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 March 31, 1996
-----------------.
Commission file number 0-17080
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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
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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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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 May 10, 1996
Page 1
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UNITRONIX CORPORATION
INDEX
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Page Number
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Part I. Financial Information (Unaudited)
Item 1:
Balance Sheets-
March 31, 1996 and June 30, 1995 3
Statements of Income -
Three Months Ended March 31, 1996 and 1995 4
and Nine Months Ended March 31, 1996 and 1995
Statement of Changes in Stockholders' Equity -
Nine Months Ended March 31, 1996 5
Statements of Cash Flows -
Nine Months Ended March 31, 1996 and 1995 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 March 31, 1996 and the Nine Months Ended
March 31, 1996
Part II. Other Information 10
Page 2
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<TABLE>
UNITRONIX CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
<CAPTION>
March 31, June 30,
1996 1995 (1)
(Unaudited)
----------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $7,106 $44,450
Accounts receivable, net 153,862 168,698
Prepaid expenses and other
current assets 27,013 46,481
--------- ---------
TOTAL CURRENT ASSETS 187,981 259,629
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, NET 100,956 111,735
---------- ---------
OTHER ASSETS
Capitalized software development
costs, net 68,727 189,924
Other 5,202 7,653
---------- -------
TOTAL OTHER ASSETS 73,929 197,577
--------- -------
TOTAL ASSETS $362,866 $568,941
========= ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C> <C>
CURRENT LIABILITIES
Notes payable - related party $267,424 $117,424
Notes payable 6,323 6,323
Accounts payable 217,645 135,989
Accounts payable - related party 57,100 57,100
Accrued expenses 227,021 107,096
Deferred revenue 85,335 153,400
-------- -------
TOTAL CURRENT LIABILITIES 860,848 577,332
NOTE PAYABLE 14,226 18,968
-------- --------
TOTAL LIABILITIES 875,074 596,300
======== ========
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 (3,997,619) (3,512,771)
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT (512,207) (27,359)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $362,866 $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 Nine Months Ended
March 31, March 31,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES:
Computer systems and
software licenses $158,093 $64,244 $436,785 $335,765
Services 200,906 278,767 652,907 749,026
------- ------- ------- -------
TOTAL REVENUES 358,999 343,011 1,089,692 1,084,791
------- ------- ------- -------
COSTS AND EXPENSES:
Cost of computer systems
and software licenses 113,333 105,487 292,109 306,895
Cost of services 81,501 63,280 269,691 208,868
Product development costs 218,692 122,521 642,109 333,972
Selling expenses 58,039 47,557 184,713 138,814
General and administrative
expense 75,057 67,921 172,066 215,563
------- ------- ------- -------
TOTAL COSTS AND EXPENSES: 546,622 406,766 1,560,688 1,204,112
------- ------- ------- -------
LOSS FROM OPERATIONS (187,623) (63,755) (470,996) (119,321)
INTEREST INCOME (EXPENSE),NET (5,236) (3,039) (11,744) (10,120)
OTHER INCOME (EXPENSE),NET (2,134) (709) (2,108) (1,094)
------- ------- ------- ------
LOSS BEFORE INCOME TAXES (194,993) (67,503) (484,848) (130,535)
------- ------- ------- ------
PROVISION FOR INCOME TAXES 0 0 0 0
------- ------- ------- ------
NET INCOME LOSS $(194,993) $(67,503) $(484,848) $(130,535)
======= ======= ======= ======
LOSS PER COMMON SHARE $(0.02) $(0.01) $(0.05) $(0.01)
======= ======= ======= ======
Weighted average number of common
shares outstanding 9,456,932 9,456,932 9,456,932 9,456,932
<FN>
See notes to financial statements.
</TABLE>
Page 4
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<TABLE>
UNITRONIX CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
For the Nine Month Period Ended March 31, 1996
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 ---- ---- (484,848) (484,848)
-------- -------- --------- --------
Balance,
March 31, 1996 9,456,932 $3,485,412 $(3,997,619) $(512,207)
========= ========= =========== =========
<FN>
See notes to financial statements.
</TABLE>
Page 5
<PAGE>
<TABLE>
UNITRONIX CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended March 31,
-----------------------------
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(484,848) $(130,535)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Depreciation and amortization 160,423 250,370
(Increase) decrease in:
Accounts receivable 14,836 79,964
Prepaid expenses and other current
assets 19,468 (10,283)
Other assets 2,451 (2,351)
Increase (Decrease) in:
Accounts payable 81,656 23,265
Accrued expenses 119,925 (53,248)
Deferred revenues (68,065) (101,911)
------- -------
Net cash provided (used) by operating
activities (154,154) 55,271
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (Purchase) of Equipment, net (28,448) (3,300)
Purchase of capitalized software
development costs 0 (30,184)
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Net cash used by investing activities (28,448) (33,484)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt. 150,000 0
Payments on debt. (4,742) (5,269)
------- -------
Net cash provided (used) by financing
activities 145,258 (5,269)
------- -------
Net increase (decrease) in cash (37,344) 16,518
Cash at beginning of period 44,450 37,307
------- -------
Cash at end of period $7,106 $53,825
======= =======
<FN>
See notes to financial statements.
