UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark one)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACTS OF 1934
For the quarterly period ended: November 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT
For the transition period from________ to_____________
Commission file number: 000-17058
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PHOENIX INTERNATIONAL INDUSTRIES, INC.
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(Exact name of small business issuer as specified in its charter)
FLORIDA 59-2564162
(State or other jurisdiction of (IRS Employer identification No.)
incorporation or organization)
1750 Osceola Drive, West Palm Beach, Florida, 33409
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(Address of principal executive offices)
(561) 688-0440
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(Issuer's telephone number)
--------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15 (d) of the Exchange Act during the past 12 months ( or for such
shorter period that the registrant was required to file such report (s), and (2)
has been subject to such filing requirements for the past 90 days. Yes [ ]
No [X]
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: Common Stock, $.001 par value
9,278,847shares outstanding as of January 28, 1999.
Transitional Small Business Disclosure Format: Yes __ No X
<PAGE>
PHOENIX INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEET AS OF NOVEMBER
30, 1998 AND MAY 31, 1998 2
CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE THREE MONTHS AND THE SIX MONTHS ENDED
NOVEMBER 30, 1998 AND NOVEMBER 30, 1997 3
CONSOLIDATED STATEMENT OF STOCKHOLDERS'
DEFICIENCY FOR THE SIX MONTHS NOVEMBER 31, 1998 4
CONSOLIDATED STATEMENT OF CASH FLOWS FOR
THE SIX MONTHS ENDED NOVEMBER 30, 1998
AND NOVEMBER 30, 1997 5
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS.
PART II: OTHER INFORMATION
SIGNATURE
<PAGE>
PHOENIX INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
November 30, 1998 and May 31, 1998
<TABLE>
<CAPTION>
ASSETS
(000's omitted)
November 30, 1998 May 31, 1998
----------------- -------------
CURRENT ASSETS (unaudited)
<S> <C> <C>
Cash $ 1 $ 3
Accounts receivable net of allowance for
doubtful accounts of $12,000 2 44
Other current assets 28 3
Net investment in subsidiary under
contract for sale - 268
---------------- ------------
TOTAL CURRENT ASSETS 31 318
Property and equipment, net 20 20
Goodwill, net 168 189
---------------- ------------
TOTAL ASSETS $ 219 $ 527
================ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 26 $ 69
Accrued expenses 83 5
---------------- ------------
TOTAL CURRENT LIABILITIES 109 74
Loan payable, related party 567 571
---------------- ------------
TOTAL LIABILITIES 676 645
---------------- ------------
STOCKHOLDERS' DEFICIENCY
Preferred stock, $0.001 par value: 5,000
shares authorized: no shares outstanding - -
Common stock, $0.001 par value; 20,000,000
shares authorized: 7,702,950 shares issued
and outstanding (8,622,028 May, 1998) 8 8
Additional paid-in-capital 4,975 4,988
Accumulated deficit (5,440) (5,114)
---------------- ------------
TOTAL STOCKHOLDERS' DEFICIENCY (457) (118)
---------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 219 $ 527
================ ============
</TABLE>
See notes to consolidated financial statements.
Page 2
<PAGE>
PHOENIX INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months and six months ended November 30, 1998 and
November 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
(000's omitted) (000's omitted)
Three Months Ended Six Months Ended
--------------------------------------- ---------------------------------------
November 30, 1998 November 30, 1997 November 30, 1998 November 30, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUES $ 16 $ 259 $ 46 $ 626
OPERATING EXPENSES
Selling, general and administrative 285 608 432 1,213
--------------- ---------------- ----------------- -----------------
OPERATING LOSS (269) (349) (386) (587)
INCOME TAX BENEFIT (PROVISION) 0 89 - 149
--------------- ---------------- ----------------- -----------------
LOSS FROM CONTINUING OPERATIONS (269) (260) (386) (438)
DISCONTINUED OPERATIONS
Income from discontinued operations - - 60 -
--------------- ---------------- ----------------- -----------------
NET LOSS $ (269) $ (260) $ (326) $ (438)
=============== ================ ================= =================
LOSS PER SHARE
Loss from continuing operations $ (0.03) $ (0.04) $ (0.02) $ (0.07)
=============== ================ ================= =================
Net loss $ (0.03) $ (0.04) $ (0.01) $ (0.07)
=============== ================ ================= =================
Weighted average common shares 7,390 6,360 7,390 6,360
=============== ================ ================= =================
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE>
PHOENIX INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
Six months ended November 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Total
(000's omitted) Numbers of Paid In Accumulated Stockholders'
Shares Par Value Capital Deficit Deficiency
---------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, May 31, 1998 8,622 $ 8 $ 4,988 $ (5,114) $ (118)
