<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES ACT OF 1934
For the Quarterly Period ended September 30, 1996
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________.
Commission file number 0-16117
UNSI CORPORATION
Exact name of small business issuer as specified in charter)
Delaware 22-2661940
(State of Incorporation) (I.R.S. Employer Identification No.)
c/o Forstmann-Leff Associates, Inc.
55 East 52nd Street, New York, New York 10055
(Address of Principal Executive Offices) (Zip Code)
(212) 407-9450
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act of 1934 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 No x
APPLICABLE ONLY TO CORPORATE ISSUERS
As of September 30, 1996 the number of shares outstanding of the issuer's
Common Stock was 2,210,000
<PAGE>
UNSI CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
September 30, June 30,
1996 1996
<S> <C> <C>
Current Assets
Cash and equivalents $ 81,063 $ 192,569
Trading securities - at market 209,058 69,815
Escrowed sale proceeds 67,983 116,333
Notes receivable 350,000 350,000
Incentive consideration receivable 375,000 --
Other current assets 13,677 8,427
-------- ---------
Total Current Assets 1,096,781 737,144
Other Assets 31,500 31,500
-------- ---------
$1,128,281 $768,644
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities
Accounts payable $ 13,804 $ 9,480
Accrued expenses 145,422 113,457
Notes and advances payable
to related parties 9,793 9,793
Income taxes payable 30,000 30,000
Other current liabilities 84,700 84,700
-------- ---------
Total Current Liabilities 283,719 247,430
-------- ---------
Long-term Obligations
Notes payable, shareholder 438,325 438,825
Pay-in-kind convertible debentures 1,276,952 1,276,952
5% Subordinated convertible debenture 331,250 331,250
--------- ---------
2,046,527 2,046,527
--------- ---------
Stockholders' Equity (Deficiency)
Preferred stock, $.01 par value;
1,000,000 shares authorized;
0 shares outstanding -- --
Common stock, $.01 par value;
authorized; 2,210,000 and
2,210,000 shares outstanding 22,100 22,100
Capital in excess of par 369,932 369,932
Accumulated deficit (1,593,997) (1,917,345)
---------- ----------
Total Stockholders' Deficiency (1,201,965) (1,525,313)
---------- ----------
$1,128,281 $768,644
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
-2-
<PAGE>
UNSI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30,
1996 1995
Revenue
Interest income $ 7,099 $ 1,456
----------- -----------
Costs and Expenses
Selling, general and
administrative expenses 26,787 32,911
Interest expense 31,967 67,157
----------- -----------
58,754 100,068
----------- -----------
(Loss) from Operations (51,655) (99,612)
(Loss) from discontinued operations -- (256,933)
Gain on disposal of discontinued
Operations, net of $30,000 of
income taxes in 1995 375,000 2,124,984
----------- -----------
Net income (loss) $ 323,345 $ 1,769,439
=========== ===========
Income (Loss) Per Share
Loss from continuing operations $ (0.01) $ (0.01)
Discontinued operations 0.05 0.23
----------- -----------
$ 0.04 $ 0.22
=========== ===========
Income (Loss) Per Share- Assuming
full dilution
Loss from continuing operations $ (0.00) $ (0.01)
Discontinued operations 0.03 0.15
----------- -----------
$ 0.03 $ 0.14
=========== ===========
Weighted average number of
shares of common stock
outstanding 2,210,000 2,210,000
=========== ===========
See accompanying notes to consolidated financial statements
-3-
<PAGE>
UNSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended September 30,
1996 1995
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income (loss) $ 323,345 $ 1,769,439
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation expense -- 25,403
Gain on disposal of
discontinued business (375,000) (2,154,984)
Changes in operating assets
and liabilities:
Decrease in accounts receivable -- 43,672
(Increase) decrease in
other current assets (5,250) 1,058
(Increase) decrease in
other assets -- --
Increase (decrease) in
accounts payable 4,324 13,424
Increase (decrease) in
unearned revenue -- 45,427
Increase (decrease) in
accrued expenses payable 31,965 (22,099)
Increase in income taxes payable -- 30,000
Increase in other current
liabilities -- --
----------- -----------
Net cash (used in) operating
activities (20,616) (248,660)
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of assets -- 1,876,914
(Additions to)/reductions in
escrow receivable 48,350 (183,000)
Investment in marketable securities (139,243) --
----------- -----------
Net cash (used in) investing activities (90,893) 1,693,914
----------- -----------
-4-
<PAGE>
UNSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Continued-
CASH FLOWS FROM FINANCING
ACTIVITIES:
Principal payments on notes payable -- (800,116)
--------- ---------
Net cash provided by financing
activities -- 800,116
--------- ---------
NET INCREASE (DECREASE) IN CASH (111,506) 645,138
CASH - BEGINNING 192,569 100,035
--------- ---------
CASH - ENDING $ 81,063 $ 745,173
========= =========
See accompanying notes to consolidated financial statements
-5-
<PAGE>
UNSI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1996
NOTE A - Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. These statements
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
The Company's consolidated condensed financial statements for the period ended
September 30, 1995 have been restated, consistent with the current fiscal
period, to reflect certain adjustments and changes in presentation related to
the finalization of the sale of the IFSI assets discussed in Note B below.
