UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: November 30,2000
----------------
[ ] 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 22,311,859 shares outstanding
as of November 30, 2000.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
PHOENIX INTERNATIONAL INDUSTRIES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2000
<PAGE> 2
PHOENIX INTERNATIONAL INDUSTRIES, INC.
INDEX
Financial Information
Financial Statements:
Independent Accountant's Report 1
Consolidated Balance Sheets as of November 30, 2000 and
May 31, 2000 2
Consolidated Statements of Operations for the three month
and six month periods ended November 30, 2000 and 1999 3
Consolidated Statements of Stockholders' Deficit
for the six month period ended November 30, 2000 4
Consolidated Statements of Cash Flows for the six month
periods ended November 30, 2000 and 1999 5
Notes to the Consolidated Financial Statements 7
<PAGE> 3
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
November 30, 2000 and May 31, 2000 and the related consolidated
statements of operations for the three month and six month periods
ending November 30, 2000 and 1999, and the consolidated statement of
stockholders' deficit for the six month period from May 30, 2000
through November 30, 2000, and the consolidated statements of cash
flows for the six month periods ending November 30, 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 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 $11 million as of November 30,
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.
/s/Wieseneck, Andres & Company, P.A.
January 17, 2001
Page 1 of 13
<PAGE> 4
PHOENIX INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(000's omitted)
November 30, 2000 May 31, 2000
----------------- ------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 247 $ 40
Accounts receivable net of allowance
for doubtful accounts of $5,000 and $8,000 548 332
Refundable deposit 90 110
Other current assets 77 77
--------- --------
Total Current Assets 962 559
--------- --------
Property and equipment, net 750 624
Reorganization value in excess of amounts allocable -
to identifiable assets, net of $8,000 and $0
accumulated amortization 670 678
Goodwill 132 61
Other assets 142 9
--------- --------
Total Assets $ 2,656 $ 1,931
========= ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 1,365 $ 994
Loan payable 336 611
Note payable - current portion 250 250
Accrued and other liabilities 272 117
--------- --------
Total Current Liabilities 2,223 1,972
Note payable, related party 500 559
Note payable, other 3,028 1,171
--------- --------
Total Liabilities 5,751 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: - -
22,311,859 and 19,353,847 shares issued
and outstanding 22 19
Additional paid-in-capital 8,247 7,544
Accumulated deficit (11,364) (9,334)
--------- --------
Total Stockholders' Deficit (3,095) (1,771)
--------- --------
Total Liabilities and Stockholders' Deficit $ 2,656 $ 1,931
========= ========
</TABLE>
See accompanying summary of accounting policies and notes
to financial statements
Page 2 of 13
<PAGE> 5
PHOENIX INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
(000s omitted) (000s omitted)
Three Months Ended Six Months Ended
------------------------------------- -------------------------------------
November 30, 2000 November 30, 1999 November 30, 2000 November 30, 1999
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Revenues $ 700 $ 467 $ 1,280 $ 919
Cost of Sales 655 473 1,158 746
----------------- ----------------- ----------------- -----------------
Gross Profit 45 (6) 122 173
----------------- ----------------- ----------------- -----------------
Operating Expenses
Selling, general and administrative 1,260 171 1971 564
Depreciation and amortization 40 8 64 37
Interest Expense 117 1 117 1
----------------- ----------------- ----------------- -----------------
Total Operating Expenses 1,417 180 2,152 602
----------------- ----------------- ----------------- -----------------
Operating Loss (1,372) (186) (2,030) (429)
Income tax benefit (provision) - - - -
----------------- ----------------- ----------------- -----------------
Loss from continuing operations (1,372) (186) (2,030) (429)
================= ================= ================= =================
Discontinued operations
Income (loss) from discontinued
operations - - - (152)
----------------- ----------------- ----------------- -----------------
Net Loss $ (1,372) $ (186) $ (2,030) $ (581)
================= ================= ================= =================
Loss per share
Loss from continuing operations $ (0.06) $ (0.02) $ (0.05) $ (0.02)
================= ================= ================= =================
Net loss $ (0.06) $ (0.02) $ (0.05) $ (0.03)
================= ================= ================= =================
Weighted average common shares 21,689 12,139 20,773 12,139
================= ================= ================= =================
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements
Page 3 of 13
<PAGE> 6
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 Capital 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 85,000 85,000
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 8,083,732 (9,992,160) (1,888,234)
=========== =============== ============== ============ ============
Debt converted to equity 1,644,812 1,645 117,907 119,552
Stock issued for services 273,000 273 29,757 30,030
Purchase of Bestnet 200,000 200 15,600 15,800
Net Loss (1,371,950) (1,371,950)
----------- -------------- -------------- ------------ ------------
Balance, November 30, 2000 22,311,859 $ 22,312 $ 8,246,996 $(11,364,110) $(3,094,802)
=========== ============== ============== ============ ============
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements
Page 4 of 13
<PAGE> 7
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)
Six Months Ended
----------------------------------------
November 30, 2000 November 30, 1999
----------------- -----------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $ (2,030) $ (572)
Add items not requiring outlay of cash:
Depreciation and amortization 64 -
Stock issued in payment for expenses 123 -
Cash was provided by
Decrease in refundable deposit 20 -
Increase in accounts payable 371 539
Increase in accrued liabilities 155 166