Recesion of ITC acquisition (1,413) (1) (302) - (303)
Issuance of stock for
consulting services 50 - 32 - 32
Shares issued 444 1 257 - 258
Net Loss - - - (326) (326)
------- -------- ------- -------- ------
Balance November 30, 1998 7,703 $ 8 $ 4,975 $ (5,440) $ (457)
======= ======== ======= ======== ======
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE>
PHOENIX INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended November 30, 1998 and November 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
(000's omitted)
Six Months Ended
---------------------------------------
November 30, 1998 November 30, 1997
----------------- -----------------
<S> <C> <C>
NET CASH USED BY OPERATING ACTIVITIES (249) (157)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (1) (103)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of loan payable - related party (138) -
Proceeds from loan payable - related party 129 -
Issuance of common stock 257 896
Less: stock subscriptions receivable - (435)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 248 461
----------------- -----------------
Net Increase (Decrease) in Cash (2) 201
Cash at Beginning of Year 3 1
----------------- -----------------
Cash at End of Year $ 1 $ 202
================= =================
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE>
PHOENIX INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
UNAUDITED
(000's omitted, except per share amounts)
NOTE 1 - THE COMPANY
ORGANIZATION - During the year ended May 31, 1998, Phoenix International
Industries, Inc. and Subsidiaries (the Company) provided, to entities located
primarily in the southeastern United States, computer consulting and certain
telecommunication services through its wholly-owned subsidiaries: HDX 9000, Inc.
(HDX), Mic Mac Investments, Inc. (MIC MAC) and Intuitive Technology Consultants,
Inc. (ITC). Previously, the Company sold products and systems for use in the
environmental clean-up industry. HDX, MIC MAC and ITC were acquired during the
year ended May 31, 1998. On June 1, 1998, the Company discontinued substantially
all of its computer consulting operations and disposed of ITC in a transaction
accounted for as a recession on the business combination.
CONSOLIDATION - The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.
NOTE 2 - BASIS OF PRESENTATION
The company 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. Operating results for the three-month period ended November 30, 1998
are not necessarily indicative of the results that may be expected for the year
ended May 31, 1999.
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 on Form 10-KSB for the year ended May 31, 1998.
<PAGE>
NOTE 3 - FINANCIAL RESULTS
The accompanying unaudited financial statements have been prepared assuming the
Company will continue as a going concern. The Company has accumulated losses of
approximately $1,600,000 in the last 27 months and has insufficient working
capital. In connection with a proposed acquisition of two additional
subsidiaries, the company will continue to incur selling, general and
administrative expenses. Realization of certain assets is dependent upon the
Company's ability to meet its future financing requirements, the success of
future operations and the continued funding of the parent Company's operations
by its chief executive officer. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. While the Company believes
that these acquisitions will become profitable in the future and that, with its
prospective acquisitions, it will generate future cash flows and return to
profitability, there can be no assurance that this will occur. Also, the Company
believes it will be able to raise the funds necessary to complete the
aforementioned acquisition in the foreign equity markets. In addition, the
Company's chief executive officer has committed to continue to provide working
capital to fund the selling, general and administrative expenses of the parent
company.
Page 6
<PAGE>
ITEM II
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is engaged in the business of operating as a holding
company. Currently owning 100% of 2 companies; HDX 9000, Inc. of West Palm
Beach, Florida and Mic-Mac Investments, Inc., of Myrtle Beach, South Carolina.
In June 1997, the Company acquired an employee placement and computer
systems design firm in Atlanta, Georgia (Intuitive Technology Consultants,
Inc.). In June 1998, the Company sold this company due to its insufficient cash
flow and continuing losses.
RESULTS OF OPERATIONS
For the Six and Three months ended November 30, 1998, compared to Six and Three
months ended November 30, 1997
Revenues decreased by 92.5% to $46,000 from $626,000 in the six months
ended November 30, 1998 (the "Fiscal 1999 Six Month Period") compared with the
six months ended November 30, 1997 (the "Fiscal 1998 Six Month Period").
Revenues decreased by 93.9% to $16,000 from $259,000 in the three months ended
November 30, 1998 (the "Fiscal 1999 2nd Quarter") compared with the three months
ended November 30, 1997 (the "Fiscal 1998 2nd Quarter"). This reduction in
revenue was attributable to the Company's disposition of Intuitive Technology
Consultants, Inc., during the first quarter of Fiscal 1999.
