Form 10-Q
Securities and Exchange Commission
Washington, DC 20549
QUARTERLY REPORT PURSUANT TO SECTON 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
-------------------------.
Commission file number 0-17080
--------
UNITRONIX CORPORATION
----------------------
(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
---------------------------------------
(Address of principal executive offices)
(Zip Code)
(508) 535-3912
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(Registrant's telephone number, including area code)
- -----------------------------------------------------------------------
Indicate by check mark whether 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
----- -----
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
----- -----
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 February 13, 1996
Page 1
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UNITRONIX CORPORATION
INDEX
------
Page Number
------------
Part I. Financial Information (Unaudited)
Item 1:
Balance Sheets-
December 31, 1995 and June 30, 1995 3
Statements of Income -
Three Months Ended December 31, 1995 and 1994 4
and Six Months Ended December 31, 1995 and 1994
Statement of Changes in Stockholders'
Equity - Six Months Ended December 31, 1995 5
Statements of Cash Flows -
Six Months Ended December 31, 1995 and 1994 6
Notes to Financial Statements 7
Item 2:
Management's Discussion and Analysis of Results of 9
Operations and Financial Condition for the Three Months
Ended December 31, 1995 and the Six Months Ended
December 31, 1995
Part II. Other Information 10 10
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<TABLE>
UNITRONIX CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
<CAPTION>
December 31, June 30,
1995 1995 (1)
(Unaudited)
----------- ----------
<S> C> <C>
ASSETS
CURRENT ASSETS
Cash $23,342 $44,450
Accounts receivable, net 139,679 168,698
Prepaid expenses and other
current assets 34,656 46,481
--------- ---------
TOTAL CURRENT ASSETS 197,677 259,629
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, NET 109,542 111,735
---------- ---------
OTHER ASSETS
Capitalized software development
costs, net 109,126 189,924
Other 5,578 7,653
---------- -------
TOTAL OTHER ASSETS 114,704 197,577
--------- -------
TOTAL ASSETS $421,923 $568,941
========= ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C> <C>
CURRENT LIABILITIES
Notes payable - related party $152,424 $117,424
Notes payable 6,323 6,323
Accounts payable 131,341 135,989
Accounts payable - related party 57,100 57,100
Accrued expenses 256,774 107,096
Deferred revenue 119,369 153,400
-------- -------
TOTAL CURRENT LIABILITIES 723,331 577,332
NOTE PAYABLE 15,807 18,968
-------- --------
TOTAL LIABILITIES 739,138 596,300
======== ========
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 (3,802,626) (3,512,771)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY (317,214) (27,359)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $421,924 $568,941
========= ========
<FN>
(1) Derived from audited financial statements.
See notes to financial statements.
</TABLE>
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<TABLE>
UNITRONIX CORPORATION
STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES:
Computer systems and
software licenses $25,995 $231,644 $278,692 $271,521
Services 208,164 219,998 452,001 470,259
------- -------- -------- --------
TOTAL REVENUES 234,159 451,642 730,693 741,780
------- -------- ------- --------
COSTS AND EXPENSES:
Cost of computer
systems & software
licenses 43,625 125,463 178,776 201,408
Cost of services 93,920 70,596 188,190 138,713
Product development
costs 238,977 103,923 423,417 219,326
Selling expenses 64,200 41,530 126,674 91,257
General and administrative
expense 51,544 83,553 97,009 147,642
------- -------- -------- --------
TOTAL COSTS AND EXPENSES: 492,266 425,065 1,014,066 798,346
------- -------- -------- --------
PROFIT(LOSS) FROM OPERATIONS (258,107) 26,577 (283,373) (56,566)
INTEREST INCOME (EXPENSE),NET (3,318) (3,434) (6,508) (7,081)
OTHER INCOME (EXPENSE) 0 (385) 26 (385)
------- -------- -------- --------
INCOME (LOSS) BEFORE
INCOME TAXES (261,425) 22,758 (289,855) (64,032)
------- -------- -------- --------
PROVISION FOR INCOME TAX 0 0 0 0
------- -------- -------- --------
NET INCOME (LOSS) $(261,425) $22,758 $(289,855) $(64,032)
======== ======== ======== ========
PROFIT (LOSS) PER COMMON
SHARE $(0.03) $0.00 $(0.03) $(0.01)
======= ======== ======== ========
Weighted average number
of common shares out-
standing 9,456,932 9,456,932 9,456,932 9,456,932
<FN>
See notes to financial statements.
