U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Fiscal Year Ended: December 31, 1998
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from To
Commission file number 0-23825
Optimum Source International, Ltd.
(Name of small business issuer in its charter)
Nevada 86-0674322
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
3539 Ocean View Blvd., Glendale,
California 91208 (Address of principal
executive offices) (Zip code)
Issuer's telephone number (818) 957-1414
Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act:
Common Stock Par Value $0.001
(Title of class)
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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 X No
Total pages: 18
Exhibit Index Page: 16
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $45,905
As of March 31, 1999, there were 1,654,051 shares of the Registrant's
common stock, par value $0.001, issued and outstanding. The aggregate market
value of the Registrant's voting stock held by non-affiliates of the Registrant
was approximately $327,026 computed at the estimated average bid and asked price
as of March 31, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"): NONE
Transitional Small Business Disclosure Format (check one): Yes ; NO X
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TABLE OF CONTENTS
Item Number and Caption Page
PART I
Item 1. Description of Business............................................4
Item 2. Description of Property............................................9
Item 3. Legal Proceedings..................................................9
Item 4. Submission of Matters to a Vote of Security Holders................9
PART II
Item 5. Market for Common Equity and Related Stockholder Matters...........9
Item 6. Management's Discussion and Analysis or Plan of Operations........10
Item 7. Financial Statements..............................................13
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure..............................................13
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.................13
Item 10. Executive Compensation............................................14
Item 11. Security Ownership of Certain Beneficial Owners and Management....15
Item 12. Certain Relationships and Related Transactions....................15
Item 13. Exhibits and Reports on Form 8-K..................................16
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PART I
ITEM 1 DESCRIPTION OF BUSINESS
General
The Company was first incorporated in the State of Utah on October 24, 1984
as A.R.M. Chemical Company, Inc. On November 13, 1984, the name of the
Corporation was changed to E.R.M. Chemical Company, Inc. From 1984 to 1986, the
Company attempted to manufacture, distribute and sell chemical products for the
purification of water. This business activity was abandoned. On September 1,
1988 the Company changed its name to M.P.V. On September 7, 1989, the name of
the Company was changed to Optimum Source International. The Company completed a
plan of reorganization on October 20, 1989 pursuant to which the assets and
corresponding liabilities of LomaCycle, Inc. were spun off to the former
shareholders of that corporation before it became a wholly-owned subsidiary of
M.P.V., Inc. From 1986 to 1990, the Company attempted to acquire interests in
various business opportunities, all attempts were abandoned. On June 29, 1990,
the domicile of the Company was changed to Nevada and the name of the Company
was changed to Optimum Source International, Ltd. The Company was inactive from
1990 to 1992. The Company was in the development stage from December 31, 1992
through December 31, 1997.
Principal products or services and their markets
The Company's primary mission is Barter/Counter-trade and its proprietary
interactive services both Domestic and International and encompassing the
liquidation & auction industries globally.
Optimum Source International Ltd., (OSI) is poised with products and
services for individuals, entrepreneurs, and companies of all sizes that are
desirous of learning or enhancing their bartering, trading and countertrading
skills. Products are developed to fully integrate with each other or may be used
as stand alone products. All products and services are currently offered on the
internet, and through selected channels of distribution.
Barter, Exchange, Swap, Trade and Countertrade are rapidly becoming the
method of choice for individuals, companies and governments for acquiring what
they want or need as it eliminates the constant monetary change. It is an
industry that has reached sales of $100 billion dollars plus worldwide and is
growing at an incredible annual rate of 20%. The industry though, has lagged in
automating. OSI has focused its efforts on providing solutions for bringing
traders together worldwide. OSI is a provider of surplus consumer goods through
its international suppliers inventories that are owned by OSI and associates are
accessible 24 hours a day via OSI's private network. OSI has developed the forum
for buyers and sellers to locate one another and conduct business using the
latest networking technologies.
