Crystal International Travel 10QSB 2007 Q3 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 10-QSB

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended   April 30, 2007

OR

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  

Commission File Number 000-29313

CRYSTAL INTERNATIONAL TRAVEL GROUP, INC.
(Name of small business issuer in its charter)

Delaware	20-0121007
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2160 HeadquartersPlaza, 10^th Floor, Morristown, New Jersey07960
(Address of principal executive offices & zip code)

973-644-0900
Registrant's telephone number, including area code:

(Former Name or Former Address, if Changed Since Last Report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.

x  Yes

o  No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o  Yes

x  No

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

o  Yes

o  No

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:   23,965,290

Transitional Small Business Disclosure Format (Check one):

o  Yes

x  No

PART I - FINANCIAL INFORMATION

CRYSTAL INTERNATIONAL TRAVEL GROUP, INC. AND SUBSIDIARIES

(A Development Stage Company)

(Formerly Mobile Reach International, Inc.)

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2007

(Unaudited)

	Pages
INDEX	F1
FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheet	F2
Condensed Consolidated Statements of Income	F3 - F4
Condensed Consolidated Statement of Stockholders’ Deficit	F5 - F6
Condensed Consolidated Statements of Cash Flows	F7 - F8
Notes to Condensed Consolidated Financial Statements	F9 - F16

F-1

CRYSTAL INTERNATIONAL TRAVEL GROUP, INC. AND SUBSIDIARIES

(A Development Stage Company)

(Formerly Mobile Reach International, Inc.)

CONDENSED CONSOLIDATED BALANCE SHEET

April 30, 2007

(Unaudited)

ASSETS

CURRENT ASSETS:
Cash	$	14,538
Prepaid insurance		13,431
Total current assets			$	27,969
PROPERTY AND EQUIPMENT - net of accumulated depreciation				41,977
OTHER ASSETS:
Deposits		11,856
Intangibles - net of amortization		25,144
Goodwill		80,596
				117,596
			$	187,542

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Current portion long-term debt	$	499,079
Short-term notes payable		484,733
Accounts payable		1,096,201
Notes payable - related parties		132,808
Accrued liabilities		1,650,096
Total current liabilities				$	3,862,917
LONG-TERM LIABILITIES:
Long-term debt		4,552,228
Convertible debentures		3,356,565
					7,908,793
STOCKHOLDERS’ EQUITY:
Preferred stock; $.0001 par value; 100,000,000 shares authorized		0
Common stock; par value $0.001; 500,000,000 shares authorized, 22,235,674 issued and outstanding, 30,625 shares to be issued		24,054
Paid-in capital		3,302,709
Deficit accumulated during the development stage		(14,910,931	)
					(11,584,168	)
				$	187,542

See Notes to Condensed Consolidated Financial Statements

F-2

CRYSTAL INTERNATIONAL TRAVEL GROUP, INC. AND SUBSIDIARIES

(A Development Stage Company)

(Formerly Mobile Reach International, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	For the Quarter						Year to Date						From Inception
	Three Months Ended April 30, 2007			Three Months Ended April 30, 2006			Nine Months Ended April 30, 2007			Period from December 8, 2005 (Date of Inception) through April 30, 2006			Period from December 8, 2005 (Date of Inception) through April 30, 2007
REVENUE:
Sales	$	51,380		$	0		$	107,073		$	0		$	107,073
License and fees		14,762			0			14,762			0			21,390
		66,142			0			121,835			0			128,463
COST AND EXPENSES:
Cost of goods sold		29,875			152,620			60,799			152,620			60,799
Sales and marketing		0			0			0			0			0
General and administrative expenses		638,244			659,298			2,041,691			736,169			9,220,361
		668,119			811,918			2,102,490			888,789			9,281,160
OPERATING LOSS		(601,977	)		(811,918	)		(1,980,655	)		(888,789	)		(9,152,697	)
OTHER INCOME (EXPENSES)
Interest expense		(44,768	)		(47,530	)		(1,880,859	)		(47,530	)		(3,258,841	)
Other expenses		0			0			(22,082	)		0			(22,082	)
		(44,768	)		(47,530	)		(1,902,941	)		(47,530	)		(3,280,923	)
NET LOSS BEFORE INCOME TAXES		(646,745	)		(859,448	)		(3,883,596	)		(936,319	)		(12,433,620	)

See Notes to Condensed Consolidated Financial Statements

F-3

CRYSTAL INTERNATIONAL TRAVEL GROUP, INC. AND SUBSIDIARIES

(A Development Stage Company)

(Formerly Mobile Reach International, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Continued)

(Unaudited)

