UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 000-26377
OXIR INVESTMENTS, INC.
(Exact name of small business issuer as specified in its charter)
California 88-0397134
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3980 Howard Hughes Parkway, Suite 340, Las Vegas, Nevada 89109
(Address of principal executive offices)
Registrant's telephone no., including area code: (702) 369-4260
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
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
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 practicable date.
Class Outstanding as of March 15, 2000
Common Stock, no par value 21,182,200
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements. . . . . . . . . . . . 3
Consolidated Balance Sheets -- December 31,
1999 and June 30, 1999 . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations -- three and
six months ended December 31, 1999 and 1998. . . . . . 6
Consolidated Statements of Stockholders' Equity. . . . . 7
Consolidated Statements of Cash Flows -- three and
Six months ended December 31, 1999 and 1998. . . . . . 8
Notes to Consolidated Financial Statements . . . . . . . 10
Item 2. Management's Discussion and Analysis and
Results of Operations. . . . . . . . . . . . . . . . . 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 14
Item 2. Changes In Securities. . . . . . . . . . . . . . . . . . 14
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of
Securities Holders . . . . . . . . . . . . . . . . . . 15
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 16
PART I
Item 1. Financial Statements
The following unaudited Financial Statements for the period
ended December 31, 1999, have been prepared by the Company.
OXIR INVESTMENTS, INC.
FINANCIAL STATEMENTS
December 31, 1999
(Unaudited)
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
December 31, June 30,
1999 1999
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 48,617 $ 52,627
Investment in trading securities 4,937,524 4,672,246
Prepaid expenses 3,969 3,978
Total Current Assets 4,990,110 4,728,851
PROPERTY AND EQUIPMENT 5,928,621 4,013,222
OTHER ASSETS
Investment 300,000 -
Related party receivable 8,080 8,080
Deposits 3,069 15,000
Total Other Assets 311,149 23,080
TOTAL ASSETS $11,229,880 $ 8,765,153
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30,
1999 1999
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 48,715 $ 39,121
Margin account 1,814,327 1,981,464
Client funds payable 1,493,461 1,252,131
Provision for income taxes 515,250 398,760
Deferred tax liability 783,644 550,134
Current portion - mortgage payable 1,550 1,303
Total Current Liabilities 4,656,947 4,222,913
LONG-TERM LIABILITY
Mortgage payable 205,525 206,492
Total Long-Term Liability 205,525 206,492
Total Liabilities 4,862,472 4,429,405
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock: 50,000,000 shares authorized of no
par value, 21,182,200 and 21,090,600 shares issued
and outstanding, respectively 2,956,769 2,498,769
Retained earnings 3,410,639 1,836,979
Total Stockholders' Equity 6,367,408 4,335,748
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,229,880 $ 8,765,153
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Income Statements
(Unaudited)
From
Inception on
For the For the May 19,
Six Months Ended Three Months Ended 1998 Through
December 31, December 31, December 31,
1999 1998 1999 1998 1999
SALES $ - $ - $ - $ - $ -
COST OF GOODS SOLD - - - - -
GROSS MARGIN - - - - -
COSTS AND EXPENSES
Depreciation expense 89,069 13,869 51,716 13,392 129,244
Rent expense 28,067 8,383 8,254 8,383 62,215
General and administrative1,133,964 238,531 222,316 118,646 1,608,547
Total Costs and Expenses 1,251,100 260,783 282.286 140,421 1,800,006
Net Loss From Operations(1,251,100) (260,783) (282,286) (140,421) (1,800,006)
OTHER INCOME (EXPENSE)
Interest expense (87,760) (14,250) (32,499) (14,250) (172,660)
Net realized gain on sale of
marketable securities 1,824,086 375,475 905,272 375,475 3,518,173
Net unrealized gain on
marketable securities 1,451,040 1,250,375 985,513 1,250,375 3,176,504
Dividends - - - - 128
Total Other
Income (Expense) 3,187,366 1,611,600 1,858,286 1,611,600 6,522,145
INCOME BEFORE TAXES 1,936,266 1,350,817 1,576,000 1,471,179 4,722,139
INCOME TAX 362,606 316,298 350,000 316,298 1,311,500
NET INCOME $1,573,660 $1,034,519 $1,226,000 $1,154,881 $3,410,639
BASIC INCOME PER SHARE $ 0.07 $ 0.10 $ 0.06 $ 0.07
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 21,128,074 10,200,490 21,170,000 15,720,000
