Form 10-Q
Securities and Exchange Commission
Washington, DC 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
-------------------------.
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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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
----- -----
1
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 1, 1997
2
UNITRONIX CORPORATION
INDEX
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Page Number
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Part I. Financial Information (Unaudited)
Item 1:
Balance Sheets-
December 31, 1996 and June 30, 1996 4
Statements of Income -
Three Months Ended December 31, 1996 and 1995 5
and Six Months Ended December 31, 1996 and 1995
Statement of Changes in Stockholders' Equity (Deficit)-
Six Months Ended December 31, 1996 6
Statements of Cash Flows -
Six Months Ended December 31, 1996 and 1995 7
Notes to Financial Statements 8
Item 2:
Management's Discussion and Analysis of Results of 10
Operations and Financial Condition for the Three Months
Ended December 31, 1996 and the Six Months Ended
December 31, 1996
Part II. Other Information 11
3
UNITRONIX CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
December 31,
1996 June 30,
(Unaudited) 1996 (1)
ASSETS ----------- --------
CURRENT ASSETS
Cash $32,326 $13,382
Accounts receivable, net 150,525 130,453
Prepaid expenses and other current assets 51,567 52,639
--------- ---------
TOTAL CURRENT ASSETS 234,418 196,474
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, NET 100,519 88,013
---------- ---------
OTHER ASSETS
Capitalized software development costs, net 14,165 28,328
Other 2,713 4,850
---------- -------
TOTAL OTHER ASSETS 16,878 33,178
--------- -------
TOTAL ASSETS $351,815 $317,665
========= ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable - related parties $620,924 $337,424
Notes payable 6,323 6,323
Accounts payable 160,354 116,595
Accounts payable - related party 57,100 57,100
Accrued expenses 152,416 161,122
Deferred revenue 122,776 117,631
-------- -------
TOTAL CURRENT LIABILITIES 1,119,893 796,195
NOTE PAYABLE 9,484 12,646
-------- --------
TOTAL LIABILITIES 1,129,377 808,841
======== ========
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 (4,262,974) (3,976,588)
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT (777,562) (491,176)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $351,815 $317,665
========= ========
(1) Derived from audited financial statements.
See notes to financial statements.
4
UNITRONIX CORPORATION
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
1996 1995 1996 1995
------ ------ ------ ------
REVENUES:
Computer systems and
software licenses $43,845 $25,995 $186,874 $278,692
Services 181,429 208,164 356,016 452,001
------- ------- ------- -------
TOTAL REVENUES 225,274 234,159 542,890 730,693
------- ------- ------- -------
COSTS AND EXPENSES:
Cost of computer systems
and software licenses 7,273 43,625 21,069 178,776
Cost of services 88,005 93,920 166,240 188,190
Product development costs 238,256 238,977 386,881 423,417
Selling expenses 65,112 64,200 136,874 126,674
General and administrative
expense 47,073 51,544 93,630 97,009
------- ------- ------- -------
TOTAL COSTS AND EXPENSES: 445,719 492,266 804,694 1,014,066
------- ------- ------- -------
LOSS FROM OPERATIONS (220,445) (258,107) (261,804) (283,373)
INTEREST INCOME (EXPENSE),NET (13,864) (3,318) (24,582) (6,508)
OTHER INCOME (EXPENSE),NET 0 0 0 26
------- ------- ------- -------
LOSS BEFORE INCOME TAXES (234,309) (261,425) (286,386) (289,855)
------- ------- ------- -------
PROVISION FOR INCOME TAXES 0 0 0 0
------- ------- ------- -------
NET LOSS $(234,309) $(261,425) $(286,386) $(289,855)
======= ======= ======= =======
LOSS PER COMMON SHARE $(0.02) $(0.03) $(0.03) $(0.03)
======= ======= ======= =======
Weighted average number of common
shares outstanding 9,456,932 9,456,932 9,456,932 9,456,932
See notes to financial statements.