	For the Quarter						Year to Date						From Inception
	Three Months Ended April 30, 2007			Three Months Ended April 30, 2006			Nine Months Ended April 30, 2007			Period from December 8, 2005 (Date of Inception) through April 30, 2006			Period from December 8, 2005 (Date of Inception) through April 30, 2007
NET LOSS BEFORE INCOME TAXES		(646,745	)		(859,448	)		(3,883,596	)		(936,319	)		(12,433,620	)
INCOME TAX (EXPENSE) BENEFIT		0			0			0			0			0
NET LOSS	$	(646,745	)	$	(859,448	)	$	(3,883,596	)	$	(936,319	)	$	(12,433,620	)
WEIGHTED AVERAGE NUMBER OF SHARES		15,751,948			7,100,000			14,791,904			7,100,000			12,062,919
LOSS PER SHARE - BASIC AND DILUTED	$	(0.04	)	$	(0.12	)	$	(0.26	)	$	(0.13	)	$	(1.03	)

See Notes to Condensed Consolidated Financial Statements

F-4

CRYSTAL INTERNATIONAL TRAVEL GROUP, INC. AND SUBSIDIARIES

(A Development Stage Company)

(Formerly Mobile Reach International, Inc.)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

(Unaudited)

	Common Stock
	Shares			Amount		Paid-in Capital		Deficit Accumulated During Development Stage			Total
Balance at December 8, 2005 (Date of Inception)		0		$	0	$	0	$	0		$	0
Common shares issued in formation of Crystal Hospitality Holdings, Inc.		200			23,012		0		0			23,012
Shares exchanged for common shares of Mobile Reach International, Inc.		(200	)		0		0		0			0
Common shares issued to Crystal Hospitality Holdings, Inc. stockholders		7,100,000			0		0		0			0
Common shares owned by Mobile Reach International, Inc. stockholders		4,743,276			0		0		0			0
Net liabilities in excess of assets acquired in share exchange		0			0		0		(2,477,311	)		(2,477,311	)
Net loss		0			0		0		(1,025,085	)		(1,025,085	)

Balance at April 30, 2006	11,843,276		23,012		0		(3,502,396	)		(3,479,384	)
Fair market value of warrants attached to short-term debt issued	0		0		68,000		0			68,000
Fair market value of beneficial conversion feature of convertible debentures	0		0		1,990,711		0			1,990,711
Net loss	0		0		0		(7,524,939	)		(7,524,939	)
Balance at July 31, 2006	11,843,276	$	23,012	$	2,058,711	$	(11,027,335	)	$	(8,945,612	)

See Notes to Condensed Consolidated Financial Statements

F-5

CRYSTAL INTERNATIONAL TRAVEL GROUP, INC. AND SUBSIDIARIES

(A Development Stage Company)

(Formerly Mobile Reach International, Inc.)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

(Continued)

(Unaudited)

	Common Stock
	Shares		Amount		Paid-in Capital		Deficit Accumulated During Development Stage			Total
Balance at July 31, 2006		11,843,276	$	23,012	$	2,058,711	$	(11,027,335	)	$	(8,945,612	)
Share based compensation agreement		0		0		11,160		0			11,160
Common shares issued in connection with conversion of debentures		562,518		56		228,779		0			228,835
Fair market value of beneficial conversion feature of convertible debentures		0		0		630,000		0			630,000
Common shares issued in connection with conversion of debentures		1,400,873		150		35,735		0			35,885
Fair market value of warrants attached to short-term debt issued		0		0		16,480		0			16,480
Net loss		0		0		0		(3,236,851	)		(3,236,851	)

Balance at January 31, 2007	13,906,667		23,218		2,980,865		(14,264,186	)		(11,260,103	)
Common shares issued as fees for services	1,000,000		100		56,900		0			57,000
Common shares issued for accrued wages to employees	1,300,000		130		47,633		0			47,763
Common shares issued in settlement of litigation	500,000		50		14,745		0			14,795
Common shares issued in settlement of short-term debt	1,000,000		100		99,900		0			100,000
Common shares issued in settlement of debt to former employee	350,000		35		30,999		0			31,034
Common shares issued on option exercise	120,000		12		20,028		0			20,040
Common shares issued in connection with conversion of debentures	4,089,632		409		51,639		0			52,048
Net loss	0		0		0		(646,745	)		(646,745	)
Balance at April 30, 2007	22,266,299	$	24,054	$	3,302,709	$	(14,910,931	)	$	(11,584,168	)

See Notes to Condensed Consolidated Financial Statements

F-6

CRYSTAL INTERNATIONAL TRAVEL GROUP, INC. AND SUBSIDIARIES

(A Development Stage Company)

(Formerly Mobile Reach International, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended April 30, 2007			December 8, 2005 (Date of Inception) through April 30, 2006			December 8, 2005 (Date of Inception) through April 30, 2007
Net loss	$	(3,883,596	)	$	(936,319	)	$	(12,433,620	)
Adjustments to reconcile net income to net cash used in operating activities:		2,565,062			652,846			10,035,063
Net cash used in operating activities		(1,318,534	)		(283,473	)		(2,398,557	)
Cash flows used in investing activities		(154,182	)		0			(171,413	)
Cash flows provided by financing activities		1,451,765			287,468			2,584,508
Net (decrease) increase in cash		(20,951	)		3,995			14,538
Cash - beginning of period		35,489			0			0
Cash - end of period	$	14,538		$	3,995		$	14,538

