10QSB 1 0001.txt 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 -------------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Nevada 76-0251547 ----------------------------- ------------------------------------- (State or other jurisdiction) (IRS Employer Identification No.) of incorporation or organization) 1500 K Street, NW, Washington, D.C. 20005 ----------------------------------------------------------------------------- (Address of principal executive offices) 202-408-8180 -------------------------------------------------------------------------------- (Issuer's telephone number) 150 Laser Court, Hauppage, NY 11788 -------------------------------------------------------------------------------- (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.
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEET (Unaudited) ASSETS April 30, 2000 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 ========== 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 ==========
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) For the three months ended April 30, ------------------------ 2000 1999 ---- ----- NET SALES $ 2,276,979 $ 1,961,372 COST OF GOODS SOLD 2,093,736 1,682,102 -------------- ------------- 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)
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) For the three months ended April 30, ----------------------- 2000 1999 ------ ------ 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) ---------- ---------- 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) ---------- ---------- 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 ========= ==========
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. INVENTORIES Inventories at April 30, 2000, consist of the following: Raw materials $ 147,424 Work-in-process 167,939 Finished goods 227,665 ---------- $ 543,028
INCOME TAXES The provision for income taxes consists of the following components: Three Months Ended April 30 2000 1999 ------ ----- 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)
--------- --------- ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED FINANCIAL STATEMENTS (Continued) APRIL 30, 2000 INCOME TAXES (Continued) Three Months Ended April 30, 2000 1999 ---- ----- Relating to change in beginning of period valuation allowance Federal 327,000 - --------- -------- $ 328,825 $ (56,500) --------- ---------
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 ------------ 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: Three Months Ended April 30, 2000 1999 ----- ----- 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 - ----------- ----------- Actual income tax provision $ 328,825 $ (56,500) ---------- -----------
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%. 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. 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. 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 ---------------- --------------------------------- MOSES L. GARSON, CHAIRMAN