SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/SB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 2002
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
GLOBUS INTERNATIONAL RESOURCES CORP.
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(Exact name of registrant as specified in its charter)
Delaware 88-0203697
- ------------------------------- -------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
80 Wall Street
Suite 518
New York, N.Y. 10005
- --------------------------------------- ----------
(Address of principal executive office) (zip code)
Registrant's telephone number, including area code: 212-558-6100
Not Applicable
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(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 [ ]
4,245,872 shares, $.001 par value, as of February 7, 2003 (Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date)
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
DECEMBER 31, 2002
(Unaudited)
I N D E X
Page No.
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Part I - Financial Information:
Item 1. Consolidated Financial Statements (Unaudited):
Balance Sheets
As at December 31, 2002 and September 30, 2002 .......... 3
Statements of Operations
For the Three Months Ended
December 31, 2002 and 2001 .............................. 4
Statements of Changes in Stockholders' Equity
For the Three Months Ended December 31, 2002
and Year Ended September 30, 2002........................ 5
Statements of Cash Flows
For the Three Months Ended
December 31, 2002 and 2001 .............................. 6
Notes to Consolidated Financial Statements .............. 7-17
Page 2 of 17
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
2002 2002
(Unaudited)
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 180,654 $ 277,314
Accounts receivable 2,088,463 1,699,423
Inventories 109,720 125,620
Other assets 2,100 600
----------- -----------
Total current assets 2,380,937 2,102,957
----------- -----------
Property assets - at cost,
net of accumulated depreciation 1,829 2,034
----------- -----------
Other assets:
Goodwill net of accumulated amortization 67,517 67,517
Security deposits 9,440 9,440
Investment in multi-lingual internet software 105,414 105,414
----------- -----------
Total other assets 182,371 182,371
----------- -----------
$ 2,565,137 $ 2,287,362
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank lines of credit payable $ 1,282,267 $ 1,282,771
Notes payable - related parties 803,502 760,202
Accounts payable 795,714 575,009
Accrued expenses and other current
liabilities - related parties 98,825 103,825
Accrued expenses and other current liabilities 63,962 60,532
----------- -----------
Total current liabilities 3,044,270 2,782,339
----------- -----------
Commitments and contingencies -- --
Stockholders' equity:
Common stock, $.001 par value, authorized -
50,000,000 shares, issued and outstanding -
4,245,872 4,246 4,246
Additional paid-in capital 5,422,675 5,422,675
Deficit (5,906,054) (5,921,898)
----------- -----------
(479,133) (494,977)
----------- -----------
$ 2,565,137 $ 2,287,362
=========== ===========
See accompanying notes to consolidated financial statements.
Page 3 of 17
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three
Months Ended
December 31
--------------------------
2002 2001
----------- -----------
Net sales $ 2,550,501 $ 3,059,038
Cost of goods sold 2,460,893 2,900,946
----------- -----------
Gross profit 89,608 158,092
----------- -----------
Operating expenses:
Selling 34,208 22,578
General and administrative 35,936 26,854
Depreciation and amortization 2,395 4,197
Allowance for doubtful accounts - 15,000
----------- -----------
72,539 68,629
----------- -----------
Income (loss) from operations 17,069 89,463
----------- -----------
Other income (expense):
Interest income - --
Interest expense ( 808) (12,677)
----------- -----------
Total other income (expense) ( 808) (12,677)
----------- -----------
Income (loss) before
income taxes 16,261 76,786
Provision for income taxes 417 --
----------- -----------
Income (loss) $ 15,844 $ 76,786
=========== ===========
Net income (loss)
per common share $ .004 $ .023
=========== ===========
Weighted average number
of shares outstanding 4,245,872 3,277,872
=========== ===========
See accompanying notes to consolidated financial statements.
