronic commerce and including more on-line
products and services over the Internet. The Company also plans
to provide telephone support for its current products and
services. As previously described, the Company began offering a
tax support package to home-based businesses. The Company
recently entered into a lease of its current principal office in
Scottsdale, Arizona with a remaining term of several years. The
Company anticipates increasing its number of employees over the
next 12 months to include clerical and other administrative
personnel to keep pace with the growth of the Company, in addition
to employees to provide telephone support as previously described.
The historical background and general description of business is
more particularly set out in the last filed Form 10-KSB Report for
the Company, which was filed during October 1999. A copy of this
filing or other filings to date under the Securities Act of 1934
by the Company will be made available by the Company to any
shareholder requesting the same, or to other interested parties.
All filed documents of the Company may further be retrieved "on
line" through the Internet at the SEC homepage at:
http://www.sec.gov.
Until the Company achieves a sustained level of profitability, it
must be considered a start-up entity. Management considers the
growth of revenues and profitability to be positive and expects to
maintain profitability for the current fiscal year, however no
warranty of this projection can be made. The Company remains
dependent on continuing cash flows to meet certain operating
expenses and no assurance of financial success or economic
survival of the Company can be assured during this period.
The Company has and will continue to incur costs related to legal
and accounting fees, initial filing fees, and advertising and
marketing fees. These types of costs may not be incurred at the
same level or percentage of revenues as experienced in the past.
Management's general discussion of operations is limited by and
should be considered within the context of the actual Condensed
Consolidated Financial Statements and notes attached thereto and
incorporated as part of Item 1 above.
6
<PAGE>
Year 2000 Disclosure
The Company uses computers and telecommunications equipment in its
operations, and has attempted to address the Year 2000 problem and
the performance of its critical functions. The Company believes it
has addressed any Year 2000 problems related to its internal
systems and has hired an in-house Chief Technical Officer who has
completed reviews and updates of the Company operating systems and
program applications for Year 2000 compliance or conduct the
upgrade or substitution of systems to be compliant. The Company
has concluded that it appears that most of the Company's current
operating systems were acquired recently enough to be fully Year
2000 compliant. Based on its review, management believes that the
Year 2000 problem will not have a material adverse effect stemming
from the internal systems of the Company.
The Company has reason to believe its major vendor is Year
2000 ready. However, there can be no guarantee that the systems
of other companies, or the independent sales agents utilizing the
Company's services on which the Company's business relies will be
converted in a timely manner or that representations made to the
Company by third parties will be accurate. As a result, the
failure of third parties to adequately address their Year 2000
problem could have a material adverse effect on the operations of
the Company.
The Company is most concerned with potential Year 2000 problems in
its third party product and service providers such as cruise
lines, hotel companies, and airlines from whom it purchases and
assembles the travel packages it resells to independent sales
agents. It is possible uncured Year 2000 problems in the
telecommunications industries, or among travel providers, could
substantially impair or shut down the Company's operations.
Further, the Company does not believe it has or may exercise any
realistic control over, or provide any assistance to these third
party providers.
While the Company believes it is not likely to encounter any
significant operational problems, there is no guarantee that a
Year 2000 system related failure would not arise. This uncertainty
is due, to a large extent, to the uncertainty surrounding
potential third party related Year 2000 problems as well as the
Company's potential failure to discover all of its own Year 2000
susceptible internal systems problems. While the Company expects
that its efforts will provide reasonable assurance that material
disruptions will not occur, as previously discussed, the potential
for interruption still exists.
The anticipated costs to the Company for internal compliance will
be primarily a portion of the salary and other compensation paid
to the Chief Technical Officer. Since the Chief Technical Officer
has other corporate duties, it is difficult to estimate direct
costs, but management does not believe they are material. The
Company's plans to deal with potential Year 2000 problems are as
outlined above. The Company believes the planning is adequate to
handle any internal Year 2000 problems, but it does not believe it
can develop any realistic contingency plan to adequately deal with
potential third party Year 2000 problems.
7
<PAGE>
PART II. Other Information
--------------------------
Item 2. Changes in Securities and Use of Proceeds.
