Neon Bloom, Inc. - Quarter Report: 2009 September (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-Q
(Mark
One)
|
þ
|
Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
|
|
|
for
the quarterly period ended September 30,
2009
|
||
|
o
|
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 333-140257
Phoenix
International Ventures, Inc.
(Exact
name of registrant as specified in its charter)
|
Nevada
|
20-8018146
|
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
61B
Industrial PKWY
Carson
City, NV 89706
(Address
of principal executive offices)
(775)
882-9700
(Registrant’s
telephone number, including area code)
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 þ No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer o
|
Accelerated
filer o
|
|
Non-accelerated
filer o
(do
not check if a smaller reporting company)
|
Smaller
reporting company þ
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act): Yes o No þ
The
number of shares outstanding of the issuer’s common stock, as of November 16,
2009 was 8,057,307.
-1-
Phoenix
International Ventures, Inc.
TABLE
OF CONTENTS
|
Page
|
|
|
PART I FINANCIAL
INFORMATION
|
|
| 3 | |
| 11 | |
| 15 | |
| 15 | |
|
PART II. OTHER INFORMATION
|
|
| 16 | |
| 16 | |
| 16 | |
| 16 | |
| 16 | |
| 16 | |
| 16 |
-2-
PART
I FINANCIAL INFORMATION
|
Item
1.
|
Financial
Statements
|
Index
to Financial Statements
|
Page
|
|
|
Condensed Consolidated Balance Sheets as of
September 30, 2009 (Unaudited) and December 31,
2008
|
4 |
|
Condensed Consolidated Statements of Operations
for the Three and Nine Months Ended September 30, 2009 and 2008
(Unaudited)
|
5 |
|
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2009 and 2008
(Unaudited)
|
6 |
|
Notes to Condensed Consolidated Financial
Statement (Unaudited)
|
7 |
-3-
Phoenix
International Ventures, Inc
Condensed
Consolidated Balance Sheet as of
|
September
30,
|
December
31,
|
||||||||
|
2009
|
2008
|
||||||||
|
Assets
|
(Unaudited)
|
||||||||
|
Current
assets
|
|||||||||
|
Cash
|
$ | 99,225 | $ | 225,767 | |||||
|
Accounts
receivable
|
245,968 | 367,074 | |||||||
|
Inventory
|
189,933 | 186,516 | |||||||
|
Prepaid
and other current assets
|
26,296 | 17,650 | |||||||
|
Total
current assets
|
561,422 | 797,007 | |||||||
|
Property
and equipment, net
|
40,098 | 47,943 | |||||||
|
Other
assets
|
4,200 | - | |||||||
|
Total
assets
|
$ | 605,720 | $ | 844,950 | |||||
|
Liabilities and Stockholders'
(Deficit)
|
|||||||||
|
Current
liabilities
|
|||||||||
|
Line
of credit
|
$ | 47,200 | $ | 48,340 | |||||
|
Accounts
payable
|
504,833 | 379,693 | |||||||
|
Other
accrued expenses
|
203,952 | 236,060 | |||||||
|
Customer
deposits
|
235,671 | 447,202 | |||||||
|
Notes
payable, current portion
|
240,307 | 212,751 | |||||||
|
Legal
settlement
|
384,000 | 384,000 | |||||||
|
Due
related party
|
256,390 | 232,304 | |||||||
|
Officer
loans
|
39,461 | 39,461 | |||||||
|
Total
current liabilities
|
1,911,814 | 1,979,811 | |||||||
|
Long
term liabilities
|
|||||||||
|
Notes
payable
|
18,143 | 24,811 | |||||||
|
Officer
advances
|
369,375 | 369,375 | |||||||
|
Total
liabilities
|
2,299,332 | 2,373,997 | |||||||
| Commitments and Contingencies | - | - | |||||||
|
Stockholders'
(deficit)
|
|||||||||
|
Preferred
stock - $0.001 par value; 1,000,000 shares
|
|||||||||
|
authorized;
zero shares issued and outstanding
|
|||||||||
|
at
September 30, 2009 and December 31, 2008
|
- | - | |||||||
|
Common
stock - $0.001 par value; 50,000,000 shares
|
|||||||||
|
authorized;
8,057,307 and 8,046,718 shares
issued and outstanding at September 30, 2009 and December 31,
2008
|
8,057 | 8,046 | |||||||
|
Additional
paid in capital
|
