FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1997
Commission File # 0-15303
UNICO, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware
(State or other jurisdiction of incorporation or organization)
73-1215433
(IRS Employer Identification Number)
8380 Alban Road, Springfield, VA 22150
(Address of principal executive offices) (Zip Code)
(703) 644-0200
(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 X No __
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class: Common Stock, $.01 Par Value
Number of shares outstanding as of August 8, 1997
8,476,309
UNICO, Inc.
INDEX
Page No.
PART 1 - FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheets
June 30, 1997 and December 31, 1996 3 & 4
Consolidated Statements of Operations
For the Quarter Ended June 30, 1997
and the Quarter Ended June 30, 1996 5
For the Six Months Ended June 30, 1997
And the Six Months Ended June 30, 1996 6
Consolidated Statements of Cash Flow
For the Six Months Ended June 30, 1997
and the Six Months Ended June 30, 1996 7
Notes to Interim Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART 11 - OTHER INFORMATION 14
SIGNATURE PAGE 19
PART 1. FINANCIAL INFORMATION
UNICO, Inc.
CONSOLIDATED BALANCE SHEETS 1 of 2
ASSETS June 30, December 31,
1997 1996
---------- ------------
CURRENT:
Cash and Cash Equivalents $ 209,069 $ 233,971
Accounts Receivable:
Trade (net of allowance for
uncollectible accounts of
$121,311 and $355,000) 414,395 357,774
Inventory 146,474 140,015
Notes Receivable 109,479 -
Territory Buy Back Allowance 497,500 -
Other Current Assets 34,031 -
Prepaid Expenses 53,041 22,636
---------- ----------
Total current assets 1,463,989 754,396
PROPERTY:
Furniture, fixtures and equipment 4,087,441 4,006,961
Leasehold improvements 109,995 109,045
Less accumulated depreciation (1,973,448) (1,759,425)
----------- ------------
Property, net 2,223,988 2,356,581
GOODWILL 228,670 232,407
DEPOSITS AND OTHER 64,739 75,830
---------- ----------
TOTAL $3,981,386 $3,419,214
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
UNICO, Inc.
CONSOLIDATED BALANCE SHEETS 2 of 2
June 30, December 31,
LIABILITIES & STOCKHOLDERS' EQUITY 1997 1996
- ---------------------------------- -------- ------------
CURRENT LIABILITIES:
Accounts payable $1,068,597 $1,278,604
Accrued liabilities 512,363 428,092
Territory buy back payable 464,958 -
Notes payable, current portion 211,234 749,261
Deferred revenue - 124,788
---------- ----------
Total current liabilities 2,257,152 2,580,745
LONG TERM LIABILITIES:
Notes Payable 1,696,223 1,110,275
Deferred Rent 229,280 229,280
---------- ----------
Total long term liabilities 1,925,503 1,339,555
---------- ----------
Total liabilities 4,182,655 3,920,300
COMMITMENTS AND CONTINGENCIES(Note 2)
DEFICIENCY IN STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value:
5,000,000 shares authorized;
designated as:
Redeemable Preferred;
280 shares issued and outstanding 3 3
Series A Convertible Preferred - -
Series B Preferred - -
Series C Preferred stock, $.01 par
value; voting on the basis of 4
votes to 1 vote for the common
stock, preferred in liquidation at
$1 per share over common shareholders,
convertible into common stock on the
basis of 4 common shares for each
preferred share, with automatic
conversion on August 1, 1998;
authorized, 2,000,000 shares, issued
and outstanding, 1,712,739 shares 17,127 17,127
Common stock - $.01 par value;
20,000,000 shares authorized;
8,476,309 shares issued and
outstanding 84,763 84,763
Additional paid-in capital 6,724,589 6,724,589
Deferred Compensation (18,230) (18,230)
Accumulated deficit (7,009,521) (7,309,338)
----------- -----------
Total deficiency in stockholders'
equity (201,269) (501,086)
----------- -----------
TOTAL LIABILITIES AND DEFICIENCY IN
STOCKHOLDERS' EQUITY $3,981,386 $3,419,214
The accompanying notes are an integral part of the consolidated financial
statements.
