UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: August 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission file number: 000-17058
PHOENIX INTERNATIONAL INDUSTRIES, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Florida 59-2564162
------------------------------- ------------------------------
(State or other jurisdiction of (IRS Employer incorporation or
organization) Identification No.)
1750 Osceola Drive, West Palm Beach, FL 33409
---------------------------------------------
(Address of principal executive offices)
(561) 688-0440
---------------------------
(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 [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: Common Stock, $.001 par
value 21,108,460 shares outstanding as of October 3, 2000.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
PHOENIX INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Financial Information
Financial Statements:
Independent Accountant's Report 1
Consolidated Balance Sheets as of August 31, 2000 and 1999 2
Consolidated Statements of Operations for
the three month period ended August 31, 2000 and 1999 3
Consolidated Statements of Stockholders' Deficit
for the three month period ended August 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for
the three month period ended August 31, 2000 and 1999 5
Notes to the Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS. 13
PART II: OTHER INFORMATION 14
SIGNATURE 15
<PAGE> 1
WIESENECK, ANDRES & COMPANY, P.A.
Certified Public Accountants
772 U.S. HIGHWAY 1, SUITE 200
NORTH PALM BEACH, FLORIDA 33408
(561) 626-0400
THOMAS B. ANDRES, C.P.A.*, C.V.A. FAX (561) 626-3453
PAUL M. WIESENECK, C.P.A.
*Regulated by the State of Florida
Independent Accountant's Report
-------------------------------
To the Board of Directors and Stockholders
Phoenix International Industries, Inc.
We have reviewed the accompanying Balance Sheets of Phoenix International
Industries, Inc. and consolidated subsidiaries as of August 31, 2000 and
May 31, 2000, and the related consolidated statements of operations,
shareholders' equity, and cash flows for the three-month periods ended
August 31, 2000 and 1999. These financial statements are the
responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in the notes to the
consolidated financial statements, the Company has accumulated losses of
approximately $9.6 million as of August 31, 2000 has insufficient working
capital and 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 and sale of common stock. The conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans regarding those matters are described in the notes to the
financial statements. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Wieseneck, Andres & Company, P.A.
October 17, 2000
<PAGE> 2
PHOENIX INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
(000's omitted)
August 31, 2000 May 31, 2000
--------------- ---------------
<S> <C> <C>
Current Assets
Cash $ 244 $ 40
Accounts receivable net of allowance for
doubtful accounts of $5,000 442 332
Refundable deposit 110 110
Other current assets 77 77
------------- -------------
Total Current Assets 873 559
------------- -------------
Property and equipment, net 764 624
Reorganization value in excess of amounts
allocable to identifiable assets, net of
$4,000 accumulated amortization 674 678
Goodwill 110 102
Other assets 9 9
------------- -------------
Total Assets $ 2,430 $ 1,972
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 883 $ 994
Loan payable 630 611
Note payable - current portion 250 250
Accrued and other liabilities 170 117
------------- -------------
Total Current Liabilities 1,933 1,972
Note payable, related party 528 559
Note payable, other 1,184 1,171
------------- -------------
Total Liabilities 3,645 3,702
------------- -------------
Stockholders' Deficit
Preferred stock, $0.001 par value: 20,000,000
shares authorized: no shares outstanding - -
Common stock, $0.001 par value; 200,000,000
shares authorized: 20 19
20,194,047 and 19,353,847 shares issued and
outstanding
Additional paid-in-capital 8,757 7,585
Accumulated deficit (9,992) (9,334)
------------- -------------
Total Stockholders' Deficit (1,215) (1,730)
------------- -------------
Total Liabilities and Stockholders' Deficit $ 2,430 $ 1,972
============= =============
</TABLE>
See accompanying notes and accountants report
<PAGE> 3
PHOENIX INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
(000's omitted)
Three Months Ended
----------------------------------
August 31, 2000 August 31, 1999
--------------- ---------------