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Current products including:
CABLE VIEW
A membership network for companies dealing with premiums, auctions, small
retail dealers, overseas buyers, and corporate users. Members may obtain
additional inventories for non- dealer/members in their areas (with their prior
approval), enter their inventories, and charge a small exchange fee. As a member
in CABLE VIEW, a company has many different close-out and liquidation
inventories at their finger-tips, 24 hours a day. The services offered by CABLE
VIEW are listed below:
E-MAIL - SEARCH - FORUMS - CLASSIFIED ADS
CABLE VIEW is available and is being introduced to the Close-Out industry
throughout the world. This private communication network which the Company
created has the capability of handling thousands of calls, 24 hours a day, and
allows members to display, manipulate, extract and exchange information.
WHAT 'CHA GOT AUCTION SERVICES
What "Cha Got is a network of auctioning services implemented to provide a
distribution system for selling consumer goods to end users and dealers. OSI
provides complete federally bonded auctioning services. All segments of
operations are controlled by OSI from its corporate headquarters in Glendale,
California. Constant communication between all entities are maintained via
computer. Satellite auction sites provide additional sales outlets of consumer
goods flowing to cash buyers nationwide.
COUNTERTRADE/BARTER
Countertrade associations are forming in ever increasing numbers. The
recent world trade agreements open up more opportunities for an already
expanding countertrade industry. A Barter, Exchange, Swap, Trade arrangement
enables a company to exchange finished goods for raw material at a fair price,
in lieu of liquidating inventories at a drastic loss. OSI provides these
services, greatly enhancing the Barter, Exchange, Swap, Trade industry, and
establishing OSI as a world-wide countertrade resource leader.
Potential negative impact of a participant in a countertrade/barter action
can negatively impact the Company and its services. For example, the publicity
resulting from a participant activities such as inappropriate claims and product
representations by participants can make the sponsoring and retaining of
participants more difficult, thereby negatively impacting sales. Furthermore,
the Company's business and results of operations could be adversely affected if
the Company terminates a significant number of participants or certain
participants who play a key role in the Company's distribution system. There can
be no assurance that these or other participant actions will not have a material
adverse effect on the Company or results of operations.
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Distribution
The infrastructure for all of OSI's operations is its own Interactive
Communications Information Exchange Network. This network allows for the
streamlining of OSI's corporate operations by minimizing paper work. It provides
both buyers and sellers of surplus goods the arena in which to identify and
negotiate transactions. It also provides the interface to wide area networks,
i.e., Internet, Microsoft's "MSN" Network, and various public and private
databases, i.e., real estate, import/export, associations, and corporations. The
Company has developed the first application software for traders worldwide,
"Traders ToolTM". This software automates all aspects of
trade/barter/countertrade, including currency conversions and inventory
tracking. Displays also indicate reminders for expiration dates of scrip or
services. Traders ToolTM interfaces with Excel for tracking trade transactions,
as well as providing statistics, reports and spreadsheets. Traders ToolTM also
has specialty modules, i.e., real estate, gems, and consumer items. Upon
request, Traders ToolTM automatically dials and connects to outside databases
for specific goods information. Traders ToolTM is the only product of its kind
available to the Barter, Exchange, Swap, Trade industry at all levels, from
novice to expert. The Company's focus is automating the liquidation and barter
industry. A network of independent representatives develop sales and marketing,
introduce new services and products, and expand distribution of products while
pursuing strategic alliance worldwide.
Competition
Competition in the barter, trading and counter trading industry is
vigorous, characterized by a relatively large number of companies (estimated at
approximately 1,500), most of which have relatively small sales. Industry
sources estimate that there are less than 100 companies in the industry that
have annual sales of $2 million or more. Since only one of these companies in
this industry is public and the rest are privately held, little reliable
financial data is available. Many of the companies have established reputations
for successfully developing and marketing barter, trading and countertrading
services, with a variety of well-established marketing outlets. Many of such
companies have greater financial, managerial, and technical resources than OSI.
Principal competitors include members of the International Reciprocal Trade
Association, and members of the National Association of Trade Exchanges.
The Company competes by emphasizing the value and premium quality of the
Company's products and the convenience of the Company's distribution system.
There can be no assurance that the Company's business and results of operations
will not be affected materially by market conditions and competition in the
future.
