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 AND EXCHANGE ACT OF 1934
For the quarterly period ended: FEBRUARY 28, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
For the transition period from______________to_____________
Commission File No. 000-17058
PHOENIX INTERNATIONAL INDUSTRIES, INC.
Exact name of small business issuer as specified in its charter
FLORIDA 59-2564162
State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
501 SOUTH DIXIE HIGHWAY, WEST PALM BEACH, FLORIDA 33401
(Address of Principal Executive Offices)
(561) 832-5208
(Issuer's telephone number, including area code)
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
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: as of March 10, 1998 there were
8,310,028 shares of the issuer's Common Stock, $.001 par value, outstanding.
Transitional Small Business Disclosure Format:
Yes No
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PHOENIX INTERNATIONAL INDUSTRIES, INC.
INDEX TO 10-QSB
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PAGE
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PART I. FINANCIAL INFORMATION
<S> <C>
ITEM 1. Financial Information
Balance Sheets as of February 28, 1997 (unaudited)
and May 31, 1997 2
Statements of Operations for the three months ended
February 28, 1998 and February 28, 1997 (unaudited) 3
Statement of Operations for the nine months ended
February 28, 1998 and February 28, 1997 (unaudited) 3
Statements of Cash Flows for the three months ended
February 28, 1998 and February 28, 1997 (unaudited) 4
Notes to Financial Statements 5
ITEM 2. Management's discussion and Analysis of
Financial Conditions and Results of Operations for
the three and nine months ended February 28, 1998 and
February 28, 1997 7
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings 9
ITEM 6 Exhibits and Reports on Form 8-K 9
Signatures 10
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PART I. FINANCIAL STATEMENTS
PHOENIX INTERNATIONAL INDUSTRIES, INC.
(Development Stage Company)
CONSOLIDATED BALANCE SHEETS
UNAUDITED
(000's omitted)
ASSETS FEBRUARY 28, 1998 MAY 31, 1997
----------------- ------------
Current Assets:
Cash and cash equivalents $ 67 $ 1
Inventory 45 0
Accounts Receivable 306 0
Notes Receivable 20 27
Prepaid expenses 100 0
---------------- -------------
Total current assets 538 28
Net Deferred Tax Asset 1,287 1,034
Property & Equipment, net 113 10
Patents and trademarks 1 1
Other assets 2 0
---------------- -------------
$ 1,941 $ 1,073
================ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 249 $ 5
Accrued wages 62 333
Payroll Taxes Payable 362 0
Notes payable 17 106
---------------- -------------
Total current liabilities 690 444
Notes payable 448 0
---------------- -------------
Total liabilities 1,138 444
---------------- -------------
Commitments and contingencies 0 0
---------------- -------------
Stockholders' Equity
Common stock, $.001 par value,
20,000 authorized 7,760 issued
and outstanding (4,960 in 1997) 8 5
Paid in capital 4,586 3,693
Less: Stock subscriptions
receivable 0 (23)
Accumulated deficit (3,791) (3,046)
---------------- -------------
Total stockholders' equity 803 629
---------------- -------------
$ 1,941 $ 1,073
=============== =============
See accompanying notes to financial statements
Page 2
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PHOENIX INTERNATIONAL INDUSTRIES, INC.
(Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(000's omitted, except per share amounts)
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<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Revenue $ 546 $ 0 $ 1,172 $ 0
Costs of consulting services:
Direct labor & employee benefit costs 387 0 759 0
-------- -------- ------- --------
Gross profit 159 0 413 0
-------- -------- ------- --------
Expenses
General and administrative 570 0 1,411 0
-------- -------- ------- --------
Income (loss) before income taxes (411) 0 (998) 0
Income Tax Benefit (Provision) 104 0 253 0
-------- -------- ------- --------
Net Income(Loss) continuing operations (307) 0 (745) 0
Discontinued Operations:
Income(Loss) form discontinued operations 0 (128) 0 (288)
Income Tax Benefit (Provision) 0 32 0 73
-------- -------- ------- --------
Net Income (loss) $ (307) $ (96) $ (745) $ (215)
======== ======== ======= ========
Income(Loss) per share from:
Continuing Operations (0.05) 0.00 (0.12) 0.00
Discontinued Operations 0.00 (0.03) 0.00 (0.07)
-------- -------- ------- --------
$ (0.05) $ (0.03) $ (0.12) $ (0.07)
======== ======== ======= ========
Weighted average number of shares 6,360 2,908 6,360 2,908
</TABLE>
See accompanying notes to financial statements
Page 3
<PAGE>
PHOENIX INTERNATIONAL INDUSTRIES, INC.
(Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(000's omitted, except per share amounts)
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<CAPTION>
NINE MONTHS ENDED
FEBRUARY 28,
1998 1997
---- ----
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Cash flows from operating activities
Net income(loss) $ (745) $ 0
Adjustment to reconcile net income(loss)
to net cash(used by)provided by
operating activities:
Depreciation an amortization 0 0
Changes in assets and liabilities
(Increase)Decrease in inventory (45) 0
(Increase)Decrease in accounts receivable (306) 0
(Increase)Decrease in notes receivable 7 (20)
(Increase)Decrease in prepaid expense (100) 0
(Increase)Decrease in net deferred tax asset (253) (73)
(Increase)Decrease in other assets (2) 0
Increase(Decrease) in accounts payable 244 3
Increase(Decrease) in accrued expense (271) 187
Increase(Decrease) in payroll taxes payable 362 0
Increase(Decrease) in notes payable 359 (250)
------- -------
Net cash (used by) provided by operating activities: (750) (153)
------- -------
Cash flows from investing activities:
Acquisitions of Property and equipment (103) (11)
Income(loss) Discontinued Operations 0 (215)
------- -------
Net cash (used by) provided by investing activities (103) (226)
------- -------
Cash flows from financing activities:
Issuance of common stock 896 405
Less: Stock subscriptions receivable 23 (23)
------- -------
Net cash (used by) provided by financing activities 919 382
------- -------
Net (decrease)increase in cash and cash equivalents 66 3
Cash and Cash equivalents beginning of period 1 0
------- -------
Cash and Cash equivalents end of period $ 67 $ 3
======= =======
</TABLE>
See accompanying notes to financial statements
Page 4
<PAGE>
PHOENIX INTERNATIONAL INDUSTRIES, INC.
(Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(000's omitted, except per share amounts)
1. The Company
Business
The Company is engaged, through its wholly-owned subsidiaries, in
computer and software development, consulting and other related services.
Previously the Company was involved in various types of products and systems for
use in the environmental clean-up industry. From January 1, 1996 through May 31,
1997, the Company wound down and closed its environmental clean-up business and
sought the acquisitions of computer consulting companies.
Organization
The Company was incorporated on July 22, 1985, pursuant to the laws of
the state of Florida under the name Hydrobac, Inc. On July 7, 1986, the
Company's name was changed to Probac, Inc. and on October 5, 1994, its name was
changed to Trident Environmental Systems, Inc. During those periods the
Company's primary business was in various types of products and systems for use
in the environmental clean-up industry. The Company closed its original clean-up
business by May 31, 1997 and therefore, treats all matters relating to the
environmental clean-up business as discontinued operations.
2. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and pursuant to the instructions to form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accrual adjustments, considered necessary for a fair
presentation have been included. Operatingresults for the three month and nine
month periods ended February 28, 1998, are not necessarily indicative of the
results that may be expected for the year ended May 31, 1998.
These financial statements and notes should be read in conjunction with
the Company's audited financial statements and notes thereto included in the
Company's Annual Report of Form 10-KSB for the year ended May 31, 1997.
Page 5
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PHOENIX INTERNATIONAL INDUSTRIES, INC.
(Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(000's omitted, except per share amounts)
3. Notes Payable
The president of the Company has been helping to fund the Company's
cash flow. As of February 28, 1998 the company owes $448,000 to the president.
