U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-QSB
Quarterly Report pursuant to Section 13 of the Securities Exchange Act of 1934
for the quarterly period ended June 30, 1999
TELEMETRIX INC.
(formerly Arnox Corporation)
----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-14724 59-345-3156
----------------- ---------------------- ----------------------
(Jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) Identification Number)
Telemetrix Inc.
c/o Michael L. Glaser, corporate Secretary
633 - 17th Street, Suite 2700
Denver, Colorado 80202
(303) 292-1200
-----------------------------------------------
(Address, including zip code, & telephone number,
of Registrant's principal executive offices)
Indicate by check mark whether the Registrant has: Yes [X] No [ ]
(1) filed all reports 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) been subject to such filing requirements for the past 90 days.
On June 30, 1999, Registrant had 7,514,200 issued and outstanding common shares
(reflects the 11.5-for-one reverse stock split on March 31, 1999).
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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TELEMETRIX INC.
(Commission File No. 0-14724)
TABLE OF CONTENTS FOR FORM 10-QSB
Page
----
Part I - Financial Information
Item 1. Financial Statements ............................................... 3
Condensed Consolidated Balance Sheets ......................... 3
Consolidated Statements of Operations and Deficiency .......... 4
Consolidated Statements of Cash flows ......................... 5
Item 2. Management's Discussion & Analysis of Financial Condition
and Results of Operations .......................................... 9
Part II - Other Information
Item 1. Legal Proceedings ................................................. 15
Item 2. Changes in Securities and Use of Proceeds ......................... 15
Item 3. Defaults Upon Senior Securities ................................... 15
Item 4. Submission of Matters to a Vote of Security Holders ............... 15
Item 5. Other Information ................................................. 15
Item 6. Exhibits and Reports on Form 8-K .................................. 16
SIGNATURES .................................................................. 17
NOTE CONCERNING FORWARD-LOOKING INFORMATION. This Quarterly Report on SEC Form
10-Q contains forward-looking statements that involve substantial risks and
uncertainties that constitute "forward-looking statements" under the Private
Securities Litigation Reform Act of 1995. Forward-looking terms such as "may",
"might", "will", "should", "could", "expect", "plans", "anticipate", "believe",
"estimate", "continue" or similar words identify such statements. Investors
should read statements that contain these terms carefully because they: (1)
discuss our future expectations; (2) project our future results of operations or
of financial condition; or (3) state other "forward-looking" information. Such
statements are not historical facts; they merely explain our expectations about
the future.
Certain risks could cause actual results or outcomes to differ materially
from our expectations. Such risks include: our limited operating history, our
ability to obtain sufficient financing, the technical and commercial viability
of our products and services, our ability to develop and implement research and
development, manufacturing, sales and marketing, financial and administrative
operations, our efforts to address Year 2000 issues, and other factors discussed
in our filings with the Securities and Exchange Commission. Forward--looking
statements included in this Report speak only as of the date of this report and
we will not revise or update these statements to reflect events or circumstances
after the date of this report or to reflect the occurrence of unanticipated
events.
ii
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<CAPTION>
TELEMETRIX INC.
(Commission File No. 0-14724)
Condensed Consolidated Balance Sheets
(Information as of June 30, 1998, and 1999, is unaudited)
At June 30
-------------------
1999 1998
ASSETS ---- ----
<S> <C> <C>
Current Assets
Cash ....................................................................... $ (3,059) $ --
Accounts Receivable ........................................................ 515,749 --
Due from related companies ................................................. 81,106 --
------------ ------------
Total current assets .................................................... 593,796 --
Capital Assets ............................................................... 26,073,903 --
Accumulated depreciation and amortization .................................... (9,870,303)
Other Assets ................................................................. 1,564,000 --
------------ ------------
Total Assets ............................................................ $ 18,361,396 --
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable ........................................................... 538,114 --
Due to related companies ................................................... 2,910,711 --
------------ ------------
Total current liabilities ............................................... 3,448,825 --
------------ ------------
Obligations under capital lease .............................................. 65,053 --
Leasehold inducement ......................................................... 139,280 --
------------ ------------
Total long term liabilities ............................................. 204,333 --
------------ ------------
Total Liabilities ................................................... 3,653,158 --
------------ ------------
Shareholders equity (deficit):
Common stock, $0.001 par value; 25 million shares authorized;
7,514,200 and 320,000 shares issued and outstanding
at June 30, 1999 and 1998, respectively .................................. 7,514 --
Additional paid-in capital ................................................... 25,024,740 25,777
Retained earnings (deficit) .................................................. (10,324,016) (25,777)
------------ ------------
Total Stockholders Equity ............................................... 14,708,238 0
------------ ------------
Total Liabilities and Equity ........................................ $ 18,361,396 $ 0
============ ============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements
3
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<TABLE>
<CAPTION>
TELEMETRIX INC.
