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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO ________________
Commission File Number: 33-28622-A
MSU CORPORATION (FORMERLY CAPITAL ACQUISITION COMPANY)
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(Exact name of Registrant as specified in its charter)
FLORIDA 22-274288
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(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
ELDER HOUSE, 526-528 ELDER GATE, CENTRAL MILTON KEYNES, MK91LR, ENGLAND
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(Address of principal executive offices)
011441908232100
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(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 report(s), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ ] No [ X ]
The number of shares of common stock of the Registrant outstanding as of
October 9, 1996 was 15,509,722 according to the Company's transfer agent. The
Company's internal records indicate that there were 15,534,722 shares of its
common stock outstanding as of October 9, 1996. After significant due
diligence, the Company has been unable to account for the 25,000 share
discrepancy.
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FORM 10-Q INDEX
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 3
Item 1. Condensed Consolidated Financial Statements . . . . . . . . . . 3
Condensed Consolidated Balance Sheets as of
December 31, 1994 and June 30, 1994 . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations for the
three and six months ended December 31, 1994 and for
the three and six months ended December 31, 1993 . . . . . 4
Condensed Consolidated Statements of Cash Flows for
the six months ended December 31, 1994 and 1993 . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 9
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . . . 9
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . 9
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . 9
</TABLE>
(2)
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PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MSU CORPORATION (FORMERLY CAPITAL ACQUISITION COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
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(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
December 31, June 30,
1994 1994
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<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 215,611 $ 10,146
Accounts receivable 420,977 63,122
Inventory -- 10,010
Prepaid expenses and other 132,358 59,373
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TOTAL CURRENT ASSETS 768,946 142,651
EQUIPMENT, net of accumulated depreciation of
$41,580 and $29,990 at December 31, 1994 and
June 30, 1994, respectively 48,029 54,034
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TOTAL ASSETS $ 816,975 $ 196,685
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Shareholder advance payable $ 1,400,000 $ 1,400,000
Short-term borrowings 678,286 111,953
Accounts payable 470,863 314,741
Related-party payable 38,326 --
Accrued liabilities 257,209 156,891
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TOTAL CURRENT LIABILITIES 2,844,684 1,983,585
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT
Common stock, $0.01 par value; 50,000,000 shares authorized;
12,722,222 and 10,196,380 shares issued and outstanding at
December 31, 1994 and June 30, 1994, respectively 127,777 101,964
Additional paid-in capital 819,956 805,492
Cumulative translation adjustments 137,493 56,261
Accumulated deficit (3,112,380) (2,750,617)
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TOTAL SHAREHOLDERS' DEFICIT (2,027,709) (1,786,900)
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TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT $ 816,975 $ 196,685
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
(3)
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MSU CORPORATION (FORMERLY CAPITAL ACQUISITION COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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(UNAUDITED)
<TABLE>
<CAPTION>
SIX
THREE MONTHS THREE MONTHS SIX MONTHS MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993
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<S> <C> <C> <C> <C>
REVENUES $ 658,356 $ 275,540 $ 827,994 $ 337,450
EXPENSES
Cost of revenues 175,550 53,010 217,210 102,686
Selling, general and
administrative and other 156,289 88,482 299,995 118,885
Research and development 357,370 568,146 673,178 1,089,692
------------ ------------ ------------ ------------
TOTAL EXPENSES 689,209 709,638 1,190,383 1,311,263
============ ============ ============ ============
OPERATING LOSS (30,853) (434,098) (362,389) (973,813)
NONOPERATING INCOME
Interest income 626 728 626 728
------------ ------------ ------------ ------------
NET LOSS $ (30,227) $ (433,370) $ (361,763) $ (973,085)
============ ============ ============ ============
LOSS PER COMMON SHARE $ 0.00 $ (0.12) $ (0.03) $ (0.28)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 12,722,000 3,525,000 12,297,000 3,525,000
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
(4)
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MSU CORPORATION (FORMERLY CAPITAL ACQUISITION COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1994 1993
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (361,763) $ (973,085)
Adjustments to reconcile net loss to net
cash used in operating activities (120,323) 162,214
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NET CASH USED IN
OPERATING ACTIVITIES (482,086) (810,871)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of equipment, net (4,524) (39,557)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings, net 568,500 893,500
Issuance of common stock 39,722 --
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NET CASH PROVIDED
BY FINANCING ACTIVITIES 608,222 893,500
EFFECT OF EXCHANGE RATE CHANGES 83,853 (50,660)
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NET INCREASE (DECREASE) IN CASH 205,465 (7,588)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,146 54,061
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 215,611 $ 46,473
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
(5)
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MSU CORPORATION (FORMERLY CAPITAL ACQUISITION COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all normal recurring
adjustments necessary to present fairly the financial position of
MSU Corporation and Subsidiaries at December 31, 1994, the results
of its operations for the three and six month periods ended December
31, 1994 and 1993, and its cash flows for the six month periods
ended December 31, 1994 and 1993.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These
condensed consolidated financial statements should be read in
conjunction with the Company's annual report on Form 10-K for the
fiscal year ended June 30, 1994. This amended quarterly report on
Form 10-Q was filed with the Securities and Exchange Commission on
November 29, 1996 and, accordingly, should also be read in
conjunction with the Company's annual report on Form 10-K for the
fiscal year ended June 30, 1996. The results of operations for the
period ended December 31, 1994 are not necessarily indicative of the
operating results for the fiscal year ended June 30, 1995.
