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 March 31, 1997
[ ] 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 March 31 1997 the number of shares outstanding of the issuer's Common
Stock was 2,210,000
1
<PAGE>
UNSI CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
(Unaudited)
<S> <C>
ASSETS
Current Assets
Cash and equivalents $373,762 $ 192,569
Trading securities - at market -- 69,815
Escrowed sale proceeds 67,983 116,333
Loans receivable 50,000 --
Other current assets 3,000 8,427
-------- ---------
Total Current Assets 494,744 387,144
Investment in preferred stock 363,677 350,000
Other Assets 31,500 31,500
-------- ---------
$ 889,921 $768,644
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities
Accounts payable $ 7,690 $ 9,480
Accrued expenses 209,600 113,457
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 341,783 247,430
-------- ---------
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;
no shares issued or outstanding -- --
Common stock, $.01 par value; 10,000,000
shares 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 (1,890,420) (1,917,345)
--------- ----------
Total Stockholders' Deficiency (1,498,388) (1,525,313)
---------- ----------
$ 889,921 $768,644
========== ==========
</TABLE>
See accompanying notes to financial statements
2
<PAGE>
UNSI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 31 March 31
1997 1996 1997 1996
---- ---- ---- ----
<S> <C>
Revenue
Interest income $ 22,528 $ 13,372 $ 6,451 $ 4,802
-------- ------- ------- -------
Costs and Expenses
Selling, general and
administrative expenses 180,477 110,162 111,303 32,696
Loss on short-term investment 93,985 37,500 -- 37,500
Interest expense 96,144 120,676 32,088 26,837
-------- ------- ------- -------
370,606 268,338 143,391 97,033
-------- ------- ------- -------
(Loss) from Operations (348,078) (254,966) (136,940) (92,231)
(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) $ 26,922 $1,613,085 $(136,940) $(92,231)
======= ========= ======== =======
Income (Loss) Per Share
Loss from continuing operations $(0.04) $(0.03) $(0.02) $(0.01)
Discontinued operations 0.05 0.24 0.00 0.00
----- ----- ----- -----
$ 0.01 $ 0.21 $(0.02) $(0.01)
===== ===== ===== =====
Income (Loss) Per Share- Assuming
full dilution
Loss from continuing operations $(0.03) $(0.02) $(0.01) $(0.01)
Discontinued operations 0.03 0.15 0.00 0.00
----- ----- ----- -----
$ 0.00 $ 0.13 $(0.01) $(0.01)
===== ===== ===== =====
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 financial statements
3
<PAGE>
UNSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended March 31
1997 1996
<S> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income (loss) $ 26,922 $1,613,085
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 5,427 (802)
Increase (decrease) in
accounts payable (1,790) 14,581
Increase (decrease) in
unearned revenue -- 45,427
Increase (decrease) in
accrued expenses payable 96,143 (2,648)
Increase in income taxes payable -- 30,000
--------- ----------
Net cash (used in) operating
activities (248,298) (372,472)
--------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of assets 375,000 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 (250,000)
Increase in loans receivable (50,000) --
--------- ----------
Net cash (used in) investing activities 429,488 1,160,581
--------- ----------
</TABLE>
4
<PAGE>
UNSI CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Continued-
<S> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Principal payments on notes payable -- (800,116)
Principal payments on notes payable - shareholder -- (44,203)
--------- ---------
Net cash used for financing
activities -- (844,319)
--------- ---------
NET INCREASE (DECREASE) IN CASH 181,193 (56,209)
CASH - BEGINNING 192,569 100,035
--------- ---------
CASH - ENDING $373,762 $ 43,826
========= =========
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
UNSI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1997
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.
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 $365,000 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 commencing from the closing of this transaction, 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. Subsequent to March 31, 1997, the Company received the balance of the
escrow funds.
Additionally, the Company has achieved the customer retention goal by the
purchaser. As a result, the Company received the $375,000 payment in January
1997, which was recorded as income in the first quarter of the current fiscal
year and as a receivable on the balance sheet at September 30, 1996.
6
<PAGE>
UNSI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1997 - Continued
Note C - Conversion of Note Receivable
In 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 stockholder
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 stockholder 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 March 31, 1997, the principal stockholder had
not exercised his option.
Note D - Loan to Debenture Holder
In January 1997, the Company advanced $50,000 to an individual who is the holder
of not less than $250,000 in principal amount of the Company's Pay- In-Kind
Debentures.
7
<PAGE>
Item 2. Management's Discussion and Analysis
Results of Operations:
Three and Nine Months Ended March 31, 1997
During the three months and nine months ended March 31, 1997, revenue (i.e.,
interest income) increased by $1,649 and $9,156, respectively, from the
corresponding periods in the prior year.
Selling, general, and administrative expenses for the three and nine months
ended March 31, 1997 increased by $78,607 or 64% and $70,315 or 240%,
respectively, from the corresponding periods in the prior year. This increase is
principally attributable to the write-offs during the three months ended March
31, 1997 of (i) a loan in the principal amount of $15,000 made during such
period to an acquaintance of Peter Lusk, the Company's chairman and (ii) loan(s)
in the principal amount of $60,000 made during such period to MVS Incorporated
("MVS"), an entity in which Mr. Lusk is affiliated. The Company has previously
written off other loans made to MVS. See Note D of Note to the Company's
consolidated financial statements. Interest expense for the three months ended
March 31, 1997 increased by $5,251 or 20% over the corresponding period of the
prior year and for the nine months ended March 31, 1997, decreased by $24,532 or
20% from the corresponding period in the prior year. The increase during the
three month period was the result of the higher total of pay-in-kind debentures
outstanding in the current period compared to the corresponding period of the
previous year and the decrease during the nine month period is attributable to
the fact that interest expense for the nine month period in the prior year
included interest at the rate of 24.5% per annum on the Company's $800,000
bridge loan.