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
Common Stock Retained
Shares Amount Earnings
Balance at inception - $ - $ -
Net income from inception on May 19,
1998 through June 30, 1998 - - -
Balance, June 30, 1998 - - -
Shares issued to founders at
predecessor cost of $0.00 per share 13,770,000 - -
Shares issued for trading securities
at $0.70 per share 1,350,000 939,764 -
Common stock issued for cash at
$1.00 per share 600,000 600,000 -
Stock issuance costs - (250,000) -
Common stock issued for cash
at $5.00 per share 100,600 503,000 -
Common stock issued for related
party acquisitions, recorded at
predecessor cost 5,270,000 706,005 -
Net income for the year ended
June 30, 1999 - - 1,836,979
Balance, June 30, 1999 21,090,600 2,498,769 1,836,979
Common stock issued for services
at $5.00 per share (unaudited) 60,000 300,000 -
Common stock issued for cash at
$5.00 per share (unaudited) 31,600 158,000 -
Net income for the six months ended
December 31, 1999 (unaudited) - - 1,573,660
Balance, December 31, 1999 (unaudited) 21,182,200 $ 2,956,769 $ 3,410,639
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
From
Inception on
For the For the May 19,
Six Months Ended Three Months Ended 1998 Through
December 31, December 31, December 31,
1999 1998 1999 1998 1999
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $1,573,660 $1,034,519 $1,226,000 $1,154,881 $3,410,639
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation expense 89,069 13,869 51,716 13,392 129,244
Stock issued for services 300,000 - - - 300,000
Changes in assets and
liabilities:
(Increase) decrease in
prepaid expenses 9 - - - (3,969)
(Increase) in related party
receivables - - - - (8,080)
(Increase) decrease in
deposits 11,931 (81,667) 11,931 33,333 (3,069)
Increase (decrease) in
accounts payable (2,078) 24,040 11,363 13,040 30,302
Increase (decrease) in
accrued liabilities 252,992 1,202,125 (6,389) 1,202,125 259,732
Increase in provision for
income taxes 350,000 316,298 337,394 316,298 1,298,894
Net Cash Provided by
Operating Activities 2,575,583 2,509,184 1,632,015 2,733,069 5,413,693
CASH FLOWS FROM INVESTING
ACTIVITIES
Investment in bank (300,000) - - - (300,000)
(Increase) decrease in
trading securities (265,278)(2,325,850)(1,912,121)(2,325,850)(2,243,040)
Increase (decrease) in
margin account (167,137) 981,112 263,918 981,112 1,106,188
Purchase of property and
equipment (2,004,458)(1,473,452) (206,045)(1,370,789)(2,848,502)
Net Cash Used by
Investing Activities (2,736,873)(2,818,190)(1,854,248)(2,715,527)(4,285,354)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from notes payable - - - - 208,000
Payments on notes payable (720) - (405) - (925)
Stock issuance costs - (250,000) - - (250,000)
Common stock issued for
cash 158,000 600,000 158,000 - 1,261,000
Advances to related parties - - - - (2,337,867)
Cash from subsidiaries - - - - 40,070
Net Cash Provided (Used)
by Financing Activities $ 157,280 $ 350,000 $ 157,595 $ - $(1,079,722)
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
For the For the May 19,
Six Months Ended Three Months Ended 1998 Through
December 31, December 31, December 31,
1999 1998 1999 1998 1999
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS $ (4,010) $ 40,994 $ (64,638) $ 17,542 $ 48,617
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 52,627 - 113,255 23,452 -
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 48,617 $ 40,994 $ 48,617 $ 40,994 $ 48,617
SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid for:
Interest $ 76,098 $ 14,250 $ 32,837 $ 14,250 $ 154,258
Income taxes $ - $ - $ - $ - $ -
Schedule of Non-Cash Activities:
Common stock issued for
services $ 300,000 $ - $ - $ - $ 300,000
Common stock issued for
trading securities $ - $ 939,764 $ - $ - $ 939,764
OXIR INVESTMENTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared
by the Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of
operations and cash flows at December 31, 1999 and 1998 and for all
periods presented have been made.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated financial
statements be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's June 30, 1999
audited consolidated financial statements. The results of operations
for periods ended December 31, 1999 and 1998 are not necessarily
indicative of the operating results for the full years.
Item 2. Management's Discussion and Analysis or Plan of Operations
Results of Operations
For the three and six months ended December 31, 1999 compared to the
three and six months ended December 31, 1998.
