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
ACT OF 1934
For the quarterly period ended April 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______ to _________
Commission file number 033-20966
Online International Corporation
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(Exact name of small business issuer as specified in its charter)
Nevada 76-0251547
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(State or other jurisdiction) (IRS Employer Identification No.)
of incorporation or organization)
1500 K Street, NW, Washington, D.C. 20005
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(Address of principal executive offices)
202-408-8180
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(Issuer's telephone number)
150 Laser Court, Hauppage, NY 11788
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(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 reports),
and (2) has been subject to such filing requirements for the 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:
8,358,280 common shares
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
April 30, 2000
<S> <C>
Cash $ 54,132
Accounts receivable, less allowance
for doubtful accounts of $0 in 2000 and $55,630 in 1999. 1,180,671
Inventory 543,028
Prepaid expenses and other 99,617
Deferred income taxes 425,000
Loan receivable-officer 5,200
-----------
Total Current Assets 2,307,648
-----------
PROPERTY, at cost, less accumulated depreciation
and amortization 1,073,683
----------
OTHER ASSETS
Loan receivable-officer 53,100
Deferred compensation trusts 117,384
Deferred taxes 71,000
Due from former subsidiary 133,185
----------
Other Assets 2,765
----------
Total Other Assets 377,434
----------
TOTAL ASSETS $ 3,758,765
==========
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
April 30,2000
Current maturities of long-term debt $ 196,933
Current portion of obligations under capital leases 112,207
Accounts payable 1,048,154
Accrued expenses 110,674
----------
Total Current Liabilities 1,467,968
----------
Long term debt, less current maturities 509,102
Obligations under capital leases, less current portion 350,269
Deferred Compensation 117,384
----------
Total Liabilities 2,444,723
STOCKHOLDERS' EQUITY
5% preferred stock, no par value; 20,000,000 shares
authorized, 7,800,156 issued and outstanding 1,584,855
Common stock, $.001 par value; 100,000,000 shares
authorized, 5,818,547 shares issued and 5,617,089
shares outstanding in 2000 5,818
Additional paid-in capital 1,436,559
Accumulated deficit (1,713,190)
Treasury Stock, at cost, 201,458 shares -
-----------
Total Stockholders' Equity 1,314,042
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,758,765
==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the three months ended
April 30,
------------------------
2000 1999
---- -----
<S> <C> <C>
NET SALES $ 2,276,979 $ 1,961,372
COST OF GOODS SOLD 2,093,736 1,682,102
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GROSS PROFIT 183,243 279,270
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 217,389 127,837
-------------- -------------
INCOME FROM OPERATIONS (34,146) 151,433
OTHER INCOME (EXPENSE)
Interest income - 3,051
Interest expenses (28,839) (5,100)
--------------- -------------
Total other expense (28,839) (2,049)
--------------- -------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (62,985) 149,384
Income tax expense 328,825 9,500
-------------- -------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (391,810) 139,884
DISCONTINUED OPEATIONS
Loss from operations of discontinued
business segment (less applicable tax
benefit of $66,000 in 1999) - (249,305)
--------------- -------------
NET LOSS (391,810) (109,421)
ACCUMULATED DEFICIT, beginning of period (1,321,380) (830,399)
--------------- -------------
ACCUMULATED DEFICIT, end of period $ (1,713,190) $ (939,820)
=============== ============
Weighted average number of shares outstanding 5,818,547 5,507,244
=============== =============
Net income loss per common share $ (0.07) $ (0.02)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the three months ended
April 30,
-----------------------
2000 1999
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (391,810) $ (109,421)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 68,100 68,100
Loss on investment in foreign lottery operation - 114,925
Deferred taxes 327,000 (66,000)
Change in:
Accounts receivable (266,083) (255,200)
Inventories 236,394 43,502
Prepaid expenses and other 44,704 (61,058)
Security deposits 20,855 (30,777)
Accounts payable 161,802 101,056
Accrued expenses and other (52,393) (74,098)
---------- ---------
Net Cash Provided by (Used in)
Operating Activities 148,569 (268,971)
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CASH FLOWS FROM INVESTING ACTIVITIES
Collection of (additions to) notes receivable 700 69,496
Acquisition of property and equipment (76,970) (27,232)
Investment in foreign lottery operation - (114,925)
Proceeds from sale of unconsolidated subsidiary 15,932 12,138
--------- ----------
Net Cash Used in Investing Activities (60,338) (60,523)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (Payment of) long-term debt (48,697) 60,000
Payment of capital lease obligations (26,358) (1,592)
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Net Cash Provided by (Used in)
Financing Activities (75,055) 58,408
---------- ----------
NET INCREASE (DECREASE) IN CASH 13,176 (271,086)
CASH
Beginning of year 40,956 605,111
End of year $ 54,132 $ 334,025
========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ 369 $ 20,035
========= ==========
Interest $ 28,839 $ 5,100
========= ==========
</TABLE>
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
APRIL 30, 2000
The accompanying unaudited financial statements do not include all of
the information and footnotes necessary for a complete presentation of
financial position, results of operations, cash flows and stockholders'
equity in conformity with generally accepted accounting principles. Except as
disclosed herein, there has been no material change in the information
disclosed in the notes to the financial statement included in the Company's
annual report for the year ended January 31, 2000. In the opinion of management,
all adjustments are of a normal recurring nature. Operating results for the
three months ended April 30, 2000 are not necessarily indicative of the
results that can be expected for the year ended January 31, 2001.