UNICO, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED JUNE 30, 1997 AND 1996
1997 1996
----------- ------------
REVENUES:
Coupon and advertising sales,
net of discounts and allowances $1,585,896 $1,638,817
Franchise fees 5,433 28,290
Other 97,191 65,302
---------- ----------
TOTAL REVENUES 1,688,520 1,732,409
EXPENSES:
Production 1,161,525 1,068,732
General and administrative 581,372 554,419
Franchise development 14,806 88,395
Interest expense - affiliate 19,331 15,000
Interest expense - other 38,534 79,826
---------- ----------
TOTAL EXPENSES 1,815,568 1,806,372
----------- -----------
NET INCOME (LOSS) BEFORE INCOME TAXES (127,048) (73,963)
DEFERRED INCOME TAX EXPENSE 9,000 9,000
----------- -----------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (136,048) (82,963)
EXTRAORDINARY GAIN FROM BUSINESS
DISSOLUTION 429,385 -
----------- -----------
NET INCOME (LOSS) $ 293,337 $ (82,963)
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,476,309 7,981,007
----------- -----------
NET INCOME (LOSS) PER COMMON SHARE .035 $ (.010)
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
UNICO, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996
------------ ------------
REVENUES:
Coupon and advertising sales,
net of discounts and allowances $ 3,033,187 $ 3,377,141
Franchise fees 78,118 120,423
Other 225,946 180,245
----------- -----------
TOTAL REVENUES 3,337,251 3,677,809
EXPENSES:
Production 2,151,072 2,435,931
General and administrative 1,054,946 1,233,938
Franchise development 141,505 177,397
Interest expense - affiliate 46,422 58,563
Interest expense - other 54,874 138,502
----------- -----------
TOTAL EXPENSES 3,448,819 4,044,331
------------ ------------
NET (LOSS) BEFORE INCOME TAXES (111,568) (366,522)
DEFERRED INCOME TAX EXPENSE 18,000 17,667
NET (LOSS) BEFORE EXTRAORDINARY ITEM (129,568) (384,189)
EXTRAORDINARY GAIN FROM BUSINESS
DISOLUTION 429,385 -
----------- ------------
NET INCOME (LOSS) $ 299,817 $(384,189)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,476,309 7,932,051
---------- ------------
NET INCOME (LOSS) PER COMMON SHARE $ .035 $ (.048)
The accompanying notes are an integral part of the consolidated financial
statements.
UNICO, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996
------------- ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 299,817 $ (384,189)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 210,286 252,699
Provision for bad debts 60,938 105,178
Deferred income taxes 18,000 17,667
Changes in operating assets and
liabilities:
Accounts and notes receivable (166,100) 221,446
Prepaid expenses and inventory (36,864) 101,631
Deposits and other (14,067) (73,895)
Accounts payable and accrued
liabilities (125,737) 199,888
Deferred revenue (124,788) (110,921)
Net Cash Provided by (Used in) ----------- -----------
Operating Activities 121,485 329,504
CASH FLOWS FROM INVESTING ACTIVITIES:
Territory Buy Back Allowance Credits
Granted (32,542) 0
Purchase of property (81,077) (139,203)
Net Cash Provided by (Used in) ----------- -----------
Investing Activities (113,619) (139,203)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debentures 0 25,000
Proceeds from notes payable 31,894 0
Payment of notes payable (64,662) (332,025)
Payment of funding costs 0 0
Net Cash Provided (Used In) ----------- -----------
Financing Activities (32,768) (307,025)
----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS: (24,902) (116,724)
Cash and Cash Equivalents -
Beginning of Period 233,971 300,821
Cash and Cash Equivalents - ----------- -----------
End of Period $ 209,069 $ 184,097
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for income taxes $ 0 $ 0
Cash paid for interest $ 31,088 $ 62,023
The accompanying notes are an integral part of the consolidated financial
statements.
UNICO, Inc.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED JUNE 30, 1997 and 1996
1. BASIS OF PRESENTATION
---------------------
The interim consolidated financial statements at June 30, 1997
and for the three month and six month, periods ended June 30,
1997 and 1996 are unaudited, but include all adjustments which the
Company considers necessary for a fair presentation. The
December 31, 1996 balance sheet was derived from the Company's
audited financial statements.