(Commission File No. 0-14724)
Consolidated Statements of Operations and Deficiency
(Information relating to the three month and six month periods ended
June 30, 1998, and 1999, is unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Service income .............................. $ 490,667 $ -- $ 490,667 $ --
Royalty revenue ............................. 8,468 -- 8,468 --
Miscellaneous revenue ....................... -- -- -- --
------------ ------------ ------------ ------------
Total Revenue ......................... 499,135 -- 499,135 --
------------ ------------ ------------ ------------
Expenses:
Selling, general and administrative ......... 574,179 3,938 574,179 8,508
Depreciation and amortization ............... 2,113,978 -- 2,113,978 --
Research and development .................... 252,572 -- 252,572 --
Bad debts ................................... -- -- -- --
Interest expense ............................ 52,706 -- 52,706 --
------------ ------------ ------------ ------------
Total Expense ......................... 2,993,436 3,938 2,993,436 8,508
------------ ------------ ------------ ------------
Income Taxes:
Current ..................................... -- -- -- --
Deferred .................................... -- -- -- --
------------ ------------ ------------ ------------
Total ................................. -- -- -- --
------------ ------------ ------------ ------------
Net income (loss) .............................. (2,494,300) (3,938) (2,494,300) (8,508)
============ ============ ============ ============
Deficit, beginning of period ................... (7,829,716) -- (7,892,716) --
Deficit, end of period ......................... $(10,324,016) $ -- $(10,324,016) $ --
------------ ------------ ------------ ------------
Weighted average shares outstanding
during period ............................... 7,289,381 320,000 3,832,129 320,000
Loss per share ................................. $ (0.34) $ (0.01) $ (0.65) $ (0.03)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements
4
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<TABLE>
<CAPTION>
TELEMETRIX INC.
(Commission File No. 0-14724)
Consolidated Statements of Cash Flows
(Information as of and relating to the six month periods ended
June 30, 1998, and 1999, is unaudited)
Six Months Ended June 30,
------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flow from operating activities
Net loss for the period ................................... $(2,494,300) $ (8,508)
Adjustments to reconcile net cash from operations
Expenses paid by Capston ................................ -- 8,508
Amortization of capital assets .......................... 2,113,978
Amortization of leasehold inducement liability .......... -- --
Amortization of other assets ............................ -- --
Changes in assets and liabilities ....................... --
Accounts receivable ................................... (78,450) --
Accounts payable ...................................... 108,333 --
----------- -----------
Net cash used in operating activities ............ (350,439) 0
----------- -----------
Cash flow from investing activities
Purchase of capital assets ................................ (101,431) --
----------- -----------
Net cash used in investing activities ............ (101,431) --
----------- -----------
Cash flow from financing activities
Increase in capital lease liabilities ..................... 4,459 --
Repayment of capital lease liability ...................... -- --
Increase in leasehold inducement liability ................ (3,821) --
Increase (repayment) of intercompany loans ................ 307,957 --
Proceeds from issuance of share capital ................... -- --
----------- -----------
Net cash used in financing activities ............ 308,595 --
----------- -----------
Net increase (decrease) in cash .............................. (143,275) 0
----------- -----------
Cash, beginning of period .................................... 40,216 0
----------- -----------
Cash, end of period .......................................... $ (3,059) $ 0
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
5
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TELEMETRIX INC.