<TABLE>
INVENTORIES
Inventories at April 30, 2000, consist of the following:
<S> <C>
Raw materials $ 147,424
Work-in-process 167,939
Finished goods 227,665
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$ 543,028
</TABLE>
INCOME TAXES
The provision for income taxes consists of the following components:
<TABLE>
Three Months Ended April 30
2000 1999
------ -----
<S> <C> <C>
Current
Federal $ - $ -
State 1,825 9,500
--------- -------
1,825 9,500
Deferred
Relating to current net operating loss Federal - (56,000)
State - (10,000)
--------- ---------
- (66,000)
</TABLE> --------- ---------
<PAGE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS (Continued)
APRIL 30, 2000
<TABLE>
INCOME TAXES (Continued)
Three Months Ended April 30,
2000 1999
---- -----
<S> <C> <C>
Relating to change in beginning of period
valuation allowance
Federal 327,000 -
--------- --------
$ 328,825 $ (56,500)
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</TABLE>
Income tax expense (benefit) for the three months ended April 30, 1999 is as
follows:
Income tax expense from continuing operations $ 9,500
Income tax benefit from discontinued operations (66,000)
---------
$ (56,500)
---------
Deferred income taxes at April 30, 2000 consist of the following:
Deferred tax assets $ 962,700
Deferred tax liabilities (30,700)
Valuation allowance (436,000)
------------
$ 496,000
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The deferred tax asset balances primarily relate to a consolidated federal
net operating loss carryforwards of $2,323,100 for Online International Corp.
The deferred tax asset balance relating to the New York net operating loss
carryover for Online Internal Corp. and Printing Associates Inc. is
completely offset by a valuation allowance. These carryforwards begin to
expire in 2019.
The reconciliation between the actual and expected Federal tax is as follows:
<TABLE>
Three Months Ended April 30,
2000 1999
----- -----
<S> <C> <C>
Income tax provision at 34% $ (133,200) $(66,000)
State and local income taxes net of Federal
Income tax effect 1,8259,500
Change in estimate for allowance 460,200 -
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Actual income tax provision $ 328,825 $ (56,500)
---------- -----------
</TABLE>
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS (Continued)
APRIL 30, 2000
SUBSEQUENT EVENTS
On July 17, 2000, the Company sold all the assets of its design and
manufacture of lottery tickets business for approximately $3,820,000 of
which cash was received for $1,000,000, note receivable for $829,000 and
purchaser assumed liabilities of $1,991,000. The note receivable represents a
contingent payment based on projected sales from the lottery ticket
manufacturing segment for a term of five years discounted at 9.50%.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Liquidity and Capital Resources
-------------------------------
The Company's cash position at April 30, 2000 was $54,132 an increase of
$13,176 from January 31, 2000.
Accounts receivable at April 30, 2000 was $1,180,671 an increase of
$266,083 from January 31, 2000. This increase is primarily attributable to
slow paying customers. The Company has not experienced any collection
difficulties.
Deferred income tax asset at April 30, 2000 was $496,000 a decrease of
$327,000 from January 31, 2000. This decrease is primarily attributable to
change in the estimate for an allowance against these deferred tax assets.
The Company does not expect to utilize all of its federal and New York state
net operation losses and the deferred tax asset is written down to its net
realizable value.
As mentioned in the notes to the financial statements, during July 2000
the Company sold its lottery ticket manufacturing segment of the business for
$3,820,000. It is the Company's intention to explore other investment
opportunities.
Results of Operations
---------------------
Three Months Ended April 30, 2000 and 1999
-------------------------------------------
Sales during the three months ended April 30, 2000 were $2,276,979, an
increase of $315,607 from the three months ended April 30, 1999. The gross
profit percentage was 8% for the three months ended April 30, 2000 compared to
14% for the three months ended April 30, 1999. This 6% decrease is primarily
attributable to additional labor and manufacturing costs incurred in the
start-up phase of its newly obtained three-year contract. In addition, the
Company has been unable to take advantage of cash discounts on raw material
purchases.
Loss from discontinued operations increased primarily due to adjusting the
deferred tax asset to its net realizable value.
The above mentioned factors resulted in a consolidated net loss of
$391,810 for the three months ended April 30, 2000 as compared to a
consolidated net loss of $109,421 for the three months ended April 30, 1999.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company was not involved in any material legal proceedings during
the reporting period.
Item 2. Changes in Securities.
There were no changes in the Company's securities during the reporting
period.
Item 3. Defaults Upon Senior Securities.
There were no defaults upon senior securities during the reporting period.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters have been submitted for a vote to securities holders during the
reporting period. However, written consent was obtained from two
shareholders comprising a majority of the shares approving the sale of the
assets of the Company. This sale was reported on Form 8-K filed
July 20, 2000.
Item 5. Other Information.
There is no further material information about the Company that has not
been mentioned herein.
Item 6. Exhibits and Reports on Form 8-K.
A Form 8-K was filed by the Company on July 20, 2000, to report a sale
of assets. This document is hereby incorporated herein by reference.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ONLINE INTERNATIONAL CORPORATION
--------------------------------
(Registrant)
--------------------------------
Date August 7, 2000 /s/ MOSES L. GARSON
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MOSES L. GARSON, CHAIRMAN
