<PAGE> 1
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 quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-26368
TRANSMEDIA ASIA PACIFIC, INC.
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3760219
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
1 HURLINGHAM BUSINESS PARK, SULLIVAN ROAD, LONDON SW6 3DU, ENGLAND
------------------------------------------------------------------
(Address of principal executive offices) (zip code)
U.K. 011-44-171-610-6776
-------------------------------
(Registrant's telephone number,
including area code)
11 ST. JAMES'S SQUARE, LONDON SW1Y 4LB, ENGLAND
-----------------------------------------------
(Former Address of principal executive offices)
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 /X/ No / /
The number of Shares outstanding of the issuer's common stock, $.00001 par
value, as of August 15, 1997: 15,249,221
<PAGE> 2
INDEX
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARIES
PART I : CONDENSED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<S> <C>
ITEM 1 ............................................................... Pages 1-9
Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Operations for the three months ended and
the nine months ended June 30, 1997 (unaudited) and June 30,1996 (unaudited).
Condensed Consolidated Balance Sheets as at:
- - September 30, 1996
- - June 30, 1997 (unaudited)
Condensed Consolidated Statements of Cash Flows for the three months ended and
the nine months ended June 30, 1997 (unaudited) and June 30,1996 (unaudited).
Condensed Consolidated Statement of Changes in Stockholders' Equity for the nine
month period ended June 30, 1997 (unaudited) and the fiscal years ended
September 30, 1995 and 1996.
Notes
ITEM 2 ................................................................. Pages 10-13
Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II: OTHER INFORMATION............................................. Page 14
SIGNATURES ............................................................. Page 15
</TABLE>
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
(unaudited) (unaudited) (unaudited) (unaudited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 414,160 $ 492,046 $ 1,256,307 $ 1,546,781
Membership fees 70,648 48,510 151,498 148,450
------------ ------------ ------------ ------------
Total revenues and fees 484,808 540,556 1,407,805 1,695,231
Cost of sales (277,098) (324,247) (834,504) (1,012,283)
------------ ------------ ------------ ------------
Gross profit 207,710 216,309 573,301 682,948
Selling, general and
administrative expenses (659,649) (877,940) (2,092,640) (2,542,221)
------------ ------------ ------------ ------------
Loss from operations (451,939) (661,361) (1,519,339) (1,859,273)
Share of losses of affiliated company -- (38,207) -- (38,207)
Interest income 1,386 4,959 10,041 23,453
Interest expense -- (37,341) -- (37,341)
------------ ------------ ------------ ------------
Loss before income taxes (450,553) (732,220) (1,509,298) (1,911,368)
Income taxes -- -- -- --
------------ ------------ ------------ ------------
Net loss (450,553) (732,220) (1,509,298) (1,911,368)
============ ============ ============ ============
Loss per common share $ (0.04) $ (0.05) $ (0.12) $ (0.13)
============ ============ ============ ============
Weighted average number of
common shares outstanding 12,469,590 15,249,221 12,469,590 14,347,584
============ ============ ============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
1
<PAGE> 4
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
September 30, June 30,
1996 1997
(unaudited)
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,171,305 $ 211,461
Trade accounts receivable 66,211 24,054
Restaurant credits (net of allowance for irrecoverable
credits of $119,762 at September 30, 1996 and of
$154,198 at June 30, 1997) 636,808 474,963
Amounts due from related parties (note 2) 48,857 450,427
Prepaid expenses and other current assets 142,127 78,247
---------- ----------
TOTAL CURRENT ASSETS 2,065,308 1,239,152
NON-CURRENT ASSETS
Investment in affiliated company (note 4) -- 2,598,108
Property and equipment (net of accumulated
depreciation $77,616 at September 30, 1996 and
$95,166 at June 30, 1997) 143,463 115,631
Intangible assets, (net of accumulated
amortization of $245,440 at September 30, 1996
and $337,480 at June 30, 1997) 1,596,176 1,504,094
Other assets (note 5) 150,000 142,946
---------- ----------
TOTAL ASSETS $3,954,947 $5,599,931
========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
2
<PAGE> 5
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
September 30, June ,30
1996 1997
(unaudited)
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 40,051 $ 10,241
Trade accounts payable 253,432 252,977
Deferred membership fee income 139,215
161,642
Accrued liabilities 250,352 351,512
Amount due to related parties (note 2) 93,300 1,250,000
----------- -----------
TOTAL CURRENT LIABILITIES $ 776,350 $ 2,026,372
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value per share
Authorised 5,000,000 shares; none issued -- --
Common stock, $0.00001 par value, 95,000,000 shares authorised,
13,362,447 issued and outstanding at September 30, 1996
and 15,249,221 at June 30, 1997 134 152
Additional paid in capital 7,470,749 9,791,062
Accumulated deficit (4,346,196) (6,257,564)
Cumulative foreign currency translation
adjustment 53,910 39,909
----------- -----------
TOTAL STOCKHOLDERS' EQUITY $ 3,178,597 $ 3,573,559
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,954,947 $ 5,599,931
=========== ===========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE> 6
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
(unaudited) (unaudited) (unaudited) (unaudited)
