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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999.
Or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO , 19 .
----- ----- --
Commission file number : 0-20937
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PHOENIX INTERNATIONAL LTD., INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Florida 59-3171810
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
500 International Parkway, Heathrow, Florida 32746
(Address of principal executive offices)
(407) 548-5100
(Registrant's telephone number including area code)
N/A
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 11, 1999
Common Stock, $0.01 par value 8,504,989
------------
(No. of Shares)
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PHOENIX INTERNATIONAL LTD., INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheets as of
March 31, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1999 and
1998 4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES
EXHIBIT INDEX
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHOENIX INTERNATIONAL LTD., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,516,823 $ 3,795,962
Investments, available for sale 3,176,483 5,995,640
Accounts receivable, net of allowance for doubtful accounts of $583,350 and
$473,350 at March 31, 1999 and December 31, 1998, respectively 10,027,553 8,158,104
Unbilled accounts receivable 6,846,551 7,497,682
Deferred tax asset 4,476,617 3,737,198
Prepaid expenses and other current assets 532,746 420,903
------------ ------------
Total current assets 26,576,773 29,605,489
Long term investments, available for sale 16,746,644 16,533,770
Property and equipment:
Computer equipment and purchased software 4,457,519 4,245,907
Furniture, office equipment and leasehold improvements 2,395,897 2,307,329
------------ ------------
6,853,416 6,553,236
Accumulated depreciation and amortization (2,643,413) (2,224,508)
------------ ------------
Net property and equipment 4,210,003 4,328,728
Capitalized software costs, net of accumulated
amortization of $2,736,379 and $2,282,480 at March 31, 1999 and
December 31, 1998, respectively 8,893,023 7,155,436
Other assets 1,879,150
1,879,150
------------ ------------
Total assets $ 58,305,593 $ 59,502,573
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 856,430 $ 599,660
Accrued expenses 1,986,257 2,124,268
Capital lease, current portion 145,235 142,051
Deferred revenue 2,775,422 2,649,364
------------ ------------
Total current liabilities 5,763,344 5,515,343
Deferred tax liability 2,752,321 2,817,939
Capital lease, long term portion 330,490 357,299
------------ ------------
Total long term liabilities 3,082,811 3,175,238
------------ ------------
Total liabilities 8,846,155 8,690,581
Shareholders' equity:
Common stock, $0.01 par value
50,000,000 shares authorized, 8,504,989 and 8,498,633 issued and
outstanding at March 31, 1999 and December 31, 1998, respectively 85,049 84,986
Additional paid-in capital 46,268,615 46,191,279
Unrealized gain on investments available for sale (net of tax effect) 116,144 238,005
Retained earnings 2,989,630 4,297,722
------------ ------------
Total shareholders' equity 49,459,438 50,811,992
------------ ------------
Total liabilities and shareholders' equity $ 58,305,593 $ 59,502,573
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
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PHOENIX INTERNATIONAL LTD., INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues:
License fees and other $ 2,311,445 $ 3,031,210
Implementation, customer and software
support and other service fees 3,223,310 1,567,234
----------- -----------
Total revenues 5,534,755 4,598,444
Expenses:
Cost of license fees and other 593,413 544,366
Cost of implementation, customer and
software support and other service fees 2,229,842 1,222,524
Sales and marketing 1,298,673 971,625
General and administrative 1,146,779 1,084,323
Product development 2,556,905 1,157,462
----------- -----------
Total expenses 7,825,612 4,980,300
Other income (expense):
Interest income 305,443 447,334
Interest expense (7,814) (13,926)
Other income (loss) (19,221) 2,485
----------- -----------
Income (loss) before income taxes (2,012,449) 54,037
Income tax expense (benefit) (704,357) 18,913
----------- -----------
Net income (loss) $(1,308,092) $ 35,124
=========== ===========
Net income (loss) per share - basic $ (0.15) $ 0.00
=========== ===========
Net income (loss) per share - diluted $ (0.15) $ 0.00
=========== ===========
Weighted average shares outstanding - basic 8,504,949 8,231,703
=========== ===========
Weighted average shares outstanding - diluted 8,504,949 8,725,621
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements of operations.
