Neon Bloom, Inc. - Quarter Report: 2010 June (Form 10-Q)

ph10q.htm

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 June 30, 2010.

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 August 16, 2010 was 8,142,657.

-1-

Phoenix International Ventures, Inc.

TABLE OF CONTENTS

	Page
PART I FINANCIAL INFORMATION	3
Item 1. Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3. Quantitative and Qualitative Disclosures about Market Risk	16
Item 4T. Controls and Procedures	16

PART II. OTHER INFORMATION
Item 1. Legal Proceedings	17
Item 1A. Risk Factors	17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3. Defaults upon Senior Securities	17
Item 4. (Removed and Reserved.)	17
Item 5. Other Information	17
Item 6. Exhibits	17

-2-

PART I FINANCIAL INFORMATION

Item 1.

Financial Statements

Index to Financial Statements

	Page
Condensed Consolidated Balance Sheets as of June 30, 2010 (Unaudited) and December 31, 2009	4
Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2010 and 2009 and for the Six Months Ended June 30, 2010 and 2009 (Unaudited)	5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009 (Unaudited)	6
Notes to Condensed Consolidated Financial Statement (Unaudited)	7

-3-

Phoenix International Ventures, Inc

Condensed Consolidated Balance Sheet as of


	June 30,			December 31,
	2010			2009
Assets	(Unaudited)			(Audited)

Current assets
Cash	$	58,193		$	148,478
Accounts receivable, net		207,119			61,329
Cost in excess of Billings		584,965			277,519
Inventory		22,589			437,595
Prepaid and other current assets		8,357			7,306

Total current assets	$	881,223		$	932,227

Property and equipment, net		95,008			73,514

Other assets		145,941			118,200

Total assets	$	1,122,172		$	1,123,941

Liabilities and Stockholders' (Deficit)

Current liabilities
Line of credit	$	13,831		$	13,087
Accounts payable		894,676			599,167
Other accrued expenses		245,647			146,979
Billings in excess of cost		51,395			-
Customer deposits		214,145			450,835
Notes Payable, current portion net of discounts		312,286			253,721
Legal settlement		384,000			384,000
Due related party		539,431			536,280
Officer loans		39,461			39,461

Total current liabilities	$	2,694,872		$	2,423,530

Long term liabilities
Notes payable		232,093			67,849
Officer advances		369,375			369,375
Total long term liabilities	$	601,458		$	437,224
Total liabilities	$	3,296,340		$	2,860,754

Commitment and Contingencies		-			-

Stockholders' (deficit)
Preferred stock - $0.001 par value; 1,000,000 shares
authorized; zero shares issued and outstanding		-			-
at June 30, 2010 and December 31,2009
Common stock - $0.001 par value; 50,000,000 shares
authorized; and 8,113,307 and 8,142,657 shares issued and outstanding at June 30, 2010 and December 31, 2009		8,143			8,113


Additional paid in capital		1,456,507			1,427,160
					-
Accumulated Deficit		(3,638,818	)		(3,172,086	)

Total stockholders' deficit	$	(2,174,168	)	$	(1,736,813	)

Total liabilities and stockholders' (deficit)	$	1,122,172		$	1,123,941

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

-4-

Phoenix International Ventures, Inc

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010 (unaudited)						2010 (unaudited)
	2010 (unaudited)			2009 (restated)			2010 (unaudited)				2009
Sales	$	571,249		$	1,066,533		$	1,702,351		$	1,578,375
Cost of sales		488,279			735,659			1,494,431			1,099,074
Gross margin	$	82,970		$	330,874		$	207,920		$	479,301

Operating expenses
General and administrative expenses	$	224,726		$	322,477		$	513,202		$	632,076

Total operating expenses	$	224,726		$	322,477		$	513,202		$	632,076

Income (loss) from operations	$	(141,756	)	$	8,397		$	(305,282	)	$	(152,775	)

Other loss		-			-			122,000			-
Interest expense		20,598			(37,454	)		39,449			57,641

Net Income (loss) before taxes	$	(162,354	)	$	(29,057	)	$	(466,731	)	$	(210,416	)

Income taxes		-			-			-			-

Net income (loss)	$	(162,354	)	$	(29,057	)	$	(466,731	)	$	(210,416	)


Net income per common share:
Basic	$	(0.02	)	$	(0.00	)	$	(0.06	)	$	(0.03	)
Diluted	$	(0.02	)	$	(0.00	)	$	( 0.06	)	$	(0.03	)

Weighted average shares outstanding:
Basic		8,139,662			7,746,309			8,129,452			7,746,309
Diluted		8,139,662			7,746,309			8,129,452			7,746,309

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

-5-

Phoenix International Ventures, Inc.

Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30,

(Unaudited)

	2010			2009
Cash flows from operating activities
Net income (loss)	$	(466,731	)	$	(210,416	)
Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation		10,529			12,541
Amortization of debt discount		5,325			39,829
Amortization of finance fees		5,135			-
Accrued interest		6,291			4,218
Change in accounts receivable		(145,790	)		160,358
Cost in excess of billings		(256,051	)		77,209
Change in inventory		415,006			(204,182	)
Changes in prepaid expenses		(1,051	)		4,982
Change in other assets		(3,499	)		(4,200	)
Change in customer deposits		(236,690	)		(163,771	)
Change in accounts payable		295,509			87,670
Change in accrued expenses		98,668			(9,532	)
Change in related party payable		3,151			17,849

Net cash used in operating activities	$	(270,198	)	$	(187,445	)

Cash flows from investing activities
Purchase of property and equipment	$	(32,023	)	$	(4,875	)

Net cash used in investing activities	$	(32,023	)	$	-

Cash flows from financing activities
Proceeds from subscription receivable		-			-
Proceeds from notes payable		240,290			100,000
Repayments on notes payable		(29,098	)		(86,312	)
Repayments related party notes		-			-
Issuance of common stock		-			-
Proceeds from (payments on) line of credit		744			(76	)

Net cash provided by (used in) financing activities	$	211,936		$	13,612

Increase in cash	$	(90,285	)	$	(178,708	)

Cash, beginning of year		148,478			225,767

Cash, end of period	$	58,193		$	47,059

Cash paid for
Interest	$	17,792		$	21,890
Income taxes		-			-

Non cash investing and financing activities:
Issuance of 24,640 shares of common stock with promissory notes		24,640
Issuance of 5,322 shares of common stock with promissory notes					5,000
Issuance of 4,711 shares of common stock with promissory notes		4,711
The accompanying notes are an integral part of these unaudited condensed consolidated 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 condensed 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 unaudited condensed consolidated financial statements should be read in conjunction with the December 31, 2009 audited financial statements and the notes thereto included in the Company’s Report on Form 10-K filed with the SEC on March 31, 2010.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned US subsidiary Phoenix Aerospace, Inc. (“PAI”) and an Israeli wholly owned subsidiary, Phoenix Europe Ventures, Ltd. (“PEV). Significant inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

Management uses estimates and assumptions in preparing consolidated financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.

Depreciation

Depreciation is computed by using the straight-line methods for financial reporting purposes and the modified accelerated cost recovery method and the accelerated cost recovery method for federal income tax purposes.

Cash and Cash Equivalents

For purposes of preparing the statement of cash flows the company considers all short-term debt securities purchased with a maturity of three months or less and all money market funds to be cash equivalents.

Concentration of Credit Risk

The Company maintains cash in accounts with a federally insured bank located in Nevada. The balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At times, the balances in these accounts may be in excess of the federally insured limits. As of June 30, 2010, the Company did not have a cash balance above the federally insured limit.

-7-

Phoenix International Ventures, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Major Customers

The Company provides services to multiple customers, but mainly provides services to two major customers. Two major customers accounted for approximately 77% of revenue and 72% of accounts receivable during the six months ended June 30, 2010. One of the above mentioned customers has $584,965 of costs in excess of billings reported as an asset in the financial statements and the Company must meet milestones before billing and collecting these amounts.

Recent Accounting Pronouncements

None

Note 2 - Financial Condition, Liquidity, and Going Concern

At June 30, 2010, the Company assessed its ability to continue as a going concern. The Company has a working capital deficit of $1,883,649 and accumulated deficit of $3,638,818, along with a net loss for the six months ended June 30, 2010 of $466,731. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

In addition the Company has deferred significant salaries to officers and deferred payments to many suppliers. The Company has developed a plan to address its financial situation and believes it can finance a significant portion of its operations through monetizing its current backlog as well as obtaining future orders. The plan is based on the Company’s current assets primarily billing and collecting costs in excess of billings, completing backlog orders, obtaining new orders, and meeting expectations regarding revenues and operating costs.

