-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WjwFdJv/hXmCQJvOdEB2+6aLWVaGe2LZK6f5VOX36DSGhYqrteLnwuNs/HUE8HTq JHaaGlSs0nfjkHlQ4bUFnA== 0000950129-96-002997.txt : 19961118 0000950129-96-002997.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950129-96-002997 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHOENIX INFORMATION SYSTEMS CORP CENTRAL INDEX KEY: 0000792157 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 133337797 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26532 FILM NUMBER: 96664318 BUSINESS ADDRESS: STREET 1: 100 SECOND AVE SOUTH STREET 2: STE 1100 CITY: ST PETERSBURG STATE: FL ZIP: 33701 BUSINESS PHONE: 8138947674 MAIL ADDRESS: STREET 1: 100 SECOND AVE STREET 2: STE 1100 CITY: ST PETERSBERG STATE: FL ZIP: 33701 FORMER COMPANY: FORMER CONFORMED NAME: DYNASTY TRAVEL GROUP INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CS PRIMO CORP DATE OF NAME CHANGE: 19910718 10-Q 1 FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1996 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------- -------- Commission File Number: 0-26532 - -------------------------------- PHOENIX INFORMATION SYSTEMS CORP. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 13-3337797 - ------------------------------------------------- ---------------------- (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 100 Second Avenue South, Suite 1100 St. Petersburg, Florida 33701 - ----------------------------------------- -------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (813) 894-8021 -------------------- Not Applicable ------------------------------------------------------- (Former name, former address and former fiscal year if changed since last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . ------ ------ As of October 31, 1996, the Registrant had 46,718,942 shares of common stock issued and outstanding. 2 PHOENIX INFORMATION SYSTEMS CORP. INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets March 31, 1996 and September 30, 1996 (Unaudited) 3 Unaudited Consolidated Statements of Operations Three Months and Six Months ended September 30, 1996 and September 30, 1995 and Inception to September 30, 1996 4 Unaudited Consolidated Statements of Cash Flows Six Months ended September 30, 1996 and September 30, 1995 and Inception to September 30, 1996 5 - 6 Notes to Financial Statements (Unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 9 PART II. OTHER INFORMATION 10 - 11 SIGNATURE PAGE 12 EXHIBIT INDEX 13
3 PHOENIX INFORMATION SYSTEMS CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS
ASSETS SEPTEMBER 30, 1996 MARCH 31, 1996 ------------------ ------------------ (UNAUDITED) Current assets: Cash and cash equivalents $ 4,090,311 $ 2,078,510 Prepaids 194,886 135,474 Trade receivables 184,780 78,622 Receivable from related parties 81,286 65,469 ------------ ------------ Total current assets 4,551,263 2,358,075 Property and equipment, net 1,668,701 1,882,549 Deposits and other 130,983 110,360 Due from joint venture partner 567,202 737,662 Goodwill, net 341,671 394,071 ------------ ------------ Total assets $ 7,259,820 $ 5,482,717 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 307,488 $ 300,773 Accounts payable 1,590,346 2,688,530 Accrued payroll and payroll taxes 301,517 272,582 Accrued interest 7,416 15,507 ------------ ------------ Total current liabilities 2,206,767 3,277,392 Payable to related parties 29,890 1,046,633 Notes payable, less current portion 122,794 173,075 Accrued compensation expense 542,250 332,250 ------------ ------------ Total liabilities 2,901,701 4,829,350 ------------ ------------ Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value, 5,000,000 shares authorized, 2,231,250 shares issued and outstanding at September 30, 1996 22,312 -- Common stock, $.01 par value, 75,000,000 shares authorized, 46,376,563 and 45,722,618 shares issued and outstanding at September 30,1996 and March 31, 1996, respectively 463,765 457,226 Additional paid-in capital 28,884,623 20,176,237 Losses that have accumulated during the development stage (25,012,581) (19,980,096) ------------ ------------ Total stockholders' equity 4,358,119 653,367 ------------ ------------ Total liabilities and stockholders' equity $ 7,259,820 $ 5,482,717 ============ ============
See accompanying notes. 3 4 PHOENIX INFORMATION SYSTEMS CORP. AND SUBSIDIARIES (a development stage company) UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS for the three months and six months ended September 30, 1996 and 1995 and cumulative for the period from inception of development stage activities, April 1, 1989, through September 30, 1996
