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, 1999
[ ] 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.)
4525 WEST HACIENDA AVENUE, STE 12H, LAS VEGAS, NEVADA 89118
(Address of principal executive offices) (Zip code)
ISSUER'S TELEPHONE NUMBER (800) 868-7233 EXT 225
-----------------------
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
Check if there is no disclosure of delinquent filers in response 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. $182,626
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As of February 14, 2000, there were 11,656,585 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 $3,406,035 computed at the estimated average
bid and asked price as of February 11, 2000.
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.
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
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network. OSI has developed the forum for buyers and sellers to locate one
another and conduct business using the latest networking technologies.
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 nondealer/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.
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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.
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.
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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.
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.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING
The Company was not in full operation during 1999 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, 1999 and 1998 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 December 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 has committed to a one year lease at $1,500 per month for
its corporate headquarters in Las Vegas, Nevada.
As of December 31, 1998 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.
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
1999.
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
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"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.
1998: High Low
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
1999:
First Quarter (To the best knowledge of
management, there was no trading of
shares for the first quarter 1999.)
Second Quarter $ 0.125 $ 0.125
Third Quarter $ 6.000 $ 5.438
Fourth Quarter $ 6.875 $ 4.750
The number of shareholders of record of the Company's common stock as
of December 31, 1999 was approximately 261.
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
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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. The Company was not in full operations as of
December 31, 1998, accordingly, comparisons with prior periods are not
meaningful.
Total Revenues - For the years ended December 31, 1999 and 1998, the Company had
total trade revenues of approximately $183,000 and $46,000, respectively.
Costs and Expenses - For the years ended December 31, 1999, the Company had net
income of approximately $75,000. 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 86% 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
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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.
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.
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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
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DIRECTOR'S NAME Age Office Term of Office
- --------------------------------------------------------------------------------
GOLDIE HUNT 70 DIRECTOR 1992 TO PRESENT
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.
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
11,656,585 shares of issued and outstanding Common Stock of the Company as of
February 14, 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 11,000,000 94%
All Executive Officers Common Stock 11,002,534 94%
and Directors as a Group
(5 persons)
Mr. O'Brien has "sole investment power" and "sole voting power" over 10,000,000
shares and "sole voting power" over 1,000,000.
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 1999 and 1998 the Company borrowed money from James O'Brien to
pay administrative expenses. The loan is payable on demand and carries an annual
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interest rate of 10 percent. As of December 31, 1999, the principal owing is
$95,456 with accrued interest of $11,299.
Through December 31, 1998 all activities of the Company had 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 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
Consolidated Balance Sheets
December 31, 1999 and 1998 F - 2
Consolidated Statements of Operations
For the Years Ended December 31, 1999 and 1998 F - 3
Consolidated Statement of Stockholders' Equity
For the Years Ended December 31, 1999 and 1998 F - 4
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1999 and 1998 F - 5
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998 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.(1)
27.1 Financial Data Schedule
(1) Incorporated by reference.
(a) No reports on Form 8-K were filed.
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SIGNATURES
In accordance with Section 13 or 15(d) 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.
DATED: FEBRUARY 15, 2000 BY /S/ JAMES O'BRIEN
----------------------------
James O'Brien,
C.E.O., President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signatures Title
/S/ JAMES O'BRIEN
James O'Brien Director, C.E.O., President
FEBRUARY 15, 2000 (Principal Executive, Financial
Date and Accounting Officer)
/S/ ROSE FISCHER
Rose Fischer Director, Secretary/Treasurer
FEBRUARY 15, 2000
Date
/S/ GOLDIE HUNT
Goldie Hunt Director
FEBRUARY 15, 2000
Date
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INDEPENDENT AUDITOR'S REPORT
Board of Directors
Optimum Source International, Ltd.