The accompanying unaudited financial statements are for the
interim periods and do not include all disclosures normally
provided in annual financial statements, and should be read
in conjunction with the Company's audited financial statements
included in the Company's Form 10-KSB for the year ended
December 31, 1996. The accompanying unaudited interim financial
statements for the three month and six month periods ended June
30, 1997 are not necessarily indicative of the results, which can
be expected for the entire year.
2. COMMITMENTS & CONTINGENCIES
---------------------------
Prior to 1995, the Florida Department of Revenue issued a
Notice of Intent to levy additional sales taxes with penalty
and interest charges totaling approximately $480,000 against
the Company's subsidiary, Cal-Central. A liability for a portion
of this matter was recorded by Cal-Central and was included in
other long-term liabilities in the financial statements at December
31, 1994. Subsequent to December 31, 1995, written settlement was
reached with Florida authorities whereby the Company agreed to a
payoff of $35,000, payable at $5,000 per quarter, over seven
quarters beginning in June, 1996. The agreed to amount is recorded
as a liability at December 31, 1996 and June 30, 1997.
The Company is exposed to various other legal matters encountered
in the normal course of business. In the opinion of management,
the resolution of these matters will not have a material adverse
effect on the Company's consolidated financial position or results
of operations.
On June 20, 1997, the Company's wholly-owned subsidiary, Cal-
Central Marketing Corporation, was dissolved resulting in the
recording of an extraordinary gain of $429,385, the net effect
of asset and liability amounts written off.
3. INCOME TAXES
------------
The Company accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS 109"), which requires
an asset and liability approach to accounting for income taxes.
Under SFAS 109, deferred tax assets or liabilities are computed
on the difference between the financial statement and income tax
bases of assets and liabilities ("temporary differences") using
the enacted marginal tax rate. Deferred income tax expenses or
benefits are based on the changes in the deferred tax asset or
liability from period to period.
Management has determined that it is not more likely than not
that the Company will be able to realize all the tax benefits
from available net operating loss carryforwards and has,
therefore, provided a valuation allowance of an equal amount.
The deferred income tax expense of $9,000 and $18,000, reflected
in the Statements of Operations for the quarter and six month
periods ended June 30, 1997, represents state income taxes
payable by United Coupon on operating profits that are not
impacted by available net operating loss carryforwards.
4. SUBSIDIARY RESTRUCTURING
------------------------
The Company acquired Cal-Central Marketing Corporation as a
wholly owned subsidiary on October 27, 1993. Operating
profitability and cash flow for the subsidiary were below
management's expectations and anticipated potential since
the acquisition. During the third quarter of 1995, management
determined that it was in the best interest of shareholders
and the Company to close the Fort Lauderdale, Florida,
production facility and consolidate all art and printing
functions for Cal-Central into the Company's newly expanded
facility in Springfield, Virginia. This transition was
accomplished during December 1995, and a restructuring charge
of $772,433 was recorded during 1995 to reflect initial costs
associated with the restructuring.
During the quarter ended March 31, 1996, the Company further
evaluated the collectibility of remaining accounts receivable
of Cal-Central, including receivables related to advertising
commitments completed during the period. As a result of this
review, the Company recorded additional bad debt expense of
$60,000 related to Cal-Central accounts receivable. During
the fourth quarter of 1996, management abandoned plans for
resurrecting the Cal-Central operation and all remaining
accounts receivable and goodwill related to the purchase
of Cal-Central were written off.
On June 20, 1997, the Company's wholly-owned subsidiary,
Cal-Central Marketing Corporation, was dissolved, resulting
in the recording of an extraordinary gain of $429,385, the net
effect of asset and liability amounts written off.
5. CORPORATE RESTRUCTURING
-----------------------
On March 4, 1996, the Company entered into a Third Restated
and Amended Loan Agreement with BancFirst, which provided for
the renewal of the Company's existing term and revolving credit
facilities until January 31, 1997.