Three Months Six Months Cumulative Ended September 30, Ended September 30, Since 1996 1995 1996 1995 April 1, 1989 ------------- ------------- ------------- ------------ ------------- Start-up and organizational expenses $ (2,993,551) $ (2,037,959) $ (5,575,899) $ (4,005,777) $(27,942,243) Travel commissions, net 84,722 71,500 198,504 176,350 722,560 Reservation revenues 149,908 84,722 250,900 84,722 610,003 License fee income 6,000 6,000 12,000 12,000 78,000 Interest and dividend income 24,522 4,978 66,562 15,339 116,588 Management fee income -- -- -- -- 138,021 Other revenues 15,448 -- 15,448 -- 15,448 ------------ ------------ ------------ ------------ ------------ Net loss before minority interest in net loss of subsidiary (2,712,951) (1,870,759) (5,032,485) (3,717,366) (26,261,623) ------------ ------------ ------------ ------------ ------------ Minority interest in net loss of subsidiary -- 193,063 -- 374,415 1,249,042 ------------ ------------ ------------ ------------ ------------ Net loss $ (2,712,951) $ (1,677,696) $ (5,032,485) $ (3,342,951) $(25,012,581) ============ ============ ============ ============ ============ Net loss per common share outstanding $ (.06) $ (.04) $ (.11) $ (.08) ============ ============ ============ ============ Weighted average number of common shares outstanding 46,275,834 40,891,507 46,048,741 40,360,232 ============ ============ ============ ============
See accompanying notes. 4 5 PHOENIX INFORMATION SYSTEMS CORP. AND SUBSIDIARIES (a development stage company) UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS for the six months ended September 30, 1996 and 1995 and cumulative for the period from inception of development stage activities, April 1, 1989, through September 30, 1996
Six Months Ended September 30, Cumulative --------------------------- Since 1996 1995 April 1, 1989 ----------- ------------ ------------- Cash flows from operating activities: Net loss $(5,032,485) $ (3,342,951) $(25,012,581) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 551,409 328,225 1,956,016 Compensation paid through issuance of stock 210,000 150,000 790,452 Transaction fee -- -- 1,140,000 Services paid through issuance of stock 193,010 365,620 1,891,317 Rent paid through in-kind contribution 170,460 170,460 681,840 Minority interest in net loss of subsidiary -- (374,415) (1,249,042) Other -- -- 157,985 ----------- ------------ ------------ (3,907,606) (2,703,061) (19,644,013) Changes in assets and liabilities: Prepaids, deposits and trade receivables (186,194) (171,096) (445,965) Accounts payable (1,098,184) 239,132 966,938 Accrued payroll and payroll taxes 28,935 (28,418) 244,940 Accrued interest (8,091) (69,205) 208,301 ----------- ------------ ------------ Net cash used in operating activities (5,171,140) (2,732,648) (18,669,799) ----------- ------------ ------------ Cash flows from investing activities: Purchase of property and equipment (285,156) (635,715) (2,509,972) ----------- ------------ ------------ Net cash used in investing activities (285,156) (635,715) (2,509,972) ----------- ------------ ------------
See accompanying notes. 5 6 PHOENIX INFORMATION SYSTEMS CORP. AND SUBSIDIARIES (a development stage company) UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS for the six months ended September 30, 1996 and 1995 and cumulative for the period from inception of development stage activities, April 1, 1989, through September 30, 1996
Six Months Ended September 30, Cumulative --------------------------- Since 1996 1995 April 1, 1989 ----------- ------------ ------------- Cash flows from financing activities: Issuance of common and preferred stock $ 8,675,000 $ 579,425 $ 10,533,095 Stock subscriptions -- -- 1,297,000 Proceeds from notes payable -- 423,000 538,000 Payments on notes payable (39,579) (134,264) (365,755) Proceeds from related parties -- 1,782,500 15,529,818 Payments to related parties (1,032,560) (83,937) (2,139,506) Payments on capital lease obligation (3,989) (4,276) 8,205 Payments of preferred stock dividends (130,775) -- (130,775) ----------- ----------- ------------ Net cash provided by financing activities 7,468,097 2,562,448 25,270,082 ----------- ----------- ------------ Increase (decrease) in cash and cash equivalents 2,011,801 (805,915) 4,090,311 Cash and cash equivalents, beginning of period 2,078,510 1,864,581 -- ----------- ----------- ------------ Cash and cash equivalents, end of period $ 4,090,311 $ 1,058,666 $ 4,090,311 =========== =========== ============