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PHOENIX INTERNATIONAL LTD., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($1,308,092) $ 35,124
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 872,804 450,371
Provision for doubtful accounts 110,000 81,200
Deferred taxes (739,397) (105,794)
Changes in operating assets and liabilities:
Accounts receivable (1,979,449) 581,939
Unbilled accounts receivable 651,131 (884,937)
Prepaid expenses and other current assets (111,843) (61,927)
Accounts payable 256,770 124,860
Accrued expenses (138,011) 276,857
Deferred revenue 126,058 (219,323)
----------- ------------
Net cash (used in) provided by operating activities (2,260,029) 278,370
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (300,180) (697,346)
Sale of investments, available for sale 4,749,244 --
Purchases of investments, available for sale (2,330,462) (266,464)
Capitalized software costs (2,191,486) (702,085)
Purchased software -- (450,000)
----------- ------------
Net cash used in investing activities (72,884) (2,115,895)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of capital lease obligations (23,625) (32,390)
Net proceeds from issuance of common stock 77,399 704,665
Cash payments for stock subscription receivable -- 48
----------- ------------
Net cash provided by financing activities 53,774 672,323
----------- ------------
Net decrease in cash and cash equivalents (2,279,139) (1,165,202)
Cash and cash equivalents at beginning of the period 3,795,962 13,034,491
----------- ------------
Cash and cash equivalents at end of the period $ 1,516,823 $ 11,869,289
=========== ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements of cash flows.
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PHOENIX INTERNATIONAL LTD., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include all adjustments, consisting only of normal recurring accruals, which the
Company considers necessary for a fair presentation of the financial position
and the results of operations for the interim periods presented. The condensed
consolidated financial statements have been prepared in accordance with the
rules and regulations of the Securities and Exchange Commission. Accordingly,
certain information and footnote disclosures usually found in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements,
"Selected Financial and Operating Data," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in the
Company's annual report on Form 10-K for the year ended December 31, 1998.
2. NET INCOME PER SHARE
Net income per share is calculated and presented in accordance with
Statement of Financial Accounting Standards No. 128, Earnings per Share ("SFAS
128"). Basic earnings per share is computed using the average number of common
shares outstanding. Diluted earnings per share is computed on the basis of the
average number of common shares outstanding plus the effect of outstanding stock
options using the "treasury stock" method based on average stock price for the
period.
The following table sets forth the computation of basic and diluted earnings per
share.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1999 1998
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<S> <C> <C>
Numerator - net income (loss) available
to common shareholders $(1,308,092) $ 35,124
=========== ==========
Denominator for basic net income per
share - weighted average shares outstanding 8,504,949 8,231,703
Effect of dilutive securities -
employee stock options 0 493,918
----------- ----------
Denominator for diluted net income per
share - adjusted weighted average shares
outstanding and assumed conversion of
dilutive securities 8,504,949 8,725,621
=========== ==========
Net income (loss) per share - basic $ (0.15) $ 0.00
=========== ==========
Net income (loss) per share - diluted $ (0.15) $ 0.00
=========== ==========
</TABLE>
Pursuant to SFAS 128 the denominator for basic and diluted net income
per share are identical for the three months ended March 31, 1999 due to the
company's net loss. Under SFAS 128 the exercise of any outstanding options or
warrants in the case of a net loss is considered antidilutive.
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The Company effected a three-for-two stock split in the form of a 50%
stock dividend, distributed on May 18, 1998 to stockholders of record on May 11,
1998. Accordingly, all share and per share amounts have been adjusted to reflect
this split.
3. CAPITALIZED SOFTWARE COSTS
The Company capitalizes certain software development costs in
accordance with Statement of Financial Accounting Standards No. 86, Accounting
for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed.
Costs incurred internally to develop a computer software product are charged to
product development expense when incurred until technological feasibility has
been established for the product. Thereafter, all software production costs are
capitalized and recorded at the lower of unamortized cost or net realizable
value. Capitalization ceases upon general release to customers. After general
release, capitalized costs are amortized using the greater of the amount
computed using: (a) the ratio that current gross revenues for a product bear to
the total of current and anticipated revenues for that product or, (b) the
straight-line method over the estimated useful life of the related product
(currently five years). Capitalized software costs also include purchased
software costs of $761,000 at March 31, 1999 and December 31, 1998.