In March 1996, as a component of the plan to consolidate the
corporate office functions from Oklahoma City to the expanded
offices of the Company in Springfield, Virginia, the Company's
Board of Directors appointed Gerard R. Bernier Chief Executive
Officer and President of the Company. This transition of
corporate authority and relocation of corporate headquarters
became effective March 31, 1996.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
Liquidity and Capital Resources
- -------------------------------
The Company's principal measures of liquidity are cash,
certificates of deposit, accounts receivable and salable
inventory. Also, management deems appropriately managed and
collateralized bank lines of credit as a proper supplement to
its liquidity.
The Company's working capital was a deficit $793,163 at June
30, 1997, a 57% improvement from December 31, 1996. This
change reflects: a decrease in Cash and Equivalents of
$24,902 resulting primarily from use of operating cash flow
to reduce current liabilities; a net increase of $166,100 in
trade Accounts and Notes Receivable, related to continuing
operations; an increase of $6,459 in paper and work in process
Inventory; an increase of $30,405 in Prepaid Expenses related
to annual insurance renewals and similar contracts; and an
increase of $497,500 in Territory Buy Back Allowances. These
changes were impacted by a decrease of $210,007 in Accounts
Payable; a $32,542 reduction of amounts owed on Territory Buy
Back Allowances; and an $84,271 increase in Accrued Liabilities
related to accrual of seasonal operating costs at United Coupon,
as well as deferral of interest expense and other debt service
costs. Working capital was also aided by a $538,027 reduction
in current portion of Notes Payable and a $124,788 reduction in
deferred revenues during the period.
During the first quarter of 1997, United Coupon Corporation
purchased the rights to acquire and resell non-developed
territories previously granted to various franchisees of
United Coupon. This purchase was recorded as an addition of
$497,500 to Territory Buy Back Allowances, reflected as an
investment, offset by a liability of an equal amount. The
purchase price is paid to franchisees in the form of
production expense credits of $500 per 10,000 homes mailed,
granted at the time that Franchisees complete on-going
cooperative advertising mailings. Such credits are recorded
as period expenses when incurred. Period credits of $32,542
were granted during the second quarter of 1997.
Long-term liabilities increased by $585,948 during the period
as a result of deferral of interest payments on subordinated
debt and extension of notes payable obligations beyond twelve
months.
During the latter half of 1995, the Company's subsidiary Cal-
Central developed a serious liquidity shortfall as a result of
an unexpected, rapid decline in the subsidiary's core
cooperative advertising business. The decline, which was
precipitated by a temporary interruption of service by two
key advertising distributors, limited Cal-Central's ability
to meet current operating and debt-service obligations. As
a result, UNICO management initiated a restructuring program
for Cal-Central, which immediately reduced operating
expenditures, through the elimination of non-critical
personnel, marginal sales centers, and unprofitable sales
and manufacturing functions. In addition, management
arranged a deferral of interest payments on subordinated
debt obligations and arranged convertible debt financing
with the Company's major debenture holders to provide
supplemental working capital for financing the restructuring
plan. Management abandoned its restructuring plan for
Cal-Central during the fourth quarter of 1996 and wrote
off remaining accounts receivable and goodwill associated
with this operation. On June 20, 1997, the Company's
wholly owned subsidiary, Cal-Central Marketing Corporation,
was dissolved, resulting in an extraordinary gain of $429,385.
On May 16, 1997, the Company received a notice of delisting
from NASDAQ Stock Market, Inc. due to capital and surplus
requirement deficiencies. Company management aggressively
pursued actions to maintain the NASDAQ listing. The NASD
Panel reviewing the Company's Plan to remedy its maintenance
requirement deficiencies found that the Plan did not present
a plan of compliance which could be completed within a
reasonable period of time and assure long term compliance
with the maintenance requirements. Accordingly, the Company's
Common Stock was delisted from the NASDAQ Stock Market,
effective July 11, 1997. The Company has appealed the NASD
Determination and is developing additional plans to regain
this listing for the Company's Common Stock, should the
Company's appeal not succeed. No assurances of success from
these actions can be determined at this time.