Page 4 of 17
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
FOR THE THREE MONTHS ENDED DECEMBER 31, 2002 AND YEAR ENDED SEPTEMBER 30, 2002
Common Shares Additional
----------------------- Paid-in- Accumulated
Shares Amount Capital Deficit
---------- ---------- ---------- ----------
Balance at September 30,2001 3,277,872 3,278 5,365,563 (6,053,223)
Common shares issued for
purchase of e-GlobusNet 968,000 968 57,112 --
Net income for year
ended September 30, 2002 -- -- -- 131,325
---------- ---------- ---------- ----------
Balance at September 30, 2002 4,245,872 4,246 5,422,675 (5,921,898)
========== ========== ========== ==========
Net income for three months
ended December 31, 2002 -- -- -- 15,844
---------- ---------- ---------- ----------
Balance at December 31, 2002 4,245,872 4,246 5,422,675 (5,906,054)
========== ========== ========== ==========
Page 5 of 17
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
December 31,
-------------------------
2002 2001
---------- -----------
Cash flows from operating activities:
Net income (loss) $ 15,844 $ 76,786
--------- ---------
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 205 4,197
Charge to bad debt allowance 0 15,000
Issuance of stock in lieu of salaries and fees 0 0
Charge to inventory reserve 15,900 0
Increase (decrease) in cash flows as a
result of changes in asset and liability
account balances:
Accounts receivable (389,040) (23,624)
Inventories 0 --
Other assets (1,500) (600)
Accounts payable 220,705 37,074
Accrued expenses and other current liabilities:
Related parties (5,000) --
Other 3,430 (10,319)
--------- ---------
Total adjustments (155,300) 22,930
--------- ---------
Net cash provided by (used in) operating
activities (139,456) 99,716
--------- ---------
Cash flows from investing activities:
Acquisition of property assets 0 0
Security deposit 0 0
--------- ---------
Net cash provided by investing activities 0 0
--------- ---------
Cash flows from financing activities:
Proceeds from (payments of) lines of credit (504) (6,408)
Proceeds from note payable-related parties 43,300 8,817
--------- ---------
Net cash provided by (used in) financing activities 42,796 2,409
--------- ---------
Net increase (decrease) in cash and cash equivalents (96,660) 102,123
Cash and cash equivalents at beginning of year 277,314 46,087
--------- ---------
Cash and cash equivalents at end of year $ 180,654 $ 148,210
========= =========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 808 $ 12,677
========= =========
Taxes paid $ 417 $ 0
========= =========
See accompanying notes to consolidated financial statements.
Page 6 of 17
GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
NOTE 1 - BASIS OF PRESENTATION.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions for Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, the statements contain all adjustments (consisting only
of normal recurring accruals) necessary to present fairly the financial
position as of December 31, 2002. The results of operations for the
three months ended December 31, 2002 and 2001 and cash flows for the
three months ended December 31, 2002 and 2001 are not necessarily
indicative of the results to be expected for the full year.
The September 30, 2002 consolidated balance sheet has been derived from
the audited consolidated financial statements at that date included in
the Company's annual report. These unaudited financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report
on.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
(a) Description of Business:
The Company has embarked on a major expansion of its international
trade activity by operating a multi-lingual, Internet-based portal that
allows international buyers and sellers of commercial and industrial
products to engage in electronic commerce seamlessly, efficiently, and
in their own native languages. The Company contracted e-GlobusNet
Corp., the developer of the software, to provide electronic commerce
among businesses in various countries. This software is being used
currently by the Company to sell its own products but as of yet the
Company is not deriving revenue from other users of the site.
e-GlobusNet Corp. had been asked to expand the features of the
software. In April, 2002 the Company exchanged 968,000 shares for the
ownership of e-GlobusNet Corp., which results in the ownership of the
software. (see Note 6)
The Company can operate either as a broker or a principal in electronic
commercial transactions. Over the past year it had been functioning
primarily as a principal between companies in Russia and the Ukraine
and those in Western Europe because of its strong background and
experience in dealing with the languages and cultures of the Eastern
Bloc countries. Many Western European countries prefer to deal with
Globus as a principal rather than dealing directly with companies in
Russia and the Ukraine.
