UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended September 30, 1998, or
[ ] Transition report under Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from to
Commission file No. 0-15369
TUNEX INTERNATIONAL, INC.
(Name of Small Business Issuer as specified in its charter)
Utah 87-0416684
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
556 East 2100 South, Salt Lake City, Utah 84106
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number: (801) 486-8133
Check whether the issuer (1) filed all reports required
to be filed by sections 13 or 15(3) of the Exchange Act
during the past 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 [ ]
Check whether the issuer filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the
Exchange Act after the distribution of securities under a
plan confirmed by a court. Yes [X] No [ ]
As of September 30, 1998, the Issuer had outstanding
1,248,525 shares of common stock.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Tunex International, Inc. ("Issuer" or "Company"), files
herewith an unaudited balance sheet of the Issuer as of
September 30, 1998, and the related statements of operations
and changes in stockholders' equity and cash flow for the six
month period ended September 30, 1998. In the opinion of
management of the Company, the financial statements fairly
present the financial condition of the Company. Management
is not aware of any adjustments that are necessary to a fair
presentation of the results for the interim periods
disclosed.
<PAGE>
TUNEX INTERNATIONAL, INC
BALANCE SHEETS
March 31, September 30,
1998 1998
(Unaudited)
CURRENT ASSETS:
Cash $ 66,263 $ 128,326
Receivables - current portion 123,001 118,479
Parts inventories 50,489 43,589
Prepaid expenses 19,135 4,602
Deferred income tax benefit 62,000 62,000
Total Current Assets 320,888 356,996
PROPERTY, PLANT AND EQUIPMENT:
Net of accumulated depreciation 194,527 163,772
OTHER ASSETS
Notes Receivable, less current 133,488 213,527
Idle Equipment 13,350 13,350
Trademarks 3,489 3,443
Deposits 12,946 12,946
Goodwill ----- 143,465
Deferred income tax benefits 128,900 128,900
Total Other Assets 292,173 515,681
TOTAL ASSETS $ 807,588 $1,036,449
<PAGE>
TUNEX INTERNATIONAL, INC.
BALANCE SHEETS
March 31, September
1998 30,
1998
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $22,398 $9,393
Accrued liabilities 50,809 39,246
Income taxes payable ------- 991
Obligations under capital 11,031 6,019
leases - current portion
Pre-petition liabilities - 51,323 51,323
current portion
Total Current Liabilities 135,561 106,972
LONG TERM DEBT:
Notes payable - related parties ------- 120,670
Obligations under capital leases,
net of current portion 17,972 3,805
Pre-petition liabilities, net of 46,973 9,106
current portion
TOTAL LIABILITIES 200,506 133,581
STOCKHOLDERS' EQUITY:
Common Stock, par value $.001,
50,000,000 shares authorized,
1,248,215 shares issued & outstanding 1,249 1,249
Preferred Stock, Class A, par value $.50,
600,000 shares authorized, issued
& outstanding 300,000 300,000
Preferred Stock, Class B, par value
$1.00, 700,000 shares authorized,
497,262 shares issued & outstanding 497,262 497,262
Additional paid-in capital 3,748,640 3,748,640
Accumulated Deficit (3,940,069) (3,751,255)
Total Stockholders Equity 607,082 795,896
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $807,588 $1,036,449
<PAGE>
TUNEX INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Six Months
Ended Ended
September 30 September 30
1998 1997 1998 1997
SALES AND OTHER REVENUE:
Service and parts sales $222,717 $273,165 $415,320 $537,340
Franchise Royalties 88,584 63,440 163,313 126,323
Franchise Sales (Net of Costs) 19,000 ------- 38,000 17,000
Other Revenue 6,599 8,062 117,261 16,946
Total Revenue 336,900 344,667 733,894 697,609
COSTS AND EXPENSES:
Cost of service and parts 141,452 172,780 273,478 340,825
General and Administrative 122,218 127,081 257,328 266,876
Depreciation / Amortization 6,151 5,267 9,412 10,533
Interest expense 3,235 3,308 4,862 7,381
Total Costs and Expenses 273,056 308,436 545,080 625,615
INCOME BEFORE INCOME TAXES 63,844 36,231 188,814 71,994
Current Income Tax Expense 3,200 1800 9,400 3,600
Deferred Income Tax Expense 14,500 9100 29,000 18,300
NET INCOME $ 46,144 $ 25,311 $150,414 $ 50,094
NET INCOME PER COMMON SHARE .022 .012 .07 .024
OR COMMON SHARE EQUIVALENT
<PAGE>
TUNEX INTERNATIONAL, INC.
STATEMENT OF CHANGES IN CASH FLOW
(Unaudited)
For the Six Months Ended September 30,
1998 1997
CASH FLOW FROM OPERATIONS:
Income Before Income Taxes $ 188,814 $ 71,994
Items not requiring cash:
Depreciation / Amortization 9,412 10,533
198,226 82,527
Decrease (increase) in receivables (75,512) 24,227
Decrease (increase) in inventories 6,900 679
(Decrease) increase in accounts payable (23,577) (22,342)
Decrease (increase) in prepaid expenses,
goodwill, PP&E, capital expenditure in 13,072 (15,951)
cash
Net cash provided (used) in operation 119,109 69,140
CASH FLOW FROM FINANCING ACTIVITIES:
Principal payments on pre-petition debt (37,867) (39,317)
Principal payments on capital lease obligations (19,179) (4,386)
Net cash provided (used) from financing (57,046) (43,703)
Net cash provided (used) during six month 62,063 25,437
Cash on hand - beginning 66,263 61,263
Cash on hand - ending $128,326 $ 86,700
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF
OPERATION
Material Changes in Financial Condition.
