Back to GetFilings.com
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, 1998
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.)
10911 Petal Street, Dallas, Texas 75238
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 503-8880
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]
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 July 31, 1998, the aggregate market value of the voting stock
held by non-affiliates of the Registrant (9,453,040 shares) was
approximately $16,826,411 based upon the average of the high and low
trading prices of the Common Stock as reported by the Nasdaq Stock Market
($1.78).
On July 31, 1998, there were 10,032,669 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 7
ITEM 3. LEGAL PROCEEDINGS 7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 9
ITEM 6. SELECTED FINANCIAL DATA 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
(F-1 through F-36) 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 20
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT 25
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 66
UNIVIEW TECHNOLOGIES CORPORATION
PART I
ITEM l. BUSINESS
(a) General Development of Business
uniView Technologies Corporation and its subsidiaries (the
"Company") is engaged in the development, licensing and implementation of
innovative hardware and network technologies and solutions for niche set-
top box applications including home healthcare, education, banking,
medical, hotel, home office, and consumer electronics, as well as
providing system integration, technical support and network consulting.
The Company was incorporated in Texas on July 13, 1984 as Donny
Osmond Entertainment Corporation and operated in several facets of the
entertainment industry until 1988. The Company filed an S-18
registration statement in November 1984 and completed the registered
offering in January 1985. On November 8, 1993 the Company's stock was
first listed on the Nasdaq Stock Market.
In November 1993, the Company acquired Curtis Mathes Corporation
(CMC), maker of consumer electronics products relating specifically to
the home entertainment industry, and in May 1994, the Company changed its
name to Curtis Mathes Holding Corporation to reflect its primary business
activity at that time. During fiscal 1996, CMC sold its entire remaining
inventory to a third party and negotiated a satisfaction of its primary
debt obligation with Deutsche Financial Services Corporation ("DFS").
CMC has had no sales since that time.
In 1996 the Company began development of its proprietary
Internet/television "convergence" technology, called "uniView(R)," designed
to enhance the capabilities of television. The Company introduced its TV
set-top box in 1997, which incorporated the uniView technology and
included its own "back office" support and connectivity to its own
Internet service, the uniView Xpressway(TM), which was developed
concurrently with its set-top box technology.
In 1997 the Company continued to move away from a consumer
electronics business model, simply manufacturing and selling set-top
boxes, toward its current technology development, licensing and computer-
related consulting business model. The Company recently acquired three
other consulting companies, which have enriched its resource pool of
employee consultants across the entire spectrum of consulting services
offered by the Company. The transition from a consumer electronics
company to a technology consulting company has been completed and is
exemplified by the Company's recent name change to "uniView Technologies
Corporation."
(b) Financial Information About Industry Segments
Please refer to Note 15 on page F-32 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
The Company's primary focus is 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 (IT). Various niche markets targeted by the
Company include home healthcare, education, banking, hotel, home office,
and consumer electronics, among others.
Consulting Services include identifying a customer's individual
needs and then either modifying an existing network system, or designing
and implementing a customized, cost-efficient, state-of-the-art
convergence network that integrates one or more devices such as personal
computers, set-top boxes, and/or web phones. Administration and
networking offerings include 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 Services include the full-service uniView Xpressway, which
allows the capability of providing web hosting, web development, and
corporate connectivity through 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.
The uniView technology is available for licensing by customers
wishing to manufacture and market a set-top box that provides a consumer
with easy and affordable access to the Internet through the television
medium. uniView set-top units seamlessly integrate Internet access, fax
and online information services with the traditional TV viewing
experience using broadcast quality translucent graphics. All uniView
units additionally have built-in e-mail, conference phone, on-screen
caller ID, automated VCR control and various interactive television
capabilities. Other unique features include the capability of
automatically monitoring the TV listings database and blocking any
programming that parents might find inappropriate based on their own
specifications of show, rating or specific content. The uniView units
are further designed to accept optional input peripherals, such as a
wireless keyboard, which can be added as an accessory to the basic
system. The uniView system is fully operational with its standard
infrared-style remote control; the infrared wireless keyboard allows
greater flexibility in "surfing" the Internet or sending e-mail by
providing a full keyboard.
The Curtis Mathes trademark is available for licensing by customers
wishing to market consumer electronics products.
Patents, Trademarks and Licenses
The Company owns or holds rights to all patents, trademarks and
licenses that it considers to be necessary in the conduct of its
business, including the registered "uniView" trademark, which is due for
renewal in July 2003; and the registered "Curtis Mathes" name and logo,
which is due for renewal in April, 2005.