Results of Operations - Quarter Ended June 30, 1997
As Compared to the Quarter Ended June 30, 1996
- ---------------------------------------------------
Gross Revenue for the quarter ended June 30, 1997 decreased
marginally from the same period in 1996, from $1,732,409 to
$1,688,520. Coupon and Advertising Sales, which include coupon
production service fees, national account advertising fees,
advertising sales and commercial printing, and which represent
94% of total revenue for 1997, decreased by 3% from the
corresponding period in 1996. This decrease reflects the
elimination of Cal-Central sales and limitations placed on
sales efforts as a result of limited working capital availability.
Franchise Fee Income for the period declined by 81% from the
prior year, with $5,433 reported for the 1997-quarter compared
to $28,290 for the same period in 1996. Franchise sales are
receiving intensive effort and management attention, although
efforts are currently hampered by limited working capital.
Other Revenue for the current period was $97,191 compared to
$65,302 in 1996. This increase is related to higher
miscellaneous service fees and interest income.
Production Expenses, which include art development, printing,
bindery, delivery, product development, distributor support
and selling expense, increased by $92,793, 9%, during the 1997
quarter in contrast to the same period in 1996. This increase
is related to higher prevailing operating costs and actions to
improve quality and customer service.
General and Administrative Expense increased by 5% over the same
period last year primarily as a result of costs associated with
Company restructuring.
Franchise Development Cost, which includes the cost of
developing, advertising, selling, training and supporting United
Coupon franchises, was 83% less than the prior year, reflecting
lower sales and reduction of advertising costs.
Interest Expense decreased $36,961 over the same period last
year as a result of conversion of convertible debenture debt
to equity during the latter portion of 1996.
During the latter portion of 1995, the Company's subsidiary,
Cal-Central, experienced a significant cash flow shortfall as
a result of the temporary interruption of product distribution
by two key distributors. This shortfall received reaction from
UNICO management through the initiation of a restructuring plan
to reduce Cal-Central administrative overhead and operating
expenses and to implement more efficient and effective approaches
to sales administration and product manufacturing. During the
initial phases of restructuring, Cal-Central was unable to meet
all product art and printing requirements. In addition, the
interruption of distribution of Cal-Central products caused a
delay in Cal-Central's ability to meet the distribution
commitment of advertising sales contracts. During the three
month period ended March 31, 1996, the Company completed art
and printing functions and delivered advertising products
related to approximately $460,000 in Cal-Central advertising
contracts. The Company did not record sales or accounts
receivable for these items due to the lateness in which such
delivery was completed. Art and printing costs related to
this work are reported as production expense for the 1996
period.
Consolidated Net Income for the current quarterly period was
$293,337 compared to a net loss of $82,963 for the prior year.
This improvement is directly related to the restructuring of
subordinated debt, reduced operating expenses at United Coupon,
and recognition of an extraordinary gain of $429,385 related to
the dissolution of Cal-Central Marketing Corporation.
Results of Operations - Six Months Ended June 30, 1997
As Compared to the Six Months Ended June 30, 1996
- -------------------------------------------------------
Gross Revenue for the six months ended June 30, 1997 declined
by 9% from the same period in 1996, from $3,677,809 to $3,337,251.
Coupon and Advertising Sales, which include coupon production
service fees, national account advertising fees, advertising
sales and commercial printing, and which represent 90% of total
revenue for 1997, decreased by 10% from the corresponding period
in 1996. This decrease reflects the elimination of Cal-Central
sales and limitations placed on sales efforts as a result of
limited working capital availability.
Franchise Fee Income for the period declined by 35% from the
prior year, with $78,118 reported for the 1997 period compared
to $120,423 for the same period in 1996. Franchise sales continue
to receive management attention, although efforts are currently
hampered by limited working capital.
Other Revenue for the current period was $225,946 compared to
$180,245 in 1996. This increase is related to higher miscellaneous
service fees and interest income.
Production Expenses, which include art development, printing,
bindery, delivery, product development, distributor support
and selling expense, declined by $284,859, 12%, during the 1997
period in contrast to the same period in 1996. This decline is
related to the lower sales levels and cost containment activities
early in the year, partially offset by higher prevailing operating
costs and actions to improve quality and customer service.