4. COMPREHENSIVE INCOME (LOSS)
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS 130"). SFAS
130 establishes new rules for the reporting and display of comprehensive income
and its components. Comprehensive income (loss) for the three months ended March
31, 1999 and 1998 is comprised of the following:
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------
1999 1998
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<S> <C> <C>
Net income (loss) as reported $(1,308,092) $35,124
Other comprehensive income:
Unrealized gain (loss) on investments
available for sale (net of tax effect) (121,861) 12,376
----------- -------
Comprehensive income (loss) $(1,429,953) $47,500
=========== =======
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
OVERVIEW
The following discussion contains statements which constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These statements appear in a number of places in this report and
include all statements that are not historical statements of fact regarding the
intent, anticipation, belief or current expectations of the Company, its
directors or its officers with respect to, among other things: (i) trends
affecting the Company's financial condition or results of operations; (ii) the
Company's growth strategy and operating strategy (including, but not limited to,
the Company's development and implementation of the Phoenix System and its other
products); (iii) the Company's financing plans; and (iv) the declaration and
payment of dividends. The words "may," "would," "could," "will," "expect,"
"estimate," "anticipate," "believe," "intends," "plans," and similar expressions
and variations thereof are intended to identify forward-looking statements.
Investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, many of
which are beyond the Company's ability to control, and that actual results may
differ materially from those projected in the forward-looking statements.
Actual results may differ materially from these forward-looking
statements as a result of many factors, including the inability to obtain,
continue and manage growth or execute agreements with new customers;
fluctuations in quarterly operating results; market acceptance of new products
and enhancements; growth in the Company's customers; risks related to the Year
2000; increased competition; dependence on new products; rapid changes in
technology, and the other factors discussed in the Company's registration
statement on Form S-1 as declared effective on August 13, 1997, including the
"Risk Factors" section contained therein.
The Company derives its revenues from two primary sources: (i) license
fees for software products and other revenues and commissions from the sale and
delivery of software and hardware products of third party vendors; and (ii) fees
for a full range of services complementing its products, including
implementation, programming services, conversion training and installation
services, interface services for tying the Phoenix System to third-party
applications, customer and software support services, disaster recovery services
and Internet/Intranet development services.
The Company's quarterly operating results have varied significantly in
the past and may vary significantly in the future. Special factors that may
cause the Company's future operating results to vary include, without
limitation: the size and timing of significant orders; the mix of direct and
indirect sales; the mix and timing of foreign and domestic sales; the timing of
new product announcements and changes in pricing policies by the Company and its
competitors; market acceptance of new and enhanced versions of the Company's
products; increased competition; changes in operating expenses, including
expenses related to acquisitions; changes in Company strategy; personnel
changes; changes in legislation and regulation; foreign currency exchange rates
and general economic factors. Product revenues are also difficult to forecast
because the market for client/server application software products is rapidly
evolving, and the Company's sales cycle, from initial review to purchase and the
provision of support services, varies substantially from customer to customer.
As a result, the Company believes that quarter to quarter comparisons of its
results of operations are not necessarily meaningful and should not be relied
upon as indications of future performance. Due to all of the foregoing
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factors, it is likely that in some future quarter the Company's operating
results will be below the expectations of public market analysts and investors.
In such an event, the price of the Company's common stock would likely be
materially adversely affected.
YEAR 2000 ISSUES
The Company's business and relationships with its customers, marketing
agents, VARs and other parties depend significantly on a number of computer
software programs, internal operating systems and network, telephonic and
Internet connections. If any of these software programs, systems or connections
are not able to recognize, store, transmit and properly process dates before, on
and after January 1, 2000 (the "Year 2000 issue"), significant system failures
or errors may result which could have a material adverse effect on the business,
financial condition and results of operations of the affected customers, agents,
other parties and the Company. In an effort to protect against possible Year
2000 problems, Phoenix has examined the Year 2000 issue as it affects three
critical areas of its business operations: (1) the Phoenix System; (2) its
internal operating and accounting systems; and (3) its customers' core
processing systems.
