Filing

10QSB/A 1 filing_68.htm CINT - 3RD QTR. REPORT Filing

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB/A

(Mark One)

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

For the quarterly period ended April 30, 2006

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

For the transition period from _____ to ______

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.)

641 Shunpike Road - Suite 333 - Chatham, NJ 07928
(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.

þ 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

þ 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: 11,582,928

Transitional Small Business Disclosure Format (Check one):

o Yes

þ No

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

CRYSTAL INTERNATIONAL TRAVEL GROUP, INC.
BALANCE SHEET
(UNAUDITED)

PERIOD ENDED APRIL 30, 2006

	4/30/06
ASSETS
CURRENT ASSETS
Cash	$ 3,995
Prepaid expenses and other current assets	50,000

Total current assets	53,995

OTHER ASSETS:
Intangible assets - net of amortization	4,896,666
Other assets	-

	4,896,666

	4,950,661

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	525,688
Accrued expenses	1,191,036
Notes payable - related party	264,456
Current portion of long-term debt	54,211

Total current liabilities	2,035,391


NON-CURRENT DEBT:
Long term debt - net of current portion	6,014,654
Debentures	350,000
Other liabilities	30,000

	6,394,654


STOCKHOLDERS' EQUITY
Common stock	23,012
Retained earnings	(3,502,396)

	(3,479,384)

	$ 4,950,661

See Notes to consolidated financial statements

CRYSTAL INTERNATIONAL TRAVEL GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME
THREE MONTH ENDED APRIL 30, 2006 AND APRIL 30, 2005.
(UNAUDITED)

		12/8/2005
	Quarter to	(Date of Inception)	Prior Year	Prior Year
	Date	to	Qtr to Date	to Date
	4/30/2006	4/30/2006	4/30/2005	4/30/2005

REVENUE:
Gross revenue	$ -	$ -	$ -	$ -

	-	-	-	-

COST AND EXPENSES:
Cost of goods sold	152,620	152,620	-	-
General and administrative expenses	534,298	611,169	-	-
	686,918	763,789	-	-

OPERATING INCOME	(686,918)	(763,789)	-	-

OTHER INCOME (EXPENSES)
Depreciation & amortization	(125,000)	(125,000)	-	-
Interest expense	(47,530)	(47,530)	-	-
Loss on sale of assets	-	-	-	-
Liabilities in excess of asset
on purchase	(2,566,077)	(2,566,077)	-	-
Other income	-	-	-	-

	(2,738,607)	(2,738,607)	-	-


NET INCOME (LOSS)	$ (3,425,525)	$ (3,502,396)	$ -	$ -

WEIGTED AVERAGE NUMBER OF SHARES	11,454,229	11,502,491

LOSS PER SHARE	$ (0.30)	$ (0.30)

See Notes to consolidated financial statements

CRYSTAL INTERNATIONAL TRAVEL GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE THREE MONTH PERIOD ENDED APRIL 30, 2006
AND NINE MONTH PERIOD ENDED APRIL 30, 2006
(UNAUDITED)

	Quarter to Date	Year to Date
	2006	2006

Net income	$ (3,425,525)	$ (3,502,396)

Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Gain or loss on disposal of fixed assets	7,668	-
Liabilities in excess of assets	2,566,077	2,566,077
Depreciation and amortization	125,000	125,000
Changes in operating assets and liabilities:
Decrease in investments held for sale	38	-
Decrease in accounts receivable	57,259	-
Increase in other current assets	(49,909)	(50,359)
Decrease in deferred revenue	(58,243)
Increase in accounts payable	162,096	117,527
(Increase) decrease in accrued expenses	330,360	460,678

Total adjustments	3,140,346	3,218,923

Net cash used in operations	(285,179)	(283,473)


Cash flows from financing activities:
Payments on related party debt	116,746	-
Proceeds on short term notes payable	151,965	264,456
Proceeds from sale of stock	-	23,012

Net cash provided by (used in)
financing activities	268,711	287,468

NET INCREASE (DECREASE) IN CASH	(16,468)	3,995

CASH AT BEGINNING OF PERIOD	20,463	-

CASH AT END OF PERIOD	$ 3,995	$ 3,995


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Non-cash activities:
Exchange of debt for intangible assets		$ 5,021,307


Acquisition of Mobile Reach International and Subsidiaries, Inc.
Assets assumed:
Cash		$ 292

Liabilities assumed:
Accounts payable		408,453
Accrued expenses		712,397
Debt		1,065,519
Convertible debentures & other liabilities		380,000

		2,566,369

Net liabilities exceeding net assets		$ (2,566,077)

See Notes to consolidated financial statements

Consolidated Changes in Stockholders' Equity
April 30, 2006 and 2005


	Common Stock
	Shares	Amount	Accumulated Deficit	Total

Balance at December 8, 2005	-	$ -	$ -	$ -

Common stock issued to Crystal International Travel Group, Inc. stockholders	200	23,012	-	23,012

Net loss	-	-	(76,871)	(76,871)

Balance at January 31, 2006	200	23,012	(76,871)	(53,859)