1,399,216 | 1,388,503 | |||||||
|
Accumulated
deficit
|
(3,100,885 | ) | (2,925,596 | ) | |||||
| (1,693,612 | ) | (1,529,047 | ) | ||||||
|
Total
liabilities and stockholders' (deficit)
|
$ | 605,720 | $ | 844,950 | |||||
|
The
accompanying notes are an integral part of the financial
statements
|
|||||||||
-4-
Phoenix
International Ventures, Inc
Condensed
Consolidated Statements of Operations
(Unaudited)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||
|
Sales
|
$ | 1,155,596 | $ | 746,137 | $ | 2,733,970 | $ | 1,678,843 | ||||||
|
Cost
of sales
|
801,674 | 461,202 | 1,900,603 | 1,014,418 | ||||||||||
|
Gross
margin
|
353,922 | 284,935 | 833,367 | 664,425 | ||||||||||
|
Operating
expenses
|
||||||||||||||
|
General
and administrative expenses
|
309,029 | 282,315 | 936,280 | 727,122 | ||||||||||
|
Total
operating expenses
|
309,029 | 282,315 | 936,280 | 727,122 | ||||||||||
|
Income
(loss) from operations
|
44,893 | 2,620 | (102,913 | ) | (62,697 | ) | ||||||||
|
Recovery
of contingency
|
- | - | - | 566,154 | ||||||||||
|
Interest
expense
|
(12,781 | ) | (28,434 | ) | (72,376 | ) | (41,768 | ) | ||||||
|
Income
(loss) before taxes
|
32,112 | (25,814 | ) | (175,289 | ) | 461,689 | ||||||||
|
Income
taxes
|
- | - | - | - | ||||||||||
|
Net
income (loss)
|
$ | 32,112 | $ | (25,814 | ) | $ | (175,289 | ) | $ | 461,689 | ||||
|
Net
income (loss) per common share:
|
||||||||||||||
|
Basic
|
$ | 0.00 | $ | 0.00 | $ | (0.02 | ) | $ | (0.06 | ) | ||||
|
Diluted
|
$ | 0.00 | $ | 0.00 | $ | (0.02 | ) | $ | (0.05 | ) | ||||
|
Weighted
average shares outstanding:
|
||||||||||||||
|
Basic
|
8,054,844 | 8,035,618 | 8,049,457 | 7,749,439 | ||||||||||
|
Diluted
|
9,625,866 | 8,035,618 | 8,049,457 | 9,861,346 | ||||||||||
|
The
accompanying notes are an integral part of the financial
statements
|
||||||||||||||
-5-
Phoenix
International Ventures, Inc.
Condensed
Consolidated Statements of Cash Flows
for
the Nine Months Ended September 30,
(Unaudited)
|
2009
|
2008
|
|||||||
|
Cash
flows from operating activities
|
||||||||
|
Net
income (loss)
|
$ | (175,289 | ) | $ | 461,689 | |||
|
Adjustments
to reconcile net income (loss) to net cash used in operating
activities
|
||||||||
|
Depreciation
|
15,765 | 10,228 | ||||||
|
Amortization
of debt discount
|
39,272 | 26,692 | ||||||
|
Accrued
interest
|
8,105 | - | ||||||
|
Change
in accounts receivable
|
121,106 | (251,057 | ) | |||||
|
Change
in inventory
|
(3,417 | ) | (36,201 | ) | ||||
|
Changes
in prepaid expenses
|
4,294 | (770 | ) | |||||
|
Change
in other assets
|
(4,200 | ) | - | |||||
|
Change
in amounts due legal settlement
|
- | (566,154 | ) | |||||
|
Change
in customer deposits
|
(211,531 | ) | (83,644 | ) | ||||
|
Change
in accounts payable
|
125,140 | 87,459 | ||||||
|
Change
in accrued expenses
|
(45,048 | ) | - | |||||
|
Change
in related party payable
|
24,086 | 107,692 | ||||||
|
Net
cash used in operating activities
|
(101,717 | ) | (244,066 | ) | ||||
|
Cash
flows from investing activities
|
||||||||
|
Purchase
of property and equipment
|
(7,920 | ) | - | |||||
|
Net
cash used in investing activities
|
(7,920 | ) | - | |||||
|
Cash
flows from financing activities
|
||||||||
|
Proceeds
from subscription receivable
|
- | 63,020 | ||||||
|
Proceeds
from notes payable
|
131,284 | 236,536 | ||||||
|
Principal
payments on notes payable
|
(147,049 | ) | (132,444 | ) | ||||
|
Issuance
of common shares
|
- | 1,900 | ||||||
|
Proceeds
of officer advances
|
- | 48,575 | ||||||
|
Proceeds
from (payments on) line of credit
|
(1,140 | ) | 15,708 | |||||
|
Net
cash provided by (used in) financing activities
|
(16,905 | ) | 233,295 | |||||
|
Decrease
in cash