Phoenix believes that the Phoenix System already addresses the Year
2000 issue because it was designed to require a four-digit year to be entered
into the date fields of the program and has always stored and processed
information using four-digit years. The Phoenix System employs sophisticated
database and other technologies provided by recognized companies in the software
industry (e.g., Sybase, Microsoft and Centura). Many of these industry companies
have published materials indicating their products are Year 2000 compliant and
the Company believes these products are capable of addressing the Year 2000
issue. The Company has tested the Phoenix System repeatedly using various dates
before, on and after January 1, 2000, including all of the dates established by
the Federal Financial Institutions Examination Council in its April 10, 1998
statement of guidelines for Year 2000 readiness. Phoenix discovered no Year 2000
problems during such tests. Phoenix plans to continue testing the Phoenix System
periodically using any additional dates set forth for testing in any future
guidelines established for financial institutions in the United States or by
foreign governmental regulatory agencies. Phoenix has not made any material
modification to the coding for the Phoenix System software and does not
anticipate making any such changes to accommodate the Year 2000 issue.
Phoenix has also reviewed its internal accounting and operating systems
in the United States and currently believes that these programs and systems are
adequately programmed to address the Year 2000 issue or can be modified or
replaced to address the Year 2000 issue without material costs or delays.
Phoenix is currently conducting tests on the third party products or systems
used in its business and at its offices and on the systems used by its marketing
agents, VARs and other third parties. The Company has contacted the providers of
material goods and services used in Phoenix's operations and has received
written assurances from several of these providers that their products and
services are capable of addressing the Year 2000 issue. The Company has not yet
completed a review of the accounting and operating systems of its VARs. Phoenix
currently expects to complete its Year 2000 examination of its internal
accounting and operating systems by the end of June 1999. The Company has not
yet completed a review of the operating systems used in its international
offices in London, England, Wellington, New Zealand, Singapore and Sydney,
Australia and currently expects that this review will not be complete until the
middle of 1999. There can be no assurances that any or all of these products and
services are Year 2000 compliant. However, Phoenix believes that if any Year
2000 issues are discovered when these
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international office systems are examined and tested, the Company will be able
to modify or replace these systems without material costs or delays.
Phoenix believes that if its customers do not successfully address Year
2000 issues in their operations, the Company's operations may be interrupted,
hindered or delayed. This would have a material adverse effect on Phoenix's
business, financial condition and results of operations. Phoenix has experienced
some difficulties in signing contracts with new customers which are delaying
decisions about purchasing new core processing systems due to their review of
potential Year 2000 issues with their institutions. Phoenix (with assistance
from some of its customers) has developed a Year 2000 readiness program that is
designed to assist its customers in testing their core processing systems for
Year 2000 problems. Phoenix has begun testing United States customers and
offered others to test their core processing systems at Phoenix's facilities,
using all of the same hardware and other third-party products employed at their
institutions. The customer institution selects the dates and other information
to be tested and Phoenix monitors the performance of the customer's processing
system and reports on any Year 2000 problems identified. Testing under this
program began in November 1998 and is expected to last between two and three
days for each customer institution.
The Company believes that many financial institutions, industry vendors
and suppliers, and other third parties are still analyzing their software and
systems to address Year 2000 issues. It is not possible, therefore, for the
Company to accurately analyze or predict possible "worst-case scenarios" related
to the Year 2000 issue and the potential impact to the Company's business if any
of these parties fail to adequately address the Year 2000 issue in their
business operations. The Company currently believes that the greatest risk to
its business from Year 2000 issues will come from its customers and third
parties whose systems fail as a result of the Year 2000 issue. The Company has
not developed a contingency plan for Year 2000 problems experienced by these
customers and third parties. It is impossible to estimate the potential expenses
involved or delays which may result from a large-scale failure of the Company's
customer institutions and third parties to resolve their Year 2000 issues in a
timely manner and there can be no assurance that such expenses, failures or
delays will not have a material adverse effect on the Company's business,
financial condition or results of operations.
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RESULTS OF OPERATIONS
The following table sets forth the percentage of total revenues
represented by certain line items in the Company's statement of operations for
the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1999 1998
------ ------
<S> <C> <C>
Revenues
License fees and other 41.8% 65.9%
Implementation, customer and
software support, and other service fees 58.2% 34.1%
------ ------
Total revenues 100.0% 100.0%
Expenses
Cost of license fees and other 10.7% 11.8%
Cost of implementation, customer and
software support, and other service fees 40.3% 26.6%
Sales and marketing 23.5% 21.1%
General and administrative 20.7% 23.6%
Product development 46.2% 25.2%
------ ------
Total expenses 141.4% 108.3%
Other income (expense)
Interest income 5.5% 9.7%
Interest expense (0.1)% (0.3)%
Other income (loss) (0.3)% 0.1%
Income (loss) before taxes (36.3)% 1.2%
Income tax (benefit) expense (12.7)% 0.4%
------ ------
Net income (loss) (23.6)% 0.8%
====== ======
</TABLE>
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Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998
Revenues. Total revenues increased 20.4% to $5.5 million in the three
months ended March 31, 1999 from $4.6 million for the three months ended March
31, 1998. Revenues from license fees decreased $720,000, or 23.7%, to $2.3
million for the three months ended March 31, 1999 from $3.0 million in the three
months ended March 31, 1998 primarily due to a decrease in the number of license
fee contract signings from U.S. customers and delays in contract signings.
