THIS STOCK IS WAITING FOR SOME LEGS.
If we get buyers, it will fly. PHXS currently at .025 cents.
Was as high as $1.++ a while back.
October 29, 1997
PHOENIX INFORMATION SYSTEMS CORP (PHXS)
Quarterly Report (SEC form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
INTRODUCTORY STATEMENT
Phoenix Information Systems Corp. ("Phoenix" or the
"Company") is a development-stage information systems and services company that
has developed airline and hotel travel reservation systems.
In fiscal 1996, Phoenix commenced operations in the United
States and China. Efforts are under way to enlist additional airlines, hotels
and other travel service providers. While Phoenix has now commenced operations,
the Company has only a brief operating history and has yet to generate
significant revenues or earnings.Consequently, Phoenix's continued existence
has depended, primarily, upon its ability to raise capital.
In China, Phoenix has installed and begun to operate its
advanced computerized travel information network for domestic airlines. Phoenix
provides state-of-the-art, travel-related information services to China through
its 70% owned joint venture with China Southern Airlines Company, Ltd.
RESULTS OF OPERATIONS
During the six months ended September 30, 1997, and the
fiscal years ended March 31, 1997, 1996 and 1995, the Company sustained net
losses of $5,980,642, $12,393,872, $9,704,318, and $4,841,824, respectively.
Losses are anticipated to continue until the data network in China is fully
implemented and utilized by China Southern for its reservation and data
processing services.
While Phoenix has concentrated its sales efforts in China,
the Company has also focused on small to medium domestic carriers that could
utilize the Company's reservation system. In fiscal 1995, Phoenix entered into
an Agreement with Eastwind Airlines, Inc. ("Eastwind") to provide Eastwind with
a complete reservation system to manage all sales, airport and operations
functions. In addition, Phoenix implemented a reservation center that processed
all Eastwind reservations as of the second quarter of fiscal 1996. Furthermore,
in May 1996, the Company commenced commercial operations with Laker Airlines.
Eastwind terminated its relationship with the Company on May 17, 1997. The
Company is actively pursuing other small to medium carriers to expand the
customer base for its reservation center.
For the quarter ended September 30, 1997, the Company had
revenues of $305,777 versus $256,078 for the quarter ended September 30, 1996,
an increase of 19% as the revenue from Laker Airlines more than offset the
prior-year revenue associated with AIT. For the quarter ended September 30,
1997, the Company had start-up and organizational expenses of $3,501,627
compared to $2,993,551 for the quarter ended September 30, 1996, an increase of
$508,076 or 17%. The growth in expenses was concentrated in stock option
compensation (+$81,000), increased business travel to China (+$149,261),
communications expenses (+$117,557), and consulting expenses primarily in
support of the Joint Venture (+$169,042).
For the six months ended September 30, 1997, the Company had start-up and organizational expenses of $6,387,414 as
compared to $5,575,899 for the comparable prior year period, an increase of $811,515 or 15%. The growth in spending for
the fiscal year-to-date period was concentrated in the same categories: stock option compensation (+$222,000),
communications expense (+$244,008), consulting fees (+$161,238) and travel, primarily to China (+$245,398).
LIQUIDITY AND CAPITAL RESOURCES
Working Capital; Financial Instability
As of September 30, 1997, Phoenix had stockholders' equity of
$9,791,892 and working capital of $1,639,865. Phoenix has not generated
significant revenues, earnings or history of operations from inception through
September 30, 1997.
Phoenix continues its efforts to raise funds in order to
assure that the Company will have sufficient capital to meet its obligations
and to implement its proposed operations and plans through late 1998, at which
time operating cash flow is projected to turn positive. However, no assurances
can be given that such efforts will be successful.
For the six months ended September 30, 1997 net cash used in
operations declined by $1,643,379 or 32% from the six months ended September
30, 1996, principally due to lower losses, a significant paydown of accounts
payable during the six months ended September 30, 1996, and the recording in
the period ending September 30, 1997 of the minority interest in the net loss
of Hainan Phoenix Information Systems, Ltd. Net cash provided by financing
activities declined by $7,916,863 during the six months ended September 30,
1997 from the comparable prior year period. A net outflow of $448,766 occurred
during the six months ended September 30, 1997, primarily associated with the
payment of preferred stock dividends. The six months ended September 30, 1996
had a net inflow from financing activities of $7,468,097 that resulted from the
issuance of the Series A and B 6% convertible preferred stock, offset partly by
payments to related parties.
In April 1996, Phoenix issued $5,000,000 of Series A 6%
convertible preferred stock. The preferred stock was convertible into common
stock at a 15% discount to market, originally subject to a maximum conversion
price of $4.00 per share and a minimum of $2.00 per share. The market value of
the Company's common stock at the date of issuance of the Series A 6%
convertible preferred stock was below the $2.00 per share minimum conversion
price. If not converted by the purchaser prior to the second anniversary of the
issuance date, the preferred stock will automatically be converted into common
stock. During the six months ended September 30, 1997, 7,930 shares of Series A
convertible preferred stock were converted into 25,000 shares of the Company's
common stock.
In September 1996, Phoenix issued $4,000,000 of Series B 6%
convertible preferred stock. The preferred stock is convertible into common
stock at the market value of the Company's common stock at the date of
conversion. If not converted by the purchaser prior to the second anniversary
of the issuance date, the preferred stock will automatically be converted into
common stock. In conjunction with the issuance of the Series B shares, the
discount on the Series A convertible preferred stock was amended from 15% to
20% and the maximum conversion price of $4.00 per share and minimum of $2.00
per share were removed. The Company recorded a Series A 6% convertible
preferred stock dividend of $658,015 for the difference between the conversion prices of the Series A 6% convertible
preferred stock and the fair market value of the Company's common stock at the date of the amendment. During the six
months ended September 30, 1997, 136,175 shares of Series B convertible preferred stock were converted into 663,038
shares of the Company's common stock.
On December 23, 1996, Phoenix acquired for $7,500,000 a 25%
interest in American Aviation Limited, through the exercise of an option. The
acquisition was financed by the issuance of 833,333 shares of Series C
Convertible Preferred Stock for $15,000,000 to S-C Phoenix Partners. American
Aviation is a company owned by affiliates of Quantum Industrial Holdings Ltd.,
George Soros and Purnendu Chatterjee. American Aviation's sole asset is a 21%
interest in Hainan Airlines, which it purchased for $25,000,000 in December
1995. Phoenix accounted for the investment by the cost method, because it has
no influence on the operations of American Aviation Ltd. despite holding a 25%
interest. Phoenix can neither sell or collateralize the investment without the
unanimous consent of the owners, who have stated that material financial
concessions would be required of Phoenix for such consent.
S-C Phoenix Partners ("SC"), an investment partnership also
comprised of affiliates of Quantum Industrial Holdings Ltd., George Soros, and
Purnendu Chatterjee, is a major shareholder of Phoenix, holding both common
stock and Series C convertible preferred stock.
Reference is made to the Company's Form 10-K for the fiscal
year ended March 31, 1997, for a complete description of certain financing
transactions entered into by the Company to meet its operating and investment
objectives.
Recent Filings: Jul 1997 (Annual Rpt) | Aug 1997 (Qtrly Rpt) | Oct 1997 (Qtrly Rpt)
More filings for PHXS available from EDGAR Online
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