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
- Net loss $(450,553) $ (731,733) $(1,509,298) (1,910,882)
Adjustment to reconcile net loss
to net cash used in operating activities
- Depreciation 7,932 7,802 22,870 23,793
- Amortization of intangible assets 30,680 30,680 92,040 92,040
- Provision for irrecoverable restaurant credits 8,041 7,872 15,741 34,436
- Amortisation of deferred compensation 62,250 -- 212,250 --
- Share of losses of affiliated company -- 38,207 -- 38,207
- Amortization of goodwill -- 46,172 -- 46,172
Changes in assets and liabilities:
- Trade accounts payable 9,719 23,612 73,107 9,682
- Accrued liabilities 13,771 115,099 35,411 100,773
- Restaurant credits (64,462) (4,698) (30,618) 101,937
- Prepaid expenses and other current assets (40,425) (19,451) 7,672 106,426
- Write off of Hawaii option -- -- -- 150,000
- Deferred membership fees 112,244 84,014 56,698 27,995
--------- ----------- ----------- -----------
Net cash used in operating activities (310,803) (402,424) (1,024,127) (1,179,421)
--------- ----------- ----------- -----------
Cash flows from investing activities:
- Due (to)/from related parties 226,778 (116,004) 255,329 (496,514)
- Disposal/(purchase) of property
and equipment (8,695) 19,004 (23,499) (2,147)
- Purchase of NHS option -- -- -- (142,946)
- Purchase of Countdown -- (945,650) -- (1,209,656)
--------- ----------- ----------- -----------
Net cash (used in)/provided by investing activities 218,083 (1,042,650) 231,830 (1,851,263)
--------- ----------- ----------- -----------
Cash flows from financing activities:
- Bank overdraft 50,840 10,240 (75,308) (29,811)
- Net proceeds from issuance
of common stock -- -- -- 1,097,500
- Loan from related party -- 1,000,000 -- 1,000,000
--------- ----------- ----------- -----------
Net cash (used in)/ provided by financing activities 50,840 1,010,240 (75,308) 2,067,689
--------- ----------- ----------- -----------
Effects of foreign currency on cash 19,620 (6,956) 34,342 3,151
Net decrease in cash and
cash equivalents (20,260) (441,790) (833,263) (959,844)
--------- ----------- ----------- -----------
Cash and cash equivalents at
beginning of period 130,095 653,251 941,098 1,171,305
--------- ----------- ----------- -----------
Cash and cash equivalents
at end of period $ 107,835 $ 211,461 $ 107,835 $ 211,461
========= =========== =========== ===========
</TABLE>
Supplemental disclosures of cash flow information:
No amounts of cash were paid for interest or income taxes for each of the
periods presented
See accompanying notes to the condensed consolidated financial statements
4
<PAGE> 7
TRANSMEDIA ASIA PACIFIC INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Number of Common Additional Cumulative Accumulated Unearned Total
shares stock paid-in capital currency deficit compensation
translation
adjustment
----------- ---- ----------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1994 11,815,790 $118 $ 4,363,109 $ (500) $ (349,650) $ -- $ 4,013,077
Issuance of common stock 673,800 7 2,021,393 -- -- (300,000) 1,721,400
Issue costs -- -- (128,744) -- -- -- (128,744)
Net loss -- -- -- -- (1,990,288) -- (1,990,288)
Effect of foreign currency
translation -- -- -- 1,449 -- -- 1,449
Treasury stock (20,000) -- (20,000) -- -- -- (20,000)
Compensation expense -- -- -- -- -- 87,750 87,750
----------- ---- ----------- -------- ----------- --------- -----------
Balance, September 30, 1995 12,469,590 $125 $ 6,235,758 $ 949 $(2,339,938) $(212,250) $ 3,684,644
Issuance of common stock 892,857 9 1,249,991 -- -- -- 1,250,000
Issue costs -- -- (15,000) -- -- -- (15,000)
Net loss -- -- -- -- (2,006,258) -- (2,006,258)
Effect of foreign currency
translation -- -- -- 52,961 -- -- 52,961
Compensation expense -- -- -- -- -- 212,250 212,250
----------- ---- ----------- -------- ----------- --------- -----------
Balance, September 30, 1996 13,362,447 $134 $ 7,470,749 $ 53,910 $(4,346,196) -- $ 3,178,597
Issuance of common stock 556,250 18 2,335,313 -- -- -- 2,335,331
Issue costs -- -- (15,000) -- -- -- (15,000)
Net loss -- -- -- -- (1,911,368) -- (1,911,368)
Effect of foreign currency
translation -- -- -- (14,001) -- -- (14,001)
----------- ---- ----------- -------- ----------- --------- -----------
Balance, June 30, 1997 13,918,697 $152 $ 9,791,062 $ 39,909 $(6,257,564) $ -- $ 3,573,559
============ ==== =========== ======== =========== ========= ===========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE> 8
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The consolidated balance sheet as of September 30, 1996 was derived from
the Company's audited financial statements. The condensed consolidated
financial statements included herein have been prepared in conformity with
generally accepted accounting principles in the United States and should
be read in conjunction with the September 30, 1996 Form 10-K filing. The
information presented in the unaudited condensed consolidated financial
statements, in the opinion of management, reflects all adjustments
(consisting of normal recurring accruals) necessary for a fair
presentation of the results for all interim periods. The results for the
three months ended and nine months ended June 30, 1997 are not necessarily
indicative of the results to be expected for the full year.
(b) Description of business
Transmedia Asia Pacific, Inc. ("the Company") was incorporated in Delaware
on March 10, 1994. The main business activity of Transmedia Asia Pacific,
Inc. and its subsidiaries (collectively the "Group") is to make cash
advances to restaurants for food and beverage credits from certain
participating restaurants which are then recovered as the Company's
cardholders utilize their restaurant charge card (see note 1(e)).