</TABLE>
Page 6
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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 nine month period ended March 31, 1996, the Company did not
capitalize any software development costs. For the nine month period
ended March 31, 1995, 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 $121,197 and $199,575
for the nine month periods ended March 31, 1996 and 1995, 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 nine month period ended March 31, 1996, the Company's
principal shareholder loaned the Company $150,000 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%.
These notes bear interest at the rate of 10% per annum. Interest expense
on these notes and prior borrowings amounted to $4,859 in the three month
period ended March 31, 1996. 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 May 1, 1996
is approximately $86,500. 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 March 31, 1996
and is included in accounts payable-related party in the accompanying
financial statements.
Page 7
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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 March 31, 1996, approximately $41,100 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 Nine Months Ended
March 31, March 31,
---------------- ----------------
1996 1995 1996 1995
-------- -------- -------- --------
Interest, net $377 $469 $2,432 $1,559
Taxes 0 0 3,842 1,324
Page 8
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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 accompany-
ing financial statements, including the notes thereto.
RESULTS OF OPERATIONS
---------------------
During the past nine months the Company continued to sell computer equipment,
consulting and software support services, and additional PRAXA software modules
to existing customers. One new PRAXA customer was added during the period.
The programming specifications for the next release of PRAXA are currently being
prepared, and some of the computer code has been written. This release will
contain the software needed 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.
Three employees were added to the software development staff during the period
to work on this project. The Company is continuing to outsource the coding of
major portions of the system to a software consulting firm.
Third Quarter Ended March 31, 1996, Compared to the Third Quarter
-----------------------------------------------------------------
Ended March 31, 1995
--------------------
Sales for the three month period ended March 31, 1996, increased by 5% from the
like period in 1995. The $94,000 increase in revenues from computer systems and
software licenses was due to several sales of system upgrades to existing PRAXA
customers. Service revenues declined by 28% from the quarter ended March 31,
1995 to the same quarter in 1996. All of this decline is attributable to
decreased revenues derived from software support.
Higher costs of computer equipment purchased for resale in the quarter ended
March 31, 1996, as compared to the same quarter in 1995 were mostly offset by
lower software amortization expenses of $26,000. Cost of services increased by
$18,000 from the 1995 quarter to 1996 due to a larger amount of consulting and
training activity. The 78% increase in product development costs reflects the
additional staffing and the outsourcing expenses incurred to develop PRAXA/OMS
Total expenses incurred for PRAXA/OMS development during the quarter were
$193,846. Management anticipates that the level of expenses associated with the
development of PRAXA/OMS will remain at or above the level realized during the
quarter ended March 31, 1996, for the remainder of the fiscal year
The Company experienced a net loss of $194,993 in the quarter ended March 31,
1996, as compared with a loss of $67,503 in the like quarter of 1995. The
larger loss is totally attributable to higher expenses in the 1996 quarter.
Page 9
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Nine Months Ended March 31, 1996 Compared to Nine Months Ended March
--------------------------------------------------------------------
31, 1995
--------
Sales for the nine month period ended March 31, 1996, were approximately $5,000
higher than for the like period in 1995. Revenues from computer systems and
software licenses increased by 30% while service revenues declined by 13%. The
decline in service revenues is due to decreased revenues from software support
which were partially offset by increased training and consulting revenues.
Total costs and expenses increased by $356,000 from the nine month period ended
March 31, 1995 to the like period in 1996. $308,000 of the increase was due to
higher product development expenses. The increase in product development
expenses also accounts for most of the increased loss from 1995 to 1996.
Current assets declined 28% during the nine months ended March 31, 1996; total
assets declined by $206,000 during the same period. $121,000 of the decline in
total assets was due to amortization of software development costs that were
capitalized in prior years. 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 $279,000 during the period, primarily due to
increases in accounts payable, accrued expenses and notes payable. Stockholders
equity declined by approximately $485,000 during the period.
Financial Condition and Liquidity
---------------------------------
On March 31, 1996, the Company had a working capital deficit of $672,867 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 approximately $86,500 at May 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.
Page 10
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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: May 10, 1996
By: /s/Sean F. Abad
---------------
Sean F. Abad
President
By: /s/William C. Wimer
-------------------
William C. Wimer
Vice President, Operations
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,106
<SECURITIES> 0
<RECEIVABLES> 153,862
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 187,981
<PP&E> 755,969
<DEPRECIATION> 655,013
<TOTAL-ASSETS> 362,866
<CURRENT-LIABILITIES> 860,848
<BONDS> 0
<COMMON> 3,485,412
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 362,866
<SALES> 1,089,692
<TOTAL-REVENUES> 1,089,692
<CGS> 292,109
<TOTAL-COSTS> 292,109
<OTHER-EXPENSES> 1,268,579
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,744
<INCOME-PRETAX> (484,848)
<INCOME-TAX> 0
<INCOME-CONTINUING> (484,848)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (484,848)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
