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, 2000
-------------------------.
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)
(978) 535-3912
---------------------------------------------------
(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 CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
9,643,718 shares of common stock, no par value, as of May 11, 2000
1
UNITRONIX CORPORATION
INDEX
-------
Page Number
-----------
Part I. Financial Information (Unaudited)
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets-
March 31, 2000 and June 30, 1999 3
Consolidated Statements of Income -
Three Months Ended March 31, 2000 and 1999 4
and Nine Months Ended March 31, 2000 and 1999
Statement of Changes in Stockholders' Deficit-
Nine Months Ended March 31, 2000 5
Consolidated Statements of Cash Flows -
Nine Months Ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2:
Management's Discussion and Analysis of Results of 11
Operations and Financial Condition for the Three Months
Ended March 31, 2000 and the Nine Months Ended
March 31, 2000
Part II. Other Information 15
2
UNITRONIX CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
March 31, 2000 June 30,
(Unaudited) 1999 (1)
ASSETS ----------- --------
CURRENT ASSETS:
Cash $11,513 $14,328
Accounts receivable, net of allowance for doubtful
accounts of $7,843 and $8,402 at March 31, 2000, and
June 30, 1999, respectively 57,624 50,658
Notes receivable 125,000 ---
Prepaid expenses and other current assets 12,945 7,713
--------- ---------
TOTAL CURRENT ASSETS 207,082 72,699
Notes receivable, long term portion 52,083 ---
Property and equipment, at cost less accumulated
depreciation of $434,896 and $429,296 at March 31, 2000
and June 30, 1999, respectively 17,879 6,653
Goodwill, less accumulated amortization of $483 and $0 at
March 31, 2000, and June 30, 1999, respectively 57,480 ---
Other assets 4,316 2,895
---------- -------
TOTAL ASSETS $338,840 $ 82,247
========= ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable - related party $595,214 $300,000
Notes payable --- 199,527
Accounts payable 87,920 12,842
Accrued expenses 71,228 77,808
Accrued interest-related party 21,216 7,500
Deferred revenue 95,561 89,736
-------- -------
TOTAL CURRENT LIABILITIES 871,139 687,413
COMMITMENTS AND CONTINGENCIES
Series A preferred stock, $1 par value, 6% cumulative
convertible nonvoting; authorized 1,000,000 shares;
956,728 issued and outstanding at March 31, 2000 and
June 30, 1999, net of unamortized issuance costs of
$2,475 at March 31, 2000, and $3,300 at June 30,
1999, plus undeclared accumulated dividends of $100,457
at March 31, 2000 and $57,404 at June 30, 1999 1,054,710 1,010,832
STOCKHOLDERS' DEFICIT:
Undesignated capital shares; authorized 2,000,000 shares at
March 31, 2000, and June 30, 1999; none outstanding --- ---
Common stock, no par value; authorized 12,000,000 shares;
9,476,932 and 9,456,932 shares issued and outstanding
at March 31, 2000, and June 30, 1999, respectively 3,487,912 3,485,412
Additional paid-in capital 37,223 7,090
Accumulated deficit (5,112,144) (5,108,500)
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT (1,587,009) (1,615,998)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $338,840 $82,247
========= ========
(1) Derived from audited financial statements.
See notes to consolidated financial statements.
