UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 1996
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required) for the transition period from
____________________ to _____________________
Commission file number: Q-2549
BRIA COMMUNICATIONS CORPORATION
(Name of Small Business Issuer in Its Charter)
New Jersey 22-1644111
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
268 West 400 South, Suite 300, Salt Lake City, Utah 84101
(Address of Principal Executive Offices) (Zip Code)
(801) 575-8073
(Issuer's Telephone Number, Including Area Code)
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.
Yes XX No
The number of shares outstanding of the issuer's common stock ($0.001 par
value), as of October 31, 1996 was 13,649,256.
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ............4
PART II
ITEM 5. OTHER INFORMATION ....................................................6
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..................................... 6
SIGNATURES............................................................7
INDEX TO EXHIBITS.................................................... 8
PART I
ITEM 1. FINANCIAL STATEMENTS
Unless otherwise indicated, the term "Company" refers to BRIA
Communications Corporation and its predecessors. Interim financial statements
including a balance sheet for the Company as of the fiscal quarter ended
September 30, 1996 and statements of operations and statements of cash flows for
the interim period up to the date of such balance sheet and the comparable
period of the preceding fiscal year are attached hereto on Pages F-1 through F-4
and incorporated herein by this reference.
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
PART I
ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS PAGE
Balance Sheets..............................................................F-1
Statements of Operations....................................................F-2
Statements of Cash Flows....................................................F-3
Condensed Notes to Financial Statements.....................................F-4
BRIA COMMUNICATIONS CORPORATION
FORMERLY KNOWN AS METALLURGICAL INDUSTRIES INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
Unaudited
September 30 December 31
1996 1995
-------------- ------------
ASSETS
CURRENT ASSETS:
Cash ..................................... $ 7,641 $ 82,398
Accounts receivable - trade .............. 104,000 239
Inventory ................................ 20,000 --
Prepaid expenses ......................... 1,900 --
----------- -----------
TOTAL CURRENT ASSETS ............. 133,541 82,637
----------- -----------
PROPERTY AND EQUIPMENT, at cost:
Machinery and equipment .................. 141,930 --
Less accumulated depreciation ............ (94,006) --
----------- -----------
NET PROPERTY AND EQUIPMENT ....... 47,924 --
----------- -----------
OTHER ASSETS
Investment Securities .................... 920,135 344,445
----------- -----------
TOTAL OTHER ASSETS ............... 920,135 344,445
----------- -----------
$ 1,101,600 $ 427,082
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable - trade ........................ 783,630 757,202
Accounts payable - related party ................ 113,790 --
Notes payable - former officers and directors ... 63,465 63,465
Current portion - notes payable ................. 45,600 --
Other current liabilities ....................... 213,542 135,506
----------- -----------
TOTAL CURRENT LIABILITIES ...... 1,220,027 956,173
----------- -----------
LONG-TERM DEBT - NET OF CURRENT PORTION
Notes payable - other ........................... 110,769 --
----------- -----------
STOCKHOLDERS' DEFICIT:
Common stock:
Class A, $.001 par value, shares issued and
outstanding, 11,817,377 and 6,798,186 ..... $ 11,817 $ 6,798
Class B, $.001 par value, shares issued and
outstanding, 213,440
(convertible into Class A shares) ......... 213 213
Capital in excess of par value .................. 7,847,664 7,054,544
Accumulated deficit ............................ (7,877,143) (7,417,180)
Trade and media credits ....................... (211,747) (173,466)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT ........... (229,196) (529,091)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,101,600 $ 427,082
=========== ===========
See accompanying notes to consolidated unaudited condensed financial statements.
F-1
BRIA COMMUNICATIONS CORPORATION
FORMERLY KNOWN AS METALLURGICAL INDUSTRIES INC.