Presently, the Company's areas of operation are in Australia through its
wholly owned subsidiary Transmedia Australia Pty Limited and in New
Zealand through its wholly owned subsidiary Transmedia Australasia Ltd .
The Company has been granted a license (the "Transmedia License") by TMNI
International Inc., an affiliate of Transmedia Network Inc. (collectively
"Network"), a corporation which is incorporated in the United States of
America. The license is to operate a specialized restaurant charge card
business in Australia and New Zealand with limited rights to sublicense
the Asia Pacific Region. The agreement to purchase the Transmedia License
was initially entered into by Conestoga Partners II Inc. ("Conestoga"), a
corporation which is related to the Company by virtue of the shareholding
in Conestoga held by Edward J. Guinan III, currently Chairman of the Board
of Directors of the Company (see note 2).
The Company intends to expand operations in other portions of the licensed
territories through wholly-owned subsidiaries, unaffiliated sublicensees
and franchisees or through joint ventures. On April 3, 1997, the Company
purchased 50% of the outstanding capital stock of Countdown Holdings
Limited, a privately owned United Kingdom company based in London, England
("Countdown"). The balance of the outstanding capital stock of Countdown
was simultaneously purchased by Transmedia Europe, Inc. on similar terms
to the terms of the Company's purchase. The Company's element of the
consideration consisted of $820,650 (500,000 pounds sterling) in cash and
the issuance of 1,330,524 shares of Common Stock in the Company. In
addition, the Company granted an option to purchase up to 277,193 shares
of Common Stock at a purchase price of $0.90 per share to the owner of
Countdown. The cash portion of the purchase price was funded by a
$1,000,000 loan from a director and stockholder of the Company. The loan
matures on September 27, 1997, bears interest at the rate of 12% per annum
and is collateralized by a pledge of all the Countdown shares purchased by
the Company. In connection with the loan, the Company issued the director
and stockholder five-year warrants to purchase up to 138,596 shares of
Common Stock at $1.13 per share.
As of June 30, 1997, Transmedia Asia Pacific, Inc, has equity interests in
the following companies:
<TABLE>
<CAPTION>
Name Country of Incorporation % Owned
<S> <C> <C>
Transmedia Australia Pty Limited Australia 100
Transmedia Australasia Ltd. New Zealand 100
Countdown Holdings Limited United Kingdom 50
</TABLE>
(c) License Cost
The Company evaluates the carrying value of its investment in License
Costs for impairment based on an estimate of future undiscounted net cash
flows that are expected to be generated and are directly attributable to
the Transmedia License. If the sum of those estimated future undiscounted
cash flows is less than the carrying value of the license costs, it is the
policy of the Company to measure impairment on the basis of the fair value
of the license costs, using a discounted cash flow technique. In the
opinion of management, there was no permanent impairment in the carrying
value of the license costs at September 30, 1996 or at June 30, 1997.
6
<PAGE> 9
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(d) Revenue Recognition
Revenues represent the retail value of food and beverages acquired from
the participating restaurants by the Company's cardholders, reduced by the
20% or 25% discount offered to cardholders. Revenues from card membership
fees are time apportioned over the period to which they relate.
(e) Restaurant Credits
Restaurant credits represent the total advances made to participating
restaurants less the amount by which these credits are recouped by the
Company as a result of Company cardholders utilizing their cards at
participating restaurants. The amounts by which such credits are recouped
amounts to approximately 50% of the retail value of food and beverages
consumed by cardholders. The Company reviews recoverability of credits and
establishes an allowance for credits to restaurants that have ceased
operations or whose credits may not be utilized by cardholders.
The funds advanced to participating restaurants are generally unsecured
and are recoverable as cardholders utilize their restaurant charge card at
the respective restaurant. In certain cases, the Company may request a
personal guarantee from the owner of a restaurant with respect to the
recoverability of the advance if the restaurant ceases operations or
ceases to be a participating restaurant. Generally, no other forms of
collateral or security are obtained from the restaurant owners.
2. RELATED PARTY TRANSACTIONS
The net amounts due from/(to) related parties consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1997
--------- -----------
<S> <C> <C>
E Guinan III $ -- $ 63,500
Conestoga Partners Inc. 26,260 26,260
Transmedia Europe Inc. (93,300) 336,813
Paul Harrison 22,597 23,854
J V Vittoria -- (1,000,000)
TMNI International Inc. ("TMNI") -- (250,000)
--------- -----------
$ (44,443) $ (799,573)
========= ===========
</TABLE>
The above loans to related parties are unsecured, non interest bearing,
and repayable on demand. The loan received from J V Vittoria is secured on
the Company's share of Countdown Holdings Limited, bears interest at a
rate of 12% per annum and is repayable on September 27, 1997. The Company
issued TMNI a promissory note in the principal amount of $250,000, payable
on April 2, 1998 and bearing interest at the rate of 10% per annum. The
promissory note are to be convertible at the holder's option into common
stock of the issuer at the rate of $1.20 per share. Information regarding
the activity with respect to the amounts due from/(to) related parties is
as follows:
<TABLE>
<CAPTION>
Conestoga Transmedia
E Guinan III Partners Inc. Europe Inc. P Harrison
------------ ------------- ----------- ----------
<S> <C> <C> <C> <C>
Balance September 30, 1996 $ -- $26,260 $ (93,300) $ 22,597
Additions 143,250 -- 1,115,600 2,901
Amounts Charged -- -- (620,243) --
Amounts Collected (79,750) -- (65,244) --
Foreign Currency movement -- -- -- (1,644)
--------- ------- ----------- --------
Balance June 30, 1997 $ 63,500 $26,260 $ 336,813 $ 23,854
========= ======= =========== ========
</TABLE>
<TABLE>
<CAPTION>
J V Vittoria TMNI
------------ ----
<S> <C> <C>
Balance September 30, 1996 $ -- $ --
Loan received (1,000,000) --
Promissory note -- (250,000)
Amounts Collected -- --
----------- ---------
Balance June 30, 1997 $(1,000,000) $(250,000)
=========== =========
</TABLE>
7
<PAGE> 10
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. PROPOSED MERGER
The Company entered into an Agreement and Plan of Reorganization (the
"Agreement"), dated as of February 10, 1997, with Transmedia Europe, Inc.,
a Delaware corporation, the Common Stock of which is quoted on the NASDAQ
Small Cap Market ("Transmedia Europe"), Transmedia Europe Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of the
Transmedia Europe ("Europe Acquisition"), and Transmedia Asia Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of the
Transmedia Europe ("Asia Acquisition").