3
UNITRONIX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
------- ------- ------- -------
REVENUE:
Software licenses $ --- $50,000 $14,721 $296,500
Software related services 108,974 129,235 374,153 401,010
Mineral exploration products 16,105 --- 16,105 ---
and services
------- ------- ------- -------
TOTAL REVENUE 125,079 179,235 404,979 697,510
------- ------- ------- -------
COSTS AND EXPENSES:
Cost of software licenses --- --- 1,090 11,668
Cost of software related services 45,558 51,817 151,145 155,939
Cost of map production 24,023 --- 24,023 ---
Software development costs 20,394 --- 30,894 ---
Selling expenses 29,579 36,161 85,091 123,165
General and administrative 152,585 131,440 326,250 385,129
expenses
------- ------- ------- -------
TOTAL COSTS AND EXPENSES 272,139 219,418 618,493 675,901
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS (147,060) (40,183) (213,514) 21,609
INTEREST INCOME (EXPENSE), NET (11,672) (13,402) (29,125) (39,366)
OTHER INCOME (EXPENSE), NET 6,109 --- 282,048 15,003
------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES (152,623) (53,585) 39,409 (2,754)
------- ------- ------- -------
PROVISION FOR INCOME TAXES --- --- --- ---
------- ------- ------- -------
NET INCOME (LOSS) $(152,623) $(53,585) $39,409 $(2,754)
======= ======= ======= =======
Basic net income (loss)per share $(0.02) $(0.01) $0.00 $0.00
======= ======= ======= =======
Shares used in computing basic net
income (loss) per share 9,458,690 9,456,932 9,457,514 9,456,932
========= ========= ========= =========
Diluted net income (loss) per share $(0.02) $(0.01) $0.00 $0.00
========= ========= ========= =========
Shares used in computing diluted net
income (loss) per share 9,458,690 9,456,932 9,457,514 9,456,932
========= ========= ========== ==========
See notes to consolidated financial statements.
4
UNITRONIX CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(Unaudited)
For the Nine Months Ended March 31, 2000
Common Stock
-------------- Additional Total
Shares Paid-in Accumulated Stockholders'
Issued Amount Capital Deficit Deficit
------ ------ ------- ------- -------
Balance,
June 30, 1999 9,456,932 $3,485,412 $7,090 $(5,108,500) $(1,615,998)
Sale of shares to 20,000 2,500 2,500
option holder
Capital contributions
to subsidiary from
minority shareholders 30,958 30,958
Net profit 39,409 39,409
Year to date unpaid
accumulated
preferred dividends (43,053) (43,053)
Amortization of
preferred stock
issuance costs (825) (825)
--------- --------- ------ ---------- -----------
Balance,
March 31, 2000 9,476,932 $3,487,912 $37,223 $(5,112,144) $(1,587,009)
========= ========= ====== =========== ===========
See notes to consolidated financial statements.
5
UNITRONIX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended March 31,
--------------------------------
2000 1999
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $39,409 $(2,754)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 6,083 20,429
Provision for bad debts (7,480) ---
Non cash expense on issuance of stock options
to consultant --- 7,020
Decreases (increases) in operating assets:
Accounts receivable (6,407) 13,109
Notes receivable (177,083) ---
Prepaid expenses and other current assets (5,232) (1,639)
Other assets (1,421) 271
Increases (decreases) in operating liabilities:
Accounts payable 75,078 (23,146)
Accrued expenses (6,580) 6,424
Accrued interest 13,716 125
Deferred revenue 5,825 16,087
------- -------
Net cash provided (used) by operating activities (64,092) 35,926
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (4,184) ---
Purchase of other assets (32,726) ---
------- -------
Net cash (used) by investing activities (36,910) ---
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 2,500 ---
Proceeds from borrowings 348,214 ---
Repayments of borrowings (252,527) (44,837)
------- -------
Net cash provided (used) by financing activities 98,187 (44,837)
------- -------
Net (decrease) in cash (2,815) (8,911)
Cash at beginning of year 14,328 75,466
------- -------
Cash at end of period $11,513 $66,555
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $30,428 $36,672
Taxes $410 $2,631
See notes to consolidated financial statements.
6
UNITRONIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 results 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, 1999 Annual Report on Form 10-K.
The consolidated financial statements include the accounts of Unitronix Corp-
oration and its majority-owned subsidiary, Interactive Mining Technologies, LLC.
All significant inter-company accounts and transactions have been eliminated.
