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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 2000
Commission file number 2-93668-FW
UNIVIEW TECHNOLOGIES CORPORATION
--------------------------------
(Exact name of Registrant as specified in its charter)
Texas 75-1975147
(State of incorporation) (I.R.S. Employer Identification No.)
17300 North Dallas Parkway, Suite 2050, 75248
Dallas, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (972) 233-0900
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.10 per share
(Title of class)
Indicate by check mark whether the 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 [ ]
Indicate by check mark, if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
On August 31, 2000, the aggregate market value of the voting stock
held by non-affiliates of the Registrant (26,584,679 shares) was
approximately $85,602,666 based upon the average of the high and low
trading prices of the Common Stock as reported by the Nasdaq Stock Market
($3.22).
On August 31, 2000, there were 27,191,816 shares of Registrant's
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: Exhibits shown on Exhibit Index.
GENERAL INDEX
Page Number
ITEM l. BUSINESS 3
ITEM 2. PROPERTIES 6
ITEM 3. LEGAL PROCEEDINGS 7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 8
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 8
ITEM 6. SELECTED FINANCIAL DATA 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements 17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 17
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 18
ITEM 11. EXECUTIVE COMPENSATION 21
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 26
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 27
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K 28
SIGNATURES 29
EXHIBIT INDEX 59
UNIVIEW TECHNOLOGIES CORPORATION
PART I
ITEM l. BUSINESS
(a) General Development of Business
uniView Technologies Corporation and its subsidiaries (the
"Company") offer competencies and expertise in creating solutions for
video on demand. Our primary focus is the development of advanced
digital set top boxes and the related support technologies, such as
broadband connectivity and computer telephony integration software
(Customer Service Support Software). We market our products and services
both domestically and internationally focusing on telecommunications,
hospitality, utilities, banking, multilevel marketing, and other Fortune
1,000 companies.
We were incorporated in Texas on July 13, 1984. We filed an S-18
registration statement in November 1984 and completed the registered
offering in January 1985. On November 8, 1993 our stock was first listed
on the Nasdaq Stock Market.
In November 1993, we acquired Curtis Mathes Corporation (CMC), maker
of consumer electronics products relating specifically to the home
entertainment industry. CMC does not currently manufacture its own
products, but rather has elected to license its brand to third parties to
manufacture and market comparable consumer electronics products.
In 1995 we began development of our proprietary Internet/television
"convergence" technology, designed to enhance the capabilities of
television. We introduced our first set top box in 1996, which
incorporated our proprietary technology. This set top box connected to
our own Internet service, the uniView Xpresswayr, which was developed
concurrently with the set top box technology, and included our own "back
office" support.
In 1997 we began offering engineering services in connection with
our revolutionary set top box and, today, we use convergence devices and
integration expertise to design custom broadband networks for clients in
multi-level marketing, hospitality, medical facilities, utilities,
banking, and telecommunications. In addition to complete network system
design and integration, we also assist in web site development, web site
hosting, customer service, and full international Internet access, as
well as product research and development.
In 1999 we added computer telephony integration (CTI) capabilities
to our product offerings and we are now able to provide full-scale
customized call center solutions. The transition from a consumer
electronics company to a full-fledged technology company has been
completed, as reflected by the Company's current name, "uniView
Technologies Corporation."
(b) Financial Information About Industry Segments
Please refer to Note O of the Notes to Consolidated Financial
Statements in this Form 10-K for information concerning Industry
Segments.
(c) Narrative Description of Business
Major Markets, Products and Services
Our uniView digital set top box technology is available for
licensing by customers wishing to manufacture and market a set top box
that that provides a consumer with easy and affordable access to the
Internet through the television medium. Our set top units offer video on
demand, high-speed Internet access, broadcast entertainment programming
and virtually limitless information and content streams. Through our
advanced set top reference designs, our set top boxes allow our customers
to save and store 6 to 8 hours of programming, rewind, and pause shows
that are in mid broadcast; provide electronic programming guides that let
users select channels based on show, actor, or theme and can also be used
to collect demographic information; incorporates view/play of published
media; and incorporates VOD (Video on Demand) Stream.
Engineering Services are offered to modify an existing network
system, or design and implement a customized, cost-efficient, state-of-
the-art interactive broadband network that integrates one or more devices
such as personal computers, set top boxes, and/or web phones.
Administration and networking offerings to support broadband deployment
includes systems design, systems configuration, project management, UNIX
administration, NT administration, Novell administration, LAN and WAN
design, and Internet connectivity. Programming languages supported
include PERL, C, C++, Java, and Visual Basic. Database consulting is
available for DBA, Programming Oracle, and SQL Server.
ISP (Internet Service Provider) Services include the full-service
uniView Xpressway which allows the capability of providing our set top
box customers deployment tools such as web hosting, web development, and
corporate connectivity through Broadband, ADSL, ISDN or dial-up, as well
as providing the specialized Internet access and online services that
enhance the advanced features of the uniView set top box.
Our CTI technologies offer the customer support services for our
customer deployments as well as other customers in need of a full range
of standard or highly customized products for customer contact centers.
The Company's flagship CTI product, CIMphonyT, is a client server, open
architecture tool kit designed to support single site or multiple,
geographically distributed network of sites ranging in size from less
than 10 to more than 4,000 agents hosting inbound and outbound calls.
CIMphony manages voice and data transactions from multiple sources while
allowing for intelligent routing and queuing.
The Curtis Mathes trademark has been licensed for television
products to Avmark, Inc., a consumer electronics marketing company.
Avmark, through its relationship with Kmart, has made Curtis Mathes
products available in over 2000 Kmart stores across the nation. The
Curtis Mathes brand is also available for licensing for additional
product lines.
Patents, Trademarks and Licenses
We own or hold rights to all patents, trademarks and licenses that
we consider to be necessary in the conduct of our business including,
among others, the registered "uniView" trademark, which is due for
renewal in July 2003; the registered "Curtis Mathes" name and logo, which
is due for renewal in April 2005; the registered "Electric Globe" logo
which is due for renewal in September 2008; the registered "uniView
Xpressway" trademark which is due for renewal in May 2009; and the
registered uniView Xpressway "X" Design which is due for renewal in
September 2008.
Manufacturing
We do not own manufacturing facilities, but rather contract all
manufacturing to third parties, primarily located in Asia. Although
large volume manufacturing is generally the responsibility of our
customers, we do contract manufacturing on a direct basis for smaller
quantities and for initial deployments. Our set top box technology is
also available for licensing to others, who make their own arrangements
for manufacturing.
Environmental
We believe that we are in compliance with all applicable
environmental laws and do not anticipate that such compliance will have a
material effect on our future capital expenditures, earnings or
competitive position.
Major Customers
In fiscal year 2000, one customer accounted for approximately 11.2%
of consolidated revenues. Additionally at fiscal 2000 year end, one
customer accounted for 36.4% and another customer accounted for 19.3% of
trade accounts receivable. We had no customers in 1999 accounting for
more than 10% of our consolidated revenues, although we had one customer
in 1999 accounting for 17% of our trade accounts receivable.
Competition
The industry in which we and our licensees operate is intensely and
increasingly competitive and includes a large number of technology
development and consulting companies, ISP's and manufacturers of consumer
electronics products. A number of companies have announced development
of, or have introduced Internet-television convergence devices and
technologies similar to our technologies. Such competitors include,
among others: (i) suppliers of low-cost Internet access technologies,
such as "network computer" devices promoted by Oracle and others, (ii)
"set top" boxes developed by WebTV Networks, Scientific Atlanta and
others, as well as (iii) video game devices that provide Internet access
such as the Sega Saturn, the Sony Playstation and the Nintendo 64. In
addition, manufacturers of television sets have announced plans to
introduce Internet access and Web browsing capabilities into their
products or through set top boxes, using technologies supplied by others.
Personal computer manufacturers, such as Gateway 2000, have announced
products that offer full-fledged television viewing, combined with
Internet access. Operators of cable television systems also plan to
offer Internet access in conjunction with cable service. We also compete
with various national and local Internet service providers, such as the
Microsoft Network, AT&T Corp., MCI Communications Corporation, Netcom and
others, and commercial on-line services such as America Online, Inc.,
ICTV and @Home Network. Competition occurs principally in the areas of
style, quality, functionality, service, design, product features and
price of the licensed product.
Research and Development
We view our ability to offer new, improved, and innovative
interactive broadband technologies as an important component in our plan
for future growth. We intend to take advantage of licensing
opportunities, as well as pursue internal and external development of new
technology as may be necessary to meet customer demand and to achieve and
maintain a competitive position in the marketplace.
Employees
As of June 30, 2000, we employed 104 persons. We believe that our
employee relations are good.
Warranty
CMC continues to meet its warranty obligations through an outside
warranty service provider which specializes in warranty service and
repair for consumer electronics. By contracting these services to an
outside company, CMC has been able to more efficiently provide consistent
high quality warranty support, and we have been able to eliminate the
direct overhead associated with the warranty support function. Amounts
have been accrued to cover estimated product warranty costs. Many of the
warranties on products sold in the past are expiring, and due to lower
product sales in the past few years CMC's warranty obligations are slowly
diminishing. (See Note H of the Notes to Consolidated Financial
Statements for further warranty information.)
ITEM 2. PROPERTIES
Location Purpose/Use Owned/Leased Square Footage
-------- ----------- ------------ --------------
Dallas, TX Corporate Headquarters;
and Products Group offices Leased 8,949
Dallas, TX Storage facility Leased 5,000
Dallas, TX Advanced Systems Group office Leased 5,120
Dallas, TX uniView Softgen office Leased 10,235
Tulsa, OK Network America,Inc. office Leased 8,400
At June 30, 2000 we operated from the foregoing locations. Our
locations are deemed to be suitable for all of our operations and are
reasonably well utilized.
ITEM 3. LEGAL PROCEEDINGS
In June 1998, we acquired 100 percent ownership of Video Management,
Inc. ("VMI"), which owns 100 percent of Network America, Inc. ("NWA"), an
Oklahoma corporation. VMI had previously acquired NWA from DataTell
Solutions, Inc. ("DataTell") as a result of an agreement to accept
collateral in satisfaction of a debt owing by DataTell to VMI. The stock
of NWA had been pledged to VMI by DataTell as collateral in a series of
note agreements with VMI. In May 1998 an involuntary petition in
bankruptcy was filed against DataTell under Chapter 7 of the United
States Bankruptcy Code. The relevance of this proceeding is that if
certain conditions are satisfied, the acquisition of NWA by VMI could be
reviewed by the Court to determine whether a preferential or a fraudulent
transfer of those assets had occurred under the bankruptcy code.
We believe that the proceeding will have no material adverse effect
upon the Company. However, as with any action of this type, the timing
and degree of any effect upon the Company are uncertain and there can be
no assurance that the proceeding will not have an adverse impact on the
Company in the future. The action is currently pending in the United
States Bankruptcy Court, Northern District of Texas, Dallas Division,
under Case No. 398-34353-RCM-7 (Chapter 7), styled In re: DataTell
Solutions, Inc. (Tax I.D. #75-2687364), Debtor and is currently awaiting
a final trustees report.
In October 1998 Raytheon Training, Inc., formerly known as Hughes
Training, Inc., filed an action against uniView Marketing Corporation
("UMC") and the Company, alleging that UMC failed to pay approximately
$475,000 under a contract between the parties dated October 25, 1994.
Although we sold UMC as of October 31, 1998, we retained a contingent
liability as guarantor of any amounts ultimately found to be due under
the contract. On June 9, 2000, the action was settled and all litigation
between the parties was dismissed with prejudice. The settlement
agreement called for us to make a net cash payment to Raytheon Training
of $90,000 and to transfer to Raytheon Training all of the intellectual
property rights relating to the RealView technology. Before dismissal,
the action was pending in the 342nd District Court of Tarrant County,
Texas, under Case No. 342-175836-98, styled Raytheon Training, Inc. f/k/a
Hughes Training, Inc. v. uniView Marketing Corporation f/k/a Curtis
Mathes Marketing Corporation and uniView Technologies Corporation f/k/a
Curtis Mathes Holding Corporation.
We are routinely a party to ordinary litigation incidental to our
business, as well as to other litigation of a nonmaterial nature, the
outcome of which we do not expect, individually or in the aggregate, to
have a material adverse effect on our financial condition or results of
operations in excess of the amount accrued for such purposes at June 30,
2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report on Form 10-K,
through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information
Our Common Stock, $.10 par value (the "Common Stock") trades on the
Nasdaq Stock MarketSM under the symbol "UVEW." "The Nasdaq Stock Market"
or "Nasdaq" is a highly-regulated electronic securities market comprised
of competing Market Makers whose trading is supported by a communications
network linking them to quotation dissemination, trade reporting, and
order execution systems. This market also provides specialized
automation services for screen-based negotiations of transactions, online
comparison of transactions, and a range of informational services
tailored to the needs of the securities industry, investors and issuers.
The Nasdaq Stock Market consists of two distinct market tiers: the Nasdaq
National Marketr and the Nasdaq SmallCap MarketSM. The Nasdaq Stock
Market is operated by The Nasdaq Stock Market, Inc., a wholly-owned
subsidiary of the National Association of Securities Dealers, Inc. The
quarterly high and low trade price information for our Common Stock for
each quarter in the last two fiscal years are presented below.
Quarter Ending Date High Trade Low Trade
------------------- ---------- ---------
Fiscal 2000
-----------
June 30, 2000 $ 5.00 $ 1.63
March 31, 2000 $ 6.81 $ 3.47
December 31, 1999 $ 7.75 $ 1.31
September 30, 1999 $ 2.75 $ 1.19
Fiscal 1999
-----------
June 30, 1999 $ 4.75 $ 0.97
March 31, 1999 $ 2.25 $ 0.38
December 31, 1998 $ 0.97 $ 0.38
September 30, 1998 $ 2.44 $ 0.50
As of August 31, 2000 there were approximately 15,500 record
shareholders and individual participants in security position listings.
