UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 000-49616
Global Yacht Services, Inc.
---------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 88-0488686
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7710 Hazard Center Drive, Suite E-415, San Diego, California, 92108
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(Address of principal executive offices)
619.990.0976
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(Issuer's Telephone Number)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of November 14, 2003, there were
1,917,277 shares of the issuer's $.001 par value common stock issued and
outstanding.
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GLOBAL YACHT SERVICES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002
GLOBAL YACHT SERVICES, INC.
CONTENTS
PAGE
----
Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheet 1
Consolidated Statements of Operations 2
Consolidated Statements of Cash Flows 3
Notes to Consolidated Financial Statements 4
GLOBAL YACHT SERVICES, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2003
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash $ 62,646
Accounts receivable, net 3,043
---------
Total current assets 65,689
DEPOSITS 2,460
---------
Total assets $ 68,149
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 4,752
---------
Total current liabilities 4,752
CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.001 par value;
Authorized shares -- 50,000,000
Issued and outstanding shares-- 1,917,277 1,917
Additional paid-in capital 191,568
Accumulated deficit (130,088)
---------
Total stockholders' equity 63,397
---------
Total liabilities and stockholders' equity $ 68,149
=========
See accompanying notes to consolidated financial statements.
1
GLOBAL YACHT SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONHS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
----------------------------- -----------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
REVENUES
Charter services $ -- $ 9,250 $ -- $ 11,930
Yacht management fees 12,606 7,491 23,386 16,506
Sales commissions -- -- -- 25,000
----------- ----------- ----------- -----------
Net revenues 12,606 16,741 23,386 53,436
COST OF REVENUES
Charter expenses -- 1,405 3,000 5,472
Yacht management expenses 9,022 2,218 10,015 8,418
----------- ----------- ----------- -----------
Total cost of revenues 9,022 3,623 13,015 13,890
----------- ----------- ----------- -----------
GROSS MARGIN 3,584 13,118 10,371 39,546
OPERATING EXPENSES
Legal and professional fees 8,660 22,644 26,281 48,185
Occupancy 585 585 1,755 1,755
Office supplies and expense 2,460 609 3,401 2,365
Outside services -- 1,500 1,500 4,500
Telephone and utilities 1,341 390 1,807 1,267
----------- ----------- ----------- -----------
Total operating expenses 13,046 25,728 34,744 58,072
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (9,462) (12,610) (24,373) (18,526)
OTHER INCOME -- -- -- 4
----------- ----------- ----------- -----------
LOSS BEFORE PROVISION FOR
INCOME TAXES (9,462) (12,610) (24,373) (18,522)
PROVISION (BENEFIT) FOR INCOME
TAXES -- -- 800 800
----------- ----------- ----------- -----------
NET LOSS $ (9,462) $ (12,610) $ (25,173) $ (19,322)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE -
BASIC AND DILUTED $ -- $ (0.01) $ (0.01) $ --
=========== =========== =========== ===========
WEIGHTED AVERAGE OF COMMON
SHARES - BASIC AND DILUTED 1,917,277 1,917,277 1,917,277 1,615,000
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
2
GLOBAL YACHT SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
SEPTEMBER 30,
-------------------------
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (25,173) $ (19,322)
Adjustments to reconcile net loss to net cash used in operating
activities
Occupancy costs contributed by officer 1,755 1,755
Changes in operating assets and liabilities
Increase in accounts receivable (3,043) --
Increase in deposits (2,460) --
(Decrease) increase in accounts payable
and accrued expenses (5,682) 1,336
--------- ---------
Net cash used in operating activities (34,603) (16,231)
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CASH FLOWS FROM INVESTING ACTIVITIES
Investment in yacht -- (25,000)
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Net cash used in investing activities -- (25,000)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock -- 126,900
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Net cash provided by financing activities -- 126,900
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (34,603) 85,669
CASH AND CASH EQUIVALENTS, beginning of period 97,249 26,127
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 62,646 $ 111,796
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid $ 800 $ 800
========= =========
Interest paid $ -- $ --
========= =========
See accompanying notes to consolidated financial statements.
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GLOBAL YACHT SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
NOTE 1 - PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of the Global Yacht Services, Inc. and its majority owned subsidiary,
Global Yacht Services, Ltd. All significant intercompany transactions have been
eliminated, if any. The unaudited consolidated financial statements included
herein have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB and Item 301(b) of Regulation S-B. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine
months ended September 30, 2003 and 2002 are not necessarily indicative of the
results that may be expected for the years ended December 31, 2003 and 2002.
These statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report on Form
10-KSB.
NOTE 2 - COMMON STOCK
On May 10, 2002, the Company issued 634,500 shares of its common stock at a
selling price of $0.20 per share pursuant to its prospectus as filed with its
registration statement on Form SB-2. The net proceeds were $126,900.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company occupies office space provided by its officer. Accordingly,
occupancy costs have been allocated to the Company based on the square foot
percentage assumed multiplied by the officer's total monthly costs. These
amounts are shown in the accompanying consolidated statement of operations for
the three and nine months periods ended September 30, 2003 and 2002,
respectively, and are considered additional contributions of capital by the
officer and the Company.
NOTE 4 - SUBSEQUENT EVENT
On November 5, 2003, the Company entered into a letter of intent to acquire
DeliaTroph Pharmaceuticals, Inc. dba Hyalozyme Therapeutics, Inc. ("Hyalozyme").
The merger is conditional on the negotiation of a definitive merger agreement;
the completion of an approximately $7,000,000 round of financing by the Company;
and, the Company and Hyalozyme obtaining all necessary board, shareholder and
third party approvals, among other conditions.
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Item 2. Plan of Operation
This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events and are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "will", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry, and
other circumstances. As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among reasonable alternatives require the exercise of judgment. To the
extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those forward-looking statements. We cannot guaranty
that any of the assumptions relating to the forward-looking statements specified
in the following information are accurate, and we assume no obligation to update
any such forward-looking statements.
Critical Accounting Policy and Estimates. Our Management's Discussion and
Analysis of Financial Condition and Results of Operations section discusses our
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, management evaluates
its estimates and judgments, including those related to revenue recognition,
accrued expenses, financing operations, and contingencies and litigation.
Management bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The most significant accounting estimates inherent in
the preparation of our financial statements include estimates as to the
appropriate carrying value of certain assets and liabilities which are not
readily apparent from other sources. These accounting policies are described at
relevant sections in this discussion and analysis and in the notes to the
consolidated financial statements included in our Quarterly Report on Form
10-QSB for the period ended September 30, 2003.
We provide a broad range of yacht services in the global marketplace. Our
services include yacht rental and charter, yacht sales and yacht services, such
as the provision of captain, crew, supplies, maintenance, delivery as well as
full-scale contracted care of yachts. Our president, Mitch Keeler, is an
experienced captain and possesses a captain certification from the U.S. Coast
Guard. Mr. Keeler provides professional advice and consultation for all aspects
of yacht lease, purchase and ownership and is available for on site assistance
anywhere in the world.
We currently generate revenues from our charter services, which range from day
charters to full week charters. We currently offer private yacht charters in San
Diego, usually of up to one week in duration as well as corporate charters,
which are typically 3 to 5 hours and short range. We have very few charters that
are longer than one week, however, they do occur. Our officers act as captain
and crew for our charter services, but we often utilize outside businesses for
services such as catering and bartending.
2
We have also generated revenues from our yacht management services and our
delivery services. Yacht management services include managing the yacht for the
owners including routine maintenance, repairs and electronics installation.
Regular maintenance includes services such as exterior and interior cleaning,
bottom cleaning, waxing and zinc replacement. Delivery services include
delivering newly purchased yachts to various locations around the world.
We have also contemplated acquiring a third party, merging with a third party or
pursuing a joint venture with a third party in order to support our development.
Accordingly, we have been researching potential acquisitions or other suitable
business partners which will assist us in realizing our business objectives. In
that regard, in November 2003 we entered into a letter of intent with DeliaTroph
Pharmaceuticals, Inc., dba Hyalozyme Therapeutics, Inc, ("Hyalozyme") a
privately held corporation based in San Diego, California and its stockholders
to merge with Hyalozyme. The proposed merger is to be accomplished by forming a
wholly-owned merger subsidiary which would then merge with and into Hyalozyme,
with Hyalozyme being the survivor. In addition, Hyalozyme's outstanding shares
would then be converted into a combination of common shares, as well as options
and warrants to purchase our common stock, in addition to shares of preferred
stock, to correspond to the capitalization of Hyalozyme.
