U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2000
-----------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
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Commission file number 0-23825
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Optimum Source International, Ltd.
----------------------------------------------------
(Exact name of small business issuer as
specified in its charter)
Nevada 86-0674322
--------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
4525 West Hacienda Avenue, Suite 12H, Las Vegas, Nevada 89118
-----------------------------------------------------------------------
(Address of principal executive offices)
(800) 868-7233
Issuer's telephone number
(Former name, former address and former fiscal year,
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. Yes X No
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date: 11,656,585 as of
September 30, 2000
Transitional Small Business Disclosure Format (check one). Yes ; No X
<PAGE>
PART I
Item 1. Financial Statements
INDEPENDENT ACCOUNTANT'S REPORT
Optimum Source International, Ltd.
We have reviewed the accompanying balance sheets of Optimum Source
International, Ltd. as of September 30, 2000 and December 31, 1999, and the
related statements of operations for the three and nine months, and cash flows
for the nine month periods ended September 30, 2000 and 1999. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statement taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
Respectfully submitted
/s/ ROBISON, HILL & CO.
Certified Public Accountants
Salt Lake City, Utah
November 30, 2000
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<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
BALANCE SHEET
September 30, December 31,
ASSETS ................................... 2000 1999
----------- ----------
Current Assets
Cash ................................... $ 236,380 $ 149
Accounts Receivable .................... 2,455 2,455
Inventory .............................. 45,800 32,100
Marketable Securities .................. 13,425 127,688
----------- ----------
Total Current Assets ................ 298,060 162,392
Other Assets
Intangible Assets ...................... 1,000,000 1,000,000
Accumulated Amortization ............... (150,000) --
----------- ----------
Total Other Assets .................. 850,000 1,000,000
Total Assets ........................... $ 1,148,060 $1,162,392
=========== ==========
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<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
BALANCE SHEET
(Continued)
<TABLE>
<CAPTION>
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY ................... 2000 1999
----------- -----------
Liabilities
<S> <C> <C>
Accounts Payable - Trade Dollars ..................... $ 32,100 $ 32,100
Accounts Payable ..................................... 34,962 28,748
Accrued Liabilities .................................. 18,408 11,299
Loans from Shareholder ............................... 410,071 95,456
----------- -----------
Total Liabilities ................................. 495,541 167,603
----------- -----------
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 11,656,585 . 11,657 11,657
Additional Paid in Capital ........................... 1,096,262 1,096,262
Accumulated Gain(Loss) on sale of marketable securities (73,728) 25,511
Retained Deficit ..................................... (381,672) (138,641)
----------- -----------
Total Stockholders' Equity (Deficit) .............. 652,519 994,789
----------- -----------
Total Liabilities and Stockholders' Equity ........ $ 1,148,060 $ 1,162,392
----------- -----------
</TABLE>
See accompanying notes and accountants' report.
5
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ----------- ------------ -----------
Revenue:
<S> <C> <C> <C> <C>
Sales ..................... $ 13,745 $ -- $ 42,895 $ 75,000
Cost of Sales ............. 20,444 -- 50,025 60,000
------------ ----------- ------------ -----------
Gross Margin ................ (6,699) -- (7,130) 15,000
Expenses
General and Administrative 129,623 715 334,080 17,165
------------ ----------- ------------ -----------
Operating Profit (Loss) ..... (136,322) (715) (341,210) (2,165)
------------ ----------- ------------ -----------
Other Income
Interest Income ........... 1 -- 333 --
Gain on Sale of Investments -- -- 106,051 --
Interest Expense .......... (2,522) (3,980) (8,205) (9,686)
------------ ----------- ------------ -----------
Total Other Income ..... (2,521) (3,980) 98,179 (9,686)
------------ ----------- ------------ -----------
Income (Loss) Before Taxes .. (138,843) (4,695) (243,031) (11,851)
Income Tax .................. -- -- -- --
------------ ----------- ------------ -----------
Net Income (Loss) ........... $ (138,843) $ (4,695) $ (243,031) $ (11,851)
============ =========== ============ ===========
Weighted Average Shares
Outstanding ............... 11,656,585 1,654,051 11,656,585 1,654,051
============ =========== ============ ===========
Loss Per Share .............. $ (0.01) $ -- $ (0.02) $ (0.01)
============ =========== ============ ===========
</TABLE>
See accompanying notes and accountants' report.