The Company may need to depend on additional capital raising efforts, obtain and maintain favorable contracts, and achieve greater operating efficiencies anticipated with increased production levels. The company believes it is viable for the next twelve months partly based on the expectation that it will receive additional orders and conduct successful money raising activities. There can be no assurance that the Company’s future efforts and anticipated operating improvements will be successful.

The unaudited condensed consolidated financial statements do not include any adjustments for future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

Note 3 –Quarterly Financial Information

During the preparation of the audited financial statements for the twelve months ended December 31, 2009, the Company discovered certain errors related to revenue recognized in the three months ended March 31, 2009 that should have been recognized in the three months ended June 30, 2009.

The Company discovered that revenue totaling $420,000 recognized during the three months ended March 31, 2009 should not have been recognized until the subsequent quarterly period due to the products not being shipped until early April 2009. The impacts of the correction of the error in the interim financial information as reported on Forms 10-Q for the three months ended June 30, 2009 are reflected in the following table:

	As Reported Three months ended
	June 30, 2009			Changes		As Restated
Sales	$	646,533		$	420,000	$	1,066,533
Cost of sales		437,800			297,859		735,659
Gross margin	$	208,733				$	330,874
General and administrative expenses		322,477					322,477
Income (Loss) from operations	$	(113,744	)			$	8,397
Interest expense		(37,454	)				(37,454	)
Net income (loss)	$	(151,198	)			$	(29,057	)
Net income (loss) per common share:
Basic	$	(0.02	)			$	(0.00	)

-8-

Phoenix International Ventures, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Note 4 - 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.

	Six months ended
	June 30 ,
	2010			2009
United States		91	%		89	%
Europe		9	%		11	%

Total		100	%		100	%

Note 5 - Inventory

Inventory consists of parts and equipment that can be manufactured or re-manufactured for re-sale. Non-current inventory consists of parts with limited current demand that are of limited supply. At June 30, 2010 and June 30, 2009, inventory consisted of the following:

	2010		2009
Raw materials	$	136,589	$	118,500
Work in process		-		272,198
Total	$	136,589	$	390,698
Non-current(classified as other asset)		114,000		114,000
Inventory, current	$	22,589	$	276,698

Note 6 – Long Term Contracts

The Company has certain long-term contracts to design and manufacture equipment. The Company periodically reevaluates its cost estimates in connection with its long term contracts and may estimate that the future costs exceed or be less than previous estimates. One of these changes in estimates has caused a loss on prior periods of $122,000 which is presented as “other income (loss)” on the statement of operations. Costs and estimated earnings on the entire contracts as of June 30, 2010 are as follows:

Costs incurred on contracts	$	1,584,633
Estimated contracts profit		190,799
Less: billings to date		(1,241,862	)
Contract costs and related estimated profits in excess of billings, net	$	533,570

The costs in excess of billings amounted to $584,965 on one contract while billings in excess of costs amounted to $51,395 on the other.

-9-

Phoenix International Ventures, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Note 7 - Notes Payable and Lines of Credit

The Company has a revolving line of credit from a foreign financial institution totaling $13,831 at June 30, 2010. The line of credit bears a monthly interest ranging from 10%-13% based upon the amount extended. As of June 30, 2010, the interest was at 13%. This item has been classified as a line of credit.

The Company had a revolving line of credit from a financial institution totaling $35,000. In October 2009, the line of credit converted to an installment note payable in equal installments of $883 per month which includes interest at 9.75% and principal until September 30, 2013. As of June 30, 2010, the Company owed $29,424 on this note payable.

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 mature in the fiscal quarter ending September 30, 2010. In exchange for the extension, the lenders were issued shares of the Company’s common stock equal to 5% of the principal amount of the notes. The Company issued an aggregate of 4,110 shares in connection with these notes.

In June and August 2009, the Company entered into three new promissory note agreements with related parties (one note with 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 interest at 15% per annum. In addition, the lenders were issued shares of the Company’s common stock equal to 5% of the principal amount of the notes upon execution. In total, the Company issued an aggregate of 6,479 shares in connection with these notes.