Under the terms of the Agreement, among other things (i) Transmedia Europe
will make a contribution to the capital of Europe Acquisition by conveying
substantially all of Transmedia Europe's assets, except for its equity
interest in Transmedia La Carte Restaurant S.A., to Europe Acquisition;
and (ii) immediately thereafter Asia Acquisition will merge with and into
the Company pursuant to which the Company will be the surviving entity and
become a wholly-owned subsidiary of Transmedia Europe and holders of
Common Stock of the Company will be entitled to receive 0.9109 of a share
of Common Stock of Transmedia Europe for each Company share previously
owned.
At the present time the Agreement has expired by its terms. It is possible
that the Agreement may be extended in the future.
4. INVESTMENT IN AFFILIATED COMPANY
The investment in affiliated company consists of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1997
(unaudited)
---------- -----------
<S> <C> <C>
Countdown Holdings Limited
Cost of investment $ -- $ 2,682,487
Share of losses -- (38,207)
Amortization of goodwill -- (46,172)
---------- -----------
$ -- $ 2,598,108
========== ===========
</TABLE>
On March 27, 1997 International Advance, Inc., a company of which Edward J
Guinan III, currently Chairman of the Board of Directors, is the principal
shareholder and an officer and a director, assigned the Countdown option
agreement at cost to the Company and Transmedia Europe, Inc. for a
consideration of approximately $205,000 (125,000 sterling) each and
related legal costs of $59,006 each.
On April 3, 1997, the Company purchased from Mr C.E.C. Radbone
approximately 50% of the outstanding capital stock of Countdown.
Countdown, through its wholly-owned operating subsidiary, Countdown Plc,
is an international provider of membership discount services. The balance
of the outstanding capital stock was simultaneously purchased by
Transmedia Europe on terms similar to the terms of the Company's purchase.
Aquisition of the 50% interest in Countdown has been accounted for using
the purchase accounting method. The cost of acquisition was calculated as
$2,682,467 giving rise to goodwill of $2,770,295. Goodwill is amortized
over over a 15 year period. The results of operations of Countdown have
been included from April 3, 1997.
8
<PAGE> 11
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. OTHER ASSETS
The other assets consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1997
-------- --------
<S> <C> <C>
Investment in option to acquire:
- Network franchise in the State of Hawaii $150,000 $ --
- National Helpline Services Pty Limited -- 142,946
-------- --------
$150,000 $142,946
======== ========
</TABLE>
The Company made an investment of $150,000 to extend the option to operate
the sole Network franchise in the State of Hawaii during the year ended
September 30, 1995. This investment has been written off in the three
months ended March 31, 1997 as the option has lapsed as the Company
decided not to open in that State. This was as a result of the Company
wanting to focus on the existing Transmedia territories and the
integration of the Transmedia and Countdown businesses.
In October 1996 the Company made an investment of $134,741, subsequently
increasing to $142,946 for ongoing legal costs, to acquire a renewable 6
month option to acquire 50% of the share capital of National Helpline
Services Pty Limited ("NHS"). Transmedia Asia Pacific, Inc. acquired an
option, on identical terms to the Company, over the remaining 50% share
capital of NHS. Although the 6 month option has expired, the Company is
currently in ongoing negotiations with the NHS management to acquire 50%
of that company. The Company currently believes that the option cost will
be offset against the purchase consideration on completion.
6. CONTINGENT LIABILITY
The Company did not withhold any amounts from Edward J Guinan III's
remuneration with respect to either U.S. or U.K. taxes through March 31,
1997. Such treatment was used pending resolution by Edward J Guinan III of
his tax residence. Mr Guinan has provided 400,000 shares of the Company's
Common Stock and 400,000 shares of Transmedia Europe, Inc.'s Common Stock
which have been sold privately realising pound sterling 293,753. The
proceeds have been used to purchase a tax certificate against any
potential tax liabilities of the Company and Transmedia Europe, Inc.. Any
excess proceeds will be first used to repay any loans of Mr Guinan and his
affiliates with the balance of the proceeds to be paid to him. There can
be no assurance as to whether the proceeds will be adequate to cover any
potential liabilities of the Company.
9
<PAGE> 12
ITEM 2
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The discussion and analysis of financial condition and results of operations
should be read in conjunction with the consolidated financial statements and the
related disclosures.