Page 7 of 17
In situations where Globus will act as a broker on the e-GlobusNet
Corp. portal, it will receive a commission of 1% each from buyer and
seller. As a principal, the Company can generate gross profit margins
of 5% to 10%, or higher, depending on the transaction. For further
discussion on E-GlobusNet.corp., see Footnote 6.
The Company had two wholly-owned subsidiaries at December 31,
2002,Globus Food Systems Corp., and Shuttle International. Globus Food
Systems exports meat, meat by-products, cheese, fish, chicken, and
other high-end food products from manufacturers in Western Europe to
Russia and the Ukraine. Additionally it now has expanded to incorporate
several other items into its product line, such as construction
supplies, stationary and office supplies. It will continue to look for
new product markets based on its contacts abroad. It represents over
96% of the current total revenues of the Company. Shuttle International
exports auto parts from U.S. manufacturers to Russia and the Ukraine.
Shuttle accounts for about 4% of the total revenues of the Company.
The Company was originally incorporated on October 24, 1984, under the
name Ross Custom Electronics ("Ross") and was engaged in the
electronics business. On May 6, 1995, Globus Food Systems International
Corp., a privately held Delaware corporation, was merged into Ross. On
October 18, 1996, Globus Food Systems International Corp. changed its
name to Globus International Resources Corp., to reflect a reflect a
broadening of its exporting business to include non-food products. Its
food exporting business was transferred to a new, wholly-owned
subsidiary called Globus Food Systems Corp., a New York corporation
formed in September, 1996.
(b) Principles of Consolidation:
The accompanying consolidated financial statements as at December 31,
2002 and September 30, 2002 and for the three months ended December 31,
2002 and 2001 include the accounts of Globus International Resources
Corp. and its subsidiaries, Shuttle International, Ltd. and Globus
Foods International, Inc. All material intercompany transactions and
balances have been eliminated in consolidation.
(c) Revenue Recognition:
The Company recognizes revenues in the period in which its products are
shipped to its customers. The Company records expenses in the period in
which they are incurred all in accordance with generally accepted
accounting principles.
(d) Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
(e) Cash and Cash Equivalents:
The Company considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents.
(f) Concentrations of Credit Risk:
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of cash
and trade accounts receivable. The Company places its cash with high
credit quality financial institutions which at times may be in excess
of the FDIC insurance limit. Concentrations of credit risk with respect
to trade accounts receivable are generally limited due to the Company's
requiring the prepayment from certain customers of up to 50% of each
sale prior to shipment. Additionally, the accompanying financial
statements reflect an allowance for doubtful accounts of $2,903,270 at
December 31, 2002 and September 30, 2002.
Page 8 of 17
(g) Inventories:
Inventories, consisting principally of finished goods, are valued at
the lower of cost (first-in, first-out method) or market. The
accompanying financial statements reflect an allowance for the disposal
of inventory of $1,722,818 and $1,692,818 at December 31, 2002 and
September 30, 2002, respectively.
(h) Property and Equipment:
The cost of property and equipment is depreciated over the estimated
useful lives of the related assets of 5 to 7 years. The cost of
leasehold improvements is amortized over the lesser of the length of
the related leases or the estimated useful lives of the assets.
Depreciation is computed on the straight-line method for financial
reporting purposes. Repairs and maintenance expenditures which do not
extend original asset lives are charged to income as incurred.
(i) Goodwill:
Goodwill arising from the acquisition of a subsidiary's minority
interest in 1996 was being amortized over a fifteen-year period.
Amortization charged to operation was $2,190 for the three months ended
December 31, 2001.
(j) Per Share Data:
Net income (loss) per share was computed by the weighted average number
of shares outstanding during each period as retroactively adjusted for
the 1 for 3 reverse stock split in January, 2001.