As of the same date there were 27,191,816 common shares outstanding. We
have never paid cash dividends on common shares, and do not anticipate
doing so in the foreseeable future.
Recent Sales of Unregistered Securities
Sales of equity securities during the fourth fiscal quarter that
were not registered under the Securities Act of 1933 consisted of the
following:
* On April 7, 2000 we issued 887,096 shares of our common stock to
accredited investors in conversion of debt to equity. The issuance was
made pursuant to the exemption from registration provided by SEC
Regulation D
* On April 7, 2000 we issued 850,000 shares of our common stock to an
accredited investor in conversion of a convertible debenture. The
issuance was made pursuant to the exemption from registration provided by
SEC Regulation D.
* On April 7, 2000 we issued 850,000 shares of our common stock to an
accredited investor in conversion of a convertible debenture. The
issuance was made pursuant to the exemption from registration provided by
SEC Regulation D.
* On April 7, 2000 we issued 846,800 shares of our common stock to
accredited investors in conversion of a convertible debenture. The
issuance was made pursuant to the exemption from registration provided by
SEC Regulation D.
* On June 23, 2000 we issued 527,518 shares of our common stock and
warrants to purchase 52,752 shares of our common stock to accredited
investors in a private placement. The warrants are exercisable for three
years at an exercise price of $3.00 per share. The issuance was made
pursuant to the exemption from registration provided by SEC Regulation D.
* On June 30, 2000 we issued 293,500 shares of our common stock in
conversion of debt to equity. The issuance was made pursuant to the
exemption from registration provided by SEC Regulation D, in that (a) the
investor or its purchaser representative is reasonably believed to have
such knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of the investment, (b) the
investor or its purchaser representative were provided with required
information and an opportunity to obtain additional information a
reasonable period of time prior to the transaction, and (c) the investor
or its purchaser representative were advised of the limitations on resale
of the common stock.
* On August 15, 2000 we issued 735,295 shares of our common stock to
accredited investors in a private placement. The issuance was made
pursuant to the exemption from registration provided by SEC Regulation D.
ITEM 6. SELECTED FINANCIAL DATA
All financial data for the years referenced below were derived from
our Consolidated Financial Statements for those years and the
comparability of the information is affected by acquisitions,
dispositions, and other transactions which are described in the footnotes
which accompany those Consolidated Financial Statements, and which should
be read in conjunction with this five-year financial summary. Other
factors which may affect the comparability of the information for the
more recent fiscal years are discussed further in Item 7 below.
Year Ended June 30,
---------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Consolidated Statement
of Operations Data
- ------------------
Revenues $ 9,145,705 $ 11,486,058 $ 2,487,213 $ 2,503,512 $ 7,656,836
Net Loss (10,863,875) (6,297,353) (17,418,141) (7,509,040) (5,887,313)
Loss per
Common Share(1) (0.57) (0.52) (3.37) (2.33) (3.55)
Loss from
Continuing
Operations (10,863,875) (6,297,353) (17,418,141) (8,298,466) (5,887,313)
Loss from
Continuing
Operations per
Common Share(1) (0.57) (0.52) (3.37) (2.57) (3.55)
Consolidated Balance Sheet Data
- -------------------------------
Total Assets 12,523,204 14,080,768 17,728,662 15,474,753 15,210,406
Long Term Debt
including Current
Maturities 595,324 3,823,210 3,835,315 525,837 1,450,435
Stockholders'
Equity 9,270,299 8,336,978 7,300,231 12,300,635 11,723,532
(1) Computed based upon the weighted average number of common shares
outstanding during each fiscal year.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion provides information to assist in the
understanding of our financial condition and results of operations and
should be read in conjunction with the Consolidated Financial Statements
and related notes appearing elsewhere herein.
Forward Looking Statements
This report may contain "Forward Looking Statements," which are our
expectations, plans, and projections which may or may not materialize,
and which are subject to various risks and uncertainties, including
statements concerning expected expenses, and the adequacy of our sources
of cash to finance our current and future operations. When used in this
report, the words "plans," "believes," "expects," "anticipates,"
"estimates" and similar expressions are intended to identify forward-
looking statements. Factors which could cause actual results to
materially differ from our expectations include the following: general
economic conditions and growth in the high tech industry; competitive
factors and pricing pressures; changes in product mix; the timely
development and acceptance of new products; and the risks described from
time to time in the our SEC filings. These forward-looking statements
speak only as of the date of this report. We expressly disclaim any
obligation or undertaking to release publicly any updates or change in
our expectations or any change in events, conditions or circumstances on
which any such statement may be based, except as may be otherwise
required by the securities laws.
Overview
uniView Technologies Corporation offers competencies and expertise
in creating solutions for video on demand. Our primary focus is the
development of advanced digital set top boxes and the related support
technologies, such as broadband connectivity and computer telephony
integration software (Customer Service Support Software). We market our
products and services both domestically and internationally focusing on
telecommunications, hospitality, utilities, banking, multilevel
marketing, and other Fortune 1,000 companies. More information about us
can be found at our web site, www.uniView.com.
Results of Operations
Revenues
Total revenues for fiscal year 2000 declined 20.4% to $9.15 million,
as compared to $11.49 million in 1999. The $2.34 million decline is
primarily attributable to reduced revenue at Network America as the
result of closing an unprofitable office in May 1999. The office had no
activity in the current fiscal year and contributed $2.39 million to
total revenue in 1999. Moreover, a subsidiary sold in October 1998,
CompuNet Support Systems, Inc., had contributed $1.25m to revenue in
fiscal 1999 with none in 2000. The decline in revenue from these two
operations was somewhat mitigated by revenues of approximately $1.51
million contributed by uniView Softgen, a new subsidiary of the Company
that commenced operations in November 1999. Revenues for fiscal year
2000 are primarily comprised of network system design and integration
services and the new revenues from the sale of CTI products and support
services provided by uniView Softgen. We expect our set top box revenues
to increase dramatically in the coming fiscal year as negotiated
contracts begin to be fulfilled. We also believe that overall demand for
the set top box, a device that provides Internet capability to users
through the television set, will begin to show signs of improvement as
high speed DSL and fiber optic capabilities become more readily
accessible in the marketplace.
Total sales for fiscal year 1999 were $11.49 million, which
represents a significant increase over sales of $2.49 million in 1998.
Most of the sales for 1999 can be attributed to network system design and
integration services provided through our subsidiary, Network America,
Inc. ("NWA"), which was acquired at the end of fiscal year 1998.
Gross Profit
Gross profit increased 51.4 % to $2.68 million in fiscal year 2000,
as compared to $1.77 million in 1999. As a percentage of total revenue,
gross profit increased to 29.3% in fiscal year 2000, compared to 15.4% in
the previous year. The increase as a percentage of revenue is primarily
a result of higher gross margins associated with uniView Softgen's
software products and support services. Furthermore, the Company has
undertaken to phase out business lines in Network America with low
margins and focus resources on opportunities that are expected to yield
increased margins.
Gross profit in 1999 was 15.4%, compared to a negative 55.3% gross
profit in 1998. Gross margin for the sale of products for 1999 was
approximately $1.48 million, which represents an increase of
approximately $896,000 over 1998. Gross margin for service revenue for
1999 was $284,000, which represents an increase of approximately $1.3
million over 1998.
Inventories and Software Costs Write-Down
During fiscal year 2000, inventories of early versions of our set
top box were written off totaling approximately $91,000. These units
were developed for specific applications and were not as versatile and
innovative as the market now demands. Even though the units were written
off, we continue to market the boxes to niche markets and applications
when opportunities arise.
During 1998 we wrote down our inventories related to our set top box
by $869,490, which represents the inventories estimated net realizable
value and had an additional provision for inventory obsolescence of
$75,263. No inventories were written down in 1999. The 1998 write-down
was the result of a change in the marketing strategy of our set top
boxes, which were initially offered on a retail basis in the consumer
electronics market. However, because of slow consumer acceptance of this
product category, we realized that set top box sales alone would not
produce the kind of return on investment that we hope to achieve for our
shareholders. We redirected our focus and determined not to sell uniView
set top boxes on a retail basis, but rather to bundle the product,
together with our connectivity and other computer-related services, and
market the resulting package in a commercially based market.
Software development costs of $201,000 capitalized in fiscal year
2000 is attributable to continued improvements and enhancements to the
various models of our set top box. Efforts to improve the Company's
product offerings by expanding capability and functionality are driven by
customer and market demands in conjunction with ever improving
technologies. These efforts are expected to be ongoing as the Company
strives to provide leading edge technologies in a very dynamic market
environment.
Operating Expenses
Total operating expenses for fiscal year 2000 increased $3.66
million to slightly over $13.31 million, compared to approximately $9.68
million for the same period last year. Significant components of
operating expenses for the fiscal years ended June 30, 2000 and 1999
consisted of the following:
Twelve months ended
-------------------
June 30, 2000 June 30, 1999
------------- -------------
Compensation $ 4,984,023 $ 3,674,393
Facilities 761,848 857,816
Depreciation 1,313,240 1,430,783
Online service expense 878,754 (112,089)
Amortization of software development costs,
trademark, and goodwill 1,133,896 1,693,487
Legal expense 299,130 73,281
Stock option expense 661,413 --
Other 3,280,726 2,062,831
------------ ------------
Total $ 13,313,030 $ 9,680,502
The overall increase in fiscal year 2000, compared to the same
period in 1999, is primarily caused by operating expenses of newly
acquired operations of uniView Softgen and Zirca Corporation, legal fees
incurred by the Company for defense in various pending litigation
matters, stock option expense relating to options granted to employees at
prices less than the full market price at date of grant, and online
service expense for an online television directory service offered to set
top box users as well as line charges. The online service expense credit
in 1999 resulted from a settlement with service providers for reduced
charges incurred in prior years.
Other expenses include one-time moving expenses relating to the
relocation of the Company's corporate offices in fiscal year 2000,
expenses relating to acquisitions, advertising, bad debt provisions,
professional fees, telephone, travel, and other general and
administrative expenses.
Total operating expenses for fiscal 1999 decreased by $2.89 million
from 1998. Compensation expense increased over 1998 by $870,000, which
resulted from the effect of a full year's reporting of the employees
acquired with NWA at the end of the previous year. Expenses related to
the Internet online service were reduced by approximately $1 million in
1999 from 1998; public company expenses consisting of filing fees,
brokerage fees and commissions was reduced by $436,000 in 1999 from 1998;
and marketing and advertising expenses were reduced by $1.2 million in
1999 from 1998. Significant components of operating expenses for 1999
consisted of $3.67 million for compensation; $858,000 for facilities (net
of $1.4 million for depreciation); and $1.69 million for amortization of
software development costs, trademark and goodwill.
Interest Expense
Interest expense for fiscal year 2000 was $283,000 as compared to
$472,000 in 1999. The decrease is due to an overall reduction in debt
and decreased borrowings throughout the year under the Company's line of
credit arrangement.
Interest expense increased to $472,000 in fiscal 1999 from $307,000
in fiscal 1998. This increase was a result of additional borrowings to
fund operations.
Liquidity and Capital Resources
Cash Flows From Operations
Cash used by operations for the fiscal year ended June 30, 2000 was
$6.70 million compared to $5.23 million in 1999. Major components of
cash flows from operations in fiscal year 2000 were a net loss from
operations of $10.86 million, offset by depreciation and amortization of
$3.45 million and stock compensation expense of $661,000.
Cash used by operations for the fiscal year ended June 30, 1999 was
$5.23 million, compared to $6.29 million in 1998. Major components of
cash flows from operations in fiscal 1999 included: $3.1 million for
depreciation and amortization; a decrease of $791,000 in accounts payable
and accrued liabilities; $1.66 million for recognition of gain on sale of
subsidiaries; and the effects of a $6.3 million loss from operations.
Cash used by operations for the fiscal years ended June 30, 1998
were $6.29 million. Major components of cash flows from operations in
fiscal 1998 included: $1.75 million decreases in prepaid expenses, a
significant portion of which relates to amounts reclassified to
inventories which accounts for the $1.1 million increase in inventories,
approximately $500,000 of the decrease in prepaid expenses relates to
advertising costs expensed in 1998; the increase in accounts payable,
accrued liabilities, and other current liabilities of $3.28 million;
$3.17 million for depreciation and amortization; $4.39 million for the
write down of inventories and capitalized software; and the effects of a
$17.4 million loss from operations.
Cash Flows From Investing Activities
During fiscal year 2000, we purchased for cash $495,000 of property
and equipment as compared to $126,000 during fiscal 1999. Additional
development costs of $201,000 were capitalized as expenditures relating
to improvements in one of our primary products, the set top box. As part
of the uniView Softgen acquisition, we received approximately $92,000 in
cash.
During fiscal year 1999, we purchased for cash $126,000 of property
and equipment as compared to $1.29 million in fiscal year 1998. We paid
$414,000 in cash for improvements to the uniView set top box product line
and Internet services in fiscal 1999 as compared to $3.22 million spent
in cash developing these product lines during fiscal 1998. We collected
another $201,000 on notes receivable and received $250,000 from the sale
of land in fiscal 1999.
During fiscal 1998, we purchased for cash $1.29 million of property
and equipment as compared to $2.1 million during fiscal 1997. The
expenditures during 1998 relate primarily to property and equipment in
connection with the Internet service. We paid $3.22 million in cash for
continued development of the uniView set top box product line and
Internet services in fiscal 1998 as compared to $3.65 million spent in
cash developing these product lines during fiscal 1997. Additionally,
during 1998, we collected $627,000 on notes receivable; and $1.1 million
was paid in cash during 1997 for licensing of technologies pertaining to
software for the set top box and uniView Xpressway product lines.
Cash Flows From Financing Activities
Cash flow from financing activities generated $4.3 million during
fiscal year 2000; major components include $4.2 million from equity
transactions and $1.0 million from the exercise of stock warrants.