<S> <C> <C>
Revenues $ 580 $ 452
Cost of Sales 503 273
--------------- ---------------
Gross Profit 77 179
--------------- ---------------
Operating Expenses
Selling, general and administrative 711 393
Depreciation and amortization 24 29
--------------- ---------------
Total Operating Expenses 735 422
--------------- ---------------
Operating Loss (658) (243)
Income tax benefit (provision) - -
--------------- ---------------
Loss from continuing operations (658) (243)
--------------- ---------------
Discontinued operations
Income (loss) from discontinued operations (152)
--------------- ---------------
Net Loss $ (658) $ (395)
=============== ===============
Loss per share
Loss from continuing operations $ (0.03) $ (0.02)
=============== ===============
Net loss $ (0.03) $ (0.03)
=============== ===============
Weighted average common shares 19,857 12,139
=============== ===============
</TABLE>
See accompanying notes and accountants report
<PAGE> 4
PHOENIX INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
PART 1: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(Unaudited)
<TABLE>
CAPTION>
Total
Shares Common Stock Additional Paid Retained Stockholders'
Outstanding Par Value $.001 in Capita Earnings Equity
----------- --------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, May 31, 2000 19,353,847 $ 19,354 $ 7,543,466 $ (9,333,938) $ (1,771,118)
-
Cash received for stock issued -
in a prior period 758,500 758,500
-
Stock Issued for services 240,200 240 92,466 92,706
Purchase of Best Net 200,000 200 63,200 63,400
-
Sale of common stock 400,000 400 299,600 300,000
-
Net Loss (658,222) (658,222)
----------- --------------- --------------- ------------- -------------
Balance, August 31, 2000 20,194,047 $ 20,194 $ 8,757,232 $ (9,992,160) $ (1,214,734)
=========== =============== =============== ============= =============
</TABLE>
See Accompanying Notes and Accountant's Report
<PAGE> 5
PHOENIX INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(000's omitted)
Three Months Ended
-------------------------------------
August 31, 2000 August 31, 1999
--------------- ---------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $ (658) $ (395)
Add items not requiring outlay of cash:
Depreciation and amortization 24 29
Writeoff of investment in HDX - 152
Stock issued in payment for expenses 93 -
Cash was provided by
Decrease in accounts receivable, net - 225
Decrease in other current assets - 8
Decrease in other assets - 101
Increase in accrued liabilities 53 74
Cash was used in
Increase in account receivable (110) -
Increase in prepaid expenses - (7)
Increase in refundable deposits - (99)
Decrease in accounts payable (53)
Decrease in accrued liabilities - (564)
-------------- --------------
Net Cash Used in Operating Activities (651) (476)
-------------- --------------
Cash Flows From Investing Activities
Acquisition of property and equipment (205) -
-------------- --------------
Cash Flows From Financing Activities
Proceeds from borrowings 32 628
Proceeds from loan from related party - 31
Receipts from loans receivable - 38
Proceeds from sale of stock 1,059 -
Repayment of loan payable related party (31) -
Payment of loans payable (329)
-------------- --------------
Net Cash Provided by (used in) Financing Activities 1,060 368
-------------- --------------
204 (108)
Net Increase (Decrease) in Cash 40 127
-------------- --------------
Cash at Beginning of Year $ 244 $ 19
Cash at End of Year ============== ==============
</TABLE>
See accompanying notes and accountants report
<PAGE> 6
PHOENIX INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(000's omitted)
Three Months Ended
-----------------------------------
August 31, 2000 August 31, 1999
--------------- ---------------
<S> <C> <C>
Supplemental Disclosures
------------------------
Cash Paid during the Year for
Interest Income - 144
Interest Expense - -
Income taxes - -
</TABLE>
See accompanying notes and accountants report
<PAGE> 7
PHOENIX INTERNATIONAL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies and General Matters
-----------------------------------------------------------------------
Organization
------------
Phoenix International Industries, Inc., (the Company), and subsidiaries
purchase wholesale long distance and local telecommunication services and
resells these services to its customers throughout the United States. The
Telephone Company of Central Florida (TCCF), a wholly owned subsidiary, was
acquired during the year ended May 31, 2000 as a reorganized debtor to
facilitate these activities.