The Company has also filed an "Intent to Use" with the U.S. Patent
and Trademark Office in connection with the "Lightning Bolts" logo which
it plans to utilize in marketing the uniView technology.
The Company has also filed an "Intent to Use" with the U.S. Patent
and Trademark Office in connection with the service mark "uniView
Xpressway & X Design" which it plans to utilize in marketing the uniView
Xpressway ISP and Online Service.
Seasonality
Sales of licensed products and services are expected to decrease
during the first and second quarters of each calendar year as a result of
the seasonal effect of the consumer buying season, resulting in decreased
royalties, subscription fees and advertising revenues payable to the
Company during such periods. Revenues generated by online subscription
fees to the uniView Xpressway service are expected to be more uniform
than sales revenues of licensed products, but consumer-buying cycles are
expected to affect these revenues as well. Although it is too early to
predict with any certainty, sales of consulting services may prove to be
related to the budgeting cycles of the Company's potential customers.
Manufacturing
The Company has no plans to manufacture any product based upon its
technology. Licensees of the Company's technology are expected to make
their own arrangements for manufacturing and may use various
manufacturers located in America and abroad to produce licensed products.
Environmental
The Company believes that it is presently in substantial compliance
with all existing applicable environmental laws and does not anticipate
that such compliance will have a material effect on its future capital
expenditures, earnings or competitive position.
Customers
The Company's customers are located throughout the United States but
concentrated in Texas, Oklahoma and Arkansas. Two customers accounted
for 12% and 11%, respectively, of the Company's total revenues in 1998,
primarily as the result of acquisition of three companies made during the
year.
Competition
The industry in which the Company and its licensees operate is
intensely and increasingly competitive and includes a large number of
technology development and consulting companies, Internet service
providers 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 the Company's
uniView 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, are introducing 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. The Company also competes 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, Road Runner Group (owned by Time Warner Inc.).
Competition occurs principally in the areas of style, quality,
functionality, service, design, product features and price of the
licensed product.
Research and Development
The Company views its ability to offer new, improved, and innovative
convergence technology as an important component in its plan for future
growth. The Company intends 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, 1998, the Company employed 109 persons. The Company
believes that its employee relations are good.
Prior Obligations Affecting Current Operations
CMC's Plan of Reorganization (the "Plan") was confirmed as of
October 1, 1992 and the obligations of the Plan were assumed by the
Company upon acquisition of CMC. The Company will continue to be
affected by the reorganization only until September 30, 1998, when the
Plan will terminate. CMC remains obligated to service past outstanding
product warranties. Amounts have been accrued to cover these estimated
product warranty costs and an additional amount is accrued monthly to
cover the estimated costs associated with ongoing warranty support for
products sold through liquidation of CMC's inventory in 1996. 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 Item 3 beginning on page 7 of this Form 10-K;
and Note 8 on page F11, and Note 13 on page F-19 of the Notes to
Consolidated Financial Statements for further warranty information.)
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 the Company has been able to eliminate
the direct overhead associated with the warranty support function.
ITEM 2. PROPERTIES
As of June 30, 1998 the Company continued to operate from the
following locations:
Location Purpose/Use Owned/Leased Square Footage
- -------- ----------- ------------ --------------
Dallas, TX Corporate Headquarters;
Advanced Systems Group
and Products Group
offices; warehouse Leased 74,882
Dallas, TX CompuNet Support
Systems, Inc. office Leased 3,724
Tulsa, OK Network America, Inc.
office Leased 8,400
Ponca City, OK Network America, Inc.
office Leased 900
Fayetteville, AR Network America, Inc.
office Leased 4,315
The Company's locations are deemed to be suitable for all of the
Company's operations and are reasonably well utilized. As the Company
has moved away from consumer electronics, its need for facilities related
to receiving, storing and distributing large quantities of consumer
electronics products has diminished. Consequently, the bulk of the
warehouse space at its current corporate headquarters location is under-
utilized. The lease term for this location expires in December 1999 and
management has already begun to evaluate its current and projected
leasing requirements.
ITEM 3. LEGAL PROCEEDINGS
In June 1998, the Company acquired 100 percent ownership of Video
Management Inc. ("VMI"), which owned 100 percent of Network America, Inc.
("NWA"), an Oklahoma corporation, and CompuNet Support Systems, Inc.
("CNSS"), a Texas corporation. VMI had previously acquired NWA and CNSS
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 and CNSS had been pledged to VMI by DataTell as
collateral in a series of note agreements with VMI. On May 15, 1998, E.
