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 December 31, 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 of 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 December 31, 1998, the Issuer had outstanding
1,248,525 share 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 December 31, 1998, and the related statements of
operations and changes in stockholders' equity and cash flow
for the nine-month period ended December 31, 1997. 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, Dec. 31,
1998 1998
(Unaudited)
CURRENT ASSETS:
Cash $ 66,263 101,213
Receivables - current 123,001 110,584
portion
Parts inventories 50,489 46,553
Prepaid expenses 19,135 4,690
Deferred income tax benefit 62,000 62,000
Total Current Assets 320,888 325,040
PROPERTY, PLANT AND EQUIPMENT:
Net of accumulated
depreciation 194,527 177,392
OTHER ASSETS
Notes Receivable, less current 133,488 213,576
Idle Equipment 13,350 13,350
Trademarks 3,489 4,210
Deposits 12,946 12,946
Goodwill ------ 141,046
Deferred income tax
benefits, less current 128,900 56,900
TOTAL OTHER ASSETS 292,173 442,028
TOTAL ASSETS 807,588 944,460
<PAGE>
TUNEX INTERNATIONAL, INC.
BALANCE SHEETS
March 31, Dec. 31,
1998 1998
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $22,398 $ 10,012
Accrued liabilities 50,809 35,550
Income tax payable ---- 2,221
Obligations under capital
leases-current portion 11,031 6,019
Pre-petition liabilities - 51,323 31,089
current portion
Total Current Liabilities 135,561 84,891
LONG TERM DEBT:
Notes payable - related parties ---- 120,670
Obligations under capital leases -
Net of current portion 17,972 1,873
Prepetition liabilities, net of
current portion 46,973 -----
Notes payable - related parties
TOTAL LIABILITIES: 200,506 207,434
STOCKHOLDERS' EQUITY:
Common Stock, par value $.001,
50,000,000 shares authorized,
1,248,525 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) (3,810,124)
Total Stockholders Equity 607,082 737,027
TOTAL LIABILITIES AND STOCKHOLDERS' $807,588 $ 944,461
EQUITY
<PAGE>
TUNEX INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months
Ended Ended
December 31 December 31
1998 1997 1998 1997
SALES AND OTHER REVENUE:
Service and parts sales $ 187,189 $ 218,762 $ 602,509 $756,102
Franchise Royalties 70,049 57,161 233,362 183,484
Franchise Sales (Net of costs) 1,000 19,000 39,000 36,000
Other Revenue 14,553 23,909 131,814 40,855
Total Revenue 272,791 318,832 1,006,685 1,016,441
COSTS AND EXPENSES:
Cost of service and parts 130,171 147,573 403,649 488,398
General and Administrative 119,673 140,334 377,001 407,210
Depreciation 6,152 5,267 15,564 15,800
Interest expense 3,664 2,813 8,526 10,194
Total Costs and Expenses 259,660 295,987 804,740 921,602
INCOME BEFORE INCOME TAXES 13,131 22,845 201,945 94,839
Current Income Tax Expense 700 1,100 10,000 4,700
Deferred Income Tax Benefits 1,900 4,450 62,000 22,600
NET INCOME $ 10,531 $ 17,295 $ 129,945 $67,539
NET INCOME PER COMMON SHARE
OR COMMON SHARE EQUIVALENT $ .005 $ .01 $ .06 $ .03
<PAGE>
TUNEX INTERNATIONAL, INC.
STATEMENT OF CHANGES IN CASH FLOW
(Unaudited)
For the Nine Months Ended December 31,
1998 1997
CASH FLOW FROM OPERATING ACTIVITIES:
Income Before Income Taxes 201,945 94,839
Items not requiring cash:
Depreciation / Amortization 15,564 15,800
217,509 110,639
Decrease (increase) in receivables (67,671) 11,505
Decrease (increase) in inventories 3,936 (3,615)
(Decrease) increase in accounts payable (25,424) (15,714)
Decrease (increase) in prepaid expenses
Goodwill, PP&E, capital expenditure
in cash (18,776) (23,048)
Net cash provided (used) in operation 123,268 79,767
CASH FLOW FROM FINANCING ACTIVITIES:
Principal payments on pre-petition debt (67,207) (68,223)
Principal payments on capital lease
obligations (21,111) (10,600)
Net cash provided (used) from financing (88,318) (78,823)
Net cash provided (used ) during nine
months 34,950 944
Cash on hand - beginning 66,263 61,263
Cash on hand - ending $ 101,213 $ 62,207
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations.