Total expenses decreased by 64.4% to $431,000 from $1,213,000for the
Fiscal 1999 Six-Month Period compared with the Fiscal 1998 Six Month Period.
Total expenses decreased by 54.2% to $285,000 from $608,000 for the Fiscal 1999
2nd Quarter compared with the Fiscal 1998 2nd Quarter. This reduction in
expenses was attributable to the Company's disposition of Intuitive Technology
Consultants, Inc., during the first quarter of Fiscal 1999.
Total expenses as a percent of revenues increased from 49.4% to89.4% for
the Fiscal 1999 Six-Month Period compared with the Fiscal 1998 Six Month Period.
The increase in expenses in relation to revenues was attributable to the
Company's legal and accounting costs not decreasing despite the disposition of
Intuitive Technology Consultants, Inc. during the Fiscal 1999 Six Month Period.
The legal and accounting costs were attributable to the transactional activities
of the Company, the due diligence investigation of certain matters pertaining to
future acquisitions and the preparation of reports filed with the Securities and
Exchange Commission.
<PAGE>
The above factors contributed to a net loss of $326,000 for the Fiscal
1999 Six Month Period as compared to the net loss of $438,000 for the Fiscal
1998 Six Month Period, and a net loss of $269,000 for the Fiscal 1999 2nd
Quarter as compared to the net loss of $260,000 for the Fiscal 1998 2nd Quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its capital requirements from operating cash
flow, loans against its accounts receivable, sales of equity securities and the
issuance of equity securities in exchange for assets acquired and services
rendered. During the six months ended November 30, 1998, the Company has been
and is continuing to attempt to attract new investment capital, which the
Company believes will be necessary to sustain its ongoing operations and to
facilitate growth. The Company continues to explore opportunities to raise
private equity capital and, in conjunction therewith, to provide credit support
for the Company's operations and potential acquisitions. Although the Company
has in the past been and continues to be in discussions with potential
investors, there can be no assurance that its efforts to raise any substantial
amount of private capital will be successful. Any substantial private equity
investment in the Company will result in voting dilution of the Company's
existing stockholders and could also result in economic dilution. If the Company
is unable to obtain new capital, the Company will be unable to carry out its
strategy of growth through acquisitions and the long-term ability of the Company
to continue its operations may be in doubt.
During the six months ended November 30, 1998, the Company closed offshore
placements of, 444,000 shares of Common Stock, for an aggregate purchase price
of $395,160. The Company incurred expenses of $138,160 in connection with such
placement, resulting in net proceeds of $257,000.
YEAR 2000
The Company has had its financial, accounting and all related reporting
systems, assessed by a third party consulting firm specializing in Y2K audits,
and to the best of its knowledge the Company is fully Year 2000 compliant.
FORWARD LOOKING STATEMENTS
Certain statements in this report set forth management's intentions,
plans, beliefs, expectations or predictions of the future based on current facts
and analyses. Actual results may differ materially from those indicated in such
statements. Additional information on factors that may affect the business and
financial results of the Company can be found in the other filings of the
Company with the Securities and Exchange Commission.
<PAGE>
PART II. OTHER INFORMATION
Item 6, Exhibits and reports on Form 8-K
(a) The following exhibits are included herewith:
27. Financial Data Schedule
(b) The Resistrant did not file any Reports on Form 8-K during the quarter for
which this report is filed.
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.
PHOENIX INTERNATIONAL INDUSTRIES, INC.
(Registrant)
February 16, 1999 By: /s/Gerard Haryman
-------------------
Gerard Haryman
President, Chief Executive Officer and
(acting) Chief Financial Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET (UNAUDITED) AND THE OPERATIONS FOR THE THREE AND SIX MONTHS ENDED
NOVEMBER 30, 1998 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-30-1999
<PERIOD-END> NOV-30-1998
<CASH> 1,107
<SECURITIES> 0
<RECEIVABLES> 2,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,000
<PP&E> 19,716
<DEPRECIATION> 23,528
<TOTAL-ASSETS> 219,000
<CURRENT-LIABILITIES> 109,000
<BONDS> 0
0
0
<COMMON> 7,702,950
<OTHER-SE> 4,975,000
<TOTAL-LIABILITY-AND-EQUITY> 219,000
<SALES> 0
<TOTAL-REVENUES> 46,000
<CGS> 0
<TOTAL-COSTS> 432,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (386,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (386,000)
<DISCONTINUED> 60,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (326,000)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
