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 March 31, 1997
-------------------------.
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
----- -----
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 May 15, 1997
2
UNITRONIX CORPORATION
INDEX
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Page Number
-----------
Part I. Financial Information (Unaudited)
Item 1:
Balance Sheets-
March 31, 1997 and June 30, 1996 4
Statements of Income -
Three Months Ended March 31, 1997 and 1996 5
and Nine Months Ended March 31, 1997 and 1996
Statement of Changes in Stockholders' Equity (Deficit)-
Nine Months Ended March 31, 1997 6
Statements of Cash Flows -
Nine Months Ended March 31, 1997 and 1996 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 March 31, 1997 and the Nine Months Ended
March 31, 1997
Part II. Other Information 12
3
UNITRONIX CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
March 31,
1997 June 30,
(Unaudited) 1996
ASSETS ----------- --------
CURRENT ASSETS
Cash $6,900 $13,382
Accounts receivable, net 100,779 130,453
Prepaid expenses and other current assets 29,934 52,639
--------- ---------
TOTAL CURRENT ASSETS 137,613 196,474
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, NET 92,004 88,013
---------- ---------
OTHER ASSETS
Capitalized software development costs, net 7,082 28,328
Other 2,436 4,850
---------- -------
TOTAL OTHER ASSETS 9,518 33,178
--------- -------
TOTAL ASSETS $239,135 $317,665
========= ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable - related parties $753,924 $337,424
Notes payable 6,323 6,323
Accounts payable 309,351 116,595
Accounts payable - related party 57,100 57,100
Accrued expenses 173,826 161,122
Deferred revenue 104,361 117,631
-------- -------
TOTAL CURRENT LIABILITIES 1,404,885 796,195
NOTE PAYABLE 8,341 12,646
-------- --------
TOTAL LIABILITIES 1,413,226 808,841
======== ========
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 (4,659,503) (3,976,588)
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT (1,174,091) (491,176)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $239,135 $317,665
========= ========
See notes to financial statements.
4
UNITRONIX CORPORATION
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
------ ------ ------ ------
REVENUES:
Computer systems and
software licenses $2,800 $158,093 $189,674 $436,785
Services 158,526 200,906 514,542 652,907
------- ------- ------- ---------
TOTAL REVENUES 161,326 358,999 704,216 1,089,692
------- ------- ------- -------
COSTS AND EXPENSES:
Cost of computer systems
and software licenses 8,917 113,333 29,986 292,109
Cost of services 83,008 81,501 249,248 269,691
Product development costs 366,172 218,692 753,053 642,109
Selling expenses 25,402 58,039 162,276 184,713
General and administrative
expense 54,858 75,057 148,488 172,066
------- ------- --------- ---------
TOTAL COSTS AND EXPENSES: 538,357 546,622 1,343,051 1,560,688
------- ------- ------- -------
LOSS FROM OPERATIONS (377,031) (187,623) (638,835) (470,996)
INTEREST INCOME (EXPENSE),NET (17,142) (5,236) (41,724) (11,744)
OTHER INCOME (EXPENSE),NET (2,356) (2,134) (2,356) (2,108)
------- ------- ------- -------
LOSS BEFORE INCOME TAXES (396,529) (194,993) (682,915) (484,848)
------- ------- ------- -------
PROVISION FOR INCOME TAXES 0 0 0 0
------- ------- ------- -------
NET LOSS $(396,529) $(194,993) $(682,915) $(484,848)
======= ======= ======= =======
LOSS PER COMMON SHARE $(0.04) $(0.02) $(0.07) $(0.05)
======= ======= ======= =======
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 Nine Months Ended March 31, 1997
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 ---- ---- (682,915) (682,915)
-------- -------- --------- --------
Balance,
March 31, 1997 9,456,932 $3,485,412 $(4,659,503) $(1,174,091)
========= ========= =========== =========
See notes to financial statements.
6
UNITRONIX CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended March 31,
--------------------------------
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(682,915) $(484,848)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Depreciation and amortization 53,517 160,423
(Increase) Decrease in:
Accounts receivable 29,674 14,836
Prepaid expenses and other current assets 22,705 19,468
Other assets 2,414 2,451
Increase (Decrease) in:
Accounts payable 192,756 81,656
Accrued expenses 12,704 119,925
Deferred revenues (13,270) (68,065)
------- -------
Net cash provided (used) by operating activities (382,415) (154,154)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (Purchase) of Equipment, net (36,262) (28,448)
------- -------
Net cash used by investing activities (36,262) (28,448)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 416,500 150,000
Payments on debt (4,305) (4,742)
------- -------
Net cash provided (used) by financing activities 412,195 145,258
------- -------
Net increase (decrease) in cash (6,482) (37,344)
Cash at beginning of period 13,382 44,450
------- -------
Cash at end of period $6,900 $7,106
======= =======
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 nine month period ended March 31, 1997, three of the Company's
shareholders loaned the Company $416,500 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 March 31, 1997,
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 March 31, 1997, approximately $52,900 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:
Nine Months Ended
March 31,
----------------
1997 1996
-------- --------
Interest, net $817 $2,432
Taxes $1,718 $3,842
4 - Earnings per Share computation
Effective June 30, 1998, the Company will adopt Statement of Financial
Accounting Standards No. 128 (SFAS 128) "Earnings per Share", which will
require the disclosure of Basic Earnings per Common Share and Diluted Basic
Earnings per Common Share for all periods presented. Early application of
SFAS 128 is not allowed, but pro forma disclosure is allowed.
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 nine 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 plans to ship the software to Beta test sites during the
month of May and make a general release to all users during the first quarter
of 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.