Additionally, net repayment of the bank line of credit totaled slightly
more than $389,000 for the year.
We generated net cash from financing activities of $7.45 million
during the fiscal year ended June 30, 1999. Significant components
included $6 million received from preferred and common stock; $2.2
million received for convertible debentures and other borrowings; and
$500,000 used for payments on long term debt.
We generated net cash from financing activities of $11.7 million
during the fiscal year ended June 30, 1998. Significant components
included $9.65 million received from preferred and common stock; $2.5
million, the significant portion of which was received under a borrowing
arrangement; and $414,000 for payments on long term debt. A significant
portion of the preferred stock issued for cash was converted into common
stock.
Other Matters
Cash Flow
During the fiscal years ended June 30, 2000, 1999 and 1998 we did
not achieve a positive cash flow from operations. Accordingly, we rely
on available borrowing arrangements and continued sale of our common
stock and preferred stock to fund operations until a positive cash flow
from operations can be achieved. We expect to achieve a positive cash
flow in the coming fiscal year; however, if we are unable to achieve a
positive cash flow from operations, additional financing or placements
will be required. We continually evaluate opportunities with various
investors to raise additional capital, without which, our growth and
profitability could be restricted. Although we believe that sufficient
financing resources are available, there can be no assurance that such
resources will continue to be available to us or that they will be
available upon favorable terms.
Factors That May Affect Future Results
We participate in a highly volatile industry that is characterized
by rapidly changing patterns and fierce industry-wide competition. It is
clear that we will be required from time to time to adjust our focus to
adapt to the rapidly changing marketplace. Any delay or failure in
anticipating or responding to such rapidly changing conditions could have
an adverse effect upon our anticipated operating results.
Outlook: Issues and Uncertainties
We do not provide forecasts of future financial performance. While
we continue to pursue new business that complements our overall business
plan, the following issues and uncertainties, among others, should be
considered in evaluating our growth outlook.
Rapid Technological Change
The computer systems design services and interactive broadband
industry is undergoing rapid changes including evolving industry
standards, frequent new product and services introductions and changes in
customer requirements and preferences. The introduction of new
technologies, products and services can render our existing and announced
technologies, products and services obsolete or unmarketable. The
development cycle for new technology may be significantly longer than our
past development cycle for existing and proposed technology and may
require us to invest our resources in areas that may not become
profitable. There can be no assurance that the expected demand for our
technologies, products and services will materialize or continue or that
the mix of our future offerings will keep pace with technological changes
or satisfy evolving customer preferences or that we will be successful in
developing and marketing future technologies, products and services.
Failure to keep pace with customer preferences and requirements in a
timely fashion could have a material adverse effect on our business,
operating results and financial condition.
Long-term Research and Development Investment Cycle
Software requires an investment in its development that often
involves a long payback cycle. We have made significant investments in
software research and development in the past, which may not be recouped
in the near future; however, we expect spending for research and
development in fiscal year 2001 to remain relatively low.
Limited Protection of Intellectual Property and Proprietary Rights: Risk
of Litigation
We regard our convergence technology containing software-related
components as proprietary and we rely primarily on a combination of
trademark, copyright and trade secret laws, employee and third-party
nondisclosure agreements, and other methods to protect these proprietary
rights. As the number of convergence products in the industry increases
and the functionality of these products overlap, infringement claims may
also increase. There can be no assurance that third parties will not
assert infringement claims against us in the future with respect to
current or future products.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates which
may adversely affect our financial position, results of operations and
cash flows. In seeking to minimize the risks from interest rate
fluctuations, we manage exposures through our regular operating and
financing activities. We do not use financial instruments for trading or
other speculative purposes and we are not a party to any leveraged
financial instruments.
We are exposed to interest rate risk primarily through our borrowing
activities, which are described in the "Long-Term Debt" Notes to the
Consolidated Financial Statements, which are incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements and related Financial Statement
Schedules are included immediately following the signature page of this
Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
A new independent accountant, Grant Thornton LLP, was engaged as of
December 1, 1998 as the principal accountant to audit the Registrant's
financial statements beginning with fiscal year ended June 30, 1999.
The client-auditor relationship with King Griffin & Adamson P.C.
ended, with the approval of our audit committee, as of December 1, 1998.
The change resulted from our desire to move to a larger firm.
During fiscal 1998 and the subsequent interim
period preceding termination of the relationship, there were no
disagreements with the former accountant on any matter of accounting
principles or practices, financial statement disclosure, or auditing
scope or procedure. Although unrelated to the change, the former
accountant's report on our financial statements for fiscal year 1998
contained an opinion that was qualified concerning our ability to
continue as a going concern. The former accountant was provided with a
copy of the above disclosures and was requested to furnish us with a
letter addressed to the Commission stating whether it agrees with the
above statements and, if not, stating the respects in which it does not
agree. The former accountant's letter was filed as an exhibit to our
Current Report on form 8-K dated December 1, 1998.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Board of Directors
The following sets forth, with respect to each member of our Board
of Directors as of June 30, 2000, his name, age, period served as
director, present position, if any, with the Company and other business
experience. All directors serve one-year terms between annual meetings
of shareholders.
Patrick A. Custer, 51, is the Chairman of the Board, President and
Chief Executive Officer. Mr. Custer served as a director from 1984 to
1985, and from 1987 until the present. He served as President and Chief
Executive Officer from 1984 to 1985 and from September 1992 until the
present. From 1986 until 1990, Mr. Custer was an international business
consultant for Park Central Funding (Guernsey), Ltd. From 1978 until
1982, Mr. Custer was a general securities principal and worked for a
major brokerage firm as a corporate finance specialist and was owner of
his own brokerage firm. He was responsible for structuring and funding
IPO's, real estate, energy companies, and numerous high-tech start-up
companies. Mr. Custer's technical experience includes engineering and
management positions with Texas Instruments and Honeywell. Mr. Custer is
a graduate of Texas Tech University in Finance and Management, with
additional studies in Electrical Engineering and master studies in
Finance.
Edward M. Warren, 59, has been a director since September 1992.
Since 1980, he has been the Registered Principal and Branch Manager for a
major securities firm in Albany, New York. He is also a Financial
Consultant, having presented numerous financial seminars over the years
throughout eastern New York and western New England. He is also a co-
founder of the Coronado Group, through which he has in the past provided
professional services to the financial community, such as the analysis of
economic and market conditions, review of financial products, exchange of
marketing ideas, and continuing evaluation and recommendation of asset
allocation models. Mr. Warren received his undergraduate degree from
Williams College and holds a Master of Arts degree from Harvard
University.
Billy J. Robinson, 52, has been a director since March 1994. He has
also served as Vice President and General Counsel since October 1993, and
as Secretary since June 1994. Mr. Robinson has over twenty years legal
experience, representing banks and other financial institutions, with a
concentration in commercial transactions. Mr. Robinson is admitted to
practice before the United States Supreme Court, the United States
District Court for the Northern District of Texas and the District of New
Mexico, and is licensed to practice before all state courts in Texas and
New Mexico. Mr. Robinson is a certified Mediator in the State of Texas
and is the author of the 1994-95 Real Estate Law Correspondence Course
for the Texas Tech University Paralegal Certification Program.
Bernard S. Appel, 68, has been a director since February 1995. He
enjoyed a career of 34 years with Radio Shack, holding every key
merchandising and marketing position, culminating with his promotion to
president in 1984. In 1992 he was promoted to Chairman of Radio Shack
and Senior Vice President of Tandy Corporation. Since July 1993, Mr.
Appel has operated the private consulting firm of Appel Associates.
Executive Officers
The following sets forth, with respect to each executive officer not
heretofore named, as of June 30, 2000, his or her name, age, present
position and offices held, period of service in such capacity, and other
business experience.
David M. Thomas, 48, has been Vice President of Finance and Chief
Financial Officer since March 2000. From May 1999 to February 2000, Mr.
Thomas held a similar position with Omega Environmental Technologies, a
Dallas-based manufacturer and distributor of after-market automotive air
conditioning parts and systems. From April 1995 to April 1999, Mr.
Thomas held a senior financial management position with Currency Systems
International, Inc., a Dallas-based manufacturer of high-speed document
processing equipment for banks, primarily responsible for the financial
management of domestic and international operations. For twelve years
prior to that, Mr. Thomas was the Chief Financial Officer, Secretary,
Treasurer and a Director for Intertrans Corporation, a publicly traded
international transportation services and logistics company based in
Dallas. Mr. Thomas holds a bachelor's degree in accounting from Stephen
F. Austin State University.
Thomas W. (Bill) Park, 65, has been Vice President and Chief
Operating Officer of various subsidiaries of the Company since October 3,
1994. He is responsible for securing strategic technology partners to
ensure leading-edge product design and manufacturing of uniView products
and the uniView Xpressway systems and services. He has in the past
managed annual sales in excess of $250 million, both domestic and abroad.
Mr. Park has a dynamic breadth of experience in manufacturing, quality
assurance, engineering, product development and customer service. Mr.
Park enjoyed a career of 29 years with Curtis Mathes Corporation (CMC),
before leaving in August, 1993 for a position as Vice President of
Benelec Corporation, an international trading company dealing in
electronics, medical supplies, and other products. From August, 1993
until his return to the company in 1994, Mr. Park continued to make his
knowledge and experience available to CMC as a consultant. During his
career with CMC, he served in various positions, beginning as an Office
Manager/Cost Accountant in 1964 and culminating as Executive Vice
President in 1985, in which capacity he served until 1993. Mr. Park has
traveled extensively and maintains valuable business contacts in Europe
and Asia. He holds a Bachelor of Business Administration degree in
Finance from the University of Texas.
Thomas P. O'Mara, 40, is the President and Chief Strategic Officer
of the Products Group division of the Company, responsible for the sales,
marketing and advertising strategy for uniView digital Set Top Box
applications. He also supervises corporate marketing and communications,
channel partner programs, and strategic alliance programs. Mr. O'Mara is
also responsible for pursuing joint development agreements and strategic
alliances with high-tech providers. Mr. O'Mara joined the Company in
1996, and in 1997 was promoted to Vice President of Sales and Marketing
of all operating subsidiaries. He was instrumental in the design,
development and implementation of the uniView digital Set Top Box
solution and the uniView Xpressway Internet access system. Prior to
joining the Company, Mr. O'Mara spent 13 years with Pioneer Electronics,
during which time he was directly involved in sales and marketing aspects
for the majority of all of Pioneer's consumer electronics products. Mr.
O'Mara holds a Bachelor of Business Administration degree in accounting
from LaSalle University (Philadelphia, PA.).
Leslie Leland, 38, is President of the uniView Softgen division of
the Company and a co-founder of Softgen International, the assets of
which were acquired by the Company in October 1999. She managed the
development of this business from a consulting and services firm to its
current status as an international player in an emerging call center
component of the technology industry. Since beginning the business eight
years ago with her husband, Cameron Hurst, Ms. Leland has been the
driving force behind the introduction of Softgen's flagship CIMphonyT
products into countries around the world, including foreign and domestic
Fortune 500 businesses. Prior to founding Softgen International, Ms.
Leland managed the configuration, installation and network connection of
more than 150 computer labs in a joint venture with IBM, at The Future
Now in Dallas. Earlier in her career, she managed the education division
at MicroAge Computer in Dallas, a joint-venture with IBM, where she
managed the installations of IBM computer labs for the K-12 and higher
education markets. She began her career with the U.S. China People's
Friendship Association in Washington, D.C. as executive director,
providing leadership and direction for a national non-profit
organization. Ms. Leland was selected as the Rotary International
Graduate Scholar to Taiwan and received the Northwest Florida Scholar-
Athlete of the Year Award. Ms. Leland holds a bachelor's degree in
international affairs and political science from Florida State University
and an MBA in international business from Marymount University in
Arlington, VA.
Cameron E. Hurst, 38, is Vice President of the uniView Softgen
division of the Company and a co-founder of Softgen International, the
assets of which were acquired by the Company in October 1999. He also
serves as the Chief Technology Officer for the Company's four divisions,
uniView Softgen, Products Group, Advanced Systems Group and Network
America, and directs and manages all network operations. Before co-
founding Softgen International eight years ago with his wife, Leslie
Leland, Mr. Hurst developed and implemented call center software
solutions for worldwide airline companies and other transportation-
related industries while at American Airlines Decision Technologies in
Dallas. He began his career at the 7th Communications Group at the
Pentagon, managing a team of communication engineers in designing,
installing and testing a 10,000-node DOD-level secure network for the
U.S. Air Force headquarters. Mr. Hurst holds a bachelor's degree in
applied science from the U.S. Air Force Academy in Colorado Springs, CO
and a master's degree in computer science from George Washington
University.
Jerry N. Burrows, 55, is President of the Network America division
and the Advanced Systems Group division of the Company. Mr. Burrows
became associated with the Company in 1996, serving as senior consultant
in charge of corporate development. In 1999, Mr. Burrows was promoted to
President of the Network America division and in 2000 was named President
of Advanced Systems Group. From 1992 to 1996, Mr. Burrows was Vice
President of F.G. Group (a consulting company affiliated with Chemical
Bank). From 1988 to 1992, Mr. Burrows was Vice President of Sales and
Marketing for FMC Corporation, and for 15 years before that, he was Vice
President of Business Development for 3M Company. He began his career as
an avionics officer in the U.S. Air Force. Mr. Burrows holds a
bachelor's degree in business communications from Oklahoma State
University.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the 1934 Act ("Section 16(a)"), requires our
directors, executive officers and persons who beneficially own more than
10% of a registered class of our equity securities ("10% Owners") to file
reports of beneficial ownership of our securities and changes in such
beneficial ownership with the Securities and Exchange Commission
("Commission"). Directors, executive officers and 10% Owners are also
required by rules promulgated by the Commission to furnish us with copies
of all forms they file pursuant to Section 16(a).