The company acquired Moye and Associates, Inc., a computer consulting firm,
in July, 2000. The consulting services provided by Moye and Associates are
primarily to commercial businesses in the Southeastern United States.
The Officers of the Company and HDX mutually agreed on March 20, 2000 to
exchange the stock and records of HDX for all shares of stock issued by the
Company to HDX at its acquisition in July 1997.
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.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount 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.
Revenue Recognition
-------------------
Revenue is generally recognized when services are performed.
Goodwill
--------
Goodwill represents the excess of the purchase price over the fair values of
the net assets and liabilities acquired resulting from business combinations
and is being amortized on a straight-line basis over five to ten years. The
Company periodically reviews the value of its goodwill to determine if an
impairment has occurred. The Company measures the potential impairment of
recorded goodwill by the undiscounted cash flows method.
Property and Equipment
----------------------
Property and equipment are stated at cost. The Company provides for
depreciation over the estimated useful lives of the related assets, which
range from five to twelve years, primarily using the straight-line method.
Income Taxes
------------
The Company accounts for income taxes under the asset and liability method,
whereby deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between financial statement
carrying amounts of existing assets and liabilities and their respective
tax basis. Deferred tax assets and liabilities are measured using tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. The realizability of deferred tax
assets is assessed throughout the year and a valuation allowance is established
accordingly.
<PAGE> 8
PHOENIX INTERNATIONAL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies and General Matters
-----------------------------------------------------------------------
(continued)
-----------
Earnings (Loss) Per Share
-------------------------
In March 1997, the FASB issued SFAS No. 128, "Earnings per Share." This
Statement was effective for interim and fiscal periods ending after
December 15, 1997. This Statement requires the presentation of (1) diluted
earnings per share, whose calculations includes not only average outstanding
common share but also the impact of dilutive potential common shares such as
outstanding common stock options; and (2) basic earnings per share which
includes the effect of outstanding common shares but excludes dilutive
potential common shares.
The weighted average common shares outstanding during the years ended August
31, 2000 and August 31, 1999 were 20,194,047 and 12,138,694 respectively.
Fair Value of Financial Instruments
-----------------------------------
The carrying amount of accounts receivable, accounts payable, accrued expenses
and loan payable to related party approximate fair value because of the short
maturity of these items.
Concentrations of Credit Risk
-----------------------------
Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of accounts receivable and refundable
deposits. Management performs regular evaluations concerning the ability of
its customers to satisfy their obligations and records a provision for doubtful
accounts based upon these evaluations.
NOTE 2 - Allowance for Doubtful Accounts, Bad Debts
---------------------------------------------------
The Company established an allowance for doubtful accounts in the amount of
$5,000 for the year ending May 31, 2000. The amounts charged to the allowance
for doubtful accounts represented .3% (three tenths of 1%) of sales for the
fiscal year ending May 31, 2000. There were no changes to the allowance
account for the period ended August 31, 2000.
NOTE 3 - Property and Equipment
-------------------------------
Property and equipment consists of the following at August 31, 2000
and 1999:
<TABLE>
<CAPTION>
August 31,2000 May 31, 2000
-------------- -------------
<S> <C> <C>
Computer Equipment $ 351,446 $ 268,687
Furniture, fixtures and equipment 204,332 147,913
Software Development 366,670 300,000
Accumulated Depreciation (158,342) (91,793)
-------------- --------------
Total $ 764,106 $ 624,807
============== ==============
</TABLE>
NOTE 4 - Other Current Assets
-----------------------------
At August 31, 2000 and May 31, 2000, loans receivable consisted of a $15,000.
non-interest bearing and non-collateralized loan due on demand from an Officer
and Stockholder of the Company.
Other current assets consisted of $61,000 of various deposits.
