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, 1999, 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 he
Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
As of September 30, 1999, 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, 1999, and the related statements of operations
and changes in stockholders' equity and cash flow for the six-
month period ended September 30, 1999. 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.
2
<PAGE>
TUNEX INTERNATIONAL, INC
BALANCE SHEETS
March 31, September 30,
1999 1999
(Unaudited)
CURRENT ASSETS:
Cash $ 111,110 $123,858
Receivables - current portion 112,645 76,428
Parts inventories 46,870 56,113
Prepaid expenses 6,352 7,585
Deferred income tax benefit 32,500 23,800
Total Current Assets 309,477 287,784
PROPERTY, PLANT AND EQUIPMENT:
Net of accumulated depreciation 174,445 181,203
OTHER ASSETS
Notes Receivable, less current 205,304 218,947
Idle Equipment 8,750 8,750
Trademarks 3,534 3,489
Deposits 8,843 8,843
Goodwill 134,490 128,651
Deferred income tax benefits 115,154 115,154
Total Other Assets 475,075 483,834
TOTAL ASSETS $960,997 $952,821
3
<PAGE>
TUNEX INTERNATIONAL, INC.
BALANCE SHEETS
March 31, September 30,
1999 1999
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 21,268 $ 18,916
Accrued liabilities 49,666 40,111
Income taxes payable ------ 6,121
Obligations under capital 5,272 3,185
leases - current portion
Pre-petition liabilities 30,712 ------
Total Current Liabilities 106,918 68,333
LONG TERM DEBT:
Notes payable - related parties 120,670 115,670
Obligations under capital leases,
net of current portion 1,742 ------
TOTAL LIABILITIES 229,330 184,003
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 (3,815,484) (3,778,333)
Total Stockholders Equity 731,667 768,818
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 960,997 $ 952,821
4
<PAGE>
TUNEX INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Six Months
Ended Ended
September 30 September 30
1999 1998 1999 1998
SALES AND OTHER REVENUE:
Service and parts sales $ 214,153 $ 222,717 $ 418,880 $ 415,320
Franchise Royalties 87,133 88,584 171,716 163,313
Franchise Sales (Net of Costs) ------ 19,000 1,500 38,000
Other Revenue 5,194 6,599 13,312 117,261
Total Revenue 306,480 336,900 605,408 733,894
COSTS AND EXPENSES:
Cost of service and parts 138,957 141,452 274,195 273,478
General and Administrative 131,222 122,218 259,927 257,328
Depreciation / Amortization 9,347 6,151 16,564 9,412
Interest expense 3,024 3,235 6,471 4,862
Total Costs and Expenses 282,550 273,056 557,157 545,080
INCOME BEFORE INCOME TAXES 23,930 63,844 48,251 188,814
Current Income Tax Expense 1,200 3,200 2,400 9,400
Deferred Income Tax Expense 3,600 14,500 8,700 29,000
NET INCOME $ 19,130 $ 46,144 $ 37,151 $ 150,414
NET INCOME PER COMMON SHARE .01 .022 .02 .07
OR COMMON SHARE EQUIVALENT
5
<PAGE>
TUNEX INTERNATIONAL, INC.
STATEMENT OF CHANGES IN CASH FLOW
(Unaudited)
For the Six Months Ended September 30,
1999 1998
CASH FLOW FROM OPERATIONS:
Income $ 48,251 $188,814
Items not requiring cash:
Depreciation / Amortization 16,564 9,412
64,815 198,226
Decrease (increase) in receivables 36,217 (75,512)
Decrease (increase) in inventories (9,243) 6,900
(Decrease) increase in accounts payable (11,907) (23,577)
Decrease (increase) in prepaid expenses,
goodwill, PP&E, capital expenditure in (32,593) 13,072
cash
Net cash provided (used) in operation 47,289 119,109
CASH FLOW FROM FINANCING ACTIVITIES:
Principal payments on pre-petition debt (30,712) (37,867)
Principal payments on capital lease
obligations (3,829) (19,179)
Net cash provided (used) from financing (34,541) (57,046)
Net cash provided (used) during six month 12,748 62,063
Cash on hand - beginning 111,110 66,263
Cash on hand - ending $123,858 $128,326
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF
OPERATION
Material Changes in Financial Condition.
At September 30, 1999, the Company's financial condition
continued to improve, primarily as the result of an increase in
cash, a decrease in receivables and the pay-off of all pre-
petition liabilities, causing the working capital to increase
from $202,559 on March 31, 1999 to $219,451 on September 30,
1999.
These reductions, along with the pay-off of all long term capital
lease obligations, have increased stockholders' equity from
$731,667 on March 31, 1999 to $768,818 on September 30, 1999.
Management believes that the working capital of the Company is
adequate for its current and ongoing operations and its ongoing
efforts to develop new service centers for conversion to
franchised centers on a gradual and limited basis and the
associated sales efforts for these conversions and the granting
of franchise licenses.
Results of Operations.