Based solely upon a review of the copies of the forms filed pursuant
to Section 16(a) furnished to us, or written representations that no year-
end Form 5 filings were required for transactions occurring during fiscal
year ended June 30, 2000, we believe that during the fiscal year ended
June 30, 2000, all Section 16(a) filing requirements applicable to our
directors, executive officers and 10% Owners were complied with.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation paid over the last
three completed fiscal years to our Chief Executive Officer and any other
executive officer who received compensation of $100,000 or more during
the fiscal year ended June 30, 2000.
Long Term Compensation
------------------------------------
Annual Compensation Awards Payouts
--------------------------------- --------------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
All
Other
Name and Year Other Restricted Securities LTIP Compen-
Principal Ended Annual Stock Underlying Payouts sation
Position Jun. 30 Salary($) Bonus($) Compensation($) Award(s)($) Options/SARs(#) ($) ($)
- -------- ------- -------- ------- -------------- ---------- -------------- ------- ------
Patrick A. Custer 2000 200,340 -- (1) -- 850,000 -- --
Chairman of the 1999 184,728 -- (1) -- -- -- --
Board and CEO 1998 170,000 -- (1) -- 15,000 -- --
Billy J. Robinson 2000 145,131 -- (1) -- 400,000 -- --
Vice President, 1999 135,722 -- (1) -- -- -- --
General Counsel 1998 125,000 -- 27,500 (2) 18,177 15,000 -- --
Jerry N. Burrows 2000 150,160 -- -- -- 50,000 -- --
President of
Network America
and Advanced
Systems Group
Thomas P. O'Mara 2000 105,805 -- (1) -- 300,000 -- --
President of
Products Group
(1) Other annual compensation to this executive officer, including
payment of a car allowance and other personal benefits, did not exceed
the lesser of $50,000 or 10% of such executive officer's total annual
salary and bonus for such fiscal year.
(2) Includes $20,000 in forgiveness of debt incurred in connection with
Mr. Robinson's relocation to Dallas in 1993.
Option Grants Table
The following table shows individual grants of stock options made during
fiscal year ended June 30, 2000 to each of the named executive officers.
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term (2)
- ------------------------------------------------------------------------------- -------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of
Securities % of Total Exercise Market
Name Underlying Options or Base Price on
Options Granted to Price the Date Expiration
Granted(#)(1) Employees ($/Sh) of Grant Date 0% ($) 5% ($) 10% ($)
------------- ---------- -------- -------- ---------- ------- ------- -------
Patrick A. Custer 400,000 18% $1.50 $2.19 06/30/04 276,000 518,000 808,000
400,000 18% $1.83 $1.63 09/27/04 -- 100,000 316,000
50,000 2% $3.50 $4.69 12/31/04 59,500 124,000 202,500
Billy J. Robinson 100,000 4% $1.50 $2.19 06/30/04 69,000 129,500 202,000
300,000 13% $1.83 $1.63 09/27/04 -- 75,000 237,000
Thomas P. O'Mara 100,000 4% $1.50 $2.19 06/30/04 69,000 129,500 202,000
200,000 9% $1.83 $1.63 09/27/04 -- 50,000 158,000
Jerry N. Burrows 50,000 2% $3.50 $4.69 12/31/04 59,500 124,000 202,500
(1) Options have a five-year life and vested immediately.
(2) The indicated 5% and 10% rates of appreciation are provided to
comply with Securities and Exchange Commission regulations and do
not necessarily reflect the views of the Company as to the likely
trend in the stock price. Actual gains, if any, on stock option
exercises and the sale of Common Stock holdings will be dependent
on, among other things, the future performance of the Common Stock
and overall stock market conditions. There can be no assurance that
the amounts reflected in this table will be achieved.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
The following table shows aggregate exercises of options (or tandem
stock appreciation rights) and freestanding stock appreciation rights
during the fiscal year ended June 30, 2000 by each of the named executive
officers.
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#)(1) FY-End ($)(1)(2)
Shares
Acquired Value Exercisable (E)/ Exercisable (E)/
Name on Exercise(#) Realized($) Unexercisable (U) Unexercisable (U)
- ---- -------------- ----------- ----------------- -----------------
Patrick A. Custer -- -- 920,000 (E) $106,500 (E)
Billy J. Robinson -- -- 430,000 (E) $ 27,400 (E)
Thomas P. O'Mara -- -- 330,000 (E) $ 27,400 (E)
Jerry N. Burrows -- -- 50,000 (E) --
(1) The Company has not made any grants of SARs.
(2) On June 30, 2000 most of the options were not considered "in-the-
money," as the fair market value of the underlying securities on
that date ($1.75) did not exceed the exercise price of the options.
Compensation of Directors
None of the inside directors are paid compensation as such, except
for services performed in another capacity, such as an executive officer.
The outside directors are paid $500 per meeting, plus their expenses for
attending Board of Director meetings. During fiscal 2000, we
additionally granted each of the two outside directors stock options to
purchase 50,000 shares of Common Stock. The options have a five year
life, vested immediately and are priced at 85% of the average closing
sale price of the Common Stock, as reported by NASDAQ, for the five (5)
trading days immediately preceding the date of grant. The exercise price
of the options is $1.68 per share and the market price of the Common
Stock on the date of grant, September 21, 1999, was $1.78 per share.
Employment Contracts and Termination and Change-in-Control Arrangements
As of July 1, 1999, we entered into employment agreements with named
executive officers Messrs. Custer, O'Mara, Park and Robinson for a one-
year term, ending on June 30, 2000. The terms of the employment
agreements include an agreed annual salary, employee benefits,
nonstatutory stock options, portions of which vest at certain times
depending on attainment of certain performance goals, and provisions
concerning termination of employment upon sale or change in control. For
a description of these terms, reference is made to the agreements filed
as exhibits to this Form 10-K.
Compensation Committee Interlocks and Insider Participation
Mr. Custer and Mr. Robinson participated in advising our Board of
Directors concerning certain aspects of executive officer compensation
during the last completed fiscal year. Mr. Custer is Chairman of the
Board, President and Chief Executive Officer; and Mr. Robinson is Vice
President, Secretary, General Counsel, and a Director.
Board of Directors Report on Executive Compensation
Executive Compensation
We have structured our executive compensation program within our
financial framework with a goal of attracting and retaining high-quality
executive talent. The executive compensation program consists generally
of base salary and employee benefits. We review our compensation
programs periodically and compare our pay practices with other similar
companies and with companies staffed with similarly-skilled executives.
During the first fiscal quarter of each year, we review salary increases
for the current year and, considering our financial performance and each
executive officer's perceived contribution to that performance, salaries
are set accordingly.
Chief Executive Officer
For the year ended June 30, 2000, Mr. Custer received $212,340 for
his services as President and Chief Executive Officer. The factors we
considered in setting his compensation include Mr. Custer's leadership in
restructuring the Company, his contribution to our strategic focus and
financial positioning, and included a consideration of his
responsibilities, experience, and skills.
Patrick A. Custer (Chairman) Edward M. Warren
Bernard S. Appel Billy J. Robinson
The foregoing report is not incorporated by reference in any prior
or future filings of the Company under the Securities Act of 1933, as
amended (the "1933 Act"), or under the Securities Exchange Act of 1934,
as amended (the "1934 Act"), unless we specifically incorporate the
report by reference and the report shall not otherwise be deemed filed
under such Acts.
Performance Graph
The following graph compares total stockholder returns of the
Company ("uniView") since June 30, 1995 to two indices: (1) the "NASDAQ
Market Index ("NASDAQ");" and (2) the aggregate price performance of
equity securities of companies classified under North American Industry
Classification System (NAICS) code 541512 for Computer Systems Design
Services ("MG Group").
The total return shown for our stock and for each index assumes the
reinvestment of dividends, even though dividends have never been declared
on our stock. The NASDAQ Market Index tracks the aggregate price
performance of equity securities of companies traded on the NASDAQ Stock
Market. The MG Group Index tracks the aggregate price performance of
equity securities of companies traded on the various exchanges, including
the NASDAQ Stock Market, which are grouped under NAICS code 541512 for
Computer Systems Design Services.
The graph should be viewed in the context of the curtailment of the
commodity consumer electronics business operations of subsidiary Curtis
Mathes Corporation during fiscal year ended June 30, 1996, the
introduction during fiscal year ended June 30, 1997 of our
technologically advanced Internet access uniView products and uniView
Xpressway Online Service, the addition during fiscal year ended June 30,
1998 of system integration, technical support and network consulting to
our comprehensive array of interactive business solutions with the
acquisition of Network America, Inc. Further consideration should note
the addition of computer telephony integration capabilities with the
acquisition of the net assets of Softgen International during fiscal year
ended June 30, 2000. Accordingly, the graph may not necessarily indicate
our future performance.
6/30/95 6/30/96 6/30/97 6/30/98 6/30/99 6/30/00
uniView 100.00 200.00 131.83 31.36 32.73 25.45
MG Group 100.00 132.38 122.60 154.42 163.82 118.62
NASDAQ 100.00 125.88 151.64 201.01 281.68 423.84
The foregoing graph is not incorporated in any prior or future
filings of the Company under the 1933 Act or the 1934 Act, unless we
specifically incorporate the graph by reference, and the graph shall not
otherwise be deemed filed under such Acts.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of August 31,
2000 with respect to the beneficial ownership of Common Stock by (i)
persons known to us to be the beneficial owners of more than 5% of the
outstanding shares of Common Stock, (ii) all directors of the Company,
(iii) each of the executive officers named in the Summary Compensation
Table (appearing in Item 11) and (iv) all directors and executive
officers of the Company and significant subsidiaries as a group.
The number of shares of Common Stock beneficially owned by each
individual set forth below is determined under the rules of the
Commission and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which an individual has sole or
shared voting power or investment power and any shares which an
individual presently, or within 60 days of September 28, 2000 (the date
on which this Form 10-K is due at the Commission, the "Due Date"), has
the right to acquire through the exercise of any stock option or other
right. Unless otherwise indicated, each individual has sole voting and
investment power (or shares such powers with his spouse) with respect to
the shares of Common Stock set forth in the following table. The
information is based upon corporate records, information furnished by
each shareholder, or information contained in filings made with the
Securities and Exchange Commission.
Number of Shares
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
------------------- ----------------------- --------
5% Beneficial Owners
Founders Equity Group, Inc.
2602 McKinney Ave., Suite 220
Dallas, Texas 75204 1,705,950(1) 6.27%
Directors
Patrick A. Custer 1,224,040(2) 4.35%
Billy J. Robinson 447,889(3) 1.62%
Edward M. Warren 185,250(4) 0.68%
Bernard S. Appel 170,000(5) 0.62%
Executive Officers
Patrick A. Custer 1,224,040(2) 4.35%
Billy J. Robinson 447,889(3) 1.62%
Thomas P. O'Mara 335,895(6) 1.22%
Jerry N. Burrows 50,000(7) .18%
All Directors and Executive
Officers as a Group 3,493,497(8) 11.61%
(1) Common shares owned.
(2) Includes 17,500 shares owned outright by Mr. Custer; 900,000 shares
issuable to Mr. Custer upon exercise of vested nonstatutory Employee
Stock Options; 261,830 shares held of record by Custer Company,
Inc., a family trust, over which Mr. Custer exercises voting
control; 20,000 shares issuable to Custer Company, Inc. upon
exercise of warrants; 23,750 shares owned by his wife; 940 shares
held by his wife for the benefit of his minor daughter; and 10
shares each held by Mr. Custer for the benefit of his two sons.
(3) Includes 17,889 shares owned outright, and 430,000 shares issuable
to Mr. Robinson upon exercise of vested nonstatutory Employee Stock
Options.
(4) Includes 20,250 shares owned outright, and 165,000 shares issuable
to Mr. Warren upon exercise of vested nonstatutory stock options.
(5) Includes 5,000 shares owned outright, and 165,000 shares issuable to
Mr. Appel upon exercise of vested nonstatutory stock options.
(6) Includes 5,895 shares owned outright, and 330,000 shares issuable to
Mr. O'Mara upon exercise of vested nonstatutory Employee Stock Options
(7) Includes 50,000 shares issuable to Mr. Burrows upon exercise of
vested nonstatutory stock options.
(8) Includes 2,413,074 shares beneficially owned by all directors and
Executive Officers shown above. Also includes 6,695 shares owned
outright, and 331,360 shares issuable to Mr. Park upon exercise of
vested nonstatutory Employee Stock Options. Also includes 25,000
shares issuable to Mr. Thomas upon exercise of vested nonstatutory
Employee Stock Options. Also includes 123,684 shares owned
outright, and 235,000 shares issuable to Ms. Leland upon exercise of
warrants. Also includes 123,684 shares owned outright, and 235,000
shares issuable to Mr. Hurst upon exercise of warrants.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
Reference is made to the financial statements filed as part of
this report.
(2) Financial Statement Schedules
Reference is made to the financial statement schedules filed as
part of this report.
All other schedules are omitted because they are not applicable
or not required, or because the required information is
included in the financial statements or notes thereto.
(3) Exhibits
Reference is made to the Exhibit Index at the end of this Form
10-K for a list of all exhibits filed with and incorporated by
reference in this report.
(b) Reports on Form 8-K
During the three months ended June 30, 2000 the Company filed
no Reports on Form 8-K.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. With the exception of historical information, the
matters discussed or incorporated by reference in this Annual Report on
Form 10-K are forward-looking statements that involve risks and
uncertainties including, but not limited to, economic conditions, product
demand and industry capacity, competitive products and services and
pricing, manufacturing efficiencies, new product development, ability to
enforce intellectual property rights, and other risks indicated in
filings with the Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
UNIVIEW TECHNOLOGIES CORPORATION
By: /s/ PATRICK A. CUSTER
Patrick A. Custer
President and Chief Executive Officer
September 28, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Company and in the capacities and on the dates indicated.