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
---------------------------------- ----------------------------------
September 30 September 30 September 30 September 30
1996 1995 1996 1995
---------------- ---------------- ---------------- ----------------
REVENUE (NET OF RETURN) ................................ $ 457,597 $ -- $ 457,597 $ --
COST OF REVENUE ........................................ 204,000 -- 204,000 --
----------- ----------- ----------- -----------
Gross profit .................... 218,597 -- 218,597 --
OPERATING EXPENSES
Selling, general and administrative ............... 393,662 718,695 705,981 913,859
----------- ----------- ----------- -----------
Total operating expenses ................. 393,662 718,695 705,981 913,859
OTHER INCOME (EXPENSES)
Loss on investments ............................... (7,579) -- (7,579) --
Interest income ................................... -- 128 -- 128
----------- ----------- ----------- -----------
Total other income (expenses) ................ (7,579) 128 (7,579) 128
NET LOSS ............................................... $ (147,644) $ (718,567) $ (459,963) $ (913,731)
=========== =========== =========== ===========
NET LOSS PER SHARE: .................................... $ (0.02) (0.14) (0.07) (0.29)
AVERAGE COMMON SHARES OUTSTANDING ...................... 8,372,861 5,309,726 7,521,077 3,148,710
See accompanying notes to consolidated unaudited condensed financial statements.
F-2
BRIA COMMUNICATIONS CORPORATION
FORMERLY KNOWN AS METALLURGICAL INDUSTRIES INC.
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the nine months ended
September 30 September 30
1996 1995
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ....................................... $ (459,963) $ (913,731)
----------- -----------
Adjustments to reconcile net income to net
cash provided by operating activities:
(Increase) decrease in accounts receivable .. (103,761) --
(Increase) decrease in inventory ............ (20,000) --
(Increase) decrease in prepaid expenses ..... (1,900) --
(Increase) decrease in other assets ......... -- (178,101)
Increase (decrease) in accounts payable ..... 140,218 (304,842)
Increase (decrease) in accrued liabilities .. 123,636 26,948
Common stock issued for assets and debts .... 568,022 1,038,278
Common stock issued for services and expenses 274,019 322,705
Gain (loss) from subsidiary ................. 7,579 --
----------- -----------
Total adjustments ... 987,813 904,988
----------- -----------
Net cash provided (used) by operating activities $ 492,850 $ (8,743)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Stock issued for purchase of subsidiary ........ (4,022) --
Purchase of investments ........................ (598,585) --
----------- -----------
Net cash provided (used) by investing activities $ (567,607) $ --
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock .................... -- 10,000
----------- -----------
Net cash provided (used) by financing activities $ $ 10,000
----------- -----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
Cash, beginning ................................ 82,398 166
----------- -----------
Cash, ending ................................... $ 7,641 $ 1,423
=========== ===========
See accompanying notes to consolidated inaudited condensed financial statements.
F-4
BRIA COMMUNICATIONS CORPORATION
(FORMERLY METALLURGICAL INDUSTRIES INC)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated unaudited condensed financial statements have
been prepared by management in accordance with the instructions in Form 10-QSB
and, therefore, do not include all information and footnotes required by
generally accepted accounting principles and should, therefore, be read in
conjunction with the Company's Annual Report to Shareholders on Form 10-KSB for
the fiscal year ended December 31, 1995. These statements do include all normal
recurring adjustments which the Company believes necessary for a fair
presentation of the statements. The interim operations results are not
necessarily indicative of the results for the full year ended December 31, 1996.
2. Changes in Class A Common Stock
On July 22, 1996, the Company acquired 99,800 shares of common stock in
Venice Auto Mall, Inc., a Florida Company ("Venice"), which represent 99.8% of
the authorized and issued common stock of Venice. In exchange for the shares,
the Company issued 127,940 restricted shares of its Class A common stock
("Common Stock") to the prior owners of Venice. In addition, the Company granted
to the prior owners options to purchase 129,000 shares of the Company's Common
Stock at an option prices of $1.00 a share.
On September 30, 1996, the Company entered into a Stock Transfer Agreement
with CyberAmerica Corporation, a Nevada Corporation formerly known as Canton
Industrial Corporation ("CyberAmerica"). Between July and September 1996,
CyberAmerica and its wholly-owned subsidiary, CFS, paid for various expenses
incurred by Venice on behalf of the Company. The Company settled the debt by
transferring the 90,000 shares of Venice to CyberAmerica pursuant to the Stock
Transfer Agreement..