Sources and availability of raw material and the names of principal suppliers
All the Company's products are currently produced by manufactures
unaffiliated with the Company. The Company's profit margins and its ability to
deliver products on a timely basis are dependent upon the ability of the
Company's outside suppliers to supply products in a timely and cost efficient
manner.
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The Company currently acquires products from suppliers that are considered
by the Company to be the superior suppliers of such products. Due to the nature
of the close out market the availability of products varies from day to day.
There can be no assurance that the loss of a supplier would not have a material
adverse effect on the Company's business and results of operations.
Dependence on one or a few major customers
No customer accounts for more than 10% of sales.
Trademark and Patent Protection
As a company selling products nationwide and internationally, OSI believes
that establishing trade and service marks and copyrights for brand names and
associated advertising and labeling materials is important in maintaining
company and product identification and integrity. Accordingly, OSI is engaged on
a continuing basis in developing brand names and such associated materials for
its products, securing trade and service mark protection for such brand names
and copyright protection for such associated material, policing its existing
marks, and enforcing its legal rights in cases of potential infringement by
third parties of its legally protected marks and copyrights. Notwithstanding
these safeguards, it is possible for competitors of the Company to imitate its
products. Furthermore, others may independently develop products similar or
superior to those developed or planned by the Company. While the Company may
obtain patents or trademarks with respect to certain of its products, the
Company may not have sufficient resources to defend such patents; such patents
may not afford all necessary protection and competitors may develop equivalent
or superior products which may not infringe such patents.
Operating Losses.
The Company has incurred net losses of $77,651 and $8,261 for the fiscal
years ended December 31, 1998 and 1997, respectively. Such operating losses
reflect developmental and other start-up activities. The Company expects to
incur losses in the near future until profitability is achieved. The Company's
operations are subject to numerous risks associated with establishing any new
business, including unforeseen expenses, delays and complications. There can be
no assurance that the Company will achieve or sustain profitable operations or
that it will be able to remain in business.
Future Capital Needs and Uncertainty of Additional Funding
The Company was not in full operation during 1998 and thus, the revenues
generated are not representative of those that are expected once full operating
status has been achieved. Revenues are not yet sufficient to support the
Company's operating expenses. However, the Company is cautiously optimistic that
operating revenues will be adequate to meet operating expenses during the next
year. Since the Company's formation, it has funded its operations and capital
expenditures primarily through private placements of debt and equity securities.
The Company will be required to seek additional financing in the future. There
can be no assurance that such financing will be available at all or available on
terms acceptable to the Company.
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Government Regulation
The Company's products currently do not require government approval. The
Company is not aware of any existing or probable governmental regulations on the
business.
Research and Development Activities
For the years ended December 31, 1998 and 1997 there was no money allocated
to research and development. Royalty agreements provided that the research and
development expenses are to be paid by the royalty holder.
Employees
As of March 31, 1999 the Company had no full time employees. There are a
total of 2 contract employees engaged in the general management and
administration.
Risk of Low-priced Stocks
Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of
1934 (the "Exchange Act") impose sales practice and disclosure requirements on
certain brokers and dealers who engage in certain transactions involving "a
penny stock."
Currently, the Company's Common Stock is considered a penny stock for
purposes of the Exchange Act. The additional sales practice and disclosure
requirements imposed on certain brokers and dealers could impede the sale of the
Company's Common Stock in the secondary market. In addition, the market
liquidity and price for the Company's securities may be adversely affected.
Under the penny stock regulations, a broker or dealer selling penny stock
to anyone other than an established customer or "accredited investor"'
(generally, an individual with a net worth in excess of $1,000,000 or annual
incomes exceeding $200,000, or $300,000 together with his or her spouse) must
make a special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to sale, unless the broker
or dealer or the transaction is otherwise exempt. In addition, the penny stock
regulations require the broker or dealer to deliver, prior to any transaction
involving a penny stock, a disclosure schedule prepared by the Securities and
Exchange Commission (the "SEC") relating to the penny stock market, unless the
broker, or dealer, or the transaction is otherwise exempt. A broker, or dealer
is also required to disclose commissions payable to the broker or dealer and the
registered representative and current quotations for the Securities. In
addition, a broker or dealer is required to send monthly statements disclosing
recent price information with respect to the penny stock held in a customer's
account and information with respect to the limited market in penny stocks.
