-----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, WYwG9O6ct7syAGkLsK/wQDLMQf1BrTt+mRNOz2XUAlFPlXxQ8b7qtZyLWCAFsUZo DQMKzkxLfk6pm3M+hg7SBQ== 0001052809-00-000004.txt : 20000210 0001052809-00-000004.hdr.sgml : 20000210 ACCESSION NUMBER: 0001052809-00-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 20000209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ONLINE INTERNATIONAL CORP /NV/ CENTRAL INDEX KEY: 0000831378 STANDARD INDUSTRIAL CLASSIFICATION: INVESTORS, NEC [6799] IRS NUMBER: 760251547 STATE OF INCORPORATION: NV FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 033-20966 FILM NUMBER: 528304 BUSINESS ADDRESS: STREET 1: 8547 ARAPAHO RD STREET 2: STE 416J CITY: GREENWOOD VILLAGE STATE: CO ZIP: 80112 BUSINESS PHONE: 5162317575 MAIL ADDRESS: STREET 1: 150 LASER COURT CITY: HAUPPAUGE STATE: NY ZIP: 11788 FORMER COMPANY: FORMER CONFORMED NAME: CONDOR WEST CORP DATE OF NAME CHANGE: 19920703 10QSB 1 FORM 10-QSB FORM 10-QSB (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934. For the quarter ended October 31, 1999 TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF - --- 1934 For the transition period from ___________ to ___________. Commission file number 033-20966 Online International Corporation ----------------------------------------------- (Exact name of registrant as specified in its charter) Nevada 033-20966 76-0251547 ------------------------------------------------------------------------- (State of Incorporation) (Commission File Number) (IRS Employer No.) 150 Laser Court Hauppauge, NY 11788 -------------------------------------------------------------------------- (Address of principal executive offices) Tel. (516) 231-7575 --------------------------------------------------------------------------- (Issuer's telephone number) 909 Frostwood, Suite 261 Houston, Texas 77024 (713) 461-5910 ----------------------------------------------------------------------------- (Former address, if changed since last report) Check whether the issuer (1) FILED ALL REPORTS REQUIED TO BE FILED BY Section 13 or 15(d) of the Exchange Act during the pat 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 --- --- 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: 5,818,547 COMMON SHARES; 7,800,156 SERIES A PREFERRED SHARES. TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES NO X --- --- --------------- Item 1. Financial Statements ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEET OCTOBER 31,1999 (UNAUDITED)
ASSETS - ------------------------------------ Cash $ 29,179 Accounts receivable, less allowance for doubtful accounts of $55,630 880,672 Inventory 730,962 Prepaid assets 82,616 Due from employees 90,646 Other current asset 38,740 ----------- TOTAL CURRENT ASSETS 1,852,815 ----------- PROPERTY, at cost, less accumulated depreciation 732,175 ----------- OTHER ASSETS Investment in foreign lottery operation 100,000 Loan Receivable 114,925 Deferred taxes 174,600 Due from former subsidiary 166,349 Deferred compensation trusts 128,083 Other Assets 187,774 ----------- TOTAL OTHER ASSETS 871,731 ----------- TOTAL ASSETS $ 3,456,721 =========== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Bank line-of-credit $ 690,000 Current portion of obligations under capital leases 49,588 Accounts payable 655,465 Accrued payroll & payroll taxes 10,965 Accrued expenses 66,377 ----------- TOTAL CURRENT LIABILITIES 1,472,395 ----------- DEFERRED COMPENSATION 128,083 OBLIGATIONS UNDER CAPITAL LEASES, less current portion 116,020 ----------- TOTAL LIABILITIES 1,716,498 ----------- STOCKHOLDERS' EQUITY 5% preferred stock, no par value ;7,800,156 shares authorized, 1,584,855 issued and outstanding Common stock, $.001 par value; 100,000,000 shares authorized, 5,818 5,818,547 shares issued; 5,617,089 outstanding Additional paid-in capital 1,436,559 Retained earnings (deficit) (1,287,009) Treasury stock, 201,458 shares -- ----------- TOTAL STOCKHOLDERS' EQUITY 1,740,223 ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,456,721 ===========
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY CONSOLIDATED INCOME STATEMENT (UNAUDITED)