(Commission File No. 0-14724)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of and relating to the six month periods ended
June 30, 1998, and 1999, is unaudited)
1. Description of Business
Telemetrix Inc. (the "Company") was recently formed through a corporate
combination ("Combination") between Arnox Corporation and Telemetrix
Resource Group, Inc ("TRG"). In this reverse takeover during the second
quarter of 1999, TRG's shareholders acquired 6,127,200 shares from Arnox in
exchange for all TRG stock. After the Combination, the companies changed
their names to reflect their complementary businesses:
- Arnox became Telemetrix Inc.
- TRG became Telemetrix Solutions Ltd.
The Company offers enabling technologies, customer management solutions and
products for digital telecommunications networks.
2. Basis of Presentation of Interim Information
Arnox (the previous name of the Registrant) was inactive prior to the
Combination on April 5, 1999, when it acquired TRG. For the six months
ended June 30, 1999, the accompanying unaudited consolidated financial
statements include the activity of Telemetrix Solutions (formerly TRG) only
after the Combination, i.e., from April 5, 1999, to June 30, 1999; TRG's
activity prior to April 5, 1999, is excluded.
In Management's opinion, the accompanying unaudited financial statements
include all normal adjustments necessary to present fairly the financial
position at June 30, 1999, and the results from operations for the six
months ended June 30, 1999 and the cash flows for the six months ended June
30, 1999. Interim results are not necessarily indicative of results for the
full year.
3. Related Party Transactions
Hartford Holdings Ltd. ("Hartford"), the Company's principal shareholder,
also controls Mondetta Telecommunications Inc. ("Mondetta"), Web CCB
Systems Inc. ("WEB"), The Becker Group of Companies and Telemetrix Software
Factory Inc. (collectively, "Affiliated Companies"). The Company advanced
funds to certain Affiliated Companies and borrowed funds from Hartford and
other affiliated companies.
Due from Related Companies
Mondetta Telecommunications Inc. ...................$ 39,540
Web CCB Systems Inc. ............................... 18,591
Telemetrix Technologies Inc. ....................... 22,975
----------
$ 81,106
6
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TELEMETRIX INC.
(Commission File No. 0-14724)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(Information as of and relating to the six month periods ended
June 30, 1998, and 1999, is unaudited)
Due to Related Companies
Hartford Holdings Ltd. ..........................$ 2,404,322
The Becker Group of Companies Inc. .............. 197,331
Telemetrix Software Factory Inc. ................ 309,058
----------
$ 2,910,711
The amounts due from Affiliated Companies and due to Affiliated Companies
are non-interest bearing and due on demand, while amounts due to Hartford
bear interest at the U.S. prime rate and are also due on demand.
Accounts receivable includes $203,500 owing from Telehub Communications
Corporation, another company in which Hartford is a substantial
shareholder.
4. Capital Assets 1998 Accumulated
Cost Amortization
---- ------------
Computer Software .............................. $25,000,000 $ 9,722,222
Computer and billing equipment ................. 674,659 73,353
Computer equipment held under capital lease ... 87,455 18,594
Furniture and equipment ........................ 123,314 24,564
Leasehold improvements ......................... 188,475 31,570
----------- ---------
$26,073,903 $ 9,870,303
Net book value.................................. $16,203,600
5. Leasehold Inducement
During the year the Company received an inducement from Northern
Cablevision Ltd., an affiliate, to subsidize leasehold improvement
expenditures. The inducement has been capitalized as a deferred liability
and will be amortized over the same 10 year useful life as the leasehold
improvements.
Leasehold inducement ........................... $ 163,600
Accumulated amortization ....................... 24,320
---------
$ 139,280
7
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TELEMETRIX INC.
(Commission File No. 0-14724)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(Information as of and relating to the six month periods ended
June 30, 1998, and 1999, is unaudited)
6. Subsequent Events
Effective July 31, 1999, the Company acquired Telemetrix Software Factory,
which produces and markets computer software products and services.
The Combination (see note 1) also includes the acquisition of Tracy II
Corporation d/b/a Western Total Communications ("WTC") in exchange for
5,372,800 shares issued to WTC's shareholders. Since WTC holds radio
frequency licenses from the U.S. Federal Communications Commission ("FCC"),
this transaction requires FCC consent, which is still pending. The Company
believes the FCC will consent to its acquisition of WTC during the quarter
ending September 30, 1999.
