<PAGE> 1
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 OT 1934
For Quarter Ended Commission File Number
June 30, 1996 0-2295
UC'NWIN SYSTEMS CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE APPLIED FOR
(State or other jurisdiction of incorporation or organization) (IRS Employer Identifiacation number)
</TABLE>
5601 North Powerline Road, Ft. Lauderdale, FL 33309
(Address of principal executive offices) (Zip Codes)
(954) 492-9797
(Registrant's telephone number, including area code)
Indicated 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 Registrant was required
to file such reports)and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
---- ----
The number of shares of Common Stock outstanding as of June 30, 1996 is
27,624,997 shares.
<PAGE> 2
UC'NWIN SYSTEMS CORPORATION
INDEX TO FORM 10-QSB
JUNE 30, 1996
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets-
June 30, 1996 and December 31, 1995 1
Statements of Operations-
Six months ended June 30, 1996 and 1995 2
Statements of Operations-
Three months ended June 30, 1996 and 1995 3
Statements of Cash Flows-
Six months ended June 30, 1996 and 1995 4
Notes to the Financial Statements 5-7
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 8-9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 10
ITEM 2. Changes in securities 10
ITEM 3. Defaults upon senior securities 10
ITEM 4. Submission of matters to a vote of security holders 10
ITEM 5. Other Information 10
ITEM 6. Exhibits and Reports on Form 8-K 10-11
Signatures 12
Exhibit 27
<PAGE> 3
UC'NWIN SYSTEMS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
--------------- -------------
(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 8,012 $ 14,304
Accounts receivable 3,539 11,025
Subscription receivable - 318,750
Prepaid expenses - 41,531
Due from employees - 2,649
----------- -----------
Total current assets 11,551 388,259
Furniture and equipment - net 142,887 167,047
Kiosks - net 990,870 1,339,784
Investment in Winners All International, Inc. 29,158 27,063
Intangible assets - net 290,125 307,375
Deposits 1,004 1,184
----------- -----------
$ 1,465,595 $ 2,230,712
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Payroll taxes payable and penalties $ 222,8$2 $ 209,534
Accounts payable 886,106 865,489
Accrued expenses 284,442 200,439
Notes payable 200,000 300,000
Due to shareholders 152,278 243,965
Loans payable - related party 237,128 186,657
----------- -----------
Total current liabilities 1,982,786 2,006,084
Commitments and contingencies - -
STOCKHOLDERS' EQUITY
Common shares, $.01 par value, 60,000,000
shares authorized, 27,624,997 and 24,930,497
shares issued and outstanding, respectively 276,250 249,305
Additional paid-in-capital 14,573,094 13,182,596
Accumulated deficit (14,759,452) (13,207,273)
Unearned compensation (607,083) -
------------ -------------
Total stockholders' equity (517,191) 224,628
------------ ------------
$ 1,465,595 $ 2,230,712
============ ============
</TABLE>
See notes to consolidated financial statements
1
<PAGE> 4
UC'NWIN SYSTEMS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------------------
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
SALES $ 51,730 $ -
EXPENSES
General and administrative 1,213,233 2,033,154
Advertising and marketing 35,551 340,830
Depreciation and amortization 350,994 529,050
------------ ------------
1,599,778 2,903,034
OTHER INCOME (EXPENSE)
Minority interest - 1,109,801
Interest expense (4,131) -
Other income - 2,379
------------ ------------
(4,131) 1,112,180
NET LOSS $ (1,552,179) $ (1,790,854)
============ ============
Weighted Average Common Shares Outstanding 26,277,747 20,047,247
============ ============
NET LOSS PER SHARE $ (0.06) $ (0.09)
============ ============
</TABLE>
See notes to consolidated financial statements
2
<PAGE> 5
UC'NWIN SYSTEMS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-------------------------------------
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
SALES $ - $ -
EXPENSES
General and administrative 659,156 1,154,926
Advertising and marketing 1,912 139,553
Depreciation and amortization 144,579 316,925
------------ ------------
805,647 1,611,404
OTHER INCOME (EXPENSE)
Minority interest - 621,359
Interest expense (1,977) -
------------ ------------
(1,977) 621,359
NET LOSS $ (807,624) $ (990,045)
============ ============
Weighted Average Common Shares Outstanding 26,682,497 20,047,247
============ ============
NET LOSS PER SHARE $ (0.03) $ (0.05)
============ ============
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 6
UC'NWIN SYSTEMS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------------
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,552,179) $(1,790,854)
Ajustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 350,994 529,050
Unearned compensation amortization 117,917 -
----------- -----------
(1,083,268) (1,261,804)
Changes in assets and liabilities
(Increase) decrease in accounts receivable 7,486 (41,200)
(Increase) decrease in investments - (54,294)
(Increase) decrease in due from employees 2,649 -
(Increase) decrease in prepaid expenses 41,531
(Increase) decrease in subscription receivable 318,750 3,182,075