The nature of the Company's business is such that there is a lead time before
profitable operations can be anticipated. This is demonstrated in the financial
results for the three month periods ended June 30, 1997 and 1996 and the nine
month periods ended June 30, 1997 and 1996. The success of the Company is
dependent upon increasing the number of cardholders ("Company Cardholders") of
the Company's card ("The Restaurant Card") and the number of restaurants
("Company Participating Restaurants"), as well as obtaining increased usage of
The Restaurant Card by Company Cardholders. The Company's joint venture
marketing partners are predominantly large size organisations, with lengthy
internal procedures. Consequently preparing campaigns for launch and the
resulting anticipated increase in Company Cardholders is taking considerably
longer than was initially anticipated. As of August 8, 1997 the Company had
approximately 30,900 Company Cardholders and 334 Company Participating
Restaurants.
Certain statements in this Report under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, including, without limitation,
statements regarding future cash requirements. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: the loss of a large number of
Company Cardholders or Company Participating Restaurants; general economic and
business conditions; industry capacity; industry trends; demographic changes;
competition; changes in business strategy or development plans; quality of
management; availability, terms and deployment of capital; business abilities
and judgment of personnel; availability of qualified personnel; changes in, or
the failure to comply with, government regulations; and other factors referenced
in this Report.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
The Company generated revenues of $492,046 for the three months ended June 30,
1997, an increase of 19% over the comparable 1996 period (27% after deducting
for foreign exchange movements). The Company increased its number of Company
Cardholders from 9,600 at June 30, 1996 to 29,100 at June 30, 1997 largely as a
result of Company Cardholders produced by the Westpac Banking Corp campaign
since August 1996. In December 1996 the Company began signing additional Company
Cardholders using the Australian company FAI Insurance ("FAI") as a joint
marketing partner. This novel arrangement allows a FAI customer, taking The
Restaurant Card, to reduce their insurance costs by the 25% saving on food and
beverages purchased, net of taxes and service, received from using The
Restaurant Card. The Company increased its number of Company Participating
Restaurants from 350 at June 30, 1996 to 353 at June 30, 1997. Membership fees
for the three months ended June 30, 1997 of $48,510 are significantly lower than
the $70,648 reported for the three months ended June 30, 1996. The difference of
$22,138 reflects an accounting adjustment in the three month period ended June
30,1996 which related to the nine month period ended June 30, 1996.
Cost of sales amounted to $324,247 for the three months ended June 30, 1997, an
increase of 17% over the comparable 1996 period (25% after deducting for foreign
exchange movements), this is consistent with the 19% increase in revenues. Cost
of sales are approximately 50% of the gross food and beverages value consumed by
Company Cardholders and represents the recovery of the advances ("Restaurant
Credits") made by the Company to the respective Company Participating
Restaurants. Selling, general and administrative expenses, consisting primarily
of the costs of operations, for the three months ended June 30, 1997 amounted to
$877,940. This exceeded the $659,649 for the three months ended June 30, 1996 by
33% due primarily to goodwill amortization of $46,172 and initial start up costs
of $64,201 in relation to the New Zealand operation.
Countdown Holdings Limited ("Countdown") incurred post acquisition losses of
approximately $76,414 after revenues of $2,284,454 for the three months ended
June 30, 1997. The Company's share of those losses amounted to $38,207.
Countdown currently has more than 6 million members and operations in 47
countries around the world. The Countdown card provides a buyers' advantage
program which offers a wide range of savings in approximately 80,000
establishments.
The Company earned $4,959 and $1,386 for the three months ended June 30, 1997
and 1996, respectively, from the temporary investment of excess cash funds.
Interest payable of $37,341 and $nil for the three months ended June 30, 1997
and 1996, respectively, relates to interest payable on loans from related
parties taken out in the period. The Company remains in a net operating loss
carry forward position for income tax purposes and no tax benefit has been
recognized for the three months ended June 30, 1997.
10
<PAGE> 13
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company incurred a net loss of $732,220 for the three months ended June 30,
1997, an increase of 63% over the comparable 1996 period. This increase is
primarily due to a 19% increase in revenues being far outweighed by a 39% in
selling, general and administrative expenses as detailed above.
NINE MONTHS ENDED JUNE 30, 1997 COMPARED TO NINE MONTHS ENDED JUNE 30, 1996
The Company generated revenues of $1,546,781 for the nine months ended June 30,
1997, an increase of 23% over the comparable 1996 period. The 23% increase in
revenues is principally due to the increase in the number of Company
Cardholders. Membership fees for the nine months ended June 30, 1997 of $148,450
are lower than the $151,498 reported for 1996 and are as a result of the Company
signing up an increased proportion of free membership 20 % Company Cardholders
for the nine months ended June 30 , 1997 compared to June 30, 1996.
Cost of sales amounted to $1,012,283 for the nine months ended June 30, 1997, an
increase of 21% over the comparable 1996 period, in line with the 23% increase
in revenues. Cost of sales are approximately 50% of the gross food and beverages
value consumed by Company Cardholders and represents the recovery of the
Restaurant Credits made by the Company to the respective Company Participating
Restaurants. Selling, general and administrative expenses, consisting primarily
of the costs of operations and goodwill amortization, for the nine months ended
June 30, 1997 amounted to $2,579,562 representing an increase of 23% over 1996.
The increase is primarily due to the write off of the Hawaii option of $150,000
and professional fees of $94,500 incurred through the end of the nine month
period for work on the proposed merger with Transmedia Europe, goodwill
amortization of $46,172 and initial start up costs of $64,201 relating to the
New Zealand operation.
Countdown Holdings Limited incurred post acquisition losses of approximately
$76,414 after revenues of $2,284,454 for the three months ended June 30, 1997.
The Company's share of those losses amounted to $38,207.