|
(126,542 | ) | (10,771 | ) | ||||
|
Cash,
beginning of year
|
225,767 | 70,314 | ||||||
|
Cash,
end of period
|
$ | 99,225 | $ | 59,543 | ||||
|
Cash
paid for
|
||||||||
|
Interest
|
$ | 27,371 | $ | 6,828 | ||||
|
Income
taxes
|
- | - | ||||||
|
Non
cash investing and financing activities:
|
||||||||
|
Issuance
of 10,589 shares of common stock with promissory
notes
|
10,724 | - | ||||||
|
Issuance
of 3,750 shares of common stock with promissory
notes
|
- | 9,263 | ||||||
|
Issuance
of 15,000 warrants with promissory notes
|
- | 21,150 | ||||||
|
Issuance
of 274,000 shares of common stock in redemption of accrued
expenses
|
- | 137,000 | ||||||
|
The
accompanying notes are an integral part of the financial
statements
|
||||||||
-6-
Phoenix
International Ventures, Inc.
Notes
to the Condensed Consolidated Financial
Statements
(Unaudited)
Note
1 - Summary of Significant Accounting Policies
Nature
of Activities
Phoenix
International Ventures, Inc. (“PIV” or the “Company”) was organized August 7,
2006 as a Nevada corporation to develop business in the market of defense and
aerospace. The Company’s primary business is manufacturing, re-manufacturing and
upgrading of Ground Support Equipment (“GSE”) used in military and commercial
aircraft.
Basis
of Presentation
The
accompanying unaudited consolidated financial statements of the Company are
presented in accordance with the requirements for Form 10-Q and Article 8-03 of
Regulation S-X. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America (“US GAAP’) have been
condensed or omitted pursuant to such SEC rules and regulations. In the opinion
of management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been made. The results for
these interim periods are not necessarily indicative of the results for the
entire year. The accompanying consolidated financial statements should be read
in conjunction with the December 31, 2008 financial statements and the notes
thereto included in the Company’s Report on Form 10-K filed with the SEC on
March 31, 2009.
The
consolidated financial statements include the accounts of the Company and its
wholly owned US subsidiary Phoenix Aerospace, Inc. (“PAI”) and an Israeli
subsidiary, Phoenix Europe Ventures, Ltd. (“PEV). Significant inter-company
accounts and transactions have been eliminated in
consolidation.
Use
of Estimates
The
preparation of the consolidated financial statements in conformity with US GAAP
requires management to make estimates and assumptions that affect certain
amounts reported and disclosed in our condensed consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Recent
Accounting Pronouncements
In
October 2009, an update was made to “Revenue Recognition – Multiple
Deliverable Revenue Arrangements.” This update removes the
objective-and-reliable-evidence-of-fair-value criterion from the separation
criteria used to determine whether an arrangement involving multiple
deliverables contains more than one unit of accounting, replaces references to
“fair value” with “selling price” to distinguish from the fair value
measurements required under the “Fair Value Measurements and
Disclosures” guidance, provides a hierarchy that entities must use to
estimate the selling price, eliminates the use of the residual method for
allocation, and expands the ongoing disclosure requirements. This update is
effective for the company beginning January 1, 2011 and can be applied
prospectively or retrospectively. Management is currently evaluating the effect
that adoption of this update will have, if any, on the company’s consolidated
financial position and results of operations when it becomes effective in
2011.