During the six months period ended September 30, 1999, the
Company's total revenue decreased from $733,894 in 1998 to
$605,408 in 1999. This decrease is attributed to the fact that
only two company-owned centers are contributing to the sales of
service and parts and that two company-owned centers had been
sold and converted to franchises in the prior year six months
period ended September 30, 1998, resulting in revenue from
franchise sales and the sale of goodwill as part of other revenue
in that period.
During the three months period ended September 30, 1999, total
revenue decreased from $336,900 in 1998 to $306,480 in 1999.
This decrease is a result of a decrease in the sales of service
and parts, no increase in franchise royalties, and the fact that
there has been no revenue from the sales of franchises during
this period compared to the revenue of $19,000 from franchise
sales during the three months period ended September 30, 1998.
While there had been stystemwide growth in sales of 8% during the
three months period ended June 30, 1999, systemwide sales during
the three months period ended September 30,1999 showed a decline
of almost 3%, which can be attributed to some unusually mild
summer weather in many of the regions where Tunex service centers
are operating, in what is historically the strongest period for
sales in the year.
For the six month period September 30, 1999 the Company shows as
income, before income tax, $48,251 compared to an income of
7
<PAGE>
$188,814 for the same period in 1998. This decrease in income is
the result of decreases in revenue, and the fact that two
conversions of company-owned centers to franchised centers
resulted in franchise sales revenue of $38,000 and revenue from
the sale of goodwill of approximately $100,000, compared to no
revenue in either of these categories during the 1999 period.
After giving effect to income tax credits, and the change as a
result of deferred tax benefits, the net income for the three
months period ended September 30, 1999 is $19,130 as compared to
$46,144 for the same period in 1998. Consequently, the company
had $.01 income per common share, on a fully diluted basis for
the three months period ended September 30, 1998, as compared to
$.022 for the same period in 1998. Net income for the six months
period ended September 30, 1999 is $37,151 as compared to
$150,414 for the same period in 1998. Income per common share,
on a fully diluted basis, for the six months period ended
September 30, 1999 is $.02 as compared to $.07 for that same
period in 1998.
During the six months period ended September 30, 1999, the
Company operated two service centers, which it also owns, and is
supporting the operations of twenty-three franchised service
centers. No new service centers have been opened for business
during that period. There are now a total of twenty-five (25)
centers in operation.
In looking ahead, the Company continues to identify new locations
for either development by the Company for turnkey conversions to
franchises or for development by qualified franchise owners,
depending on circumstances and the availability of cash or other
financing to the Company
The Company is also actively promoting and 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
the areas involved.
Year 2000 (Y2K) Readiness.
The Company has conducted a review of its computer systems and
has identified the systems that could be affected by the "Year
2000" issue. The Year 2000 issue is principally the result of
computer programs that have time-sensitive software which may
recognize a date using "00" as the year 1900 rather than the year
2000. The Year 2000 issue may also affect the systems and
applications of the Company's vendors or customers.
8
<PAGE>
While the Company has not performed a detailed analysis of the
Y2K capabilities of its primary vendors, management believes that
sufficient alternative sources of supplies and services are
available to be called upon in the event one of the Company's
primary vendors suffers a Y2K related disruption of its
operations.
As part of management's review of internal telecommunications and
computer systems, a decision was reached to reprogram the
affected portion of the Company's current and system-wide Point-
of-Service (POS) Software program, which is now Y2K compliant.
All hardware and software has been tested for compliance and the
reprogramming of embedded chips. The accounting software has
been replaced with a Y2K compliant version. The Company is in
the process of replacing the POS software in all its franchised
locations with the Y2K compliant version. All franchisees of the
Company have been notified to have their present computer
hardware tested, reprogrammed or updated in order to be compliant
for Year 2000 operation. All these procedures and operations
have been completed. Cost for reprogramming, testing, and
additional Y2K compliant hardware and software have been
approximately $5,000.00 during this fiscal year.
The Company sees no potential risk from these reprogramming and
updating operations and there are adequate internal personnel and
resources available to have all the Company's computer systems
Y2K compliant. In a worst case scenario, manual procedures are
available to continue the operations, should any computer system
fail.
9
<PAGE>
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, 1999 By Rudolf Zitzmann (Signature)
President (Duly Authorized and
Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 123,858
<SECURITIES> 0
<RECEIVABLES> 295,375
<ALLOWANCES> 5,056
<INVENTORY> 56,113
<CURRENT-ASSETS> 287,784
<PP&E> 181,203
<DEPRECIATION> 296,457
<TOTAL-ASSETS> 952,821
<CURRENT-LIABILITIES> 68,333
<BONDS> 0
0
797,262
<COMMON> 1,249
<OTHER-SE> (29,693)
<TOTAL-LIABILITY-AND-EQUITY> 952,821
<SALES> 418,880
<TOTAL-REVENUES> 605,408
<CGS> 274,195
<TOTAL-COSTS> 259,927
<OTHER-EXPENSES> 23,035
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 48,251
<INCOME-TAX> 2,400
<INCOME-CONTINUING> 45,851
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 8,700
<NET-INCOME> 37,151
<EPS-BASIC> .03
<EPS-DILUTED> .02
</TABLE>