Note B - Sale of Business
On September 5, 1995, the Company sold all of its operating assets, with
concomitant assumption by CDA Investment Technologies, Inc of essentially all
liabilities associated with IFSI's operating activities. The base purchase price
of $2,249,600 was comprised of assumption of liabilities of the Company of
approximately $358,600 and payment of cash to the Company of approximately
$1,691,000. Additionally, the purchaser placed $200,000 of the sale proceeds
into an escrow account. The escrow balance was payable to the Company over an
eighteen-month period, subject to payment from the account of any unrecorded
liabilities that may arise related to pre-transaction activities. After
deduction of $17,000 of addition employee sick leave payments, all but $67,983
of the escrowed funds have been paid to the Company. The Company does not
believe that there are any material additional liabilities to be paid from the
escrow funds.
Additionally, the Company has achieved the customer retention goal required by
the purchaser. As a result, the Company has recorded the expected $375,000
payment in current period income and as a receivable on the balance sheet at
September 30,1996. Subject to the achievement by the purchaser of certain
product development goals, the Company would receive up to an additional
$375,000 on the sale of the IFSI assets. Management believes that it is unlikely
that the second goal will be achieved. The contingent consideration has not been
recorded as part of the sale price and would be recognized as the retention and
development goals are met.
During the first quarter of fiscal 1995, the Company recorded a loss from
discontinued operations of approximately $257,000 and an extraordinary gain of
approximately $2,125,000, net of associated income taxes of $30,000, related to
the sale of the assets.
-6-
<PAGE>
UNSI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1996 - Continued
Note C - Conversion of Note Receivable
During September, 1996, the Company converted a $350,000 note receivable from
Live Picture, Inc., plus interest accrued thereon, into 201,093 shares of Live
Picture preferred stock, which has been classified as a noncurrent asset and
valued at cost, plus the accrued interest. With respect to those shares, the
Company and its principal shareholder entered into an agreement, expiring June
30, 1998, whereby the Company has the right to require the principal shareholder
to purchase the shares at $1.80 per share. The minimum value which the Company
would receive if it exercised its option to require the purchase is greater than
the carrying value of the shares. The principal shareholder has the option to
purchase the shares from the Company at $2.00 per share through December 31,
1996, with the purchase price increasing by $0.20 per share for each successive
six-month period thereafter. As of September 30, 1996, neither the Company nor
the principal shareholder had exercised this option.
Note D - Commitments and Contingencies
The Company is a party in a lawsuit which has arisen in the normal course of
business involving an assertive claim of $24,000. In the opinion of management,
the ultimate outcome of the lawsuit will not have a material impact, if any, on
the Company's financial statements.
-7-
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operations:
Three Months Ended September 30, 1996 and 1995
Interest income for the period ended September 30, 1995 increased by $5,643 from
the corresponding period in the prior year. The increase was primarily due to
the interest on the $350,000 note receivable that was converted into preferred
stock in September 1996, less the effect of lower average cash balances during
the current period compared to the corresponding period in the prior year.
