U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2000
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File number 33-58694
VITRIX, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 13-3465289
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
51 West Third Street, Suite 310, Tempe, Arizona 85281
(Address of principal executive offices)
(480) 967-5800
(Issuer's telephone number)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: At November 10, 2000, the issuer had
outstanding 30,605,290 shares of Common Stock, par value $.005 per share.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
VITRIX, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
2000 2000
----------- -----------
<S> <C> <C>
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 188,309 $ 620,765
Accounts receivable - trade, net 279,893 229,717
Inventory 80,484 91,204
Prepaid expenses and other current assets 29,147 38,182
----------- -----------
TOTAL CURRENT ASSETS 577,833 979,868
PROPERTY AND EQUIPMENT, NET 158,735 168,779
----------- -----------
TOTAL ASSETS $ 736,568 $ 1,148,647
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 46,762 $ 46,303
Accounts payable 69,941 88,953
Accrued liabilities 138,598 145,143
Deferred revenue 147,897 152,307
----------- -----------
TOTAL CURRENT LIABILITIES 403,198 432,706
LONG-TERM DEBT, LESS CURRENT PORTION 27,322 34,231
----------- -----------
TOTAL LIABILITIES 430,520 466,937
----------- -----------
COMMITMENTS: -- --
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.005 par value, 50,000,000 shares authorized,
30,605,290 and 30,508,218 shares issued and outstanding 153,025 152,541
Contributed capital 2,508,198 2,498,005
Accumulated deficit (2,355,175) (1,968,836)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 306,048 681,710
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 736,568 $ 1,148,647
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Financial Statements
2
<PAGE>
VITRIX, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
2000 1999
------------ ------------
REVENUES:
Product sales $ 246,992 $ 199,291
Services revenue 113,190 3,378
------------ ------------
TOTAL REVENUES 360,182 202,669
COST OF REVENUES
Product 104,875 65,562
Services 54,854 --
------------ ------------
TOTAL COST OF REVENUES 159,729 65,562
------------ ------------
GROSS PROFIT 200,453 137,107
------------ ------------
COSTS AND EXPENSES:
Sales and marketing 246,137 97,042
Research and development 218,080 101,884
General and administrative 127,040 126,472
------------ ------------
TOTAL COSTS AND EXPENSES 591,257 325,398
------------ ------------
NET LOSS FROM OPERATIONS (390,804) (188,291)
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (3,145) (2,108)
Interest income 7,610 3,220
------------ ------------
4,465 1,112
------------ ------------
NET LOSS $ (386,339) $ (187,179)
============ ============
BASIC LOSS PER SHARE $ (0.01) $ (0.01)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 30,516,125 23,345,379
============ ============
The Accompanying Notes are an Integral Part
of the Financial Statements
3
<PAGE>
VITRIX, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 2000 AND
THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
----------------------- -------------------- CONTRIBUTED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
----------- --------- ---------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1999 10,000,000 $ 100,000 13,241,031 $ 66,205 $ 956,468 $ (870,617) $ 252,056
Issuance of stock options for services -- -- -- -- 12,000 -- 12,000
Exercise of stock options 70,000 350 26,375 -- 26,725
Exercise of warrants -- -- 264,687 1,323 4,500 -- 5,823
Sale of common stock and warrants,
net of costs -- -- 6,732,500 33,663 1,409,662 -- 1,443,325
Issuance of common stock for services -- -- 200,000 1,000 39,000 -- 40,000
Preferred stock conversion (10,000,000) (100,000) 10,000,000 50,000 50,000 -- --
Net loss -- -- -- -- -- (1,098,219) (1,098,219)
----------- --------- ---------- -------- ---------- ----------- -----------
Balance at June 30, 2000 -- -- 30,508,218 152,541 2,498,005 (1,968,836) 681,710
Exercise of stock options -- -- 97,072 484 10,193 -- 10,677
Net loss -- -- -- -- -- (386,339) (386,339)
----------- --------- ---------- -------- ---------- ----------- -----------
Balance at September 30, 2000 -- $ -- 30,605,290 $153,025 $2,508,198 $(2,355,175) $ 306,048
=========== ========= ========== ======== ========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Financial Statements
4
<PAGE>
VITRIX, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
----------------------
2000 1999
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(386,339) $(187,179)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 15,976 7,773
Stocks options issued for services -- 11,500
Changes in Assets and Liabilities:
Accounts receivable-trade (50,176) 4,842