The Company has issued promissory notes for that amount which pay twelve percent
(12%) simple interest and mature in 18 months.
4. Stockholders Equity
On February 1, 1998, the shareholders approved the following
transaction. The company paid $458,000 of accrued wages by issuing 1,420,000
shares of restricted common stock.
Page 6
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ITEM 2 MANAGEMENT'S DISCUSSION OF OPERATIONS
On August 4, 1994, the Board of Directors approved a 1 for 10 reverse
split of the outstanding shares of Common Stock of ProBac International
Corporation. The reverse split was completed on September 11, 1994. On October
2, 1996, shareholders approved Amendments to the Articles of Incorporation,
changing the name of the Company to Phoenix International Industries, Inc.;
changing the authorized capital to 20,000,000 shares of Common Stock, par value
$.001 per share; and up to 5,000 shares of Preferred Stock for use as needed.
The Company's Common Stock was reverse split 1 for 15 at this time.
On June 1, 1997, the Company acquired Intuitive Technology Consultants,
Inc. ("ITC") headquartered in Atlanta, Georgia. In consideration therefore, the
Company issued 1,500,000 shares of its "restricted" Common Stock to the former
shareholders of ITC in exchange for 100% (1,000,000 shares) of the authorized
and issued stock of ITC.
On July 21, 1997 the Company in a "stock for stock" transaction,
completed the acquisition of 100% of the stock of HDX 9000, Inc. (HDX), of New
York, New York. In consideration therefore, the Company issued 500,000 shares of
its "restricted" Common Stock to the former shareholders of HDX in exchange for
100% (1,500 shares) of the authorized and issued stock of HDX.
Since the Company's inception in 1985, no revenues have been generated
as the Company has been a development stage corporation. With the acquisition of
ITC, the Company began generating revenue in June of 1997 for the first time.
The comparatives from February 28, 1998 to February 28, 1997 must be read in the
context of continuing operations in the three and nine months ended February 28,
1998 and zero revenue from discontinued operations in the three and nine months
ended February 28, 1997.
With regard to the Statements of Operations for the three and nine
months ending February 28, 1998, the Company had revenues of $546,000 and
$1,172,000, respectively. The Company had direct labor and employee benefit
costs of $387,000 and $759,000, respectively. This generated a gross profit from
continuing operations of $159,000 and $413,000, respectively. Essentially, all
of the Company's revenues are being produced by its ITC subsidiary. The G&A
expenses for this subsidiary were $404,000 and $947,000 for the three and nine
months, respectively. Corporate overhead in the home office and the HDX
subsidiary amounted to $166,000 and $464,000 for the three and nine months,
respectively. There was an operating loss from continuing operations of $411,000
and $998,000, respectively, reduced by the income tax benefit of $104,000 and
$253,000 for the three and nine months. The net losses were $307,000 and
$745,000, respectively. For the three and nine months ended February 28, 1997,
the Company had zero revenue and a loss from discontinued operations of $96,000
and $215,000, respectively, net of income tax benefits.
Page 7
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LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1998, the Company had $538,000 in current assets as
opposed to $690,000 in current liabilities, which results in a working capital
deficit of $152,000. This compares to $28,000 in current assets and $444,000 in
current liabilities for a working capital deficit of $416,000 at May 31, 1997.
For the nine months ended February 28, 1998, cash and cash equivalents
increased $66,000; inventory increased $45,000; and accounts receivable
increased $306,000. Accounts payable increased $244,000; accrued wages decreased
$271,000; and payroll taxes increased $362,000 in the same period.
As shown in Note 3 of the Consolidated Financial Statements, the
Company is dependent upon the receipt of new capital (either equity or debt) to
fund its on-going operations. The Company has been funded by Gerard Haryman,
President and CEO, during this period. Mr. Haryman is currently owed $448,000.
The Company has issued Promissory Notes for that amount carrying a simple
interest rate of twelve percent (12%), maturing 18 months after date of issue.