-7-
Note
2 - Geographical Segments
Product
revenues are attributed to regions based on the location of the customer. The
following table summarizes the Company’s geographical customer concentration of
total product revenue.
|
Nine
months ended September 30,
|
||||||||
|
Region
|
2009
|
2008
|
||||||
|
United
States
|
86 | % | 64 | % | ||||
|
Europe
|
14 | % | 36 | % | ||||
|
Total:
|
100 | % | 100 | % | ||||
Note 3 -
Inventory
Inventory
consists of used equipment that can be re-manufactured for re-sale and parts. At
September 30, 2009 and December 31, 2008, inventory consisted of the
following:
|
30-Sep-09
|
31-Dec-08
|
|||||||
|
Raw
Materials
|
$ | 135,409 | $ | 114,000 | ||||
|
Work
in Progress
|
54,524 | 72,516 | ||||||
|
Total:
|
$ | 189,933 | $ | 186,516 | ||||
Note
4 – Long Term Contracts
The
Company has certain long-term contracts to design and manufacture equipment with
various customers. Costs and estimated earnings on these contracts for the nine
months ended September 30, 2009 are as follows:
|
2009
|
||||
|
Costs
incurred on contracts this period
|
$ | 857,141 | ||
|
Estimated
contracts profit
|
257,341 | |||
|
Less:
billings to date
|
(1,101,542 | ) | ||
|
Contract
costs and related estimated profits in excess of billings
|
$ | 12,940 | ||
The costs
in excess of billings have been included in prepaid and other assets for balance
sheet purposes.
-8-
Note
5 - Notes Payable and Lines of Credit
The
Company has a revolving line of credit from a financial institution totaling
$35,000. At September 30, 2009, the line of credit was fully extended
and the Company is required to make monthly interest-only payments at a 9.75%
annual percentage rate.
The
Company has a revolving line of credit from a foreign financial institution
totaling $12,200. At September 30, 2009, the line of credit bears a
monthly interest ranging from 10%-13% based upon the amount
extended.
In July
and August 2009, two investors extended their promissory note arrangements that
were entered into in the previous year in the aggregate principal amount of
$89,474 for an additional one year bearing 15% interest per annum. These notes
will now mature in the fiscal quarter ending September 30, 2010. These notes
were discounted by the issuance of shares of the Company’s common stock equal to
5% of the principal amount of the notes. In total the Company issued an
aggregate of 4,110 shares in connection with this discount.
In June
and August 2009, the Company entered into three new promissory note agreements
with related parties, an Israeli individual and two notes with Cyprus
Corporation, in the aggregate amount of $125,000. These notes are to be paid in
full at various dates between June 18, 2010 and August 23, 2010 and bear
15% interest per annum. In addition, these notes were discounted by the issuance
of shares of the Company’s common stock equal to 5% of the principal amount of
the note. In total the Company issued an aggregate of 6,479 shares in
connection with this discount.
At
September 30, 2009, notes payable consist of the following:
|
Total
|
||||||
|
Amount
|
Current
|
|||||
|
Unsecured
note payable to a financial institution in a foreign country; 12.4% per
annum;
|
$
|
7,035
|
$
|
7,035
|
||
|
Secured
note payable to a financial institution; 10% interest per annum; monthly
payments of $756 until 2012; collateralized by an
automobile
|
27,970
|
9,827
|
||||
|
Unsecured
promissory note agreements, less unamortized discount $8,608
of in 2009; effective interest rates are approximately
15%
|
211,026
|
|||||
|
|
||||||
|
211,026
|
||||||
|
Unsecured
note payable to an individual; interest
at 7%
|
12,419
|
12,419
|
||||
|
$
|
258,450
|
$
|
240,307
|
|||
-9-
Note
6 - Related Party Transactions
As
of September 30, 2009, the Company owed an officer for his advances
totaling $408,836, of which $39,461 is current. As of September 30, 2009 there
was no arrangement to pay out this sum and the officer agreed to consider the
Company’s cash reserves in collecting this advance. These advances are
non-interest bearing and the officer has agreed not to demand payment of the
long term portion during the next twelve months.
During
the nine months ended September 30, 2009, the Company paid down $15,000 of
accrued and deferred salaries owed to officers. As of September 30, 2009, the
Company owed $178,617 of deferred and accrued salaries to its
officers.
The
former CFO’s employment contract expired in April 2009. The Company
has solicited his consulting services for the months of May, June, July, August
and September 2009 for $2,000 per month. For the nine months ended September 30,
2009, the Company has paid $8,000 of consulting fees to the former
CFO.
On April
26, 2007, the Company entered into a consulting agreement with a related party
to assist the Company with its business development. Consulting fees
under the agreement require a minimum annual payment of $120,000. At
September 30, 2009, the Company owed $77,773 to the related party.
In June
2009, the Company purchased parts from a related party in the total sum of
$130,000. As of September 30, 2009, the Company owed the related party $20,000
for these parts. This liability is recorded in accounts payable.