On September 10, 1996, the Company acquired Kingslawn Offset, Inc., a New
York corporation which owns and manages a printing business. In exchange for
acquiring all of Kingslawn's issued and outstanding capital stock, the Company
issued 2,000,000 restricted shares of its Class A Common Stock valued at $0.75
per share. Kingslawn's president and principal shareholder was also granted a
$500,000 lien on all equipment and fixtures in Kingslawn's possession as of
September 10, 1996. This lien is convertible at the holders' option into the
Company's Common Stock at $0.75 per share.
On September 30, 1996, the Company entered into a Stock Exchange Agreement
with Homes for America Holdings, a Nevada corporations ("Homes"). Pursuant to
the Agreement, the Company exchanged 1,450,000 restricted shares of its Common
Stock for 625,000 restricted shares of common stock in Homes. The shares
exchanged have been valued $500,000 on the Company's financial statements for
the quarter ended September 30, 1996.
3. Acquisition of CyberFootball
On July 11, 1996, the Company entered into an agreement with CyberMalls,
Inc. ("CyberMalls"), a Utah corporation. Pursuant to the agreement, the Company
purchased CyberFootball Inc., a Nevada Corporation ("CFI") from CyberMalls. With
the assistance of CyberMalls, CFI will design and build a virtual mall,
CyberFootball, which will be focused on the sport of football. CFI will also
continue to provide the Company with ongoing maintenance of the virtual mall.
The Company acquired CFI by agreeing to issue 1,875,000 shares of its Class A
Common Stock valued at $0.375 per share to CyberMalls and pay additional future
consideration which is continent on the success of CyberFootball. In exchange,
CFI will issue 9,101,019 shares of its restricted common stock to the Company
which amounts to 90.1% of the issued and outstanding shares of CFI. The Company
later changed the name of CyberFootball virtue mall to Mega Sports Mall to
reflect the expanded focus of the mall.
4. Changes in classification of trade/media credits
As of September 30, 1996, the Company owned $211,747 in trade and media
credits. Pursuant to SAT #58 "Equity Accounts", unrealized assets should be
included in the Stockholders' Equity section, not the Asset section.
Consequently, the Company reclassified the trade and media credits from other
assets to a separate heading in the Stockholders' equity.
5. Subsequent Events
On November 13, 1996, the Company filed a Form S-8 registration statement
and established a Stock Option Plan. The Company registered a total of 2,500,000
shares of its Common Stock valued at $1,250,000. As of November 15, 1996, the
Company has issued 1,029,444 shares of its Common Stock through the Stock Option
Plan.
On October 17, 1996, Wendell Hall resigned as a director of the Company.
Yosef Shimron was appointed as a director and Chairman of the Board of Directors
on November 1, 1996.
6. Additional footnotes included by reference
Except as indicated in Notes 1-3 above, there have been no other material
changes in the information disclosed in the notes to the financial statements
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995. Therefore, those footnotes are included herein by reference.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
BRIA Communications Corporation, a New Jersey corporation hereafter
referred to as the "Company," was originally involved in the repair of aircraft
turbines and engine components and the purchasing, processing and selling of
special refractory metals. All active operations in such industries ceased in
June 1994, an event that significantly affected the Company's performance. The
Company then changed its focus to searching for suitable merger or acquisition
candidates.
On July 11, 1996, the Company entered into an agreement with
CyberMalls, Inc. ("CyberMalls"), a Utah corporation wholly owned by Canton
Financial Services Corporation ("CFS"). Pursuant to the agreement the Company
purchased CyberFootball, Inc., a Nevada corporation ("CFI"). CFI is a
developmental stage company whose business plan involves developing a virtual
mall on the Internet. Internet virtual malls are a new trend in the marketplace
specializing in global online commerce. These malls allow potential vendors to
sell their wares and services to shoppers via interactive software designed for
use on the Internet. The Company hopes to capitalize on this new trend in the
marketplace by developing its own virtual mall through the purchase of CFI. The
Company has since changed the name of CFI to Mega Sports Mall ("MSM"). The new
focus of MSM includes a wide variety of sports. The Company hopes that this new
focus will be more attractive to potential vendors and shoppers, although no
assurances can be given.