The Company earned $23,453 and $10,041 for the nine months ended June 30, 1997
and 1996, respectively, from the temporary investment of excess cash funds.
Interest payable of $37,581 for the nine months ended June 30, 1997 relates to
interest payable on loans from related parties. The Company remains in a net
operating loss carry forward position for income tax purposes and no tax benefit
has been recognised for the nine months ended June 30, 1997.
The Company incurred a net loss of $1,911,368 for the nine months ended June 30,
1997, an increase of 27% over the comparable 1996 period. This increase is due
to a 23% increase in revenues being exceeded by a 23% increase in selling,
general and administrative expenses and the share of Countdown Holdings
Limited's losses for the first time as detailed above.
LIQUIDITY AND CAPITAL RESERVES
As of June 30, 1997, the Company had a working capital deficit of $787,720 and
an accumulated deficit since inception of $6,257,564. The Company requires
substantial additional funds to move forward with its business plans and to
satisfy substantial amounts currently due creditors. At June 30, 1997,
approximately $249,000 was currently due creditors, a significant portion of
which is well past due. The Company is currently seeking to raise up to
$1,250,000 by means of an equity financing, the proceeds of which will be used
in connection with the possible acquisition of NHS (see below) and for working
capital, including the repayment of a portion of amounts due creditors and
royalties under the Transmedia License (see below). Although the Company
anticipates that its efforts to raise additional capital will be successful,
there can be no assurance with respect thereto.
The Company was initially capitalized with 7,250,000 shares. On May 26, 1994,
the Company issued: (i) 450,000 shares of Common Stock to Conestoga for
$450,000; (ii) 590,790 shares were issued to Network as partial consideration
for the purchase of the Transmedia License; and (iii) 3,525,000 shares were sold
to private investors in a private placement at an offering price of $1 per
share. Of the cash proceeds of $3,525,000, $1,000,000 was paid to Network for
further consideration (in addition to the $250,000 paid to Network by Conestoga
and reimbursed to Conestoga by the Company) for the purchase of the Transmedia
License from the private placement of shares, leaving a balance, after costs, of
$2,322,212 available to the Company for use as working capital in respect of the
utilization by the Company of its rights under the Transmedia License. Initially
such utilization has taken place in Australia through the Company's wholly owned
subsidiary, Transmedia Australia Pty Limited. In the future, the Company may
expand operations in other portions of the Licensed Territories through
wholly-owned subsidiaries or through unaffiliated sublicensees and franchisees.
In April 1995, the Company completed a second private placement of 573,800
shares of Common Stock at a price of $3 per share. The net proceeds of such
private placement were used as working capital in respect of the utilization by
the Company of its rights under the Transmedia License. The net cash to the
Company from the second private placement of shares in April 1995 was
$1,892,656. On June 16, 1995 the Company entered into an agreement with Nomura,
Wassertein, Perella and Co. Ltd. to provide certain consulting services through
June 16, 1996. Pursuant to such agreement, the Company issued 100,000 shares of
Common Stock and paid a $100,000 retainer to Nomura, Wassertein, Perella and Co.
Ltd.
11
<PAGE> 14
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
In July 1996 the Company completed a private placement of 892,857 shares of
Common Stock at a price of $1.40 per share. The net proceeds of $1,235,000 have
been used to provide working capital to existing operations. In December 1996
the Company issued, in a private placement, 556,250 shares of Common Stock at a
price of $2.00 per share together with warrants to purchase 185,417 shares of
Common Stock, which expire in December 1999 and have an exercise price of $2.00
per share. The net proceeds of $1,097,500 are being used to provide working
capital to existing operations.
The Company made investments of $150,000 to extend the option to operate the
sole Network franchise in the State of Hawaii and $1,000,000 to acquire the
Transmedia License during the year ended September 30, 1995 and period ended
September 30, 1994, respectively. The investment in the Network franchise in the
State of Hawaii has been written off in the three months ended March 31, 1997 as
the option has lapsed as the Company decided not to open in that State. This was
as a result of the Company wanting to focus on the existing Transmedia
territories and the integration of the Transmedia and Countdown businesses.
In December 1996 Transmedia Network, Inc. ("TMNI") and its affiliate Transmedia
International, Inc. agreed, at the Company's request, to amend the Transmedia
License. The principal revisions allowed the Company to expand into new
businesses, acquire Countdown PLC and undertake a corporate restructuring. In
consideration a $750,000 fee was paid on April 3, 1997 when the acquisition of
Countdown PLC was completed. This fee was split between the Company and
Transmedia Europe, Inc. and took the form of $125,000 each in cash to TMNI and
each agreed to issue a promissory note in the principal amount of $250,000 and
bearing interest at the rate of 10% per annum. The promissory notes are to be
convertible at the holder's option into common stock of the issuer at the rate
of $1.20 per share. A $250,000 fee, split between the Company and Transmedia
Europe, Inc. subject to joint and several liability, will also be payable when,
and if, a corporate restructuring is completed.
In order to maintain full rights under the Transmedia License the Company was
required to commence operations in a country other than Australia and New
Zealand by May 25, 1997. The Company was not be able to comply with this
requirement. The Company has negotiated with Network a time extension of this
requirement to September 30, 1998.