We have audited the accompanying consolidated balance sheets of Optimum
Source International, Ltd., as of December 31, 1999 and 1998, and the related
consolidated statements of operations, retained earnings, and cash flows for the
years then ended. These consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Optimum
Source International, Ltd., as of December 31, 1999 and 1998 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
February 9, 2000
F - 1
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OPTIMUM SOURCE INTERNATIONAL, LTD.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash .................................................. $ 149 $ --
Accounts Receivable ................................... 2,455 --
Inventory ............................................. 32,100 50,000
Available-for-Sale Investments ........................ 127,688 --
----------- -----------
Total Current Assets ................................. 162,392 50,000
Other Assets - Intangible Assets .......................... 1,000,000 --
----------- -----------
$ 1,162,392 $ 50,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts Payable ....................................... $ 28,748 $ 18,689
Trade Dollars Payable .................................. 32,100 65,000
Accrued Liabilities .................................... 11,299 2,133
Loans From Shareholder ................................. 95,456 83,306
----------- -----------
Total Liabilities .................................... 167,603 169,128
----------- -----------
Stockholders' Equity
Preferred Stock, authorized 5,000,000 shares of
$.01 par value, issued and outstanding zero ......... -- --
Common Stock, authorized 50,000,000 shares of
$.001 par value, issued and outstanding 11,656,585 at
December 31, 1999 and 1,654,051 at December 31, 1998 11,657 1,654
Additional Paid in Capital ............................ 1,096,262 92,765
Accumulated Other Comprehensive Income ................ 25,511 --
Retained Deficit ...................................... (138,641) (213,547)
----------- -----------
Total Stockholders' Equity (Deficit) ................. 994,789 (119,128)
----------- -----------
Total Liabilities and Stockholders' Equity ............. $ 1,162,392 $ 50,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 2
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
----------- -----------
Revenues ...................................... $ 182,626 $ 45,905
Cost of Revenues .............................. 56,400 14,013
----------- -----------
Gross Profit ............................. 126,226 31,892
----------- -----------
Expenses
General and Administrative Expenses ........ 37,712 101,878
Other Expense - Interest ................... 13,608 7,615
----------- -----------
Total Expenses ........................... 51,320 109,493
----------- -----------
Net Income (Loss) Before Taxes ................ 74,906 (77,601)
Income Taxes .................................. -- (50)
----------- -----------
Net Loss ...................................... $ 74,906 $ (77,651)
=========== ===========
Net Income (Loss) Per Share ................... $ 0.03 $ (0.05)
=========== ===========
Weighted Average shares
Outstanding .................................. 2,887,004 1,654,051
=========== ===========
The accompanying notes are an integral part of these financial statements.
F - 3
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Stock Paid-in Comprehensive Retained Treasury
-------------------------
Shares Amount Capital Income Deficit Stock
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 . 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) --
November 2, 1999 Shares
issued in exchange for
"The Word" subsidiary ...... 10,000,000 10,000 990,000 -- -- --
December 20, 1999 Shares
issued for cash ............ 2,534 3 13,497 -- -- --
Comprehensive income:
Net Income ............... -- -- -- -- 74,906 --
Unrealized holding gains . -- -- -- 25,511 -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 11,656,585 $ 11,657 $ 1,096,262 $ 25,511 $ (138,641) $ --
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 4
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
December
----------------------
1999 1998
--------- ---------
CASH FLOWS FROM OPERATING
Net cash Provided (used) by operating activities ..... $ 76,676 $ (28,726)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Available-for-sale Investments ........ (102,177) --
--------- ---------
Net cash used by investing activities ................ (102,177) --
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock ............... 13,500 --
Loans from shareholder ............................... 12,150 28,726
--------- ---------
Net cash provided by financing activities ............ 25,650 28,726
--------- ---------
Net increase (decrease) in cash and
Cash equivalents ................................... 149 --
Cash and cash equivalents at beginning
of year ............................................. -- --
--------- ---------
Cash and cash equivalents at end of year ............. $ 149 $ --
========= =========
RECONCILIATION OF NET LOSS TO CASH PROVIDED (USED) BY
OPERATING ACTIVITIES
Net Income (loss) .................................... $ 74,906 $ (77,651)
CHANGES IN ASSETS AND LIABILITIES
Increase in accounts receivable ...................... (2,455) --
Decrease (Increase) in inventory ..................... 17,900 (35,987)
Increase in prepaid expense .......................... -- 10,000
Increase in accounts payable ......................... 10,059 16,234
Increase (Decrease) in trade dollars payable ......... (32,900) 65,000
Increase (Decrease) in accrued expenses .............. 9,166 (6,322)
--------- ---------
Net Cash Provided (Used) by Operating Activities ..... $ 76,676 $ (28,726)
========= =========
Supplemental Disclosure of Cash Flow Information
Interest ............................................. $ -- $ --
Income Taxes ......................................... $ -- $ --
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES: On November 2, 1999 the Company acquired a wholly owned subsidiary
"The Word Ltd" and its products and marketing rights (i.e., Traders Tool
software, Art of Starter Barter Book, and world wide marketing rights to both
products), in exchange for 10 million shares of the Company's common stock
valued at $.10 per share (total exchange value $1,000,000).