- -------------------------------------------------
During the first three months ending September 30, 1999, the Company
issued 2,000 shares of common stock, $.001 par value, in exchange for
services rendered in connection with a speaking engagement.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------------------------------------------------------------
No matters were required to be submitted to shareholder vote during the
quarter ending September 30, 1999. During the second quarter of
the current fiscal year, the Corporation is scheduled to hold
its annual shareholders meeting on or about November 29, 1999. The Company
anticipates the shareholders voting on the election of the Board of
Directors and several business matters, such as an employee stock
option plan and director compensation plan.
Item 5. Other Information.
- --------------------------
The Company has changed its corporate counsel to Jennings, Strouss &
Salmon, P.L.C., Phoenix, Arizona. The Company also introduces a new
product line of tax-related products and services for home-based
businesses, as further described in the Management's Discussion and
Analysis of Financial Condition and Results of Operations in Item 2
above. As of the end of the first quarter ended September 30, 1999,
the Company knows of no other material information other than as
described and set out above and under this Item 5.
Item 6. Exhibits and Reports of Form 8-K.
- -----------------------------------------
(1) The attached unaudited Condensed Consolidated Financial
Statements for the period ended September 30, 1999,
are attached and incorporated as Part I.
(2) The Company made no 8-K Filings in the quarter ended
September 30, 1999.
. . . . . . .
OTHER EXHIBITS:
None.
8
<PAGE>
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.
TRAVEL DYNAMICS, INC.
Date: November 15, 1999 By: /S/ James Piccolo
--------------------------------
James Piccolo
President, CEO and Director
Financial and Accounting Officer
Date: November 15, 1999 By: /S/ Brian K. Service
-------------------------------
Brian K. Service
CFO and Managing Director
(Principal Financial and
Accounting Officer)
9
<PAGE>
TRAVEL DYNAMICS, INC.
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page
Condensed Consolidated Balance Sheet -
September 30, 1999 (Unaudited). . . . . . . . . . F-1
Condensed Consolidated Statements of Operations
for the Three Months Ended September 30, 1999
and 1998 (Unaudited). . . . . . . . . . . . . . . F-2
Condensed Consolidated Statements of Stockholders'
Deficit for the Three Months Ended September
30, 1999 (Unaudited). . . . . . . . . . . . . . . F-3
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended September 30, 1999
and 1998 (Unaudited). . . . . . . . . . . . . . . F-4
Notes to Condensed Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . F-5
<PAGE>
TRAVEL DYNAMICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1999
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . $ 201,509
Other receivables . . . . . . . . . . . . . . . . . . . . 284,616
Inventory . . . . . . . . . . . . . . . . . . . . . . . . 30,235
Prepaid assets. . . . . . . . . . . . . . . . . . . . . . 59,107
Other current assets. . . . . . . . . . . . . . . . . . . 92,450
----------
Total Current Assets. . . . . . . . . . . . . . . . . . 667,917
----------
Property and Equipment
Office equipment. . . . . . . . . . . . . . . . . . . . . 181,999
Software for internal use . . . . . . . . . . . . . . . . 126,074
Less accumulated depreciation . . . . . . . . . . . . . . (30,934)
----------
Net Property and Equipment. . . . . . . . . . . . . . . 277,139
----------
Other Assets
Trademarks, net of $789 accumulated amortization. . . . . 4,470
Marketing master database, net of $25,492
accumulated amortization . . . . . . . . . . . . . . . . 92,165
Investments in certificates of deposit. . . . . . . . . . 80,000
Other assets. . . . . . . . . . . . . . . . . . . . . . . 86,744
----------
Total Other Assets. . . . . . . . . . . . . . . . . . . 263,379
----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . $1,208,435
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable. . . . . . . . . . . . . . . . . . . . . $ 127,771
Accrued liabilities . . . . . . . . . . . . . . . . . . . 216,662
Deferred sales. . . . . . . . . . . . . . . . . . . . . . 412,622
----------
Total Current Liabilities . . . . . . . . . . . . . . . 757,055
----------
Convertible Notes Payable. . . . . . . . . . . . . . . . . . 677,728
----------
Stockholders' Deficit
Common stock -$0.001 par value; 50,000,000
shares authorized; 4,342,080 shares issued
and outstanding. . . . . . . . . . . . . . . . . . . . . 4,342
Additional paid-in capital. . . . . . . . . . . . . . . . 820,863
Unearned compensation . . . . . . . . . . . . . . . . . . (63,741)
Accumulated deficit . . . . . . . . . . . . . . . . . . . (987,812)
----------
Total Stockholders' Deficit . . . . . . . . . . . . . . (226,348)
----------
Total Liabilities and Stockholders' Deficit. . . . . . . . . $1,208,435
==========
See the accompanying notes to condensed consolidated financial statements.