Selling, general, and administrative expenses for the three months ended
September 30, 1996 decreased by $6,124 from the corresponding period in the
prior year due to lower professional fees incurred during the current period.
Interest expense for the period ended September 30, 1996 decreased by 52.4% to
$31,957 from the corresponding period in the prior year because the prior year
period includes interest incurred in connection with the Company's $800,000
bridge loan which bore interest at the rate of 24.5% per annum.
For the three months ended September 30, 1996, the Company had a loss from
continuing operations of $51,655, compared to a loss from continuing operations
of $99,612 for the corresponding period in the prior year. During the three
months ended September 30, 1996, the Company recorded a non-recurring gain of
$375,000 reflecting the achievement of an incentive target related to the sale
of the operating subsidiary. During the corresponding period in the prior year,
the Company recorded a loss from discontinued operations of $256,933 and an
extraordinary gain of $2,124,984 (after taxes) from the sale of the assets and
business of its operating subsidiary. Net income for the three months ended
September 30, 1996 was $323,345, compared to net income of $1,769,439 for the
corresponding period in the prior year. The Company does not anticipate that it
will generate earnings or positive cash flow in the immediate future.
Liquidity and Capital Resources
At September 30, 1996, the Company had $463,062 of working capital (exclusive of
the $350,000 Live Picture note that was converted into preferred stock). The
Company currently engages in no operating activities other than the investment
of its cash and the search for possible merger or acquisition opportunities.
Accordingly, the Company's expenditures consist primarily of interest expense
(which with respect to the pay-in-kind convertible debentures (the "PIK
Debentures") is paid through the issuance of additional PIK Debentures and the
balance of which is owed to Peter Lusk, the payment of which he has deferred)
and professional fees. The Company's working capital is sufficient to meet its
near term operating needs and it has no commitments for any material capital
expenditures. The Company however, has not determined (other than through the
acquisition of a profitable business) how it will satisfy the approximately $1.3
million of indebtedness related to the PIK Debentures that mature in 1999 or the
approximately $.8 million of indebtedness owed to Mr. Lusk.
-8-
<PAGE>
Part II.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27.1 -- Financial Data Schedule
(b) Reports on Form 8-K.
None
-9-
<PAGE>
SIGNATURE
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 hereunto duly authorized.
UNSI CORPORATION
By: /s/Peter A. Lusk
Peter A. Lusk, Chairman of the Board
(Principal Executive Officer and
Principal Financial and
Accounting Officer)
Dated: February 25, 1997
New York, New York
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 81,063
<SECURITIES> 209,058
<RECEIVABLES> 792,983
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,096,781
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,128,281
<CURRENT-LIABILITIES> 283,719
<BONDS> 1,608,202
0
0
<COMMON> 22,100
<OTHER-SE> (1,224,065)
<TOTAL-LIABILITY-AND-EQUITY> 1,128,281
<SALES> 0
<TOTAL-REVENUES> 7,099
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 56,787
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,967
<INCOME-PRETAX> (51,655)
<INCOME-TAX> 0
<INCOME-CONTINUING> (51,655)
<DISCONTINUED> 0
<EXTRAORDINARY> 375,000
<CHANGES> 0
<NET-INCOME> 323,345
<EPS-PRIMARY> .04
<EPS-DILUTED> .03
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 745,173
<SECURITIES> 0
<RECEIVABLES> 196,200
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 941,373
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 972,873
<CURRENT-LIABILITIES> 308,601
<BONDS> 1,524,663
0
0
<COMMON> 22,100
<OTHER-SE> (1,320,816)
<TOTAL-LIABILITY-AND-EQUITY> 972,873
<SALES> 0
<TOTAL-REVENUES> 1,456
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 32,911
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,157
<INCOME-PRETAX> (99,612)
<INCOME-TAX> 0
<INCOME-CONTINUING> (99,612)
<DISCONTINUED> (256,933)
<EXTRAORDINARY> 2,124,984
<CHANGES> 0
<NET-INCOME> 1,769,439
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.14
</TABLE>
