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Form 10-Q
Securities and Exchange Commission
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURIT
IES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17080
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UNITRONIX CORPORATION
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(Exact name of registrant as specified in its charter)
New Jersey 22-2086851
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Newbury Street, Peabody, MA 01960
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(Address of principal executive offices)
(Zip Code)
(508) 535-3912
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(Registrant's telephone number, including area code)
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(Former name, former address, former fiscal year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
9,456,932 shares of common stock, no par value, as of November 6, 1995
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UNITRONIX CORPORATION
Index
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Part I. Financial Information (Unaudited) Page Number
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Item 1:
Balance Sheets-
September 30, 1995, and June 30, 1995 3
Statements of Income -
Three Months Ended September 30, 1995 and 1994 4
Statement of Changes in Stockholders'
Deficit - Three Months Ended September 30, 1995 5
Statements of Cash Flows
Three Months Ended September 30, 1995 and 1994 6
Notes to Financial Statements 7
Item 2:
Management's Discussion and Analysis of Results of
Operations and Financial Condition for the Three
Months Ended September 30, 1995 9
Part II. Other Information 10
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UNITRONIX CORPORATION
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
September 30, June 30,
ASSETS 1995 1995(1)
(Unaudited) ---------
-----------
CURRENT ASSETS
Cash $69,473 $44,450
Accounts receivable, net 223,613 168,698
Prepaid expenses and other current assets 50,791 46,481
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TOTAL CURRENT ASSETS 343,877 259,629
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PROPERTY, PLANT AND EQUIPMENT, net 108,945 111,735
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OTHER ASSETS
Capitalized software develop. costs, net 149,525 189,924
Other 5,980 7,653
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TOTAL OTHER ASSETS 155,505 197,577
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TOTAL ASSETS $608,327 $568,941
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LIABILITIES AND STOCKHOLDERS DEFICIT
CURRENT LIABILITIES
Notes payable - related party $117,424 $117,424
Notes payable 6,323 6,323
Accounts payable 146,677 135,989
Accounts payable - related party 57,100 57,100
Accrued expenses 169,409 107,096
Deferred revenue 149,795 153,400
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TOTAL CURRENT LIABILITIES 646,728 577,332
Note payable 17,388 18,968
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TOTAL LIABILITIES 664,116 596,300
STOCKHOLDERS' DEFICIT
Common stock, no par value, 12,000,000
shares authorized, 9,456,932 shares
issued and outstanding 3,485,412 3,485,412
Undesignated capital shares, 3,000,000 --- ---
shares authorized, none outstanding
Accumulated deficit (3,541,201) (3,512,771)
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TOTAL STOCKHOLDERS' DEFICIT (55,789) (27,359
)
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TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $608,327 $568,941
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(1) Derived from audited financial statements
See notes to financial statements.
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UNITRONIX CORPORATION
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
September 30,
1995 1994
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REVENUES:
Computer systems and software licenses $252,697 $39,877
Services 243,837 250,261
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TOTAL REVENUES 496,534 290,138
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COSTS AND EXPENSES:
Cost of computer systems and software licenses 135,151 75,945
Cost of services 94,270 68,117
Product development costs 184,440 115,403
Selling expenses 62,474 49,727
General and administrative expenses 45,465 64,089
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TOTAL COSTS AND EXPENSES 521,800 373,281
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LOSS FROM OPERATIONS (25,266) (83,143
)
INTEREST INCOME (EXPENSE), NET (3,190) (3,647)
OTHER INCOME 26
0
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LOSS FROM OPERATIONS BEFORE
INCOME TAXES (28,430) (86,790
)
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PROVISION FOR INCOME TAXES 0
0
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NET LOSS $(28,430)
$(86,790)
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LOSS PER COMMON SHARE $0
$(0.01)
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Weighted Average Number of Common
Shares Outstanding 9,456,932 9,456,932
See notes to financial statements.