In October 1996, the Company made an initial investment of $134,741,
subsequently increasing to $142,946 for ongoing legal costs, to acquire a
renewable 6 month option to acquire 50% of the share capital of National
Helpline Services Pty Limited ("NHS"). NHS is an Australian business based in
Sydney which operates an innovative telephone helpline and medical evacuation
business. Its main clients are businesses in the financial services sector who
are seeking to augment the package offered to their customers. As of December,
1996, NHS had approximately 4 million members in Australia. Transmedia Europe,
Inc. acquired an option, on identical terms to the Company, over the remaining
50% share capital of NHS. A further $8,205 for NHS-related legal fees has been
capitalised within the investment cost of the NHS option during the three months
ended March 31, 1997. Although the 6 month option has expired, the Company is
currently in ongoing negotiations with the NHS management to acquire 50% of that
company. The Company currently believes that if the acquisition occurs the
option cost will be offset against the purchase consideration.
On April 3, 1997, the Company purchased from Mr C.E.C. Radbone approximately 50%
of the outstanding capital stock of Countdown. Countdown, through its
wholly-owned operating subsidiary, Countdown Plc, is an international provider
of membership discount services. The balance of the outstanding capital stock
was simultaneously purchased by Transmedia Europe, Inc. ("Transmedia Europe") on
terms similar to the terms of the Company's purchase.
In payment of the purchase price, the Company issued 1,330,524 shares of its
common stock, $0.00001 par value per share ("Common Stock") and paid pound
sterling 500,000 (approximate U.S. Dollar equivalent as of April 3, 1997 was
$800,000) in cash. In addition, the Company granted Mr Radbone an option to
purchase up to 277,193 shares of Common Stock at a purchase price of $0.9019 per
share.
The cash portion of the purchase price was funded by a $1,000,000 loan from a
director and stockholder of the Company. The loan matures on September 27, 1997,
bears interest at the rate of 12% per annum, and is collateralized by a pledge
of all of the shares purchased by the Company from Mr Radbone. In connection
with the loan, the Company issued to the director and stockholder five-year
warrants to purchase up to 138,596 shares of Common Stock at $1.13 per share.
In connection with the acquisition, the Company and Transmedia Asia each agreed
to pay $125,000 in cash to TMNI and each agreed to issue TMNI a promissory note
in the principal amount of $250,000, payable on April 2, 1998 and bearing
interest at the rate of 10% per annum. The promissory notes are to be
convertible at the holder's option into common stock of the issuer at the rate
of $1.20 per share. The Company agreed to pay such amounts in order to obtain
the consent to the Countdown acquisition, which consent was required by the
terms of the master license agreement from TMNI under which the Company operates
its discount restaurant charge card business.
Due to the shortage of funds, the Company has failed to pay approximately
$31,000 in royalties owing under the Transmedia License. The Company is in
discussions regarding an extension of the time for payment. Failure to pay such
royalties could result in the loss of the Transmedia License in all licensed
territories, including the United Kingdom.
12
<PAGE> 15
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
In addition to the investments above, there were cash inflows from related
parties of $116,004 and outflows to related parties of $226,778 for the three
months ended June 30, 1997 and 1996, respectively. There were cash inflows from
related parties of $496,514 and outflows to related parties of $255,329 for the
nine months ended June 30, 1997 and 1996, respectively. On March 27, 1997
International Advance, Inc., a company of which Edward J Guinan III, Chairman of
the Company, is the principal shareholder and an officer and director , assigned
the Countdown option agreement at cost to the Company and Transmedia Europe,
Inc. for a consideration of approximately $205,000 (125,000 sterling) each and
related legal costs of $59,006 each.
Net cash used in operating activities for the three months ended June 30, 1997
and 1996 was $402,424 and $310,803, respectively, and for the nine months ended
June 30, 1997 and 1996 was $1,179,421 and $1,024,127, respectively, mainly
resulting from the net loss for the relevant periods. Of these amounts $4,698
and $64,462 represent the net cash outflow for the three months ended June 30,
1997 and 1996, respectively, and $101,937 represents the net cash inflow and
$30,618 represents the net cash outflow for the nine months ended June 30, 1997
and 1996, respectively, for advances to Company Participating Restaurants. The
Company continues to improve returns from Company Participating Restaurants by
tighter control of restaurant advances. The cash outflows were funded by the
1995 and 1996 issues of Common Stock and the loan received from a director and
stockholder of the Company in April 1997.
The cash resources of the Company will be used to provide Restaurant Credits to
Company Participating Restaurants in Asia and the Pacific Rim including Japan,
China, Hong Kong, Taiwan, Korea, The Philippines and India (the "Licensed
Territories"), and to pay for general and administrative expenses, including
officers' compensation and compensation to independent sales consultants for the
recruitment of Company Participating Restaurants, and Company Cardholders.
The Restaurant Credits are generally unsecured and are recoverable only as
Company Cardholders utilise The Restaurant Card at the respective Company
Participating Restaurant. In a small number of cases, the Company may request a
personal guarantee from the owner. Generally, no other forms of collateral or
security are obtained from restaurant owners. Recovery of Restaurant Credits as
well as generation of gross profit from operations is strongly dependent upon
the frequency of use by existing Company Cardholders of The Restaurant Card.
Losses from restaurant failures have not been significant in the limited
operating experience of the Company.
The Company has not made any significant capital commitments other than the
commitments made under the Transmedia License and in connection with the
possible acquisition of an interest in NHS. The Company does not have an
immediate plan to make other significant capital commitments related to the
operation of its business in Australia or New Zealand.