8
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TELEMETRIX INC.
(Commission File No. 0-14724)
Item 2. Management's Discussion & Analysis of Financial Condition and Results of
Operations
The following discussion should be read in conjunction with the unaudited
Consolidated Financial Statements and related notes. The results presented
in this Report do not necessarily indicate the results to be expected in
any future periods. This discussion contains forward-looking statements
based on our current expectations, which involve risks and uncertainties.
These risks and uncertainties mean that future events could dramatically
differ from the projections in our forward-looking statements.
OVERVIEW. We offer enabling technologies and customer management solutions
for communications networks. As telecommunications markets grow and service
categories converge, carriers must both expand the scope of their services
while solidifying their customer base with quality customer service. We
believe our products and services directly address those needs. We can
offer individual components or package solutions to customers in these
highly competitive markets, to enable them to add value, bundle services
and expand their businesses. We currently provide Billing & Customer Care
services through the Telemetrix Solutions subsidiary. Features of such
services include rating, bill generation, order fulfillment, customer
service, fraud control and accounts receivable processes.
We initially entered the telecommunications industry through a
corporate combination ("Combination") between Arnox Corporation (now named
"Telemetrix Inc.") and Telemetrix Resource Group Limited ("TRG", now named
"Telemetrix Solutions Ltd."; we use "TRG" and "Telemetrix Solutions" for
activities before and after, respectively, the Combination). Before the
Combination, Arnox was inactive and TRG was just commencing operations. At
this early stage of its business, TRG spent approximately $25,600,000 to
acquire customer care software (TRACCS & Intro CCB, collectively, the
"Billing Software) and then to refine and ready that software for use.
TRG's principal stockholders funded these development activities through
loans ($600,000) and equity contributions ($25 million). As Telemetrix
Solutions launched its services, we incurred additional costs to set up our
corporate infrastructure and hire operations staff. Since our Company,
products and services are innovative and relatively unknown, we are now
conducting "missionary" marketing to create awareness of our products and
services.
TRG acquired the TRACCS software in April 1998 and the Intro CCB
software in June 1998, and completed development of the Billing Software in
third quarter 1998. TRG began marketing Billing Software licenses as well
as the Customer Care Service Bureau operations (in which we perform
customer management services on behalf of carrier customers) in late 1998.
During 1998, TRG did not issue any Billing Software licenses but did obtain
four Service Bureau customers who were billed $18,000. During the first six
months of 1999, we obtained two additional Service Bureau customers, who
were billed $143,000, and issued one Billing Software license for $250,000.
To accommodate this increased business, our staff expanded from six to
thirty. TeleHub Communications Corporation ("TeleHub"), an affiliate of our
principal shareholder hired us to help them design their billing and
customer care systems; during 1998 and 1999, we billed TeleHub
approximately $700,000.
9
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TELEMETRIX INC.
(Commission File No. 0-14724)
When licensing the Billing Software, we will charge a base fee,
generally $2.5 million for TRACCS and $0.5 million for Intro CCB, plus
additional fees for additional modules or customized features. We also
intend to charge an additional monthly fee (approximately 15% to 18% of the
license fee) for software maintenance and upgrades. For Service Bureau
activities, we intend to charge a fee of 3%-5% of the customer's annual
revenue, lower than the customary 4%-6% fee for telecommunications billing
services. While we actively market the Billing Software and Service Bureau
to numerous carriers, especially those with annual sales under $100
million, we estimate that transactions with affiliates such as TeleHub
might generate approximately 50% of 1999 revenue from billing and customer
care services. As we expand our customer base, revenue from affiliates
should decline to 20% of total revenue from billing and customer care
services.