<PAGE> 9
PHOENIX INTERNATIONAL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - Business Combinations
------------------------------
(1) The Company acquired 100% of the outstanding common stock
(1,000 shares) of Moye & Associates, Inc. (doing business as
BEST NET(Best Net), which is incorporated in the state of
Georgia, on July 28, 2000. The shareholders' of Best Net are
to receive 600 shares of the Company's stock for each common
share of Best Net held; 200,000 shares of the Company's stock
are issued at closing, 200,000 shares are to be delivered 135
days after closing, December 12, 2000, and the remaining
200,000 will be issued 270 days from the closing,
approximately April 28, 2001. The business combination was
accounted for by the purchase method
(2) The Company acquired 100% of the issued and outstanding
voting common stock of TCCF (a reorganized debtor) on July 27,
1999. The consideration and terms are as follows. All
administrative claims and expenses are not to exceed $570,000.
Priority claims and taxes, not exceeding $300,000 to be paid
in $25,000 installments over a period of six years with
interest payable at 8%. In addition, Phoenix will deposit a
total of $500,000 into a creditor trust fund. The initial
deposit of $100,000 to the trust fund was made at the
Confirmation Order and the balance will be deposited in four
consecutive semi-annual installments of $100,000 (see Note
10). TCCF began operating as a Reorganized Debtor using Fresh
Start Accounting in compliance with Accounting Statement of
Position (SOP) 90-7 on July 28, 1999. Except as expressly
provided in the Plan, the Confirmation Order shall discharge
any and all debts or claims whatsoever and any prior equity
interests in the Company. The assets of TCCF were restated to
properly reflect their reorganized value, the liabilities
subject to compromise and those that are not subject to
compromise are segregated and any prior stockholder's equity
was eliminated.
NOTE 6 - Loans Payable
----------------------
At August 31, 2000, the company is obligated to the
following loans payable:
Two non-interest bearing, non-collateralized loans
due on demand to current employees and stockholders
of the company. $ 92,500
A non-interest bearing, non-collateralized loan due
on demand to a related company of the Chief Executive
Officer. 238,419
Two non-interest bearing, non-collateralized loans
due on demand. 299,058
--------
Total Loans Payable $629,977
NOTE 7 - Loan Payable - Related Party
-------------------------------------
The notes payable to shareholder and Chief Executive Officer
is noncollaterized and due on demand. Interest is accrued
at the Applicable Federal Rate (AFR) of approximately 6.25%
Principal $ 500,574 $ 500,574
Accrued Interest Payable 27,110 58,246
------------- -------------
Total $ 527,684 $ 558,820
============= =============
<PAGE> 10
PHOENIX INTERNATIONAL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - Notes Payable
----------------------
Notes payable at August 31, 2000 is as follows:
Two notes payable due to the creditor trust fund. 1)
A $500,000, 8% non-collateralized note with $100,000
payment due semi-annually starting July 26, 1999.
The proceeds from this note are for paying the
allowed general unsecured creditors (pre-petition
accounts payable). This note matures July 26, 2001
and 2) A $300,000, 8% non-collateralized note with
semiannual payments of $25,000 starting July 26,
1999. The proceeds from this note are for paying
allowed priority tax claims. This note matures July
26, 2005. Accrued interest payable included in
principal at August 31, 2000 is $13,146. $ 684,236
A 13% $750,000 note due July 21, 2000 with interest
payable quarterly. The note was renewed, in
accordance with the terms of the note, for an
additional twelve months by giving written notice
prior to maturity. The note is collateralized by
3,000,000 shares of the company's stock issued to the
lender in accordance to the terms of a pledge and
security agreement. The lender has an option to
purchase the 3,000,000 pledged shares at any time for
a period of two years from the date of the pledge for
.36c per share. An additional 1,000,000 shares were
issued to the lender at inception of the loan as
payment for a "facility fee". 750,000
----------
Total Long-Term Debt 1,434,236
Less Current Portion 250,000
----------
Net Long-Term Debt $1,184,236
==========
NOTES 9 - Income Taxes
----------------------
Deferred income taxes are provided for temporary differences between the
financial reporting and income tax basis of the Company's assets and
liabilities. Temporary differences, net operating loss carry forwards and
valuation allowances comprising the net deferred taxes on the balance sheets
are as follows:
August 31, 2000
---------------
(000)
Loss carry forward for tax purposes $ 5,880
==============
Deferred tax asset (34%) $ 1,972
Valuation allowance (1,972)
--------------
Net deferred tax asset $ -
==============
At August 31, 2000, the Company had federal income tax net operating loss
carry forward of approximately $5,800,000 which will expire through the year
2020.
