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 July 31, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 033-20966
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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
of incorporation or organization) Identification No.)
1500 K Street, N.W., Suite 900, Washington, D.C. 20005
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(Address of principal executive offices)
(202) 408-8180
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(Issuer's telephone number)
n/a
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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
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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: 7,800,156 Series A Preferred
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Shares, convertible into one share of common stock per preferred share;
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8,358,280 common shares
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
July 31, 2000
CURRENT ASSETS
Cash $ 22,091
Investment in government securities, at cost, which approximates market 850,000
Notes receivable 1,131,421
--------------
Total Current Assets 1,003,512
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OTHER ASSETS
Notes receivable 698,009
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TOTAL ASSETS $ 1,701,521
==============
See notes to consolidated financial statements.
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
July 31, 2000
CURRENT LIABILITIES
Accrued expenses $ 41,633
Accrued income taxes 27,711
-----------
Total Current Liabilities 69,344
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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 (1,395,055)
Treasury Stock, at cost, 201,458 shares -
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Total Stockholders' Equity 1,632,177
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,701,521
============
See notes to consolidated financial statements
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the six months ended
July 31, 2000 July 31, 1999
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NET SALES $ 4,165,780 $ 4,037,951
COST OF GOODS SOLD 3,908,227 3,464,202
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GROSS PROFIT 257,553 573,749
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 499,658 309,129
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INCOME (LOSS) FROM OPERATIONS (242,105) 264,620
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OTHER INCOME (EXPENSE)
Gain on sale of assets 1,073,675 -
Interest expense, net (53,345) (6,614)
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Total other (income) expense 1,020,330 (6,614)
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INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 778,225 258,006
Income tax expense (benefit) 851,900 15,000
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LOSS FROM CONTINUING OPERATIONS (73,675) 243,006
DISCONTINUED OPERATIONS
Loss from operations of discontinued business segment
(less applicable tax benefit of $85,000 in 1999) - (264,435)
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NET LOSS (73,675) (21,429)
ACCUMULATED DEFICIT, beginning of period (1,321,380) (830,399)
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ACCUMULATED DEFICIT, end of period $ (1,395,055) $ (851,828)
================ ===============
Weighted average number of shares outstanding 5,818,547 5,507,244
================ ==============
Net income loss per common share-basic and diluted
-From continuing operations $ (0.01) $ 0.04
-From discontinued operations - (0.04)
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Total $ (0.01) $ -
========================================================
See notes to consolidated financial statements
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the three months ended
July 31, 2000 July 31, 1999
--------------------- --------------------
NET SALES $ 1,888,801 $ 2,076,579
COST OF GOODS SOLD 1,814,491 1,782,100
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GROSS PROFIT 74,310 294,479
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 282,269 181,292
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INCOME (LOSS) FROM OPERATIONS (207,959) 113,187
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OTHER INCOME (EXPENSE)
Gain on sale of assets 1,073,675 -
Interest expense, net (24,505) (4,565)
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Total other (income) expense 1,049,170 (4,565)
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INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 841,210 108,622
Income tax expense 523,075 5,500
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INCOME FROM CONTINUING OPERATIONS 318,135 103,122
DISCONTINUED OPERATIONS
Loss from operations of discontinued
business segment
(less applicable tax benefit of $85,000 in 1999) - (15,130)
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NET INCOME (LOSS) 318,135 87,992
ACCUMULATED DEFICIT, beginning of period (1,713,190) (939,820)
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ACCUMULATED DEFICIT, end of period (1,395,055) $ (851,828)
================================= ================
Weighted average number of shares
outstanding-Basic 5,818,547 5,507,244
================================== ================
Weighted average number of shares
outstanding-Diluted 13,618,703 13,307,400
================================== =================
Net income loss per common share-Basic
-From continuing operations $ 0.05 $ 0.02
-From discontinued operations - (0.00)
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Total $ 0.05 $ 0.02
================================== =================
Net income loss per common share-Diluted
-From continuing operations $ 0.02 $ 0.01
-From discontinued operations - (0.00)
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Total $ 0.02 $ 0.01
================================= ==============
See notes to consolidated financial statements.