Principal Executive Officer
/s/ PATRICK A. CUSTER Chairman of the Board, September 28, 2000
Patrick A. Custer President, Chief Executive Officer
and Director
Principal Financial and Accounting Officer
/s/ DAVID M. THOMAS Vice President, Finance and September 28, 2000
David M. Thomas Chief Financial Officer
Additional Directors
/s/ BILLY J. ROBINSON Vice President, Secretary, September 28, 2000
Billy J. Robinson General Counsel and Director
/s/ EDWARD M. WARREN Director September 28, 2000
Edward M. Warren
/s/ BERNARD S. APPEL Director September 28, 2000
Bernard S. Appel
Report of Independent Certified Public Accountants
Board of Directors
uniView Technologies Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of uniView
Technologies Corporation and Subsidiaries as of June 30, 2000 and 1999,
and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the two years then ended.
These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
uniView Technologies Corporation and Subsidiaries as of June 30, 2000 and
1999, and the consolidated results of their operations and their
consolidated cash flows for each of the two years then ended in
conformity with accounting principles generally accepted in the United
States of America.
We have also audited Schedule II for the years ended June 30, 2000 and
1999. In our opinion, this schedule presents fairly, in all material
respects, the information required to be set forth therein.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As shown in the financial
statements, the Company incurred net losses of $10,863,875, $6,297,353
and $17,418,141 for the years ended June 30, 2000, 1999 and 1998,
respectively. These factors, among others, as discussed in Note B to the
financial statements raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to these
matters are described in Note B. The financial statements do not include
any adjustments that might result from the outcome of these
uncertainties.
GRANT THORNTON LLP
Dallas, Texas
August 18, 2000
F-1
Report of Independent Certified Public Accountants
Board of Directors
uniView Technologies Corporation and Subsidiaries (Formerly Curtis Mathes
Holding Corporation)
We have audited the consolidated statements of operations, changes in
stockholders' equity and cash flows of uniView Technologies Corporation
and Subsidiaries for year ended June 30, 1998. These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management as well as evaluating
the overall financial statement presentation. We believe our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and
the cash flows of uniView Technologies Corporation and Subsidiaries for
year ended June 30, 1998, in conformity with generally accepted
accounting principles.
We have also audited Schedule II for year ended June 30, 1998. In our
opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed
in Note B to the consolidated financial statements, the Company has
experienced recurring losses and has a working capital deficiency that
raises substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also
described in Note B. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
KING GRIFFIN & ADAMSON P.C.
Dallas, Texas
September 14, 1998
F-2
uniView Technologies Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 30,
ASSETS 2000 1999
------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 1,422,167 $ 4,412,664
Trade accounts receivable, net of allowance
of $5,874 in 2000 and $76,510 in 1999 1,126,462 1,117,308
Inventories 261,601 436,583
Prepaid expenses 883,268 28,283
Other current assets 372,086 --
------------ ------------
Total current assets 4,065,584 5,994,838
PROPERTY AND EQUIPMENT, net of accumulated
depreciation 1,057,541 1,310,207
OTHER ASSETS
Purchased software, net of accumulated
amortization of $291,154 in 2000 2,203,811 --
Software development costs, net of accumulated
amortization of $4,384,322 in 2000 and
$3,038,519 in 1999 546,328 1,690,958
Licenses, net of accumulated amortization of
$275,000 in 2000 and $123,750 in 1999 -- 151,250
Trademark, net of accumulated amortization
of $1,552,357 in 2000 and $1,308,119 in 1999 3,332,398 3,576,636
Goodwill, net of accumulated amortization of
$211,919 in 2000 and $318,730 in 1999 1,208,414 1,302,699
Other 109,128 54,180
------------ ------------
Total other assets 7,400,079 6,775,723
------------ ------------
Total assets $ 12,523,204 $ 14,080,768
============ ============
F-3
uniView Technologies Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS - CONTINUED
June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
------------ ------------
CURRENT LIABILITIES
Trade accounts payable $ 505,468 $ 778,485
Accrued and other current liabilities 1,188,082 1,142,095
Line of credit 321,442 710,858
Current maturities of long-term debt 51,958 366,447
Current maturities of obligations under
capital leases 93,000 55,168
Deferred revenue 964,030 --
------------ ------------
Total current liabilities 3,123,980 3,053,053
LONG TERM DEBT, less current maturities -- 2,590,017
OBLIGATIONS UNDER CAPITAL LEASES, less
current maturities 128,925 100,720
------------ ------------
Total liabilities 3,252,905 5,743,790
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred stock, cumulative, $1.00 par value;
1,000,000 shares authorized
Series A, 30,000 and 140,000 shares issued
and outstanding at June 30, 2000 and 1999,
respectively (liquidation preference of
$30,000 and $140,000) 30,000 140,000
Series H, 2 and 3 shares issued and outstanding
at June 30, 2000 and 1999, respectively
(liquidation preference of $50,000 and $75,000) 2 3
Series 1999-C, 44 shares issued and outstanding
at June 30, 1999 (liquidation preference of
$1,100,000) -- 44
Series 1999-D1, 720 shares issued and outstanding
at June 30, 2000 and 1999 (liquidation preference
of $18,000,000) 720 720
Series 1999-E, 96 shares issued and outstanding at
June 30, 1999 (liquidation preference of $2,400,000) -- 96
Common stock, $.10 par value; 80,000,000 shares
authorized; 26,456,521 and 15,013,150 shares
issued and outstanding at June 30, 2000 and
1999, respectively 2,645,652 1,501,315
Additional paid in capital 59,944,947 49,128,729
Accumulated deficit (53,351,022) (42,433,929)
------------ ------------
Total stockholders' equity 9,270,299 8,336,978
------------ ------------
Total liabilities and stockholders'equity $ 12,523,204 $ 14,080,768
============ ============
The accompanying notes are an integral part of these statements
F-4
uniView Technologies Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended June 30,
2000 1999 1998
------------ ------------ ------------
Revenues
Product sales $ 7,710,606 $ 10,160,563 $ 2,197,507
Services 1,435,099 1,325,495 289,706
------------ ------------ ------------
Total revenues 9,145,705 11,486,058 2,487,213
Cost of products and services
Cost of product sales 5,553,372 8,677,047 1,609,807
Provision for inventory obsolescence -- -- 944,753
Cost of services 910,958 1,041,840 1,309,297
------------ ------------ ------------
Total cost of products and
services 6,464,330 9,718,887 3,863,857
------------ ------------ ------------
Gross margin 2,681,375 1,767,171 (1,376,644)
Operating expenses 13,313,030 9,680,502 12,569,050
Write-down of software
development costs -- -- 3,519,584
------------ ------------ ------------
Operating loss (10,631,655) (7,913,331) (17,465,278)
Other (income) expense
Loss from sale of land -- 82,800 --
Interest and other income (50,876) (510,106) (354,062)
Interest expense 283,096 471,545 306,925
Gain on sale of subsidiaries -- (1,660,217) --
------------ ------------ ------------
Total other (income) expense 232,220 (1,615,978) (47,137)
------------ ------------ ------------
NET LOSS (10,863,875) (6,297,353) (17,418,141)
Dividend requirements on
preferred stock 901,800 199,441 391,445
------------ ------------ ------------
Net loss attributable to
common stockholders $(11,765,675) $(6,496,794) $(17,809,586)
============ =========== ============
Per share amounts allocable to
common stockholders
Net loss - basic and diluted $(.57) $(.52) $(3.37)
Weighted average common shares
outstanding 20,572,886 12,402,179 5,282,511
The accompanying notes are an integral part of these statements
F-5
uniView Technologies Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Preferred Stock Additional
---------------------- -------------------- Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit
---------- ---------- -------- ---------- ----------- ------------
Balances - July 1, 1997 3,670,920 $ 367,092 141,287 $ 141,287 $30,317,592 $(18,525,336)
Issuance of common stock for cash 100,000 10,000 -- -- 240,000 --
Issuance of common stock in exchange for
equity position in land partnership 142,359 14,236 -- -- 265,764 --
Issuance of common stock in exchange for
settlement of debt, interest and accounts
payable 764,604 76,460 -- -- 1,180,747 --
Issuance of common stock for acquisition
of VMI 800,000 80,000 -- -- 723,000 --
Conversion of Series K preferred including
accrued dividends for common stock 164,220 16,422 (9) (9) (9,499) (6,913)
Conversion of Series L preferred for
common stock 248,857 24,886 (1,275) (1,275) (23,611) --
Issuance of Series M preferred for cash -- -- 140 140 3,289,860 --
Conversion of Series M preferred including
accrued dividends for common stock 1,892,505 189,251 (140) (140) 55,721 (244,832)
Issuance of Series N preferred for cash -- -- 120 120 2,819,880 --
Conversion of Series N preferred including
accrued dividends for common stock 2,248,903 224,890 (120) (120) (101,577) (123,194)
Issuance of Series Q Preferred for cash -- -- 60 60 1,409,940 --
Dividends paid through issuance of common
stock 240 24 -- -- -- (24)
Warrants issued for services -- -- -- -- 432,530 --
Dividends paid in cash -- -- -- -- -- (5,000)
Issuance of Series 1998-A1 preferred stock
for cash -- -- 80 80 1,879,920 --
Post reverse split rounding adjustment 62 6 -- -- (6) --
Net loss for the year -- -- -- -- -- (17,418,141)
---------- ---------- -------- ---------- ----------- ------------
Balances - June 30, 1998 10,032,670 1,003,267 140,143 140,143 42,480,261 (36,323,440)
F-6
uniView Technologies Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - CONTINUED
Common Stock Preferred Stock Additional
---------------------- -------------------- Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit
---------- ---------- -------- ---------- ----------- ------------
Conversion of Series Q preferred including
accrued dividends for common stock 1,761,879 $ 176,188 (28) $ (28) $ (168,446) $ (7,714)
Conversion of Series 1998 A-1 preferred
including accrued dividends for common
stock 563,100 56,310 (12) (12) (52,751) (3,547)
Sale of common stock for cash 1,375,000 137,500 -- -- 412,500 --
Exercise of warrants 211,751 21,175 -- -- 68,557 --
Preferred stock dividends -- -- -- -- -- (1,875)
Issuance of Series 1998 - A1 preferred
stock for cash -- -- 16 16 399,984 --
Issuance of common stock in exchange for
services 68,750 6,875 -- -- 20,625 --
Conversion of debt to common stock 1,000,000 100,000 -- -- 900,000 --
Issuance of Series 1999-C preferred stock
for cash -- -- 44 44 1,099,950 --
Issuance of Series 1999-D1 preferred stock
for cash redemption of 1998-A1 and
cancellation of warrants
Series 1998-A1 -- -- (84) (84) (11,549,916) --
Series 1999-D1 -- -- 720 720 17,999,280 --
Series A and B warrants -- -- -- -- (2,481,251) --
Issuance of Series 1999-E Preferred stock
for Redemption of Series Q
Series Q -- -- (32) (32) (2,399,968) --
Series 1999-E -- -- 96 96 2,399,904 --
Issuance of warrants with sale of
subsidiaries -- -- -- -- -- 200,000
Net loss -- -- -- -- -- (6,297,353)
---------- ---------- -------- ---------- ----------- ------------
Balances - June 30, 1999 15,013,150 1,501,315 140,863 140,863 49,128,729 (42,433,929)
F-7
uniView Technologies Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - CONTINUED
Common Stock Preferred Stock Additional
---------------------- -------------------- Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit
---------- ---------- -------- ---------- ----------- ------------
Redemption of Series A preferred stock -- $ -- (100,000) $ (100,000) $ -- $ (18,099)
Conversion of Series A preferred including
accrued dividends for common stock 7,767 777 (10,000) (10,000) 10,873 (1,650)
Conversion of Series 1999-E preferred
including accrued dividends for common
stock 802,696 80,270 (96) (96) (72,086) (8,088)
Conversion of Series 1999-C preferred
including accrued dividends for common
stock 891,932 89,193 (44) (44) (65,643) (23,506)
Conversion of Series H preferred including
accrued dividends for common stock 1,666 167 (1) (1) (166) --
Sale of common stock 1,673,024 167,302 -- -- 4,287,963 --
Exercise of warrants 1,718,250 171,825 -- -- 866,550 --
Common stock issued for services 351,250 35,125 -- -- 147,375 --
Conversion of debt to common stock 3,918,286 391,828 -- -- 2,396,895 --
Legal settlement paid in stock 250,000 25,000 -- -- 475,000 --
Preferred stock dividends -- -- -- -- -- (1,875)
Acquisitions of businesses 1,828,500 182,850 -- -- 2,108,043 --
Stock compensation for employees and
directors -- -- -- -- 661,414 --
Net loss -- -- -- -- -- (10,863,875)
---------- ---------- -------- ---------- ----------- ------------
Balances - June 30, 2000 26,456,521 $2,645,652 30,722 $ 30,722 $59,944,947 $(53,351,022)
========== ========== ======== ========== =========== ============
The accompanying notes are an integral part of this statement
F-8
uniView Technologies uniView Technologies Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended June 30,
2000 1999 1998
------------ ------------ ------------
Cash flows from operating activities
Net loss $(10,863,875) $ (6,297,353) $(17,418,141)
Adjustments to reconcile net loss
to cash and cash equivalents
used in operating activities
Loss on sale of assets -- 82,800 --
Depreciation and amortization 3,447,138 3,124,272 3,168,332
Bad debt expense 114,078 97,453 150,583
Gain on sale of subsidiaries -- (1,660,217) --
Gain on sale of marketable
securities -- -- (29,015)
Provision for inventory obsolescence -- -- 944,753
Write-down of software development
costs -- -- 3,519,584
Stock compensation expense 661,414 -- --
Changes in assets and liabilities,
net of effects from acquisitions
and dispositions
Trade accounts receivable 9,779 87,905 (571,588)
Inventories 174,982 141,769 (1,110,798)
Prepaid expenses (325,399) (13,574) 1,752,995
Other current assets (372,086) -- --
Other assets 40,831 -- 20,835
Accounts payable and
accrued liabilities 2,544 (791,160) 3,282,626
Deferred revenue 406,957 -- --
------------ ------------ ------------
Cash and cash equivalents used
in operating activities (6,703,637) (5,228,105) (6,289,834)
Cash flows from investing activities
Purchases of property and equipment (495,378) (126,198) (1,287,459)
Cash from acquisition 91,681 -- --
Additions to software development
costs (201,173) (414,186) (3,218,943)
Licenses -- -- (13,920)
Sale of marketable securities -- -- 311,157
Proceeds from sale of land -- 250,000 --
Collections on note receivable -- 200,555 626,785
Issuance of note receivable -- -- (350,000)
------------ ------------ ------------
Cash and cash equivalents
used in investing activities (604,870) (89,829) (3,932,380)
F-9
uniView Technologies Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Year ended June 30,
2000 1999 1998
------------ ------------ ------------
Cash flows from financing activities
Proceeds from line of credit $ 5,780,382 $ 4,540,057 $ --
Principal payments on
line of credit (6,169,798) (4,747,652) --
Proceeds from long term debt -- 2,148,762 2,500,000
Principal payments on
long-term debt (299,686) (499,415) (413,888)
Principal payments on
capital lease obligations (90,306) (102,748) (24,256)
Dividends paid (1,875) (1,875) (5,000)
Proceeds from exercise of
stock warrants 1,038,375 89,731 --
Proceeds from sale of
common and preferred stock 4,179,017 6,018,750 9,650,000
Redemption of preferred stock
for cash (118,099) -- --
------------ ------------ ------------
Cash and cash equivalents
provided by financing
activities 4,318,010 7,445,610 11,706,856
Net increase (decrease) in cash
and cash equivalents (2,990,497) 2,127,676 1,484,642
Cash and cash equivalents,
beginning of year 4,412,664 2,284,988 800,346
------------ ------------ ------------
Cash and cash equivalents,
ending of year $ 1,422,167 $ 4,412,664 $ 2,284,988
============ ============ ============
Supplemental information
Cash paid for:
Interest $ 98,909 $ 196,839 $ 64,427
Income taxes $ -- $ -- $ --
See Note M for supplemental schedule of non-cash investing
and financing activities.