The Company entered into an Agreement and plan of Reorganization (the
"Agreement"), dated as of February 10, 1997, with Transmedia Europe, Inc., a
Delaware corporation, the Common Stock of which is quoted on the NASDAQ Small
Cap Market ("Transmedia Europe"), Transmedia Europe Acquisition Corporation, a
Delaware corporation and wholly-owned subsidiary of the Transmedia Europe
("Europe Acquisition"), and Transmedia Asia Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of the Transmedia Europe ("Asia
Acquisition"). Under the terms of the Agreement, among other things (i)
Transmedia Europe will make a contribution to the capital of Europe Acquisition
by conveying substantially all of Transmedia Europe's assets, except for its
equity interest in Transmedia La Carte Restaurant S.A., to Europe Acquisition;
and (ii) immediately thereafter Asia Acquisition will merge with and into the
Company pursuant to which the Company will be the surviving entity and become a
wholly-owned subsidiary of Transmedia Europe and stockholders of Common Stock
of the Company will be entitled to receive 0.9109 of a share of Common Stock of
Transmedia Europe. At this time the Agreement has expired without being
completed. There is no assurance when or if a merger will be affected nor as to
the terms of any such merger.
The Company did not withhold any amounts from Edward J Guinan III's remuneration
with respect to either U.S. or U.K. taxes through March 31, 1997. Such treatment
was used pending resolution by Edward J Guinan III of his tax residence. Mr
Guinan has provided 400,000 shares of the Company's Common Stock and 400,000
shares of Transmedia Europe, Inc.'s Common Stock which have been sold privately
realising pound sterling 293,753. The proceeds have been used to purchase a tax
certificate against any potential tax liabilities of the Company and Transmedia
Europe, Inc.. Any excess proceeds will be first used to repay any loans of Mr
Guinan and his affiliates with the balance of the proceeds to be paid to him.
There can be no assurance as to whether the proceeds will be adequate to cover
any potential liabilities of the Company.
INFLATION AND SEASONALITY
The Company does not believe that its operations will be influenced by inflation
in the foreseeable future. The business of individual Company Participating
Restaurants may be seasonal depending on their location and the type of food and
beverages served. However, the Company at this time has no basis on which to
project seasonal effects, if any, to its business as a whole.
13
<PAGE> 16
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARIES
PART II: OTHER INFORMATION
Item 5 Other Information
In July 1997, Mr Edward Guinan III was elected Chairman of the Board of
Directors of the Company and Mr Paul Harrison succeeded to the offices of
President, Chief Executive Officer and Treasurer/Chief Financial Officer. Mr
Harrison is acting as the Company's principal financial officer pending the
hiring of a new Chief Financial Officer.
Item 6: Exhibits and Reports on Form 8-K
a) Exhibits:
10.1(v) Master License Amendment dated as of May 15, 1997, by and between
TMNI International Incorporated and the Company
b) Reports on Form 8-K: - An amendment to report on Form 8-K was filed on June
16, 1997 regarding the acquisition of 50% of the outstanding capital of
Countdown Holdings Limited.
14
<PAGE> 17
TRANSMEDIA ASIA PACIFIC INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused their Report to be signed on its behalf by the
undersigned thereunto duly authorised.
TRANSMEDIA ASIA PACIFIC, INC.
By /s/ Paul L. Harrison
- -----------------------
PAUL L. HARRISON
Chief Executive Officer and Duly Authorised Representative
August 15, 1997
15
<PAGE> 18
EXHIBIT INDEX
Exhibit No. Description
10.1.(v) Master License Amendment dated as of May 15, 1997, by
and between TMNI International Incorporated and the
Company.
<PAGE> 1
EXHIBIT 10.1(v)
Amendment No. 1 ("Amendment No. 1") dated as of May 15, 1997, to the
Master License Agreement ("Agreement") dated March 21, 1994 by and between TMNI
International Incorporated ("Licensor") and Transmedia Asia Pacific, Inc. as
assignee of Conestoga Partners II, Inc. ("Licensee").
WHEREAS the parties to the Agreement wish to modify certain terms of
the Agreement;
NOW THEREFORE the parties agree as follows:
1. The first two sentences of Section 3.2 of the Agreement shall be
deleted in their entirety and the following shall be substituted therefor:
"Licensee shall establish, through permitted sublicensees, a
Business in any one country in the Territory (other than
Australia and New Zealand) no later than September 30, 1998 or
Licensee shall lose all rights granted hereunder for all
countries in the Territory, other than Australia and New
Zealand. If Licensee has established a Business in one such
country by such date, then Licensee shall in addition establish
a Business in a second country in the Territory no later than
September 30, 2000 or Licensee shall lose all rights granted
hereunder for all countries in the Territory, other than
Australia and New Zealand and the first country."
2. All definitions contained in the Master License Agreement shall
have the same meaning in this Amendment No. 1.
3. Except as otherwise amended herein, the Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed, sealed and delivered this Amendment No. 1 as of the
day and year first above written.
TMNI International Incorporated
By: Michael Chasen
----------------------------------
Attest: Title: President
-------------------------------
Carol Milhauser
- -----------------------------------
Transmedia Asia Pacific, Inc.
By: Paul Harrison
----------------------------------
Attest: Title: President
-------------------------------
Michelle Glenn
- -----------------------------------
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 211,461
<SECURITIES> 0
<RECEIVABLES> 24,054
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<INVENTORY> 474,963
<CURRENT-ASSETS> 1,239,152
<PP&E> 210,797
<DEPRECIATION> 95,166
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0
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<TOTAL-LIABILITY-AND-EQUITY> 5,599,931
<SALES> 1,695,231
<TOTAL-REVENUES> 1,695,231
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<TOTAL-COSTS> 3,554,504
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<INCOME-PRETAX> (1,911,368)
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