Note
7 - Commitments and Contingencies
Leases
The
Company leases a 10,300 square foot operating facility under a lease term which
commenced on March 1, 2009 and expires on February 28, 2011. Minimum
lease payments remaining for the facility total $70,040. Lease
expense through September 30, 2009 was $54,080 and was $27,000 for the nine
months ended September 30, 2008.
Legal
Settlement
On May
26, 2006, the Company entered into a settlement agreement whereby it agreed to
issue purchase credits in the amount of $500,000 and make cash payments of
$150,000. At September 30, 2009, the remaining balance of the legal settlement
was $384,000 in trade credits. These credits may be utilized by the
counterparty at their discretion with no specific expiration
date. The Company is obligated to provide the credits on terms
similar to those of its traditional customers. In the event the
purchase credits are not honored the counterparty reserved the right to pursue
other forms of settlement of the remaining balance equal to the amount of trade
credits.
-10-
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results
of Operations
|
FORWARD-LOOKING
STATEMENTS
The
information set forth in Management’s Discussion and Analysis of Financial
Condition and Results of Operations (“MD&A”) contains certain
“forward-looking statements”, including, among others (i) expected changes in
the Company’s revenues and profitability, (ii) prospective business
opportunities and (iii) the Company’s strategy for financing its business.
Forward-looking statements are statements other than historical information or
statements of current condition. Some forward-looking statements may be
identified by use of terms such as “believes,” “anticipates,” “intends” or
“expects.” These forward-looking statements relate to the plans, objectives and
expectations of the Company for future operations. Although the Company believes
that its expectations with respect to the forward-looking statements are based
upon reasonable assumptions within the bounds of its knowledge of its business
and operations, in light of the risks and uncertainties inherent in all future
projections, the inclusion of forward-looking statements in this report should
not be regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved.
You
should read the following discussion and analysis in conjunction with the
Financial Statements and Notes attached hereto, and the other financial data
appearing elsewhere in this quarterly report.
The
Company’s revenues and results of operations could differ materially from those
projected in the forward-looking statements as a result of numerous factors,
including, but not limited to, the following: the risk of significant natural
disaster, the inability of the Company to insure against certain risks,
inflationary and deflationary conditions and cycles, currency exchange rates,
changing government regulations domestically and internationally affecting our
products and businesses.
OVERVIEW
Phoenix
International Ventures, Inc. (“PIV” or the “Company”) was incorporated on August
7, 2006. The financial statements are consolidated with the Company’s wholly
owned subsidiaries, Phoenix Aerospace, Inc. and Phoenix Europe Ventures,
Ltd.
We
manufacture support equipment for military aircraft which is used for
maintaining, operating or testing aircraft sub-systems. We also remanufacture
existing support equipment in order to extend usefulness and eliminate original
product defects. We are ISO 9001/2000 certified, which is due for renewal on
April 26, 2010.
The main
users of the equipment are the United States Air Force, US Navy and
defense-aerospace companies.
Results
of Operations
-11-
Financial
Information - Percentage of Revenues
(Unaudited)
|
Nine
Months ended
|
||||||||
|
September 30,
|
||||||||
|
2009
|
2008
|
|||||||
|
Revenues
|
100
|
%
|
100
|
%
|
||||
|
Cost
of Goods Sold
|
-70
|
%
|
-60
|
%
|
||||
|
Gross
Profit
|
30
|
%
|
40
|
%
|
||||
|
Operating
Expenses:
|
||||||||
|
General
and Administrative
|
-34
|
%
|
-43
|
%
|
||||
|
Total
Operating Expenses
|
-34
|
%
|
-43
|
%
|
||||
|
Other
Income (Expenses)
|
-3
|
%
|
31
|
%
|
||||
|
Income
(Loss) before Taxes
|
-6
|
%
|
28
|
%
|
||||
|
Net
income (loss)
|
-6
|
%
|
28
|
%
|
||||
Comparison of Nine Months Ended
September 30, 2009 and September 30, 2008
Revenues. Revenues increased
63% to $2,733,970 for the nine months ended September 30, 2009 as compared to
$1,678,843 for the nine months ended September 30, 2008.
For the
nine months ended September 30, 2009, 38% of our revenues were from
remanufacturing, 33% were manufacturing and design, 14% were parts trading, and
15% from study contracts. This compares to 11% of revenues from
remanufacturing, 35% from manufacturing and design, 26% from parts trading and
28% from study contracts during the nine months ended September 30,
2008.