The accompanying notes are an integral part of these statements
F-10
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
-----------------------
uniView Technologies Corporation and Subsidiaries (the Company),
previously known as Curtis Mathes Holding Corporation, offer
competencies and expertise in creating solutions for video on demand,
set top box products, interactive broadband connectivity, computer
telephony integration software for call center automation, and overall
broadband solutions, as well as providing system integration, technical
support and network consulting. The Company markets its products and
services both domestically and internationally focusing on multi-level
marketing, hospitality, utilities, banking, telecommunications and
other Fortune 1,000 companies.
Principles of Consolidation
---------------------------
The accompanying financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances
and transactions are eliminated in consolidation.
Use of Estimates
----------------
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 and disclosure of contingent assets and liabilities at the
date of the financial statements and the accompanying notes. Actual
results could differ from those estimates.
Cash Equivalents
----------------
All highly liquid debt investments with an original maturity of three
months or less are considered to be cash equivalents.
Inventories
-----------
Inventories are stated at the lower of average cost or market.
Inventories consist of computer parts and peripherals to be used in
network systems and products.
Property and Equipment
----------------------
Property and equipment are stated at cost and are depreciated using the
straight-line method over estimated useful lives of three to five
years. Maintenance and repairs are expensed as incurred. Equipment
leased under capital lease obligations is depreciated over the life of
the lease using the straight-line method.
F-11
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Accounting for Impairment of Long-Lived Assets
----------------------------------------------
The Company evaluates long-lived assets and intangibles held and used
for impairment whenever events or changes in circumstances indicate
that the carrying amounts may not be recoverable. Impairment is
recognized when the undiscounted cash flows estimated to be generated
by those assets are less than the carrying amounts of such assets.
Software Development Costs
--------------------------
The Company capitalizes software development costs incurred from the
time technological feasibility of the software is established until the
software is ready for use in products. Research and development costs
related to software development are expensed as incurred. The
capitalized costs related to software which will become an integral
part of the Company's revenue-producing products are amortized in
relation to expected revenues from the product or straight-line, over
three years, whichever is greater. The carrying value of software
development costs is regularly reviewed by the Company, and a loss is
recognized when the net realizable value by product falls below the
unamortized cost.
Fair Value of Financial Instruments
-----------------------------------
The Company's financial instruments consist of cash and cash
equivalents, notes receivable and debt. The fair value of all
instruments other than debt approximates the recorded amounts because
of the liquidity and short term nature of these items. It is not
practicable to estimate the fair value of the Company's debt as they
are unique instruments for which there is no public market.
Stock-Based Compensation
------------------------
The Company accounts for stock-based compensation to employees using
the intrinsic value method. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the quoted market price
of the Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock.
Revenue Recognition
-------------------
The Company recognizes service revenue as the services are provided.
Equipment and product sales are recognized at the time of delivery and
customer acceptance.
Advertising Costs
-----------------
Advertising costs are charged to operations when the advertising first
takes place. Advertising costs for the years ended June 30, 2000, 1999
and 1998 were $304,069, $189,226 and $1,399,362, respectively.
F-12
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Loss Per Share
--------------
Basic loss per common share is based on the weighted average number of
common shares outstanding. Diluted loss per share is computed based on
the weighted average number of shares outstanding, plus the number of
additional common shares that would have been outstanding if dilutive
potential common shares had been issued. In all years presented, all
potential common shares were anti-dilutive.
Reclassifications
-----------------
Certain reclassifications of the 1999 and 1998 financial statements and
related notes have been made to conform with the 2000 presentation.
NOTE B - GOING CONCERN MATTERS
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. The Company
incurred net losses of $10,863,875, $6,297,353, and $17,418,141 during
the years ended June 30, 2000, 1999, and 1998, respectively.
For the last several years, the Company has been developing its
business plan with a focus in offering the technical expertise of its
experienced and knowledgeable staff to customers wishing to increase
business productivity by maximizing the benefits of their information
technology. The Company's product offerings include providing
consulting services to niche markets, internet service provider
services, technology products through its set top box, and the
licensing of the Curtis Mathes trademark. Through the Company's
acquisition of Network America, Inc. in 1998 and the addition of its
Advanced System Group, revenues increased sharply during 1999. In
October 1999, the Company acquired the assets and assumed certain
liabilities of Softgen International, Inc. to enter the computer
telephony integration (CTI) business, which provided revenue of $1.5
million in 2000. However, the Company's operating losses continued.
The Company is planning to continue the increase in revenue growth
coupled with a reduction in general and administrative expenses to
reach profitability.
For the last three years, the Company used significant amounts of cash
from operations and despite the negative cash flows from operations,
the Company was able to secure financing to support itself. The
Company's ability to continue as a going concern is dependent on its
ability to continue to obtain the necessary operating funds until
operations begin to generate sufficient cash flows to meet the needs of
the Company.
The financial statements do not include any adjustments to reflect the
possible effects on the recoverability and classification of assets or
liabilities which may result from the inability of the Company to
continue as a going concern.
F-13
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE C - BUSINESS COMBINATIONS AND DIVESTITURES
Acquisitions
------------
Effective June 12, 1998, the Company acquired 100 percent of the issued
and outstanding capital stock of Video Management, Inc. (VMI), which
owned 100 percent of the issued and outstanding common stock of Network
America, Inc. (NWA), an Oklahoma corporation, and CompuNet Support
Systems, Inc. (CNSS), a Texas corporation. The purchase price of
$1,600,000 consisted of 800,000 shares of the Company's common stock
valued at $2.00 per share. NWA and CNSS provide implementation of
local area networks, network hardware design, consulting and software
designed systems and customized hardware, personal computer and network
systems primarily in the Southwestern United States. Goodwill from
this transaction is being amortized over fourteen years on a straight-
line basis.
On May 15, 1998, an individual filed an involuntary petition in
bankruptcy against the company that previously owned NWA and CNSS
before VMI (Previous Owner) requesting that an order for relief be
entered against that Previous Owner under Chapter 11 of the United
States Bankruptcy Code. Petitioner alleged in his petition that the
Previous Owner was indebted to him, that the Previous Owner was in
default on the obligation owed to him and that "upon information and
belief, the Previous Owner is generally not paying its debts that are
not subject to bona fide dispute as they become due."
The relevance to the Company of this proceeding is that if certain
conditions are satisfied, the acquisition of NWA and CNSS by VMI could
be reviewed by the Court to determine whether a preferential or
fraudulent transfer of those assets had occurred under the bankruptcy
code. The Previous Owner and VMI are both cognizant that this
proceeding could affect certain interests of the Company in the future.
VMI and its shareholders have been very cooperative with the Company in
ensuring that these issues are resolved. The action is currently
awaiting a final trustees report.
Management believes that the proceeding will have no material adverse
effect upon the Company. However, as with any action of this type, the
timing and degree of any effort upon the Company are uncertain and
there can be no assurance that the proceeding will not have an adverse
impact on the Company in the future.
Effective May 1998, the Company acquired 100 percent of the issued and
outstanding capital stock of Corporate Network Solutions, LLC (CNS), a
Texas limited liability company. In consideration of the sale and
transfer of the units of ownership of CNS, the Company paid $50,000 in
cash and agreed to pay $150,000 over a ten-month period under a
noninterest-bearing note payable. Further, the Company agreed to
continue the payment of capital equipment leases valued at
approximately $121,000. This transaction has been accounted for as a
purchase and, accordingly, the results of operations have been included
from the date of purchase. Resulting goodwill attributable to this
transaction was $174,106 which was amortized fully during fiscal 1998.
F-14
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE C - BUSINESS COMBINATIONS AND DIVESTITURES - Continued
Effective September 22, 1999 the Company acquired assets of Zirca
Corporation ("Zirca") for $300,000 cash and 360,000 restricted common
shares of the Company valued at $675,000. The acquisition of Zirca was
accounted for as a purchase and the Company has allocated the excess
purchase price over tangible assets acquired of approximately $360,000
to purchased software.
Effective October 29, 1999 the Company acquired the assets and assumed
certain liabilities of Softgen International, Inc. ("Softgen").
Consideration for the acquisition consisted of 1,175,000 restricted
shares of the Company's common stock and warrants to acquire another
940,000 shares at $3.00 per share, plus other consideration for a total
value of $2.7 million, and certain former shareholders of Softgen
received 39% ownership of the new corporation, uniView Softgen
Corporation. As a result of the acquisition of Softgen, which was
accounted for as a purchase, the Company allocated the excess purchase
price over tangible assets acquired of approximately $2.2 million to
purchased software based on an appraisal. During the third fiscal
quarter ended March 31, 2000, certain adjustments were made to the
purchase price and corresponding allocation of purchase price as the
result of a more detailed analysis of the assets and liabilities
assumed in the acquisition.
All acquisitions have been accounted for as purchases and the
operations of the purchased companies have been included in the
Company's statement of operations since their date of acquisition.
The unaudited pro forma information set forth below assumes the
acquisition of Softgen and Zirca had occurred at the beginning of 1999.
The information is presented for informational purposes only and is not
necessarily indicative of the results of operations that actually would
have been achieved had the acquisition been consummated at that time.
For the years ended June 30, 2000 and 1999, the information is as
follows:
2000 1999
------------ ------------
Revenues $ 9,947,827 $ 13,186,058
Net loss $ 11,109,456 $ 6,797,353
Loss per common share $(.57) $(.55)
Divestitures
------------
In October, 1998, the Company completed the sale of the stock of two of
its wholly-owned subsidiaries, uniView Marketing Corporation (UMC) and
CNSS. The consideration for the transaction was the assumption of the
net liabilities of the subsidiaries and warrants to purchase 500,000
shares of stock of the Company at $.50 per share. The warrants expire
in three years and a gain of $1.66 million was recognized on the
transaction.
F-15
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment at June 30, 2000 and 1999 consist of the
following:
2000 1999
----------- -----------
Equipment $ 3,412,471 $ 4,537,767
Furniture and fixtures 218,017 170,998
Computer software 188,738 83,611
Vehicles 108,430 89,025
Leasehold improvements 177,333 174,768
----------- -----------
4,104,989 5,056,169
Less accumulated depreciation and amortization (3,047,448) (3,745,962)
----------- -----------
$ 1,057,541 $ 1,310,207
=========== ===========
Equipment under capital leases included above at June 30, 2000 and 1999
was $118,922 and $86,825, respectively, and the related accumulated
amortization amounted to $11,832 and $8,682, respectively.
Depreciation expense for years ending June 30, 2000, 1999 and 1998
totaled $1,313,241, $1,417,760, and $1,296,082, respectively.
NOTE E - OTHER ASSETS
The Company purchased the Curtis Mathes Corporation in 1994 and has
exclusive rights to the Curtis Mathes name, subject to certain
sublicensing arrangements. The trademark is being amortized on a
straight-line basis over 20 years. Amortization expense was $244,238
for each of the years ended June 30, 2000, 1999, and 1998.
Goodwill totaling $1,420,333 from 1998 acquisitions of VMI and CNS is
being amortized over its estimated useful life of fourteen years.
Amortization expense for 2000 was $101,452 and $102,415 for 1999.
Software development costs are amortized in relation to expected
revenue from the product or three years, whichever is greater.
Amortization expense for 2000 and 1999 was $1,345,803 and $1,276,772,
respectively.
Purchased software is amortized in relation to expected revenue from
the product or straight-line over three years, whichever is greater.
Amortization expense for 2000 was $291,154.
Licenses are amortized over the length of the agreement. Amortization
for 2000 and 1999 was $151,250 and $48,334, respectively.
F-16
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE F - LINE OF CREDIT
The Company's subsidiary, Network America, Inc. has a $2.15 million
credit facility bearing interest at prime (9.5% at June 30, 2000) plus
2.25% with a finance company collateralized by accounts receivable and
inventories. The outstanding balance at June 30, 2000 and 1999 was
$321,442 and $710,858, respectively and interest is payable monthly.