The accompanying notes are an integral part of these financial statements
F - 5
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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.
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.
RECLASSIFICATION
Certain reclassifications have been made in the 1998 financial
statements to conform with the 1999 presentation.
F - 6
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(CONTINUED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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 YEAR ENDED DECEMBER 31, 1999
Basic Earnings per Share
Income available to common shareholders ..... $ 74,906 2,887,004 $0.03
========= ========= =====
FOR THE YEAR ENDED DECEMBER 31, 1998
Basic Earnings per Share
Income available to common shareholders ...... $ (77,651) 1,654,051 $(0.05)
========= ========= =====
There are no outstanding common stock equivalents at December 31, 1999.
The effect of outstanding common stock equivalents would be antidilutive for
1998 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 - 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.
F - 7
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(CONTINUED)
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 and 1998 were $25,511 and $0, respectively.
NOTE 4 - INCOME TAXES
As of December 31, 1999, the Company had a net operating loss
carryforward for income tax reporting purposes of approximately $111,000
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
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 December 31:
1999 1998
-------- --------
Deferred Tax Asset:
Net operating loss carryforward .............. $ 26,540 $ 55,790
Valuation Allowance .......................... (26,540) (55,790)
-------- --------
Deferred Tax Asset ............................. -- --
-------- --------
Deferred Tax Liability: ........................ -- --
-------- --------
Net Deferred Tax Asset (Liability) ............. $ -- $ --
======== ========
The components of the income tax provision are as follows:
1999 1998
-------- --------
Current
Federal ............................ $ 14,535 $ --
State .............................. -- 50
Deferred
Federal ............................ (14,535) --
State .............................. -- --
-------- --------
Total .......................... $ -- $ 50
======== ========
F - 8
<PAGE>
OPTIMUM SOURCE INTERNATIONAL, LTD.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(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:
1999 1998
------ ------
Statutory federal income tax rate ........ 34.00 % 34.00 %
State income taxes ....................... -- % 2.00 %
Other .................................... (34.00) % (36.00) %
----- -----
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 December 31, 1999, the principal owing is
$95,456 with accrued interest of $11,299.
NOTE 6 - 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 1998 have been restated to
reflect the reverse stock split.
NOTE 7 - 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 December 31, 1998 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.
F - 9
<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, 1999 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>
<CIK> 0001056256
<NAME> OPTIMUM SOURCE INTERNATIONAL, LTD.
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1.00
<CASH> 0
<SECURITIES> 128
<RECEIVABLES> 2
<ALLOWANCES> 0
<INVENTORY> 32
<CURRENT-ASSETS> 162
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1162
<CURRENT-LIABILITIES> 168
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> 983
<TOTAL-LIABILITY-AND-EQUITY> 1162
<SALES> 183
<TOTAL-REVENUES> 183
<CGS> 56
<TOTAL-COSTS> 56
<OTHER-EXPENSES> 38
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> 75
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