The
increase in revenues was primarily driven by an increase in the execution of
remanufacturing orders in the nine months ended September 30, 2009 as compared
to the same period in 2008. The increase in the execution of remanufacturing
orders is a result of increased demand for these items; in addition we believe
that favorable relations with suppliers contributed to the increase in receipt
and execution of such sales orders. We currently have orders for additional
remanufactured goods which we expect to execute in the next twelve
months. Management expects, although there can be no assurance, that
remanufacturing will continue to be a significant portion of our sales, although
the demand we have experienced for remanufacturing orders has tended to be
erratic.
Manufacturing
and design revenue increased as well, primarily due to costs incurred in the
execution of a long term contract for the design and manufacturing of aircraft
engine trailers which began at the end of 2008. We expect this contract to
continue to generate significant revenues in the next twelve months. Management
believes, although there can be no assurance, that manufacturing and design
sales will continue to be a significant portion of our revenues.
Revenue
from study contracts decreased during the nine months ended September 30, 2009
as compared to the same period in 2008. These contracts are reaching their
life-end. We have not accumulated additional study contracts in the past twelve
months and we expect this revenue stream to be depleted next year. However,
management believes, although there can be no assurance, that marketing efforts
may result in future study contracts.
-12-
The
volume of revenue from parts trading remained consistent for the nine months
ended September 30, 2009 as compared to the same period in 2008. Management
believes, although there can be no assurance, that the volume of revenue from
parts trading will remain relatively similar for the next twelve
months.
For the
nine months ended September 30, 2009, 86% of our revenues were derived from U.S.
customers and 14% from European customers as compared to the nine months ended
September 30, 2008 during which 64% of our revenues were derived from U.S.
customers and 36% from European customers. Revenues from European customers
consisted of only parts trading for the nine months ending September 30, 2009 as
compared to the nine months ended September 30, 2008 in which significant
portions of the sales from Europe were from remanufacturing activities.
Management expects this trend to continue in the next twelve
months.
Cost of Sales. Cost
of sales consists primarily of subcontractors and raw materials used in
manufacturing along with other related charges. Cost of sales increased 87%
to $1,900,603 for the nine months ended September 30, 2009, compared to
$1,014,418 for the nine months ended September 30, 2008, representing 70% and
60% of the total revenues for nine months ended September 30, 2009 and nine
months ended September 30, 2008, respectively.
The
increase in our cost of sales in the nine months ended September 30, 2009 as a
percentage of revenue is primarily attributable to a decrease in the portion of
study revenue out of the entire revenue in the nine months ended September 30,
2009. Study contracts require fewer acquisitions of materials and tend to have
higher margins. In addition, during the nine months ending September 30, 2008 we
had high margins in our manufacturing revenue stream which is not expected to
reoccur. Management believes, although there can be no assurance, that
approximatly70% cost of sales as a percentage of revenue is typical of the
Company’s future aggregate revenue stream.
General and Administrative
Expenses. General and administrative expenses increased by 29% to
$936,280 for the nine months ended September 30, 2009 from $727,122 for the nine
months ended September 30, 2008. The increases in general and
administrative costs are primarily attributable to an increase of salaries,
audit fees, travel, entertainment, rent and professional fees for the
nine months ended September 30, 2009 as compared with the same period in
2008.
The 63%
increase in revenue for the nine months ended September 30, 2009 demanded
additional outlays and expenses to the Company. Management believes, although
there can be no assurance, that continued increase in revenues may result in
continued increase in general and administrative expenses, although at a lower
growth rate.
As a
percentage of revenues, general and administrative expenses decreased to 34% for
the nine months ended September 30, 2009, as compared to 43% for the nine months
ended September 30, 2008.
Net (loss) income.
Net Loss for the nine months ended September 30, 2009 amounted to $175,289
as compared to a net income of $461,689 for the same period during
2008. The 2008 income was attributable to a one time recovery of
contingent income in the amount of $556,154 in the nine months ended
September 30, 2008.
Comparison
of Three Months Ended September 30, 2009 and September 30, 2008
Revenues. Revenues increased
55% to $1,155,596 for the three months ended September 30, 2009 compared to
$746,137 for three months ended September 30, 2008.