NOTE 3 - PROPERTY ASSETS.
Property assets consist of:
December 31, September 30,
2002 2002
------------ -------------
Data processing and office equipment $ 63,331 $ 63,331
Furniture and fixtures 21,283 21,283
Automobiles and trucks 43,687 43,687
--------- ---------
128,301 128,301
Less: Accumulated depreciation 126,472 126,267
--------- ---------
$ 1,829 $ 2,034
========= =========
Depreciation expense charged to operations for the three months ended
December 31, 2002 and 2001 amounted to $205 and $2,007, respectively.
Security Deposits:
Security deposits are comprised of rent deposits relating to various leaseholds
which the Company occupies of which $3,000 is for warehouse space leased from
a related party.(see note 4)
Page 9 of 17
NOTE 4 - RELATED PARTY TRANSACTIONS.
(a) Notes Payable:
A stockholder and the Company entered into a loan agreement in April
1996 whereby the stockholder acquired the Company's 7% interest bearing
note $125,000 at par. The note was originally payable in full plus
accrued interest on March 31, 1997. On April 30, 1997, the note was
amended and the due date was extended to April 30, 1998. Accrued
interest payable on these loans aggregated $45,500 at December 31, 2002
and September 30, 2002, respectively, and is included in accrued
expenses-related party. No interest was charged in the three months
ended December 31, 2002 as the stockholder has waived the right to
accrue more interest at this time. In May 1997, the stockholder agreed
to subordinate his loan to a bank which the Company owes $1,220,617.
The stockholder has extended the due date indefinitely and has verbally
agreed not to demand payment of the debt as long as any portion of the
line of credit is outstanding.
On August 26, 1996, the parents of the Company's President purchased
Shuttle's 15% interest bearing $20,000 note at par. The note, as
amended, is repayable in full with no definite repayment date. No
interest was charged for the three months ended December 31, 2002 and
2001. Accrued interest payable to these individuals of $7,750 is
included in accrued expenses-related party at December 31, 2002 and
September 30, 2002, respectively. These creditors have agreed to
subordinate this indebtedness to a bank which the Company owes
$1,220,617 and also have verbally agreed not to demand payment of the
debt as long as any portion of the debt is outstanding.
During the first quarter of fiscal 2000, three shareholders of the
Company loaned the Company $156,000 due to the current cash needs of
the business. Subsequently, one shareholder has advanced at various
times a total of $650,000. As of December 31, 2002,$140,074 was paid
back to the shareholders. These amounts have no definite repayment
terms and the shareholders have agreed not to require the accrual of
interest.
(b) Rent Payable:
Globus and Shuttle lease warehouse space from an entity controlled by
three of the Company's officer/directors. Rent charged to operations in
the three months ended December 31, 2002 and 2001 was $2,100, of which
$44,651 was unpaid and included in accrued expenses - related parties
at December 31, 2002 and September 30, 2001, respectively. The leases
which expire in 2003 require aggregate monthly rentals of $700.
Page 10 of 17
NOTE 5 - FINANCING ARRANGEMENT.
(i) SHORT-TERM DEBT:
At December 31, 2002, the Company had various credit facilities
available:
A bank note exists for direct borrowings and acceptances in the amount
of $1,220,617 on direct borrowings, currently at 12% interest per
annum. The line was originally $3,000,000, however due to the inability
of the Company to pay any portion of the balance in the last two years,
the line has been limited to what is outstanding currently. The line is
collateralized by a first lien on all corporate assets not previously
pledged or collateralized. The Company is presently in discussions to
sell a building owned by the three officers, of which certain of the
proceeds will be paid to the bank. At that point, the Company intends
to continue discussions with the bank as to possible restructuring of
the present debt arrangement. Due to the possible restructure,
no interest expense was accrued since October, 2001.
The Company has lines of credit with two other banks totalling
$100,000 in the aggregate.This $100,000 is guaranteed by an officer of
the Company. Interest during the three months ended December 31, 2002
and 2001 was charged at various rates of 5.00% to 15%.