(Increase) decrease in loans receivable - (1,018)
(Increase) decrease in due from affiliate - (987,166)
(Increase) decrease in other assets 180 36,405
(Increase) decrease in intangible assets 43,219 37,882
(Increase) decrease in other assets - (3,229)
Increase (decrease) in due to shareholders (91,687) -
Increase (decrease) in notes payable (100,000) -
Increase (decrease) in accounts payable and accrued liabilities 104,620 935,356
Increase (decrease) in other current liabilities - 74,662
Increase (decrease) in payroll taxes payable and penalties 13,298 -
Increase (decrease) in loans payable-related party 50,471 905,803
----------- -----------
390,517 4,085,276
NET CASH USED BY OPERATING ACTIVITIES (692,751) 2,823,472
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment/Sale of equipment 23,056 (1,704,413)
Increase in investments (2,095) -
Increase (decrease) in minority interest - (1,109,801)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES 20,961 (2,814,214)
----------- -----------
CASH FLOWS FORM FINANCING ACTIVITIES
Issuance of Stock 665,498 -
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 665,498 -
----------- -----------
NET DECREASE IN CASH (6,292) 9,258
----------- -----------
CASH AT BEGINNING OF PERIOD 14,304 (3,772)
----------- -----------
CASH AT END OF PERIOD $ 8,012 $ 5,486
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
NON CASH FINANCING ACTIVITIES:
Stock issued for services $ 725,000 $ -
=========== ===========
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 7
UC'NWIN SYSTEMS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 six
month period ended June 30, 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.
5
<PAGE> 8
UC'NWIN SYSTEMS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3: CONVERSION OF INDEBTEDNESS
a) In January 1996, an individual converted $100,000 of indebtedness
for 200,000 shares of common stock and 100,000 warrants to purchase
100,000 shares of common stock at $1.50 per warrant.
b) In February 1996, a major shareholder converted $200,000 of
indebtedness for 400,000 shares of common stock and 200,000 warrants to
purchase 200,000 shares of common stock at $1.50 per warrant.
c) In May 1996, $30,348 of trade payables were converted for 60,000
shares of common stock.
NOTE 4: CONSULTING AGREEMENTS
a) On April 2, 1996, the Company entered into a five year contract with
M.H. Meyerson & Co., Inc. to perform investment banking services for
the Company. In consideration for its services M.H. Meyerson received
warrants to purchase a total of 500,000 shares of common stock with an
exercise price of $2.00 per share. Such warrants were valued at $25,000
and will be amortized over five years.
b) 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 Consultant's 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. These shares issued were valued at $50,000 and the stock
options issued were valued at $50,000. Such amounts will be amortized
over the next twelve months. In June 1996, Mr. Gladstone exercised his
option to purchase the 500,000 shares of common stock at $0.50 per
share by converting $180,000 of monies loaned to the Company and
$70,000 of trade payables incurred by the Company with his company for
travel related services.
c) 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. In
6
<PAGE> 9
UC'NWIN SYSTEMS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
consideration for the services to be rendered, 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. These shares issued were valued at
$500,000 and the options issued were valued at $100,000. Such amounts
will be amortized over the next twelve months. In June 1996, the
Company received $100,000 for the exercise of 200,000 options for
common stock at $.50 per share.
NOTE 5 SUBSEQUENT EVENTS
a) On July 19, 1996 the Company entered into a twelve month
professional consulting agreement with Mark Ellert to develop and
market corporate fact sheets and summaries designed to advise potential
distributors and users in the hotel and travel industry of the
Company's kiosk technology and in the retail industry potential
distributors of the Company's prepaid cellular telephone systems. In
consideration for the consultants services the directors authorized the
issuance of 450,000 shares of the Company's common stock and 450,000
stock options exercisable at $2.50 a share for three years.
b) On July 26, 1996 the Company entered into a joint marketing
agreement with Telecard Communications, Inc. ("TCI"), of New York to
act as a non-exclusive sales and marketing representative in the
marketing, distribution and sale of prepaid cellular telephones and
airtime, (the "Product"), for an initial term of five years with
automatic annual renewals thereafter unless terminated by either party
by written notice given at least ninety days prior to the expiration of
any yearly period. The Company may sell the Product within the United
States and its territories and in any foreign country. In full
consideration of TCI was granted by the Company a warrant to purchase
five hundred thousand shares of its common stock, $.01 par value,
having an exercise price of $.45 per share and a term of five years.