3 MO.ENDED 3 MO.ENDED 9 MO.ENDED 9 MO.ENDED 10/31/1999 10/31/1998 10/31/1999 10/31/1998 ------------ ------------ ------------ ------------ Sales - net $ 1,936,371 $ 1,876,237 $ 5,976,978 $ 6,826,182 Cost of goods sold 1,848,093 1,585,640 5,312,295 5,618,886 ------------ ------------ ------------ ------------ Gross profit 88,278 290,597 664,683 1,207,296 Selling, general & administrative 180,168 433,431 717,696 1,410,176 Merger expenses 355,000 -- 355,000 -- ------------ ------------ ------------ ------------ Income (loss) from operations (446,890) (142,834) (408,013) (202,880) OTHER EXPENSE (18,216) (8,303) (48,597) (11,656) ------------ ------------ ------------ ------------ (LOSS) BEFORE INCOME TAXES (465,106) (151,137) (456,610) (214,536) Income tax expense (benefit) -- -- -- -- ------------ ------------ ------------ ------------ NET (LOSS) (465,106) (151,137) (456,610) (214,536) ============ ============ ============ ============ EARNINGS PER SHARE $ (0.03) $ (0.01) $ (0.03) $ (0.02) ============ ============ ============ ============ WEIGHTED AVERAGE SHARES OUTSTANDING 13,369,486 13,307,400 13,328,323 13,307,400 ============ ============ ============ ============
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
3 MONTHS ENDED 3 MONTHS ENDED 9 MONTHS ENDED 9 MONTHS ENDED OCTOBER 31, 1999 OCTOBER 31, 1998 OCTOBER 31, 1999 OCTOBER 31, 1998 ---------------- ---------------- ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(465,106) $(151,137) $(456,610) $ (214,536) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization $ 68,478 68,469 205,433 205,433 Change in: Accounts Receivable $ 232,082 368,479 (192,999) 129,759 Inventory $(143,379) (15,844) (120,116) 97,850 Prepaid expenses and other current assets $ (4,222) (306,223) 10,034 (670,693) Loan Receivable $ -- -- (114,925) Other assets $ (8,648) -- (130,012) Accounts payable $ 199,989 (82,666) 225,614 (163,189) Accrued expenses and other current liabilities $ (1,561) 11,190 (99,021) 42,508 --------- --------- --------- --------- NET CASH USED IN OPERATING ACTIVITIES (122,367) (107,732) (672,602) (572,868) --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Due from former subsidiary $ 14,171 7,907 40,324 56,519 Acquisitions of property and equipment $ (32,679) (9,038) (69,695) (39,326) --------- --------- --------- --------- NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (18,508) (1,131) (29,371) 17,193 --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Line of Credit borrowings $ 100,000 300,000 160,000 300,000 --------- Payments of obligations under capital leases $ (11,614) (10,200) (33,959) (30,344) --------- --------- --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 88,386 289,800 126,041 269,656 --------- --------- --------- --------- NET (DECREASE) INCREASE IN CASH (52,489) 180,937 (575,932) (286,019) CASH Beginning of period $ 81,668 404,928 605,111 871,884 --------- --------- --------- --------- End of period $ 29,179 $ 585,865 $ 29,179 $ 585,865 ========= ========= ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for: Interest $ 18,284 $ 7,769 $ 52,020 $ 19,994 ========= ========= ========= ========= Taxes $ 7,672 $ -- $ 15,897 $ -- ========= ========= ========= =========
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
COMMON STOCK PREFERRED STOCK ------------------------ -------------------------- ADDITIONAL RETAINED Number of Par Number of Par Paid-in Earnings Shares Value Shares Value Capital (Deficit) ---------- ----------- ---------- ------------- ------------ ----------- Balance at January 31, 1997, as previously reported 2,486,950 $ 2,487 250 $ 1,693,223 $ 1,331,522 $ 256,239 2-for-1 common stock split effective July 14, 1998 2,486,950 -- -- -- -- -- 33,334-for-1 preferred stock split, effective July 14, 1998 -- -- 8,333,250 -- -- -- --------- ----------- --------- ----------- ----------- ----------- Balance at January 31, 1997, as restated 4,973,900 2,487 8,333,500 1,693,223 1,331,522 256,239 Conversion of preferred stock 533,344 267 (533,344) (108,368) 108,101 -- Net Income for year ended January 31, 1997 -- -- -- -- -- 68,027 --------- ----------- --------- ----------- ----------- ----------- Balance at January 31, 1998 5,507,244 2,754 7,800,156 1,584,855 1,439,623 324,266 Change in par value resulting from July 14, 1998 stock split -- 2,753 -- -- (2,753) -- Net loss for year ended January 31, 1999 -- -- -- -- -- (1,154,665) --------- ----------- --------- ----------- ----------- ----------- Balance at January 31, 1999 5,507,244 5,507 7,800,156 1,584,855 1,436,870 (830,399) Additional stock issued from merger on September 9, 1999 311,303 311 -- -- (311) -- Net loss for nine months ended October 31, 1999 -- -- -- -- -- (456,610) --------- ----------- --------- ----------- ----------- ----------- TOTAL STOCKHOLDERS' EUITY AT October 31, 1999 5,818,547 $ 5,818 7,800,156 $ 1,584,855 $ 1,436,559 $(1,287,009) ========= =========== ========= =========== =========== =========== TREASURY STOCK ------------------------ Number of Par Shares Value Total ---------- --------- ----------- Balance at January 31, 1997, as previously reported -- $-- $ 3,283,471 2-for-1 common stock split effective July 14, 1998 -- -- -- 33,334-for-1 preferred stock split, effective July 14, 1998 -- -- -- -------- ----------- ----------- Balance at January 31, 1997, as restated -- -- 3,283,471 Conversion of preferred stock -- -- -- Net Income for year ended January 31, 1997 -- -- 68,027 -------- ----------- ----------- Balance at January 31, 1998 -- -- 3,351,498 Change in par value resulting from July 14, 1998 stock split -- -- -- Net loss for year ended January 31, 1999 -- -- (1,154,665) -------- ----------- ----------- Balance at January 31, 1999 -- -- 2,196,833 Additional stock issued from merger on September 9, 1999 201,458 -- -- Net loss for nine months ended October 31, 1999 -- -- (456,610) -------- ----------- ----------- TOTAL STOCKHOLDERS' EUITY AT October 31, 1999 201,458 -- $ 1,740,223 ======== =========== ===========
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS: 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, 1999. In the opinion of Management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three months ended October 31, 1999 are not necessarily indicative of the results that can be expected for the year ending January 31, 2000. INVENTORIES Inventories at October 31, 1999 consist of the following: Raw Materials: $427,126 Work-in-process: 75,967 Finished goods: 227,869 -------- $730,962
MERGER TRANSACTION On September 9, 1999 ("the merger date") the corporation previously known as Online International Corporation ("old Online") merged with Condor West Corporation ("Condor") a publicly traded Nevada corporation with no material assets, liabilities or operations. Prior to the merger, Condor effected a 48-for-1 reverse stock split. Condor was the surviving legal entity and old Online ceased to exist. Condor, however, changed its name to Online International Corporation ("new Online"). Each common shareholder of old Online (5,507,244 issued and outstanding on the merger date) received one share of new Online common for each share of old Online common. Each holder of old Online Series A Preferred shares (7,800,156 issued and outstanding on the merger date) received one share of new Online Series A Preferred for each share of old Online Series A Preferred. Each common shareholder of Condor (311,303 issued and outstanding on the merger date) received one share of new Online common for each share of Condor common. Old Online had previously purchased 201,458 shares (included in the 311,303 issued and outstanding) of Condor common stock for $275,000; these shares resulted in the creation of treasury stock in new Online. Although Condor (now with the legal name of Online International Corporation) is legally the surviving corporation, old Online is the continuing, surviving entity for accounting purposes. The accounting for the transaction is similar to a reverse takeover wherein old Online was merged into Condor. For financial reporting purposes the transaction is being recorded as if old Online issued 311,303 new shares of common stock of which 201,458 were recorded as treasury shares with no cost. The $275,000 paid for the Condor shares, along with $80,000 of professional fees incurred, has been recorded as merger expense in the statement of operations. The Series A Preferred shares of new Online have rights that exceed those of the Series A Preferred shares of old Online. Each new Series A Preferred share has the same voting rights as a share of common stock except that in the case of certain defaults the Series A Preferred acquires additional rights. Also, the old limitation, under which holders of Series A Preferred could only convert enough shares to common to give them 20% of the outstanding common shares has been eliminated. STOCK