Prior to closing of the merger, we will have no more than $100,000 in
liabilities and have no more than 3,900,000 shares of our common stock issued
and outstanding. Under the terms of the proposed merger, we will have
approximately 35,500,000 shares issued and outstanding at closing, in addition
to convertible preferred stock, warrants and options, which will be issued to
the historical shareholders of Hyalozyme. Prior to closing, Hyalozyme may also
grant additional options to its current senior management. Also under the terms
of the proposed merger, and following closing, we will change our name to
DeliaTroph Pharmaceuticals, Inc. or a similar name. Prior to closing, Hyalozyme
must complete a financing of no more than $7,112,142. Hyalozyme anticipates
raising those funds through equity financings, although there is no guarantee
that it will be able to do so.
We hope to conclude this transaction during January 2004, though we cannot
guarantee that this will occur. We believe that this transaction will increase
the value of our common stock to our shareholders, however, we cannot guaranty
that we will be able to consummate this transaction or that we will be able to
acquire any such entity, or that in the event that we acquire another entity,
this acquisition will increase the value of our common stock. We intend to
continue providing our yacht maintenance, charter and delivery services until
such time as we consummate such an agreement.
Liquidity and Capital Resources. Our total assets were $68,149 as of September
30, 2003. Of those assets, we had cash of $62,646 and accounts receivable of
$3,043 as of September 30, 2003. Therefore, our total current assets were
$65,689 as of September 30, 2003. We also had $2,460 in deposits. We believe
that our available cash is sufficient to pay our day-to-day expenditures.
Our current liabilities were $4,752 as of September 30, 2003, and were
represented solely by accounts payable and accrued expenses. We had no other
liabilities and no long term commitments or contingencies as of September 30,
2003.
For the three months ended September 30, 2003.
Results of Operations.
Revenue. For the three months ended September 30, 2003, we realized revenues of
$12,606 from yacht management fees, compared to revenues of $16,741 generated
for the three months ended September 30, 2002, which resulted from receiving
$9,250 in charter services and $7,491 in yacht management fees. The difference
in our revenues is accounted for the by fact that we had different sources of
revenues during the three months ended September 30, 2003. Our cost of revenues
was $9,022 for the three months ended September 30, 2003, which was represented
solely by yacht management expenses. This is compared to cost of revenues of
$3,623 for the same period ended September 30, 2002, which was represented by
$1,405 in charter expenses and $2,218 in yacht management expenses. Therefore,
our gross margin for the three months ended September 30, 2003 was $3,584,
compared to $13,118 for three months ended September 30, 2002. We hope to
generate more revenues as we expand our customer base.
3
Operating Expenses. For the three months ended September 30, 2003, our total
operating expenses were approximately $13,046, compared to $25,728 for the three
months ended September 30, 2002. For the three months ended September 30, 2003,
the majority of our total operating expenses were represented by legal and
professional fees of $8,660. We also had occupancy expenses of $585, office
supplies and expense of $2,460 and $1,341 for telephone and utilities. Our
operating expenses for the three month period ending September 30, 2002 totaled
$25,728, most of which were represented by legal and professional fees of
$22,644. We also had occupancy expenses of $585, office supplies and expense of
$609, outside services expenses of $1,500, and $390 for telephone and utilities.
Our operating expenses were lower because we incurred fewer professional and
legal fees during the three month period ending September 30, 2003 as compared
to the three months ending September 30, 2002, because during 2002 we were
preparing a registration statement.
For the three months ended September 30, 2003, we experienced a net loss of
approximately $9,462, compared to a net loss of $12,610 for the three months
ended September 30, 2002, because we incurred lower operating expenses during
the three months ended September 30, 2003. We anticipate that we will continue
to incur significant general and administrative expenses, but hope to continue
generating income as we expand our operations.
For the nine months ended September 30, 2003.
Results of Operations.
Revenue. For the nine months ended September 30, 2003, we realized revenues of
$23,386 from yacht management fees, compared to revenues of $53,436 generated
for the nine months ended September 30, 2002, which resulted from receiving
$11,930 in charter services, $16,506 in yacht management fees and $25,000 we
received from sales commissions. The difference in our revenues is accounted for
primarily by the fact that we had no revenues from sales commissions or charter
services during the nine months ended September 30, 2003. Our cost of revenues
was $13,015 for the nine months ended September 30, 2003, which was represented
by $3,000 in charter expenses and $10,015 in yacht management expenses. This is
compared to $13,890 for the same period ended September 30, 2002, which was
represented by $5,472 in charter expenses and $8,418 in yacht management
expenses. Therefore, our gross margin for the nine months ended September 30,
2003 was $10,371, compared to a gross margin of $39,546 for nine months ended
September 30, 2002. We hope to generate more revenues as we expand our customer
base.