-13-
For the
three months ended September 30, 2009, 36% of the revenues were derived from
manufacturing and design, 10% were derived from study contracts and 36% were
derived from remanufacturing orders, and 18% were derived from parts trading as
compared with the three months ended September 30, 2008, during which 60% of
revenues were derived from manufacturing and design, 16% were derived from study
contracts, 22% were derived from parts trading and 2% were derived from
remanufacturing.
The
increase in sales was primarily driven by an increase in the execution of
remanufacturing orders in the three months ended September 30, 2009 as compared
to the same period in 2008. The increase in the execution of remanufacturing
orders is a result of increased demand for these items; in addition we believe
that favorable relations with a supplier contributed to the increase in receipt
and execution of such sales orders. We currently have orders for additional
remanufactured goods which we expect to execute in the next twelve
months. Management expects, although there can be no assurance, that
remanufacturing will continue to be a significant portion of our sales, although
the demand we have experienced for remanufacturing orders has tended to be
erratic.
For the
three months ended September 30, 2009, 82% of our revenues were derived from
U.S. customers and 18% from European customers as compared to 77% from U.S.
customers and 23% from European customers for the same period in 2008. Revenues
from European customers consisted of only parts trading for the three months
ended September 30, 2009 and the three months ended September 30,
2008.
Cost of Sales. Cost
of sales consists primarily of subcontractors and raw materials used in
manufacturing along with other related charges. Cost of sales increased 74% to
$801,674 for the three months ended September 30, 2009, compared to $461,202 for
the three months ended September 30, 2008, representing 69% and 61% of the total
revenues for three months ended September 30, 2009 and September 30, 2008,
respectively.
The
increase in our cost of sales in the three months ended September 30, 2009 as a
percentage of revenue is primarily attributable to decreases in the portion of
study revenue as a percentage of the entire revenue in the three months ended
September 30, 2009. Study contracts require fewer acquisitions of materials and
tend to have higher margins. In addition in the three months ending September
30, 2008 we had high margins in our manufacturing revenue stream which are not
expected to reoccur. Management believes, although there can be no assurance,
that approximately 70% cost of sales as a percentage of the revenues is typical
of the Company’s future aggregate revenue streams.
General and Administrative
Expenses. General and administrative expenses increased by 10% to
$309,029 for the three months ended September 30, 2009 from $282,315 for the
three months ended September 30, 2008.
As a
percentage of revenues, general and administrative expenses decreased to 26% for
the three months ended September 30, 2009, as compared to 38% for the three
months ended September 30, 2008. This is a result of an increase in
revenues for three months ended September 30, 2009 as compared to September 30,
2008.
LIQUIDITY AND
CAPITAL RESOURCES
Cash as
of September 30, 2009 amounted to $99,225, as compared with $225,767 as of
December 31, 2008, a decrease of $126,542.
Accounts
receivable decreased as of September 30, 2009 as compared to December 31, 2008
primarily due to a $234,000 account receivable that has been accumulating for a
longer than usual period of time as of December 31, 2008. The longer payment
period resulted from our Company being processed by our customer as a vendor in
connection with that contract. Many times, payments for new programs or
customers take longer to be paid.
-14-
Accounts
payable increased as of September 30, 2009 as compared to December 31, 2008
primarily due costs related to the performance of one of the Company’s long term
design contracts. In this contract we are at a point in which we have to spend
significant outlays in order to complete a phase.
We lease
a 10,300 square foot operating facility under a lease term that commenced March
1, 2009 and expires February 28, 2011. Minimum lease payments remaining
for this facility total $70,040.
We will
continue to finance our operations mainly from the cash provided from operating
activities. Management believes that we will execute significant portions of our
backlog in the next twelve months, and proceeds from those sales are expected to
fund most of our operations. As of September 30, 2009, we had a
backlog of approximately $6,993,504. In some of these orders, we
collect revenues as we progress on the project and in some cases we can collect
advances from our customers in order to pay for material and/or labor for those
projects. In another contract, for $904,200 the Company has negotiated with the
customer to provide an advance of 25% of the total billings in order to
alleviate the working capital burden. Additionally, management is
expecting, although there can be no assurance, that additional orders will be
received.