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the six months ended
July 31, 2000 July 31, 1999
-------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (73,675) $ (21,429)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 124,851 136,955
Gain on sale of assets (1,073,675) -
Deferred taxes 823,000 (100,000)
Change in:
Accounts receivable 106,334 (425,081)
Inventories 26,667 23,263
Prepaid expenses and other 59,809 (177,804)
Security deposits 21,655 -
Accounts payable (30,142) 25,625
Accrued expenses and other (21,922) (82,460)
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Net Cash Provided by (Used in) Operating Activities (37,098) (620,931)
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CASH FLOWS FROM INVESTING ACTIVITIES
Collection of notes receivable 1,000,800 70,696
Investment in government Securities (850,000) -
Acquisition of property and equipment (51,971) (37,016)
Proceeds from sale of assets 40,948 -
Proceeds from sale of unconsolidated subsidiary 15,932 26,153
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Net Cash Used in Investing Activities 155,709 59,833
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (Payment of) long-term debt (84,060) 60,000
Payment of capital lease obligations (53,416) (22,345)
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Net Cash Provided by (Used in) Financing Activities (137,476) 37,655
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NET DECREASE IN CASH (18,865) (523,443)
CASH
Beginning of period 40,956 605,111
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End of period $ 22,091 $ 81,668
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ 369 $ -
============================ ===================
Interest $ 53,345 $ 33,736
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ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the three months ended
July 31, 2000 July 31, 1999
-------------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 318,135 87,992
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 56,751 68,855
Gain on sale of assets (1,073,675) -
Deferred taxes 496,000 (34,000)
Change in:
Accounts receivable 372,417 (169,881)
Inventories (209,727) (20,239)
Prepaid expenses and other 15,105 (85,969)
Security deposits 25,799 -
Accounts payable (191,944) (75,431)
Accrued expenses and other 30,471 (8,362)
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Net Cash Used in Operating Activities (160,668) (237,035)
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CASH FLOWS FROM INVESTING ACTIVITIES
Collection of (additions to) notes receivable 141,048 1,200
Investment in government Securities 850,000 -
Acquisition of property and equipment - (9,784)
Proceeds from sale of unconsolidated subsidiary - 14,015
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Net Cash Used in Investing Activities 191,048 5,431
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CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term debt (35,363) -
Payment of capital lease obligations (27,058) (20,753)
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Net Cash Used in Financing Activities (62,421) (20,753)
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NET DECREASE IN CASH (32,041) (252,357)
CASH
Beginning of period 54,132 334,025
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End of period $ 22,091 $ 81,668
============================ ======================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ - $ -
=========================== =======================
Interest $ 30,255 $ 16,598
=========================== =======================
See notes to consolidated financial Statements
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JULY 31, 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
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 six months ended July 31, 2000
are not necessarily indicative of the results that can be expected for the year
ended January 31, 2001.
INCOME TAXES
The provision for income taxes consists of the following components:
Six Months Three Months
Ended July 31, 2000 Ended July 31, 2000
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Current
Federal $ - $ -
State 28,900 27,075
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28,900 27,075
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Deferred
Federal 346,300 346,300
State - -
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346,300 346,300
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Relating to change in beginning of period
valuation allowance
Federal 476,700 149,700
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$ 851,900 523,075
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ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS (Continued)
JULY 31, 2000
INCOME TAXES (Continued)
Deferred income taxes at July 31, 2000 consist of the following:
Deferred tax assets $ 815,300
Valuation allowance (815,300)
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$ -
================
The deferred tax asset balance relating to the Federal and New York net
operating loss carryover for Online International Corp. 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:
Six Months Ended Three
Ended July Months Ended
31, 2000 July 31, 2000
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Income tax provision at 34% $ 289,290 $ 310,705
Effect of expenses not deductible for income 1,085 747
taxes
State and local income taxes net of Federal
Income tax effect 28,900 27,075
Change in tax estimates other than valuation
Allowance 55,925 34,848
Change in estimate for valuation 476,700 149,700
allowance ----------------------------------------------
Actual income tax provision $ 851,900 $ 523,075
================================================
SALE OF SUBSIDIARY
On July 17, 2000, the Company sold all the assets of its design and
manufacture of lottery tickets business for approximately $3,935,000 of which
cash was received for $1,000,000, a note receivable for $829,000 and the
assumption of liabilities of approximately $2,100,000 by the purchaser. 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.
ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES
Liquidity and Capital Resources
- --------------------------------
The Company's cash position, including short term marketable securities,
at July 31, 2000 was $870,000 an increase of $820,000 from April 30, 2000.
This increase is a result of the sale of the assets of the design and
manufacture of the lottery ticket business.
Notes receivable increased by approximately $829,000 as a result of the sale
of all the assets of its design and manufacture of lottery tickets business.
Deferred income tax asset at July 31, 2000 decreased by $496,000 from April
30, 2000. This decrease is primarily attributable to the utilization of the
federal net operating loss. 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.
Results of Operations
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Six Months Ended July 31, 2000 and 1999
Sales during the six months ended July 31, 2000 were $4,165,780 an increase
of $127,829 from the six months ended July 31, 1999
The gross profit percentage was 6% for the six months ended July 31, 2000
compared to 14% for the six months ended July 31, 1999. This 8% 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. During July, 2000, the assets of the design and
manufacture of lottery tickets business was sold at a profit of approximately
$1,000,000.
The above mentioned factors resulted in a consolidated net loss of $70,000
for the six months ended July 31, 2000 as compared to a consolidated net
loss of $20,000 for six months ended July 31, 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.
The Company filed a Form 8-K 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
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(Registrant)
Date September 15, 2000 /s/ MOSES L. GARSON
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