<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1996
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: 0-26532
- --------------------------------
PHOENIX INFORMATION SYSTEMS CORP.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
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<S> <C>
Delaware 13-3337797
- --------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
</TABLE>
<TABLE>
<S> <C>
100 Second Avenue South, Suite 1100
St. Petersburg, Florida 33701
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (813) 894-8021
--------------
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Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
--- ---
As of July 31, 1996, the Registrant had 46,319,146 shares of common stock
issued and outstanding.
<PAGE> 2
PHOENIX INFORMATION SYSTEMS CORP.
INDEX
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
March 31, 1996 and
June 30, 1996 (Unaudited) 3
Unaudited Consolidated Statements of Operations
Three Months ended
June 30, 1996 and
June 30, 1995 and Inception to
June 30, 1996 4
Unaudited Consolidated Statements of Cash Flows
Three Months ended
June 30, 1996 and
June 30, 1995 and Inception to
June 30, 1996 5 - 6
Notes to Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 9
PART II. OTHER INFORMATION 10
SIGNATURE PAGE 11
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PHOENIX INFORMATION SYSTEMS CORP. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1996
(UNAUDITED) MARCH 31, 1996
---------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,302,206 $ 2,078,510
Prepaids 215,749 135,474
Trade receivables 96,212 78,622
Receivable from related parties 73,797 65,469
------------ ------------
Total current assets 2,687,964 2,358,075
Property and equipment, net 1,878,466 1,882,549
Deposits and other 90,086 110,360
Due from joint venture partner 652,432 737,662
Goodwill, net 367,871 394,071
------------ ------------
Total assets $ 5,676,819 $ 5,482,717
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 309,302 $ 300,773
Accounts payable 1,326,875 2,688,530
Accrued payroll and payroll taxes 247,637 272,582
Accrued interest 4,500 15,507
Dividend payable 69,982 -
------------ ------------
Total current liabilities 1,958,296 3,277,392
Payable to related parties 29,182 1,046,633
Notes payable, less current portion 148,239 173,075
Accrued compensation expense 407,250 332,250
------------ ------------
Total liabilities 2,542,967 4,829,350
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized,
1,130,000 shares issued and outstanding at June 30, 1996 11,300 -
Common stock, $.01 par value, 75,000,000 shares authorized,
46,021,646 and 45,722,618 shares issued and outstanding
at June 30,1996 and March 31, 1996, respectively 460,216 457,226
Additional paid-in capital 25,031,948 20,176,237
Losses that have accumulated during the development stage and
preferred stock dividend of $69,982 for the
quarter ended June 30, 1996 (22,369,612) (19,980,096)
------------ ------------
Total stockholders' equity 3,133,852 653,367
------------ ------------
Total liabilities and stockholders' equity $ 5,676,819 $ 5,482,717
============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
PHOENIX INFORMATION SYSTEMS CORP. AND SUBSIDIARIES
(a development stage company)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
for the three months ended June 30, 1996 and 1995
and cumulative for the period from inception of development
stage activities, April 1, 1989, through June 30, 1996
--------------
<TABLE>
<CAPTION>
Three Months
Ended June 30, Cumulative
---------------------------- Since
1996 1995 April 1, 1989
---- ---- -------------
<S> <C> <C> <C>
Start-up and organizational expenses $(2,582,348) $(1,967,818) $ (24,948,692)
Travel commissions, net 113,782 104,850 637,838
Management fee income - - 138,021
Reservation center revenues 100,992 - 460,095
License fee income 6,000 6,000 72,000
Interest and dividend income 42,040 10,361 92,066
----------- ----------- -------------
Net loss before minority interest
in net loss of subsidiary (2,319,534) (1,846,607) (23,548,672)
----------- ----------- -------------
Minority interest in net loss of subsidiary - 181,352 1,249,042
----------- ----------- -------------
Net loss $(2,319,534) $(1,665,255) $ (22,299,630)
=========== =========== =============
Net loss per common share
outstanding $ (.05) $ (.04)
=========== ===========
Weighted average number of common
shares outstanding 45,814,875 39,759,268
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
PHOENIX INFORMATION SYSTEMS CORP. AND SUBSIDIARIES
(a development stage company)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three months ended June 30, 1996 and 1995
and cumulative for the period from inception of development
stage activities, April 1, 1989, through June 30, 1996
--------------
<TABLE>
<CAPTION>
Three Months
Ended June 30, Cumulative
---------------------------- Since
1996 1995 April 1, 1989
---- ---- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
- ------------------------------------
Net loss $(2,319,534) $(1,665,255) $ (22,299,630)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization expense 266,479 111,842 1,671,086
Compensation paid through issuance
of stock 75,000 75,000 655,452
Transaction fee - - 1,140,000
Services paid through issuance of stock 75,000 183,320 1,773,307
Rent paid through in-kind contribution 85,230 85,230 596,610
Minority interest in net loss of
subsidiary - (181,352) (1,249,042)
Other - (15,573) 157,985
----------- ----------- -------------
(1,817,825) (1,406,788) (17,554,232)
Changes in assets and liabilities:
Prepaids, deposits and trade receivables (77,592) 150,944 (337,363)
Accounts payable (1,361,653) 228,823 703,469
Accrued payroll and payroll taxes (24,945) (77,179) 191,060
Accrued interest (11,007) (70,038) 205,385
----------- ----------- -------------
Net cash used in operating activities (3,293,022) (1,174,238) (16,791,681)
----------- ----------- -------------
Cash flows from investing activities:
- ------------------------------------
Purchase of property and equipment (236,196) (529,492) (2,461,012)
Investments in/advances to Joint Venture - (234,500) -
----------- ----------- -------------
(236,196) (763,992) (2,461,012)
Net cash used in investing activities (236,196) (763,992) (2,461,012)
----------- ----------- -------------
</TABLE>
See accompanying notes.