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ITEM 2 DESCRIPTION OF PROPERTY
The Company at this time has no properties. As of December 31, 1998, all
activities of the Company have been conducted by corporate officers from either
their homes or business offices. Currently, there are no outstanding debts owed
by the company for the use of these facilities and there are no commitments for
future use of the facilities.
ITEM 3 LEGAL PROCEEDINGS
The Company is not engaged in any legal proceedings other than the ordinary
routine litigation incidental to its business operations, which the Company does
not believe, in the aggregate, will have a material adverse effect on the
Company, or its operations.
ITEM 4 SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
No matters were subject to a vote of security holders during the year 1998.
PART II
ITEM 5 MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The stock is traded over-the-counter on the NASDAQ Bulletin Board with the
trading symbol "OSIN". The following high and low bid information was provided
by PC Financial Network. The quotations provided reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions.
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1997: High Low
First Quarter $ 1.750 $ 1.500
Second Quarter $ 0.938 $ 0.480
Third Quarter (To the best knowledge of
management, there was no trading
of shares for the third quarter
1997.)
Fourth Quarter $ 0.250 $ 0.250
1998:
First Quarter (To the best knowledge of
Second Quarter management, there was no trading
of shares for the first and second
quarter 1998.)
Third Quarter $ 0.125 $ 0.125
Fourth Quarter $ 1.125 $ 0.250
The number of shareholders of record of the Company's common stock as of
May 12, 1999 was approximately 259.
The Company has not paid any cash dividends to date and does not anticipate
paying dividends in the foreseeable future. It is the present intention of
management to utilize all available funds for the development of the Company's
business.
ITEM 6 MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS
General
The following discusses the financial position and results of operations of the
Company.
Results of Operations
From 1984 to 1986, the Company attempted to manufacture, distribute and
sell chemical products for the purification of water. This business activity was
abandoned. From 1986 to 1990, the Company attempted to acquire interests in
various business opportunities, all attempts were abandoned. The Company was
inactive from 1990 to 1992. The Company was in the development stage from
December 31, 1992 through December 31, 1997. Accordingly, comparisons with prior
periods are not meaningful.
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Total Revenues - For the year ended December 31, 1998, the Company had total
trade revenues of approximately $46,000.
Costs and Expenses - For the years ended December 31, 1998, the Company had a
net loss of approximately $78,000. The net loss for 1998 is largely attributable
to additional expenses incurred by startup companies. Given the limited
operations which took place in 1998, any discussion of operating expenses as a
percentage of sales would not be meaningful and might be misleading.
Liquidity and Capital Resources
The Company requires working capital principally to fund its current
operations. Generally the Company has adequate funds for its activities. There
are no formal commitments from banks or other lending sources for lines of
credit or similar short-term borrowing. It is anticipated that the current
operations will expand and funds generated will exceed the Company's working
capital requirements for the next year.
The Company intends to seek an acquisition of a larger and potentially more
profitable business. The Company intends to focus on opportunities to acquire
new products or technologies in development as well as those currently being
operated, including a complete operating business that has demonstrated
long-term growth potential, strong marketing presence, and the basis for
continuing profitability. The Company has not identified any specific target or
possible acquisition. As the Company pursues its acquisition program, it will
incur costs for ongoing general and administrative expenses as well as for
identifying, investigating, and negotiating a possible acquisition.
In order to complete any acquisition, the Company may be required to
supplement its available cash and other liquid assets with proceeds from
borrowings, the sale of additional securities, including the private placement
of restricted stock and/or a public offering, or other sources. There can be no
assurance that any such required additional funding will be available or
favorable to the Company.
Because management controls 59.83% of voting rights, management may
actively negotiate or otherwise consent to the purchase of any portion of their
common stock as a condition to or in connection with a proposed merger or
acquisition. Furthermore, management could consent or approve any particular
stock buy-out transaction without shareholder approval. In the event that an
appropriate merger candidate is located, the Company may need to pay cash
finder's fees or may issue securities (debt or equity) as a finders's fee.