In February and March 2010, the Company entered into promissory note agreements with related parties in the aggregate amount of $175,000. These notes are to be paid in full at various dates between February and March of 2012 and bear interest at 11% per annum. In addition, the lenders were issued shares of the Company’s common stock equal to 14% of the principal amount of the notes. In total, the Company issued an aggregate of 24,640 shares in connection with these notes.

During May and June 2010, two new one year promissory notes were entered into with the aggregate principal amount of $65,290 bearing interest at 11%. As an incentive to enter the transaction, the lenders were issued shares of the Company’s common stock equal to 7% of the principal amount of the notes. The Company issued an aggregate of 4,711 shares in connection with these notes.

During June 2010, one of the notes to the Cyprus corporation for $50,000 was extended for an additional year. The note bear interest of 11% per annum and the Company was also required to issue 3,684 shares of common stock as an incentive to enter into an extension. As of June 30, 2010 these s hares had not been issued yet.

As of June 30, 2010 unsecured promissory note agreements consisted of the following:

Note	Interest APR			Incentive shares
Short term notes(1year)
Note to related party maturing on June 30, 2010		15	%		2,941
Note to an Israeli corporation on maturing on July 21, 2010		15	%		2,294
Note to an Israeli individual maturing on August 18, 2010		15	%		1,816
Note to a related party Cyprus corporation maturing on August 20, 2010		15	%		1,157
Note to an Israeli individual maturing on May 1, 2011		11	%		2,943
Note to an Israeli individual maturing on May 31, 2011		11	%		1,786
Note to a related party Cyprus corporation maturing on August 20, 2010		11	%		3,684

Long term notes(2year)
Note to related party maturing on February 2, 2012		11	%		14,140
Note to a related party Cyprus corporation maturing on March 24, 2012		11	%		10,500

-10-

Phoenix International Ventures, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

At June 30, 2010, a summary of all notes payable:

	Total
	Amount		Current
Unsecured note payable to a financial institution in a foreign country; 12.4% per annum	$	4,374	$	4,374
Secured note payable to a financial institution; monthly payments of $756 until 2012; collateralized by an automobile		21,167		9,827
Unsecured promissory note agreements(1 year); effective interest rates are 15% and 11% due in 2010 and 2011		281,215		281,215
Unsecured promissory note agreements(2 year); effective interest rates are approximately 11% due in 2011		178,642		3,642
Secured note payable to a financial institution; monthly payments of $671 until 2014; interest at 7.99%;collateralized by an automobile		29,557		5,524
Unsecured note payable to a financial institution; 9.75% per annum; monthly payments of $883 until 2013		29,424		7,704
Total:	$	544,379	$	312,286

Note 8 - Related Party Transactions

As of June 30, 2010, the Company owed a total of $539,431 to related parties of which $236,171 was deferred and accrued salaries to its officers, $68,471 was vacation payable to the officers, $109,811 was fees owed in relation to a consulting agreement entered into with a related party on April 26, 2007, and $123,000 were purchases of parts and inventory from a related party.

In addition to this amount, the Company owed an officer for his advances totaling $408,836, of which $39,461 is due in the current year. As of June 30, 2010, 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 current fiscal year.

Note 9 - Commitments and Contingencies

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 $32,960. Lease expenses through June 30, 2010 were $24,720 compared to $32,430 in June 30, 2009. During the second and third quarters of 2009, the Company had leases on two facilities.

On May 26, 2006, the Company entered into a settlement agreement relating to a legal dispute with Kellstrom totaling $1,173,913 plus interest. As part of the settlement, the Company was required to provide $500,000 in trade credits and a $566,154 payment contingent upon the event the Company was awarded an Air Start Cart development contract prior to May 26, 2008 in the minimum amount of $10,000,000. This settlement was then reflected in the Company’s financial statements. The contingent payment was directly tied to the contract award. The contract was not received by May 26, 2008 but all other terms of the settlement, except for the provision of trade credits, were satisfied. Since the contingency expired without being met, the Company recovered the previously recognized contingent liability in the amount of $566,154. The remaining trade credits of $500,000 were granted to Kellstrom towards the purchase of materials, repairs, maintenance, and overhaul services. The credits were due upon receipt of a purchase order from Kellstrom but the Settlement Agreement did not provide a specific termination date in lieu of full satisfaction. While there is no specific requirement to pay Kellstrom cash in lieu of the trade credits if they fail to execute a purchase order, Kellstrom has reserved the right to pursue any remaining settlement amounts in the event the Company fails to honor the remaining trade credit obligation. As of June 30, 2010, a balance of $384,000 remained outstanding on the trade credits.