General and Administrative Expense declined by 15% over the same
period last year, primarily as a result of efficiencies associated
with Company restructuring, partially offset by the costs of the
restructuring.
Franchise Development Cost, which includes the cost of developing,
advertising, selling, training and supporting United Coupon
franchises, was 20% less than the prior year, reflecting lower
sales and reduction of advertising costs.
Interest Expense decreased $95,769 over the same period last
year as a result of conversion of convertible debenture debt
to equity during the latter portion of 1996.
During the latter portion of 1995, the Company's subsidiary,
Cal-Central, experienced a significant cash flow shortfall as
a result of the temporary interruption of product distribution
by two key distributors. This shortfall received reaction from
UNICO management through the initiation of a restructuring plan
to reduce Cal-Central administrative overhead and operating
expenses and to implement more efficient and effective
approaches to sales administration and product manufacturing.
During the initial phases of restructuring, Cal-Central was
unable to meet all product art and printing requirements. In
addition, the interruption of distribution for Cal-Central
products caused a delay in Cal-Central's ability to meet the
distribution commitment of advertising sales contracts. In
early 1996, the Company completed art and printing functions
and delivered advertising products related to approximately
$460,000 in Cal-Central advertising contracts. The Company did
not record sales or accounts receivable for these items
due to the lateness in which such delivery was completed.
Art and printing costs related to this work are reported as
production expense for the 1996 period.
Consolidated Net Income for the six months ended June 30,
1997 was $299,817 compared to a net loss of $384,189 for
the prior year. This improvement is directly related to
the restructuring of subordinated debt, reduced operating
expenses at United Coupon, and recognition of an extraordinary
gain of $429,385 related to the dissolution of Cal-Central
Marketing Corporation.
PART II - OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
-----------------
Omitted from this report as inapplicable.
Item 2. Changes in Securities
---------------------
Omitted from this report as inapplicable.
Item 3. Default Upon Senior Securities
------------------------------
Omitted from this report as inapplicable.
Item 4. Submission of Matters to Vote of Securities Holders
---------------------------------------------------
Omitted from this report as inapplicable.
Item 5. Other Information
-----------------
On June 5, 1997, Steve Kronzek was elected to serve as a
member of the Board of Directors of the Company.
On June 25, 1997, the Company executed a letter of intent
(the "Letter of Intent") with a prospective third party
investor (the "Investor"). The Investor has more than 30
years experience in the printing industry and has operating
facilities nationwide. The Company will benefit not only
from the infusion of working capital from the Investor, but
also from the Investor's sharing of its industry experience
through participation on the Company's Board of Directors.
Pursuant to the Letter of Intent, the Investor will, subject
to the satisfaction of certain conditions precedent, purchase
100% of a newly created Series A Convertible Preferred
Stock for $500,000. The holder of the Series A Convertible
Preferred Stock: i) may convert their stock into a 19.5%
interest of the Company's Common Stock; ii) will have a
liquidating preference equal to the amount of their $500,000
investment; iii) may elect a majority of the Company's Board
of Directors; and iv) vote the equivalent of 19.5% of the
Company's Common Stock in all Shareholder voting matters
other than the election of the Board.
The Investor will also, subject to the satisfaction of certain
other conditions precedent, invest an additional $793,650 into
the Company in exchange for 31% of the Company's Common Stock
(on a fully diluted basis). Contemporaneous with the Investor's
purchase of 31% of the Company's Common Stock, the Investor's
19.5% interest acquired in the initial phase of the transaction,
will automatically be converted to Common Stock. This second
phase of the transaction would occur six months after the
consummation of the first.
The transactions contemplated by the Letter of Intent are
subject to: i) the approval of the transactions by the
Company's Shareholders; ii) the Shareholders' approval of
a reverse stock split to accommodate the transactions; iii)
the satisfactory completion of a due diligence search by the
Investor; and iv) the satisfaction of certain other conditions
precedent, including the conversion of all of the Company's
Series C Convertible Preferred Stock and all remaining
subordinated debentures and promissory note holders to an
additional new class of Series D Convertible Preferred
Stock by the proposed closing date, October 1, 1997. The
Series D Convertible Preferred Stock will have a liquidating
preference subordinate to that of the Investor's Series A
Convertible Preferred Stock and will automatically convert
to Common Stock upon either the consummation of the second
phase of the Investor's transaction described above or the
Series D Shareholder's divestiture of a Common Stock
equivalent of his or her holdings.
