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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
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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<S> <C>
For Quarter Ended: Commission File Number:
March 31, 1996 0-2295
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UC'NWIN SYSTEMS CORPORATION
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(Exact name of Registrant as specified in its charter)
DELAWARE APPLIED FOR
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(State or other jurisdiction of incorporation or organization) (IRS Employer Identification number)
5601 North Powerline Road, Suite 404, Ft Lauderdale, Florida 33309
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(Address of principal executive offices)
(954) 492-9797
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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 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 Registrant was required to
file such reports) and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
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The number of shares of Common Stock outstanding as of March 31, 1996 is
25,739,997.
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UC'NWIN SYSTEMS CORPORATION
INDEX TO FORM 10-Q
MARCH 31, 1996
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995
Consolidated Statements of Operations
Three months ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995
Notes to Consolidated Financial Statements
ITEM 2. Managements Discussion and Analysis of Results of
Operations and Financial Condition
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
ITEM 2. Changes in securities
ITEM 3. Defaults upon senior securities
ITEM 4. Submission of matters to a vote of security holders
ITEM 5. Other Information
ITEM 6. Exhibits and Reports on Form 8-K
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UC'N WIN SYSTEMS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
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(UNAUDITED)
<S> <C> <C>
ASSETS
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CURRENT ASSETS:
Cash $ - $ 14,304
Accounts receivable 4,024 11,025
Subscription receivable - 318,750
Prepaid expenses 16,614 41,531
Due from employees 1,230 2,649
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Total current assets 21,868 388,259
Furniture and equipment - net 152,830 167,047
Kiosks - net 1,156,201 1,339,784
Investment in Winners All International, Inc. 29,158 27,063
Intangible assets - net 298,760 307,375
Deposits 2,379 1,184
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$ 1,661,196 $ 2,230,712
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Cash overdraft $ 9,348 $ -
Payroll taxes payable and penalties 232,738 209,534
Accounts payable 890,408 865,489
Accrued expenses 239,442 200,439
Notes payable 200,000 300,000
Due to shareholders 86,077 243,965
Loans payable - related party 217,654 186,657
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Total current liabilities 1,875,667 2,006,084
Commitments and contingencies - -
STOCKHOLDERS' EQUITY
Common shares, $.01 par value, 60,000,000
shares authorized, 25,739,997 and 24,930,497
shares issued and outstanding, respectively 257,400 249,305
Additional paid-in-capital 13,476,596 13,182,596
Accumulated deficit (13,948,467) (13,207,273)
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Total stockholders' equity (214,471) 224,628
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$ 1,661,196 $ 2,230,712
============ ============
</TABLE>
See Notes to consolidated financial statements
1
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UC'N WIN SYSTEMS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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1996 1995
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(UNAUDITED)
<S> <C> <C>
SALES $ 51,730 $ -
EXPENSES
General and administrative 554,077 283,511
Advertising and marketing 33,639 83,960
Depreciation and amortization 206,415 212,144
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794,131 579,615
OTHER INCOME (EXPENSE)
Royalty income - 145,833
Interest expense (2,154) -
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(2,154) 145,833
NET LOSS $(744,555) $(433,782)
========= =========
NET LOSS PER SHARE $ (0.03) $ (0.02)
========= =========
</TABLE>
See Notes to consolidated financial statements
2
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UC'N WIN SYSTEMS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1996 1995
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(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(744,555) $ (800,809)
Ajustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 206,415 212,125
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(538,140) (588,684)
Changes in assets and liabilities
(Increase) decrease in accounts receivable 7,001 -
(Increase) decrease in investments - (114,976)
(Increase) decrease in due from employees 1,419 -