Finder's fees or other acquisition related compensation may be paid to officers,
directors, promoters or their affiliates. Any such finder's fee paid to an
officer, director, promoter, or affiliate may present a conflict of interest
because of the non-arms length nature of such transaction. There are no such
negotiations in progress or contemplated.
There are no arrangements or understandings between non-management
shareholders and management under which non-management shareholders may directly
or indirectly participate in or influence the management of the Company's
affairs.
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The Company may be required to supplement its available cash and other
liquid assets with proceeds from borrowing, the sale of additional securities,
or other sources. There can be no assurance that any such required additional
funding will be available or, if available, that it can be obtained on terms
favorable to the Company.
Inflation and Regulation
The Company's operations have not been, and in the near term are not
expected to be, materially affected by inflation or changing prices. The Company
will encounter competition from a variety of firms selling barter/trade services
in its market area. Many of these firms have long standing customer
relationships and are well-staffed and well financed. The Company believes that
competition in the barter/trade industry is based on competitive pricing,
although the ability, reputation and support of a marketing network is also
significant. The Company does not believe that any recently enacted or presently
pending proposed legislation will have a material adverse effect on its results
of operations.
Factors That May Affect Future Results
Management's Discussion and Analysis and other parts of this form 10-KSB
contain information based on management's beliefs and forward-looking statements
that involve a number of risks, uncertainties, and assumptions. There can be no
assurance that actual results will not differ materially for the forward-looking
statements as a result of various factors, including but not limited to the
following:
The markets for many of the Company's offerings are characterized by
rapidly changing technology, evolving industry standards, and frequent new
product introductions. The Company's operating results will depend to a
significant extent on its ability to design, develop, or otherwise obtain and
introduce new products, services, systems, and solutions and to reduce the costs
of these offerings. The success of these and other new offerings is dependent on
many factors, including proper identification of customer needs, cost, timely
completion and introduction, differentiation from offerings of the Company's
competitors, and market acceptance. The ability to successfully introduce new
products and services could have an impact on future results of operations.
Year 2000 Compliance
The Company has made an effort to insure that the software components of
its information and billing systems are Year 2000 compliant. Management is in
the process of confirming that all of such systems are Year 2000 compliant. Upon
such confirmation, management believes that, after January 1, 2000, the Company
will be able to accurately track and bill for its services and products. At the
same time, it is likely that the operations of a number of the Company's vendors
rely on software that is not Year 2000 compliant.
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ITEM 7 FINANCIAL STATEMENTS
The financial statements of the Company and supplementary data are included
beginning immediately following the signature page to this report. See Item 13
for a list of the financial statements and financial statement schedules
included.
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are not and have not been any disagreements between the Company and
its accountants on any matter of accounting principles, practices or financial
statements disclosure.
PART III
ITEM 9 DIRECTORS EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
THE EXCHANGE ACT
Executive Officers and Directors
The following table sets forth the name, age, and position of each
executive officer and director of the Company:
Director's Name Age Office Term of Office
James O'Brien 63 CEO/President 1990 to Present
Rose Fischer 46 Secretary/Treasurer 1996 to Present
Goldie Hunt 70 Director 1992 to Present
Jessie Warner 43 Director 1998 to Present
Robert Dresser 70 Director 1998 to Present
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Business Experience
James O'Brien, CEO/President, founded Optimum Source International Ltd., during
the past five years Mr. O'Brien developed software, established trade and
countertrade exchanges for Optimum Source International, Ltd.
Rose Fischer, Secretary/Treasurer, with an associate degree in accounting, has
been Director and Operations Facilitator for the past two years, which includes
finalization and implementation of all electronic commerce. Prior to OSI, Ms.
Ros's experience was as a financial consultant with a privately held firm since
1985.
Goldie Hunt, Director, for the past six years has pursued her personal interests
since retiring from the retail industry.
Jessie Warner, Director, has associates degree in Business Management. Currently
with a broad background in organizational management, sales and customer
service, Mr. Warner researches company bios and backgrounds of prospective
clients, coordinates road shows between the senior stockbrokers and CEOs of
public companies.