See Notes to Condensed Consolidated Financial Statements

F-7

CRYSTAL INTERNATIONAL TRAVEL GROUP, INC. AND SUBSIDIARIES

(A Development Stage Company)

(Formerly Mobile Reach International, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SUPPLEMENTAL DISCLOSURE INFORMATION

(Continued)

(Unaudited)

 0 Nine Months Ended April 30, 2007 December 8, 2005 (Date of Inception) through April 30, 2006 December 8, 2005 (Date of Inception) through April 30, 2007

Non-cash activities:

Conversion of debentures for common stock	$	311,769	$	0	$	311,769
Refinancing of short-term debt to convertible debt		0		0		100,000
Exchange of debt for intangible assets		0		0		5,021,307
Settlement of accrued wages for common stock		47,763		0		47,763
Settlement of litigation for debt and common stock		48,188		0		48,188
Settlement of related party debt for common stock		100,000		0		100,000
Settlement of debt to former employee for stock and short-term note payable		40,834		0		40,834

Acquisition of Travel House, Inc.:

Purchase price	$	123,500		$	0	$	123,500
Add:
Cash		1,132			0		1,132
Subtract:
Accounts payable		(3,804	)		0		(3,804	)
Goodwill	$	120,828		$	0	$	120,828

Acquisition of Mobile Reach International and Subsidiaries:

Assets assumed:
Cash	$	262	$	262
Liabilities assumed:
Accounts payable		408,527		408,527
Accrued expenses		507,859		507,859
Short-term debt		294,169		294,169
Long-term and convertible debt		1,267,018		1,267,018
		2,477,573		2,477,573
Net liabilities exceeding net assets	$	2,477,311	$	2,477,311

See Notes to Condensed Consolidated Financial Statements

F-8

CRYSTAL INTERNATIONAL TRAVEL GROUP, INC. AND SUBSIDIARIES

(A Development Stage Company)

(Formerly Mobile Reach International, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Summary of Accounting Policies:

General:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-QSB, and therefore, do not include all the information necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Accordingly, the results from operations for the three month period ended April 30, 2007 are not necessarily indicative of the results that may be expected for the year ended July 31, 2007. The unaudited consolidated financial statements should be read in conjunction with the July 31, 2006 financial statements and footnotes thereto included in the Company's SEC Form 10-KSB.

Business:

The Company was originally organized to develop and sell mobility software products and services in the United States and Europe. Its offices were located in Cary, North Carolina until the Exchange Agreement discussed below. Since the effective date of the Exchange Agreement, the Company moved its operations to Morristown, New Jersey. The principal focus of operations has been the development of travel products and services for sale to the general public in the United States through the utilization of registered agents and internet website booking services.

Subsequent to the share exchange mentioned below, Mobile Reach International, Inc. changed its name to Crystal International Travel Group, Inc.

Basis of presentation:

On April 17, 2006, effective April 29, 2006, Crystal International Travel Group, Inc. and Subsidiaries (formerly Mobile Reach International, Inc.) (the "Company") completed a share exchange with the stockholders of Crystal Hospitality Holdings, Inc., a Delaware corporation ("CHH"), pursuant to a Share Exchange Agreement (the "Exchange Agreement"), by and among the Company, CHH and the holders of the outstanding capital stock of CHH (the "CHH Stockholders"). As a result, CHH is now a wholly-owned subsidiary of the Company. The Company has accounted for this share exchange using the purchase method of accounting as prescribed by Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations". The share exchange has been treated as a reverse acquisition of the Company by CHH, due to the stockholders of CHH receiving 60.4 percent of the voting rights of the combined entity. The condensed consolidated financial statements include the results from operations for both companies from August 1, 2006 through April 30, 2007 and the financial statements of the survivor corporation, CHH for the period from inception (December 8, 2005) to April 30, 2006 and for the period from inception (December 8, 2005) through April 30, 2007.

F-9

During the quarter ended October 31, 2006, the Company established a subsidiary named Platinum Hospitality Holdings, Inc. (“PHH”), a Delaware corporation. Effective August 1, 2006, PHH purchased all of the outstanding stock of JRM, Inc. dba The Travel House (“TH”) for $123,500. TH is a New Jersey corporation that has been operating as a full service travel agency. The Company purchased TH in order to establish a direct retail outlet for the travel products it is developing or plans to develop. The Company accounted for this acquisition as prescribed by SFAS No. 141, “Business Combinations”. The Company recorded $80,596 in goodwill for this acquisition. The condensed consolidated financial statements include the results of operations for TH from August 4, 2006 to April 30, 2007.

Development stage operations:

Since December 8, 2005 (date of inception), the Company has been concentrating its effort on raising capital and developing new travel related products for the retail market. As defined by SFAS No. 7 “Accounting and Reporting by Development Stage Enterprises”, the Company is a development stage company. Under SFAS No. 7, a development stage enterprise is subject to the same accounting principles as a normal enterprise but are required to present a cumulative income statement showing revenues and expenses from inception.