Inventory 10,720 (13,407)
Prepaid expenses and other current assets 9,035 (29,694)
Accounts payable (19,012) (26,356)
Accrued liabilities (6,545) 2,403
Deferred revenue (4,410) 2,640
--------- ---------
NET CASH USED BY OPERATING ACTIVITIES (430,751) (227,478)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,932) (12,781)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (5,932) (12,781)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital leases (6,450) (1,709)
Proceeds from exercise of stock options 10,677 --
Proceeds from issuance of stock -- 300,000
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,227 298,291
--------- ---------
Net change in cash and cash equivalents (432,456) 58,032
Cash and cash equivalents at beginning of period 620,765 376,365
--------- ---------
Cash and cash equivalents at end of period $ 188,309 $ 434,397
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 3,145 $ 1,376
========= =========
Income taxes paid $ -- $ --
========= =========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of stock options for services $ -- $ 11,500
========= =========
The Accompanying Notes are an Integral Part
of the Financial Statements
5
<PAGE>
VITRIX, INC.
NOTE TO FINANCIAL STATEMENTS
(UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND INTERIM FINANCIAL STATEMENTS
The accompanying financial statements of Vitrix, Inc. ("Vitrix" or the
"Company") have been prepared in accordance with generally accepted accounting
principles ("GAAP"), pursuant to the rules and regulations of the Securities and
Exchange Commission, and are unaudited. Accordingly, they do not include all the
information and footnotes required by GAAP for complete financial statements. In
the opinion of management, all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation of the results for the interim
periods presented have been made. The results for the three-month period ended
September 30, 2000 may not be indicative of the results for the entire year.
These financial statements should be read in conjunction with the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 2000.
LOSS PER SHARE:
Basic loss per share of common stock was computed by dividing the net loss by
the weighted average number of shares outstanding of common and preferred stock.
The preferred stock outstanding as of September 30, 1999 was included in the
calculation due to its automatic conversion into common stock at such time as
the Company had sufficient authorized common stock to issue the shares. In
October 1999, the Company amended it Articles of Incorporation to increase the
number of shares of authorized common stock to 50,000,000, resulting in the
automatic conversion of the preferred stock to shares of common stock on a
one-for-one basis.
Diluted earnings per share are computed based on the weighted average number of
shares of common stock and dilutive securities outstanding during the period.
Dilutive securities are options and warrants that are freely exercisable into
common stock at less than the prevailing market price. Dilutive securities are
not included in the weighted average number of shares when inclusion would
increase the earnings per share or decrease the loss per share.
SUBSEQUENT EVENTS:
The Company generated cash of approximately $120,000 during the month of October
2000 through the exercise of approximately 850,000 warrants by various
shareholders pursuant to a Warrant Exercise Agreement.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
REVENUES. Revenue for three month period ended September 30, 2000 (the
"reporting period"), rose 78% to $360,182, compared to revenue of $202,669 for
the three month period ended September 30, 1999 (the "comparable period"). This
growth was principally the result of an increased customer demand for the
Company's bundled software and hardware solutions, which resulted in an increase
in sales volume.
GROSS PROFIT. Gross profit as a percentage of revenues decreased to 56% in
the reporting period, compared to 68% in the comparable period. The decrease in
gross profit as a percentage of revenues was primarily attributable to an
increase in the proportion of bundled software and hardware solutions sales to
software-only solutions sales. The average gross profit per unit sold on
software and hardware units is lower than the average gross profit margin on
software-only solutions. Due to the Company's increased service revenue volume,
the Company has hired additional service support personnel resulting in an
increase in cost of services.
EXPENSES. Sales and marketing expenses were $246,137, or 68% of revenues,
in the reporting period, compared to $97,042, or 48% of revenues, in the
comparable period. The increase in sales and marketing expense is attributable
to increased labor costs resulting from the hiring of additional salespeople and
increased advertising and promotional expense.