We issued
three new private capital notes and extended two of the original notes, due to
mature in one year, payable between June and August 2010 with principal value of
$214,474. We believe that we have sufficient funds to repay these note
arrangements upon their maturity. In addition, we believe that if needed we will
be able to extend some of those notes. Management is considering raising
additional cash by issuing debt and/or equity securities.
|
Item
3.
|
Quantitative and Qualitative Disclosures about Market
Risk
|
Not
applicable.
|
Item
4T.
|
Controls
and Procedures
|
(a) Evaluation of Disclosure Controls
and Procedures: As of the end of the period covered by this report, we
carried out an evaluation, under the supervision and with the participation of
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of
the design and operation of our disclosure controls and procedures. Disclosure
controls and procedures are designed to ensure that information required to be
disclosed is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and forms,
and is accumulated and communicated to management, including our Chief Executive
Officer and Chief Financial Officer, to allow for timely decisions regarding
required disclosure of material information required to be disclosed in the
reports that we file or submit under the Securities Exchange Act of 1934 as
amended (the “Exchange Act”). Our disclosure controls and procedures are
designed to provide reasonable assurance of achieving these objectives. Based
upon this evaluation, our Chief Executive Officer and Chief Financial Officer
have concluded that our disclosure controls and procedures are not
effective.
(b) Changes in Internal Control over
Financial Reporting: During the three months ended September 30, 2009, we
have began a process of implementing new internal control procedures. Several
new procedures, including procedures for relating accounting have already been
implemented. Additional procedures, including procedures for cash disbursement,
purchasing and entity level control are intended to be implemented at a later
date. Although we believe that these new controls and procedures are reasonably
expected to improve our internal control over financial reporting we have not
yet sufficient reporting cycles to test these new controls, and so we cannot yet
attest to their effectiveness.
-15-
PART
II. OTHER INFORMATION
|
Item
1.
|
Legal
Proceedings.
|
Not
applicable.
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds.
|
In June,
July and August 2009, the Company entered into promissory note agreements with
related parties for the aggregate amount of $125,000. These notes are to be paid
in full at various dates by the between June 2010 and August 2010 and bear 15%
interest per annum. In addition, these notes were discounted by shares. In total
the Company issued an aggregate of 6,479 shares.
In July
and August 2009, the Company issued 4,110 shares of common stock in connection
with an agreement to extend note arrangements which became effective in July and
August 2009.
|
Item
3.
|
Default
upon Senior Securities.
|
Not
applicable.
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders.
|
On July
24, 2009, Phoenix International Ventures, Inc. (the “Company”) held its 2009
Annual Meeting of Stockholders in Carson City, Nevada to consider and vote upon
two proposals: (i) to re-elect Zahir Teja and Neev Nissenson as the
Company’s directors to serve until the next Annual Meeting of Stockholders and
until their successors are duly elected and qualified, and (ii) to ratify the
Company’s Board of Director’s selection of Mark Bailey & Company, Ltd. as
the Company’s independent auditors for the fiscal year ended December 31,
2009. During the Annual Meeting, the Company’s stockholders approved
both items.
|
Item
5.
|
Other
Information.
|
|
Item
6.
|
Exhibits
|
|
No.
|
Exhibit
|
|
4.1
|
Form of uncollateralized promissory
note (incorporated
by reference to Exhibit 4.1 of the Company’s Quarterly Report on Form 10-Q
filed with the SEC on August 11, 2009).
|
|
4.2
|
Form of uncollateralized promissory note
extension (incorporated
by reference to Exhibit 4.2 of the Company’s Quarterly Report on Form 10-Q
filed with the SEC on August 11, 2009)
|
-16-
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.
|
Phoenix
International Ventures, Inc.
|
|||
|
(Registrant)
|
|||
|
November
16, 2009
|
By:
|
/s/ Zahir
Teja
|
|
|
Zahir
Teja
|
|||
|
President
and Chief Executive Officer
|
|||
|
November
16, 2009
|
By:
|
/s/ Neev
Nissenson
|
|
|
Neev
Nissenson
|
|||
|
Chief
Financial Officer
(principal
financial and accounting officer)
|
|||
-17-
INDEX TO EXHIBITS
|
No.
|
Exhibit
|
|
4.1
|
Form of uncollateralized promissory
note (incorporated
by reference to Exhibit 4.1 of the Company’s Quarterly Report on Form 10-Q
filed with the SEC on August 11, 2009).
|
|
4.2
|
Form of uncollateralized promissory note
extension (incorporated
by reference to Exhibit 4.2 of the Company’s Quarterly Report on Form 10-Q
filed with the SEC on August 11, 2009)
|
-18-