Concentrations of credit risk:

The Company has no significant off-balance-sheet concentration of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.

The Company maintains its cash balances with multiple reputable financial institutions in the form of demand deposits.

Intangible assets:

The Company accounts for intangible assets under SFAS No. 142, “Goodwill and Other Intangible Assets”. Intangible assets are recorded at cost. Intangible assets subject to amortization include customer lists from business purchases. These costs are amortized over the asset’s estimated useful life of 24 months.

Income taxes:

Deferred income taxes provide for temporary differences between the basis of the Company's assets and liabilities for financial reporting and income tax purposes. As of April 30, 2007, any deferred tax asset resulting from the three months of operating losses would be fully offset by a valuation allowance due to the uncertainty of realizing future tax benefits.

F-10

Fair value of financial instruments:

At April 30, 2007, the Company did not have any outstanding financial derivative instruments. The carrying amount of cash, receivables, payables and current liabilities approximate fair value due to the short maturity of these instruments.

Use of accounting estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosures. Accordingly, the actual amounts could differ from those estimates. Any adjustments applied to estimated amounts are recognized in the year in which such adjustments are determined.

Note 2 - Going Concern:

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of Crystal International Travel Group, Inc. and subsidiaries as a going concern. However, as a result of the merger discussed in Note 1, the Company has acquired debt on certain notes payable that are in default, payroll taxes and other payables owed by the acquired company. Additionally, the Company has used substantial amounts of working capital in start-up operations and has generated an operating loss leading to an accumulated stockholders’ deficit of $11,584,168 at April 30, 2007. Further, at April 30, 2007, the Company’s current liabilities exceeded current assets by $3,834,948. Based on these factors, the Company may not be able to continue as a going concern.

With the merger discussed in Note 1, the Company’s management has taken over management of the acquired company and is changing the acquired company’s focus of operations. Plans include licensing out all software development and concentrating on the Company’s core business of providing travel packages to individuals. Management also plans on additional financing through the issuance of convertible debentures. However, no assurance can be given that the Company will continue as a going concern without the successful completion of additional financing and the commencement of management’s planned changes in operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

As a result of delinquencies and defaults, the Company may be subject to collection actions whenever agreements cannot be reached, including, but not limited to, litigation, foreclosure and/or seizure of assets and bank accounts.

F-11

Note 3 - Property and Equipment:

The principal categories and estimated useful lives of property and equipment are as follows:

	April 30, 2007			Estimated Useful Lives
Office and computer equipment	$	50,586			3 to 7 years
Less: accumulated depreciation		(8,609	)
	$	41,977

Note 4 - Intangible Assets:

In August 2006, the Company purchased all the outstanding shares of a fully operational travel agency for $123,500 in cash. At the time of the purchase, the Company was seeking to expedite the regulatory licensing process for travel agencies by purchasing an already licensed agency. In the exchange, the Company received an established customer database. Management valued the database at $40,231 by discounting the estimated cash flow from commissions on sales to repeat customers. This customer database is amortized over an estimated useful life of twenty-four months.

Intangible assets at April 30, 2007 consisted of the following:

	April 30, 2007			Estimated Useful Lives
Customer database	$	40,231			2 years
Less: accumulated amortization		(15,087	)
	$	25,144
Unamortized intangibles:
Goodwill - Travel House	$	80,596

Amortization expense amounted to $5,029 for the three months ended April 30, 2007, $15,087 for the nine months ended April 30, 2007 and $15,087 for the period from December 8, 2005 (date of inception) through April 30, 2007.

Note 5 - Accrued Liabilities:

At April 30, 2007, accrued expenses consisted of the following items:

Salary and wages payable	$	289,757
Accrued and withheld taxes		515,842
Accrued interest		438,042
Accrued service expense		395,480
Other accrued expenses		10,975
	$	1,650,096

F-12

Accrued and withheld taxes primarily consist of delinquent payroll taxes withheld and accrued on former employees of Mobile Reach International, Inc. (“MRI”) and its subsidiaries. Penalties and interest calculated through April 30, 2007 are included in the reported balance.