Research and development expenses were $218,080, or 61% of revenues, in the
reporting period, compared to $101,884, or 50% of revenues, in the comparable
period. The increase in research and development expense is attributable to
increased labor costs as a result of the Company's commitment to enhance
existing products and develop new products.
General and administrative expenses were $127,040, or 35% of revenues, in
the reporting period, compared to $126,472, or 62% of revenues, in the
comparable period. The decrease in general and administrative expenses as a
percentage of revenue is primarily attributable to maintaining the same level of
expenses while increasing revenue.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at September 30, 2000 was $174,635, compared to $337,881 at
September 30, 1999. Cash and cash equivalents at those dates amounted to
$188,309 and $434,397, respectively.
OPERATIONS. Net cash used by operations increased to $430,751 in the
reporting period, compared to net cash used by operations of $227,478 in the
comparable period. The increase was primarily attributable to an increase in the
net loss and accounts receivable and a decrease in accounts payable.
INVESTMENT ACTIVITIES. For the reporting period, the Company used $5,932 to
purchase property and equipment, compared to $12,781 of property and equipment
purchases in the comparable period.
7
<PAGE>
FINANCING ACTIVITIES. Net cash provided by financing activities decreased
to $4,227 in the reporting period, compared to $298,291 in the comparable
period. The decrease was due to the Company raising $300,000 through a private
placement in the comparable period.
As of October 31, 2000, the Company believes that its current working
capital and funds generated from operations are sufficient to fund the Company's
operations for the next three months. In the absence of obtaining additional
capital through asset sales, securing a revolving credit facility, debt or
equity offerings, or a combination of the foregoing, the Company will be unable
to fund its operations and will experience defaults under certain of its
contractual agreements, including its lease agreements for its corporate
headquarters. These agreements are subject to termination in the event of
default. Certain of the parties to these agreements could take legal action
against the Company to collect amounts owed to them. Accordingly, the Company's
financial condition could require that the Company seek the protection of
applicable reorganization laws in order to avoid or delay actions by third
parties, which could materially adversely affect, interrupt or cause the
cessation of the Company's operations. The Company's independent certified
public accountants have issued a going concern opinion on the financial
statements of the Company for the year ended June 30, 2000.
The Company has on-going discussions with various financial sources in an
effort to raise additional capital. While the Company believes that it will
succeed in attracting additional capital, there can be no assurance that the
Company's efforts will be successful.
FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-QSB contains certain forward-looking
statements and information which the Company believes are within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The forward - looking statements
contained herein can be identified by the use of forward-looking terminology
such as "believes," "expects," "may," "will," "should," or "anticipates," or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy that involve risks and uncertainties. The Company wishes
to caution the reader that these forward-looking statements that are not
historical facts, are only predictions. No assurances can be given that the
future results indicated, whether expressed or implied, will be achieved. While
sometimes presented with numerical specificity, these projections and other
forward-looking statements are based upon a variety of assumptions relating to
the business of the Company, which, although considered reasonable by the
Company, may not be realized. Because of the number and range of assumptions
underlying the Company's projections and forward-looking statements, many of
which are subject to significant uncertainties and contingencies that are beyond
the reasonable control of the Company, some of the assumptions inevitably will
not materialize, and unanticipated events and circumstances may occur subsequent
to the date of this report. These forward-looking statements are based on
current expectations and the Company assumes no obligation to update this
information. Therefore, the actual experience of the Company and the results
achieved during the period covered by any particular projections or
forward-looking statements may differ substantially from those projected.
Consequently, the inclusion of projections and other forward-looking statements
should not be regarded as a representation by the Company or any other person
that these estimates and projections will be realized, and actual results may
vary materially. There can be no assurance that any of these expectations will
be realized or that any of the forward-looking statements contained herein will
prove to be accurate.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time involved in legal proceedings arising from
the normal course of business. As of the date of this report, the Company is not
currently involved in any legal proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the quarter ended
September 30, 2000.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
VITRIX, INC.
Dated: November 14, 2000 By /s/ Craig J. Smith
------------------------------------
Craig J. Smith
Chief Financial Officer
10