Page 11 of 17
NOTE 5 - FINANCING ARRANGEMENT: (CONTINUED)
SHORT-TERM DEBT: (CONTINUED)
December 31, September 30,
2002 2002
------------ -------------
Bank borrowing outstanding at December 31, 2002 and
September 30, 2002 amounted to:
Acceptances payable under the $1,220,617 bank note $1,220,617 $ 1,220,617
Other bank loans payable (2) under $100,000 credit-line 61,650 62,154
---------- -----------
$1,282,267 $ 1,282,771
========== ===========
(ii) RELATED PARTIES:
On April 7, 1996, the Company borrowed $125,000 from an
officer/stockholder. The repayment date is indefinite as of June 30,
2002. Interest had been accrued until September 30, 2000 at 7%. Per
approval of the shareholder, no interest has been accrued since. On
August 26, 1996 the Company borrowed $20,000 from a parent of its
President as evidenced by a 15% note. The note has no definite
repayment date. Per the noteholder's approval, no interest was accrued
in fiscal 2003 and 2002. Both of these notes are subordinated to a bank
(see above) in connection with the granting of a note to the Company by
the bank. As long as any balance is outstanding under this note, the
note holders have verbally agreed not to demand payment of the notes
and to subordinate such notes to this bank.
Page 12 of 17
NOTE 6 - COMMON STOCK.
(a) COMMON STOCK ISSUED FOR SERVICES RENDERED:
In fiscal 2000,500,000 shares were issued to two different consultants
in lieu of cash payments for the exclusive rights to use certain
software which is the basis for the portal described in Footnote 1.
200,000 shares were issued to another consultant in lieu of cash
payments for services related to developing the business plan to the
internet based portal. The market value of the shares recorded was
recorded as prepaid costs based on the fact that as of April, 2002 the
Company used the shares as a downpayment towards buying the software
outright. This purchase was done through the issuance of 968,000
shares in April 1, 2002. The value of these shares at the time of
issuance was $58,080, and was recorded as "investment in multi-lingual
software" along with the downpayment of $47,334.
Page 13 of 17
NOTE 7 - MAJOR RELATIONSHIPS AND SEGMENT INFORMATION.
The Company is comprised of two business segments. The distribution of
food products, rubber and stationary (food products) and the
distribution of auto paint and parts. Set forth below are sales,
operating income, capital expenditures, depreciation and identifiable
assets of the segments.
For the Three
Months Ended
December 31, 2002
-----------------
Net sales (000's):
Food products $ 2,444
Other 107
------------
$ 2,551
============
Operating income (loss) (000's):
Food products $ 49
Other (32)
------------
$ 17
============
Depreciation and
amortization (000's):
Food products $ 2
Other 0
------------
$ 2
============
Identifiable assets (000's):
Food products $ 2,393
Other 170
------------
$ 2,563
============
Page 14 of 17
NOTE 8 - COMMITMENTS AND CONTINGENCIES.
Leases:
The Company is a lessee under 3 operating real property leases for
office and warehouse space. Rent expense charged to operations for the
three months ended December 31, 2002 and 2001 was $17,838 and $16,590,
respectively. Future minimum annual rent commitments as of the
Company's fiscal year end are as follows:
Years Ended September 30, 2003 $67,755
NOTE 9 - Possible acquisition:
The registrant has entered into a Letter of Intent dated September 20,
2002 for the acquisition of 100% of the capital stock of three foreign
corporations in exchange for such number of shares of the Registrant's
common stock as shall equal eighty(80%) percent of the Registrant's
total issued and outstanding shares. This transaction, when completed,
will result in a change in control of Registrant in that the
shareholders of the three foreign companies will own the majority of
the Registrant's capital stock. At the current date, the conclusion of
this acquisition is uncertain and may not occur. Financial information
regarding these companies are not available.
Page 15 of 17