Common stock owned by Mobile Reach International, Inc. stockholders	4,322,543	-	-	-

Shares issued for retirement of debt	260,385	-	-	-

Common shares issued in merger to Crystal International Travel Group, Inc. stockholders	6,999,800	-	-	-

Net loss	-	-	(3,425,525)	(3,425,525)

Balance at April 30, 2006	11,582,928	$ 23,012	$ (3,502,396)	$ (3,479,384)

NOTES TO FINANCIAL STATEMENTS

For the period ended April 30, 2006

Note 1 – Summary of Significant Accounting Policies:

These unaudited consolidated financial statements have been prepared in accor

dan

ce with accounting principles generally accepted in the

United States of America

for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the

United States of America

for complete audited financial statements. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended July 31, 2005. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal accruals and charges) necessary to present fairly the financial position of the Company at April 30, 2006, and the results of its operations for the three months ended April 30, 2006 and 2005, and cash flows for the three months ended April 30, 2006 and 2005. The results of operations for the three months ended April 30, 2006 are not necessarily indicative of the results to be expected for the entire year.

Principles of consolidation: On April 17, 2006, effective April 29, 2006, Crystal International Travel Group, Inc (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 Company did not record any amount for goodwill on this share exchange; the Company did record $2,566,077 of expense representing the amount that Mobile Reach International, Inc.'s liabilities exceeded assets on April 29, 2006. The consolidated financial statements include the results from operations for CHH from December 8, 2006 (date of inception) through April 30, 2006, and the results from operations for Mobile Reach International, Inc. for April 30, 2006 only. Mobile Reach Technologies, Inc. is the Company's only current operating subsidiary.

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.

Revenue Recognition: For software arrangements with multiple elements, revenue is recognized using the residual method prescribed by SOP 98-9, "Modification of SOP 97-2 'Software Revenue Recognition' with Respect to Certain Transactions."

Revenue applicable to undelivered elements, principally software maintenance, training and implementation services, is determined based on vendor specific objective evidence ("VSOE") of the fair value of those elements.

VSOE is established by the price of the element when it is sold separately (i.e., the renewal rate for software maintenance and normal prices charged for training and professional services).

Revenue applicable to elements for which VSOE of fair value is not determinable is deemed equal to the remainder/residual amount of the fixed arrangement price.

Assuming none of the undelivered elements and VSOE of fair value exists for all undelivered elements are essential to the functionality of any of the delivered elements; the residual revenue attributed to the delivered elements is recognized when all other criteria for revenue recognition for those elements have been met.

Recent Accounting Pronouncements

Share-Based Payment

In December 2004, the FASB issued a revision of SFAS 123 ("SFAS 123(R)") that requires compensation costs related to share-based payment transactions to be recognized in the statement of operations. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be remeasured each reporting period.

Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS 123(R) replaces SFAS 123 and is effective as of January 1, 2006. Compensation cost for stock options issued on March 16, 2006 was recognized prior to the merger with CHH.

In March 2005, the U.S. Securities and Exchange Commission, or SEC,

released Staff Accounting Bulletin 107, "Share-Based Payments," ("SAB 107"). The interpretations in SAB 107 express views of the SEC staff, or staff, regarding the interaction between SFAS 123R and certain SEC rules and regulations, and provide the staff's views regarding the valuation of share-based payment arrangements for public companies. In particular, SAB 107 provides gui

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modification of employee share options prior to adoption of SFAS 123R and disclosures in Management's Discussion and Analysis subsequent to adoption of SFAS 123R. SAB 107 requires stock-based compensation be classified in the same expense lines as cash compensation is reported for the same employees. The Company and management is reviewing SAB 107 in conjunction with its review of SFAS 123R.

Nonmonetary Exchange

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets--An Amendment of Accounting Principles Board (APB) Opinion No. 29, Accounting for Nonmonetary Transactions" ("SFAS 153"). SFAS 153 eliminates the exception from fair measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, "Accounting for Nonmonetary Transactions," and replaces it with an exception for exchanges that do not have commercial substance. SFAS 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity expected to change significantly as a result of the exchange.

SFAS 153 is effective for fiscal periods beginning after June 15, 2005. The adoption of SFAS 153 is not expected to have a material impact on the Company's current financial condition or results of operations.

Conditional Asset Retirement

In March 2005, the FASB issued FASB Interpretation (FIN) No. 47 - "Accounting for Conditional Asset Retirement Obligations – an Interpretation of SFAS 143 (FIN No. 47). FIN No. 47 clarifies the timing of liability recognition for legal obligations associated with the retirement of a tangible long-lived asset when the timing and/or method of settlement are conditional on a future event. FIN No. 47 is effective no later than December 31, 2005. FIN No. 47 did not impact the Company for the three month period ended April 30, 2006.

Accounting Changes and Error Corrections

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections, a Replacement of APB No. 20 and FASB 3 (SFAS No.154). SFAS No. 154 requires retrospective application to prior periods' financial statements of a voluntary change in accounting principle unless it is impracticable. APB Opinion No. 20 "Accounting Changes," previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle.