See accompanying notes. 6 7 PHOENIX INFORMATION SYSTEMS CORP. AND SUBSIDIARIES (A development stage company) NOTES TO FINANCIAL STATEMENTS September 30, 1996 (unaudited) NOTE A The accompanying consolidated financial statements include the accounts of Phoenix Information Systems Corp. ("Phoenix Information") and its subsidiaries, Phoenix Systems Group, Inc. (wholly owned since March 27, 1995), Phoenix Systems Ltd. (wholly owned since November 11, 1993), Hainan Phoenix Information Systems, Ltd. (70% owned since November 22, 1993) and American International Travel Agency, Inc. (wholly owned since September 15, 1994). The consolidated group of companies is collectively referred to herein as "Phoenix". All significant intercompany accounts and transactions have been eliminated. NOTE B The financial information reflects all normal recurring adjustments that, in the opinion of management, are deemed necessary for a fair presentation of the results for the interim periods. The results for the interim periods are not necessarily indicative of the results to be expected for the year. NOTE C The attached summarized financial information does not include all disclosures required to be included in a complete set of financial statements prepared in conformity with generally accepted accounting principles. The Form 10-K, for the fiscal year ended March 31, 1996 should be read in conjunction with the data herein. 7 8 PHOENIX INFORMATION SYSTEMS CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. INTRODUCTORY STATEMENT Phoenix Information Systems Corp. ("Phoenix" or the "Company") is a development-stage information systems and services company that has developed airline and hotel travel reservation systems. In fiscal 1996, Phoenix commenced operations in the United States, China and Russia. Efforts are under way to enlist additional airlines, hotels and other travel service providers. While Phoenix has now commenced operations, the Company has only a brief operating history and has yet to generate significant revenues or earnings. Consequently, Phoenix's continued existence has depended, primarily, upon its ability to raise capital. In China, Phoenix has installed and begun to operate its advanced computerized travel reservation system for domestic airlines. Phoenix provides state-of-the-art, travel-related information services to China through its 70% owned joint venture with China Hainan Airlines. RESULTS OF OPERATIONS During the six months ended September 30, 1996, and the fiscal years ended March 31, 1996, 1995 and 1994, the Company sustained net losses of $5,032,485, $9,704,318, $4,841,824 and $2,567,932, respectively. These losses may continue for a presently undetermined time. Reservation revenues reflect a full quarters results for the quarter ended September 30, 1996 while reservation revenues started in the quarter ended September 30, 1995. While Phoenix has concentrated its sales efforts in China, Russia and other countries, the Company has also focused on small domestic carriers that could utilize the Company's reservation system. In fiscal 1995, Phoenix entered into an Agreement with Eastwind Airlines, Inc. ("Eastwind") to provide Eastwind with a complete reservation system to manage all sales, airport and operations functions. In addition, Phoenix implemented a reservation center that processes all Eastwind reservations as of the second quarter of fiscal 1996. Furthermore, in May 1996, the Company commenced commercial operations with Laker Airlines. For the quarter ended September 30, 1996, the Company had start-up and organizational expenses of $2,993,551 compared to $2,037,959 for the quarter ended September 30, 1995. The expanding start-up and organizational expenses in the quarter ended September 30, 1996 as compared to the quarter ended September 30, 1995, reflects principally the addition of marketing and administrative employees as the Company's focus shifts from product development to generation of customers and sales. 8 9 LIQUIDITY AND CAPITAL RESOURCES Working Capital; Financial Instability As of September 30, 1996, Phoenix had stockholders' equity of $4,358,119 and working capital of $2,344,496. Phoenix has not generated any significant revenues, earnings or history of operations from inception through September 30, 1996. In September 1996, Phoenix issued 1,250,000 shares of 6% Series B Convertible Preferred Stock for a purchase price of $3.20 per share with a liquidation preference of $4.00 per share. The Company also issued a warrant to purchase 150,000 shares of common stock at an exercise price of $3.00 per share. The preferred stock is convertible into common stock at the lesser of $3.00 or the market price per share (conversion