A user of the current version of PRAXA has verbally agreed to purchase PRAXA/OMS
to be installed in three divisions of the company. If a contract is granted by
the customer, these installations will be the Beta test sites for the product.
Third Quarter Ended March 31, 1997, Compared to the Third Quarter Ended
- -----------------------------------------------------------------------
March 31, 1996
- --------------
Revenue for the three month period ended March 31, 1997 decreased by 55%
from the like period in 1996. Sales of computer systems and software licenses
decreased approximately $156,000, while revenue from services declined approx-
imately $42,000. The lower sales of computer systems and software licenses is
indicative of the lack of opportunities to sell additional software and/or
software and hardware upgrades to the PRAXA user base. The lower support
revenues are 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 for the three month period
ended March 31, 1997, decreased by 92% from the like period in 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 1996 period to $6,733 in the 1997 period.
No software development costs have been capitalized since fiscal 1995.
10
Product development costs increased by 67% from the third quarter in fiscal 1996
to the like period in fiscal 1997. This increase was due to the use of consul-
tants to assist the Company's internal product development group in the develop-
ment of the PRAXA/OMS product. Additionally, the customer support staff spent
approximately 40% of their time on developing the upcoming release of the PRAXA
software.
Selling expenses decreased by 56% from the three month period ended March 31,
1996 to the like period in 1997 due to lower sales commissions and the resig-
nation of a sales consultant early in the quarter. General and administrative
expenses decreased by 27% due to the resignation of two administrative employees
during the quarter.
Nine Months Ended March 31, 1997 Compared to Nine Months Ended March 31,1996
- ----------------------------------------------------------------------------
Revenue for the nine months ended March 31, 1997, decreased by approximately
35% from the like period in 1996. Sales of computer systems and software
licenses decreased by $247,000 while sales of services decreased by $138,000.
Management anticipates further declines in revenue until such time as PRAXA/OMS
is brought to market and is accepted by the marketplace.
The cost of computer systems and software licenses for the nine month period
ended March 31, 1997, decreased by 90% from the like period in 1996 because no
complete computer systems were sold during the 1997 period, and because of the
aforementioned decrease in software amortization expenses. The cost of
services, selling expenses and general and administrative expenses decreased
from the 1996 period to the 1997 period because of continued tight cost controls
by management and the staff resignations noted above. Product development costs
increased by 17% from the nine months ended March 31, 1996, to the like period
in 1997 due to a larger internal staff and external consultants assigned to the
PRAXA/OMS project, and the time spent by the customer support staff on develop-
ing the next release of PRAXA. The loss from operations for the nine month
period ended March 31, 1997, increased by 41% from the like period in 1996.
Total assets decreased by 25% during the nine months ended March 31, 1997, from
the like period in 1996, while total liabilities increased by 75%. Most of the
increase in liabilities was in notes payable to related parties and accounts
payable. Working capital decreased by approximately $668,000 during the nine
month period ended month period ended March 31, 1997, to negative $1,267,272.
The stockholders' deficit increased by $683,000 during the same period.
Financial Condition and Liquidity
- ---------------------------------
The Company borrowed $416,500 from shareholders during the nine month period
ended March 31, 1997. 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. From time to time
funds have been provided to the Company by certain shareholders in the form of
11
demand notes, all of which bear interest of 10% per annum. To date there have
been no demands for repayment of the notes or payment of the interest accrued
on the notes. However, management cannot guarantee that such demands will not
be made. The Company is attempting to secure additional sources of funding;
however, there can be no guarantee that additional sources of funding will be
found. The PRAXA/OMS development activity will be curtailed if such funding is
not located.
Management does not project the realization of significant amounts of revenue
from sales of PRAXA/OMS in fiscal 1997. Also, there can be no assurance that
the product will be developed, or if it is developed, that it will be accepted
by the market.
Earnings per Share Computation
- ------------------------------
Effective June 30, 1998, the Company will adopt Statement of Financial
Accounting Standards No. 128 (SFAS 128) "Earnings per Share", which will
require the disclosure of Basic Earnings per Common Share and Diluted
Basic Earnings per Common Share for all periods presented. Early application
of SFAS 128 is not allowed, but pro forma disclosure is allowed.
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, 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
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 March 31, 1997 the Company had borrowed $753,924 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 March 31, 1997, owed $74,791 in
accrued interest to the note holders. This amount is included in accrued
expenses in the Company's balance sheet. As of April 28, 1997 the note holders
have not requested payment of the interest due on the notes, but there can be no
assurance that such demand will not be made.
12
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 nine months
ended March 31, 1997.
13
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 15, 1997
By: /s/Jack E. Shaw
---------------
Jack E. Shaw
Chairman and Chief
Executive Officer
By: /s/William C. Wimer
-------------------
William C. Wimer
Vice President, Operations
14
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,900
<SECURITIES> 0
<RECEIVABLES> 103,789
<ALLOWANCES> 3,010
<INVENTORY> 0
<CURRENT-ASSETS> 137,613
<PP&E> 793,584
<DEPRECIATION> 701,580
<TOTAL-ASSETS> 239,135
<CURRENT-LIABILITIES> 1,404,885
<BONDS> 0
<COMMON> 3,485,412
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 239,135
<SALES> 704,216
<TOTAL-REVENUES> 704,216
<CGS> 29,986
<TOTAL-COSTS> 29,986
<OTHER-EXPENSES> 1,313,065
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,724
<INCOME-PRETAX> (682,915)
<INCOME-TAX> 0
<INCOME-CONTINUING> (682,915)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (682,915)
<EPS-PRIMARY> (.07)
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