5
UNITRONIX CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
For the Six Months Ended December 31, 1996
Common Stock
------------------
Shares Accumulated Stockholders'
Issued Amount Deficit Deficit
------ ------ ------- -------
Balance, June 30, 1996 9,456,932 $3,485,412 $(3,976,588) $(491,176)
Net loss for the period ---- ---- (286,386) (286,386)
-------- -------- --------- --------
Balance,
December 31, 1996 9,456,932 $3,485,412 $(4,262,974) $(777,562)
========= ========= =========== =========
See notes to financial statements.
6
UNITRONIX CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended December 31,
--------------------------------
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(286,386) $(289,855)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Depreciation and amortization 34,315 105,929
(Increase) decrease in:
Accounts receivable (20,072) 29,019
Prepaid expenses and other current assets 1,072 11,825
Other assets 2,137 2,075
Increase (Decrease) in:
Accounts payable 43,759 (4,648)
Accrued expenses (8,706) 149,678
Deferred revenues 5,145 (34,031)
------- -------
Net cash provided (used) by operating activities (228,736) (30,008)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (Purchase) of Equipment, net (32,658) (22,939)
------- -------
Net cash used by investing activities (32,658) (22,939)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 283,500 35,000
Payments on debt (3,162) (3,161)
------- -------
Net cash provided (used) by financing activities 280,338 31,839
------- -------
Net increase (decrease) in cash 18,944 (21,108)
Cash at beginning of period 13,382 44,450
------- -------
Cash at end of period $32,326 $23,342
======= =======
See notes to financial statements.
7
UNITRONIX CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Summary of Significant Accounting Policies
BASIS OF PRESENTATION:
The accompanying financial statements are unaudited. In the opinion of manage-
ment, 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, 1996 Annual Report on Form 10-K.
2 - Related Party Transactions:
During the six month period ended December 31, 1996, three of the Company's
shareholders loaned the Company $283,500 that was used to fund operations.
The demand notes for these loans bear interest at the rate of 10% per annum.
These and prior notes require quarterly payments of interest which the Company
has not made, causing the notes to be in default. The note holders have not
demanded payment of the interest or repayment of the notes but there can be no
assurances that they will not do so. There is no guarantee that the Company's
shareholders will continue to provide funds to the Company.
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, 1996,
and is included in accounts payable-related party in the accompanying
financial statements.
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, 1996, approximately $50,800 is owed to the Company
under the new agreement. This amount is included in accounts receivable
in the Company's balance sheet.
8
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,
---------------- ----------------
1996 1995 1996 1995
-------- -------- -------- -------
Interest, net $303 $1,016 $629 $2,055
Taxes 0 0 $1,706 $3,842
9
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
- ---------------------
The company continued to sell computer equipment, additional PRAXA software
modules, software support services and consulting services to existing customers
over the past six months. One new customer acquired PRAXA software and
associated training services during the period.
Programming and testing of the next release of PRAXA continued during the
period. The Company expects to ship the software to Beta test sites during the
final quarter of the fiscal year and make a general release to all users early
in the next fiscal year.
Development of the client/server version of PRAXA, named PRAXA/OMS, continued
during the period. A preliminary version of some of the functions included in
the product was demonstrated at the annual conference of the American Production
and Inventory Control Society in October. Follow-up activities are continuing
with several prospective purchasers that viewed the product at the conference.
Second Quarter Ended December 31, 1996, Compared to the Second Quarter Ended
- ----------------------------------------------------------------------------
December 31, 1995
- -----------------
Revenue for the three month period ended December 31, 1996 decreased by 3.8%
from the like period in 1995. Sales of computer systems and software licenses
increased approximately $18,000, while revenue from services declined approx-
imately $27,000. This is a reflection of lower sales of consulting and training
services, and marginally lower sales of software support services.
The cost of computer systems and software licenses decreased by 83% from 1995 to
1996 since there were no complete computer systems sold during the period.
Expenses incurred for the amortization of software development costs that were
capitalized in prior years decreased from $40,339 in the 1995 period to $6,733
in 1996. No software development costs have been capitalized since fiscal 1995.
Other operating expenses decreased by approximately 2% from the 1995 period to
1996. The reduction in costs and operating expenses resulted in a 10.4%
decrease in the net loss from 1995 to 1996.