(Increase) decrease in prepaid expenses 24,917 -
(Increase) decrease in subscription receivable 318,750 3,182,075
(Increase) decrease in loans receivable - 9,249
(Increase) decrease in due from affiliate - (587,096)
(Increase) decrease in intangible assets - 37,882
Increase (decrease) in cash overdraft 9,348 -
Increase (decrease) in due to shareholders (157,888) -
Increase (decrease) in notes payable (100,000) -
Increase (decrease) in accounts payable and accrued liabilities 63,922 474,822
Increase (decrease) in payroll taxes payable and penalties 23,204 -
Increase (decrease) in loans payable-related party 30,997 (448,699)
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221,670 2,553,257
NET CASH USED BY OPERATING ACTIVITIES (316,470) 1,964,573
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment/Sale of equipment 2,166 (1,333,776)
Increase in investments (2,095) -
Increase (decrease) in minority interest - (488,440)
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NET CASH USED BY INVESTING ACTIVITIES 71 (92,933,016)
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CASH FLOWS FORM FINANCING ACTIVITIES
Issuance of Stock 302,095 -
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NET CASH PROVIDED BY FINANCING ACTIVITIES 302,095 -
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NET DECREASE IN CASH (14,304) (90,968,443)
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CASH AT BEGINNING OF PERIOD 14,304 (3,772)
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CASH AT END OF PERIOD $ - $ 138,585
========= ============
</TABLE>
See Notes to consolidated financial statements
3
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UC'NWIN SYSTEMS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-QSB Rule 10-01 (covering those rules pertaining to Interim
Financial Statements) of Regulation S-X. They do not include all
information and footnotes required by generally accepted accounting
principles for complete financial statements. However, except as
disclosed herein, there has been no material change in the information
disclosed in the notes to consolidated financial statements included
in Form 10-K of UC'NWIN Systems Corporation (the "Company") for the
year ended December 31, 1995. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for the fair presentation have been included. Operating
results for the three month period ended March 31, 1996, are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1996.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
NOTE 2: INVESTMENT IN WINNERS' ALL INTERNATIONAL, INC.
The Company has increased their investment in Winners' All
International, Inc. from 41% at December 31 1995 to 46% as of March 31
1996. During the quarter ended March 31, 1996 the Company acquired
838,000 shares of common stock in Winners' All International, Inc.
through the issuance of 209,500 shares of common stock in the Company,
such shares acquired have been recorded on the equity basis at the
amount of $2,095.
4
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UC'NWIN SYSTEMS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3: CONVERSION OF INDEBTEDNESS
In January 1996, an individual converted $100,000 of indebtedness for
100,000 shares of common stock and 50,000 warrants to purchase 50,000
shares of common stock at $1.50 per warrant.
5
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ITEM 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
Quarter ended March 31, 1996 compared to the Quarter ended March 31, 1995.
During the quarter ended March 31, 1996, UC'NWIN Systems Corporation "the
Company" decreased their spending on marketing and administrative costs in an
effort to preserve working capital and minimize cash requirements. The general
and administrative expenses decreased from $1,079,505 to $794,131 for the
comparative three months ended March 31, 1995. The decrease was attributed to
the reduction in operating expenses due to the ending of the one year agreement
for the Shell Oil Company promotion.
The expenses of UC'NWIN Systems, Inc. and UC'NWIN Systems Corporation for the
quarter ended March 31, 1996 were $587,716 excluding depreciation and
amortization. In December 1994 the Company formed WinNetwork, LLC ("WinNet"),
a joint venture arrangement between Winners All, Ltd. and UC'NWIN Systems, Inc.
to minimize operational costs between the companies and to maximize the
exploitation of the UC'NWIN System.
WinNet is aggressively pursuing kiosk and software contracts for the joint
promotion between WinNet and retailers and manufacturers of multiple household
name products. Additionally, WinNet has received significant interest in
supplying kiosks for proprietary purposes, which would require leasing kiosks
to the proprietary customers and charging for software programming and
updating. Significant interest for the UC'NWIN System has also been received
in the United Kingdom and Europe. The Company has developed sales in the
United Kingdom during the three months ended of $51,730.