Revenues from implementation, customer and software support, and other service
fees increased $1.7 million, or 105.7%, to $3.2 million in the three months
ended March 31, 1999 from $1.6 million in the three months ended March 31, 1998
due primarily to an increased number of installations, an increase in foreign
professional services and customers under support agreements.
Expenses. Cost of license fees increased 9.0% to $593,000 in the three
months ended March 31, 1999 from $544,000 in the three months ended March 31,
1998. These costs increased in the 1999 period mainly as a result of higher
amortization of capitalized software development costs.
Cost of implementation, customer and software support and other service
fees increased $1.0 million, or 82.4%, to $2.2 million in the three months ended
March 31, 1999 from $1.2 million in the three months ended March 31, 1998
primarily as a result of increased staffing, travel and personnel related costs
to support a larger number of installations and customers under support
agreements.
Sales and marketing expenses increased 33.7% to $1.3 million in the
three months ended March 31, 1999 from $972,000 in the three months ended March
31, 1998 primarily as a result of additional expenses incurred in connection
with increased staffing, travel and personnel related costs, the relocation of
the United Kingdom sales office to a larger facility, and the opening of the
Singapore sales office.
General and administration expenses was $1.1 million and $1.1 million
in the three months ended March 31, 1999 and 1998, respectively, primarily as
the result of increased professional service fees, personnel related costs, and
provision for doubtful accounts.
Product development expenses increased 120.9% to $2.6 million in the
three months ended March 31, 1999 from $1.2 million in the three months ended
March 31, 1998. Product development expenses increased in the 1999 period
primarily as a result of increased personnel related costs to expand and enhance
the Company's product line. Expenses also increased due to contract labor costs
incurred at the new Sydney, Australia product development center.
Other Income (Expense). Interest income was $305,000 and $447,000 in
the three months ended March 31, 1999 and 1998, respectively. Interest income
decreased in the 1999 period primarily due to a decrease in interest-bearing
funds. Other income (expense) decreased to a $19,000 loss in the three months
ended March 31, 1999 from a $2,000 gain in the three months ended March 31,
1998, primarily due to realized foreign losses from the operations of three of
the company's foreign subsidiaries, Phoenix International A.P. Limited, Phoenix
EMEA Limited, and Phoenix International (Australia) Pty. Limited.
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Income Tax Expense. The income tax benefit was $704,000 for the three
months ended March 31, 1999 and income tax expense was $19,000 for the three
months ended March 31, 1998. The Company's effective tax rate was 35% for the
three months ended March 31, 1999 and 1998, respectively. The decrease in income
tax expense was the result of the pre-tax operating loss for the three months
ended March 31, 1999.
Net Income (Loss). The Company incurred a $1.3 million net loss in the
three months ended March 31, 1999 compared to net income of $35,000 in the three
months ended March 31, 1998, primarily as a result of increases in costs related
to implementation, customer support and product development.
LIQUIDITY AND CAPITAL RESOURCES
The Company funds its cash needs through existing cash and investment
balances, interest on investments and, to a lesser extent, through cash flow
from operations, without relying on lines of credit or other borrowings. At
March 31, 1999, cash and cash equivalents were $1.5 million, short term
investments were $3.2 million and long term investments were $16.7 million.
Short and long term investments consist primarily of U.S. Treasury securities.
For the three months ended March 31, 1999, cash used by operations was $2.3
million resulting principally from the net loss for the period and an increase
in trade accounts receivable of $2.0 million, offset by decreases in unbilled
accounts receivable of $651,000 and an increase in accounts payable of $257,000
which contributed cash from the Company's operating activities. Cash used by
investing activities was $73,000 for the three months ended March 31, 1999,
including $300,000 for purchases of property and equipment and $2.2 million for
capitalized software development costs. Purchase of long term investments used
$2.3 million of cash and the sale of short term investments provided $4.7
million in cash for the three months ended March 31, 1999. Financing activities
provided $54,000 of cash for the three months ended March 31, 1999, including
$77,000 from the issuance of common stock pursuant to the exercise of stock
options. Capital lease payments represented a use of cash of $24,000 for the
three months ended March 31, 1999. Working capital was $20.8 million at March
31, 1999.