In July 1999, we acquired Telemetrix Software Factory, which develops
customized software products and services, primarily for the
telecommunications and power utilities industries. Furthermore, we agreed
to acquire Tracy II Corporation (doing business as Western Total
Communications, "WTC"), which develops products for wireless telemetry and
provides wireless communications services in the west Nebraska region,
subject to consent from the Federal Communications Commission. We believe
the FCC will consent to our acquisition of WTC so we can complete that
acquisition by September 30, 1999 (our Current Reports on Form 8-K
describe this transaction; see Item 6(b), below). After these
acquisitions, our products, services and expertise will cover distinct, but
inter-related business areas:
o Billing & Customer Care (rating, bill generation, order
fulfillment, customer service, fraud control, accounts receivable
processes);
o Software Development (for internal integration needs and end-user
customization).
o Wireless telecommunications (rural PCS, paging and mobile
services);
o Wireless Telemetry (reading, monitoring, transmitting data &
controlling remote devices);
Since the products and services of Telemetrix Software Factory and WTC
require further development, we expect to incur additional costs before
those operations generate revenue.
DESCRIPTION OF FINANCIAL COMPONENTS
Revenue and Cost of Sales: The following chart summarizes the components of
revenue and the associated cost of sales (excluding depreciation) from our
proposed operations:
Revenue Source Cost of Sales (excluding depreciation)
-------------- -------------------------------------
Billing Software Licensing Compensation for technical staff
Service Bureau Billing expenses (printing costs, paper,
postage and delivery)
Software Maintenance Compensation for technical staff
Operating Expenses. As we develop our products and services and ready them
for market, the operating expenses principally consist of research &
development, customer support and implementation and selling, general and
administrative costs. When we launch products and services, then selling
expenses substantially increase, while research & development will
decrease. After sales of products and services reach "regular" levels, the
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TELEMETRIX INC.
(Commission File No. 0-14724)
principal operating expenses will be customer support, selling, general a
administrative. Since we are still in the initial stages of our business
plan, operating expenses probably will increase during the next year as we
continue research & development, implementation and selling to expand our
operations.
Research & Development: These costs consist primarily of salaries and
consulting costs for improving and customizing the billing software. We expect
research & development always will constitute a significant operating expense
because we must continually enhance and upgrade our products and services.
Capital Expenditures: The Service Bureau also has volume-based capital
requirements. As this business grows, we must purchase more powerful
computers and hire more service representatives to support the growth.
Selling: Sales & Marketing expenses include salaries and commissions
for sales staff, trade show expenses, consulting fees and advertising.
Since our Company, products and services are innovative and relatively
unknown, we must conduct considerable "missionary" marketing to create
awareness of our products and services. Similarly, we will incur high
initial marketing expenses when addressing new categories of
customers; for example, when we expand the Billing Software target
market from smaller carriers to LECs and utility companies. Such
missionary work will entail significant initial marketing costs. We
anticipate low sales volumes for 12 to 18 months before our
"missionary" work takes root and sales reach "regular" levels.
Licensing: The Billing & Customer Care operations use several AS/400
computers and smaller PC-based computing systems which will require
periodic maintenance fees and software upgrade license fees.
General and Administrative: General and administrative expenses
primarily consist of salaries and related expenses of management,
support personnel, occupancy fees, professional fees, and general
corporate and administrative expenses. As the size and scope of our
business grow, we must supplement our corporate and administrative
staff, especially accounting and contract management.
Depreciation and Amortization. These non-cash expenses include depreciation
of tangible property, networks and equipment plus amortization of
intangible assets and goodwill. We amortize computers, billing equipment
and Billing Software costs over three years. The acquisition cost for the
Billing Software and related equipment was significant ($25 million) and
will cause high depreciation and amortization expense for the next three
years. Although we will incur additional capital expenditures every year,
such expenditures should be lower than those incurred during the start-up
period. We expect the respective depreciation and amortization to decline
after the initial three year period.
Interest Expense. Interest expense includes interest we pay on third party
debt, related party debt, imputed interest from capital leases and other
obligations. The Company's principal interest expense arises from related
party debt.
11
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TELEMETRIX INC.
(Commission File No. 0-14724)
RESULTS OF OPERATIONS
From April 5, 1999 to June 30, 1999, compared to six months ended June 30, 1998
We acquired TRG on April 5, 1999; prior to that acquisition, we were inactive.