5
<PAGE> 6
PHOENIX INFORMATION SYSTEMS CORP. AND SUBSIDIARIES
(a development stage company)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three months ended June 30, 1996 and 1995
and cumulative for the period from inception of development
stage activities, April 1, 1989, through June 30, 1996
--------------
<TABLE>
<CAPTION>
Three Months
Ended June 30, Cumulative
-------------------------- Since
1996 1995 April 1, 1989
---- ---- -------------
<S> <C> <C> <C>
Cash flows from financing activities:
- ------------------------------------
Issuance of common and preferred stock $ 4,795,000 $ 198,875 $ 6,653,095
Stock subscriptions - - 1,297,000
Proceeds from notes payable - 161,867 538,000
Payments on notes payable (14,133) (86,478) (340,309)
Proceeds from related parties - 25,000 15,529,818
Payments to related parties (1,025,779) (102,905) (2,132,725)
Payments on capital lease obligation (2,174) (2,174) 10,020
----------- ----------- -------------
Net cash provided by financing
activities 3,752,914 194,185 21,554,899
----------- ----------- -------------
Increase (decrease) in cash and cash
equivalents 223,696 (1,744,045) 2,302,206
Cash and cash equivalents, beginning of period 2,078,510 1,864,581 -
----------- ----------- -------------
Cash and cash equivalents, end of period $ 2,302,206 $ 120,536 $ 2,302,206
=========== =========== =============
</TABLE>
See accompanying notes.
6
<PAGE> 7
PHOENIX INFORMATION SYSTEMS CORP. AND SUBSIDIARIES
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
(unaudited)
NOTE A
The accompanying consolidated financial statements include the accounts of
Phoenix Information Systems Corp. ("Phoenix Information") and its subsidiaries,
Phoenix Systems Group, Inc. (wholly owned since March 27, 1995), Phoenix
Systems Ltd. (wholly owned since November 11, 1993), Hainan Phoenix Information
Systems, Ltd. (70% owned since November 22, 1993) and American International
Travel Agency, Inc. (wholly owned since September 15, 1994). The consolidated
group of companies is collectively referred to herein as "Phoenix". All
significant intercompany accounts and transactions have been eliminated.
NOTE B
The financial information reflects all normal recurring adjustments that,
in the opinion of management, are deemed necessary for a fair presentation of
the results for the interim periods. The results for the interim periods are
not necessarily indicative of the results to be expected for the year.
NOTE C
The attached summarized financial information does not include all
disclosures required to be included in a complete set of financial statements
prepared in conformity with generally accepted accounting principles. The Form
10-K, for the fiscal year ended March 31, 1996 should be read in conjunction
with the data herein.
7
<PAGE> 8
PHOENIX INFORMATION SYSTEMS CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
INTRODUCTORY STATEMENT
Phoenix Information Systems Corp. ("Phoenix" or the "Company")
is a development-stage information systems and services company that has
developed airline and hotel travel reservation systems.
In fiscal 1996, Phoenix commenced operations in the United
States, China and Russia. Efforts are under way to enlist additional airlines,
hotels and other travel service providers. While Phoenix has now commenced
operations, the Company has only a brief operating history and has yet to
generate significant revenues or earnings. Consequently, Phoenix's continued
existence has depended, primarily, upon its ability to raise capital.
In China, Phoenix has installed and begun to operate its
advanced computerized travel reservation system for domestic airlines. Phoenix
provides state-of-the-art, travel-related information services to China through
its 70% owned joint venture with China Hainan Airlines.