Wade Griffin ("Petitioner"), an individual, filed an involuntary petition
in bankruptcy against DataTell requesting that an order for relief be
entered against DataTell under Chapter 7 of the United States Bankruptcy
Code. Petitioner alleged in his petition that DataTell was indebted to
him, that DataTell was in default on the obligation owed to him and that
"upon information and belief, DataTell is generally not paying its debts
that are not subject to bona fide dispute as they become due." DataTell
filed a motion to dismiss the petition, alleging that Petitioner does not
satisfy the necessary requirements and has vigorously contested the
proceeding.
The relevance to the Company of this proceeding is that if an order
for relief is entered by the Court, and if certain other conditions are
satisfied, the acquisition of NWA and CNSS 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. DataTell 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.
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 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 and DataTell's Motion to Dismiss and Petitioner's application for
an order for relief is currently set for hearing in October 1998 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.
Subsidiary Curtis Mathes Marketing Corporation, now known as uniView
Marketing Corporation ("UMC"), has been named as a respondent by Davis
A/S ("Davis") in a commercial, international arbitration proceeding filed
on May 26, 1998. Davis claims that UMC breached a contract to purchase
and sell large-screen projection television sets. Davis seeks
approximately $9,756,703 in damages, based on claims for lost profits and
out-of-pocket expenses. UMC has filed a formal response to the
arbitration claim, claiming that Davis materially breached the Agreement
by failing to provide a product of merchantable quality, and by failing
to timely provide the "new product" contracted for in the Agreement.
Settlement discussions are ongoing and 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
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 International Chamber of
Commerce Court of Arbitration under Case No. 9981 FMS, styled Davis A/S
v. Curtis Mathes Marketing Corporation.
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, 1998.
CMC remains subject to a Chapter 11 Plan of Reorganization (the
"Plan") until September 30, 1998, when it expires. In connection with
its acquisition of CMC, the Company agreed to comply in all respects with
the Plan. Under the Plan, CMC received a discharge of all pre-petition
debts, except for those specifically allowed under the Plan. CMC has
been further required by the Plan to maintain certain cash reserves to
cover its outstanding product warranties, to make certain cash
contributions proportional to its income toward the payment of certain
classes of allowed claims, and has been restricted in certain areas that
relate to corporate structure and to financial activities outside the
ordinary course of business.
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
The Company's 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 the Company's Common Stock for each quarter in the last
two fiscal years are presented below. (The prices shown have been
adjusted to comparable values to reflect a 10 to 1 reverse split of the
Common Stock, which occurred on April 22, 1998).
Quarter Ending Date High Trade Low Trade
Fiscal 1998
June 30, 1998 $ 5.00 $ 1.41
March 31, 1998 $ 6.25 $ 1.25
December 31, 1997 $ 8.44 $ 1.25
September 30, 1997 $ 9.69 $ 4.69
Fiscal 1997
June 30, 1997 $18.13 $ 8.75
March 31, 1997 $20.56 $10.19
December 31, 1996 $18.75 $ 6.25
September 30, 1996 $25.31 $13.13
As of July 31, 1998 there were approximately 12,000 record
shareholders and 10,032,669 common shares outstanding. The Company has
never paid cash dividends on common shares, and does not anticipate doing
so in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
All financial data for the years referenced below were derived from
the Consolidated Financial Statements of the Company 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,
------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Consolidated Statement
of Operations Data
- ----------------------
Net Sales or Operating
Revenues(1) $ 2,487,213 $ 2,503,512 $ 7,656,836 $ 21,267,244 $ 14,730,847
Net Income (Loss) (17,418,141) (7,509,040) (5,887,313) (4,236,585) (309,444)
Income (Loss)
per Common Share(2) (3.37)(3) (2.33)(4) (3.55)(5) (4.40)(6) (0.50)(7)
Income (Loss) from
Continuing Operations(1) (17,418,141) (8,298,466) (5,887,313) (4,409,585) (1,009,042)
Income (Loss) from
Continuing Operations
per Common Share(1),(2) (3.37)(3) (2.57)(4) (3.55)(5) (4.60)(6) (1.40)(7)
Consolidated Balance
Sheet Data
- --------------------
Total Assets 17,728,662 $ 15,474,753 $ 15,210,406 $ 14,088,400 $ 18,260,221
Long Term Debt including
Current Maturities 29,361 961,030 1,450,435 3,282,706 2,204,611
Shareholders' Equity 7,300,231 12,300,635 11,723,532 2,920,780 4,217,485
(1) 1994 adjusted based upon the disposition of SMI subsequent to fiscal
year end.
