FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 0-27828
WANDERLUST INTERACTIVE, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3779546
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
598 Broadway, New York, NY 10012
(Address of principal executive offices)
(Zip Code)
(212) 966-8887
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
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 and 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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of May 1, 1996.
3,763,719 shares of common stock, par value $.01 per share.
Page 1 of 14
There is no Exhibit Index.
<PAGE>
WANDERLUST INTERACTIVE, INC.
INDEX
Part I. Financial Information Page No.
Item 1. Financial Statements
Balance Sheets - 3
March 31, 1996 and June
30, 1995
Statements of Operations- 4
Three Months and Nine Months Ended
March 31, 1996 and July 2, 1994
(inception) to March 31, 1996
Statement of Cash Flows - Nine 5
Months Ended March 31, 1996,
and July 2, 1994 (inception) to
March 31, 1996
Notes to Financial Statements 6-11
Item 2. Management's Discussion and Analysis 12
of Financial Condition and
Results of Operations
Part II. Other Information
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
<PAGE>
Wanderlust Interactive, Inc.
(A Development Stage Company)
Balance Sheets
ASSETS
March 31, June 30,
1996 1995
Current assets:
Cash and cash equivalents $5,634,943 $ 721,968
Prepaid expenses 24,000 -
Total current assets 5,658,943 721,968
Fixed assets, net 170,751 36,176
Other assets:
License rights 75,000 75,000
Organization costs, net of amortization 4,823 5,936
Deferred loan costs, net of amortization 12,344 18,792
Security deposits 14,320 7,820
Other 24,000 -
130,487 107,548
$5,960,181 $ 865,692
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities, accounts payable
and accrued liabilities $ 79,133 $ 24,291
Long-term debt, convertible debentures 507,500 507,500
586,633 531,791
Commitments and contingency
Shareholders' equity:
Preferred stock, $.01 par value;
authorized, 100,000 shares;
issued and outstanding, none - -
Common stock, $.01 par value;
authorized, 10,000,000 shares;
issued and outstanding, 3,668,719 and 36,687 20,250
2,024,973 shares, respectively
Additional paid-in capital 6,776,715 634,895
Deficit accumulated during the
development stage ( 1,439,854) ( 321,244)
5,373,548 333,901
$5,960,181 $ 865,692
See notes to financial statements.
<PAGE>
Wanderlust Interactive, Inc.
(A Development Stage Company)
Statements of Operations
July 1, 1994
Three Months Nine Months (inception) to
ended ended March 31, 1996
March 31, 1996 March 31, 1996 (cumulative)
Sales $ - $ - $ -
Expenses:
Research and development 288,529 742,558 870,846
General and administrative 184,744 354,323 526,986
Interest, net of interest
income 9,781 21,729 42,022
483,054 1,118,610 1,439,854
Net loss $ 483,054 1,118,610 1,439,854
Net loss per common stock
share $ .20 $ .47 $ .62
Weighted average shares
outstanding 2,424,633 2,387,357 2,325,735
See notes to financial statements.
<PAGE>
Wanderlust Interactive, Inc.
(A Development Stage Company)
Statements of Cash Flows
July 2, 1994
Nine Months (inception to
Ended March 31, 1996
March 31, 1996 (cumulative)
Cash flows from operating activities:
Net loss ($1,118,610) ($1,439,854)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Amortization and depreciation 58,092 61,391
Common stock issued for bonus - 25,000
Common stock issued for service - 14,310
Common stock issued for interest - 19,610
Change in:
Prepaid expenses (24,000) (24,000)
Organization costs - (7,420)
Security deposit (6,500 (14,320)
Other assets (24,000) (24,000)
Accounts payable and accrued
liabilities 54,842 79,133
Net cash used in operating activities (1,060,176) (1,310,150)
Cash flows from investing activities:
Purchase of license - (75,000)
Purchase of fixed assets (183,259) (219,997)
Net cash used in investing activities (183,259) (294,997)
Cash flows from financing activities:
Issuance of common stock and warrants 6,158,257 6,754,482
Proceeds, notes payable - 507,500
Debt acquisition costs (1,847) (21,892)
Net cash provided by financing
activities 6,156,410 7,240,090
Increase in cash and cash equivalents 4,912,975 5,634,943
Cash and cash equivalents, beginning 721,968 -
Cash and cash equivalents, ending $5,634,943 $5,634,943
Cash paid for interest $ 352 $ 562
See notes to financial statements.