NOTE 2 - SHAREHOLDERS' EQUITY
During the six months ended December 31, 1994, shareholders' deficit
increased approximately $241,000. Net loss for the period was
$361,763. The cumulative translation adjustment increased by
approximately $81,000. The Company issued 2,525,842 shares of its
common stock for aggregate net proceeds of approximately $40,000
cash.
NOTE 3 - LOSS PER COMMON SHARE
Loss per common share is computed based upon the weighted average
number of shares outstanding during the period.
NOTE 4 - RELATED-PARTY TRANSACTIONS
Approximately $30,000 of related-party payable was paid during the
period.
(6)
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW OF BUSINESS OPERATIONS AND SIGNIFICANT RISKS
On October 3, 1994, MSU Corporation, formerly Capital Acquisition Company,
acquired the outstanding capital stock of MSU Plc., a private company based in
the United Kingdom, which owns all of the capital stock of MSU (UK) Limited
(MSU PLC and MSU (UK) Limited together referred to as 'MSU') through the
issuance of 9,422,222 shares of its common stock. This transaction has been
accounted for as a recapitalization of MSU, with MSU as the acquirer (a reverse
acquisition) and, accordingly, the historical consolidated financial statements
through the date of the transaction are those of MSU. Shareholders' equity
reflects the equivalent number of common shares received in the
recapitalization and all references in the financial statements with regard to
number of shares of common stock have been restated to give retroactive effect
to the transaction.
The Company operates primarily through MSU (UK) Limited, which is engaged in
the design and development of computer chips and chipsets for use in consumer
electronic products.
The consolidated financial statements include the accounts of MSU Corporation,
MSU Plc. and MSU (UK) Limited (collectively the "Company"). All significant
intercompany accounts have been eliminated in the consolidated financial
statements.
The Company's consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has incurred
losses since inception. At December 31, 1994, there was an accumulated deficit
of approximately $3,112,000. Additionally, the Company has had recurring
negative cash flows from operations. These factors raise substantial doubt
about the Company's ability to achieve profitability and/or to continue as a
going concern.
RESULTS OF OPERATIONS
REVENUES
The Company has no customers to date that frequently and systematically
purchase its products or retain its services. Revenues during the three month
periods ended December 31, 1994 and 1993 were approximately $658,000 and
$276,000, respectively, and revenues during the six month periods ended
December 31, 1994 and 1993 were approximately $828,000 and $337,000,
respectively. These revenues were derived principally through development
arrangements in which the Company performed engineering and design work for its
customers for a development fee and, in the periods ended on December 31, 1994,
from chip sales in connection with product development. Typically, the
Company's development arrangements also provide for royalty and/or license fees
to be paid to the Company if the customer sells products developed in
conjunction with the Company and/or incorporating the Company's proprietary
technology. To date, none of these arrangements have resulted in royalty or
license fee revenue to the Company. The Company could be materially adversely
affected if its customers fail to manufacture, market and sell products
developed in conjunction with the Company.
During the quarter ended December 31, 1994, the Company's revenues were
concentrated in a small number of customers. The loss of any one customer
could have a material adverse effect on the Company's business.
The Company's revenues for the three and six month periods ended December 31,
1994 increased approximately 139% and 145%, respectively, compared to the same
periods during 1993. These increases were largely attributable to chip sales
(in connection with product development) in the periods ended December 31,
1994.