(2) Computed based upon the weighted average number of common shares
outstanding during each fiscal year.
(3) For the year ended June 30, 1998, for purposes of computation of
earnings per share, net loss was increased for preferred stock
dividends $391,445 ($0.07 per common share) and the computation was
based upon 5,282,511 weighted average shares outstanding.
(4) For the year ended June 30, 1997, for purposes of computation of
earnings per share, net loss was increased for preferred stock
dividends of $27,223 ($0.00 per common share) and the computation
was based upon 3,230,759 weighted average shares outstanding.
(5) For the year ended June 30, 1996, for purposes of computation of
earnings per share, net loss was increased for preferred stock
dividends of $300,040 ($0.17 per common share) and the computation
was based upon 1,743,201 weighted average shares outstanding.
(6) For the year ended June 30, 1995, for purposes of computation of
earnings per share, net loss was increased for preferred stock
dividends of $78,188 ($0.08 per common share) and the computation
was based upon 941,650 weighted average shares outstanding.
(7) For the year ended June 30, 1994, for purposes of computation of
earnings per share, net loss was increased for preferred stock
dividends of $121,329 ($0.15 per common share) and the computation
was based upon 816,862 weighted average shares outstanding.
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 the Company's 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
When used in this Form 10-K, the words "plans," "expects,"
"anticipates," "estimates," "believes" and similar expressions are
intended to identify forward-looking statements. Such statements, which
may include statements contained in the following section, are subject to
risks and uncertainties, discussed in greater detail in the "Risk
Factors" section of the Company's latest registration statement filed
with the Securities and Exchange Commission, that could cause actual
results to differ materially from those projected or discussed. These
forward-looking statements speak only as of the date of this Form 10-K.
The Company expressly disclaims any obligation or undertaking to release
publicly any updates or change in the Company's expectations with regard
thereto or any change in events, conditions or circumstances on which any
such statement may be based.
Overview
During 1998, the Company continued the implementation of its
technology development, licensing and computer-related consulting
business model and the refinement of its convergence technology. The
development of the Company's total convergence technology package has
been completed and, as a result of its aggressive plan of development,
the Company has become the first and, to management's knowledge, the only
company capable of delivering customizable "End to End Solutions" for a
variety of niche applications. Before now, a company wishing to enter
the convergence market with a complete system had to either develop the
technology itself or license hardware technology from one company,
Internet connectivity from another company, and on-line content from
still another. Now, for the first time, hardware, software, Internet
connectivity, and on-line content are all available in one package for
companies wishing to enter the convergence market in general, or for
those wishing to enter a specific market, such as home healthcare,
education, banking, hotel, home office, or consumer electronics, among
others.
The Company's recent acquisitions of three other consulting
companies have enriched its resource pool of employee consultants across
the entire spectrum of consulting services offered by the Company, while
providing the Company with a base of existing revenues upon which it can
build as it goes forward into a new fiscal year. The transition from a
consumer electronics company to a technology development, licensing and
computer-related consulting company is complete and management believes
that the Company is poised to begin reaping the rewards of its previous
hard work during the coming year.
Results of Operations
Revenues
Sales for 1998, which were $ 2.49 million, were comparable to sales
of $2.50 million from 1997. During fiscal 1998, the Company introduced
its uniView set-top box and uniView Xpressway Internet service to the
market. Revenues generated from these products and services during 1998
have been insignificant, which can be attributed in part to overall
depressed sales levels in the market for this product group generally,
and can also be attributed to the Company's evolving business model
during 1998 of continuing to move away from a consumer electronics
business model to its current business model. Substantially all sales
for 1998 occurred as a direct result of the Company's pooling of newly
acquired subsidiaries.
Sales for 1997 decreased to $2.50 million from 1996, which
represents a decline of $5.15 million. This decrease occurred as the
Company redirected its primary focus to the development of the uniView
product line. Unforeseen delays in the introduction of the uniView
product in fiscal 1997 contributed to diminished sales for that year.
All sales for the year ended June 30, 1997 are a result of finished goods
television products being exchanged for advertising from a major cable
television network.
Gross Margin
Gross margin for the sale of products for 1998 was $497,512. Gross
margin for service revenue for 1998 was ($1,004,666). Gross margins for
product sales and services provided by the acquired subsidiaries is
expected to remain fairly consistent in the future, but is not comparable
to 1997 as a result of a different product and service mix provided in
1998.