OPTIONS In September 1999 the Company adopted an incentive stock option plan ("ISO"). Contemporaneously with the adoption of the plan, 700,000 options were granted to employees and directors of the Company. The options vest in one year from the grant date. Each option gives the holder the right to buy one share of common share of common stock for one dollar ($1.00). The options are exercisable over a three year period from the date of grant. The Company accounted for the granting of the options under the intrinsic value method. There would not have been a material difference in the net loss had the Company instead determined the cost based on the fair value of the options granted. Item 2. MANAGEMENT'S DISCUSSIONS AND ANALYSES OR PLAN OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The consolidated financial statements reflect the combined operations of Condor and Online International Corporation. Condor had no material assets, liabilities or operations prior to the merger as discussed in the Notes to the financial statements. The Company's cash position at October 31, 1999 was $29,179 a decrease of $575,932 from January 31, 1999. This decrease is attributable to the use of funds to support the operations of the lottery management segment of the Company. During the first two fiscal quarters of the year the lottery management segment of the Company continued to support its existing contract in Cambodia as well as pursue lottery management opportunities in Liberia and other areas. Approximately $80,000 was used to purchase instant lottery tickets for the games in Cambodia; $51,000 was used to pursue the Liberian contract; $67,000 was paid to various consultants working on these projects. The Company also incurred merger expenses of $355,000 as discussed in the notes to the financial statements. Inventories on hand increased approximately $120,000 because the manufacturing segment of the Company was in the start up phase of a new contract and built up finished goods inventories of its existing products while maintaining raw materials for the new project. The Company anticipates that the financial impact of the new contract will not be recognized until the first quarter of the fiscal year ending January 2001, as shipments in this fiscal year will not be significant, however costs will be incurred during the current fiscal year to modify the equipment to meet the specifications of the product. The manufacturing segment of the business has obtained a three-year contract requiring certain capital and operating expenditures. The short-term cash flows of the Company are sufficient to fund day to day operations, however long term borrowings of approximately $450,000 are projected within the next fiscal quarter to purchase new equipment as well as improve existing equipment for the newly acquired contract. The Company believes it will secure such funding without difficulty. The lottery management segment of the business has experienced limited activity, however, management is in the process of preparing a business plan that will address its strategy for the upcoming fiscal year. Accounts receivable at October 31, 1999 were $880,672. The lottery and parimutuel products industry is controlled by a limited number of contractors. During the three months ended October 31, 1999, approximately 72% of the Company's sales were to two contractors. In addition, approximately 57% of the accounts receivable balance at October 31, 1999 are due from these contractors. The Company has not experienced any collection difficulties. Working capital at October 31, 1999 was $380,420 a decrease of $563,154 from the working capital of $943,574 at January 31, 1999. This decrease in working capital is attributable to a decrease in cash offset by an increase in inventories and accounts receivable at October 31, 1999. The Company is in the process of converting its bank line of credit to a 4 year term loan. This will be completed prior to its fiscal year end, January 31, 1999. The ratio of current assets to current liabilities is 1.3 to 1 at October 31, 1999 compared to 1.8 to 1 at January 31, 1999. This change is mainly attributable to the increase in accounts payable coupled with the decrease in cash. The Company is committed to providing high quality products and service into the year 2000 