Losses from operations for the three and nine months ended March 31, 1997,
increased by $44,709 or 48% and $93,112 or 37%, respectively, over losses from
the corresponding periods in the prior year. Net income (loss) for the nine
months ended March 31, 1997, decreased by approximately $1.59 million to $26,922
because net income from the corresponding period in the prior year included the
$2.12 million gain the Company recorded on the sale of its IFSI subsidiary.
Liquidity and Capital Resources
At March 31, 1997, the Company had $152,961 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 the Company's chairman, 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.
8
<PAGE>
Part II.
Item 6. Exhibits and Reports on Form 8-K.
(a)Exhibit Index
2.1 - Agreement and Plan of Merger dated as of January 3,
1994 by and among UNSI Corporation, IFSI Acquisition,
Inc. and Investors' Fiduciary Services, Inc. ("IFSI") (1)
2.2 - Agreement of Purchase and Sale dated as of September 5,
1995 by and among Investors' Fiduciary Services, Inc.,
UNSI Corporation, Peter Lusk and CDA Investment Technologies,
Inc. (7)
3.1 - Restated Certificate of Incorporation. (2)
3.2 - By laws of the Registrant. (3)
3.3 - Certificate of Amendment to the Company's Restated Certificate
of Incorporation (4)
4.1 - Series A Warrant. (1)
4.2 - Form of Series B Warrant (including exhibits A through D
thereto). (1)
4.3 - 5% Subordinated Convertible Debenture Due January 2, 1999. (1)
4.4 - Certificate of Designations, Preferences and Rights of the
Company in respect of Series B Preferred Stock. (1)
4.5 - 5% Promissory Note issued by Investors' Fiduciary Services, Inc.
to Peter Lusk (the "IFSI Note"). (1)
4.6 - Guaranty of the IFSI Note. (1)
4.7 - Form of 7% Pay-in-Kind Convertible Debenture due May 31, 1999. (8)
4.8 - Registrant's Series C Warrant (WC-4).(9)
4.9 - Registrant's Series C Warrant (WC-5).(9)
4.10 - Registrant's Series D Warrant (WD-4).(9)
4.11 - Registrant's Series D Warrant (WD-5).(9)
4.12 - Registrant's Series E 7.12% Additional Convertible Debenture dated May
31, 1999. (10)
4.13 - Registrant's Series F 7% Additional PIK Convertible Debenture dated May
31, 1999. (10)
10.1 - Consulting Agreement and Option Agreement between the
Company and David Bondon. (5)
10.2 - 1986 Stock Option Plan, as amended. (6)
10.6 - Demand note issued by Registrant to United States Trust Company of New
York. (8)
10.7 - Agreement dated June 27, 1996 between the Company and Peter Lusk. (10)
(1) Incorporated by reference to the corresponding exhibit of the
Registrant's Current Report on Form 8-K for January 3, 1994.
(2) Incorporated by reference to exhibit 3(a) of the Registrant's
Registration Statement on Form S-18 (File No. 33-11874).
(3) Incorporated by reference to the exhibit 3(b) of Registrant's Annual
Report on Form 10-K for the fiscal year ended June 30, 1988.
(4) Incorporated by reference to exhibit 3.3 of the Registrant's Current
Report on Form 8-K for May 29, 1991.
9
<PAGE>
Item 6. Exhibits and Reports on Form 8-K (continued).
(5) Incorporated by reference to exhibit 10(e) of the Registrant's
Registration Statement on Form S-18 (File No. 33-11874).
(6) Incorporated by reference to exhibit 10(j) of the Registrant's Annual
Report on Form 10-K for the year ended June 30, 1988.
(7) Incorporated by reference to exhibit 2.1 of the Registrant's Current
Report on Form 8-K dated September 5, 1995.
(8) Incorporated by reference to the corresponding exhibit of the
Registrant's Annual Report on Form 10- KSB for the fiscal year ending
June 30, 1994.
(9) Incorporated by reference to the corresponding exhibit of the
Registrant's Annual Report on Form 10- KSB for the fiscal year ending
June 30, 1995.
(10) Incorporated by reference to the corresponding exhibit of the
Registrant's Annual Report on Form 10- KSB for the fiscal year ending
June 30, 1996.
(b) Reports on Form 8-K.
None during this period.
10
<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: May 16, 1997
New York, New York
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> MAR-31-1997 MAR-31-1996
<CASH> 373,762 43,826
<SECURITIES> 0 250,000
<RECEIVABLES> 117,983 116,333
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 494,744 761,425
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 889,921 792,925
<CURRENT-LIABILITIES> 341,783 285,006
<BONDS> 1,608,202 1,524,663
0 0
0 0
<COMMON> 22,100 22,100
<OTHER-SE> (1,520,488) (1,477,169)
<TOTAL-LIABILITY-AND-EQUITY> 889,921 792,925
<SALES> 0 0
<TOTAL-REVENUES> 6,451 4,802
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 111,303 70,196
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 32,088 26,837
<INCOME-PRETAX> (136,940) (92,231)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (136,940) (92,231)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (136,940) (92,231)
<EPS-PRIMARY> (0.02) (0.01)
<EPS-DILUTED> (0.01) (0.01)
</TABLE>