To date, 100% of the Series C Convertible Preferred
Shareholders and approximately 37% of the subordinated
promissory note holders have already agreed to convert
their interests to the new class of Series D Convertible
Preferred Stock upon the closing of the initial investment.
Management, with the assistance of the investment advisors
to the subordinated debenture and promissory note holders,
has commenced efforts to obtain the agreement of the remaining
subordinated debt holders to convert. The conversion of the
subordinated debentures and subordinated promissory notes would
result in the elimination of approximately $1,218,467 of principal
and interest, and in turn, would significantly increase the
Company's equity and improve its ability to service remaining
debt obligations.
The initial investment of $500,000, together with the
contemporaneous conversion of subordinated debt to equity,
will provide working capital, which has previously severely
limited the Company's ability to grow.
Item 6.
- -------
Exhibits and Reports on Form 8-K
- --------------------------------
A. Exhibits
- -----------
The following exhibits are filed with this Form 10-QSB and
are identified by the numbers indicated.
2 Plan of Reorganization and Agreement of Merger among
UNICO, Inc., AEC Acquisitions, Inc. and Cal-Central Marketing
Corporation (1)
3.1 Certificate of Incorporation, as amended (2)
3.2 By-laws, as amended (2)
3.3 Amendment to the Certificate of Incorporation to
increase the authorized shares of common stock (3)
3.4 By-laws, as amended (10)
4.1 Form of Common Stock Purchase Warrant, dated
September 11, 1988 (4)
4.2 Form of Class B Common Stock Purchase Warrant,
November 1, 1993 (3)
4.3 Form of Subordinated Debenture dated October 26,
1993, offered through Duncan-Smith Company (3)
4.4 Certificate of Designations, Preferences, and Rights
of Series A Convertible Preferred Stock (3)
4.5 Certificate of Designations, Preferences, and Rights
of Series A Redeemable Preferred Stock (3)
4.6 Certificate of Designations, Preferences, and Rights
of Series B Redeemable Preferred Stock (3)
4.7 Certificate of Designations, Preferences, and Rights
of Series C Preferred Stock (10)
10.4 Form of Common Stock Purchase Warrant dated October 26,
1993 offered through Duncan-Smith Company (3)
10.5 Second amendment to Lease Agreement Cal-Central Marketing
Corp. (3)
10.6 United Coupon Corporation Franchise Agreement (2)
10.7 Employment Agreement between United Coupon Corporation
and Gerard R. Bernier, as amended January 1, 1995 (5)
10.9 Credit Agreement by and between UNICO, Inc. and its
Subsidiaries and BancFirst (2)
10.10 Purchase Agreement with Concord Video (2)
10.11 Omnibus Equity Compensation Plan (2)
10.12 Convertible Debenture Loan Agreement by and between
UNICO, Inc. and its subsidiaries, United Coupon Corporation
and AEC Acquisitions, Inc. and Renaissance Capital Partners,
Ltd. Dated December 31, 1991 (2)
10.13 Amended and Restated Loan Agreement by and between
UNICO, Inc. and its Subsidiaries and BancFirst, as amended
August 31, 1994 (5)
10.17 Restructure Agreement among UNICO, Inc., Cal-Central
Marketing Corporation and The American Education Corporation,
dated as of December 31, 1993 (3)
10.18 United Coupon Corporation Lease Agreement (5)
10.19 Master Agreement and Schedules of Indebtedness 1 and
2 between CIT Group and United Coupon Corporation (5)
10.27 Subordinated Loan Agreement dated June 30, 1995,
among UNICO, Inc. and Cal-Central Marketing Corporation and
the Harlon Morse Fentriss Trust, Philip W. Stephenson, Jr.,
RHOJOAMT Partnership, Ltd., CITCAM Stock Co., Barbara T.