2009 $ 43,000
2010 308,000
2011 166,000
2012 193,000
2013 850,000
2019 760,000
2020 3,100,000
2021 358,000
<PAGE> 11
PHOENIX INTERNATIONAL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition, the Company is reviewing its ability to utilize certain net
operating losses prior to the Company's emergence from bankruptcy in 1994.
These losses have not been reflected in arriving at the net operating loss
carry forwards in the calculation of the deferred tax assets.
NOTE 10 - Business Segments
---------------------------
The Company's reportable segments are strategic business units that offer
different products or services. The Company has four reportable segments:
computer consulting, investment, telecommunications services, and acquisition
services. The accounting of the segments is the same as those described in
the summary of significant accounting policies. There have been no
intersegment sales or transfers.
The following is a summary of segment activity:
<TABLE>
<CAPTION>
Computer
Consulting
(Dis- Computer Telephone Acquistion
continued) Consulting Services Services Totals
August 31, 2000 --------------------------------------------------------------------------
---------------
<S> <C> <C> <C> <C> <C>
Revenues $ - $ 90,204 $ 486,769 $ - $ 576,973
Interest income - - 2,800 638 3,438
Interest expense - 2,092 104 48,837 51,033
Depreciation and amortization - 23,871 900 24,771
Segment profit (loss) 10,823 (485,499) (183,546) (658,222)
Segment assets - 7,631 2,067,492 354,920 2,430,043
August 31, 1999
---------------
Revenues $ - $ - $ 79,884 $ - $ 451,565
Interest income - - - 144 144
Interest expense - - 3,986 - 3,986
Depreciation and amortization - 7,612 21,000 - 28,612
Loss from discontinued operations (152,000) - - (152,000)
Segment profit (loss) (152,000) (2,751) (127,938) (112,043) (394,732)
Segment assets - 6,990 1,419,487 329,409 1,877,411
</TABLE>
NOTE 11 - Commitments and Contingencies
---------------------------------------
The Company leases its principal business location from a related party, the
spouse of the chief executive officer. The lease, which provides for annual
rental of approximately $40,000, expires in September 2001. Rent expense for
the three month periods ended August 31, 2000 and 1999 was $10,600 of which
$10,600 was accrued at August 31, 2000.
The Company is obligated for the lease of an automobile for 36 months with
monthly payments of $508. The lease expires in December 2001.
A suit has been filed against the Company for nonpayment of occupancy lease
payments for a facility that was vacated by the Company in November 1995. The
outcome of the litigation is not determinable at this time.
A suit has been filed by the Company in an attempt to recover past due
promissory notes in excess of $290,000. The outcome of the litigation is
not determinable at this time.
A suit has been filed against the Company involving breach of contract of an
alleged consulting agreement. The outcome of the litigation is not
determinable at this time.
<PAGE> 12
PHOENIX INTERNATIONAL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A suit has been filed against the Company involving breach of contract by the
Company regarding the transfer of stock to the previous owners of the Mic Mac
Investments, a corporation that was purchased by the Company. The Company is
currently entered into settlement negotiations.