The Company believes its cash balances, investments and cash flow from
operations will be sufficient to meet its working capital, capital expenditure
and capitalized software development requirements at least through 1999. Cash
flows from operating activities are dependent on continued advance payments from
customers, and there is no assurance that the Company will continue to receive
these payments from customers or that it will continue to receive these payments
in advance on the same terms as it has in the past. The Company anticipates that
its operating and investing activities may use cash in the future, particularly
from growth in operations and development activities. Consequently, any such
future growth may require the Company to obtain additional equity or debt
financing.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property subject to,
any material legal proceedings, other than routine litigation incidental to its
business.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
--- -----------
<S> <C>
3.1 Amended and Restated Articles of Incorporation, as amended by the
Articles of Amendment to Amended and Restated articles of
Incorporation as filed with the Secretary of the State of Florida on
May 28, 1997 (incorporated by reference to Exhibit 3.1 of the
Company's Registration Statement on Form S-1 (No. 333-31415) as
declared effective by the SEC on August 13, 1998. (the "Registration
Statement")).
3.2 Amended and Restated Bylaws, effective July 8, 1996, (incorporated by
reference to Exhibit 3.2 of the Company's Form 10-Q, dated August 14,
1996, File No. 0-20937)
4.1 See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated
Articles of Incorporation and Amended and Restated Bylaws defining
the rights of the holders of Common Stock of the Company
(incorporated by reference to Exhibit 4.1 of Registration Statement).
27.1 Financial Data Schedule for the three months ended March 31, 1999
(for SEC use only)
</TABLE>
b) Reports on Form 8-K
None.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934,the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PHOENIX INTERNATIONAL LTD., INC.
/s/ Bahram Yusefzadeh
-------------------------------------------------
May 11, 1999 Bahram Yusefzadeh
Chairman of the Board and Chief Executive Officer
(principal executive officer)
/s/ Theodore C. Burns
-------------------------------------------------
May 11, 1999 Theodore C. Burns
Senior Vice President and Chief Financial Officer
(principal financial and accounting officer)
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Page
--- ----------- ----
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation, as amended by the
Articles of Amendment to Amended and Restated articles of
Incorporation as filed with the Secretary of the State of Florida on
May 28, 1997 (incorporated by reference to Exhibit 3.1 of the
Company's Registration Statement on Form S-1 (No. 333-31415) as
declared effective by the SEC on August 13, 1998. (the "Registration
Statement").
3.2 Amended and Restated Bylaws, effective July 8, 1996, (incorporated by
reference to Exhibit 3.2 of the Company's Form 10-Q, dated August 14,
1996, File No. 0-20937)
4.1 See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated
Articles of Incorporation and Amended and Restated Bylaws defining
the rights of the holders of Common Stock of the Company
(incorporated by reference to Exhibit 4.1 of Registration Statement).
27.1 Financial Data Schedule for the three months ended March 31, 1999
(for SEC use only)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FROM FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1999 (FOR SEC USE
ONLY) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,516,823
<SECURITIES> 19,923,127
<RECEIVABLES> 17,457,454
<ALLOWANCES> (583,350)
<INVENTORY> 0
<CURRENT-ASSETS> 26,576,773
<PP&E> 6,853,416
<DEPRECIATION> (2,643,413)
<TOTAL-ASSETS> 58,305,593
<CURRENT-LIABILITIES> 5,763,344
<BONDS> 0
0
0
<COMMON> 85,049
<OTHER-SE> 49,374,389
<TOTAL-LIABILITY-AND-EQUITY> 58,305,593
<SALES> 0
<TOTAL-REVENUES> 5,534,755
<CGS> 0
<TOTAL-COSTS> 2,823,255
<OTHER-EXPENSES> 5,002,357
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,814)
<INCOME-PRETAX> (2,012,449)
<INCOME-TAX> 704,357
<INCOME-CONTINUING> (1,308,092)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,308,092)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