Note 6 - Short-term Notes Payable:

The balances on these notes at April 30, 2007 are as follows:

Note payable due to a vendor dated February 2005; due in eighteen monthly installments of $1,007 including interest at ten percent; note is in default.	$	5,524
Note payable for accrued wages dated August 2002; bearing interest at six percent; due and payable with interest at the earliest of (a) Company obtaining debt or equity funding greater than $1,000,000 in a quarter or (b) Company earns revenues of $1,000,000 in a quarter; note is in default.		49,908
Note payable to a vendor dated December 2004; due in six monthly installments of $2,836 including interest at eighteen percent; note is in default.		17,027
Note payable to former employees for accrued wages and expenses dated February and March 2005; bearing no interest and due and payable at the earliest of (a) Company obtaining debt or equity funding greater than $1,000,000 in a quarter or (b) Company earns revenues of $1,000,000 in a quarter; note is in default.		24,000
Note payable to a vendor dated March 2005; bearing no interest due in four equal monthly payments of $14,000; note is in default.		56,000
Note payable to former employee dated April 2005; bearing no interest and due in six monthly installments of $5,000; note is in default.		30,000
Note payable to a vendor dated July 2005; due in eighteen monthly installments of $390 including interest at eight percent; note is in default.		6,243
Note payable to vendor dated July 2005; due in eleven monthly installments of $1,500; note is in default.		15,888
Notes payable to former employees dated March 2006; due in a single payment on June 30, 2006; notes are in default.		29,449
Note payable dated November 2006; due in a single payment with interest accrued at twelve percent on March 31, 2007.		200,000
Note payable to former employee dated February 2007; bearing eight percent interest and seven monthly payments of $6,000.		40,893
Note payable to former employee dated February 2007; bearing eight percent interest and five monthly payments of $2,000.		9,801
	$	484,733

F-13

As part of the short-term note payable dated November 2006, the Company executed a Security Agreement in which all of the Company’s assets are pledged as collateral.

Note 7 - Convertible Debentures:

During the three months ended April 30, 2007, holders of the June 2006 debenture issuance converted $52,048 worth of debentures to 4,089,632 shares of common stock. The conversion price ranged from $0.0105 to $0.0152 per share.

Under the Security Agreement attached to the debentures issued under the June 2006 debenture offering, all of the Company’s assets are pledged as collateral.

Note 8 - Stockholders’ Equity:

For the period ended April 30, 2007, the Company’s common stock issued and outstanding was 22,235,674 with an additional 30,625 shares to be issued. During the period the Company issued 4,089,632 common shares in connection with converted debentures (Note 7).

In February 2007, the Company settled a lawsuit and debt of $55,688 with a former officer for 500,000 shares of restricted common stock and a note payable of $40,893 (Note 6).

In February 2007, the Company settled debt of $40,834 with a former officer for 350,000 shares of restricted common stock and a note payable of $9,801 (Note 6).

In February 2007, the Company settled debt of $45,000 with a vendor for 900,000 shares of restricted common stock.

In February 2007, the Company settled accrued wages worth $47,763 with 1,300,000 shares of restricted common stock.

In February 2007, the Company settled debt with a related party of $100,000 with 1,000,000 shares of restricted common stock.

In February 2007, options for 120,000 shares of restricted common stock were exercised (Note 9).

In March 2007, the Company recorded expenses for services from consultants for investor relations fees of $12,000 in exchange for 100,000 shares of restricted common stock.

F-14

Note 9 - Stock Options:

The Company records stock options as required by Statement of Financial Accounting Standards No. 123(R), “Share-Based Payments”. This Statement requires the Company “to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost will be recognized over the period during which an employee is required to provide service in exchange for the award.”

During the nine months ended April 30, 2007, the Company issued options to an employee of the Company. The options granted total 400,000 shares of common stock with an option price of $.26 per share. The Company determined that the options issued had a value of $37,200 using the Black-Scholes pricing model and a thirty percent volatility factor at the date of grant. The options become vested over a period of three years and expire five years after the agreement date. During the period ended April 30, 2007, options of 120,000 shares had vested and were exercised, the remaining balance of 280,000 was forfeited.

Compensation expense related to these options is recorded in the period in which the holders become vested. For the nine months ended April 30, 2007, $11,160 of compensation expense was recorded related to these options.

Note 10 - Related Party Transactions:

During the period ended April 30, 2007, a limited liability company related through common ownership and another corporation that is a stockholder in the Company had made advances to the Company. Principal and interest of five percent is due on each note one year from the date of the note. The balance of these notes at April 30, 2007 is $132,808. Interest accrued on these notes through April 30, 2007 is $9,273 and is included in accrued expenses.

During the period ended April 30, 2007, a limited liability company that is related through common ownership has paid bills on behalf of the company. The Company expenses these costs with the liability being included in accounts payable. The total of these costs included in accounts payable are $91,321.

Note 11 - Pro-Forma Financial Information:

The following pro-forma financial information summarizes the results of operations for the nine months ended April 30, 2007, as if the merger between MRI and CHH had been completed August 1, 2005:

	Nine Months Ended April 30, 2007			Nine Months Ended April 30, 2006
Net revenues	$	121,835		$	374,426
Operating loss		(3,883,596	)		(3,502,131	)
Loss per share - basic and diluted		(0.27	)		(0.30	)

F-15

Note 12 - Other Matters:

Commitments and legal proceedings:

In March 2006, the Company purchased intangible assets consisting of web sites, phone numbers, registered trademark names and a customer database from FS Suntours. Subsequent to the purchase, FS Suntours delayed turning over control of the phone numbers, websites and never released the customer database to the Company. In June 2006, FS Suntours was forced into bankruptcy by its creditors. Later, FS Suntours’ parent corporation filed voluntary bankruptcy proceedings. In July 2006, as a result of the bankruptcy filings, legal proceedings resulting from the intangible asset purchase and the failure to gain control over the intangible assets, the Company recognized an impairment charge against the value of the intangible assets.