<PAGE>
Wanderlust Interactive, Inc.
(A Development Stage Company)
Notes to Financial Statements
July 2, 1994 (inception) to March 31, 1996
The condensed financial statements contained herein should be read in
conjunction with the financial statements and related notes contained in the
Company's Registration Statement on Form SB-2, as amended. In the opinion of
management, the accompanying unaudited interim financial statements contain
all adjustments (consisting only of normal accruals) necessary to present
fairly the Company's financial position as of March 31, 1996 and results of
its operations and cash flows for the nine months and three months then
ended. (The results of operations for the nine month and three month periods
ended March 31, 1996 are not necessarily indicative of the results to be
expected for the full year.)
1. Summary of significant accounting policies and business activity:
Business activity:
Wanderlust Interactive, Inc. ("Company"), a Delaware corporation, was
formed to create, develop, publish, market and sell interactive
multimedia software entertainment titles on CD-ROM for personal
computers. The Company was incorporated in May, 1994 but had no
transactions until July 2, 1994. The Company is considered to be in the
development stage as no revenues have been derived from operations and
the Company is primarily involved in research and development activities.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Common stock split and reverse split:
In July, 1994, the Company effected a 20,000 for one stock split. In
connection with the public offering, the Company has agreed to effect a
reverse stock split on a .83366 for 1 basis. The stockholders' equity
accounts and all share and per share data retroactively reflect these
splits.
Wanderlust Interactive, Inc.
(A Development Stage Company)
Notes to Financial Statements (Continued)
July 2, 1994 (inception) to March 31, 1996
1. Summary of significant accounting policies and business activity
(continued):
Fixed assets:
Fixed assets consist primarily of leasehold improvements, computers and
other equipment, and are stated at cost. Amortization of leasehold
improvements is provided on a straight-line basis over the shorter of the
estimated useful lives of the improvements or the life of the lease.
Depreciation is provided on a straight-line basis over the estimated
useful life of the related assets.
Organization costs:
Organization costs represent costs incurred in connection with organizing
the Company. These costs are being amortized on a straight-line basis
over 5 years.
Cash and cash equivalents:
The Company considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents.
Deferred loan costs:
Deferred loan costs represent costs incurred in connection with the
issuance of convertible debentures. These costs will be amortized on
a straight-line basis through May, 1997, or will be expensed upon payment
or conversion of debentures.
Concentration of credit risk:
Financial instruments which subject the Company to concentrations of
credit risk consist of temporary cash investments. The Company places
its temporary cash investments with high quality financial institutions.
Net loss per share:
Net loss per share is based on the weighted average number of shares of
common stock outstanding during the period. Common stock issued for
consideration below the assumed initial public offering price of $5.00
per share during the 12 months preceding the date of the initial filing
of a registration statement with the Securities and Exchange Commission
has been included in the calculation of the weighted average as if they
were outstanding for the entire period.
<PAGE>
Wanderlust Interactive, Inc.
(A Development Stage Company)
Notes to Financial Statements(Continued)
July 2, 1994 (inception) to March 31, 1996
2. Commitments and contingency:
Effective March, 1996, the Company entered into a three year employment
agreement with an officer. The agreement provides for a salary of
$150,000 per year and bonuses related to the development of and revenues
generated for each title.
In May, 1995, the Company entered into a four year nonexclusive license
agreement which provides for use of the "Pink Panther" character. The
Company paid $75,000 as a nonrefundable advance royalty, to be applied
to future royalties. The agreement provides for payment of the greater
of a percentage royalty on wholesale prices or an absolute minimum per
unit sold, but may not be less than $150,000 over the life of the
agreement. The agreement also provides for the shipment of minimum copies
by certain due dates. Failure to ship such minimum copies may cause
termination of the agreement.