Increase in other current liabilities 743 -
Cash was used in
Increase in account receivable (216) (99)
Increase in prepaid expenses - -
Increase in other assets - (409)
----------------- -----------------
Net Cash Used in Operating Activities (770) (375)
----------------- -----------------
Cash Flows From Investing Activities
Acquisition of property and equipment (190) (654)
Other (155) 86
----------------- -----------------
Net Cash Used in Investing Activities (345) (568)
----------------- -----------------
Cash Flows From Financing Activities
Proceeds from borrowings 1,857 857
Proceeds from sale of stock 385 -
Repayment of short term notes payable (861) -
Payment of loans payable (59) -
----------------- -----------------
Net Cash Provided by (used in)
Financing Activities 1,322 857
----------------- -----------------
Net Increase (Decrease) in Cash 207 (86)
Cash at Beginning of Period 40 127
----------------- -----------------
Cash at End of Period $ 247 $ 41
================= =================
</TABLE>
See accompanying summary of accounting policies
and notes to financial statements
Page 5 of 13
<PAGE> 8
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)
Six Months Ended
----------------------------------------
November 30, 2000 November 30, 1999
----------------- -----------------
<S> <C> <C>
Supplemental Disclosures
------------------------
Cash Paid during the Year for
Interest Income 1 144
Interest Expense 173 1
Income taxes - -
Non Cash Transactions
Stock issued for payment of debt 119 -
Purchase of Moye and Associates
(d/b/a Bestnet) for stock 79 -
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements
Page 6 of 13
<PAGE> 9
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
and internet service provider, in July, 2000. The consulting services
provided by Moye and Associates are primarily to commercial businesses.
The internet services are primarily to individual customers in the
Southeastern United States. These financial statements have been restated
to reflect the inclusion of Bestnet's operations at November 30, 1999 and
May 31, 2000.
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.
See accompanying independent accountants' review report
Page 7 of 13
<PAGE> 10
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
November 30, 2000 and November 31, 1999 were $21,689,000 and $12,139,000
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.
NOTE 3 - Property and Equipment
-------------------------------
Property and equipment consists of the following at November 30, 2000 and
May 31, 2000:
November 30, 2000 May 31, 2000
----------------- ------------
Computer Equipment $ 327,699 $ 268,687
Furniture, fixtures and equipment 228,803 147,913
Software Development 387,670 300,000
Accumulated Depreciation (193,819) (91,793)
------------- -----------
Total $ 750,353 $ 624,807
============= ===========
NOTE 4-Other Current Assets
---------------------------
At November 30, 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.
See accompanying independent accountants' review report
Page 8 of 13
<PAGE> 11
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. These financial statements
have been restated to reflect the inclusion of Bestnet's operations
at November 30, 1999 and May 31, 2000.
(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 eight
consecutive quarterly installments of $50,000 (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 November 30, 2000, the company is obligated to the following loans
payable:
One non-interest bearing, non-collateralized loans due on
demand to current employees and stockholders of the
company. 97,878
A non-interest bearing, non-collateralized loan due on
demand to a related company of the Chief Executive
Officer. 10,149
Two non-interest bearing, non-collateralized loans due
on demand. 201,180
---------
Total Loans Payable $ 335,942
=========
NOTE 7 - Convertible Debenture
------------------------------
The Company issued $2 million of 12% secured convertible debentures on
June 22, 2000 that matures in December 2001. Interest is payable
quarterly commencing on June 30, 2000 and each quarter thereafter while
such debentures are outstanding. All overdue and unpaid interest shall
entail a late fee at the rate of 15% per annum. The debenture shall be
convertible into shares of common stock at the option of the holder, in
whole or in part at any time and from time to time, after the original
Issue Date. The number of shares of common stock issuable upon a
conversion shall be determined by a formula as specified in the agreement.
A Holder may not convert debentures or receive shares of common stock as
payment of interest to the extent such conversions or receipt of such
interest payment would result in the holder beneficially owning in excess
of 4.999% of the then issued and outstanding shares of common stock. At
November 30, 2000, the holder has converted 1,644,812 shares valued at
$119,552.
See accompanying independent accountants' review report
Page 9 of 13
<PAGE> 12
PHOENIX INTERNATIONAL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8-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%.
<TABLE>
<CAPTION>
November 30, 2000 November 30, 1999
----------------- -----------------
<S> <C> <C>
Principal 500,574 650,979
Accrued Interest Payable 19,419 -
Total 519,993 650,979
</TABLE>
NOTE 9 - Notes Payable
----------------------
Notes payable at November 30, 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 November 30, 2000 is
$5,424. 647,797
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 $0.36 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
Secured convertible debentures were issued at 12% with
interest paid quarterly. The debentures mature December
2001. (See Note 7) 1,880,448
----------
Total Long-Term Debt 3,278,245
Less Current Portion 250,000
----------
Net Long-Term Debt $3,028,245
==========
NOTE 10 - Consulting Agreements
-------------------------------
The Company entered into a six month consulting agreement on May 1, 2000
with the NIR Group, LLC to advise management with respect to the Company's
field of interest and business, strategic and commercial matters, and
assist the Company in overall operational and business strategy. The
Company will pay the consultant $15,500 per month ($93,000 total) plus
10,000 shares of the Company's common stock.
