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 December 31, 1997
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.)
5301 Beethoven Street, Los Angeles, CA 90066
(Address of principal executive offices)
(Zip Code)
(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 X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of February 10, 1997
Shares of common stock, par value $.01 per share.
Page 1 of 10
There is no Exhibit Index.
WANDERLUST INTERACTIVE, INC.
INDEX
Part I. Financial Information Page No.
Item 1. Financial Statements
Consolidated Balance Sheet 3
at December 31, 1997
Consolidated Statements of 4
Operations - Three Months Ended
December 31, 1997 and 1996
and Six Months Ended
December 31, 1997 and
1996
Consolidated Statements of 5
Cash Flows - Six Months
Ended December 31, 1997,
and 1996
Notes to Consolidated 6
Financial Statements
Item 2. Management's Discussion 7-8
and Analysis of Financial
Condition and Results of
Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 9
Signature 10
Wanderlust Interactive, Inc. and Subsidiary
Consolidated Balance Sheet
ASSETS
December 31,
1997
Current assets:
Cash and cash equivalents $ 214,581
Accounts receivable, net of reserve
of $23,500 400,277
Prepaid expenses 38,529
Other current assets 119,320
Total current assets 772,707
Fixed assets, net 685,205
Other assets:
License rights, advance royalty 150,000
Security deposits, and other 45,122
Patents and licenses, net 2,763,604
Capitalized software 49,238
Goodwill, net 1,642,157
4,650,121
$6,108,033
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 797,213
Billings in excess of costs and estimated
earnings on contracts in progress 313,238
Notes and loans payable 585,413
Convertible debentures 102,500
Total current liabilities 1,798,364
Due to officer/shareholder 53,203
Commitments and contingency
Shareholders' equity:
Preferred stock, $.01 par value; authorized,
100,000 shares; issued and outstanding, none 0
Common stock, $.01 par value; authorized,
10,000,000 shares; issued and outstanding,
6,497,061 shares 64,971
Additional paid-in capital 11,985,690
Accumulated deficit ( 7,794,195)
4,256,466
$6,108,033
See notes to consolidated financial statements.
<TABLE>
Wanderlust Interactive, Inc. and Subsidiary
Consolidated Statements of Operations
<CAPTION>
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 0 $ 38,000 $ 2,367 $ 38,000
Development contracts 584,207 0 834,150 0
Royalties 268,345 138,087 505,835 256,387
852,552 176,087 1,342,352 294,387
Expenses:
Cost of product sales 0 50,042 34,000 50,042
Cost of development
contracts 299,974 0 576,431 0
Research and development 24,641 785,326 236,592 1,524,720
Selling, general
and administrative 437,313 336,740 839,582 695,492
Depreciation and
amortization 192,699 125,623 574,609 159,510
Interest expense
(income), net 13,188 ( 4,153) 32,112 ( 38,965)
967,815 1,293,578 2,293,326 2,390,799
Net loss $ 115,263 $1,117,491 $ 950,974 $2,096,412
Net loss per common share,
basic and diluted $ .02 $ .30 $ .17 $ .56
Weighted average
shares outstanding 5,865,950 3,763,719 5,499,145 3,763,719
See notes to consolidated financial statements. <PAGE>
</TABLE>
Wanderlust Interactive, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Six Six
Months Months
Ended Ended
December 31, December 31,
1997 1996
Cash flows from operating
activities:
Net loss ($ 950,975) ($ 2,096,412)
Adjustments to reconcile net loss
to net cash used in operating activities:
Write off of license rights 50,000 0
Write off of capitalized software 50,700 0
Amortization 304,455 0
Depreciation 169,454 159,510
Change in:
Accounts receivable ( 163,296) ( 56,351)
Costs and estimated earnings in excess of
billings on contracts in progress 20,600 0
Billings in excess of costs and estimated
earnings on contracts in progress 182,953 0
Inventory 0 ( 47,090)
Accounts payable and accrued expenses 82,986 784
Prepaid expenses ( 14,029) 0
Other assets ( 108,491) 19,550
Net cash used in operating activities ( 375,643) ( 2,020,009)
Cash flows from investing activities:
Purchase of fixed assets ( 8,860) ( 361,977)
Noncurrent receivable 0 ( 230,000)
Net cash used in investing activities ( 8,860) ( 591,977)
Cash flows from financing activities:
Payments on notes payable ( 94,756) 0
Proceeds from loan payable 192,000 0
Payments on due to officer ( 30,097) 0
Issuance of common stock and warrants,
Net of costs of issuance 303,176 0
Net cash provided by financing activities 370,323 0
Increase (decrease) in cash
and cash equivalents ( 14,180) ( 2,611,986)
Cash and cash equivalents, beginning 228,761 4,893,658
Cash and cash equivalents, ending $ 214,581 $ 2,281,672
During the six months ended December 31, 1997 269,583 shares of
common stock were
issued in exchange for $162,500 of convertible debentures.