Robert Dresser, Director, A former newspaper executive, Mr. Dresser's tenure of
the past 30 plus years directing the Stockbrokers Society into the leading
organization that assists public corporations enhancing their visibility in the
financial and investment community.
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of forms 3, 4, and 5 and amendments thereto,
furnished to the Company during or respecting its last fiscal year, no director,
officer, beneficial owner of more than 10% of any class of equity securities of
the Company or any other person known to be subject to Section 16 of the
Exchange Act of 1934, as amended, failed to file on a timely basis reports
required by Section 16(a) of the Exchange Act for the last fiscal year.
ITEM 10 EXECUTIVE COMPENSATION
There has been no executive compensation.
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ITEM 11 SECURITY OWNERSHIP OF BENEFICIAL OWNERS
AND MANAGEMENT
Principal Shareholders
The table below sets forth information as to each person owning of record
or who was known by the Company to own beneficially more than 5% of the
1,654,051 shares of issued and outstanding Common Stock of the Company as of
March 31, 1999 and information as to the ownership of the Company's Stock by
each of its directors and executive officers and by the directors and executive
officers as a group. Except as otherwise indicated, all shares are owned
directly, and the persons named in the table have sole voting and investment
power with respect to shares shown as beneficially owned by them.
# of
Name and Address Nature of Shares
of Beneficial Owners Ownership Owned Percent
Directors
James O'Brien Common Stock 1,000,000 60%
All Executive Officers Common Stock 1,000,000 60%
and Directors as a Group
(5 persons)
Mr. O'Brien has "sole investment power" and "sole voting power". There have been
no common shares issued to any of the directors of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
James O'Brien, the President of the Company, provided the Company with the
marketing distribution plans, compensation program, commission payout structure,
operations, and automated monthly ordering system.
During 1998 and 1997 the Company borrowed money from James O'Brien to pay
administrative expenses. The loan is payable on demand and carries an annual
interest rate of 10 percent. As of December 31, 1998, the principal owing is
$83,306 with accrued interest of $2,083.
As of December 31, 1998 all activities of the Company have been conducted
by corporate
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officers from either their homes or business offices. Currently, there are no
outstanding debts owed by the Company for the use of these facilities and there
are no commitments for future use of the facilities.
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements Page
Report of Robison, Hill & Co., Independent Certified Public Accountants......F-1
Balance Sheets as of December 31, 1998, and 1997.............................F-2
Statements of Loss for the years ended
December 31, 1998, and 1997.............................................F-3
Statement of Stockholders' Equity for the years ended
December 31, 1998, and 1997.............................................F-4
Statements of Cash Flows for the years ended
December 31, 1998, and 1997.............................................F-5
Notes to Financial Statements................................................F-6
2. Financial Statement Schedules
The following financial statement schedules required by Regulation
S-X are included herein.
All schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
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3. Exhibits
The following exhibits are included as part of this report:
Exhibit
Number Title of Document
3.1 Articles of Incorporation(1)
3.2 By-laws(1)
23.1 Consent of Robison, Hill & Co.
27.1 Financial Data Schedule
(1) Incorporated by reference.
(b) No reports on Form 8-K were filed.
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SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on it behalf by the undersigned, thereunto duly authorized.
OPTIMUM SOURCE INTERNATIONAL, LTD.
Dated: May 17, 1999 By /S/ James O'Brien
----------------------------
James O'Brien,
C.E.O., President
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 17th day of May 1999.
Signatures Title
/S/ James O'Brien
James O'Brien C.E.O., President
(Principal Executive, Financial
and Accounting Officer)
/S/ Rose Fischer
Rose Fischer Secretary/Treasurer
/S/ Goldie Hunt
Goldie Hunt Director
/S/ Jessie Warner
Jessie Warner Director
/S/ Robert Dresser
Robert Dresser Director
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INDEPENDENT AUDITOR'S REPORT
Board of Directors
Optimum Source International, LTD.
(Formerly a Development Stage Company)
We have audited the accompanying balance sheets of Optimum Source
International, LTD., (Formerly A development Stage Company) as of December 31,
1998 and 1997, and the related statements of loss, retained earnings, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Optimum Source
International, LTD., (Formerly A development Stage Company) as of December 31,
1998 and 1997 and the results of its operations, and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
Respectfully submitted,
/s/ Robison, Hill & Co.