NOTE 12 - Going Concern
-----------------------
The financial statements are presented on the basis that the Company is a
going concern. Going concern contemplates the realization of assets and
satisfaction of liabilities in the normal course of business over a reasonable
length of time. The Company has incurred losses in the last two years
aggregating approximately $4,500,000 and, as of August 31, 2000, has a deficit
of approximately $9,600,000 and insufficient working capital.
During these two years, the Company has made several acquisitions, two of
which have been rescinded. In connection therewith, it has incurred
significant selling, general and administrative expenses which have been
funded by loans from the Company's chief executive officer and selling of
common stock in the United States and in foreign markets. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.
The Company believes that its recent acquisitions will become profitable in
the future and will generate future cash flows. However, 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 and
provide temporary working capital in the U.S. and 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> 13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Except for the historical information herein, the matters
discussed in this quarterly report includes forward-looking statements
that may involve a number of risks and uncertainties. Actual results
may vary based upon a number of factors, including, but not limited
to, risk in product availability, product technology changes, market
acceptance of new products and services, questions of continuing
demand, the impact of competitive products and pricing, changes in
economic conditions and other risk factors contained in the Company's
most recent filings with the Securities and Exchange Commission
("SEC").
RESULTS OF OPERATIONS
Phoenix International Industries, Inc.(the "Company") is a
development stage company. The disclosure in the quarterly report
should be read in conjunction with the Company's annual report on Form
10-KSB for its year ended May 31, 2000, which was filed with the SEC.
During the Company's three month period ended August 31, 2000,
the Company incurred net losses of $658,000 compared to net losses of
$395,000 for the comparable three month period for the preceding year.
The Company reported revenues of $580,000 for the three month
period ended August 31, 2000 compared to revenues of $452,000 for the
three month period ended August 31, 1999. These revenues resulted
from telecommunication service sales generated by Phoenix's affiliate
Telephone Company of Central Florida, Inc.("TCCF"), and The Best.Net,
as disclosed in the combined financial statement which is included in
this filing.
The Company, during the three month period ended August 31, 2000
executed an exchange of stock agreement and acquired 100% of Moye &
Associates (aka "The Best. Net"), a Georgia Corporation based on St.
Simons Island. The Best Net is an Internet Service Provider (ISP) with
over 2,500 customers, a computer sales and service company and also
has an e-commerce site on the Internet.
The Company, based upon the representations received from TCCF,
believes that prior to the end of fiscal 2001, TCCF will become
profitable due to continued increasing revenues from operations
primarily as it increases its subscriber base for its
telecommunications business. The acquisition by Phoenix of companies
like The Best. Net is an excellent example of how Phoenix can assist
TCCF in expanding its customer base. TCCF and The Best Net have
already begun "cross-selling" their respective services to each others
customers.
The Company, during the coming year, will continued to pursue
efforts to add additional affiliates or become involved in attractive
joint ventures, primarily in the telecommunications industry, in order
to generate additional revenue streams for all of its subsidiaries.
Although no longer wholly owned by the Company, HDX 9000, Inc.'s
President, Timothy Palmer, will continue to serve as a Director of the
Company and act as a consultant on an "as needed" basis. Whether
there will be any on-going involvement between the Company and its
former subsidiary has yet to be decided.
The Company's net losses for the three month period ended August
31, 2000, continue to be the result of expenses involved with
supporting the day to day operation of TCCF, the expenses of expanding
its sales operation during the period and the continued expenses
associated with continuing to operate and maintain its offices,
professional fees and expenses associated with being a reporting
public company, which include: legal, accounting and EDGAR/printing
preparation,. The Company incurred non-cash expenses associated with
the issuance of 200,000 shares of restricted stock to the former
owners of Moye & Associates, Inc. as partial payment for its
acquisition, and the assumption of two outstanding loans to the
company by its former majority shareholder.
In order for the Company to pay its operating expenses, including
office rents, communication expenses, accounting and bookkeeping fees,
printing and EDGAR preparation costs, publication costs, and other
general and administrative expenses, the Company was dependent upon
the funds provided by non-interest bearing loans from the Company's
executive officers, director and shareholders.