F-1
<PAGE>
TRAVEL DYNAMICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months
Ended September 30,
-----------------------
1999 1998
---------- ----------
Sales. . . . . . . . . . . . . . . . . . . . . . $1,417,485 $ 281,990
Cost of Sales. . . . . . . . . . . . . . . . . . 580,733 167,573
---------- ----------
Gross Profit . . . . . . . . . . . . . . . . . . 836,752 114,417
---------- ----------
Expenses
Selling, general and administrative
expense. . . . . . . . . . . . . . . . . . . 740,658 179,100
Merger and reorganization expense . . . . . . - 307,983
Interest expense. . . . . . . . . . . . . . . 81,206 -
---------- ----------
Total Expenses . . . . . . . . . . . . . . . 821,864 487,083
---------- ----------
Net Income (Loss). . . . . . . . . . . . . . . . $ 14,888 $ (372,666)
========== ==========
Basic Earnings (Loss) Per Common Share . . . . . $ 0.00 $ (0.22)
========== ==========
Diluted Earnings (Loss) Per Common Share . . . . $ 0.00 $ (0.22)
========== ==========
See the accompanying notes to condensed consolidated financial statements.
F-2
<PAGE>
TRAVEL DYNAMICS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional Total
------------------- Paid-In Unearned Accumulated Stockholders'
Share Amount Capital Compensation Deficit Deficit
--------- -------- --------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance-June 30, 1999. . . . . . . 4,340,080 $ 4,340 $ 758,960 $ (78,997) $(1,002,700) $ (318,397)
Issuance of common stock for
consulting services . . . . . . . 2,000 2 2,373 - - 2,375
Amortization of deferred
compensation. . . . . . . . . . . - - - 11,536 - 11,536
Forfeiture of unvested stock
options . . . . . . . . . . . . . - - (3,720) 3,720 - -
Beneficial debt conversion
feature . . . . . . . . . . . . . - - 63,250 - - 63,250
Net income . . . . . . . . . . . . - - - - 14,888 14,888
--------- -------- --------- --------- ----------- ----------
Balance-September 30, 1999 . . . . 4,342,080 $ 4,342 $ 820,863 $ (63,741) $ (987,812) $ (226,348)
========= ======== ========= ========= =========== ==========
<FN>
See the accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
F-3
<PAGE>
TRAVEL DYNAMICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months
Ended September 30,
----------------------
1999 1998
---------- ----------
Cash Flows From Operating Activities
Net income (loss). . . . . . . . . . . . . . . . . $ 14,888 $ (372,666)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization . . . . . . . . . 17,616 1,881
Compensation relating to common
stock, options and debentures
granted. . . . . . . . . . . . . . . . . . . . 13,911 123,601
Expenses paid with notes payable. . . . . . . . - 166,382
Interest expense relating to beneficial
conversion feature . . . . . . . . . . . . . . 63,250 -
Changes in operating assets and liabilities:
Other receivables . . . . . . . . . . . . . . (131,560) 9,377
Prepaid expenses . . . . . . . . . . . . . . (41,075) (5,700)
Inventory . . . . . . . . . . . . . . . . . . 27,396 (5,229)
Other assets. . . . . . . . . . . . . . . . . (116,350) (61,823)
Accounts payable. . . . . . . . . . . . . . . (88,593) (31,313)
Accrued liabilities . . . . . . . . . . . . . 123,138 45,468
Deferred sales. . . . . . . . . . . . . . . . (20,838) 170,385
---------- ---------
Net Cash and Cash Equivalents Provided
By (Used In) Operating Activities. . . . . . . (138,217) 40,363
---------- ---------
Cash Flows From Investing Activities
Payments to purchase property and equipment
and intangible assets . . . . . . . . . . . . . . (84,292) -
Increase in related party receivable . . . . . . . - (16,410)
---------- ---------
Net Cash and Cash Equivalents Used In
Investing Activities. . . . . . . . . . . . . (84,292) (16,410)
---------- ---------
Cash Flows From Financing Activities
Proceeds from issuance of notes payable. . . . . . 250,000 -
---------- ---------
Net Cash and Cash Equivalents Provided
By From Financing Activities . . . . . . . . . 250,000 -
---------- ---------
Net Increase in Cash and Cash Equivalents. . . . . . 27,491 23,953
Cash and Cash Equivalents at Beginning