</TABLE>
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<TABLE>
UNITRONIX CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
For the Six Month Period Ended December 31, 1995
Common Stock
<CAPTION>
Shares Accumulated Stockholders'
Issued Amount Deficit Equity
------ ------ ------- ------
<S> <C> <C> <C> <C>
Balance, June 30,1995 9,456,932 $3,485,412 $(3,512,771) $(27,359)
Net Loss for the Period ---- ---- (289,855) (289,855)
-------- -------- --------- ---------
Balance,
December 31, 1995 9,456,932 $3,485,412 $(3,802,626) $(317,214)
========= ========== ============ =========
<FN>
See notes to financial statements.
</TABLE>
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<TABLE>
UNITRONIX CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended December 31,
-----------------------------
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(289,855) $( 64,032)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Depreciation and amortization 105,929 166,399
(Increase) decrease in:
Accounts receivable 29,019 5,132
Prepaid expenses and other current
assets 11,825 1,007
Other assets 2,075 (8,157)
Increase (Decrease) in:
Accounts payable (4,648) 44,460
Accrued expenses 149,678 (39,356)
Deferred revenues (34,031) (16,972)
--------- --------
Net cash provided (used) by operating
activities (30,008) 88,481
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment (22,939) (1,278)
Purchase of capitalized software
development costs 0 (30,184)
--------- --------
Net cash used by investing activities (22,939) (31,462)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt. 35,000 0
Payments on debt. (3,161) (3,154)
-------- --------
Net cash provided (used) by financing
actvities 31,839 (3,154)
-------- --------
Net increase (decrease) in cas h (21,108) 53,865
Cash at beginning of period 44,450 37,307
-------- --------
Cash at end of period $23,342 $91,172
========= =========
<FN>
See notes to financial statements.
</TABLE>
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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 six month period ended December 31, 1995, the Company did not
capitalize any software development costs. For the six month period
ended December 31, 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 $80,798 and $133,050
for the six month periods ended December 31, 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 the three month period ended December 31, 1995, the Company's
principal shareholder loaned the Company $35,000 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 $2,974 and $2,936 in the
three month periods ended December 31, 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 December 31, 1995 is approximately
$248,000. 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 management
agreement with a related entity controlled by its principal shareholder.
The amount owed to this related entity was $57,100, at December 31, 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 December 31, 1995, approximately $37,500 is owed to the Company
under the new agreement. This amount is included in accounts receivable
in the Company's balance sheet.
3 - Supplemental Disclosures of Cash Flow Information:
Cash paid for interest and income taxes for the periods indicated were
as follows:
Three Months Ended Six Months Ended
December 31, December 31,
---------------- ------------------
1995 1994 1995 1994
-------- -------- -------- --------
Interest, net $1,016 $498 $2,055 $1,090
Taxes 0 0 0 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
- ---------------------
During the past six months the Company continued to sell computer
equipment, consulting and software support services, and additional
PRAXA modules to existing customers. One new customer was acquired
during the period.
The programming specifications for the next release of PRAXA are
currently being prepared. This release will contain the code to
accommodate dates into the twenty-first century. It will also contain
numerous enhancements that have been requested by users, that will be
useful to much of the user base. A shipping date has not yet been
determined for the new release.
During the period, the Company continued to devote most of its product
development resources to the project to create a completely new
manufacturing resource planning product. Currently called PRAXA/OMS,
the product is being developed as a client/server system with a
graphical user interface and a relational data base. It will be capable
of operating on the computer equipment from several manufacturers that
utilize versions of the UNIX operating system. Two software developers
were added to the staff during the period to work on this project.