<PAGE> 14
During this reporting period as it has previously, the company
has raised a portion of its operating capital through the sale of
restricted stock, however in future there can be no assurance of any
additional sale of restricted stock. Further, there can be no
assurance, based upon present market price of the shares, that it will
be able to raise additional private placement funding, at terms and
conditions satisfactory to the Company.
Also during this reporting period the Company entered into a
Secured Convertible Debenture Purchase Agreement consisting of 12%
Secured Convertible Debentures, and Common Stock Purchase Warrants,
for the initial amount of no less than $2,000,000. This Agreement was
constructed in a manner that at the Company's descretion, allows
rollovers, additional tranches or other means of raising additional
capital beyond the initial $2,000,000. This agreement is with private
investors who received the right to register said stock in accordance
with the SB-2 registration statement prepared by Phoenix's legal
counsel and filed with and accepted by the SEC, and incorporated
herein by reference.
The Company still continues to be dependent upon the willingness
of the Company's executive officers/directors and its consultants to
accept shares as compensation for continued services to the Company,
which services the Company considers to be valuable and necessary to
its continued operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company, at August 31, 2000 had current assets of $873,000
compared to current assets of $559,000 at May 31, 2000. To assist the
Company in its cash flow requirements the Company may determine,
depending upon the prevailing stock price of its shares, to seek
subscriptions from the sale of securities to private investors,
although there can be no assurance that it will be successful in
securing any investment from private investors at terms and conditions
satisfactory to the Company, if at all.
Based upon the Company's present liquid resources, its present
operating expenses, and the commitment of its executive officers to
continue to defer most or all of their salaries, and if no new
revenues are generated from operations or other sources, the Company
will be able to operate for a minimum of three months. However, in the
near term, the Company does anticipate a significant increas
operating revenues as a result the business developments by TCCF and
The Best.Net.
The Company's monthly operating expenses during the three month
period ended August 31, 2000, does not reflect any salary to Gerard
Haryman or Thomas Donaldson, the Company's executive officers, who's
salaries have been accrued, but not paid, at the rate of $20,833 and
$8,600 per month respectively. The Company does not contemplate
commencing full salary payments to Messrs. Haryman and Donaldson
unless and until it begins to generate positive cash flow from
operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
During the period ended February 29, 2000 the company was
served with a lawsuit filed on behalf of the pervious owners of Mic-
Mac, Inc. (formerly a wholly owned subsidiary of the Company) the
lawsuit demanded the release of the restrictions placed on the 220,000
stock which was received in payment for Mic-Mac, Inc. Additionally,
the lawsuit demanded that the contingent balance of the purchase price
(250,000 shares of restricted stock) be issued. As a first setp in
resolving this issue the company, previous to the first quarter of
fiscal 2001, released the restrictions on the 220,000 shares of stock,
but still maintains the position that the previous owners are not
entitled to any additional stock as the performance clauses in the
purchase agreement were not met. This litigation is still in progress
and has of yet, not been decided.
Additionally, one of the Company's subsidiaries TCCF, is
involved in a dispute with one of its former carriers regarding a
default in payment for services. The Company believes that the
accusation is incorrect and is answering the complaint. TCCF is also
involved in litigation with a former billing services supplier, who
alleges breech of contract and lack of payment. TCCF maintains the
position that the supplier was the one in breech, and is preparing to
litigate if necessary.
The balance of legal proceedings involving the Company are as reported
in the company's 10-KSB of May 31, 2000 and incorporated herein by
reference.
Item 2. Changes in Securities
NONE
<PAGE> 15
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 on Form 8-K
NONE
SIGNATURES
In accordance with the requirements of the Securities Exchange Act
of 1934, the registrant caused this report caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PHOENIX INTERNATIONAL INDUSTRIES, INC.
(Registrant)
October 19, 2000 By:/s/ GERARD HARYMAN
--------------------------------------
Gerard Haryman
President, Chief Executive Officer and
(acting) Chief Financial Officer