During the six months ended December 31, 1997 1,250 shares of common stock were
issued for extension of due date of convertible debentures.
During the six months ended December 31, 1997 285,000 shares of common stock
were issued for services relating to raising capital.
During the six months ended December 31, 1997 50,000 shares of
common stock were issued to satisfy $30,000 of accounts payable.
See notes to consolidated financial statements. <PAGE>
Wanderlust Interactive, Inc.
Notes to Consolidated Financial Statements
1. The financial statements as of December 31, 1997 and for the
three and six month periods ending December 31, 1997 and 1996
are unaudited and reflect all adjustments (consisting of only
normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The
financial statements should be read in conjunction with the
financial statements and notes thereto, together with
management s discussion and analysis of financial condition
and results of operations contained in the Company s Annual
Report to Stockholders incorporated by reference in the
Company s Annual Report on Form 10- KSB for the fiscal year
ended June 30, 1997. The results of operations for the three
and six months ended December 31, 1997 are not necessarily
indicative of the results for the entire fiscal year ending
June 30, 1998.
2. During the six months ended December 31, 1997 the Company
effected a private offering of 850,000 shares of common stock
and 212,500 warrants for aggregate consideration, net of
expenses of $303,176. The warrants are exercisable at $1.25
per share and expire one year from the date of issuance. In
connection with services performed for the private offering,
the Company issued 285,000 shares of common stock.
3. During the quarter ended December 31, 1997, the Company
revised its assessment of the useful lives of its patents and
licenses. The assessment indicated that a useful life of
eight years (rather than four years as previously used) would
be appropriate. As a result of this change in accounting
estimate, net loss for the six months and three months ended
December 31, 1997 was reduced by $141,724 and $141,724,
respectively, and net loss per common share for the comparable
periods was reduced by $.03 and $.02, respectively.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
For the three months ended December 31, 1997, the Company had
revenues of $852,552, an increase of $676,469 or 384% over revenues
of $176,083 in the corresponding three month period in 1996. This
increase was derived largely from the Company's acquisition of
Western Technologies, where the Company has added new customers in
the funded development of video and computer games and the created
new funded toy designs. In the three months ended December 31,
1997, the results improved significantly with a net loss of
$115,263, or $.02 per share, compared with a loss of $1,293,578, or
$.30 per share, in the previous period, a $1,002,230 reduction of
losses in the current period. When non-cash depreciation and
amortization expenses of $192,699 are excluded, the results in the
three month period ended December 31, 1997 reflect a positive cash
flow of $77,436 compared with a negative cash flow of $991,868 in
the previous period excluding non-cash depreciation and
amortization expenses of $125,623, a positive swing of $1,069,304
during the current period.
For the six months ended December 31, 1997 and 1996, the
Company had revenues of $1,342,352 and $294,387, respectively, an
improvement of $1,047,965. The Company incurred a net loss of
$950,974, or $.17 per share, for the six month period ended
December 31, 1997 as compared to $2,096,412, or $.56 for the year
earlier period, a $1,145,438 reduction of losses in the current
period. When non-cash depreciation and amortization expenses of
$574,609 are excluded, the results for the six month period ended
December 31, 1997 reflect a negative cash flow of $376,365 compared
with a negative cash flow of $1,936,902 in the previous period
excluding non-cash depreciation and amortization expenses of
$159,510, a positive swing of $1,560,537.