Net income for the three month ("second quarter") and six month ("first
half") periods ended December 31, 1999 was $1,226,000 ($.06 per share) and
$1,573,660 ($.07 per share), respectively, compared to $1,154,881 ($.07) per
share) and $1,034,519 ($.10 per share) for the second quarter and first half
of 1998, respectively. The Company did not recognize any sales during the
second quarter or first half of 1999 or 1998. The 6% increase in net income
for the second quarter of 1999 is attributed primarily to the 141% increase
in net realized gains on marketable securities from $375,475 in the 1998
second quarter to $905,272 in the 1999 second quarter. This gain was partially
offset by the 21% decrease in net unrealized gain on marketable securities,
from $1,250,375 in 1998 to $985,513 in the 1999 period, due to management's
decision to sell a portion of the Company's marketable securities. During
the second quarter of 1999, total costs and expenses increased 101% from the
second quarter of 1998, primarily attributed to the 87% increase in general
and administrative expenses due to opening an office in Las Vegas, Nevada and
in Moscow, Russia, and the 286% increase in depreciation expense related to
the Las Vegas and Moscow offices. The Company's income tax obligation
increased 11% from $316,298 in the second quarter of 1998 to $350,000 for the
second quarter of 1999, based on pre-tax capital gains. The Company pays
taxes under both Russian tax laws and United States tax laws.
The 52% increase in net income for the first half of 1999 is attributed
primarily to the 386% increase in net realized gain on marketable securities
from $375,475 in the first half of 1998 to $1,824,086 in the first half of
1999. Also, net unrealized gain on marketable securities increased 16% to
$1,451,040 in the first half of 1999 from $1,250,375 in the comparable 1998
period. During the first half of 1999, total costs and expenses increased
480% compared to the 1998 period. General and administrative expenses
increased 375% during the first half of 1999 due to opening the office in Las
Vegas and Moscow depreciation expense increased 542% related to the Las Vegas
office, and rent expense increased 235%, also related to the Las Vegas and
Moscow offices. The Company's income tax obligation increased 15% from
$316,298 in the first half of 1998 to $362,606 for the first half of 1999.
Interest expense for the second quarter and first half of 1999 increased
128% and 516%, respectively, when compared to the 1998 period. This increase
reflects interest paid on the Company's margin accounts and the mortgage on
real property located in Las Vegas.
Liquidity and Capital Resources
Total cash and cash equivalents at December 31, 1999 was $48,617
compared to $52,627 at June 30, 1999. Also at December 31, 1999, the Company
had $4,937,524 in investments in trading securities compared to $4,672,246
at June 30, 1999. The 6% increase is due primarily to market appreciation.
Net cash provided by operating activities for the second quarter and
first six months of 1999 was $1,632,015 and $2,575,583, respectively,
compared to $2,733,069 and $2,509,184 for the 1998 periods. The 40% decrease
during the second quarter of 1999 is primarily attributed to the $1,202,125
increase in accrued liabilities in the 1998 period compared to the $6,389
decrease in 1999. This was due to the purchase of property and equipment.
The 3% increase during the first six months of 1999 is primarily attributed
to the increase in net income and depreciation expense, the issuance of stock
for services valued at $300,000. Offsetting the increase in net cash
provided for the first half of 1999 was the $1,202,125 increase in accrued
liabilities in 1998 compared to and increase of only $252,992 in 1999. This
was due to the increase in funds payable to clients in 1999 representing
client earnings that have not been distributed.
Net cash used by investing activities for the second quarter and first
half of 1999 was $1,854,248 and $2,736,873, respectively, compared to
$2,715,527 and $2,818,190 for the comparable 1998 periods. These results are
primarily attributed to the purchase of property and equipment and the
increase in the Company's margin debt.
Net cash provided by financing activities was $157,595 and $157,280 for
the second quarter and first half of 1999, respectively, compared to $0 and
$350,000 provided in the first half of 1998. This reflects the issuance of
the Company's stock for $600,000 cash during the first half of 1998 and
$250,000 in costs related to the issuance.
At December 31, 1999 the Company had total assets of $11,229,880 and
stockholders' equity of $6,367,408. In comparison, at June 30, 1999, the
Company had total assets of $8,765,153 and total stockholders' equity of
$4,335,748. Working capital was a $333,163 at December 31, 1999, compared
to $505,938 at June 30, 1999.
The Company anticipates meeting its working capital needs during the
next twelve months primarily with revenues from its operating and investing
activities or, if necessary from the sale of securities or from borrowing.
Management has not entered into any arrangements or definitive agreements for
additional sales of securities, either through a private placement or a
public offering. There can be no assurance that the Company will be able to
successfully secure funds either from the sale of its securities or from
loans, or that such funds may be available on terms favorable to the Company.
If the Company's operations are not adequate to fund its operations and it
is unable to secure financing from the sale of its securities or from private
lenders, the Company could experience a cash flow shortage which could
curtail the Company's operations.
In the opinion of management, inflation has not had a material effect
on the operations of the Company.
Year 2000
Year 2000 issues may arise if computer programs have been written using
two digits (rather than four) to define the applicable year. In such case,
programs that have time-sensitive logic may recognize a date using "00" as
the year 1900 rather than the year 2000, which could result in
miscalculations or system failures.