6
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
STATEMENT OF CASH FLOWS
For the Nine Months
Ended September 30,
---------------------
2000 1999
--------- --------
Cash Flows from Operating Activities:
Cash paid to suppliers ............................. $(199,459) $(11,850)
--------- --------
Net cash used in operating activities ................. (199,459) (11,850)
--------- --------
Cash Flows from Investing Activities:
Cash received from sale of marketable securities ... 121,075
--------- --------
Net cash used by investing activities ................. 121,075 --
--------- --------
Cash Flows From Financing Activities:
Loans from shareholder ............................. 314,615 11,850
--------- --------
Net Cash Provided by Financing Activities ............ 314,615 11,850
--------- --------
Net Increase (Decrease) in Cash and
Cash Equivalents .................................... 236,231 --
Cash and Cash Equivalents at
Beginning of the Year ............................... 149 --
--------- --------
Cash and Cash Equivalents at
End of the Year ..................................... $ 236,380 $ --
========= ========
Reconciliation of Net Loss to Cash Used
by Operating Activities
Net income (loss) ..................................... $(243,031) $(11,851)
Changes in Assets and Liabilities
--------
Increase in accounts receivable ....................... -- --
Decrease (Increase) in inventory ...................... (13,700) 30,000
Decrease (Increase) in marketable securities .......... -- (75,000)
Gain on sale of investments ........................... (106,051) --
Increase in accounts payable .......................... 6,214 6,563
Increase in trade dollars payable ..................... -- 30,000
Increase in accrued expenses .......................... 7,109 8,438
Amortization .......................................... 150,000 --
--------- --------
Net Cash Used by Operating Activities ................. $(199,459) $(11,850)
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH
-------------------------------
FLOW INFORMATION:
Interest $ 8,205 $ --
Income Taxes $ -- $ --
See accompanying notes and accountants' report.
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<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
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.
The unaudited financial statements as of September 30, 2000 and for the
nine months then ended reflect, in the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to fairly state the
financial position and results of operations for the three and nine months.
Operating results for interim periods are not necessarily indicative of the
results which can be expected for full years.
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.
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.
Consolidation
The consolidated financial statements include the accounts of the Company,
its predecessors and its wholly owned subsidiary The Word. Ltd. The effect of
all intercompany balances and transactions have been eliminated in combination.
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.
8
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Reclassification
Certain reclassifications have been made in the 1999 financial statements
to conform with the 2000 presentation.
Loss per Share
The reconciliations of the numerators and denominators of the basic
earnings per share computations are as follows:
Per-Share
Income Shares Amount
------ ------ ------
(Numerator) (Denominator)
For the three months ended September 30, 2000
---------------------------------------------
Basic Earnings per Share
Income available to common shareholders $ (138,843) 11,656,585 $ (0.01)
============ =========== ==========
For the nine months ended September 30, 2000
--------------------------------------------
Basic Earnings per Share
Income available to common shareholders $ (243,031) 11,656,585 $ (0.02)
============ =========== ==========
For the three months ended September 30, 1999
---------------------------------------------
Basic Earnings per Share
Income available to common shareholders $ (4,695) 1,654,051 $ --
============ =========== ==========
For the nine months ended September 30, 1999
--------------------------------------------
Basic Earnings per Share
Income available to common shareholders $ (11,851) 1,654,051 $ (0.01)
============ =========== ==========
There are no outstanding common stock equivalents at September 30, 2000. The
effect of outstanding common stock equivalents would be antidilutive for 2000
and are thus not considered.
9
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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.
Intangibles
Intangible assets associated with the acquisition of "The Word, Ltd." are
amortized over five years.