Also, the Company outsourced the coding of several major portions of the
system to a national software consulting firm.
Second Quarter Ended December 31, 1995, Compared to the Second Quarter
- ----------------------------------------------------------------------
Ended December 31, 1994
- -----------------------
Revenues for the three month period ended December 31, 1995 decreased by
48% from the like period in 1994. Sales of computer systems and
software licenses declined by 89%, while the sales of services declined
by 5%. Services include software maintenance and support, consulting,
training and custom programming.
The cost of computer systems and software licenses decreased by 65% from
1994 to 1995 since there were no computer systems in the 1995 sales mix.
The cost of computer systems and software licenses exceeded the revenue
from these items because of the amortization of software development
costs that were capitalized in prior years. The amortization expense is
a fixed monthly amount regardless of the amount of software sold during
the period.
The cost of services increased by 33% from 1994 to 1995 because the sale
of services in 1995 included a greater amount of consulting and training
than in the prior year. Product development costs increased by 130% due
to the addition of development personnel and the charges connected with
the software consulting firm for their work on the development of
PRAXA/OMS. Total costs and expenses, excluding the cost of computer
Page 9
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systems and software licenses, increased by $149,000 or 50% from 1994 to
1995. $135,000 of this increase was due to increased expenditures for
the development of PRAXA/OMS. Management anticipates that the level of
expenses associated with the development of PRAXA/OMS will remain at or
above the level experienced during the quarter ended December 31, 1995,
for the remainder of the current fiscal year.
The Company experienced a net loss of $261,425 in the quarter ended
December 31, 1995, as compared with net income of $22,758 in the like
quarter of 1994. This difference was due to lower sales and higher
expenses in the 1995 quarter.
Six Months Ended December 31, 1995 Compared to Six Months Ended December
- ------------------------------------------------------------------------
31, 1994
- --------
Sales for the six month period ended December 31, 1995, declined by 1%
from the like period in 1994. Sales of computer systems and software
licenses increased by 3% while revenue from services decreased by 4%
from year to year.
Total costs and expenses increased by approximately $216,000 from the
six month period ended December 31, 1994 to the like period in 1995.
$204,000 of the increase was attributable to higher product development
costs. Most of the increased loss that the Company experienced in the
1995 period was due to increased product development expenses.
Total assets declined by 26% during the six month period ended December
31, 1995. The ongoing amortization of software development costs that
were capitalized in prior years accounted for $80,000 of the decrease in
value of total assets. All of the development costs incurred to date
for PRAXA/OMS have been charged to current expenses, in accordance with
Statement of Financial Accounting Standards No. 86.
Total liabilities increased by 24% during the six month period, mostly
due to increased borrowings and accruals for work in progress by the
software consulting firm. Stockholders equity declined approximately
$290,000 during the period.
Financial Condition and Liquidity
- ---------------------------------
On December 31, 1995, the Company had a working capital deficit of
$525,654 as compared to a deficit of $317,703 at June 30, 1995. The
unused portion of the $400,000 line of credit that was granted to the
Company by its principal shareholder was $217,576 at February 1, 1996.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
The Company did not file any reports on Form 8-K during this quarter.
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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.
Unitronix Corporation
Date: February 13, 1996
By: Sean F. Abad
------------------
President
By: William C. Wimer
------------------
Vice President, Operations
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 23,342
<SECURITIES> 0
<RECEIVABLES> 139,679
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 197,677
<PP&E> 750,460
<DEPRECIATION> 640,918
<TOTAL-ASSETS> 421,923
<CURRENT-LIABILITIES> 723,331
<BONDS> 0
<COMMON> 3,485,412
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 421,924
<SALES> 730,693
<TOTAL-REVENUES> 730,693
<CGS> 178,776
<TOTAL-COSTS> 178,776
<OTHER-EXPENSES> 835,290
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6508
<INCOME-PRETAX> (289,855)
<INCOME-TAX> 0
<INCOME-CONTINUING> (289,855)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (289,855)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