LIQUIDITY AND CAPITAL RESOURCES
The Company will require financing to create new software programs and to
manufacture and place additional kiosks and these software programs. Such
financing may be in the form of equity, debt or the leasing of the kiosks and
related equipment. The terms of the WinNet agreement states Winners All, Ltd.
has agreed to provide $5,000,000 of financing which is estimated by management
6
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sufficient to enable the Company to achieve profitability. Winners All, Ltd.
provided $3,182,075 of financing through September 30, 1995 by the sale of
common stock in its parent company Winners All International, Inc. UC'NWIN
Systems Corporation converted $300,000 of financing for the quarter ended March
31, 1996 into equity. The Company is seeking to amend the operating agreement,
since WIN is not able to fulfill their obligation to fund WinNet and the
Company has assumed the obligation in order to protect their investment. Also,
the Company has initiated discussions with financial institutions to secure
financing for the manufacturing of kiosks related to the sale or lease of
proprietary kiosks.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS - N/A
Item 2. CHANGES IN SECURITIES - N/A
Item 3. DEFAULT UPON SENIOR SECURITIES - N/A
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS - N/A
Item 5. OTHER INFORMATION - N/A
Item 6. EXHIBITS AND REPORTS
During the quarter ended March 31, 1996 and upto the time of filing the Company
entered into the following agreements:
(1) On April 2, 1996 the Company entered into a five year contract with
M.H.Meyerson & CO., Inc. to perform investment banking services to the
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Company which includes, without limitation, assistance in mergers,
acquisitions, internal capital structuring and placement of new debt and equity
issues. In consideration for its services Meyerson received Warrants to
purchase a total of 500,000 shares of Common Stock with an exercise price of
$2.00 per share.
(2) On April 17, 1996 the Company entered into a twelve month professional
consulting agreement with Richard Gladstone to develop and distribute corporate
fact sheets and information summaries designed to advise potential distributors
and users of the Company's technology. In consideration for the Consultants
services the board of directors authorized the issuance of 100,000 shares, each
consisting of one share of common stock and a 90 day option to purchase 500,000
shares, exercisable at 50% of the closing price of the stock the day before it
is issued. At the time of filing the option had not been exercised.
(3) On May 5, 1996 the Company entered into a twelve month professional
consulting agreement with Lyle K. Pfeffer to consult with the officers and
directors of the Company with respect to the Company's relationship with its
shareholders, potential investors and industry securities analysts. The
Consultant shall arrange and co-ordinate "Roadshows", individual meetings at
which representatives of the company shall meet with shareholders, potential
investors and industry securities analysts. in consideration for the
Consultants services the board of directors authorized the issuance of
1,000,000 shares of common stock and an option to purchase 1,500,000 options of
common stock exercisable at $0.50 for a term of three years.
8
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SIGNATURES
Pursuant to the requirement 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.
UC'NWIN Systems Corporation
Registrant
Date: July 9, 1996 By: /s/ John Neilson
------------------------
John Neilson
Director, President and
Chief Executive Officer
Date: July 9, 1996 By: /s/ Ivan Thornley-Hall
------------------------
Ivan Thornley-Hall
Director, Secretary and
Chief Financial Officer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UC'NWIN SYSTEMS CORPORATION FOR THE THREE MONTHS ENDED
MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 4,024
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,868
<PP&E> 2,161,272
<DEPRECIATION> 852,241
<TOTAL-ASSETS> 1,661,196
<CURRENT-LIABILITIES> 1,875,667
<BONDS> 0
0
0
<COMMON> 257,400
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,661,196
<SALES> 0
<TOTAL-REVENUES> 51,730
<CGS> 0
<TOTAL-COSTS> 794,131
<OTHER-EXPENSES> 2,154
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (744,555)
<INCOME-TAX> 0
<INCOME-CONTINUING> (744,555)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (744,555)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