2. Net Income (Loss) per Common Share:
------------------------------------
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 ("SFAS 128") Earnings per Share, which requires
disclosure of basic earnings per common share and diluted earnings per
common share for all periods presented. Shares used in computing basic and
diluted net income (loss) per share are based on the weighted average shares
outstanding in each period, excluding treasury stock. Basic net income (loss)
per share excludes any dilutive effect of stock options and convertible
preferred stock. Diluted net income per share includes the dilutive effect
of the assumed exercise of stock options using the treasury stock method,
and the assumed conversion of the outstanding convertible preferred stock. The
following table shows the computation of basic and diluted net income per share:
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- ----
Numerator:
Net income (loss) $(152,623) $(53,585) $39,409 $(2,754)
Preferred dividends (14,351) (14,351) (43,053) (43,053)
Amortization of preferred stock
issuance cost (275) (275) (825) (825)
-------- ------- ------- -------
Income available to common shareholders $(167,249) $(68,211) $(4,469) $(46,632)
======== ======= ======= =======
7
UNITRONIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
continued
Denominator:
Weighted average number of
shares issued and
outstanding 9,458,690 9,456,932 9,457,514 9,456,932
Assumed exercise of options and
warrants reduced by the number of
shares which would have been
purchased with the proceeds of
those options and warrants --- --- --- ---
Assumed conversion of
preferred stock --- --- --- ---
---------- ---------- ---------- ----------
Total shares 9,458,690 9,456,932 9,457,514 9,456,932
========== ========== ========== ==========
Basic net income per share $(0.02) $(0.01) $0.00 $0.00
========== ========== ========== ==========
Diluted net income per share $(0.02) $(0.01) $0.00 $0.00
========== ========== ========== ==========
The number of stock options and warrants outstanding was 1,473,250 as of March
31, 2000,and 465,000 as of March 31, 1999. The number of potential shares
convertible into common stock from the exercise of convertible preferred stock
was 956,728 as of March 31, 2000 and 1999. Neither of these situations qualify
as common stock equivalents for the three month and nine month periods ended
March 31, 2000 and 1999, as they would have an antidilutive effect on earnings
per share.
3. Legal Proceedings
-----------------
The Company filed suit against Computer Management Sciences, Inc. (CMSI) in
the United States District Court for the District of Massachusetts on October
25, 1996. The suit was seeking damages resulting from the breach of three
contracts by CMSI to develop portions of a client-server ERP software system,
such contracts having been entered into in 1995 and 1996. The Company
was seeking an amount in excess of $150,503, which is the amount that the
Company paid to CMSI during the course of the contracts, plus costs, interest
and such other relief that the Court deemed just and equitable. On January
17, 1997, CMSI filed a counterclaim in the same Court alleging that the
Company was liable to CMSI in an amount exceeding $200,000 on account of the
Company's alleged breaches of the same contracts. During the three month
period ended March 31, 2000, the Company and CMSI withdrew their respective
suits against each other, with CMSI agreeing to pay the Company $20,000.
On June 30, 1998, the Company filed for arbitration against InterObjects, a
software development firm, for breach of contract and failure to meet
milestones in the development of a new Enterprise Resource Planning system.
The Company made a prepayment of $300,000 in September of 1997 related to this
contract, all of which was charged to operating expenses in the year ended
June 30, 1998. Development of the new system by InterObjects ceased in January,
1998, and the contract was subsequently terminated.
The Company and InterObjects reached an agreement to settle their dispute during
the period ended September 30, 1999, without resorting to arbitration. Inter-
8
UNITRONIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
continued
Objects agreed to repay the $300,000 that the Company had advanced to them for
the terminated software project. An initial payment of $50,000 was made by
InterObjects in August, 1999. A note for the remaining $250,000 that will be
paid by the founder of InterObjects in equal monthly installments over a 24
month period, along with interest on the unpaid balance, was accepted by the
Company.
The $300,000 settlement was credited to non-operating income during the period
ended December 31, 1999, and the $250,000 note was recorded as a note receiv-
able. Legal fees of $24,061 that were incurred in conjunction with the settle-
ment were charged to non-operating expenses during the same period.
4. Notes Payable
-------------
On August 1, 1993, the Company incurred a $37,937 note payable bearing
interest at 8% due to the Illinois Department of Revenue for settlement of
revenue taxes owed to the State of Illinois. The note was payable in monthly
installments of $527 and the final payment was made on July 1, 1999. The note
payable balance as of March 31, 2000 and 1999 was $0 and $2,108, respect-
ively.