Also in March 2006, the Company had entered into a service contract with a former vendor of FS Suntours in expectation of capitalizing on the benefits of the intangible assets mentioned above. This contract was a seven year contract with minimum base payments due in monthly installments for the service and an annual per passenger charge due in November of each year. Since the signing of the agreement in March 2006, no services have been provided by the vendor.

As a result of the failure of FS Suntours to turn over the intangible assets and the bankruptcy filing mentioned above, the Company ceased accruing service expenses related to the contract and interest expense related to the FS Suntours liability.

In February 2007, the Company settled a lawsuit brought by a former officer of a former subsidiary of MRI. The suit was settled for debt (Note 6) and common stock (Note 8).

Unsecured creditors of the company:

The Company is delinquent with a number of unsecured creditors for which no payment arrangements exist or for which no agreement to forestall collection action has been agreed upon. Whenever feasible the Company negotiates with these creditors to reach settlement agreements that are acceptable to the Company.

As a result of the delinquencies and defaults, the Company may be subject to collection actions whenever agreements cannot be reached, including, but not limited to, litigation, foreclosure and/or seizure of assets and bank accounts.

F-16

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

We are a development stage company and as such, you should read the following discussion of the Company's business and results of operations in conjunction with the consolidated unaudited financial statements attached herein.

Forward Looking Statements

This portion of this Quarterly Report on Form 10-QSB includes statements that constitute "forward-looking statements." These forward-looking statements are often characterized by the terms "may," "believes," "projects," "expects," or "anticipates," and do not reflect historical facts. Specific forward-looking statements contained in this portion of the Quarterly Report include, but are not limited to the Company's expectation that it will begin generating significant revenues from the sale of its products rather than from equity or debt financings. Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include, but are not limited to the risks and uncertainties set forth below in the section titled "Risk Factors," as well as other factors that we are currently unable to identify or quantify, but may exist in the future.

In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements.

We are a development stage company and as such, you should read the following discussion of the Company's business and results of operations in conjunction with the consolidated unaudited financial statements attached herein.

Financial Discussion

On April 17, 2006, we completed a reverse merger with Crystal Hospitality Holdings, Inc. (Crystal). The shareholders of Crystal acquired approximately 60.4% of our voting shares. As discussed in the Liquidity and Capital Resources section below, the new management has arranged for short term financing. No other equity in the Company has been sold. We have been able to stabilize the operations of the Company and no new defaults on existing Mobile Reach debts have occurred. Significant market risk exists as a result of our previously existing financial issues, the change in ownership and the change in business focus.

2

As of the date of this filing, we have not gained complete control over the intangible assets associated with Crystal’s purchase of FS Suntours’ Suntrips intellectual property.  The customer database has not been delivered; the phone numbers and the trademarks are still in control of FS Suntours. Therefore, we recorded an asset impairment charge of $4,896,666 in relation to these assets for the year end July 31, 2006.

Our lack of complete control over the Suntrips assets has had a material impact on our business plan relating to the use of these assets. We have been able to operate and derive marginal revenue from the web portal and have focused the company’s efforts in the development efforts of incubating the IntelliFares™ product.  Moreover, on December 8, 2006, the United States Bankruptcy Court of the Western District of Texas entered an order requiring the return of the assets in question, which we expected to occur no later than December 31, 2006 but due to the complexity of the bankruptcy case this has not yet occurred.  As of the date of this filing we have serious concerns as to whether we will be able to acquire any of the additional assets. Additionally, we are currently evaluating possible causes of action we may have against FS Suntours but have not initiated any action to date.  At this time, we are unable to estimate any future cash flows, if any, relating to the SunTrips assets.  However, we are pursuing additional acquisitions candidates which we hope might create revenue in the near term.

IntelliFares Limited is a company registered in the Democratic Republic of Ireland and resides at Ulysses House, Foley Street, Dublin 1 and is a wholly owned subsidiary of Crystal.  Initially, income from IntelliFares will be realized from the commercialization of a suite of products marketed under the brand name IntelliFares.  The products are derived from a business methodology described more fully in both United States and International Patent Applications entitled “Subscription Management For Periodic Travel Services.”  IntelliFares is a product offering wherein travelers who participate in predictable, recurring travel patterns, such as timeshare or second homeowners, college students, business travelers and the like will be able to contract with us for the future purchase of five years of future air travel at or below comparable open market air ticket prices, and fix that price for the five year period, by contracting with IntelliFares to arrange for the purchase of airfare on their behalf, after depositing the full five years of payment with IntelliFares.  Deposits will be managed through a depository relationship with UBS AG.