The Company will receive forty per cent of the net profits from the
sale of the Product during the term. Upon termination of this agreement
the Company will not be restricted in selling prepaid cellular
telephones and airtime to its customers as long as the cellular
telephone systems are manufactured by a manufacturer other than TCI's
vendor.
c) On August 8, 1996, the Company entered into a twelve month
professional consulting agreement with Richard Gladstone to develop and
market corporate fact sheets and summaries designed to advise potential
distributors and users of the Company's prepaid cellular telephone
systems in the travel and hospitality industries. In consideration for
the consultant's services the board of directors authorized the
issuance of 400,000 shares of the Company's common stock.
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
WinNetwork, LLC ("WinNet") a joint venture arrangement between Winners All, Ltd.
and UC'NWIN Systems, Inc., a subsidiary of UC'NWIN Systems Corporation (the
Company), organized to minimize operational costs between the two companies and
to maximize the exploitation of the UC'NWIN System. WinNet is pursuing kiosk and
software contracts for joint promotion between WinNet and retailers and
manufacturers of multiple household name products, but due to the lack of
sufficient working capital in the recent months, the Company has had to refocus
most of its efforts on raising funds to provide working capital to continue
pursuing the exploitation of the UC'NWIN System. Although the Company continues
to receive significant interest in supplying kiosks for proprietary purposes,
including the leasing of such kiosks and developing proprietary software
programs, the development and promotional work has been limited due to the lack
of sufficient working capital. The Company has also received interests in the
UC'NWIN System in the United Kingdom and Europe where the Company has received
$51,730 of sales for the six months ended June 30, 1996.
In July 1996, the Company entered into a joint marketing agreement with Telecard
Communications, Inc. of New York to sell pre-paid cellular telephones and
airtime. The Telecard pre-paid cellular service is a unique new technology with
patents pending which permits customer to pre-pay for their cellular airtime and
avoid all complications which preclude credit impaired customers from obtaining
cellular telephone accounts. Customers can purchase a pre-paid cellular
telephone for as little as $250 and avoid credit checks, turn-downs, long-term
contracts, security deposits and monthly invoices. The pre-paid cellular
telephones will be available through a network of major retailers, super
markets, drug stores, convenience stores and shopping malls.
Quarter ended June 30, 1996 compared to the Quarter ended June 30, 1995
The Company did not develop any reserves for the quarter ended June 30, 1996
(the "1996" Quarter); revenues for the quarter ended June 30, 1995 (the "1995
Quarter) were also $0. The development of revenues for the UC'NWIN System has
been difficult primarily due to the lack of sufficient working capital necessary
to adequately market an support the UC'NWIN System.
General and administrative costs have decreased significantly to $659,156 for
the 1996 Quarter as compared to $1,154,926 for the 1995 Quarter. Advertising and
marketing expenses decreased significantly to $1,912 for the 1996 Quarter from
$139,553 for the 1995 Quarter. Most of the decrease in the aforementioned
expenses can be attributed to the reduction in overhead due to the lack of
working capital. Approximately $116,000 of the 1996 Quarter expenses can be
attributed to amortization of consulting fees valued from stock and stock
options issued during the 1996 Quarter.
8
<PAGE> 11
Six months ended June 30, 1996 compared to the six months ended June 30, 1995.
During the quarter ended June 30, 1996 (the "1996 Period"),the Company decreased
their spending on marketing and administrative costs in an effort to preserve
working capital and minimize cash requirements. Sales have increased to $51,730
for the 1996 Period from $0 from the 1995 Period, primarily due to the
evaluation fees paid from the UK interest in the UC'NWIN System. The general and
administrative expenses decreased to $1,213,233 for the 1996 Period from
$2,033,154 for the 1995 Period. Advertising and marketing costs were also
reduced significantly for the 1996 Period of $35,551 as compared to $340,830 for
the 1995 Period. The decrease was largely attributed to the reduction in
operating expenses due to the ending of the one year agreement for the Shell Oil
Company promotion, and the reduction in overhead due to the lack of sufficient
working capital.