Although MSM is not currently operational, the Company is actively
soliciting vendors to place shops in the virtual mall. To help it meet this goal
it has employed various consultants with experience advertising on the Internet.
Once vendors are located, the Company will enter into individual lease contracts
and design advertising web pages to meet the needs of its vendors. The Company
expects to begin leasing the shops in the next two to three months. However, no
assurances can be given that vendors will be located or that if they are located
that they will result in a profitable venture for the Company.
On September 10, 1996, the Company acquired 100% of the issued and
outstanding capital stock of Kingslawn Offset, Inc., a New York corporation
engaged in the printing of full color catalogs, sales sheets, and other
publications ("Kingslawn"). For more information on the Company's acquisition of
Kingslawn refer to the Company's Form 10-KSB for the period ended December 31,
1995. The Company acquired Kingslawn with the intention of expanding Kingslawn's
current printing operations. The Company intends to attempt to raise capital on
behalf of Kingslawn to help it purchase additional equipment and increase
production. Additionally, the Company and Kingslawn are considering the
Company's possible acquisitions of other subsidiaries to complement Kingslawn's
business. The Company can provide no assurances that it will be able to
profitably raise sufficient capital or successfully expand Kingslawn operations.
Nor can the Company assure that any of the acquisitions will be made, or if made
that they will be profitable.
During November 1996, the Company rescinded two Stock Exchange
Agreements previously entered into during September 1996 with TAC, Inc., a Utah
corporation, ("TAC"). Pursuant to the Agreements, the Company acquired an
aggregate of 500,000 restricted shares of TAC's Common Stock in exchange for
issuing 2.5 million shares of the Company's Class A Common Stock, restricted
pursuant to Rule 144. However, the Company believed it to be in its best
interest to rescind both of these Agreements.
The Company continues to search for appropriate business opportunities,
including businesses which the Company can acquire as operating subsidiaries.
The Company's goal is to acquire assets which will increase the Company's
consolidated revenues and complement the Company's existing business. The
Company is conducting preliminary negotiations with various entities. The
Company hopes that these negotiations will lead to further acquisitions or
mergers by the Company. Additionally, the Company has employed various
consultants to help it market its services on the Internet. However, the Company
has not entered into any agreements with these entities and no assurances can be
given that any current negotiation will result in any material business
opportunity. In addition, due to the Company's limited cash position, it is
likely the Company will have to tender shares of its Common Stock as
consideration for any acquisition or merger. Such an exchange of the Company's
Common Stock would dilute the existing ownership position of current
shareholders. The Company hopes to satisfy its short term cash requirements
through the future revenues generated from its newly acquired subsidiary
although the Company can provide no such assurances.
To further help it find appropriate business opportunities, the
Company has employed the services of CFS. CFS provides business services to the
Company including administrative, accounting, and shareholder relations work.
CFS also leases office space to the Company and is an affiliate of CyberMalls.
MSM has entered into a separate Consulting Agreement with CFS by which CFS will
provide its best efforts to assist MSM in becoming a viable public entity.
The Company itself has no full time employees aside from its current
officers and directors and has no current plans to increase its staff. However,
pursuant to its Consulting Agreements with CFS, CyberMalls and individual
consultants, it receives consulting, administrative and other services as needed
for its development from approximately 40 individuals. Kingslawn Offset has a
staff of 5 employees. The Company does not currently own any real property and
does not have plans to purchase same.
On November 13, 1996, the Company filed a Form S-8 registration
statement under the Securities Act of 1933 to register shares to be issued
pursuant to the exercise of options granted under the Company's 1996 Stock
Option Plan ("the Plan"). Through the Plan, the Company registered 2.5 million
shares of its Class A Common Stock with an aggregate value of $1,250,000. The
Plan is designed to provide compensation and incentive bonuses to the Company's
employees and consultants who, due to current financial constraints of the
Company, cannot be adequately compensated in cash. As of November 15, 1996, the
Company has issued a total of 1,029,444 shares of its Class A Common Stock
through its Stock Option Plan to various consultants and employees.