ITC's revenues continue to increase. ITC has made arrangements with
American Factors Corporation ("American") to discount its accounts receivable.
As of February 28, 1998, the Company had factored $306,225 of revenues through
American.
Page 8
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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. None
INDEX
(2) PLAN OF ACQUISITIONS, REORGANIZATION, ARRANGEMENT. LIQUIDATION, OR
SUCCESSION.
Not applicable
(3) ARTICLES OF INCORPORATION AND BY-LAWS.
The Articles of Incorporation and Articles of Amendment to Articles of
Incorporation and By-Laws of the Registrant were filed as Exhibits 3.1,
3.2, and 3.3, respectively, to the Registrant's Form 10-KSB as of May
31, 1995 under the Securities and Exchange Act of 1934, filed March ,
1998 with the Securities and Exchange Commission and incorporated
herein by reference.
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS.
Not applicable
(9) VOTING TRUST AGREEMENT.
Not applicable
(10) MATERIAL CONTRACTS.
The Material Contracts of the Registrant's were filed as Exhibits 10.1,
10.2, 10.3, 10.4, and 10.5, respectively, to the Registrant's Form
10-KSB as of May 31, 1995 under the Securities and Exchange Act of
1934, filed March , 1998 with the Securities and Exchange Commission
and incorporated herein by reference.
(11) STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS.
Not applicable
(12) STATEMENT REGARDING COMPUTATION OF RATIONS.
Not applicable
(13) ANNUAL REPORT TO SECURITY HOLDERS, FORM 10-Q OR QUARTERLY REPORT TO
SECURITY HOLDERS.
Not applicable
(16) LETTER RE: CHANGE IN CERTIFYING ACCOUNTANTS.
Not applicable
(17) LETTER RE: DIRECTOR RESIGNATION.
Not applicable
(18) LETTER RE: CHANGE IN ACCOUNTING PRINCIPALS.
Not applicable
(19) PREVIOUSLY UNFILED DOCUMENTS.
Not applicable
(21) SUBSIDIARIES OF THE REGISTRANT.
Not applicable
(22) PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO VOTE OF SECURITY
HOLDERS.
Not applicable
(23) CONSENT OF EXPERTS AND COUNSEL.
Not applicable
(24) POWER OF ATTORNEY.
Not applicable
(27) FINANCIAL DATA SCHEDULE.
(99) ADDITIONAL EXHIBITS.
Not applicable
9
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SIGNATURES
In accordance with Section 13 or 15(d) 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, in the City of West Palm Beach,
Florida on April 14, 1998.
PHOENIX INTERNATIONAL INDUSTRIES, INC.
By: /s/ Gerard Haryman
---------------------------------
Gerard Haryman, President and CEO
In accordance with the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
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<CAPTION>
SIGNATURE TITLE DATE
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<S> <C> <C>
/s/ Gerard Haryman President, CEO and April 14, 1998
- ------------------------------ Chairman of the Board
Gerard Haryman
/s/ Tom Donaldson Vice President, Secretary April 14, 1998
- ------------------------------ and Director
Tom Donaldson
/s/ Harvey Birnholz Treasurer, CFO and April 14, 1998
- ------------------------------ Director
Harvey Birnholz
</TABLE>
10
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> DEC-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 67,000
<SECURITIES> 0
<RECEIVABLES> 326,000
<ALLOWANCES> 0
<INVENTORY> 45,000
<CURRENT-ASSETS> 538,000
<PP&E> 116,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,941,000
<CURRENT-LIABILITIES> 690,000
<BONDS> 0
0
0
<COMMON> 8,000
<OTHER-SE> 4,586,000
<TOTAL-LIABILITY-AND-EQUITY> 1,941,000
<SALES> 546,000
<TOTAL-REVENUES> 546,000
<CGS> 387,000
<TOTAL-COSTS> 387,000
<OTHER-EXPENSES> 570,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (411,000)
<INCOME-TAX> (104,000)
<INCOME-CONTINUING> (307,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (307,000)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