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UNITRONIX CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(Unaudited)
For the Three Months Ended September 30, 1995
Common Stock
------------
Shares Accumulated
Stockholders'
Issued Amount Deficit
Deficit
------ ------ ------- -----
- --
Balance, June 30, 1995 9,456,932 $3,485,412 $(3,512,771) $(27,359)
Net Loss for the Period ---- ---- (28,430)
(28,430)
--------- --------- --------- ------
Balance, Sept. 30, 1995 9,456,932 $3,485,412 $(3,541,201) $(55,789)
========= ========= ========= ======
See notes to financial statements.
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UNITRONIX CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended September 30,
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(28,430) $(86,79
0)
Adjustments to reconcile net loss
to net cash provided by
operating activities
Depreciation and amortization 51,890
83,970
(Increase) decrease in:
Accounts receivable (54,915)
171,728
Prepaid expenses and other current assets (4,310)
(1,751)
Other assets 1,673 1,520
Increase (decrease) in:
Accounts payable 10,688
14,586
Accrued expenses 62,313
(50,886)
Deferred revenues (3,605)
(49,601)
Net cash provided by ------ ------
- -
operating activities 35,304 82,776
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- -
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (8,701)
(7,500)
Purchases of capitalized software
development costs 0
(30,184)
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- -
Net cash used by investing activities (8,701) (37,684)
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- -
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on debt (1,580)
(1,581)
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- -
Net cash used by financing activities (1,580) (1,581)
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- -
Net increase in cash 25,023
43,511
Cash at beginning of period 44,450 37,307
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- -
Cash at end of period $69,473
$80,818
See notes to financial statements.
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UNITRONIX CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Summary of Significant Accounting Policies
BASIS OF PRESENTATION:
All financial statements are unaudited. In the opinion of management, all
adjustments, which include only normal recurring adjustments necessary to
present fairly the financial position, results of operations, and cash flows
for all periods presented, have been made. The result of operations for
interim periods are not necessarily indicative of the operating results for
the full year.
Footnote disclosure normally included in financial statements prepared in
accordance with generally accepted accounting principles has been omitted in
accordance with the published rules and regulations of the Securities and
Exchange Commission. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's June 30, 1995 Annual Report on Form 10-K.
SOFTWARE COSTS:
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed," the Company capitalizes certain software costs after
technological feasibility of the product has been established. For the three
month period ended September 30, 1995, the Company did not capitalize any
software development costs. For the three month period ended September 30,
1994, the Company capitalized $30,184 of software costs. Such costs are
amortized on a straight-line basis over the estimated useful life of three
years or the ratio of current revenue to the total of current and anticipated
future revenue, whichever is greater. Amortization of these costs amounted
to $40,399 and $66,525 for the three month periods ended September 30, 1995
and 1994, respectively, and is included in cost of computer systems and
software licenses. Costs incurred prior to the establishment of
technological feasibility are charged to product development costs.
2 - Related Party Transactions:
During fiscal 1994, the Company's principal shareholder loaned the Company
$50,000 under a $400,000 line of credit agreement which bears interest at the
time funds are loaned at the greater of either 10% or the bank's prime
interest rate plus 2%. This note bears interest at the rate of 10% per
annum. Interest expense on this note and prior borrowings amounted to $2,936
and $3,127 in the periods ended September 30, 1995 and 1994, respectively.
From time to time the line of credit is used to post an irrevocable standby
letter of credit with Digital Equipment Corporation for the purchase of
computer hardware being resold to customers of the Company. The unused
portion of the line of credit at September 30, 1995 is approximately
$283,000. The principal shareholder has agreed to keep the entire line of
credit available to the Company until September 1, 1996, the date upon which
the line of credit may be renewed at the option of the principal shareholder.
During fiscal 1993 and 1992, the Company had a consulting and management
agreement with a related entity controlled by its principal shareholder. The
amount owed to this related entity was $57,100, at September 30, 1995 and is
included in accounts payable in the accompanying financial statements.
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Effective July 1, 1993 a new agreement became effective in which
substantially all of the employees of the related entity became employees of
the Company.
Under the new agreement, the Company charges the related entity for services
it provides as well as fifteen percent of the Company's rent expense for
space occupied by the related entity. As of September 30, 1995,
approximately $34,200 is owed to the Company under the new agreement. This
amount is included in prepaid expenses and other current assets in the
Company's balance sheet.