Gross margin, as a percentage of sales for 1997, was a negative 4%,
compared to 10.3% in 1996. During fiscal 1997, dated inventory was sold
at below original cost while costs of running nationwide points of
presence for the uniView Xpressway online service resulted in additional
negative costs.
Inventory and Software Costs Write-Down
The Company originally positioned itself to sell uniView set top
boxes on a retail basis and to offer the technology for licensing by
other companies wishing to manufacture and market this type product in
the consumer electronics market. However, as the Company's initial sales
and consumer acceptance of this product category generally were
progressing more slowly than expected, the Company realized that set-top
box sales alone would not produce the kind of return on investment that
the Company hopes to achieve for its shareholders. The Company
redirected its focus and determined not to sell uniView set top boxes on
a retail basis, but rather to bundle the product, together with its
connectivity and other computer-related services, and market the
resulting package in a commercially based market. Accordingly, during
1998 the Company wrote down its inventory related to the set top box by
$869,490, which represents the inventory's estimated net realizable value
on a retail basis.
Software development costs are comprised of two significant
categories: those related to the uniView set top box and those related
to the uniView Xpressway Internet service. Management's plan from
inception was to create and maintain the uniView technology as state-of-
the-art convergence technology, and during 1998 continued implementation
of this plan by taking the necessary steps to ensure the development of
timely upgrades of certain portions of the uniView technology. The
upgrades principally relate to software changes in the platform and
operating system of the set top box.
Approximately $2.4 million of costs were capitalized in 1998 in
connection with the uniView set top box. Capitalized software costs for
the existing platform and operating system, which are not expected to be
used in the next generation of the uniView set top box on a go-forward
basis, were expensed and amounted to approximately $3 million.
Software development costs capitalized in connection with the
uniView Xpressway Internet service during 1998 and 1997 were $828,000 and
$1,151,000, respectively. The Company originally positioned itself to
market its uniView Xpressway Internet services to a broad based consumer
market, consistent with its initial marketing strategy for the set-top
box. The Company has redirected its focus and has determined to promote
those services in the commercial market, as an integral part of the
uniView package. In connection with this refocus and a review of
capitalized software costs, during 1998 the Company wrote-off
approximately $452,000 of software development costs attributable to the
uniView Xpressway Internet service.
Operating Expenses
During fiscal 1998, compensation expense increased by $1.38 million
over 1997 as a result of an increase in the number of employees of the
Company. Amortization of goodwill, trademark and software development
costs, and depreciation of property plant and equipment increased by
approximately $2.34 million during 1998. This results primarily from
amortization of the capitalized software costs which the Company began to
amortize in 1998, as well as depreciation of equipment related to the
Internet service, which the Company began depreciating in 1998. In
addition, the Company amortized goodwill in connection with its
acquisitions of CNS and VMI. VMI had existing goodwill on its books at
the time that it was acquired by the Company. In connection with the
Internet service, the Company expensed approximately $1 million for
connectivity related to frame relay, local loop carrier charges and
points of presence. These increases were partially offset by other
increases and decreases in expenses.
Operating expenses for fiscal 1997 increased by $2,500,000 from
1996. Significant components of this increase are $1,981,000 for
advertising and $517,000 for research and development. Where
appropriate, the Company has elected to capitalize certain expenses
relating to the uniView product line and uniView Xpressway Internet
service.
Interest Expense
Interest expense increased from $86,000 in fiscal 1997 to $307,000
in fiscal 1998. This increase is primarily the result of additional
borrowings during 1998 intended to fund the uniView product and Internet
service operations.
Interest expense declined from $583,000 during fiscal 1996 to
$86,000 during fiscal 1997. This decline resulted from the continued
decline in average borrowings outstanding.
Liquidity and Capital Resources
Cash Flows From Operations
Cash used by operations for the fiscal years ended June 30, 1998 and
1997 were ($6,290,000) and ($7,270,000), respectively. Major components
of cash flows from operations in fiscal 1998 included: $1,753,000
decreases in prepaid expenses, a significant portion of which relates to
amounts reclassified to inventory which accounts for the $1,111,000
increase in inventory, 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
$3,283,000; $3,168,000 for depreciation and amortization; $4,389,000
for the write down of inventory and capitalized software; and the effects
of a $17,418,000 loss from operations.
Cash used by operations for the fiscal years ended June 30, 1997 and
1996 were ($7,270,000) and ($1,920,000), respectively. Major components
of cash flows from operations for 1997 included: $1,825,000 for
increases in prepaid expenses related to parts inventory components for
uniView production; $789,000 for recognition of gain on extinguishment of
debt (net of income taxes of $463,000); the increase in accounts payable,
accrued liabilities, and other payables of $1,439,000; $691,000 for
depreciation and amortization; and the effects of a ($7,509,000) loss
from operations.