On July 14, 1997, the Carolina First Bank loaned the Company $200,000 in the
form of a demand note that was secured by all of the assets of the Company and
the guarantee of the Company's principal shareholder. This note was renewed for
$199,000 on June 30, 1998, for a one year period and again on July 28, 1999,
for a one year period, bearing interest at the prime rate.
On October 29, 1999, in response to a request for repayment by the bank, the
Company's principal shareholder paid the principal of $199,000 and interest due
of $4,202.49 to the Carolina First Bank. In turn, the Company executed a note
with the Company's principal shareholder in the amount of $203,202.49. This
note is due upon demand and bears interest at the rate of 10%.
5. Related Party Transactions
--------------------------
At the time that the $200,000 loan from the Carolina First Bank was granted in
1997, the Board of Directors of the Company approved the issue of 200,000 shares
of the Company's common stock to the principal shareholder as compensation for
the risk that the principal shareholder assumed when he personally guaranteed
the loan. These shares were never issued to the principal shareholder.
In recognition of the fact that the shares that had been granted will not be
issued, and as compensation for the additional risk that the principal share-
holder has taken in granting the loan of $203,202.49 to the Company, the
Company's Board of Directors resolved to issue to the principal shareholder
warrants for the purchase of the Company's common shares at a price of $0.125
per share in the following amounts: (1) 400,000 shares for guaranteeing the
original loan from the Carolina First Bank, (2) 100,000 shares for each of the
two one-year renewals of the loan, and (3) 100,000 shares at the end of each
fiscal year, beginning with the fiscal year ending June 30, 2000, for each
year the note to the principal shareholder remains unpaid.
During the nine month period ended March 31, 2000, in addition to the loans
9
UNITRONIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
continued
discussed above, the Company's principal shareholder loaned the Company $67,000
to be used to fund operations. During the same nine month period, $53,000 of
this amount was repaid, leaving an outstanding balance of $14,000. This amount
is in addition to a $300,000 loan that was made to the Company by the same
shareholder in 1998. These notes bear interest at the rate of 10% per annum.
6. Operating Segments
------------------
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," in fiscal 1999. SFAS No. 131 established standards
for reporting information about operating segments in the Company's financial
statements. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision making group, in
deciding how to allocate resources and in assessing performance. The Company's
chief operating decision maker is the Chief Executive Officer of the Company.
The Company organizes its business units into three reportable segments:
software licenses, software related services, and mineral exploration products
and services. The segments' accounting policies are the same as those
described in the summary of significant accounting policies except that interest
expense and non-operating income and expenses are not allocated to the
individual operating segments when determining segment profit or loss. The
Company evaluates performance based on profit or loss from operations before
interest and income taxes not including nonrecurring gains and losses.
A summary of the segment information for the three month and nine month periods
ended March 31, 2000 and 1999, is presented below.
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- ----
Software Licenses:
Revenue $0 $50,000 $14,721 $296,500
Costs and expenses 53,103 98,265 196,005 315,081
-------- ------- ------- -------
(Loss) for segment (53,103) (48,265) (181,284) (18,581)
-------- ------- ------- -------
Services:
Revenue 108,974 129,235 374,153 401,010
Costs and expenses 81,980 121,153 257,710 360,820
-------- ------- ------- -------
Income for segment 26,994 8,082 116,443 40,190
-------- ------- ------- -------
Mineral Exploration Products and Services:
Revenue 16,105 --- 16,105 ---
Costs and expenses 137,056 --- 164,778 ---
-------- ------- ------- -------
Income for segment (120,951) --- (148,673) ---
-------- ------- ------- -------
Total income (loss) for segments $(147,060) $(40,183) $(213,514) $21,609
======== ======= ======= =======
10
UNITRONIX CORPORATION
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
FORWARD LOOKING STATEMENTS
- --------------------------
In addition to historical information, this Quarterly Report contains forward-
looking statements. The forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those reflected in such forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which reflect
management's opinions only as of the date hereof. The Company undertakes no
obligation to revise or publicly release the results of any revision to these
forward-looking statements. Readers should carefully review the risk factors
described in other documents the Company files from time to time with the SEC,
including the Annual Report on Form 10-K for the fiscal year ended June 30, 1999
and the Quarterly Reports on Form 10-Q filed by the Company in fiscal 2000.