Certified Public Accountants
Salt Lake City, Utah
April 29, 1999
F - 1
<PAGE>
<TABLE>
<CAPTION>
OPTIMUM SOURCE INTERNATIONAL, LTD.
(Formerly A Development Stage Company)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
1998 1997
--------- ---------
<S> <C> <C>
Assets
Current Assets
Inventory ............................................ $ 50,000 $ 14,013
Prepaid Expense ...................................... -- 10,000
--------- ---------
Total Current Assets ................................ 50,000 $ 24,013
========= =========
Liabilities and Stockholders' Equity
Liabilities
Accounts Payable ...................................... 18,689 2,455
Trade Dollars Payable ................................. 65,000 --
Accrued Liabilities ................................... 2,133 8,455
Loans From Shareholder ................................ 83,306 54,580
--------- ---------
Total Liabilities ................................... 169,128 65,490
--------- ---------
Stockholders' Equity
Preferred Stock, authorized 5,000,000 shares of
$.01 par value, issued and outstanding 0 ......... -- --
Common Stock, authorized 50,000,000 shares of
$.001 par value, issued and outstanding 1,654,051 1,654 1,654
Additional Paid in Capital ........................... 92,765 93,876
Retained Deficit ..................................... (213,547) (135,896)
Less: Treasury Stock 59,738 shares at Cost ........... -- (1,111)
--------- ---------
Total Stockholders' Equity (Deficit) ................ (119,128) (41,477)
--------- ---------
Total Liabilities and Stockholders' Equity ............ $ 50,000 $ 24,013
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 2
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
(Formerly A Development Stage Company)
STATEMENTS OF LOSS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
--------- ---------
Revenues ....................................... $ 45,905 $ --
Cost of Revenues ............................... 14,013 --
--------- ---------
Gross Profit .............................. 31,892 --
--------- ---------
Expenses
General and Administrative Expenses ......... 101,878 2,554
Other Expense - Interest .................... 7,615 5,707
--------- ---------
Total Expenses ............................ 109,493 8,261
--------- ---------
Net Loss Before Taxes .......................... (77,601) (8,261)
Income Taxes ................................... (50) --
--------- ---------
Net Loss ....................................... $ (77,651) $ (8,261)
========= =========
Net Loss Per Share ............................. $ (0.05) $ --
========= =========
Weighted Average shares
Outstanding ................................... 1,654,051 1,654,051
========= =========
The accompanying notes are an integral part of these financial statements.
F - 3
<PAGE>
<TABLE>
<CAPTION>
OPTIMUM SOURCE INTERNATIONAL, LTD.
(Formerly A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Additional
Common Stock Paid-in Retained Treasury
---------------------
Shares Amount Capital Deficit Stock
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 . 1,654,051 $ 1,654 $ 93,876 $(127,635) $ 1,111
Net Loss ................... -- -- -- 8,261 --
--------- --------- --------- --------- ---------
Balance at December 31, 1997 1,654,051 1,654 93,876 (135,896) 1,111
Treasury stock canceled .... -- -- (1,111) (1,111)
Net Loss ................... -- -- -- (77,651) --
--------- --------- --------- --------- ---------
Balance at December 31, 1998 1,654,051 $ 1,654 $ 92,765 $(213,547) $ --
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 4
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
(Formerly A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
December
--------------------
1998 1997
-------- --------
Cash Flows From Operating
Net cash used by operating activities .................. $(28,726) $ (1,600)
-------- --------
Cash Flows From Investing Activites
Net cash used by investing activities .................. -- --
-------- --------
Cash flows From Financing Activities
Loans from shareholder ................................. 28,726 1,600
-------- --------
Net cash provided by financing activities .............. 28,726 1,600
-------- --------
Net increase (decrease) in cash and
Cash equivalents ..................................... -- --
-------- --------
Cash and cash equivalents at beginning
of year ............................................... -- --
-------- --------
Cash and cash equivalents at end of year ............... $ -- $ --
======== ========
Reconciliation of Net Loss to Cash Provided (Used) by
Operating Activities
Net loss ............................................... $(77,651) $ (8,261)
Changes in Assets and Liabilities
Amortization ........................................... -- --
Increase in inventory .................................. (35,987) --
Increase in prepaid expense ............................ 10,000 --
Increase in accounts payable ........................... 16,234 855
Increase in trade dollars payable ...................... 65,000 --
Increase (Decrease) in accrued expenses ................ (6,322) 5,806
-------- --------
Net Cash Used by Operating Activities .................. $(28,726) $ (1,600)
======== ========
Supplemental Disclosure of Cash Flow Information
Interest ............................................... $ -- $ --
Income Taxes ........................................... $ -- $ --
The accompanying notes are an integral part of these financial statements
F - 5
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
(Formerly A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Optimum Source International, LTD.