Grinnan, and Goose Creek (7)
10.28 Form of Common Stock Purchase Warrant, dated June 30,
1995 (7)
10.29 Subordinated Convertible Debt Loan Agreement, dated
October 1995, and schedule of advances, among UNICO, Inc.,
United Coupon Corporation, and Cal-Central Marketing
Corporation and Renaissance Capital Group, Inc. and Duncan-
Smith Company (7)
10.30 Third Restated Loan Agreement dated March 4, 1996,
among UNICO, Inc., United Coupon Corporation, Cal-Central
Marketing Corporation and BancFirst (7)
10.31 Debt Exchange Agreement among UNICO, Inc., Renaissance
Capital Partners, Ltd. And Duncan-Smith Investment Co. dated
July 1996 (8)
10.32 Employment Agreement Between United Coupon Corporation
Gerard R. Bernier, dated April 1, 1996 (10)
10.33 Modification and Extension to the Third Restated Loan
Agreement between UNICO, Inc., United Coupon Corporation,
Cal-Central Marketing Corporation, and BancFirst, dated
August 15, 1996 (10)
10.34 Consolidated Renewal Promissory Note between UNICO,
Inc., United Coupon Corporation and BancFirst, dated August
15, 1996 (10)
10.35 Loan Conversion Agreement between UNICO, Inc. and Kurt
H.C. Bottcher, dated September 30, 1996 (10)
27 Financial Data Schedule-Pursuant to EDGAR filing
requirements for the period ended June 30, 1997, filed herewith
this Form 10-QSB dated August 13, 1997.
*********************
(1) Incorporated by reference to the Registrant's Form 8-K, dated
October 27, 1993 (SEC File No. 0-15303).
(2) Incorporated by reference to the Registrant's Form 10-K for
the fiscal year ended December 31, 1992 (SEC file no. 0-15303).
(3) Incorporated by reference to the Registrant's Form 10-KSB for
the fiscal year ended December 31, 1993 (SEC file no. 0-15303).
(4) Incorporated by reference to the Registrant's Form S-18
Registration Statement (SEC file no. 33-73 10-FW).
(5) Incorporated by reference to the Registrant's Form 10-KSB for
the fiscal year ended December 31, 1994 (SEC file no. 0-15303).
(7) Incorporated by reference to the Registrant's Form 10-KSB for
the fiscal year ended December 31, 1996 (SEC file no. 0-15303).
(8) Incorporated by reference to the Registrant's Form 8-K, dated
July 30, 1996 (SEC file no. 000-15303).
(9) Incorporated by reference to the Registrant's Form 8-K/A
dated December 12, 1996 (SEC file no. 000-15303).
(10) Incorporated by reference to the Registrant's Form 10-KSB
for the fiscal year ended December 31, 1997 (SEC file no. 0-15303).
B. Reports on Form 8-K
There were no reports on Form 8-K filed during the three-
month period ended June 30, 1997.
SIGNATURES
- ----------
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the Undersigned.
UNICO, INC.
August 13, 1997
By: /s/Gerard R. Bernier
--------------------
Chief Executive Officer
and President
August 13, 1997
By: /s/Subhash Ghei
--------------------
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 209,069
<SECURITIES> 0
<RECEIVABLES> 645,185
<ALLOWANCES> (121,311)
<INVENTORY> 146,474
<CURRENT-ASSETS> 1,463,989
<PP&E> 4,197,436
<DEPRECIATION> 1,973,448
<TOTAL-ASSETS> 3,981,386
<CURRENT-LIABILITIES> 2,257,152
<BONDS> 0
0
17,130
<COMMON> 84,763
<OTHER-SE> (303,162)
<TOTAL-LIABILITY-AND-EQUITY> 3,981,386
<SALES> 1,591,329
<TOTAL-REVENUES> 1,688,520
<CGS> 1,176,331
<TOTAL-COSTS> 1,815,568
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,865
<INCOME-PRETAX> (127,048)
<INCOME-TAX> 9,000
<INCOME-CONTINUING> (136,048)
<DISCONTINUED> 0
<EXTRAORDINARY> 429,385
<CHANGES> 0
<NET-INCOME> 293,337
<EPS-PRIMARY> .035
<EPS-DILUTED> .035
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