This facility contains various financial covenants, including among
other things, minimum net worth, maintenance of various fixed charge
ratios and maximum allowable indebtedness to net worth.
NOTE G - LONG-TERM DEBT
Long-term debt at June 30, 2000 and 1999 consists of the following:
2000 1999
--------- -----------
Convertible note payable to a finance company
collateralized by a blanket security agreement
with interest at 18%. Principal and interest
is due March 31, 2002. Amounts are convertible
into common stock at $1.00 per share. During
2000, this note was converted to common stock. $ -- $ 774,648
Convertible notes payable to various parties with
interest at 6%, payable quarterly and principal
due March 2002. The notes are convertible at
$.625 per share. During 2000, these notes were
converted to common stock. -- 1,800,000
Noninterest-bearing note payable with principal
payments of $15,000 payable monthly,
collateralized by the outstanding common
stock of subsidiary. -- 90,000
Unsecured notes payable of a subsidiary to third
parties with interest at 9% to 12%, with
scheduled maturities from December 31,1999
to February 14, 2000. -- 176,447
Demand note to an individual with interest at 6%,
payable monthly. -- 100,000
Other 51,958 15,369
--------- -----------
51,958 2,956,464
Less current portion (51,958) (366,447)
--------- -----------
$ -- $ 2,590,017
========= ===========
The weighted average interest rate of borrowings
outstanding at June 30, 2000 is 10.7%.
F-17
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE H - COMMITMENTS AND CONTINGENCIES
Lease Commitments
-----------------
The Company leases equipment and facilities under long-term leases.
The following are scheduled future minimum lease payments at June 30,
2000:
Operating Capital
leases leases
----------- ---------
2001 $ 419,259 $ 97,645
2002 253,229 75,142
2003 203,573 35,149
2004 164,373 24,631
2005 76,822 --
----------- ---------
$ 1,117,256 232,567
===========
Less amount representing interest (10,642)
---------
Present value of net minimum lease
payments including current
maturities of $110,227 $221,925
=========
Rental expense under operating leases for the years ended June 30,
2000, 1999, and 1998 was $530,701, $410,809, and $698,032,
respectively.
Litigation
----------
On July 26, 1999, the Company and a vendor agreed to settle a legal
action. In return for a prepayment of $750,000 and 250,000 shares of
its common stock whose market value at closing date was $1.84 per
share, the Company will receive two years of television listing
services from the vendor. The agreement requires an additional annual
fee of $70,000 and a nominal fee per customer.
The Company is routinely a party to ordinary litigation incidental to
its business, as well as to other litigation of a nonmaterial nature,
the outcome of which management does not expect, individually or in the
aggregate, to have a material adverse effect on the financial condition
or results of operations of the Company in excess of the amount accrued
for such purposes at June 30, 2000.
Warranty Provision
------------------
Pursuant to their exit from the consumer electronics market in 1998,
the Company recorded a reserve for future warranty obligations. Since
that time, the Company has outsourced repairs and parts servicing for
all warranty claims. These obligations end in fiscal year 2001 and the
remaining warranty provision of $81,990 is recorded in current
liabilities.
F-18
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE I - CONCENTRATIONS OF CREDIT RISK
During 2000, one customer represented 11% of sales while in 1999, no
single customer represented more than 10% of sales. In 1998, one
customer accounted for 12% of sales. At June 30, 2000, two customers
represented 56% of trade accounts receivable and at June 30, 1999, one
customer represented 17% of trade accounts receivable.
NOTE J - STOCKHOLDERS' EQUITY
Preferred Stock
---------------
The Company has 1,000,000 shares authorized of $1.00 par value
cumulative preferred stock. The Company's articles of incorporation
allow the board of directors to determine the number of shares and
determine the relative rights and preferences of any series of
preferred stock to be issued.
At June 30, 2000, the Company had issued and outstanding 30,000 Series
A, 2 Series H, and 720 Series 1999 D-1 preferred shares. At June 30,
1999, the Company has issued and outstanding 140,000 Series A, 3 Series
H, 44 Series 1999-C, 720 Series 1999D-1, and 96 Series 1999-E preferred
shares. Series A preferred shares are non-convertible, redeemable at
the Company's option and carry cumulative dividends of 6%. Series H
preferred shares are convertible based upon conversion ratios as
determined in the Certificate of Designation, redeemable at the
Company's option and carry cumulative dividends of 5%. Series 1999-D1
preferred shares are convertible based upon conversion ratios as
determined in the Certificate of Designation, redeemable at the
Company's option and carry cumulative dividends of 5%.
Dividends of $1,875, $1,875 and $5,000 on preferred stock were paid in
cash during the three years in the period ended June 30, 2000. Non-
cash dividends of $33,244 were paid during the year ended June 30, 2000
through the issuance of common stock. Noncash dividends of $11,261
were paid during the year ended June 30, 1999. Cumulative dividends in
arrears as of June 30, 2000 and 1999 amounted to $957,200 and $130,645,
respectively.
Common Stock
------------
Effective April 24, 1998, the Board of Directors amended the par value
of the common stock from $0.01 to $0.10 per share and 1 for 10 reverse
stock split. The authorized number of shares was maintained at
80,000,000. All references throughout the financial statements to
numbers of shares and per share amounts have been restated.
Stock Options
-------------
The Company has periodically granted stock options for employment and
outside services received during the years reported. These options are
treated as fixed, compensatory awards.
F-19
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE J - STOCKHOLDERS' EQUITY - Continued
The Company grants non-compensatory stock options to key employees and
directors at market value at the date of grant. These options
generally vest immediately; however, during 2000, options covering
366,971 shares vest over 3 years and during 1998, options covering
90,000 shares vest over 1.5 years.
During 2000 options issued with exercise price less than market value
resulted in compensation expense of $661,414. During 1999 and 1998,
options issued with exercise prices less than market value on the grant
date were immaterial and, accordingly, no compensation expense has been
recognized in these years. Had compensation cost been determined on
the basis of fair value pursuant to FASB Statement No. 123, net loss
and net loss per share for 2000, 1999, and 1998 would have been
increased as follows:
2000 1999 1998
------------ ------------ ------------
Net loss
As reported $(10,863,875) $ (6,297,353) $(17,418,141)
Pro forma (13,961,374) (6,414,539) (17,483,423)
Loss per share
As reported (.57) (.52) (3.37)
Pro forma (.72) (.53) (3.38)
The fair value of these options was estimated at the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions:
2000 1999 1998
------ ------ ------
Expected volatility 158% 175% 79%
Risk-free interest rate 5.9% 5.5% 6%
Expected lives 1.5 to 3.75 years 3 years .5 to 2.5 years
Dividend yield -- -- --
F-20
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE J - STOCKHOLDERS' EQUITY - Continued
Additional information with respect to all options outstanding at June
30, 2000, and changes for the three years then ended was as follows:
Above Equal to Below
market price market price market price
------------------- --------------- --------------
Weighted Weighted Weighted
average average average
exercise exercise exercise Total
Options price Options price Options price Options
--------- -------- ------- ----- ------- ----- ---------
Outstanding at
July 1, 1997 20,235 $ 32.20 -- $ -- 100,000 $9.40 120,235
Price adjustment of
variable options -- -- -- -- -- (8.30) --
Granted 2,500 8.75 90,000 2.30 10,000 1.54 102,500
Forfeited/expired (5,700) 30.00 -- -- -- -- (5,700)
--------- -------- ------- ----- ------- ----- ---------
Outstanding at
June 30, 1998 17,035 14.64 90,000 2.30 110,000 3.03 217,035
Granted 41,250 5.98 100,000 1.83 10,000 2.30 151,250
Exercised -- -- -- -- (11,176) 1.17 (11,176)
Forfeited (11,175) 6.83 (90,000) 2.30 (21,324) 1.64 (122,499)
--------- -------- ------- ----- ------- ----- ---------
Outstanding at
June 30, 1999 47,110 8.91 100,000 1.83 87,500 3.73 234,610
Granted 1,613,221 2.36 -- -- 820,000 1.76 2,433,221
Exercised -- -- -- -- -- -- --
Forfeited (2,000) 22.50 -- -- -- -- (2,000)
--------- -------- ------- ----- ------- ----- ---------
Outstanding at
June 30, 2000 1,658,331 $ 2.53 100,000 $1.83 907,500 $1.95 2,665,831
========= ======== ======= ===== ======= ===== =========
Number Weighted
of shares average
underlying exercise
options price
---------- --------
Options exercisable at June 30, 1998 217,035 $ 3.64
========== ========
Options exercisable at June 30, 1999 234,610 $ 3.96
========== ========
Options exercisable at June 30, 2000 2,340,840 $ 2.11
========== ========
F-21
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE J - STOCKHOLDERS' EQUITY - Continued
For 2000, options granted above and below market value had a weighted
average fair value per share of $1.58 and $2.30, respectively. For
1999, options granted above, equal to, and below market value had a
weighted average fair value per share of $1.54, $1.57, and $1.60,
respectively. For 1998, options granted above, equal to, and below
market value had a weighted average fair value per share of $.19, $.87
and nil, respectively.
Information about stock options outstanding at June 30, 2000 is
summarized as follows:
Options outstanding Exercisable
-------------------------------- ----------------------
Weighted
average Weighted Weighted
remaining average average
Range of contractual exercise Number exercise
exercise prices Number life price exercisable price
- --------------- --------- ----- ------- ----------- --------
$1.10 to $1.50 721,250 3.95 $ 1.49 721,250 $ 1.49
$1.68 to $2.30 1,375,000 4.05 1.84 1,375,000 1.84
$2.69 to $3.72 491,971 4.66 3.62 166,980 3.43
$8.75 to $9.40 76,250 1.79 9.38 76,250 1.79
$26.50 1,360 .26 26.50 1,360 26.50
--------- ----- ------- ----------- --------
2,665,831 3.98 $ 2.30 2,340,840 $ 2.11
========= ===== ======= =========== ========
Common stock warrants issued and outstanding at June 30, 2000 are
summarized as follows:
Weighted average
Range of exercise price Number remaining life
----------------------- --------- ----------------
$1.00 100,000 1.83
$2.00 to $3.00 1,727,752 1.99
$4.00 to $6.00 210,000 4.67
$32.80 5,250 .92
---------
2,043,002
=========
All outstanding warrants are exercisable.
In connection with the acquisition of Softgen, the Company issued
warrants allowing the holders the ability to purchase 940,000 shares of
the Company's common stock at a price of $3.00 per share, exercisable
from the date of acquisition, October 29, 1999, for a period of three
years.
F-22
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE J - STOCKHOLDERS' EQUITY - Continued
During the fiscal year ended June 30, 2000, the Company issued warrants
to acquire 362,752 shares of the Company's common stock to various
entities in connection with their assistance in the raising of capital
during the year. The warrants have exercise prices ranging from $2.00
to $6.00 and expire between June 2003 and March 2005.
During the fiscal year ended June 30, 2000, warrants to purchase
1,718,250 shares of the Company's common stock were exercised. The
warrants were issued in previous years in connection with the raising
of capital for the Company and the exercise prices ranged from $.40 to
$2.20 per share.
NOTE K - INCOME TAXES
A reconciliation of income tax benefit computed by applying the U.S.
Federal tax rates to the net loss and recorded income tax expense
(benefit) is as follows:
2000 1999 1998
----------- ----------- -----------
Tax benefit at statutory rate $(3,693,718) $(2,141,099) $(5,922,168)
State income taxes, net of
federal income tax effect (72,914) (66,723) (506,109)
Non-deductible expenses 143,198 138,527 99,867
Change in estimate for prior years 183,466 -- 355,846
Change in valuation allowance 3,439,968 2,069,295 5,972,564
----------- ----------- -----------
$ -- $ -- $ --
=========== =========== ===========
F-23
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE K - INCOME TAXES - Continued
The components of the Company's deferred income taxes at June 30, 2000
and 1999 are as follows:
2000 1999
-------------- -----------
Deferred tax liabilities
Fixed assets $ (62,011) $ (34,812)
Software and product development costs (712,803) (434,102)
Deferred costs (119,027) --
-------------- -----------
(893,841) (468,914)
Deferred tax assets
Inventory reserve 3,533 5,100
Bad debt reserve 1,997 26,013
Warranty 34,677 56,545
Accrued liabilities 113,560 136,000
Deferred revenue 328,258 8,972
Net operating loss carryforwards 18,619,036 15,003,536
-------------- -----------
19,101,061 15,236,166
-------------- -----------
Net deferred tax asset 18,207,220 14,767,252
Valuation allowance (18,207,220) (14,767,252)
-------------- -----------
$ -- $ --
============== ===========
At June 30, 2000, the Company has net operating loss carryforwards for
Federal income tax purposes of approximately $54,729,000 which may be
used to offset future taxable income, subject to provisions of the
Internal Revenue Code, and will expire in various amounts in the years
2008 through 2020 if not utilized.
F-24
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE L - PENSION AND OTHER BENEFIT PROGRAMS
Prior to a subsidiary's bankruptcy filing in 1992, the subsidiary had a
defined benefit plan, which covered substantially all full-time
employees. The following table sets forth the funded status of the
Company's defined pension plan at June 30:
2000 1999 1998
-------- -------- --------
Actuarial present value of
benefit obligations
--------------------------
Accumulated benefit obligation $781,466 $773,950 $712,835
Projected benefit obligation 781,466 773,950 712,835
Plan assets at fair value 657,772 639,202 615,352
-------- -------- --------
Excess projected benefit obligation 123,694 134,748 97,483
Increase due to an assumption change -- -- 57,151
-------- -------- --------
Net pension liability $123,694 $134,748 $154,634
======== ======== ========
Net pension cost includes
the following components
---------------------------
Interest on unfunded liability $ 9,432 $ 10,826 $ 6,952
Actuarial gain (loss) (10,437) 11,425 (848)
-------- -------- --------
Net pension cost (benefits) $ (1,005) $ 22,251 $ 6,104
======== ======== ========
The weighted average assumed discount rate used in determining the
actuarial present value of the projected benefit obligation for 2000,
1999 and 1998 was 7.00%.