Consequently, this discussion and the unaudited Consolidated Financial
Statements include Telemetrix Solution's activity only after its acquisition,
i.e., from April 5, 1999, to June 30, 1999 (the "Recent Period"); TRG's activity
prior to April 5, 1999, is excluded. During the Recent Period, Telemetrix
Solutions began marketing and started providing services and products to their
initial customers. The operating results for this period reflect the early stage
of our business and our significant research and development activities. Arnox
was inactive during the six months ended June 30, 1998.
Revenue totaled $500,000 during the Recent Period, compared to none during
the six months ended June 30, 1998. During the Recent Period, we received
$61,000 from the four clients of the service bureau and $439,000 from
consulting, software development and maintenance services. This revenue includes
transactions with TeleHub, an affiliate, which paid $194,000 for software
consulting services. During the six months ended June 30, 1998, there was no
revenue. We expect revenue to increase substantially over the next 12 to 18
months.
Cost of Sales (excluding depreciation) for the Recent Period were $24,500,
compared to none during the six months ended June 30, 1998. This increase
resulted from the initiation of billing services.
Operating expenses increased to $803,000 during the Recent Period (TRG
incurred operating expenses of $392,000 for the three months ended June 30,
1998). The increase is primarily due to salary and consulting costs incurred to
build the infrastructure required to support our growing client base.
Research & Development expenses increased to $239,400 for the Recent
Period (TRG incurred operating expenses of $83,600 for the three months
ended June 30, 1998). Salary and consulting costs increased to service to
support the growing client base. Research & development expenses will
increase until second quarter of 2000, principally for establishing
Telemetrix Software Factory's Object Technology libraries and programming
tools and for developing WTC's technology.
Pre-Production expenses were not incurred during the Recent Period or
the six months ended June 30, 1998. After we acquire Telemetrix Software
Factory and WTC, we will incur pre-production expenses in order to develop
their technology.
Licensing expenses were not material during the Recent Period or the
six months ended June 30, 1998. After we acquire Telemetrix Software
Factory and WTC, we will incur licensing expenses in connection with their
technology.
Manufacturing expenses were not incurred during the Recent Period or
the six months ended June 30, 1999. After we acquire WTC, we will start
incurring manufacturing expenses for WTC's products in the fourth quarter
of 1999.
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TELEMETRIX INC.
(Commission File No. 0-14724)
Sales & Marketing expenses increased to $174,300 for the Recent Period
(TRG incurred sales & marketing expenses of $39,600 for the three months
ended June 30, 1998). Increased salary and promotional expenses have been
incurred to create awareness of our products and to build our client base.
General & Administrative expenses increased to $389,300 for the Recent
Period (TRG incurred general & administrative expenses of $268,800 for the
three months ended June 30, 1998). This increase primarily results from
salary costs for building the finance and accounting infrastructure needed
to support a growing business.
Depreciation and Amortization expense increased to $2.1 million for the
Recent Period (TRG incurred depreciation and amortization expense of $1.4
million for the three months ended June 30, 1998). The increase is directly
related to one additional month of amortization for the computer license
software.
Interest expense was $52,700 for the Recent Period. This expense represents
the interest charges on related party loans, principally the loan from Hartford
Holding Ltd.
Net loss. We reported a net loss of $2.494 million for the Recent Period
(TRG's net loss was $1.781 million for the three months ended June 30, 1998).
The principal component of this net loss was the significant depreciation &
amortization expense for the computer software license. We did not record any
benefit for income taxes due to the uncertainty surrounding the realization of
the favorable tax attributes in future tax returns. Accordingly, we recorded a
valuation allowance against its total net deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
TRG's principal stockholders have financed our activities through loans
(approximately $2.8 million) and equity contributions ($25 million). The Service
Bureau operations have also provided some funding for operations and
development. We expect to have positive cash flow by the fourth quarter of 1999.
If we fail to operate within the planned operational budget or fail to obtain
revenue from operations, then we must obtain additional funds; no assurance can
be given that such funds would be available or that such funds would be
available on acceptable terms or in the amounts or time periods we require.