NOTE 2 - COMPREHENSIVE INCOME
Comprehensive income is the total of (1) net income plus (2) all other
changes in net income arising from nonowner sources, which are referred to as
other comprehensive income. An analysis of changes in components of accumulated
other comprehensive income is presented in the statement of changes in
stockholders' equity.
NOTE 3 - AVAILABLE-FOR-SALE INVESTMENTS
The Company's investments in marketable equity securities are held for an
indefinite period and thus are classified as available for sale. Unrealized
holding gain (loss) on such securities, which were added to stockholders' equity
during 1999 were $25,511 . For the nine months ended September 30, 2000, this
unrealized holding loss was $73,728.
NOTE 4 - INCOME TAXES
As of September 30, 2000, the Company had a net operating loss carryforward
for income tax reporting purposes of approximately $354,000 expiring in 2016
through 2018. Current tax laws limit the amount of loss that can offset future
taxable income when there is a substantial change in
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<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Continued)
NOTE 4 - INCOME TAXES (continued):
ownership. The amount of net operating loss available to offset future income
will be limited if there is a substantial change in ownership.
The Company is subject to corporate federal income taxes. Deferred taxes
are determined based on the estimated future tax effects of differences between
the financial reporting and tax basis of assets and liabilities given the
provisions of the enacted tax laws. The deferred tax asset and deferred tax
liability comprised the following at September 30:
September 30, December 31,
2000 1999
--------- --------
Deferred Tax Asset:
Net operating loss carryforward ............... $ 123,911 $ 26,540
Valuation Allowance ........................... (123,911) (26,540)
--------- --------
Deferred Tax Asset .............................. -- --
--------- --------
Deferred Tax Liability: ......................... -- --
--------- --------
Net Deferred Tax Asset (Liability) .............. $ -- $ --
========= ========
The components of the income tax provision are as follows:
For the Nine Months
Ended September 30,
2000 1999
--------------------- --------------------
Current
Federal ................ $ -- $ --
State .................. -- --
Deferred
Federal ................ -- --
State .................. -- --
--------------------- --------------------
Total .............. $ -- $ --
===================== ====================
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<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Continued)
NOTE 4 - INCOME TAXES (continued):
A reconciliation between the Company's effective tax rate and the statutory
federal income tax rate on the income from continuing operations is as follows:
For the Nine Months
Ended September 31,
2000 1999
------- -------
Statutory federal income tax rate ......... 34.00 % 34.00 %
State income taxes ........................ -- % -- %
Other ..................................... (34.00) % (34.00) %
------- -------
Effective income tax rate ................. -- % -- %
======= =======
NOTE 5 - RELATED PARTY TRANSACTIONS
During 1999 and 1998 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 September 30, 2000, the principal owing is
$410,071 with accrued interest of $18,408.
NOTE 6 - COMMITMENTS
The Company has committed to a one year lease at $1,500 per month for its
corporate headquarters in Las Vegas, Nevada.
As of September 30, 2000 all activities of the Company were conducted by
corporate officers from either their homes or business offices. 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.
12
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
General - This discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
Company's annual report on Form 10-KSB for the year ended December 31, 1999.
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.
Total Revenues - For the nine months ended September 30, 2000 and 1999, the
Company had total sales of approximately $42,900 and $75,000 respectively.
Costs and Expenses - For the nine months ended June 30, 2000 and 1999, the
Company had a net loss of approximately $243,000 and $11,900, respectively.
Liquidity and Capital Resources
The Company requires working capital principally to fund its current operations.
There are no formal commitments from banks or other lending sources for lines of
credit or similar short-term borrowing, but the Company has been able to borrow
any additional working capital that has been required. From time to time in the
past, required short-term borrowing have been obtained from a principal
shareholder or other related entities.
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.
13
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
The Company did not file a report on Form 8-K during the three months ended
September 30, 2000.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
OPTIMUM SOURCE INTERNATIONAL, LTD.
(Registrant)
DATE: December 1, 2000
----------------
By: /S/
------
James O'Brien, C.E.O., President
(Principal financial and Accounting Officer)
15