In April, 1995, the Company entered into a one year lease for office
space at an annual rental of $36,000. The lease provides for a four year
option at annual rentals ranging from $37,800 to $43,758. In December,
1995, the Company entered into a one year lease for additional office
space at an annual rent of $36,000, with options to renew similar to
those described. Rent expense for the period from July 2, 1994 to March
31, 1996 was $44,423. Rent expense for the three and nine months ended
March 31, 1996 was $16,073 and $38,123, respectively.
In July, 1994, the Company effected a private placement of common stock.
The Company did not accept a subscription from one person who sought to
acquire 90,035 shares of common stock. This individual advanced the
Company $27,000 which amount the Company has attempted to return. This
individual refused to accept these funds and such funds are currently
held in escrow. There is no assurance that this individual may not have
a claim against the Company due to the failure to issue him 90,035 shares
of common stock. The Company does not believe the claim is valid, and
intends to vigorously defend itself against this claim.
3. Convertible debentures:
In May, 1995, the Company issued units consisting of convertible
debentures and common stock. An aggregate of $507,500 of debentures
payable and 465,374 shares of common stock were issued to various
investors in exchange for $1,015,000. The debentures bear interest at
the rate of 8% (payable annually), and are due in May, 1997. The
debentures are convertible into common shares at the rate of $2.16 per
share.
<PAGE>
Wanderlust Interactive, Inc.
(A Development Stage Company)
Notes to Financial Statements (Continued)
July 2, 1994 (inception) to March 31, 1996
4. Fixed assets, net:
March 31, June 30,
1996 1995
Computers $171,709 $ 1,002
Furniture 11,495 5,536
Leasehold improvements 36,793 30,200
219,997 36,738
Less accumulated depreciation
and amortization 49,246 562
$170,751 $ 36,176
5. Initial public offering:
On March 28, 1996, the Company closed an initial public offering of
common stock and redeemable warrants. A total of 1,300,000 shares of
common stock and 2,100,000 redeemable warrants were issued. See note 11
regarding over-allotment option. The redeemable warrants are exercisable
at any time during a three year period commencing March 28, 1996 at an
exercise price of $7.00 per share. The redeemable warrants include an
option whereby, under certain conditions, the Company can redeem the
warrants.
In connection with the initial public offering, the investment banker
received, for nominal consideration, five year warrants to purchase
130,000 shares of common stock and 210,000 redeemable warrants. These
warrants are exercisable at any time during a four year period commencing
March 1997 for $6.00 per share of common stock and $.30 per redeemable
warrant. The Company has also agreed to utilize the services of the
investment banker on a consulting basis for two years at a monthly fee
of $2,000; the aggregate fee of $48,000 was paid at closing.
6. Income taxes:
For income tax purposes, as of March 31, 1996 the Company has deferred
start-up costs approximating the financial accounting net loss. Such
costs will be amortized over five years commencing when business begins
for tax purposes. The deferred start-up costs result in a deferred tax
asset of approximately $561,000, however, a valuation reserve has been
recorded for the full amount due to the uncertainty of realization of the
deferred tax asset.
<PAGE>
Wanderlust Interactive, Inc.
(A Development Stage Company)
Notes to Financial Statements (Continued)
July 2, 1994 (inception) to March 31, 1996
7. Incentive stock option plan:
In 1994, the Company adopted an Incentive Stock Option Plan ("Plan").
In September, 1995, the Company amended the Plan.
The Plan provides for the granting of options to purchase up to 360,000
shares of common stock at an exercise price equal to the fair market
value of the common stock (110% of fair market value for a holder of in
excess of 10%) on the date of the grant. As of March 31, 1996, options
to purchase 240,037 shares of common stock at an average exercise price
of $1.26 per share were outstanding. No options have been exercised to
date.