Note 10 – Subsequent events:

Subsequent events were evaluated through August 16, 2010.

The Company has repaid a $50,000 note arrangement that matured on June 30, 2010 in August 2010.

-11-

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.

These forward-looking statements speak only as of the date of this Quarterly Report. Subject at all times to relevant federal and state securities law disclosure requirements, we expressly disclaim any obligation or undertaking to disseminate any update or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. Consequently, all of the forward-looking statements made in this Quarterly Report are qualified by these cautionary statements and there can be no assurance of the actual results or developments.

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. The Company is ISO 9001/2000 certified, which is due to expire on June 11, 2011.

The main users of the equipment are the United States Air Force, US Navy and defense-aerospace companies.

Results of Operations

Financial Information - Percentage of Revenues

(Unaudited)

	Six Months ended
	June 30,
	2010			2009
Revenues		100	%		100	%
Cost of Goods Sold		-88	%		-70	%
Gross Profit		12	%		30	%
Operating Expenses:
General and Administrative		-30	%		-40	%
Total Operating Expenses		-30	%		-40	%
Other Income (Expenses)		-9	%		-4	%
Income (Loss) before Taxes		-27	%		-13	%
Net income (loss)		-27	%		-13	%

-12-

Results of Operations-Fiscal Summary

Comparison of the six months ended June 30, 2010 and June 30, 2009

Revenues. Revenues increased 7% to $1,702,351 for the six months ended June 30, 2010, compared to $1,578,375 for the six months ended June 30, 2009.

For the six months ended June 30, 2010, remanufacturing revenue accounted for 50% of our total revenue, manufacturing and design accounted for 31%, parts trading accounted for 11%, and study contracts were 8% of revenues. This compares to remanufacturing of 40%, manufacturing and design of 30%, study contracts of 19% and parts trading of 11% of revenues for the six months ended June 30, 2009.

There was an increase in remanufacturing revenue as a result of the conclusion of a large purchase order for remanufactured air start carts. These units are typically of high dollar volume. Management believes that there will be a reduction in revenue from this stream in nominal numbers in the next six months. The Company did receive an order for one remanufactured air start cart unit which is expected to be delivered in the second half of 2010.

Manufacturing and design was the second highest revenue producing stream primarily due to a large manufacturing and design contract. The Company has already recognized revenue for approximately 68% of contract to design, test and manufacture aircraft engine trailers. Management believes this order will comprise a significant portion of our future revenues. This order also contains an option for the customer to order additional units which, if exercised, will lead to additional revenues. The Company has accumulated approximately $584,965 of costs in excess of billings on this contract. The billing and collection of the costs in excess of billings is partly depended on reaching some milestones that are expected to occur in the near future.

Revenue from study orders decreased during the final stages of performance on existing contracts during the six month ended June 30, 2010. The Company did not receive additional study type orders during the six months ended June 30, 2010 and management believes that revenue from this stream will decrease in the future. Management believes, although there can be no assurance, that completed study orders may spawn additional orders to remanufacture and/or manufacture the equipment studied thereby, increasing manufacturing and remanufacturing revenue in the future.

Parts trading revenue remained at similar volumes during the six months ended June 30, 2010 compared to the same period in 2009. Management expects, although there can be no assurance, that this revenue stream will decrease during the remainder of the year ended December 31, 2010.

The Company has diverse contracts with large customers which make up significant portions of revenue. The United States Air Force and Navy represented 27% of the Company’s revenues for the six months ended June 30, 2010. The remaining 73% of revenues were to aerospace companies and military contractors. Two customers represented 77% of the Company’s revenues for the six months ended June 30, 2010. Management feels that similar trends will continue in the near future.

Cost of Sales. Cost of sales consists primarily of sub-contractors and raw materials used in the manufacturing and remanufacturing processes, along with labor and allocations of indirect labor and overhead. Cost of sales increased to $1,494,431 for the six months ended June 30, 2010, compared to $1,099,074 for the six months ended June 30, 2009, representing 88% and 70% of total revenues for the six months ended for each period, respectively.

Cost of sales as a percentage of revenue increased on design and manufacturing contracts as costs were adjusted higher than previously expected, this resulted in a decrease of gross margin on this project which comprises 27% of our revenues for the six months ended June 30, 2010.