Cash Flows From Investing Activities
During fiscal 1998, the Company purchased for cash $1,287,000 of
property plant and equipment as compared to $2,100,000 during fiscal
1997. The expenditures during 1998 relate primarily to property and
equipment in connection with the Internet service. The Company paid
$3,219,000 in cash for continued development of the uniView set top box
product line and Internet services as compared to $3,650,000 spent in
cash developing these product lines during fiscal 1997. Additionally,
during 1998, the Company collected $627,000 on notes receivable.
During fiscal 1997, the Company purchased, for cash, approximately
$2,100,000 of property, plant and equipment as compared to approximately
$136,000 during fiscal 1996. The Company also paid $3,650,000 in cash in
1997 for development of software pertaining to the uniView and uniView
Xpressway product lines. Further, $1,114,000 was paid in cash for
licensing of technologies pertaining to software for the uniView and
uniView Xpressway product lines.
Cash Flows From Financing Activities
The Company generated net cash from financing activities of
$11,706,000 during the fiscal year ended June 30, 1998. Significant
components included: $9,650,000 received from preferred and common
stock; $2,500,000, the significant portion of which was received under a
borrowing arrangement; $414,000 for payments on long term debt. A
significant portion of the preferred stock issued for cash was converted
into common stock.
The Company generated net cash from financing activities of
$11,767,000 during the fiscal year ended June 30, 1997. Significant
components included $8,296,000 received from issuances of preferred and
common stock; $1,000,000 received from advances under the Company's
borrowing arrangement that was later converted to common stock;
$1,173,000 paid in cash for preferred stock redeemed; $643,000 for
payments on long term debt; and the receipt of $4,352,000 cash for common
stock issued in the prior year.
Other Matters
Cash Flow
During the fiscal years ended June 30, 1998, 1997 and 1996 the
Company did not achieve a positive cash flow from operations.
Accordingly, the Company relies on available borrowing arrangements and
continued sale of its common stock and preferred stock to fund operations
until a positive cash flow from operations can be achieved. Management
believes that, with the recent acquisitions, and by continuing to conduct
its operations in accordance with its revised business model, the Company
should expect to achieve a positive cash flow in the coming fiscal year;
however, if the Company is unable to achieve a positive cash flow from
operations, additional financing or placements will be required.
Management continually evaluates opportunities with various investors to
raise additional capital, without which, the Company's growth and
profitability could be restricted. Although management believes that
sufficient financing resources are available, there can be no assurance
that such resources will continue to be available to the Company or that
they will be available upon terms favorable to the Company.
Readiness for Year 2000
The Company's assessment of its Year 2000 issues is not complete,
however, the Company has taken actions to assess the nature and extent of
the work required to make its systems, products and infrastructure Year
2000 ready. The Company intends to work toward making its internal
information technology Year 2000 ready, which may include replacing or
updating existing computer systems as needed. Additionally, the Company
plans to evaluate the Year 2000 readiness of its consultants, vendors and
suppliers. Where the Company determines that critical consultants,
vendors or suppliers are not Year 2000 ready, the Company will monitor
their progress and take appropriate actions. The Company believes it is
taking the necessary steps to resolve Year 2000 issues and, based on
current progress and future plans, the Company believes that the Year
2000 date change will not significantly affect the Company's ability to
deliver products and services to its customers on a timely basis;
however, given the uncertain consequences of failure to resolve
significant Year 2000 issues, there can be no assurance that any one or
more such failures would not have a material adverse effect on the
Company.
Factors That May Affect Future Results
The Company participates in a highly volatile industry which is
characterized by rapidly changing patterns and fierce industry-wide
competition. It is clear that the Company will be required from time to
time to adjust its focus to adapt to the rapidly changing marketplace.
Any delay or failure of the Company in anticipating or responding to such
rapidly changing conditions could have an adverse effect upon the
anticipated operating results of the Company.
Outlook: Issues and Uncertainties
The Company does not provide forecasts of future financial
performance. While management continues to pursue new business that
complements the Company's overall business plan, the following issues and
uncertainties, among others, should be considered in evaluating its
growth outlook.
Rapid Technological Change
The computer systems design services and convergence technology
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 the Company's existing and
announced technologies, products and services obsolete or unmarketable.