of Period . . . . . . . . . . . . . . . . . . . . . 174,018 26,885
---------- ---------
Cash and Cash Equivalents at End of Period . . . . . $ 201,509 $ 50,838
========== =========
See the accompanying notes to condensed consolidated financial statements.
F-4
<PAGE>
TRAVEL DYNAMICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1- INTERIM FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by Travel Dynamics,
Inc. (the Company) and are unaudited. In the opinion of management, the
accompanying unaudited financial statements contain all necessary
adjustments for fair presentation, consisting of normal recurring
adjustments except as disclosed herein.
The accompanying unaudited interim financial statements have been condensed
pursuant to the rules and regulations of the Securities and Exchange
Commission; therefore, certain information and disclosures generally
included in financial statements have been condensed or omitted. These
financial statements should be read in connection with the Company's annual
financial statements included in the Company's annual report on Form 10-KSB
as of June 30, 1999. The financial position and results of operations of the
interim periods presented are not necessarily indicative of the results to
be expected for the year ended June 30, 2000.
Amounts previously reported for September 30, 1998 and for the three months
then ended have been adjusted to conform to the audited consolidated
financial statements for June 30, 1999 and for the year then ended.
NOTE 2 - CONVERTIBLE NOTES PAYABLE
During the three months ended September 30, 1999, the Company issued 10%
convertible debentures totaling $250,000 in cash. Interest accrues on the
debentures beginning June 30, 1999 and is payable at the end of each
quarter. The convertible debentures mature and are redeemable at their face
value on January 2, 2015. The debentures may be converted into common stock
of the Company at the rate of $1.00 per share through June 30, 2001. Each
debenture is callable at 110% of its face value at any time after the first
anniversary date of the execution of the note. The holders of the
debentures, may upon notice of the call, convert the debenture into common
stock within thirty days of receiving written notice of such call.
The Company recognized interest expense equal to the difference between the
$1.00 conversion price per share and the market value of the Company's stock
on the day the debentures were issued, which was $1.27 per share. Interest
expense of $63,250 was recognized due to the beneficial conversion feature
for the three months ended September 30, 1999.
NOTE 3 - COMMON STOCK
During the three months ended September 30, 1999, the Company issued 2,000
shares of common stock for consulting services. These shares were valued at
$2,375, or $1.19 per share, based on the market value of the common stock.
F-5
<PAGE>
NOTE 4 - BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
The following data shows the amounts used in computing earnings per share
for the three months ended September 30, 1999 and 1998 and the effect on
income and weighted average number of shares of dilutive potential common
stock:
For the Three Months Ended
September 30,
--------------------------
1999 1998
----------- -----------
Net income (loss) used in basic earnings
per share . . . . . . . . . . . . . . . . $ 14,888 $ (372,666)
=========== ===========
Weighted average number of common shares
used in basic earnings per shares . . . . 4,342,080 1,698,155
Incremental shares from assumed
conversion of stock options . . . . . . . 1,034,256 -
----------- -----------
Weighted average number of common
shares and dilutive potential common
shares used in dilutive earnings
per share . . . . . . . . . . . . . . . . 5,376,336 1,698,155
=========== ===========
The incremental shares from assumed conversion of 10% convertible
debentures into 677.722 common shares have not been included in the
weighted average number of common shares and dilutive potential common
shares for the three months ended September 30, 1999 as they were
antidilutive.