RESULTS OF OPERATIONS
During the three months ended June 30, 1996, and the fiscal
years ended March 31, 1996, 1995 and 1994, the Company sustained net losses of
$2,319,534, $9,704,318, $4,841,824 and $2,567,932, respectively. These losses
may continue for a presently undetermined time.
Reservation center revenues reflect a full quarters results
for the quarter ended June 30, 1996 while the revenues from the reservation
center started in the second quarter of the fiscal year ending March 31, 1996.
While Phoenix has concentrated its sales efforts in China,
Russia and other countries, the Company has also focused on small domestic
carriers that could utilize the Company's reservation system. In fiscal 1995,
Phoenix entered into an Agreement with Eastwind Airlines, Inc. ("Eastwind") to
provide Eastwind with a complete reservation system to manage all sales,
airport and operations functions. In addition, Phoenix implemented a
reservation center that processes all Eastwind reservations as of the second
quarter of fiscal 1996. Furthermore, in May 1996, the Company commenced
commercial operations with Laker Airlines.
For the quarter ended June 30, 1996, the Company had start-up
and organizational expenses of $2,582,348 compared to $1,967,818 for the
quarter ended June 30, 1995. The expanding start-up and organizational
expenses in the quarter ended June 30, 1996 as compared to the quarter ended
June 30, 1995, reflects principally the addition of marketing and
administrative employees as the Company's focus shifts from product development
to generation of customers and sales.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
Working Capital; Financial Instability
As of June 30, 1996, Phoenix had stockholders' equity of
$3,133,852 and working capital of $729,668. Phoenix has not generated any
significant revenues, earnings or history of operations from inception through
June 30, 1996. In April 1996, Phoenix issued $5,000,000 of 6% convertible
preferred stock. The preferred stock is convertible into common stock at a 15%
discount to market, subject to a maximum conversion price of $4.00 per share
and a minimum of $2.00 per share. If not converted by the purchaser prior to
the second anniversary of the issuance date, the preferred stock will
automatically be converted into common stock. During the quarter ended June
30, 1996, 120,000 shares of the Company's preferred stock were converted into
230,028 shares of common stock.
Reference is made to the Company's Form 10-K for the fiscal
year ended March 31, 1996, for a complete description of certain financing
transactions entered into by the Company to meet its operating and investing
activities.
9
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings:
Ungerleider v. Robert P. Gordon, Phoenix Information Systems Inc., et al.
On August 7, 1996, the District Court ruled on Phoenix's motion to dismiss
and dismissed substantial portions of Plaintiff's claims. The court rejected
Plaintiff's claims of fraudulent inducement to enter into the Settlement
Agreement, which effectively precludes Plaintiff from trying to enforce a
finders fee agreement or any of the options, payments, or other rights which he
released as part of the Settlement Agreement. Plaintiff may amend his
Complaint, but the court's order requires him to do so in a manner consistent
with the court's order, which precludes Plaintiff's claims related to alleged
oral promises made prior to the signing of the Settlement Agreement. The case
has been referred to mediation for settlement discussions.
Reference is made to Item 3 of the Company's Form 10-K, for the fiscal year
ended March 31, 1996, for additional information regarding this proceeding.
Charles Chang and Juliette Chang v. Robert P. Gordon and Phoenix Information
Systems Corp.
Reference is made to Item 3 of the Company's Form 10-K, for the fiscal year
ended March 31, 1996, for a complete description of pending legal proceedings
against the Company.
ITEM 2. Changes in Securities: None
ITEM 3. Defaults Upon Senior Securities: None
ITEM 4. Submissions of Matters to a Vote of Security Holders: None
ITEM 5. Other Information: None
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
11) Earnings Per Share - See Consolidated Statement of Operations
27) Financial Data Schedule
(b) Reports on Form 8-K - None
10
<PAGE> 11
PHOENIX INFORMATION SYSTEMS CORP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHOENIX INFORMATION SYSTEMS CORP.
-------------------------------------------
(Registrant)
Dated: August 12, 1996 /s/ ROBERT P. GORDON
-------------------------------------------
Robert P. Gordon, President and
Chief Executive Officer
/s/ LEONARD S. OSTFELD
-------------------------------------------
Leonard S. Ostfeld, Vice President and
Chief Financial Officer
11
<PAGE> 12
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- -------------- -------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,302,206
<SECURITIES> 0
<RECEIVABLES> 96,212
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,687,964
<PP&E> 3,231,507
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,676,819
<CURRENT-LIABILITIES> 1,958,296
<BONDS> 0
0
11,300
<COMMON> 460,216
<OTHER-SE> 2,662,336
<TOTAL-LIABILITY-AND-EQUITY> 5,676,819
<SALES> 214,774
<TOTAL-REVENUES> 262,814
<CGS> 0
<TOTAL-COSTS> 2,582,348
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,319,534)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,319,534)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
</TABLE>