The Company has completed its assessment of the Year 2000 issue,
including both technology and non-technology systems, and believes that any
costs of addressing the issue will not have a material adverse impact on its
financial position. The Company believes that its existing computer systems
and software will not need to be upgraded to mitigate the Year 2000 issues.
Prior to purchasing its technology systems, the Company received confirmation
form its vendors that the systems are year 2000 compliant. Currently, the
Company's technology system is equipped with an ASUS P2B-F motherboard and
SuperMicro P6DGE motherboard with the latest BIOS versions. The Company's
servers are functioning under LinuxREdHat 5.2 operational system and its www
servers use the Apache / 1.3.6 Unix mod. The Company's principal offices use
Windows 2000 and Windows NT4 SP5. The Company does not have any significant
non-information technology or systems.
The Company has not incurred any material costs associated with its
assessment of the Year 2000 problem. In the event that Year 2000 issues
impact the Company's accounting operations and other operations aided by its
computer system, the Company believes, as part of a contingency plan to be
developed, that it has adequate personnel to perform those functions manually
until such time that any Year 2000 issues are resolved. The Company has not
had any problems regarding Year 2000 through February 2000.
The Company believes that third parties with whom it has material
relationships will not materially be affected by the Year 2000 issues,
although the Company has not contacted these parties directly. These third
parties are relatively small entities, which do not rely heavily on
information technology ("IT") systems and non-IT systems for their
operations. However, if the Company and third parties upon which it relies
are unable to address any Year 2000 issues in a timely manner, it could
result in a material financial risk to the Company, including loss of revenue
and substantial unanticipated costs. Accordingly, the Company plans to
devote all resources required to resolve any significant Year 2000 issues in
a timely manner.
The Company is cognizant that Year 2000 compliance problems could
undermine the general infrastructure necessary to support its operations.
The Company depends on third party Internet Service Providers, or ISPs, or
hosting centers to provide connections to the Internet. Any interruption of
service from ISPs or hosting centers to provide connections could result in
a temporary interruption of the operation of the Company's web site. Any
interruption in the security, access, monitoring or power systems at the ISPs
or hosting centers could result in an interruption of services. Moreover,
it is difficult to predict what effect year 2000 compliance problems will
have on the integrity and stability of the Internet.
Should the Company identify any problem with respect to its year 2000
readiness, it will prepare a contingency plan, if necessary. The Company
does not have any material contracts with external contractors to assist
in completing its year 2000 compliance effort. In addition, no employees have
been hired or reassigned to complete the Company's year 2000 compliance.
Risk Factors and Cautionary Statements
This Report contains certain forward-looking statements. The Company
wishes to advise readers that actual results may differ substantially from
such forward-looking statements. Forward-looking statements involve risks
and uncertainties that could cause actual results to differ materially from
those expressed in or implied by the statements, including, but not limited
to, the following: the possible success of the Company's varied projects, the
volatility of the financial markets in which the Company invests, the ability
of the Company to fund its current and future projects and its ability to
meet its cash and working capital needs, and other risks detailed in the
Company's periodic report filings with the Securities and Exchange
Commission.
PART II
Item 1. Legal Proceedings
There are presently no material pending legal proceedings to which
the Company or any of its subsidiaries is a party or to which any of its
property is subject and, to the best of its knowledge, no such actions
against the Company are contemplated or threatened.
Item 2. Changes In Securities
During the three month period ended December 31, 1999, the Company
issued 60,000 shares of its common stock, valued at $5.00 per share, to one
person for services rendered to the Company, and 31,600 shares of common
stock, valued at $5.00 per share, to one person for cash. The issuances were
made in private transactions to persons familiar with the business of the
Company. For these transactions, the Company relied upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as
amended.
Item 3. Defaults Upon Senior Securities
This Item is not applicable to the Company.
Item 4. Submission of Matters to a Vote of Security Holders
This Item is not applicable to the Company.
Item 5. Other Information
This Item is not applicable to the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedules
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company during the
three month period ended December 31, 1999.\
SIGNATURES
In accordance with the requirements of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OXIR INVESTMENTS, INC.
Date: March 22, 2000 By /S/ Vassili I. Oxenuk
Vassili I. Oxenuk,
President and Director
Date: March 22, 2000 By /S/ Michael Smirnov
Michael Smirnov, Vice President,
Chief Financial Officer and
Director (Principal Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE OXIR INVESTMENTS, INC. FINANCIAL
STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JUL-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 48,617
<SECURITIES> 4,937,524
<RECEIVABLES> 0
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<CURRENT-ASSETS> 4,990,110
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<COMMON> 2,956,769
<OTHER-SE> 3,410,639
<TOTAL-LIABILITY-AND-EQUITY> 11,229,880
<SALES> 0
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