The weighted average number of common shares used in the computation for
basic and diluted loss per share at September 30, 1998 does not include
options on 1,000,000 shares of common stock because their effects would be
antidilutive.
NOTE 5 - STOCK OPTIONS
A summary of the status of the Company's stock options as of September 30,
1999 and 1998 and changes during the three months then ended is presented
below:
<TABLE>
<CAPTION>
For the Three Months Ended For the Three Months Ended
September 30, 1999 September 30, 1998
-------------------------- ---------------------------
Weighted- Weighted-
Average Average
Shares Exercise Price Shares Exercise Price
---------- -------------- ---------- ---------------
<S> <C> <C> <C> <C>
Outstanding at beginning of period . . 1,500,000 $ 0.39 - $ -
Forfeited. . . . . . . . . . . . . . (12,000) 2.36 - $ -
Granted. . . . . . . . . . . . . . . - - 1,000,000 0.10
---------- ----------
Outstanding at period end. . . . . . 1,488,000 - 1,000,000 0.10
========== ==========
Options exercisable at period end. . 315,000 $ 0.15 - $ -
========== ==========
Weighted-average fair value of
options granted during the period . $ - $ 0.11
========== ==========
</TABLE>
F-6
<PAGE>
The Company measures stock-based compensation from options granted to
non-employees by the fair value method set forth under Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", and measures compensation from options granted to employees
using the intrinsic value method prescribed in Accounting Principles Board
Opinion 25, "Accounting for Stock Issued to Employees", and related
interpretations. Stock-based compensation charged to operations was $11,536
and $3,000 during the three months ended September 30, 1999 and 1998. Had
compensation cost for the Company's options granted to an employee been
determined based on the fair value at the grant dates consistent with the
alternative method set forth under Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation", net loss and
loss per share would have increased for the three months ended September 30,
1999 and 1998 to the pro forma amounts indicated below:
For the Three Months Ended
Ended September 30,
--------------------------
1999 1998
---------- ----------
Net income (loss):
As reported . . . . . . . . . . . . . $ 14,888 $ (372,666)
Pro forma . . . . . . . . . . . . . . 8,013 (402,666)
Basic earnings (loss) per share:
As reported . . . . . . . . . . . . . $ 0.00 $ (0.22)
Pro forma . . . . . . . . . . . . . . 0.00 (0.24)
Diluted earnings (loss) per share
As reported . . . . . . . . . . . . . $ 0.00 $ (0.22)
Pro forma . . . . . . . . . . . . . 0.00 (0.24)
The fair value of each option granted was estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions for the period ended September 30, 1998:
underlying common stock value - $0.15, expected life of the options - 5
years, expected volatility - 75% and risk-free interest rate - 4.4%. There
were no options issued during the three months ended September 30, 1999.
F-7
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF SEPTEMBER 30, 1999, AND STATEMENTS OF OPERATIONS FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 201,509
<SECURITIES> 80,000
<RECEIVABLES> 284,616
<ALLOWANCES> 0
<INVENTORY> 30,235
<CURRENT-ASSETS> 667,917
<PP&E> 308,073
<DEPRECIATION> (30,934)
<TOTAL-ASSETS> 1,208,435
<CURRENT-LIABILITIES> 757,055
<BONDS> 677,728
0
0
<COMMON> 4,342
<OTHER-SE> (230,690)
<TOTAL-LIABILITY-AND-EQUITY> 1,208,435
<SALES> 1,417,485
<TOTAL-REVENUES> 1,417,485
<CGS> 580,733
<TOTAL-COSTS> 580,733
<OTHER-EXPENSES> 740,658
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81,206
<INCOME-PRETAX> 14,888
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,888
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,888
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