COST OF REVENUES
Cost of revenues for the three month periods ended December 31, 1994 and 1993
were approximately $176,000 and $53,000, respectively, and for the six-month
periods ended December 31, 1994 and 1993 were approximately $217,000 and
$103,000, respectively. As a percentage of revenues, cost of revenues were
approximately 27% and 19% in the three month periods ended December 31, 1994
and 1993, respectively, and were approximately 26% and 31% in the six month
(7)
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periods ended December 31, 1994 and 1993, respectively. The cost of revenues
fluctuations are due to variations in gross margins as between chip sales,
support services and development services.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses generally consist of expenditures related to
the Company's independent development of its chips and prototype products and
specific research and development performed pursuant to development
arrangements with third parties. For the three month periods ended December
31, 1994 and 1993, research and development expenses were approximately
$357,000 and $568,000, respectively, and for the six month periods ended
December 31, 1994 and 1993, research and development expenses were
approximately $673,000 and $1,090,000, respectively. As a percentage of
revenues, research and development expenses were approximately 54% and 206% in
the three month periods ended December 31, 1994 and 1993, respectively, and
approximately 81% and 323% in the six month periods ended December 31, 1994 and
1993, respectively. The fluctuations from period to period reflect the varying
demands for research and development which are dictated by technological
changes and the need for the Company's products to remain competitive and
commercially viable, and the requirements of the Company's customers.
SELLING, GENERAL AND ADMINISTRATIVE AND OTHER EXPENSES
Selling, general and administrative and other expenses were approximately
$156,000 and $88,000 for the three month periods ended December 31, 1994 and
1993, respectively, and approximately $300,000 and $119,000 for the six month
periods ended December 31, 1994 and 1993, respectively. Selling, general and
administrative and other expenses principally consist of advertising and
promotional costs, which are charged to operations as incurred; telephone, rent
and occupancy costs; professional fees; interest; and depreciation. This
category of expenses was approximately 77% higher in the three month period
ended December 31, 1994 and approximately 152% higher in the six month period
ended December 31, 1994 than in the comparable periods ended in 1993 because of
costs associated with the recapitalization of MSU Corporation by MSU Plc.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations almost exclusively through private
sales of equity securities. For the six month period ended December 31, 1994,
cash used in operating activities of approximately $482,000 was primarily
attributable to the Company's net loss for the period. Cash used in investing
activities of approximately $5,000 during such period related primarily to
acquisition of electronics equipment. Cash flows from financing activities of
approximately $608,000 during such period were primarily attributable to
aggregate net proceeds of approximately $40,000 from private sales of common
stock and net borrowings of approximately $569,000.
At December 31, 1994, the Company's principal source of liquidity was
approximately $216,000 in cash.
The Company believes that cash on hand and cash flows expected to be generated
by operations will be insufficient to meet its anticipated cash needs for
working capital and capital expenditures for the remainder of fiscal 1995. To
satisfy the balance of its liquidity requirements, the Company will attempt to
sell additional equity or debt securities and/or obtain additional bank credit,
to the extent the Company is able to do so, for which there can be no
assurance. The sale of additional equity or convertible debt securities will
result in additional dilution to the Company's stockholders. There can be no
assurance that the Company's liquidity requirements will be met or that the
Company will be able to continue as a going concern.
FINANCIAL CONDITION AT AND RESULTS OF OPERATIONS FOR 1996
This amended quarterly report on Form 10-Q was filed with the Securities and
Exchange Commission on November 29, 1996 and, accordingly, should be read in
conjunction with the annual report of MSU Corporation (formerly Capital
Acquisition Company) and Subsidiaries on Form 10-K for the fiscal year ended
June 30, 1996.
(8)
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
27.2 Financial Data Schedule.
(9)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MSU CORPORATION
(Registrant)
Date: November 27, 1996 /s/ Keith Hall
------------------ -----------------------------------
KEITH HALL, President
(Principal Financial and Accounting
Officer)
(10)
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
27.2 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT OF
INCOME FILED AS PART OF THE COMPANY'S REPORT ON FORM 10-Q FOR THE QUARTER ENDED
DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT
ON FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 215,611
<SECURITIES> 0
<RECEIVABLES> 420,977
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 768,946
<PP&E> 89,609
<DEPRECIATION> 41,580
<TOTAL-ASSETS> 816,975
<CURRENT-LIABILITIES> 2,844,684
<BONDS> 0
0
0
<COMMON> 127,222
<OTHER-SE> (2,154,931)
<TOTAL-LIABILITY-AND-EQUITY> 816,975
<SALES> 827,994
<TOTAL-REVENUES> 828,620
<CGS> 217,210
<TOTAL-COSTS> 1,190,383
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (361,763)
<INCOME-TAX> 0
<INCOME-CONTINUING> (361,763)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (361,763)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