is based on the liquidation preference price per share). If not converted by the purchaser prior to the second anniversary of the issuance date, the preferred stock will automatically be converted into common stock. Furthermore, the Company granted the right of first refusal with respect to certain additional issuances. According to the terms of the amended Series A preferred stock offering, the maximum and minimum conversion prices per share on the Series A preferred stock of $4.00 and $2.00, respectively were deleted. During the six months ended September 30, 1996, 268,750 shares of the Company's Series A preferred stock were converted into 527,528 shares of common stock. Reference is made to the Company's Form 10-K for the fiscal year ended March 31, 1996, for a complete description of certain financing transactions entered into by the Company to meet its operating and investing activities. 9 10 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings: Ungerleider v. Robert P. Gordon, Phoenix Information Systems Inc., et al. On August 7, 1996, the District Court granted Phoenix's motion to dismiss substantial portions of Plaintiff's claims. The court rejected Plaintiff's claims of fraudulent inducement to enter into the Settlement Agreement, which effectively precludes Plaintiff from trying to enforce a finders fee agreement or any of the options, payments, or other rights which he released as part of the Settlement Agreement. Plaintiff was given leave to amend his Complaint, but the court's order required him to do so in a manner consistent with the court's order, which precludes Plaintiff's claims related to alleged oral promises made prior to the signing of the Settlement Agreement. On August 22, 1996, Plaintiff filed a Second Amended Complaint, which in its first eight counts essentially reiterated the claims which the District Court dismissed on August 7, 1996. Plaintiff also has sued Phoenix for allegedly participating in repossessing 1.2 million shares of Phoenix stock from Plaintiff and failing to perform oral promises which Plaintiff contends were part of the Settlement Agreement. The Defendants have moved to dismiss or strike the Second Amended Complaint, in part because the allegations contradict the rulings contained in the District Court's August 7, 1996 order. The case was referred to mediation for settlement discussions. However, mediation has been postponed because Plaintiff's counsel moved for and was granted leave to withdraw from the case as reflected by the court's September 2, 1996 order. Plaintiff has not yet had new counsel enter an appearance on his behalf. Reference is made to Item 3 of the Company's Form 10-K, for the fiscal year ended March 31, 1996, for additional information regarding this proceeding. Charles Chang and Juliette Chang v. Robert P. Gordon and Phoenix Information Systems Corp. The motion of defendants Robert P. Gordon and Phoenix to dismiss the Amended Complaint in this action has been fully submitted and is awaiting decision. The Court has stayed discovery in the action pending a decision on the motion to dismiss. Reference is made to Item 3 of the Company's Form 10-K for the fiscal year ended March 31, 1996, for additional information regarding this proceeding. ITEM 2. Changes in Securities: Reference is made to Part I of Item 2 of this 10-Q for description of modifications to the terms of the Series A preferred stock. ITEM 3. Defaults Upon Senior Securities: None ITEM 4. Submissions of Matters to a Vote of Security Holders: None ITEM 5. Other Information: None 10 11 ITEM 6. Exhibits and Reports on Form 8-K: (a) Exhibits 11) Earnings Per Share - See Consolidated Statement of Operations 27) Financial Data Schedule (b) Reports on Form 8-K - None 11 12 PHOENIX INFORMATION SYSTEMS CORP. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PHOENIX INFORMATION SYSTEMS CORP. ----------------------------------------- (Registrant) Dated: November 12, 1996 /s/ ROBERT P. GORDON ----------------------------------------- Robert P. Gordon, President and Chief Executive Officer /s/ LEONARD S. OSTFELD ----------------------------------------- Leonard S. Ostfeld, Vice President and Chief Financial Officer 12 13 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 - Financial Data Schedule
13 EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS MAR-31-1997 APR-01-1996 SEP-30-1996 4,090,311 0 184,780 0 0 4,551,263 3,280,473 0 7,259,820 2,206,767 0 0 22,312 463,765 3,872,042 7,259,820 449,404 543,414 0 5,575,899 0 0 0 (5,032,485) 0 0 0 0 0 (5,032,485) (.11) 0
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