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 PRAXA software, software support services and
consulting services to existing customers during the past nine months. In
addition, the Company was marketing the latest version of the PRAXA software to
PRAXA users that are not covered by support agreements because of the ability
of the latest version to handle dates in the twenty-first century (year 2000
compliant or Y2K compliant). No orders were received for this software during
the nine month period, and efforts to market this software to existing customers
were disbanded in January, 2000. In order to better align costs with antic-
ipated revenues, the Companys director of sales was terminated as of December
31, 1999, and his services as a sales consultant were retained at a significant
cost savings to the Company. Although the Company will continue to attempt to
sell the current PRAXA software to new customers, there can be no assurances
that additional sales of the software will occur.
Discussions with another software development firm have been underway for a
year to have that firm create a graphical user interface for the Company's PRAXA
software, modify the software to operate with one or more relational database
systems and provide the software with e-commerce capabilities. A recent survey
of the PRAXA user base that was conducted to determine the level of interest in
these features indicated that, because of the lateness to market and the lack of
substantial new capabilities, sales of the product may not recoup the develop-
ment costs. There can be no assurance that these enhancements to the PRAXA
software will be developed or that they can be sold if they are developed.
The Company's majority owned subsidiary, Interactive Mining Technologies, LLC,
continued with the initial phase of a project to develop predictive software
that will be marketed to the mineral exploration industry. This phase consists
of building and evaluating a model to validate the techniques to be incorporated
in the final software product. The model is scheduled to be completed in June,
2000, at which time a decision will be made to proceed with development of the
software or to take some other course of action.
11
During the quarter ended March 31, 2000, Interactive Mining Technologies, LLC,
with minor ownership participation by Goldsat Mining, Inc., formed a new
Canadian corporation, Enersource Mapping, Inc. The new corporation acquired
the assets of an existing Canadian corporation that specialized in producing
tenement maps for sale to various parties with interests in the mining industry.
The formation of Enersource Mapping, Inc., and the subsequent purchase of the
assets of G. E. Jones Enterprises, Limited, were described in a Form 8-K that
was filed by the Company on February 24, 2000. The financial results for
Interactive Mining Technologies, LLC, and Enersource Mapping, Inc., are reported
under the business segment "Mineral Exploration Products and Services" and
are consolidated into the operating statements and balance sheets of the Company
Third Quarter Ended March 31, 2000, Compared to the Third Quarter Ended
- -----------------------------------------------------------------------
March 31, 1999
- --------------
Total revenue for the quarter ended March 31, 2000, decreased by 30% from
the period ended March 31, 1999. Revenue from the sale of software licenses was
nonexistent in the March, 2000 period. Revenue from software related services
decreased by 16% from the 1999 period to the 2000 period, as a result of some
customers not renewing their PRAXA support contracts. Management anticipates
that revenue from software and services will continue to decline as PRAXA
customers will continue to migrate to other software packages if the Company
cannot locate or develop products that are competitive with the current software
offerings from other vendors. As previously discussed in this document, the
Company has been attempting to structure a partnership with a software company
that has the expertise and resources to enhance the PRAXA system with a graphic
user interface and relational database capabilities. However, the limited
interest in such a product that was displayed in a recent survey of the PRAXA
user base raised doubts about the advisability of undertaking the project. The
Company and its proposed partner are currently evaluating the desirability of
undertaking the proposed project.
Three Months Ended
March 31,
------------------------
2000 Change 1999
------- -------- -------
Software licenses --- (100)% $50,000
Percentage of revenue 0% 27.9%
Software related services $108,974 (16)% $129,235
Percentage of revenue 87.1% 72.1%
Mineral exploration products and services $16,105 100% ---
Percentage of revenue 12.9% ---
------- -------
Total revenue $125,079 (30)% $179,235
======= =======
The cost of software licenses decreased by 46% from the three month period
ended March 31, 1999, to the period ended March 31, 2000. $16,000 of the
decrease is due to lower selling and marketing expenses, and the remainder
is due to lower administrative expenses. The cost of software related
services decreased by 32% from the 1999 period to the comparable period in 2000
due to lower demand for training and consulting services.