Revenue for IntelliFares will be recognized from the assessment of an initial registration fee, a minimal account administration fee (currently planned at 3% of the initial 5 year deposit), and various exception fees, including cancellation charges.  It is intended that the future growth in air ticket prices, if any, will be offset by income derive from the depository relationship with UBS.  For the purpose of confidentiality and the maintenance of first mover advantage, complete details on how the product works from a financial perspective will be released after the product is fully launched, which was planned for late spring 2007.  Due to the complexity of the product, and the time required to assemble our distribution network for the product, management believes first revenue from distributor sales will occur sometime between June and October 2007.  Details will concurrently be made available to shareholders and the investing public. Consumer and distributor features and benefits are now available on the company’s website at http://www.intellifares.com.  The product will be sold through distributors, as such consumers will be able to purchase it through traditional travel agents and time share operators (developers, vacation clubs, exchanges).  The first such distributor that has entered into a distribution agreement with IntelliFares is Flying Dutchmen Travel of Santa Rosa California.

3

Sources of Revenue

On March 10, 2006, Mobile Reach Technologies, Inc. entered into a License Agreement with Spectrum Mobile, Inc. whereby it licensed certain of its assets to Spectrum Mobile, including, but not limited to, its Splitwave Server, Splitwave Server Plug-In Modules, Splitwave Client for Blackberry, Splitwave Client for Windows and Pocket PC and Split Forms Wizard. The License Agreement provides for a sliding scale of 5% of license fees received by Spectrum Mobile for the first two years of the License Agreement, 4% of licenses fees for the third year of the License Agreement and 3% of licenses fees for the fourth year of the License Agreement. Due to unclear payment terms and the belief that we can obtain better financial terms from Spectrum Mobile, we renegotiated the License Agreement and executed it on June 15, 2007.  This amended agreement improves the overall terms potentially allowing the company to recover its prior investments in developing the software.

The License Agreement with Spectrum Mobile had the effect of significantly reducing our revenue as well operating expenses relating to the Mobile Reach Technology assets. Prior to the License Agreement, we received all of the license revenue associated with sales to customers. Under the terms of the License Agreement described above, we receive a much smaller percentage of the license revenues. However, we are not responsible for any of the operating costs associated with delivery of products and services to Spectrum Mobile customers.

Revenues for the quarter period January 1,^, 2007 to April 30,^, 2007 were generated from the sale of travel and travel related products. For the nine months ending April 30, 2007 revenue was composed of both travel related and MRI licensing activity.  Ongoing licensing revenue, if any, will be recognized as per the terms of the amended agreement referenced above.

        Our revenue stream for the travel operations are derived from commissions on sales of travel components (for example air tickets, hotel rooms, car rental, etc.), margins built into packages (for example air plus hotel plus transfers plus excursions), production overrides from travel product supplier sales and service fees.

4

CRITICAL ACCOUNTING POLICIES

        In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States, we make estimates, assumptions and judgments that can have a material impact on its net revenue, operating income and net income (loss), as well as on the value of certain assets on our consolidated balance sheet. We believe that the estimates, assumptions and judgments involved in the accounting policies described herein have the greatest potential impact on our consolidated financial statements. We consider these to be its critical accounting policies. The policies described herein are not intended to be a comprehensive list of all our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, with no need for management judgment in their application. There are also areas in which management judgment in selecting any available alternative would not produce a materially different result. Our audited consolidated financial statements and notes thereto contain significant accounting policies and other disclosures required by generally accepted accounting principles. The accounting policies that are considered critical to an understanding of the consolidated financial statements are highlighted below.

Results of Operations

       Revenues and expenses presented on the consolidated statement of income for January 31, 2007, represent the results of operations for Crystal International for the period November 1,^, 2006 through January 31,^, 2007, the results of operations for Crystal Hospitality Holdings, Inc. for the period November 1, 2005 through January 31, 2006, and the results of operations for Mobile Reach International, Inc. for the period November 1, 2005 through January 31, 2006.

REVENUES:

        Our revenues for the quarter ending April 30, 2007 were $66,142.00 and were generated from the travel related services provided as compared to revenues of $0.00 during the comparable quarter ending April 30, 2007 when revenues were primarily comprise of licensing and services fees, which we recognize as revenue when the product or services are provided to the client. For the nine months ending April 30, 2007 revenue was $121,835.00, composed of the travel related revenue of $107,073.00 and license and fee revenue of $14,762.00 as compared to $0 revenue for the prior year period.  The unaudited consolidated financial data; is provided for comparative purpose only and does not claim to be indicative of our actual financial position or results carry forward operations.

GENERAL AND ADMINISTRATIVE EXPENSES:

Combined general and administrative expenses of Crystal for the Quarter ended April 30, 2007 were $638,244.00 representing a decrease of 3.2% over Mobile Reach International's $659,298.00 for the three-month period ended April 30, 2006. General and administrative consisting primarily of compensation, Professional fees including both legal and accounting, costs associated with Securities agreements and compliance reporting. The decrease in general and administrative reflects  the change in the mix of professional fees associated with the salaries of personnel, professional and legal fees associated with litigation, and development costs associated with IntelliFares™, vs. similar expenses to operate Mobile Reach.