The development cycle for new technology may be significantly longer than
the Company's past development cycle for existing and proposed technology
and may require the Company to invest its resources in areas that may not
become profitable. There can be no assurance that the expected demand
for the Company's technologies, products and services will materialize or
continue or that the mix of the Company's future offerings will keep pace
with technological changes or satisfy evolving customer preferences or
that the Company 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 the Company's business, operating results and financial
condition.
Long-term Research and Development Investment Cycle
Software requires an investment in its development which often
involves a long payback cycle. The Company has made significant
investments in software research and development in the past, which may
not be recouped by the Company in the near future; however, with the
completion of its "End to End Solution" management expects spending for
research and development in 1999 to decrease significantly from 1998
levels.
Limited Protection of Intellectual Property and Proprietary Rights: Risk
of Litigation
The Company regards its convergence technology containing software-
related components as proprietary and relies 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 the Company in the future with respect
to current or future products.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements and related Financial Statement
Schedules are included at pages F-1 through F-36 in this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
During the Company's two most recent fiscal years, no independent
accountant engaged as the principal accountant to audit the Company's
financial statements has resigned or was dismissed.
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 the
Company's Board of Directors as of June 30, 1998, 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, 49, is the Chairman of the Board, President and
Chief Executive Officer of the Company. Mr. Custer served as a director
of the Company from 1984 to 1985, and from 1987 until the present. He
served as President and Chief Executive Officer of the Company 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 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, 57, has been a director of the Company 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 a co-founder of the Coronado Group, which provides 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, 50, has been a director of the Company since
March, 1994. He has also served as Vice President/ General Counsel of
the Company since October, 1993, and as Secretary of the Company since
June, 1994. Mr. Robinson has over twenty years legal experience,
representing banks and other financial institutions, with a concentration
in commercial transactions and real estate. 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, 66, has been a director of the Company since
February, 1995. He has 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
August, 1993, Mr. Appel has operated the private consulting firm of Appel
Associates. He is a director of Integrated Technology USA, Inc., a
company with a class of securities registered pursuant to section 12 of
the Exchange Act of 1934.
Executive Officers
The following sets forth, with respect to each executive officer of
the Company not heretofore named, as of June 30, 1998, his name, age,
present position and offices held with the Company, period of service in
such capacity, and other business experience.
F. Shelton Richardson, Jr., 39, was Vice President/ Chief Financial
Officer of the Company from February, 1995 through September 18, 1998.
From February, 1990 to February, 1995 he was Chief Financial Officer of
Captivision, Inc., a consulting firm specializing in electronics and
telecommunications ventures. Mr. Richardson holds a Bachelor of Science
degree in Accounting and Taxation from the University of Houston and a
Master of Business Administration from Houston Baptist University.
Thomas W. (Bill) Park, 63, has been Vice President/ Chief Operating
Officer of various subsidiaries of the Company 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, and he is a
recognized expert in the consumer electronics industry. Mr. Park enjoyed
a career of 29 years with 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
with the company, 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, 38, joined the Company in August, 1996, and in
April, 1997 was promoted to Vice President/ Sales and Marketing of all
operating subsidiaries of the Company, bringing with him more than 14
years of experience in the consumer electronics industry. Mr. O'Mara is
responsible for the sales, marketing and advertising strategy for
uniView's set-top box applications, and the uniView Xpressway, the
Company's Internet-access system and on-line service. In addition, Mr.
O'Mara has applied his broad technology expertise in the actual
development, design and execution of the uniView technology. He also
supervises corporate marketing and communications, channel partner
programs, and strategic alliance programs. 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 received a
bachelor of business administration degree in accounting from LaSalle
University (Philadelphia, Pa.).
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the 1934 Act ("Section 16(a)"), requires the
Company's directors, executive officers and persons who beneficially own
more than 10% of a registered class of the Company's equity securities
("10% Owners") to file reports of beneficial ownership of the Company's
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 the Company 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 the Company, or written representations
that no year-end Form 5 filings were required for transactions occurring
during fiscal year ended June 30, 1998, the Company believes that during
the fiscal year ended June 30, 1998, all Section 16(a) filing
requirements applicable to its 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 the Company's Chief Executive Officer and
any other executive officer of the Company who received compensation of
$100,000 or more during the fiscal year ended June 30, 1998.