3 - Supplemental Disclosure of Cash Flow Information:
Cash paid for interest and income taxes for the periods indicated were as
follows:
Quarter Ended September 30,
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1995 1994
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Interest, net $424 $632
Taxes 3,842 1,324
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UNITRONIX CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The analysis of the Company's financial condition, capital resources
and operating results should be viewed in conjunction with the accompanying
financial statements, including the notes thereto.
RESULTS OF OPERATIONS
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First Quarter Ended September 30, 1995, Compared to the First Quarter Ended
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September 30, 1994
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Total sales for the three month period ended September 30, 1995 increased by
71% from the like period in fiscal 1994. A decline of 26% in revenue from
software maintenance was more than offset by increases of 534% in the sale of
computer systems and software licenses and 300% in revenue from professional
services. These increases were attributable to the sale of a large Digital
computer system and several PRAXA license upgrades resulting from customer
installations of Digital Alpha AXP computers. The sales mix included a sale
of the PRAXA software to a new customer.
The 78% increase in the cost of computer systems and software licenses from
the year ago period was due to lack of sales of computer systems in the 1994
period versus the sale of one system in 1995. Selling expenses increased by
26% from the 1994 period due to higher commission expenses incurred with the
higher level of sales. The 38% increase in cost of services was due to an
increase in the number of support line calls from new customers and those
customers converting to Digital Alpha AXP computer systems. Product
development costs increased by 60% as more internal and external resources
were devoted to the development of PRAXA/OMS, the client-server enterprise
resource planning system that is being developed by the Company. Management
projects that PRAXA/OMS will be available to sell late in this fiscal year.
General and administrative expenses declined by 29% from 1994 to 1995 because
some administrative employees are devoting significant amounts of time to the
PRAXA/OMS development project and those amounts of time are charged to the
cost of product development.
Accounts receivable increased by 33% from June 30 to September 30, 1995,
because of the sales noted above. The Company received payment for most of
those sales in October. Both the age of the Company's accounts receivable as
measured in number of days of sales outstanding and the Company's bad debt
experience continue to be satisfactory.
Capitalized software development costs, net of amortization to date,
decreased by approximately $40,000 from June 30 to September 30, 1995. This
decrease is due to ongoing amortization of the capitalized development costs
of prior releases of PRAXA. None of the development costs of the next
release of PRAXA or of PRAXA/OMS were capitalized during the period since
neither project has reached the point at which costs can be capitalized, as
defined in Statement of Financial Accounting Standards No. 86.
The increase in accrued expenses of approximately $62,000 is attributable to
accruals made for the development of a portion of PRAXA/OMS that is being
performed by an outside firm, for which the Company has not been invoiced.
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Financial Condition and Liquidity
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On September 30, 1995 the Company had a working capital deficit of $302,851
as compared to a deficit of $317,703 at June 30, 1995.
Management projects that capital from sources other than operations will be
needed to fund the Company in fiscal 1996. A lending agreement exists
between the Company and its principal shareholder that provides for a total
of $400,000 in borrowing and posting of irrevocable letters of credit for
securing equipment purchases. This agreement terminates on September 1,
1996, unless it is extended upon the request of the Company and the agreement
of the lender. As of November 6, 1995, the Company had $117,424 of notes
payable outstanding against this agreement. The principal shareholder
intends to make an additional capital investment in the Company in order to
facilitate the development of PRAXA/OMS. Management believes that with cash
generated from its operations, the lines of credit and the intended
additional capital investment, it will have sufficient cash to fund
operations through fiscal 1996.
Management has not projected the realization of a significant amount of
revenue from sales of PRAXA/OMS in fiscal 1996. There can be no assurance
that the product will be developed, or if it is developed and released, that
it will be accepted by the market.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
None.
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Signatures
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 thereunto duly authorized.
Date: November 7, 1995 Unitronix Corporation
By: Sean F. Abad
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President
By: William C. Wimer
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Vice President,
Operations
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