In addition we saw significant increases in external engineering and internal labor costs regarding the Company’s remaining study contract. The Company also, did not have any work in process to inventory for June 30, 2010. Finally some cost allocations were made from general and administrative accounts to cost of sales accounts including reallocation of some salaries, facilities costs and other costs during the six months ended June 30, 2010 to appropriately reflect cost of sales. These allocations were not done in the six months ended June 30, 2009.

General and Administrative Expenses. General and administrative expenses decreased 18% for the six months ended June 30, 2010 to $513,202 compared to $632,076 during the six months ended June 30, 2009. A portion of the decrease can be attributable to the cost allocations described above, the Company also saw a reduction in accounting fees. Management expects, although there can be no assurance, general and administrative expenses will continue at these levels in the near future.

As a percentage of revenues, general and administrative expenses decreased to 30% of total revenue for the six months ended June 30, 2010, as compared to 40% of total revenue for the six months ended June 30, 2009. Management further believes, although there can be no assurance, that the current general and administrative infrastructure can accommodate significantly higher revenue volume.

-13-

Interest Expense and Other Income. Interest expense decreased by 11% to $39,449 for the six months ended June 30, 2010, from $57,641 for the six months ended June 30, 2009. Notes entered into in 2009 which mature in 2010 carry interest at 15% per annum and include incentive shares of common stock equal to 5% of the principal amount of the notes. Notes entered into in 2010 carry interest at 11% per annum and include shares of common stock equal to 7% of the principal amount of the notes. We expect total interest expense to decrease or remain the same during the remainder of the year ended December 31, 2010.

Other loss. At March 31, 2010 we recorded a loss adjustment of $122,000 relating to a long term contract. Due to an anticipated higher cost associated with this contract than previously estimated. Due to this change in estimate, we recorded a loss on prior periods.

Taxes on Income. We had no tax liabilities for either of the six months ended June 30, 2009 or June 30, 2010.

Net Loss. Net loss for the six months ended June 30, 2010 amounted to ($466,731) compared to a net loss of ($210,416) for the six months ended June 30, 2009.

Comparison of the three months ended June 30, 2010 and June 30, 2009

Revenues. Revenues decreased 46% to $571,249 for the three months ended June 30, 2010, compared to $1,066,553 for the six months ended June 30, 2009 as restated.

For the three months ended June 30, 2010, remanufacturing revenue accounted for 37% of our total revenue, manufacturing and design accounted for 34%, parts trading accounted for 5%, and study contracts were 23% of revenues. This compares to remanufacturing of 59%, manufacturing and design of 27%, study contracts of 11% and parts trading of 3% of revenues for the three months ended June 30, 2009.

In nominal numbers, revenues declined in all revenue streams except for study contract revenue in the three months ended June 30, 2010 as compared to the three months ended June 30, 2009. Management believes that revenues will continue to be lower than comparable periods of 2009 in the near future. Management expectations regarding additional remanufacturing orders did not materialize during the three months ended June 30, 2010. The company did receive an order for one additional remanufactured air start cart unit which is expected to be delivered in the second half of 2010. Management believes, although there can be no assurance, that additional orders will be issued to the company in the near future.

Revenue from study orders remained at similar volumes. The Company did not receive additional study type orders during the three months ended June 30, 2010 and management believes that revenue from this stream will decrease in the future. Management believes, although there can be no assurance, that completed study orders may spawn additional orders to remanufacture and/or manufacture the equipment studied thereby, increasing manufacturing and remanufacturing revenue in the future.

Cost of Sales. Cost of sales consists primarily of sub-contractors and raw materials used in the manufacturing and remanufacturing processes, along with labor and allocations of indirect labor and overhead. Cost of sales decreased to $488,279 for the three months ended June 30, 2010, compared to $735,659 for the three months ended June 30, 2009 primarily due to a decrease in revenues. Cost of sales representing 85% and 68% of total revenues for the three months ended for each period respectively.

Cost of sales as a percentage of revenue increased due to an increase in the estimated costs on design and manufacturing contracts as costs were adjusted to be higher than previously expected, this resulted in a decrease of gross margin on this project which comprises 34% of our revenues for the six months ended June 30, 2010.