The cost of mineral exploration products and services were incurred by the
12
Company's majority owned subsidiary, Interactive Mining Technologies, LLC,
and its subsidiary, Enersource Mapping, Inc. All of the time expended by
Company employees and expenses incurred in performing duties for the subsid-
iaries are reflected in the cost of mineral exploration products and services.
The cost for this segment also includes all expenses incurred directly by
the subsidiaries, such as salaries, rent, office expenses and the cost of
producing the tenement maps.
Total costs and expenses increased by 24% from the period ended March 31, 1999,
to the like period in 2000. When coupled with the 30% decrease in revenues from
the 1999 period to the 2000 period, the loss from operations increased by
$(107,000), or 266%, from 1999 to 2000. Although management proposes to take
further steps to decrease expenses, it is anticipated that losses from
operations will continue to be incurred until such time as the Company or its
subsidiary can bring a successful new product to market.
Three Months Ended
March 31,
------------------------
2000 Change 1999
------- -------- -------
Cost of software licenses $ 53,103 (46)% $ 98,265
Percentage of revenue 42.5% 54.8%
Cost of software related services $ 81,980 (32)% $121,153
Percentage of revenue 42.6% 25.7%
Cost of mineral exploration products
and services $137,056 --- $ ---
Percentage of revenue 109.6% ---
------- -------
Total costs and expenses $272,139 24 % $219,418
======= =======
Nine Months Ended March 31, 2000, Compared to the Nine Months Ended
- -------------------------------------------------------------------
March 31, 1999
- --------------
Total revenue for the nine months ended March 31, 2000, decreased by 42%
from the corresponding period in 1999. Revenue from the sale of software
licenses decreased by 95% because only one PRAXA license upgrade was sold
during the 2000 period as compared with the sale of four license upgrades in
the 1999 period. Total revenue from the sale of services decreased by
approximately $27,000, or 7%, from the nine months ended December 31, 1999 to
the corresponding 2000 period. This decrease was due to lower revenues from
software support agreements, as customers continued to replace their PRAXA
software with other systems, and lower consulting and training revenues.
13
Nine Months Ended
March 31,
------------------------
2000 Change 1999
------- -------- -------
Software licenses $14,721 (95)% $296,500
Percentage of revenue 3.6% 42.5%
Software related services $374,153 (7)% $401,010
Percentage of revenue 92.4% 57.5%
Mineral exploration products & services $16,105 100% ---
Percentage of revenue 4.0% ---
------- -------
Total revenue $404,979 (42)% $697,510
======= =======
During the nine month period ended March 31, 2000, three license transfers for
Xentis software were purchased for resale to users of the PRAXA system.
During the comparable period in 1999, three license upgrades for Xentis
were purchased by the Company for resale to PRAXA users. The cost of software
related services decreased by 3% from the 1999 period to the like period in 2000
due to lower sales of training and consulting services.
The costs related to the mineral exploration products and services segment
were incurred by the Company's subsidiaries that operate in this segment. The
fact that the revenue for this segment is insignificant is indicative of the
start up nature of these operations.
Interactive Mining Technologies continued to fund the development of a model
to be used to confirm the validity of the science to be incorporated into
the predictive software product. The model is scheduled to be completed in
June, 2000, at which time a decision will be made to proceed with the software
development or to take other action. In the event that the model does not prove
the envisioned approach to the software design to be valid, Interactive Mining
Technologies management will reassess the desirability of proceeding with the
project.
Enersource Mapping, Inc., a majority owned subsidiary of the Company, which
began operating on February 1, 2000, acquired the assets of G.E. Jones Enter-
prises, Ltd. Enersource Mapping produces and markets tenement maps of major
areas of active mineral production and exploration around the world. An
internet web site, to be deployed in May, 2000, is being developed to facilitate
the sale of the maps.