Results of Operations
Gross revenues for both the nine months and the quarter ended September
30, 1996, were $457,597 compared to zero for the same periods in 1995. The
increase in both cases is attributable to the Company's September 1996
acquisition of Kingslawn Offset Corporation, an operating entity. During the
first nine months of 1995, the Company had no operations and devoted all its
efforts to locating a suitable merger and/or acquisition partner and thus
generated no revenue.
Costs of revenues increased from zero during the first nine months of
1995 to $204,000 for the same period in 1996. Costs of revenues for the third
quarter in 1996 were $204,000 compared to zero for the same period in 1995.
Kingslawn's operations accounted for all costs of revenues in 1996.
Gross profit was $253,597 for both the nine months and the quarter
ended September 30, 1996, and gross profit as a percentage of revenues was 55%.
Selling, general, and administrative expenses were $913,859 from January 1
through September 30, 1995 and $705,981 for the comparable period in 1996. For
the quarter ended September 30, selling, general, and administrative expenses
were $718,695 for 1995 and $393,662 for 1996. The high level of selling,
general, and administrative expenses in both years is attributable to the
Company's expenses incurred in searching for merger/acquisition partners. Most
of these expenses were covered by stock issuances.
The Company had no interest income for the nine months and the three
months ended September 30, 1996, compared to $128 for the same periods in 1995.
The Company incurred a loss from investment in the amount of $7,579 during the
third quarter of 1996 compared to zero in the same period in 1995.
Operating loss was $459,963 during the first nine months of 1996
compared to $913,731 for the same period in 1995. For the quarter ended
September 1996, the Company incurred $147,644 in operating losses compared to
$718,567 in the same period in 1995. The substantial loss in 1996 is primarily
due to the high level of selling, general, and administrative expenses.
Net loss was $459,963 during the nine months ended September 30, 1996,
and $913,731 during the comparable period in 1995. For the quarter ended
September, the Company recorded a net loss in the amount of $147,644 in 1996
compared to $718,567 in 1995.
Capital Resources and Liquidity
The Company had a negative working capital of $1,086,486 as of
September 30, 1996 compared to a working capital deficiency of $873,536 at the
end of December 1995. The main reason behind this increase in working capital
deficiency is that during 1996 the Company incurred debts to various consultants
for services rendered.
Net stockholders' deficit in the Company was $529,091 at the end of
December 1995 and $229,196 as of September 30, 1996. This decrease in the
deficit is primarily due to the Company's 1996 issuance of common stock for
services and other assets.
PART II
ITEM 5. OTHER INFORMATION
On November 1, 1996 the Company appointed Joseph Shimron as a director,
vice-president and Chairman of the Board of Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index to Exhibits. Exhibits required to be attached by Item 601 of
Regulation S-B are listed in the Index to Exhibits beginning on page 7
of this Form 10-QSB, which is herein incorporated by reference.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter for which this report is filed.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, this TH day of November 1996.
BRIA Communications
/s/ Richard Lifschutz
Richard Lifschutz
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signature Title Date
/s/ Richard Lifschutz President and Director November 14, 1996
- -------------------------
Richard Lifschutz
/s/ Joseph Shimron Vice President and Director November 14, 1996
- -----------------------
Joseph Shimron
INDEX TO EXHIBITS
EXHIBIT NUMBER PAGE NUMBER DESCRIPTION
3(a) * Certificate of Incorporation of the
Company, (Incorporated by reference
from exhibit of like number filed
with the Company's Form 10-KSB for
the year ended December 31, 1988.)
3(b) * By-Laws of the Company.
(incorporated by reference from
exhibit of like number filed with
the Company's Form 10-KSB for the
year ended 1988.)
10(i)(a) 9 Mutual Agreement to Rescind dated
November 6, 1996 between the Company
and TAC, Inc.
10(i)(b) 12 Mutual Agreement to Rescind dated
November 8, 1996 between the Company
and TAC, Inc.
* Incorporated herein by reference
from the Company's Form 10-KSB for
the period ended December 31, 1988.