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 June 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
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 [ ]
As of June 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 June 30, 1999, and the related statements of operations
and changes in cash flow for the three month period ended
June 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, June 30,
1999 1999
Unaudited
CURRENT ASSETS:
Cash $ 111,110 $ 128,660
Receivables - current portion 112,645 102,235
Parts inventories 46,870 55,858
Prepaid expenses 6,352 6,743
Deferred income tax benefit 32,500 32,500
Total Current Assets 309,477 325,996
PROPERTY, PLANT AND EQUIPMENT:
Net of accumulated depreciation 174,445 178,011
OTHER ASSETS
Notes Receivable, less current 205,304 209,918
Idle Equipment 8,750 8,750
Goodwill 134,490 131,069
Trademarks 3,534 3,512
Deposits 8,843 8,843
Deferred income tax benefits 115,154 115,154
Total Other Assets 475,075 477,246
TOTAL ASSETS $960,997 $981,253
3
<PAGE>
TUNEX INTERNATIONAL, INC.
BALANCE SHEETS
March 31, June 30,
1999 1999
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $21,268 $33,628
Accrued liabilities 49,666 45,944
Income taxes payable - - - 8,800
Obligations under capital
leases-current portion 5,272 4,916
Pre-petition liabilities 30,712 11,307
Total Current Liabilities 106,918 104,595
LONG TERM DEBT:
Notes Payable - Related parties 120,670 120,670
Obligations under capital leases -
net of current portion 1,742 - - -
TOTAL LIABILITIES 229,330 225,265
STOCKHOLDERS' EQUITY:
Common Stock, par value $.001,
50,000,000 shares authorized,
1,248,525 shares issued & 1,249 1,249
outstanding
Preferred Stock, Class A, par value $.50,
600,000 shares authorized, issued & 300,000 300,000
outstanding
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) (3,791,163)
Total Stockholders' Equity 731,667 755,988
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 960,997 $ 981,253
4
<PAGE>
TUNEX INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Quarter Ended June 30,
1999 1998
SALES AND OTHER REVENUE:
Service and parts sales $204,727 $192,603
Franchise Royalties 84,583 74,729
Franchise Sale (Net of Costs) 1,000 19,000
Other Revenue 8,117 110,662
Total Revenues $298,427 $396,994
COSTS AND EXPENSES:
Cost of service and parts 135,238 132,026
General and Administrative 130,624 135,110
Depreciation 4,797 3,261
Interest expense 3,447 1,627
Total Costs and Expenses 274,106 272,024
INCOME BEFORE INCOME TAXES $ 24,321 $ 124,970
Current Income Tax Expense 1,200 6,200
Deferred Income Tax Expense 5,100 14,500
NET INCOME $ 18,081 $ 104,270
NET INCOME PER COMMON SHARE
OR COMMON SHARE EQUIVALENT $.009 $.05
5
<PAGE>
TUNEX INTERNATIONAL, INC.
STATEMENT OF CHANGES IN CASH FLOW
(Unaudited)
For the Three Months Ended June 30,
1999 1998
CASH FLOW FROM OPERATIONS:
Income $ 18,081 $104,270
Items not requiring cash:
Depreciation 4,797 3,261
22,878 107,531
Decrease (increase) in receivables 5,796 (101,788)
Decrease (increase) in inventories (8,988) 10,961
(Decrease) increase in accounts payable 17,438
Decrease (increase) in prepaid expenses
PP&E, capital expenditure in cash (3,171) 48,906
Decrease in deferred tax benefits 5,100 14,500
Net cash provided (used) in operation $39,053 $60,002
CASH FLOW FROM FINANCING ACTIVITIES:
Principal payments on pre-petition debt (19,405) (18,778)
Principal payments on capital lease
obligations (2,098) (2,408)
Net cash provided (used) from (21,503) (21,186)
financing
Net cash provided during three 17,550 38,816
months
Cash on hand - beginning 111,110 66,263
Cash on hand - ending $128,660 $105,079
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF
OPERATION
Material changes in financial condition.
At June 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 continuing reduction of pre-
petition liabilities, causing the working capital to increase
from $202,559 on March 31, 1999 to $221,401 on June 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 $755,988 on June 30, 1999.
Management believes that the working capital of the Company is
adequate for its current and ongoing operations and its
continuing 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 franchise
sales.
Results of operations.
During the three months ended June 30, 1999, the Company's total
revenue decreased from $396,994 in 1998 to $29,842 in 1999. This
decrease is the direct result of the sale and the conversion to a
franchise of a company owned center during the quarter ended June
30, 1998, which also included the sale of a franchise license.
Sales of service and parts increased slightly from $192,602 in
1998 to $204,727 during the 1999 period. Franchise royalties
increased from $74,729 in 1998 to $84,482 during the 1999 period,
the result of increased system wide sales.
For the three month period ended June 30, 1999 the Company shows
an income from operations, before income tax of $24,321 compared
to income of $124,970 for the same period in 1998. This decrease
in income is solely the result of the fact that there has not
been a sale and conversion of a company center or the sale of a
franchise license in that period as compared to the same period
in 1998.
After giving effect to income tax expenses and the change as a
result of deferred tax benefits, the net income for the three
months period ended June 30, 1999 is $18,081, as compared to
$104,270 for the same period in 1998. Consequently, the Company
had net income per common share, on a fully diluted basis, of
$0.009 for the three month period ended June 30, 1999 as compared
to $0.05 for the same period in 1998.
During the three month period ended June 30, 1999, the Company
operated two service centers, which it also owns. No new service
centers have been opened for business during that period. There
are now a total of twenty-five (25) centers in operation with a
7
<PAGE>
systemwide sales increase of nine percent (9%) for the period
ended June 30, 1999.
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 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 they
year 2000. The Year 2000 issue may also affect the systems and
applications of the Company's vendors or customers.
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 not yet Y2K
compliant. All hardware and software is presently being tested
for compliance and for reprogramming of embedded chips. The
accounting software has been replaced with a Y2K compliant
version. The Company will also replace 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 will be completed by the end of the
third calendar quarter of the year 1999. Cost for reprogramming,
testing, and additional Y2K compliant hardware and software are
expected to be approximately $5,000.00 during this fiscal year.
8
<PAGE>
The Company sees no potential risk from these reprogramming and
updating operations and there are adequate internal personnel
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.
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: August 11, 1999 By: Rudolf Zitzmann (Signature)
President (Duly Authorized and
Principal Financial Officer)
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 128,660
<SECURITIES> 0
<RECEIVABLES> 312,153
<ALLOWANCES> 5,056
<INVENTORY> 55,858
<CURRENT-ASSETS> 325,996
<PP&E> 178,001
<DEPRECIATION> 289,522
<TOTAL-ASSETS> 981,253
<CURRENT-LIABILITIES> 104,595
<BONDS> 0
0
797,262
<COMMON> 1,249
<OTHER-SE> 42,523
<TOTAL-LIABILITY-AND-EQUITY> 981,253
<SALES> 204,727
<TOTAL-REVENUES> 298,427
<CGS> 135,238
<TOTAL-COSTS> 130,624
<OTHER-EXPENSES> 8,244
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 24,321
<INCOME-TAX> 1,200
<INCOME-CONTINUING> 23,121
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 5,100
<NET-INCOME> 18,081
<EPS-BASIC> 0.014
<EPS-DILUTED> 0.009
</TABLE>