and beyond. The Company has prepared its systems and operations to be year 2000 compliant. Costs to the Company included capital purchases and operating expenses. Additionally, the Company has received confirmation from its primary vendors and customers of Y2K compliance. RESULTS OF OPERATIONS THREE MONTHS ENDED OCTOBER 31, 1998 TO THREE MONTHS ENDED OCTOBER 31, 1999 Sales in the three months ended October 31, 1999 remained consistent with the sales in the three months ended October 31, 1998. The gross profit percentage was 4.5% in the quarter ended October 31, 1999 compared to 15% in the quarter ended October 31, 1998. This 10.5% decrease is attributable to the additional labor and manufacturing costs incurred in the start up phase of the newly obtained contract. The initial production run of the new contract resulted in unforeseen technical and mechanical difficulties. The Company believes the costs incurred will have a positive impact on the profitability of the contract in the long term. The consolidated loss from operations for the three months ended October 31, 1999 was ($446,890). During the quarter ended October 31, 1999, the Company merged as discussed in the footnotes to the financial statements at a cost of $355,000. The Company began ISO 9002 certification efforts during the quarter ended October 31, 1999. ISO is an internationally recognized quality assurance standardization program. Completion of this project is scheduled for the first quarter of fiscal year 2001. Costs associated with this program will be approximately $45,000. NINE MONTHS ENDED OCTOBER 31, 1998 TO NINE MONTHS ENDED OCTOBER 31, 1999 Year to date sales at October 31, 1999 were $849,000 lower than the year to date sales for the nine months ended October 31, 1998. This decrease is primarily attributable to the decrease in sales to two customers. The decrease in sales is due to competitive price reductions, coupled with an increase in footage (ticket yield) per roll to the major customers. The Company has maintained its market share of these customers in the nine months ended October 31, 1999. The gross profit percentage for the nine months ended October 31, 1999 was 11% as compared to 18% for the nine months ended October 31, 1998. This decrease is attributable to the price changes discussed above as well as the start up costs related to the new contract. Selling, general and administrative expenses for the nine months ended October 31, 1999 were $717,696 compared to $1,410,176 for the nine month period ended October 31, 1998. This $692,000 decrease is attributable to the lottery management segment reducing its consulting staff and travel expenses related to its international business operations. The consolidated loss for the nine months ended October 31, 1999 was ($456,610), comprised of net income before taxes of $181,988 in the manufacturing segment of the Company and a net loss of ($638,598) in the lottery management segment of the Company. The loss for the lottery management segment of the business includes a $355,000 merger expense as described in the footnotes to the financial statements. As previously mentioned, the lottery management segment has been virtually inactive since the second quarter of the fiscal year. Item 6. Exhibits and Reports on Form 8-K. On February 7, 2000, the Registrant filed a report on Form 8-K to report a change in the Registrant's fiscal year. On September 23, 1999, the Registrant filed a report on Form 8-K to report a change in control pursuant to a merger. At the time of the merger, the Registrant was known as Condor West Corporation. The merger was between Online International Corporation and the Registrant with the Registrant being the surviving company. As part of the merger, the Registrant changed its name to Online International Corporation. The Registrant reported the resignation of its existing directors and the election of three new directors. The Registrant also included the audited financial statements of the company that was merged into the Registrant and to whom control of the Registrant passed. 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 Date: February 7, 2000 /s/ Stanley James White --------------------------------------- Stanley James White Chief Executive Officer, President & Secretary -----END PRIVACY-ENHANCED MESSAGE-----