The expenses of the 1996 Period excluded depreciation and amortization expenses
of $350,994 as compared to $529,050 for the 1995 Period.
LIQUIDITY AND CAPITAL RESOURCES
The Company will require financing in the form of equity or debt to pursue the
promotion and development of the UC'NWIN System and the TCI joint venture of
promoting the prepaid cellular phones.
The Company has developed working capital during 1996 primarily through the debt
financings which were subsequently converted to common stock. During 1996,
$400,348 of payables were converted to common stock, and $280,000 of stock
options were exercised to fund working capital requirements. The Company has
also been able to employ consultants through the issuance of common stock or
stock options.
The working capital deficit increased at June 30, 1996 to $1,971,235 from
$1,617,825 at December 31, 1995.
The WinNet joint venture has failed to provide any additional financing above
the initial $3 million provided in early 1995. Consequently, the Company is
seeking to modify the terms of the initial joint venture arrangement, since
Winners All, Ltd. was not able to fulfill their obligations and the Company had
to fund such obligations.
The Company is currently in discussions to obtain debt and equity financings to
fund working capital needs for both the UC'NWIN System and the TCI joint
venture.
9
<PAGE> 12
PART III OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - None
ITEM 2. CHANGES IN SECURITIES - None
ITEM 3. DEFAULT UPON SENIOR SECURITIES - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES SHAREHOLDERS - None
ITEM 5. OTHER INFORMATION - None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(1) On July 26, 1996 the Company entered into a joint marketing agreement with
Telecard Communications, Inc. ("TCI"), of New York to act as a non-exclusive
sales and marketing representative in the marketing, distribution and sale of
prepaid cellular telephones and airtime, (the "Product"), for an initial term of
five years with automatic annual renewals thereafter unless terminated by either
party by written notice given at least ninety days prior to the expiration of
any yearly period. UC'NWIN Systems may sell the Product within the United States
and its territories and in any foreign country. In full consideration of TCI
agreeing to appoint the Company as its sales and marketing agent, TCI was
granted by the UC'NWIN a warrant to purchase Five Hundred Thousand (500,000)
shares of its common stock, $.01 par value, having an exercise price of $.45 per
share and a term of five (5) years. The UC'NWIN will receive forty per cent
(40%) of the Net Profits from the sale of the Product during the term. Upon
termination of this agreement the Company will not be restricted in selling
prepaid cellular telephones and airtime to its customers as long as the cellular
telephone systems are manufactured by a manufacturer other than TCI's vendor.
(2) On August 8, 1996, the Company entered into a twelve month professional
consulting agreement with Richard Gladstone to develop and market corporate fact
sheets and summaries designed to advise potential distributors and users of the
Company's prepaid cellular telephone systems in the travel and hospitality
industries. In consideration for the consultant's services the board of
directors authorized the issuance of 400,000 shares of the Company's common
stock.
(3) On July 19, 1996 the Company entered into a twelve month professional
consulting agreement with Mark Ellert to develop and market corporate fact
sheets and summaries designed to advise potential distributors and users in the
hotel and travel industry of the Company's kiosk technology and in the retail
industry potential distributors of the Company's prepaid cellular telephone
systems. In consideration for the consultants
10
<PAGE> 13
services the directors authorized the issuance of 450,000 shares of the
Company's common stock and 450,000 stock options exercisable at $2.50 a share
for three years.
11
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant had duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UC'NWIN Systems Corporation
Registrant
Date: August 20, 1996 By: /s/ John Neilson
---------------------------------
John Neilson
Director, President and Chief
Executive Officer
Date: August 20, 1996 By: /s/ Ivan Thornley-Hall
---------------------------------
Ivan Thornley-Hall
Director, Secretary and Chief
Financial Officer
12
<PAGE> 15
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
OF UC'NWIN SYSTEMS CORPORATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 8,012
<SECURITIES> 0
<RECEIVABLES> 3,539
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,551
<PP&E> 2,128,657
<DEPRECIATION> 994,900
<TOTAL-ASSETS> 1,465,595
<CURRENT-LIABILITIES> 1,982,786
<BONDS> 0
0
0
<COMMON> 276,250
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,465,595
<SALES> 0
<TOTAL-REVENUES> 51,730
<CGS> 0
<TOTAL-COSTS> 1,599,778
<OTHER-EXPENSES> 4,131
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,552,179)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,552,179)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,552,179)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