Note 2 - Going Concern:

As shown in the accompanying financial statements, the Company has sustained a net loss of $3,425,525 during the three months ended April 30, 2006. As of the same period, the Company is in default on certain notes, payroll taxes and other payables. As a result, cash currently available is not sufficient to support the Company's operations for the next year.

In order to meet the cash requirements for the remainder of the year, the Company needs to either raise additional capital through public or private financing or acquire a suitable business as another subsidiary to offset the cash needs.

Subsequent to the balance sheet date, the Company obtained additional financing (see Note 9 - Subsequent events).

The Company is attempting to raise additional capital.

If the Company is able to raise capital in the future, it is probable that it will result in substantial dilutions to stockholders interests. These factors create substantial doubt as to the Company's ability to continue as a going concern.

The Company continues its efforts to complete the necessary steps in order to meet its cash flow requirements throughout the fiscal year 2006.

However, no assurances can be given that the Company will continue as a going concern without the successful completion of additional financing.

The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Note 2 – Intangibles:

In March 2006, the Company purchased intangible assets from another company. These assets include a customer database which is amortized over an estimated useful life of twenty-four months. In addition, the Company purchased registered trademarks that for generally accepted accounting principles purposes are considered to have an indefinite life, and do not allow amortization. These trademarks are subject to annual impairment testing.

Intangible assets at April 29, 2006, consisted of the following:

Customer database – net of amortization of $125,000

$1,375,000

Trademarks

3,521,666

Note 3 – Pro-forma information:

The following pro-forma data summarizes the results of operations for
the period ended April 30, 2006, as if the merger with Mobile Reach
International, Inc. and Subsidiaries had been completed August 1, 2005:

	Three Months Ended 4/30/2006	Nine Months Ended 4/30/2006
Net revenue	$ 41,938	$ 374,426
Operating loss	(683,710)	(3,502,396)
Loss per share - basic and diluted	(0.06)	(0.30)

Note 3 - Notes Payable:

Notes payable at April 30, 2006 consisted of the following:

Note payable to a vendor dated February 2005; due in eighteen monthly installments of $1,007 including interest at six percent.

Note payable to a vendor dated July 2005; due in eighteen monthly installments of $390 including interest at eight percent.

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.

Note payable to former employee and former owner of Waves dated December 2004; bearing no interest and no specified repayment terms.

Note payable for accrued wages; 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 payable for F.S. SunTours purchase of 84 monthly payments of $100,000 of principle and interest discounted at 5.5 percent

Note 4 - Convertible Debentures:

March 2004, the Company issued $525,000 of five percent convertible debentures that mature on March 15, 2007. The debentures were convertible into Company's common stock at a conversion price of $0.16 per share.

In an effort to entice the debenture holders from this series of debentures to invest the second series mentioned later, the Company agreed to re-price the conversion feature and the warrants of the March 2004 issuance to $0.01 per share through a settlement agreement signed by all parties.

All interest and penalties accrued through March 2005 on the five percent debentures was treated additional paid-in capital on warrants issued with the March 2005 series debenture mentioned below.

Interest accrued on debentures that are converted into common stock may be paid in cash or with common stock (conversion price $0.01 per share). In connection with the issuance these debentures, the Company issued 12,202 common stock purchase warrants at original exercise price of $0.32 per share.

However, as part of the settlement agreement, these warrants were also re-priced to $0.01 per share.

The warrants expire March 31, 2006 and $175,000 of the warrants were exercised prior to the merger with CHH.

March 2005, the Company began offering a second series of convertible debentures. This series required investors from the March 2004 series to invest minimum of twenty percent over and above the value of their holdings in the March 2004 series.

This series of convertible debentures mature April 27, 2007 have an interest rate of eight percent. The debentures are convertible into Company's common stock at a conversion price of $0.01 per share.

Interest accrues from March 17, 2005 and may be paid in cash or in the Company's common stock at a conversion price of $0.01 per share.

In connection with these debentures, the Company issued to the holders of the March 2004 five percent convertible debentures that invested additional funds an additional 202,046 common stock purchase warrants at an exercise price of $0.01 per share.

Subsequent investors were issued 608,766 common stock purchase warrants at an exercise price of $0.0077 per share.

These warrants expire April 27, 2010 and no warrants were exercised at April 30, 2006.

Subsequent to the March 2005 offering, the Company received an additional $750,000 in funding on the March 2005 eight percent convertible debentures.

The additional debentures included 1,217,532 in common stock purchase warrants with an exercise price of $0.0077 per share expiring April 20, 2010.

Note 6 - Shares Outstanding:

For the period ended April 30, 2006, the Company's common stock issued and outstanding was 11,582,928.

During the period the company issued its shares as follows: Securities issued - 7,000,000 shares issued in connection with the merger with

EX-31.1	CERTIFICATION OF CEO PER SECTION 302
EX-31.2	CERTIFICATION OF CFO PER SECTION 302
EX-32.1	CERTIFICATION OF CEO PER SECTION 906
EX-32.2	CERTIFICATION OF CFO PER SECTION 906



Date: June 22, 2006	By:	/s/ Fabrizzio Busso Campana
		Fabrizzio Busso Campana Chief Executive Officer