The Company entered into a second consulting agreement with the NIR Group,
LLC on August 1, 2000. The term of this agreement is three months. The
consultant will assist the company in structuring acquisition plans,
including, without limitation, structuring and negotiation of acquisition
and disposition of assets. The Company shall pay the consultant $50,000
per month ($150,000 total) plus 71,000 shares of the Company's common
stock.
See accompanying independent accountants' review report
Page 10 of 13
<PAGE> 13
PHOENIX INTERNATIONAL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - 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:
(000s Ommitted)
November 30, 2000
-----------------
Loss carry forward for tax purposes $ 7,252
============
Deferred tax asset (34%) $ 2,432
Valulation allowance (2,432)
------------
Net deferred tax asset $ -
============
At November 30, 2000, the Company had federal income tax net operating
loss carry forward of approximately $7,100,000 which will expire through
the year 2020.
2009 $ 43,000
2010 308,000
2011 116,000
2012 193,000
2013 850,000
2019 760,000
2020 3,100,000
2021 358,000
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 12 - 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:
See accompanying independent accountants' review report
Page 11 of 13
<PAGE> 14
PHOENIX INTERNATIONAL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - Business Segments(continued)
--------------------------------------
<TABLE>
<CAPTION>
Computer
Consulting
(Dis- Computer Telephone Acquisition
continued) Consulting Services Services Totals
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the three months ended
November 30, 2000
-----------------
Revenues $ - $ 116 $ 584 $ - $ 700
Interest income - - - 1 1
Interest expense - - - 117 117
Depreciation and amortization - 1 38 1 40
Segment profit (loss) 6 (705) (661) (1,372)
Segment assets - 9 2,178 469 2,656
For the three months ended
November 30, 1999
-----------------
Revenues $ - $ 73 $ 394 $ - $ 467
Interest income - - - - -
Interest expense - 1 - - 1
Depreciation and amortization - 8 - - 8
Loss from discontinued operations 152 - - -
Segment profit (loss) - (6) (108) (72) (186)
Segment assets - 8 1,288 351 1,647
</TABLE>
NOTE 13 - 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 November 30, 2000 and 1999 was
$10,600 of which $10,600 was accrued at November 30, 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.
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.
See accompanying independent accountants' review report
Page 12 of 13
<PAGE> 15
PHOENIX INTERNATIONAL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - 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 $5,900,000 and, as of November 30,
2000, has a deficit of approximately 11,000,000 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.
See accompanying independent accountants' review report
Page 13 of 13
<PAGE> 16
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
statementsthat 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, and its previous
quarterley report for the quarter ended August 31, 2000 which were
filed with the SEC.
During the Company's three month period ended November 30,
2000, the Company incurred net losses of $1,372,000 compared to net
losses of $186,000 for the comparable three month period for the
preceding year.
The Company reported revenues of $700,000 for the three month
period ended November 30, 2000 compared to revenues of $467,000 for
the three month period ended November 30, 1999. These revenues
resulted from telecommunication service sales generated by Phoenix's
affiliates, 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, Georgia. 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,
which has not yet been activated.
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
its efforts to add additional affiliates or become involved in
attractive joint ventures, primarily in the telecommunications
<PAGE> 17
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, continues to serve as a Director
of the Company and act as a consultant on an "as needed" basis.
Future involvement between the Company and its former subsidiary is
unlikely.
The Company's net losses for the three month period ended
November 31, 2000, continue to be the result of expenses involved
with supporting the day to day operation of TCCF, the expenses of
expanding its affiliates sales operations, including the posting of a
$200,000 deposit to BellSouth for TCCF, and the acquisition of
additional subsidiaries. Also contributing to the Company loss
during the period are 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 also incurred non-cash expenses associated
with the issuance of 1,644,812 shares of stock to the underwriters of
the convertible debenture referred to above.
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.
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, as previously referred to, during the previous
reporting period, which ended August 31, 2000, 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 discretion
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.
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
The Company, at November 30, 2000 had current assets of
$962,000 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
increase 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 November 30, 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 shares of 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, has
been involved in a dispute with one of its former carriers regarding
a default in payment for services. The Company believed that the
accusation was incorrect, however after obtaining advice from legal
counsel, the Company decided not to litigate the matter and the
carrier was awarded a default judgement against TCCF in the amount of
$321,587.52. The Company and the carrier are currently in
negotiations in an attempt to reach an agreeable settlement of this
matter. TCCF is also involved in litigation with a former billing
services supplier, who alleges breech of contract and lack of
<PAGE> 19
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
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
<PAGE> 20
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)
January 18, 2001 By:/s/ GERARD HARYMAN
--------------------------------------
Gerard Haryman
President, Chief Executive Officer and
(acting) Chief Financial Officer
<PAGE> 21