YEAR 2000 READINESS
The term "Year 2000 Issue" generally describes the various problems that might
result from improper processing of dates and date-sensitive calculations
involving dates in the Year 2000 and beyond. The "Year 2000 Issue" results from
computer programs using two digits rather than four digits to define the
applicable year, so that all dates are interpreted as being between 1900 and
1999. Computers and other equipment using such programs will incorrectly
interpret dates after the year 1999. Such misinterpretation might cause system
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TELEMETRIX INC.
(Commission File No. 0-14724)
failures or miscalculations and thereby disrupt operations, for example,
temporary inability to process transactions, to send invoices, or to engage in
other normal business activities. Year 2000 issues could affect us through the
Year 2000 incompatibility of our own computer systems and equipment as well as
the Year 2000 incompatibility of third parties, such as vendors, suppliers or
customers.
The Company believes that adequate resources have been allocated for this
purpose and does not expect to incur significant expenditures to resolve Year
2000 issues.
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TELEMETRIX INC.
(Commission File No. 0-14724)
Part II - Other Information
Item 1. Legal Proceedings
There are no pending legal proceedings against Registrant.
Item 2. Changes in Securities and Use of Proceeds.
(a) Not Applicable.
(b) Not Applicable.
(c) Issuance of Unregistered Securities. On April 5, 1999, Registrant
issued 6,127,200 shares of its common stock as the consideration
for its acquisition of Telemetrix Resource Group, Inc., a
Colorado corporation ("TRG"). These securities were issued to
TRG's sole shareholder in a private transaction exempt from
Securities Act registration pursuant to Securities Act section
4(2). This transaction was described in Registrant's Current
Report on SEC Form 8-K filed April 14, 1999 (see Item 6(b)(1)).
Concurrently with this issuance, Registrant issued 1,067,000
shares of common stock to certain consultants and advisors in a
transaction registered under the Securities Act on SEC Form S-8.
(d) Not Applicable.
Item 3. Defaults Upon Senior Securities.
(a) Not Applicable.
(b) Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted for a vote of Security Holders.
Item 5. Other Information
None.
15
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TELEMETRIX INC.
(Commission File No. 0-14724)
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. (*means filed with this Report)
(2.1) Reorganization Agreement, dated March 22, 1999, between and
among the Registrant, TRG, WTC and the stockholders of TRG
and WTC. Submitted with Registrant's Current Report on SEC
Form 8-K filed April 14, 1999.
(3.1) Amendment to the Certificate of Incorporation of Telemetrix
Inc. (formerly Arnox Corporation) dated March 22, 1999.
Submitted with Registrant's Current Report on SEC Form 8-K
filed April 5, 1999.
(4.1) Specimen Certificate for shares of the $0.001 par value
Common Stock of Telemetrix Inc. Submitted with Registrant's
Current Report on SEC Form 8-K filed April 5, 1999.
(16.1) Letter from Want & Ender C.P.A., dated May 11, 1999,
regarding change in certifying accountants. Submitted with
Registrant's Current Report on SEC Form 8-K filed May 17,
1999.
*(27) Financial Data Schedules.
(b) Reports on Form 8-K. During the three months ended June 30, 1999,
Registrants filed the following Current Reports on SEC Form 8-K:
(1) April 5, 1999: Reported amendments to Registrant's
Certificate of Incorporation that changed Registrant's name,
effected a reverse split of Registrant's common stock and
increased Registrant's the authorized capital (Item 5: Other
Events).
(2) April 14, 1999: Reported Registrant's acquisition of TRG
through a "reverse takeover" (Items 1, 2, 4, 5 & 6). This
Report was amended on:
(i) April 23, 1999: to revise description of the "reverse
takeover".
(ii) May 17, 1999: to revise Item 4 (Change in Certifying
Accountant).
(iii) May 18, 1999: to revise Item 4 (Change in Certifying
Accountant).
(3) June 30, 1999: Reported that Registrant had not engaged a
Certifying Accountant and update the status of the "reverse
takeover" of Tracy II Corporation d /b/a Western Total
Communications ("WTC").
16
<PAGE>
TELEMETRIX INC.
(Commission File No. 0-14724)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TELEMETRIX INC., a Delaware corporation
August 18, 1999 By: /s/ OZ PEDDE
--------------------------------------------------
Oz Pedde
Chief Executive Officer &
Acting Chief Financial Officer
17
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