10
Six Months Ended December 31, 1996 Compared to Six Months Ended December 31,
- ----------------------------------------------------------------------------
1995
- ----
Revenue for the six months ended December 31, 1996 decreased by approximately
26% from the like period in 1995. Sales of computer systems and software
licenses decreased by $92,000 while sales of services decreased by $96,000.
Management anticipates further declines in revenue until such time as PRAXA/OMS
is brought to market.
The cost of computer systems and software licenses decreased by 88% for the six
month period because no complete computer systems were sold during the period,
and the aforementioned decrease in software amortization expenses. A 6%
decrease in other expenses was primarily attributable to lower product
development out-sourcing costs. The 11.6% reduction in cost of services is
directly related to the lower sales of consulting and training services and
software support services. The net loss for the 1996 period was approximately
1% lower than the net loss for the comparable 1995 period.
Total assets increased by 11% during the six months ended December 31, 1996,
while total liabilities increased by 40%. Working capital decreased by
approximately $285,000 during the period to negative $885,475. The
stockholders' deficit increased by $286,000 during the period.
Financial Condition and Liquidity
- ---------------------------------
The Company borrowed $283,500 from shareholders during the six month period
ended December 31, 1996. As of August 31, 1996 the $400,000 line of credit
that was granted to the Company by its principal shareholder was exhausted and
there were no other credit lines available to the Company. The Company is
attempting to secure additional sources of funding.
Management does not project the realization of significant amounts of revenue
from sales of PRAXA/OMS in fiscal 1997. There can be no assurance that the
product will be developed, or if it is developed, that it will be accepted by
the market.
Part II-Other Information
Item 1. Legal Proceedings
The Company filed suit against Computer Management Sciences, Inc. (CMSI)
in the United States District Court for the District of Massachusetts in Boston,
Massachusetts on October 25, 1996. The suit seeks damages resulting from the
breach of three contracts by CMSI to develop portions of the PRAXA/OMS software,
which contracts had been entered into by the Company in 1995 and 1996. The
Company is seeking an amount in excess of $150,403.50, which is the amount that
the Company paid to CMSI during the course of the contracts, plus costs,
interest and such other and further relief that the Court deems just and
11
equitable. On January 17, 1997, CMSI filed a counterclaim in the same Court
alleging that the Company is liable to CMSI in an amount exceeding $200,000 on
account of the Company's alleged breaches of the same contracts. Management
believes that the CMSI counterclaim is without merit and is defending this
counterclaim vigorously.
Item 3. Defaults Upon Senior Securities
As of December 31, 1996 the Company had borrowed $620,924.16 from three
of its shareholders. The loans are in the form of demand notes that require
quarterly payments of interest to the holders of the notes. The Company has
made no interest payments against the notes and, as of December 31, 1996, owed
$57,836.82 in accrued interest to the note holders. This amount is included
in accrued expenses in the Company's balance sheet. As of February 12, 1997
the note holders have not requested payment of the interest due on the notes,
but there can be no assurance that no such demand will be made.
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 the six months
ended December 31, 1996.
12
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, 1997
By: /s/Sean F. Abad
---------------
Sean F. Abad
President
By: /s/William C. Wimer
-------------------
William C. Wimer
Vice President, Operations
13
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 32,326
<SECURITIES> 0
<RECEIVABLES> 160,639
<ALLOWANCES> 10,114
<INVENTORY> 0
<CURRENT-ASSETS> 234,418
<PP&E> 789,979
<DEPRECIATION> 689,460
<TOTAL-ASSETS> 351,815
<CURRENT-LIABILITIES> 1,119,893
<BONDS> 0
<COMMON> 3,485,412
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 351,815
<SALES> 542,890
<TOTAL-REVENUES> 542,890
<CGS> 21,069
<TOTAL-COSTS> 21,069
<OTHER-EXPENSES> 783,625
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,582
<INCOME-PRETAX> (286,386)
<INCOME-TAX> 0
<INCOME-CONTINUING> (286,386)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (286,386)
<EPS-PRIMARY> (.03)
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