8. Related party transactions:
During the period from July 2, 1994 (inception) to March 31, 1996, the
Company incurred $250,475 of legal fees and disbursements to a law firm.
For the three and nine months ended March 31, 1996, legal fees and
disbursements of $149,000 and $194,000 were incurred to such law firm,
respectively. A partner in that firm is an officer/shareholder/director.
These fees were related primarily to organization costs and the raising
of debt and equity capital.
9. Bridge financing:
On December 29, 1995 the Company completed a private offering of 343,746
shares of common stock and 515,624 redeemable warrants for an aggregate
consideration of $378,750. The redeemable warrants provide for automatic
conversion into an equal number of warrants bearing the same rights as
those discussed in Note 5, "Initial public offering".
10. New authoritative accounting pronouncements:
The Financial Accounting Standards Board has issued Financial Accounting
Standard No. 123 "Accounting for Stock-Based Compensation" (FAS 123).
FAS 123 will take effect for transactions entered into during the fiscal
year beginning July 1, 1996; with respect to disclosures required for
entities that elect to continue to measure compensation cost using a
prior permitted accounting method, such disclosures must include the
effects of all awards granted in the fiscal year beginning July 1, 1995.
The Company's election under FAS 123 has not been determined and the
effect of adoption of FAS 123 on the Company's financial statements has
not been determined.
Wanderlust Interactive, Inc.
(A Development Stage Company)
Notes to Financial Statements (Continued)
July 2, 1994 (inception) to March 31, 1996
11. Subsequent event:
In April, 1996, the underwriter of the Company's initial public offering
exercised its over-allotment option. The Company issued 95,000 shares
of common stock and 315,000 redeemable warrants for consideration of
$480,519 after deductions for expenses.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The Company had no revenues for the three and nine months ended March 31,
1996. The Company incurred a net loss of $483,054 or $.20 per share, and
$1,118,610, or $.47 per share, for the three and nine month periods ended
March 31, 1996, respectively.
For the three and nine month periods ended March 31, 1996, research and
development expenses totalled $288,529 and $742,558, respectively. General
and administrative expenses ("GA") were $184,744 and $354,323 for the three
and nine month periods ended March 31, 1996, respectively.
Financial Condition
The Company's working capital at March 31, 1996 was $5,579,810. It was
$697,677 at June 30, 1995. The Company's current ratio was 71.51 to 1 at
March 31, 1996 as compared to 29.72 to 1 at June 30, 1995.
The Company used cash for operating activities in the amount of
$1,060,176 during the nine months ended March 31, 1996. The Company
purchased $183,259 of new equipment during the nine months ended March 31,
1996. Largely due to the initial public offering of securities by the
Company, the Company generated $6,156,410 of cash from financing activities
during the nine months ended March 31, 1996. As a result, the Company's cash
and cash equivalents increased from $721,968 at June 30, 1995 to $5,634,943
at March 31, 1996.
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information
On March 28, 1996, the Company closed an initial public offering of
common stock and redeemable warrants. A total of 1,300,000 shares of common
stock and 2,100,000 redeemable warrants were issued. The redeemable warrants
are exercisable at any time during a three year period commencing March 28,
1996 at an exercise price of $7.00 per share. The redeemable warrants
include an option whereby, under certain conditions, the Company can redeem
the warrants.
In April, 1996, the underwriter of the Company's initial public offering
exercised its over-allotment option. The Company issued 95,000 additional
shares of common stock and 315,000 additional redeemable warrants for
consideration of $480,519 after deductions for expenses.
Item 6. Exhibits and Reports on Form 8-K
(b) During the quarter ended March 31, 1996, the registrant did not
file any reports on Form 8-K.
<PAGE>
SIGNATURE
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.
WANDERLUST INTERACTIVE, INC.
Dated: May 10, 1996 s/Catherine Winchester
Catherine Winchester
President (Principal Financial
Officer)
cdkidz\10q-mar.96
<PAGE>
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<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
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<RECEIVABLES> 0
<ALLOWANCES> 0
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<PP&E> 219,997
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