Operating Expenses. For the nine months ended September 30, 2003, our total
operating expenses were $34,744 compared to $58,072 for the nine months ended
September 30, 2002. For the nine months ended September 30, 2003, the majority
of our total operating expenses were represented by legal and professional fees
of $26,281. We also had occupancy expenses of $1,755, office supplies and
expense of $3,401, outside services expenses of $1,500, and $1,807 for telephone
and utilities. Our operating expenses for the nine month period ending September
30, 2002 totaled $58,072, most of which were represented by legal and
professional fees of $48,185. We also had occupancy expenses of $1,755, office
supplies and expense of $2,365, outside services expenses of $4,500, and $1,267
for telephone and utilities. Our operating expenses were lower because we
incurred fewer professional and legal fees during the nine month period ending
September 30, 2003 as compared to the nine months ending September 30, 2002,
because during 2002 we were preparing a registration statement.
For the nine months ended September 30, 2003, we experienced a net loss of
approximately $24,373, compared to a loss from operations of $18,526, plus $4 in
other income for a net lost of $18,522 for the nine months ended September 30,
2002, because we generated lower revenues during the nine months ended September
30, 2003, despite the fact that our expenses were lower during the nine months
ended September 30, 2003 as compared to the same period ended September 30,
2002. We anticipate that we will continue to incur significant general and
administrative expenses, but hope to continue generating income as we expand our
operations.
Our Plan of Operation for the Next Twelve Months. In our management's opinion,
to effectuate our business plan in the next twelve months, the following events
should occur or we should reach the following milestones in order for us to
become profitable:
1. We must conduct marketing activities to promote our services
and obtain additional customers to increase our customer base.
We currently market our business primarily through referrals
and our website. Our president, Mitch Keeler, had a large
foundation of business and a strong reputation in the
industry, which we believe has been transferred to us. We
believe that referrals comprise approximately 70% of our
business and business generated from our website is
approximately 30% of our business. Future marketing will
include articles and advertisements in industry publications,
such as: Yachting, Motor Boating, and Sea. We hope to continue
to increase our customer base.
4
2. We must continue to develop relationships with various parties
including yacht owners, sellers, brokers, lessors, charter
agents, maintenance suppliers, industry professionals and
specialists, captains, crew, engineers, designers, insurance
agents, legal advisors, and government agents. We believe that
these parties will help supply some of our services and they
may become sources of referrals. We hope to continue to
develop relationships with several of those parties who
provide some of the services that we offer as well as be
sources of referrals.
3. We must develop our website so that it will function as a
means for global clients to access our range of services and
communicate with us for support services as well as for use as
a marketing tool to inform and persuade customers to engage
our services. We intend to develop our website so that we
utilize a database set up on the backend, which will capture
customer information and allow us to process information
concerning our clients and potential clients. One objective
for our website is to interact with clients in "real time" so
that they feel that their needs are being taken care of
professionally and on a personal level. Within six to twelve
months, we should have developed our website to provide those
services.
We have cash of $62,646 as of September 30, 2003. In the opinion of management,
available funds will satisfy our working capital requirements for the next
twelve months. Our forecast for the period for which our financial resources
will be adequate to support our operations involves risks and uncertainties and
actual results could differ as a result of a number of factors.
We hope to conclude the transaction with Hyalozyme as described above during the
next three months, as described above, though we cannot guarantee that this will
occur. We intend to continue providing our yacht maintenance, charter and
delivery services until such time as we consummate the transaction with
Hyalozyme.
We are not currently conducting any research and development activities, other
than the development of our website. We do not anticipate conducting such
activities in the near future. In the event that we expand our customer base,
then we may need to hire additional employees or independent contractors as well
as purchase or lease additional equipment.
Item 3. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. We maintain controls and
procedures designed to ensure that information required to be disclosed in the
reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission. Based upon
their evaluation of those controls and procedures performed as of September 30,
2003, our chief executive officer and the principal financial officer concluded
that our disclosure controls and procedures were adequate.
(b) Changes in internal controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by the chief
executive officer and principal financial officer.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to Vote of Security Holders
None.
5
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
31. Rule 13a-14(a)/15d-14(a) Certifications.
32. Section 1350 Certifications.
(b) Reports on Form 8-K
None.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Global Yacht Services, Inc.,
a Nevada corporation
November 14, 2003 By: /s/ Mitch Keeler
----------------------------------
Mitch Keeler
Its: president, principal executive
officer, director
7