5

LIQUIDITY AND CAPITAL RESOURCES

As of April 30,2007, we had an accumulated deficit of $12,433,620.00 and a working capital deficit of $3,280,923.00. Our independent auditors, who audited our financial statements for the period ended July 31, 2006, expressed substantial doubt about our ability to continue as a going concern given our recurring losses from operations, negative working capital and net stockholders' deficit.

We are currently burning $150,000 per month and our goal is to begin generating sufficient revenues to support operations by September 2007. We believe this goal is obtainable as the months of October through April are traditionally months of both heavy travel and heavy booking, although the level of either is not currently quantifiable. If this does not occur, we will anticipate we will need an additional $1 to $2 million debt or equity financing to implement our business plan over the next six to eighteen months. Should this become necessary we cannot be certain of the terms and conditions under which such capital could become available, if at all.

OTHER SIGNIFICANT MATTERS

On July 3, 2006 the Company executed a financing agreement whereby the company issued notes convertible into Company’s common shares and warrants for additional common shares of the Company.  The agreement provided for a total investment of$2,000,000, of which $700,000 was received by the Company on July 3, 2006, and an additional $600,000 was received by the Company on August 3, 2006.  The Company has filed a registration statement which includes the shares issue able by the Company upon conversion of the outstanding notes which became effective on January 19, 2007.  The Company received the remaining balance of $700,000 on February 1, 2007.    

Item 3. Controls and Procedures.

EVALUATION OF OUR DISCLOSURE CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13-d-15(e) and 15d-15(e)). Based upon that evaluation and management's assessment of the potential effect of the material weakness described below, our Chief Executive Officer (and Principal Accounting Officer) concluded that as of the end of the period covered by this Quarterly Report on Form 10-QSB our disclosure controls and procedures were effective to enable us to record, process, summarize and report information required to be included in our periodic SEC filings within the required time period.

6

DISCLOSURE CONTROLS AND INTERNAL CONTROLS

Disclosure Controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 ("Exchange Act"), such as this quarterly report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated, as appropriate to allow timely decisions regarding required disclosure. Internal Controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized, recorded and reported; and (2) our financial statements are presented in conformity with generally accepted accounting principles.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time the Company subject to litigation which, if successful, could exceed applicable insurance coverage. With the exception of the below, the Company is not currently a party to any legal proceedings which are not incidental to the Company’s routine business or that the Company believes will have a material adverse affect on its results of operations.

On July 26, 2006 in the United States District Court for the Middle District of Florida, Michael J. Hewitt filed a Complaint and Demand for Jury Trial against the Company alleging that on or about August 4, 2004 he was terminated by the Company without just cause. Mr. Hewitt is seeking approximately $1.1 million in damages. The Company believes this suit to be without merit and plan to defend it vigorously.

Item 1A. Risk Factors.

The following are additional risk factors the Company faces.  These should be read in connection with the entire set of risk factors set for the Company Annual Report for the year ended July 31, 2006 filed on Form 10-KSB on November 14, 2006 with the Securities and Exchange Commission.

7

We have been unable to gain complete control of the SunTrips, and are continued inability may have a materially adverse impact on our operations.

As of the date of the Quarterly Report, we have not gained complete control over the intangible assets associated with our purchase of FS Suntours’ intellectual property.  The customer database has not been delivered; the phone numbers and the trademarks are still in control of FS Suntours. Therefore, we recorded an asset impairment charge of $4,896,666 in relation to these assets for the year ended July 31, 2006.  Our lack of complete control over the Suntrips assets has had a material impact on our business plan relating to the use of these assets. We have been able to operate and derive marginal revenue from the web portal.  We are attempting to secure complete control of the intangible assets.  On December 8, 2006, the United States Bankruptcy Court of the Western District of Texas entered an order requiring the return of the SunTrips assets in question, which we expected to occur no later than December 31, 2006 but due to the complexity of the bankruptcy case this has not yet occurred.  In the event the assets are not returned, our operations will continue to be materially adversely affected and increases the likelihood we will not continue as a going concern.

Due to the fact we do not have complete control of the SunTrips assets, we have developed a product called IntelliFares.  If IntelliFares is not widely accepted in the marketplace, it will have a material adverse affect on our operations.

We believe IntelliFares to be a unique and novel product for travelers.  However, in order for it to be successful, it will need to be adopted by a significant portion of predictable, pattern travelers.  In the event it is not accepted by predictable, pattern travelers, it will have a materially adverse affect on our business operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 5. Other Information.

Not applicable.

8

Item 6. Exhibits and Reports on Form 8-K.

31	Certification pursuant to SEC Release No. 33-8238, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

9

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: June 20, 2007	By:	/s/ Fabrizzio Busso Campana
		Fabrizzio Busso Campana Chief Executive Officer

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