At September 30, 1998, the Company's financial condition
continued to improve, primarily as the result of an increase in
cash, a decrease in accounts payable, accrued liabilities and
capital lease obligations, causing the working capital to
increase from $185,327 on March 31, 1998 to $250,024 on September
30, 1998.
Further reduction of long-term debt, in particular pre-petition
liabilities, has increased stockholders' equity from $607,082 on
March 31, 1998 to $795,896 on September 31, 1998.
Management believes that the working capital of the Company is
adequate for its current and on-going operations and its
continuing development of new service centers for turn-key
operations to franchised centers on a gradual basis and the
associated sales efforts for these turn-keys and franchise
licenses.
Results of Operations.
Although service and parts sales in company-owned centers have
decreased from $537,340 in 1997 to $415,320 in 1998, the result
from the sale and conversion of two company-owned centers to
franchised centers in the months of May 1998 and July 1998, total
revenue for the six month period ended September 30, 1998 have
increased from $697,609 in 1997 to $733,894 in 1998. The sale
and conversion of these company-owned centers has left the
Company with one center for the months of May and June. However,
the re-acquisition of an established franchised center in the
month of July has offset a large portion of the lost revenue from
the centers that have been converted to franchises.
The total revenue increase is the result of an increase in
franchise royalties from $126,323 in 1997 to $163,313 in the same
period of 1998 and the revenue from the franchise license and the
goodwill from the sale and conversions of a company-owned center.
The franchise royalties increase is the combined result of two
new franchised centers having been added to the system, the added
royalties from two centers having been converted from company
operations to franchises, and a 7.5% increase in same-store,
systemwide sales for the six months period ended September 30,
1998.
For the six month period September 30, 1998 the company shows as
income before income tax $188,814 compared to an income of
$71,994 for the same period in 1997. This increase in income is
the result of the revenue increases, reduced costs and expenses,
and the result of conversion of company-owned centers to
franchised centers.
After giving effect to income tax credits, and the change as a
result of deferred tax benefits, the net income for the three
month period ended September 30, 1998 is $46,144 as compared to
$25,311 for the same period in 1997. Consequently, the company
had $.022 income per common share, on a fully diluted basis for
the three month period ended September 30, 1998, as compared to
$.012 for the same period in 1997. Net income for the six months
ended September 30, 1998 is $150,414 as compared to $50,094 for
the same period in 1997. Income per common share, on a fully
diluted basis, for the six month period ended September 30, 1998
is $0.07 as compared to $0.024 for that same period in 1997.
During the six month period ended September 30, 1998, the company
operated, for most of the time, one company-owned center and one
center that is franchised to an investment entity. Starting with
July 1998 the company re-acquired the franchised center from the
investment entity and now owns and operates two centers. During
this six month period the Company had new franchised centers open
in two Utah locations. This makes the total amount of centers in
the Tunex system twenty-five (25) compared to twenty-three (23)
at the same period in 1997.
In looking ahead, the company continues to identify new locations
for either development by the company for turn-key conversions to
franchises or for development by qualified franchise owners,
depending on circumstances and the availability of cash to the
Company.
The Company is also actively promoting, through printed
advertising and the Company's newly established website
(www.tunex.com), and is offering individual franchise licenses
for development by the franchise licensees, primarily in states
where Tunex franchises are already in operation and continues to
offer master franchises for areas, cities or states in other
parts of the country. Individual franchise licenses cost $19,000
with 5% royalty fees on gross sales. The cost of master
franchises is dependent on the size of areas involved.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS: Attached is the Financial Data Schedule, Exhibit
Reference Number 27.
FORM 8-K: None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
TUNEX INTERNATIONAL, INC.
Date: November 10, 1998 By Rudolf Zitzmann (Signature)
President (Duly Authorized and
Principal Financial Officer)
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 128,325
<SECURITIES> 0
<RECEIVABLES> 332,006
<ALLOWANCES> 5,056
<INVENTORY> 43,589
<CURRENT-ASSETS> 356,996
<PP&E> 163,772
<DEPRECIATION> 276,298
<TOTAL-ASSETS> 1,036,449
<CURRENT-LIABILITIES> 106,972
<BONDS> 0
0
797,262
<COMMON> 1,249
<OTHER-SE> (2,615)
<TOTAL-LIABILITY-AND-EQUITY> 1,036,449
<SALES> 415,320
<TOTAL-REVENUES> 733,894
<CGS> 273,478
<TOTAL-COSTS> 257,328
<OTHER-EXPENSES> 14,274
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 188,814
<INCOME-TAX> 9,400
<INCOME-CONTINUING> 179,414
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 29,000
<NET-INCOME> 150,414
<EPS-PRIMARY> .09
<EPS-DILUTED> .07
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