During the nine months period ended December 31, 1998, the
Company's total revenue declined from $756,102 to $602,509. This
is primarily the result of service and parts sales coming from
just two centers versus three, and at times four centers, over
the first three month period of the nine month period, ending
December 31, 1998. Income before income taxes for the three
months ended, December 31, 1998 was $13,131 compared to $22,845
for the same period in 1997. This was mainly due to revenue from
Franchise Sales of $19,000 in 1997 compared to virtually no sales
in the same period of 1998.
Income before income taxes, for the nine month period ended
December 31, 1998, is $201,945 compared to $94,839 for the same
period in 1997. This increase, in general, is the result of
increased royalties due to a systemwide same-store sales increase
of 7.3 % in franchised centers, plus the royalty income from two
additional franchised centers, and other revenue as the result of
gains from the sales and conversion of company-owned centers,
additional interest income and reduction in some pre-petition
liabilities.
After giving effect to income tax expenses, and the change as a
result of deferred tax benefits, the net income for the three-
month period ended December 31, 1998 is $10,531 as compared to
$17,295 for the same period in 1997. Consequently, the company
had $.005 income per common share, on a fully diluted basis for
the three month period ended December 31, 1998, as compared to
$.01 for the same period in 1997. Net income for the nine-month
period ended December 31, 1998 is $129,945 as compared to $67,539
for the same period in 1997. Income per common share, on a fully
diluted basis, for the nine-month period ended December 31, 1998
is $0.06, as compared to $0.03 for that same period in 1997.
The Company is actively advertising its franchise opportunities
in business publications and on its Internet website and expects
to find qualified individuals that will either buy newly
developed and operational centers or purchase individual
franchise licenses for development by the franchise licensee.
The Company is presently planning to add six more licenses to its
system over the next twelve month period for development,
training and business start-up. The company is concentrating its
efforts primarily in the mountain 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 on gross sales. The cost of master franchises is
dependent on the size of the area involved.
Liquidity and Capital Resources
At December 31, 1998 the Company's financial conditions continue
to improve. Total Assets increased from $807,588 on March 31,
1998 to $944,461 at December 31, 1998, the result of an increase
in long-term notes and the goodwill from a center recently re-
purchased. Current assets remained basically the same, and with
current liabilities decreasing from $135,561 on March 31, 1998 to
$84,891 at December 31, 1998, working capital of the Company
increased from $185,327 on March 31, 1998 to $240,149 on December
31, 1998.
Further reduction of long-term debt, in particular pre-petition
liabilities, along with an increase in long-term receivables has
increased stockholders' equity from $607,082 on March 31, 1998 to
$737,027 on December 31, 1998.
Management believes that the working capital of the company is
adequate for its current and ongoing operations. Development of
additional new service centers is dependent on the development,
sale and conversion of such centers to franchise licensees and
the sale of franchise licenses for development by the licensees.
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 will be replaced with a Y2K compliant
version. The Company will also replace the POS software in all
its franchised locations with the Y2K compliant version, along
with testing of the operating hardware for compliance and any
required reprogramming or updates. All these procedures and
operations will be completed by mid-year 1999. Cost for new Y2K
compliant hardware and software were approximately $7000.00 in
fiscal year 1998 and the cost for reprogramming, testing, and
additional Y2K compliant hardware and software are expected to be
another $5000.00 during fiscal year 1999.
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: February 12, 1999 By Rudolf Zitzmann (Signature)
President (Duly Authorized and
Principal Financial Officer)
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1998
<CASH> 101,213
<SECURITIES> 0
<RECEIVABLES> 324,160
<ALLOWANCES> 5,056
<INVENTORY> 46,553
<CURRENT-ASSETS> 325,040
<PP&E> 177,392
<DEPRECIATION> 280,002
<TOTAL-ASSETS> 944,460
<CURRENT-LIABILITIES> 84,891
<BONDS> 0
0
797,262
<COMMON> 1,249
<OTHER-SE> (61,484)
<TOTAL-LIABILITY-AND-EQUITY> 944,461
<SALES> 602,509
<TOTAL-REVENUES> 1,006,685
<CGS> 403,649
<TOTAL-COSTS> 377,001
<OTHER-EXPENSES> 24,090
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 201,945
<INCOME-TAX> 10,000
<INCOME-CONTINUING> 191,945
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 62,000
<NET-INCOME> 129,945
<EPS-PRIMARY> .1
<EPS-DILUTED> .06
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