During the nine month period ended March 31, 2000, the Company settled a
dispute with InterObjects, a software development firm that had been contracted
to develop an Enterprise Resource Planning system for the Company. The terms
of the settlement call for InterObjects to return to the Company $300,000 that
was paid to InterObjects by the Company in 1997 as partial payment for the new
software. The Company was paid $50,000 of the settlement amount in August,
1999, and received a note for the remaining $250,000, which will be paid over
a 24 month period. The $300,000 settlement was recorded as other income and
the legal fees that were incurred by the Company in reaching the settlement
was recorded as other expense. The addition of the net amount of the other
income and expenses resulted in income before taxes for the nine months ended
March 31, 2000, of $39,409.
14
Nine Months Ended
March 31,
------------------------
2000 Change 1999
------- -------- -------
Cost of software licenses $196,005 (38)% $315,081
Percentage of revenue 48.4% 45.2%
Cost of software related services $257,710 (29)% $360,820
Percentage of revenue 63.6% 51.7%
Cost of mineral exploration products
and services $164,778 100% ---
Percentage of revenue 40.1% ---
------- -------
Total costs and expenses $618,493 (8)% $675,901
======= =======
Liquidity and Capital Resources
- -------------------------------
As of March 31, 2000, the working capital deficit was $(664,057) as compared
to a deficit of $(614,714) at June 30, 1999.
Management projects that capital from sources other than operations will be
required to fund the Company's ownership position in Interactive Mining Tech-
nologies and its subsidiary, Enersource Mapping, Inc. The Company anticipates
raising this capital through the private placement of stock in the Company and
by selling a portion of its ownership position in Interactive Mining Tech-
nologies. This plan will require that new shares in the Company be authorized
by the current shareholders, as there is not sufficient stock available to
execute the plan. The shares held by existing shareholders will be diluted to
the extent that new stock is issued. There can be no assurance that the Company
will be able to raise additional funds and failure to do so may have a material
adverse impact on the Company's business and operations.
Management projects that sufficient funds will not be generated from the sale of
existing products and services to allow the Company to operate through the
period ended June 30, 2000. As a result, management anticipates that
additional financing will be required during the period to sustain the
Company's operations. There can be no assurance that funds sufficient to
operate through June 30, 2000, will be available on acceptable terms or at
all, in which case the Company may be forced to cease operations.
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 on October
25, 1996. The suit requested payment for damages resulting from the breach of
three contracts by CMSI to develop portions of a client-server ERP software
product, such contracts having been entered into in 1995 and 1996. The Company
was seeking an amount in excess of $150,503, which is the amount that the
Company paid to CMSI during the course of the contracts, plus costs, interest
and such other relief as the Court found to be just and equitable. On January
17, 1997, CMSI filed a counterclaim in the same Court alleging that the
15
Company was liable to CMSI in an amount exceeding $200,000 on account of the
Company's alleged breaches of the same contracts. During the three month
period ended March 31, 2000, the Company and CMSI withdrew their respective
suits against each, with CMSI agreeing to pay the Company $20,000.
On June 30, 1998, the Company filed for arbitration against InterObjects, a
software development firm, for breach of contract and failure to meet
milestones in the development of a new Enterprise Resource Planning system.
The Company made a prepayment of $300,000 in September of 1997 related to this
contract, all of which was charged to operating expenses in the year ended
June 30, 1998. Development of the new system by InterObjects ceased in January,
1998, and the contract was subsequently terminated.
The Company and InterObjects reached an agreement to settle their dispute during
the period ended September 30, 1999, without resorting to arbitration. Inter-
Objects agreed to repay the $300,000 that the Company had advanced to them for
the terminated software project. An initial payment of $50,000 was made by
InterObjects in August, 1999. A note for the remaining $250,000 that will be
paid by the founder of InterObjects in equal monthly installments over a 24
month period, along with interest on the unpaid balance, was accepted by the
Company. All payments that were scheduled to be received through January 1,
2000, have been received by the Company.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
A report on Form 8-K reporting the acquisition of the assets of G.E. Jones
Enterprises, Limited, by Enersource Mapping, Inc. on February 9, 2000, was
filed on February 24, 2000.
16
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 12, 2000
By: /s/William C. Wimer
---------------
William C. Wimer
Vice President, Operations and
Chief Financial Officer
17
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