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 December 31, 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 x No
APPLICABLE ONLY TO CORPORATE ISSUERS
As of December 31 1996 the number of shares outstanding of the issuer's
Common Stock was 2,210,000
<PAGE>
UNSI CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, June 30,
1996 1996
Current Assets
Cash and equivalents $160,031 $ 192,569
Trading securities - at market -- 69,815
Escrowed sale proceeds 67,983 116,333
Incentive consideration receivable 375,000 --
Other current assets -- 8,427
-------- ---------
Total Current Assets 603,014 387,144
Investment in preferred stock 363,677 350,000
Other Assets 31,500 31,500
-------- ---------
$ 998,191 $768,644
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities
Accounts payable $ 11,108 $ 9,480
Accrued expenses 177,511 113,457
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 313,112 247,430
-------- ---------
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 (1,753,480) (1,917,345)
---------- ----------
Total Stockholders' Deficiency (1,361,448) (1,525,313)
---------- ----------
$ 998,191 $768,644
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
-2-
<PAGE>
UNSI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
December 31 . December 31
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue
Interest income ........................................ $ 16,077 $ 8,570 $ 8,978 $ 7,114
----------- ----------- ----------- -----------
Costs and Expenses
Selling, general and
administrative expenses ............................... 69,174 77,466 42,387 44,555
Loss on short-term investment .......................... 93,985 -- 93,985 --
Interest expense ....................................... 64,056 93,839 32,089 26,682
----------- ----------- ----------- -----------
227,215 171,305 168,461 71,237
----------- ----------- ----------- -----------
(Loss) from Operations ................................... (211,138) (162,735) (159,483) (64,123)
(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) ........................................ $ 163,862 $ 1,705,316 $ (159,483) $ (64,123)
=========== =========== =========== ===========
Income (Loss) Per Share
Loss from continuing operations ......................... $ (0.03) $ (0.02) $ (0.02) $ (0.01)
Discontinued operations ................................. 0.05 0.23 0.00 0.00
----------- ----------- ----------- -----------
$ 0.02 $ 0.21 $ (0.02) $ (0.01)
=========== =========== =========== ===========
Income (Loss) Per Share- Assuming
full dilution
Loss from continuing operations ......................... $ (0.02) $ (0.01) $ (0.00) $ (0.00)
Discontinued operations ................................. 0.03 0.15 0.00 0.00
----------- ----------- ----------- -----------
$ 0.01 $ 0.14 $ 0.00 $ (0.00)
=========== =========== =========== ===========
Weighted average number of
shares of common stock
outstanding ............................................. 2,210,000 2,210,000 2,210,000 2,210,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
-3-
<PAGE>
UNSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Ended December 31
1996 1995
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income (loss) $ 163,862 $1,705,316
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 25,403
Gain on disposal of
discontinued business (375,000) (2,154,984)
Changes in operating assets
and liabilities:
Decrease in accounts receivable -- 56,872
(Increase) decrease in
other current assets 8,427 595
Increase (decrease) in
accounts payable 1,628 30,072
Increase (decrease) in
unearned revenue -- 45,427
Increase (decrease) in
accrued expenses payable 64,054 (29,484)
Increase in income taxes payable -- 30,000
--------- ----------
Net cash (used in) operating
activities (137,029) (290,783)
--------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of assets -- 1,876,914
(Additions to)/reductions in
escrow receivable 48,350 (116,333)
Capitalization of interest receivable (13,677) --
(Increase) decrease in investment in
marketable securities 69,815 (287,500)
--------- ----------
Net cash (used in) investing activities 104,488 1,478,081
--------- ----------
-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 used for financing
activities -- (800,116)
--------- ---------
NET INCREASE (DECREASE) IN CASH (32,538) 382,182
CASH - BEGINNING 192,569 100,035
--------- ---------
CASH - ENDING $160,031 $482,217
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
UNSI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 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.
-5-
<PAGE>
UNSI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 1996 - Continued
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 as income during the period ended September 30, 1996 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
continuing 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.
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 December 31, 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.
Item 2. Management's Discussion and Analysis or Plan of Operations
Three and Six Months Ended December 31, 1996 and 1995
Interest income for the three and six months ended December 31, 1996 was
approximately 26% and 88%, respectively, higher than interest income for the
corresponding periods in the prior year. The increase for the six months ended
December 31, 1996 was due to the interest income generated on the $350,000 note
receivable from Live Picture, Inc. See Note C of Notes to the Company's
consolidated financial statements.
-6-
<PAGE>
Item 2. (continued)
Selling, general, and administrative expenses for the three and six months ended
December 31, 1996 decreased by $2,168 and $8,292, respectively, from the
corresponding periods in the prior year. Interest expense for the six months
ended December 31, 1996, was $29,783 less than interest expense for the
corresponding period in the prior year because interest expense in the prior
year includes interest at the rate of 24.5% per annum paid by the Company in
connection with the $800,000 bridge loan it received.
During the three months ended December 31, 1996, the Company liquidated certain
short-term investments and realized a loss of $93,985. For the three and six
months ended December 31, 1996, losses from continuing operations were
approximately 148% and 30%, respectively, higher than losses from continuing
operations during the corresponding periods in the prior year. Losses from
continuing operations increased despite the reduction (for the six months ended
December 31, 1996) in interest expense because of the losses associated with the
liquidation of the short term investments described above.
Liquidity and Capital Resources
At December 31, 1996, the Company had $289,902 of working capital. 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
indebtedness of approximately $.8 million owed to Mr. Lusk.
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
-7-
<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
-8-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1996
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 160,031 482,217
<SECURITIES> 0 287,500
<RECEIVABLES> 442,983 116,333
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 603,677 886,513
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 998,191 918,013
<CURRENT-LIABILITIES> 313,112 317,864
<BONDS> 1,608,202 1,524,663
0 0
0 0
<COMMON> 22,100 22,100
<OTHER-SE> (1,383,548) (1,384,939)
<TOTAL-LIABILITY-AND-EQUITY> 998,191 918,013
<SALES> 0 0
<TOTAL-REVENUES> 8,978 7,114
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 136,372 44,555
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 32,089 26,682
<INCOME-PRETAX> (159,483) (64,123)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (159,483) (64,123)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (159,483) (64,123)
<EPS-PRIMARY> (.02) (0.01)
<EPS-DILUTED> .00 (0.00)
</TABLE>