is presented to assist in understanding the Company's financial statements. The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
Organization and History
The Company was incorporated under the laws of the State of Utah on October
24, 1984. The Company Redomiciled to the State of Nevada on June 29, 1990. From
1984 to 1986, the Company attempted to manufacture, distribute and sell chemical
products for the purification of water. This business activity was abandoned.
From 1986 to 1990, the Company attempted to acquire interests in various
business opportunities, all attempts were abandoned. The Company was inactive
from 1990 to 1992. The Company was in the development stage from December 31,
1992 through December 31, 1997.
Nature of Business
The Company's primary mission is Barter/Counter-trade and its proprietary
interactive services both Domestic and International and encompassing the
liquidation & auction industries globally.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Loss per Share
The reconciliations of the numerators and denominators of the basic
earnings per share computations are as follows:
F - 6
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
(Formerly A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loss per Share (Continued)
Per-Share
Income Shares Amount
(Numerator) (Denominator)
For the year ended December 31, 1998
Basic Earnings per Share
Income available to common shareholders $ (77,651) 1,654,051 $ (0.05)
========= ========= ========
For the year ended December 31, 1997
Basic Earnings per Share
Income available to common shareholders $ (8,261) 8,297,472 $ --
========= ========= =========
The effect of outstanding common stock equivalents would be antidilutive
for 1998 and 1997 and are thus not considered.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 2 - INCOME TAXES
As of December 31, 1998, the Company had a net operating loss carryforward
for income tax reporting purposes of approximately $186,000 expiring in 1999
through 2013. Current tax laws limit the amount of loss that can offset future
taxable income when there is a substantial change in ownership. The amount of
net operating loss available to offset future income will be limited if there is
a substantial change in ownership.
F - 7
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
(Formerly A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(Continued)
NOTE 3 - COMMITMENTS
As of December 31, 1998 and 1997 all activities of the Company have been
conducted by corporate officers from either their homes or business offices.
Currently, there are no outstanding debts owed by the company for the use of
these facilities and there are no commitments for future use of the facilities.
NOTE 4 - RELATED PARTY TRANSACTIONS
During 1998 and 1997 the Company borrowed money from an officer to pay
administrative expenses. The loan is payable on demand and carries an annual
interest rate of 10 percent. As of December 31, 1998, the principal owing is
$83,306 with accrued interest of $2,083.
NOTE 5 - STOCK SPLIT
On December 23, 1998, 1998 the Board of Directors authorized 5 to 1 reverse
stock split of the Company's $.001 par value common stock. As a result of the
split, 6,703,159 shares were canceled, and additional paid-in capital was
increased by $6,703. All references in the accompanying financial statements to
the number of common shares and per-share amounts for 1997 have been restated to
reflect the reverse stock split.
F - 8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET OF OPTIMUM SOURCE INTERNATIONAL, LTD. AS OF DECEMBER 31, 1998 AND
THE RELATED STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE YEAR THEN ENDED AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 50
<CURRENT-ASSETS> 50
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 50
<CURRENT-LIABILITIES> 169
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> (121)
<TOTAL-LIABILITY-AND-EQUITY> 50
<SALES> 46
<TOTAL-REVENUES> 46
<CGS> 14
<TOTAL-COSTS> 14
<OTHER-EXPENSES> 102
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> (78)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (78)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