In addition we saw significant increases in external engineering and internal labor costs regarding the Company’s remaining study contract. The Company, also, did not have any work in process inventory for June 30, 2010. Finally, some cost allocations were made from general and administrative accounts to cost of sales accounts including reallocation of some salaries, facilities costs and other costs during the three months ended June 30, 2010 to appropriately reflect cost of sales. These allocations were not done in the three months ended June 30, 2009.

General and Administrative Expenses. General and administrative expenses decreased 30% for the three months ended June 30, 2010 to $224,726 compared to $322,477 during the six months ended June 30, 2009. A portion of the decrease can be attributable to the cost allocations described above; the Company also saw a reduction in accounting fees and travel expenses. Management expects, although there can be no assurance, that general and administrative expenses will continue at these levels in the near future.

As a percentage of revenues, general and administrative expenses increased to 39% of total revenue for the three months ended June 30, 2010, as compared to 30% of total revenue for the three months ended June 30, 2009. The changes in general and administrative expenses as percentage of revenues are primarily attributed to the decrease in revenues. Management further believes, although there can be no assurance, that the current general and administrative infrastructure can accommodate significantly higher revenue volume.

-14-

Summary of Liquidity and going concern

At June 30, 2010, we assessed the Company’s ability to continue as a going concern. We have a working capital deficit of $1,883,649 and accumulated deficit of $3,638,818, along with a net loss of $466,731 for the six months ended June 30, 2010. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

Our financial situation deteriorated during the last six months primarily because management’s expectations regarding additional short term orders did not materialize during the last six months coupled with increased costs and delays in the company’s major design and manufacturing contract. Management expects, although there can be no assurance, additional orders will be received by the Company in the near future; we also expect that some of these orders will provide advances to assist our working capital needs. The Company may be unable to finance its operations solely from revenues from operations.

We have developed a plan to address the financial situation and believe the Company can still finance a significant portion of its operations through monetizing its current backlog as well as future orders. We found it necessary during the first six months of 2010 to extend and issue new debt through promissory notes to replace previous note arrangements and raise additional operating capital. In addition, we have deferred significant salaries to officers and deferred payments to many suppliers for long periods of time. The plan is based on the Company’s current assets, primarily billing and collecting costs in excess of billings, completing backlog orders, obtaining new orders, and meeting expectations regarding revenues and operating costs.

We currently have $584,965 of costs in excess of billings which we expect to bill and collect in the near future. The billing of this amount is also dependent on reaching certain contractual milestones. We have diverse customer payment arrangements regarding our contracts. Certain contracts require payments upon delivery and have a net 30 payment schedule while other contracts allow for advances or milestone billing which enables the Company to obtain financing for the production process which is typical in all of our revenue streams.

Cash Flows (Operating, Investing, and Financing)

Cash as of June 30, 2010, amounted to $58,193 compared to $148,478 as of December 31, 2009, which is a decrease of $90,285.

Cash used in operating activities increased by $82,753 to $270,198 for the six months ended June 30, 2010 from $187,445 for the six months ended June 30, 2009. Inventory and work in process decreased significantly and resulted in an increase in cash as delivery of certain products were made and no further inventory was accumulated. However, these increases in cash were lower than the changes in accounts receivable, customer deposits, and cost in excess of billings that decreased cash flow In summary, cash decreased during the six months ended June 30, 2010 primarily due to reduced accounts receivable, earned deposits, and accumulated cost in excess of billings.

As our products consist of large items of equipment, changes in the cash flow items period to period are subject to significant fluctuations which might not be attributable to a trend but rather to specific circumstances of a delivery and cutoff date.

Net cash provided by financing activities for the six months ended June 30, 2010 was $211,936, which is related to the issuance of two promissory notes and the extension of one other during the quarter. These notes also included an additional obligation to issue shares of common stock.

Capital Expenditures and Other Obligations

Management believes there is no need for material additional capital investments in order to execute the current order backlog. Our capital investments are primarily for the purchase of equipment for the services and products that we provide or intend to provide. This equipment includes vehicles, shop tools, and shop machinery. Although this may change, we currently do not expect to make material capital investments during the next twelve months.

On January 29, 2009, we entered into an agreement to lease a new production facility starting March 1, 2009 until February 28, 2011 at a monthly rent of $4,120. Minimum payments on this lease for the next twelve months will be $49,440.