F-25
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE M - NON-CASH INVESTING AND FINANCING ACTIVITIES
2000 1999 1998
----------- ----------- -----------
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for
purchase of assets $ 2,290,893 $ -- $ --
=========== =========== ===========
Conversion of debt to common stock $ 2,788,723 $ 1,000,000 $ 724,114
=========== =========== ===========
Issuance of common stock for
expenses and services $ 682,500 $ 27,500 $ --
=========== =========== ===========
Stock compensation $ 661,414 $ -- $ 432,530
=========== =========== ===========
Stock issued in connection
with a pooling of interests $ -- $ -- $ 803,000
=========== =========== ===========
Issuance of common stock for land $ -- $ -- $ 280,000
=========== =========== ===========
Issuance of common stock in
satisfaction of accounts
payable and accrued liabilities $ -- $ -- $ 533,093
=========== =========== ===========
Conversion of note receivable
including accrued interest
for stock of VMI $ -- $ -- $ 815,879
=========== =========== ===========
Purchase of subsidiary for
note payable $ -- $ -- $ 200,000
=========== =========== ===========
Issuance of common stock
for dividends $ 33,244 $ 11,261 $ 374,963
=========== =========== ===========
Sale of subsidiaries in
consideration of sub-licenses $ -- $ 1,660,217 $ --
=========== =========== ===========
Sale of land for note $ -- $ 250,000 $ --
=========== =========== ===========
Redemption of Series 1998-A1
Preferred Stock for Series
1999-D1 and cancellation of
warrants $ - $14,532,806 $ -
=========== =========== ===========
Redemption of Series Q Preferred
Stock for Series 1999-E $ - $ 2,400,000 $ -
=========== =========== ===========
F-26
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE N - RELATED PARTY TRANSACTIONS
During 1998, the Company purchased the remaining interest in a
partnership that officers and related parties purchased during 1997.
The Company issued 142,359 shares of common stock in the transaction.
The asset underlying the partnership was classified as land. During
1999, the Company incurred a loss of $82,800 on the sale of this land.
In 1998, a trust in which the President of the Company holds a
beneficial interest, loaned the Company $250,000 under a note which
bore interest at 14%. In April 1998, the Company exchanged 147,725
shares of common stock for settlement of the outstanding principal and
interest.
NOTE O - BUSINESS SEGMENT INFORMATION
The Company is primarily engaged in high technology product sales and
consulting and support services. The following tables set forth
certain information with respect to the years ended June 30:
The Company has two segments for 2000 and 1999: Technology product
sales and technology consulting and support services. In 1998 the
Company also had a consumer electronics segment. The segments are
differentiated by the products and services provided as follows:
Product sales
-------------
This segment consists of set-top boxes, network equipment, computer
cabling, computer telephony integration (CTI) and personal computer
equipment and peripherals.
Consulting and support services
-------------------------------
This segment consists of services for the implementation of e-
business solutions, software support maintenance, and network
development and support.
Consumer electronics
--------------------
This segment consists of consumer electronics relating to the home
entertainment industry. The Company exited this segment in 1998.
The Company's underlying accounting records are maintained on a legal
entity basis. Segment disclosures are on a performance basis
consistent with internal management reporting. The Company evaluates
performance based on earnings from continuing operations before income
taxes and other income and expense. The Corporate column includes
corporate overhead related items. The accounting policies of the
segments are the same as those described in the summary of significant
accounting policies (Note A).
F-27
uniView Technologies Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE O - BUSINESS SEGMENT INFORMATION - Continued
2000 1999 1998
------------ ------------ ------------
Net revenues
Product sales $ 7,710,606 $ 10,160,563 $ 2,066,359
Services 1,435,099 1,325,495 289,706
Consumer electronics -- -- 131,148
------------ ------------ ------------
$ 9,145,705 $ 11,486,058 $ 2,487,213
============ ============ ============
Operating loss
Product sales $ (2,638,049) $ (2,081,390) $ (2,541,457)
Services (1,154,461) (460,314) -
Corporate (6,788,270) (4,944,321) (5,514,393)
Consumer electronics -- -- (9,055,366)
------------ ------------ ------------
Total operating loss (10,580,780) (7,486,025) (17,111,216)
Less interest expense (283,095) (471,545) (306,925)
Gain on sale of subsidiaries -- 1,660,217 --
------------ ------------ ------------
Loss from continuing operations $(10,863,875) $ (6,297,353) $(17,418,141)
============ ============ ============
Identifiable assets
Computer products and service $ 8,023,184 $ 9,516,628 $ 9,133,287
Corporate 4,500,020 4,564,139 7,013,852
Consumer electronics -- -- 1,581,523
------------ ------------ ------------
$ 12,523,204 $ 14,080,767 $ 17,728,662
============ ============ ============
Depreciation, amortization
and write-down
Computer products and service $ 2,230,321 $ 2,769,607 $ 5,539,401
Corporate 1,216,817 354,665 271,335
Consumer electronics -- -- 741,447
------------ ------------ ------------
$ 3,447,138 $ 3,124,272 $ 6,552,183
============ ============ ============
Capital expenditures
Computer products and service $ 487,378 $ 99,951 $ 1,287,459
Corporate 8,000 26,247 --
------------ ------------ ------------
$ 495,378 $ 126,198 $ 1,287,459
============ ============ ============
F-28
uniView Technologies Corporation and Subsidiaries
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the years ended June 30, 2000, 1999 and 1998
Balance at Charged to Charged Balance
beginning costs and to other at end
Description of year expenses accounts Deductions of year
----------- --------- --------- -------- ---------- ---------
Year ended June 30, 1998
Note receivable
reserve $ 375,000 $ 224,417 $ -- $(375,000) $ 224,417
Allowance for
doubtful accounts -- 20,017 -- -- 20,017
Year ended June 30, 1999
Note receivable
reserve 224,417 -- -- (224,417) --
Allowance for
doubtful accounts 20,017 256,493 -- (200,000) 76,510
Year ended June 30, 2000
Allowance for
doubtful accounts 76,510 -- -- (70,636) 5,874
UNIVIEW TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential
Number Description of Exhibits Page
2.1 Sale and Purchase Agreement dated as of October 29, 1999,
between the Company and Softgen International, Inc., et al.,
concerning the purchase of certain assets of Softgen
International, Inc. (filed as Exhibit "2.1" to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1999 and incorporated herein by reference.) N/A
2.2 Acquisition Agreement dated as of September 22, 1999, between
the Company and Zirca Corporation, concerning the purchase of
certain assets of Zirca Corporation (filed as Exhibit "2.2" to
the Company's Registration Statement on Form S-3 originally
filed with the Commission on March 8, 2000 and incorporated
herein by reference.) N/A
3(i) Articles of Incorporation of the Company, as amended,
defining the rights of security holders (filed as Exhibit
"4.1" to the Company's Registration Statement on Form S-3
originally filed with the Commission on May 13, 1998 and
incorporated herein by reference.) N/A
3(ii) Bylaws of the Company, as amended (filed as Exhibit "3(ii)" to
the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1999 and incorporated herein by reference.) N/A
4.1 Form of Common Stock Certificate of the Company (filed as
Exhibit "4.2" to the Company's annual report on Form 10-K for
the fiscal year ended June 30, 1994 and incorporated herein
by reference.) N/A
4.2 uniView Technologies Corporation 1999 Equity Incentive Plan
(filed as Exhibit "4.4" to the Company's Registration
Statement on Form S-8 filed with the Commission on July 12,
2000 and incorporated herein by reference.) N/A
4.3 Series A Preferred Stock terms and conditions (filed as
Exhibit "4.3" to the Company's annual report on Form 10-K
for the fiscal year ended June 30, 1994 and incorporated
herein by reference.) N/A
4.4 Series H Preferred Stock terms and conditions (filed as
Exhibit "4.4" to the Company's Registration Statement on
Form S-3 originally filed with the Commission on June 20,
1996 and incorporated herein by reference.) N/A
4.5 Series 1999-C Preferred Stock terms and conditions (filed
as Exhibit "4.5" to the Company's Registration Statement
on Form S-3 filed with the Commission on June 28, 1999
and incorporated herein by reference.) N/A
4.6 Series 1999-D1 Preferred Stock terms and conditions (filed
as Exhibit "4.6" to the Company's Registration Statement
on Form S-3 filed with the Commission on June 28, 1998
and incorporated herein by reference.) N/A
4.7 Form of warrant issued in connection with Series 1998-A1
Preferred Stock (filed as Exhibit "4.7" to the Company's
Registration Statement on Form S-3 filed with the Commission
on July 20, 1998 and incorporated herein by reference.) N/A
4.8 Form of warrant issued in connection with the J.P. Carey
Agreement (filed as Exhibit "4.8" to the Company's
Registration Statement on Form S-3 filed with the Commission
on July 20, 1998 and incorporated herein by reference.) N/A
4.9 Form of Securities Purchase Agreement for private placement
to Founders Equity Group, Inc. (filed as Exhibit "4.9" to
the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 1999 and incorporated herein by
reference.) N/A
4.10 Form of Securities Purchase Agreement for private placement
to Bonanza Partners, Ltd. (filed as Exhibit "4.10" to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 1999 and incorporated herein by
reference.) N/A
4.11 Form of warrant issued in connection with private placement
to Bonanza Partners, Ltd. (filed as Exhibit "4.11" to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 1999 and incorporated herein by
reference.) N/A
4.12 Form of warrant issued in connection with acquisition of
certain assets of Softgen International, Inc. (filed as
Exhibit "4.12" to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended December 31, 1999 and
incorporated herein by reference.) N/A
4.13 Series 1999-E Preferred Stock terms and conditions (filed
as Exhibit "4.9" to the Company's Registration Statement on
Form S-3 filed with the Commission on June 28, 1998 and
incorporated herein by reference.) N/A
4.14 Form of warrant issued in connection with Founder's Equity
fee agreement and Associates Funding Group, Inc. (filed as
Exhibit "4.7" to the Company's Registration Statement on
Form S-3 filed with the Commission on June 28, 1999 and
incorporated herein by reference.) N/A
4.15 Form of warrant issued in connection with Nations Investment
Corp., Ltd. (filed as Exhibit "4.8" to the Company's
Registration Statement on Form S-3 filed with the Commission
on June 28, 1999 and incorporated herein by reference.) N/A
4.16 Form of Securities Purchase Agreement for 1999.1 and
1999.2 Convertible Debenture (filed as Exhibit "4.9" to
the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1998 and incorporated herein
by reference.) N/A
4.17 Extension Agreement for Note and Security Agreement with
Geneva Reinsurance Company, Ltd. dated March 16, 1999
allowing conversion of the remaining principal balance of
the note into common stock (filed as Exhibit "4.17" to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1999 and incorporated herein by reference.) N/A
4.18 Form of Securities Purchase Agreement for private placement
to LBI Group, Inc. (filed as Exhibit "4.4" to the Company's
Registration Statement on Form S-3 filed with the Commission
on May 19, 2000 and incorporated herein by reference.) N/A
4.19 Form of warrant issued in connection with private placement
to LBI Group, Inc. (filed as Exhibit "4.5" to the Company's
Registration Statement on Form S-3 filed with the Commission
on May 19, 2000 and incorporated herein by reference.) N/A
4.20* Form of Securities Purchase Agreement for private placement
to Founders Partners VI, LLC. 63
4.21* Form of Securities Purchase Agreement for private placement
to First Ecom.com, Inc. 70
10.1 Loan and Security Agreement between Network America, Inc.
and FINOVA Capital Corporation dated October 30, 1998 (filed
as Exhibit "10.1" to the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1998 and incorporated
herein by reference.) N/A
10.2* Lease Agreement between the Company and CMD Realty Investment
Fund II, L.P., dated October 18, 1999 pertaining to the
property utilized as the corporate headquarters. 77
10.2.1* First Addendum to Lease Agreement between the Company and
CMD Realty Investment Fund II, L.P., dated November 10,
1999 pertaining to the property utilized as the corporate
headquarters. 142
10.2.2* Second Addendum to Lease Agreement between the Company and
CMD Realty Investment Fund II, L.P., dated January 10, 2000
pertaining to the property utilized as the corporate
headquarters. 146
10.3* ** Employment Contract with Mr. Custer dated as of July 1,
2000. 150
10.4* ** Employment Contract with Mr. Robinson dated as of July 1,
2000. 157
10.5* ** Employment Contract with Mr. O'Mara dated as of July 1,
2000. 165
10.6* ** Employment Contract with Mr. Burrows dated as of January 1,
2000. 173
10.7 Database Service Agreement between TVData Technologies,
L.P. and the Company dated August 1, 1999 (filed as Exhibit
"10.17" to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1999 and incorporated herein by
reference.) N/A
10.8* Business Alliance Agreement between subsidiary uniView
Technologies Products Group, Inc. and Zoned In, Inc. dated
May 25, 2000. 181
10.9* Trademark License Agreement between the Company and Avmark,
Inc. relating to the Curtis Mathes trademark, dated July 1,
2000. 192
10.10* Global Purchase Agreement with HSBC Holdings plc relating
to installation of computer telephony integration software
by uniView Softgen Corporation in HSBC call centers, dated
October 26, 1999. 199
16 Letter from King Griffin & Adamson, P.C. regarding change in
certifying accountant (filed as Exhibit "16" to our Current
Report on Form 8-K dated December 1, 1998 and incorporated
herein by reference.) N/A
21* Subsidiaries of the Company. 227
27* Financial Data Schedule (for EDGAR filing purposes only.) N/A
_______________
* Filed herewith.
** Management contract or compensation plan or arrangement required to
be filed as a exhibit pursuant to Item 14 (c).