For the six month periods ended December 31, 1997 and 1996,
research and development expenses totaled $236,592 and $1,524,720,
respectively, reflecting the end of development on the Pink Panther
games. Selling, general and administrative expenses were $839,582
and $695,492 for the six month periods ended December 31, 1997 and
1996, respectively.
Financial Condition
The Company used substantially less cash for operating
activities in the amount of $375,643 during the six months ended
December 31, 1997, as compared to using $2,020,009 in the year
earlier period, an improvement of $1,644,366. This reflects the
Company's change in activities due to its acquisition of Western
Technologies and reduction of costs at its New York and California
offices. The Company purchased $8,860 of fixed assets during the
six months ended December 31, 1997, as compared to $361,977 a year
ago. Financing activities provided funds in the amount of $370,323
and $0 during the six months ended December 31, 1997 and 1996,
respectively. This primarily reflects issuance of common stock and
warrants during the current period.
The Company reduced its working capital deficit at December
31, 1997 to $1,025,657 from $1,116,839 at June 30, 1997, an
improvement of $91,182 in the current period. The Company's
current ratio was .43 to 1 at December 31, 1997 as compared to .31
to 1 at June 30, 1997.
During the six months ended December 31, 1997, holders of
$162,500 of convertible debentures converted their debentures into
269,583 shares of Common Stock of the Company (the "Common Stock").
At December 31, 1997, there remained $102,500 of these convertible
debentures, of which $31,250 were due, unpaid and in default.
During the six months ended December 31, 1997, the Company
conducted a private equity offering pursuant to which it issued
850,000 shares of Common Stock and 212,500 warrants to purchase
additional shares of Common Stock, for net proceeds of $303,176.
Due to significant losses and lower sales than forecast from
the Company's Pink Panther CD-Rom titles, the Company has
experienced significant cash flow shortages resulting in the
Company substantially reducing its staff, especially in its New
York office where it went from 50 to three. In addition, the
Company is attempting to further reduce its expenditures, and is
subleasing unused facilities. Evenso, unless the Company raises
additional capital or its revenues from operations increase, the
Company will encounter increased liquidity pressures that could
result in a further material disruption of its operations. There
is no assurance, however, that such additional capital will be
available, or if available, whether it will be available on terms
acceptable to the Company.
Safe Harbor Statement
Statements which are not historical facts, including
statements about the Company's confidence and strategies and its
expectations about new and existing products, technologies and
opportunities, market and industry segment growth, demand and
acceptance of new and existing products are forward looking
statements that involve risks and uncertainties. These include,
but are not limited to, product demand and market acceptance risks;
the impact of competitive products and pricing; the results of
financing efforts; the loss of any significant customers of any
business; the effect of the Company's accounting policies; the
effects of economic conditions and trade, legal, social, and
economic risks, such as import, licensing, and trade restrictions;
the results of the Company's business plan and the impact on the
Company of its relationship with its lenders.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on From 8-K
(b) During the quarter ended December 31, 1997, the
registrant did not file any reports on Form 8-K.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange At 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: February 19, 1998 s/Jay Smith, III
Jay Smith, III
President
(Principal Financial Officer)
WPDOCS\CDKIDZ\10Q.97
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1997
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 214,581 2,281,672
<SECURITIES> 0 0
<RECEIVABLES> 400,277 56,351
<ALLOWANCES> 23,500 0
<INVENTORY> 0 47,000
<CURRENT-ASSETS> 772,707 2,409,113
<PP&E> 685,205 452,499
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 6,108,033 3,431,804
<CURRENT-LIABILITIES> 1,798,364 631,055
<BONDS> 0 0
0 0
0 0
<COMMON> 64,971 37,637
<OTHER-SE> 4,191,495 2,763,112
<TOTAL-LIABILITY-AND-EQUITY> 6,108,033 3,431,804
<SALES> 2,367 38,000
<TOTAL-REVENUES> 1,342,352 294,387
<CGS> 34,000 50,042
<TOTAL-COSTS> 839,582 695,492
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 32,112 (38,965)
<INCOME-PRETAX> (950,974) (2,096,412)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (950,974) (2,096,412)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (950,974) (2,096,412)
<EPS-PRIMARY> (.17) (.56)
<EPS-DILUTED> (.17) (.56)
</TABLE>