Sources of Liquidity

We shall continue to finance a significant portion of our operations through monetizing our current backlog and deliveries on new orders we expect to receive, although there can be no assurance we will be successful. In addition the Company is pursuing financing activities through the issuances of debt and / or equity instruments as necessary. Please see summary of Liquidity and Going Concern section above.

-15-

As of June 30, 2010, we had backlog orders of approximately $3 million compared to a backlog of $7.1 million for June 30, 2009. Management believes a significant portion of our backlog will be delivered during the next twelve months. Additionally, management is expecting, although there can be no assurance, that additional orders will materialize during that time. Included in our 2010 backlog is $2,800,000 consisting of a Department of Defense program designated to Phoenix Aerospace projects. In this program we will supply the Department of Defense with parts linked to products we developed. We expect, although there can be no assurance, to see significant revenue from this program in 2010.

Debt and Capital

We are pursuing the raising of additional capital through private and/or public placements to fund our operations, although there can be no assurance that our efforts will be successful.

We have issued several promissory note arrangements in 2009 and 2010 that amount to $281,215 as of June 30, 2010. These notes mature in 2010 and 2011. The notes issued in 2009 bear interest at 15% while the notes issued in 2010 bear interest at 11%. Incentive stock shares were also issued along with these notes. Management believes, although there can be no assurance, that we will be able to repay or extend these notes or enter into new note arrangements at terms similar to the current note arrangements to the Company.

In February and March 2010, we entered into long term promissory note agreements with related parties in the aggregate amount of $175,000, including accrued interest of $3,642 as of June 30, 2010. These notes are to be paid in full at various dates between February and March of 2012 and bear interest at 11% per annum. In addition, the lenders were issued additional shares of the Company’s common stock equal to 7% of the principal amount of the notes. In total, we issued an aggregate of 24,640 shares in connection with these notes.

During May and June 2010, two new one year promissory notes were entered in with the aggregate principal amount of $65,290 bearing interest at 11% per annum. As an incentive to enter into these transactions, the lenders were issued shares of the Company’s common stock equal to 7% of the principal amount of the notes. The Company issued an aggregate of 4,711 shares in connection with these notes.

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 six months ended June 30, 2010, we implemented new procedures, including updated procedures relating to accounting which include greater scrutiny over cut-off issues, work in process and revenue recognition. Although we believe these new controls and procedures are reasonably expected to improve our internal control over financial reporting we have not yet experienced sufficient reporting cycles to test these new controls, and so we cannot yet attest to their effectiveness.

-16-

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

Not applicable.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

In February and March 2010, the Company entered into promissory note agreements with related parties in the aggregate amount of $175,000. These notes are to be paid in full at various dates between February and March of 2012 and bear interest at 11% per annum. In addition, the lenders were issued shares of the Company’s common stock equal to 7% of the principal amount of the note. In total the Company issued an aggregate of 24,640 shares in connection with these notes.

During May and June 2010 two new one year promissory notes were entered in with the aggregate principal amount of $65,290 bearing interest 11%. As an incentive, the lenders were issued shares of the Company’s common stock equal to 7% of the principal amount of the notes. The Company issued an aggregate of 4,711 shares in connection with these notes.

During June 2010, the company extended a note to a Cyprus corporation for 50,000 for an additional year. The note bears interest at 11% per annum and the Company was also required to issue an additional 3,684 shares of common stock as an incentive to enter into this extension. As of June 30, 2010 these shares had not yet been issued.

The offering of the promissory notes and the shares of common stock were not registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon exemptions from the registration requirements of the Securities Act set forth in Section 4(2) thereof as a transaction by the Company not involving any public offering. The investors met the “accredited investor” criteria required by the rules and regulations promulgated under the Securities Act and there was no underwriter and no general solicitation related to the offering.

Item 3.

Default upon Senior Securities.

Not applicable.

Item 4.

(Removed and Reserved.)

Item 5.

Other Information.

None.

Item 6.

Exhibits

No.	Exhibit
4.1	Form of uncollateralized promissory note
31.1	Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

-17-

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)

August 16, 2010	By:	/s/ Zahir Teja
		Zahir Teja
		President and Chief Executive Officer




August 16 , 2010	By:	/s/ Neev Nissenson
		Neev Nissenson
		Chief Financial Officer (principal financial and accounting officer)

-18-

INDEX TO EXHIBITS

No.	Exhibit
4.1	Form of uncollateralized promissory note
31.1	Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

-19-