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
All
Other
Name and Year Other Restricted Securities LTIP Compen-
Principal Ended Annual Stock Underlying Payouts sation
Position Jun. 30 Salary($) Bonus($) Compensation($) Award(s)($) Options/SARs(#) ($) ($)
Patrick A. Custer 1998 170,000 -0- 12,000 -0- 15,000 -0- -0-
Chairman of the 1997 151,310 11,200 12,000 -0- 40,000 -0- -0-
Board and CEO 1996 102,692 -0- 12,000 59,750 -0- -0- -0-
Billy J. Robinson 1998 125,000 -0- 27,500 18,177 15,000 -0- -0-
Vice President, 1997 110,481 11,200 27,500 43,625 15,000 -0- -0-
General Counsel 1996 72,981 -0- 27,500 79,475 -0- -0- -0-
Option/SAR Grants in Last Fiscal Year
The following table shows all individual grants of stock options to
the named executive officers during the fiscal year ended June 30, 1998.
Grant Date
Individual Grants Value
------------------------------------------------------- ----------
(a) (b) (c) (d) (e) (f)
Number of % of Total
Securities Options/
Underlying SARs
Name and Options/ Granted to Exercise Market Grant
Principal SARs Employees or Base Price on Date
Position Granted in Fiscal Price the Date Expiration Present
(#)(1)(2) Year(2) ($/Sh) of Grant Date Value(3)
Patrick A. Custer
Chairman of the
Board and CEO 15,000 20% $2.30 $2.50 April 14, 2003 $18,066
Billy J. Robinson
Vice President,
General Counsel 15,000 20% $2.30 $2.50 April 14, 2003 $18,066
(1) Options have a five-year life, vest in increments over one and one-
half years and are priced at the average closing bid price of the
Common Stock, as reported by NASDAQ, for the five (5) trading days
immediately preceding the date of grant.
(2) The Company has not made any grants of SARs.
(3) The options were valued as of April 15, 1998 using the SFAS 123 -
Black Scholes Option Pricing Model, assuming expected volatility of
79%, a 6% estimated risk-free rate of return, 0% dividend yield, and
time of exercise of 2.0 years. (Please refer to Note 10 beginning
on page F-12 of the Notes to Consolidated Financial Statements in
this Form 10-K for further information concerning pricing of
options.)
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
The following table shows aggregate exercises of options (or tandem
stock appreciation rights) and freestanding stock appreciation rights
during the fiscal year ended June 30, 1998 by each of the named executive
officers.
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#)(2) FY-End ($)(2)(3)
Name and Shares Value
Principal Acquired Realized Exercisable (E)/ Exercisable/
Position on Exercise ($)(1) Unexercisable (U) Unexercisable
- -------- ----------- ------ ----------------- -------------
Patrick A. Custer
Chairman of the 20,000 (E) --
Board and CEO -- -- 30,000 (U) --
Billy J. Robinson
Vice President, 12,500 (E) --
General Counsel -- -- 17,500 (U) --
(1) The Company has not made any grants of SARs.
(2) On June 30, 1998 the options were not considered "in-the-money," as
the fair market value of the underlying securities on that date
($2.16) 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
of the Company. The outside directors of the Company are paid $500 per
meeting, plus their expenses for attending Board of Director meetings.
During fiscal 1998, the Company additionally granted each of the two
outside directors stock options to purchase 75,000 shares of Common Stock
of the Company. The options have a five year life, vest in increments
during the one and one-half year period following the date of grant and
are priced at the average closing bid 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 $2.30 per share
and the market price of the Common Stock on the date of grant, April 15,
1998, was $2.50 per share.
Employment Contracts and Termination and Change-in-Control Arrangements
In April 1997 the Company entered into employment agreements with
named executive officers Messrs. Custer and Robinson for approximately a
three-year term with the Company. The terms of both employment agreements
include an agreed annual salary, employee benefits, nonstatutory stock
options, portions of which vest at certain times depending on the
employee's continued tenure with the Company, and provisions concerning
termination of employment upon sale or change in control of the Company.
Compensation Committee Interlocks and Insider Participation
Mr. Custer and Mr. Robinson participated in advising the Company's
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 of the
Company; and Mr. Robinson is Vice President, Secretary, General Counsel,
and a Director.
Board of Directors Report on Executive Compensation
Executive Compensation
The Company has structured its executive compensation program within
the financial framework of the Company with a goal of attracting and
retaining high-quality executive talent. The executive compensation
program consists generally of base salary and employee benefits. The
Company reviews its compensation programs periodically and compares its
pay practices with other similar companies and with companies staffed
with similarly-skilled executives. During the first fiscal quarter of
each year, the Company reviews salary increases for the current year and,
considering the Company's 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, 1998, Mr. Custer received $182,000 and
nonstatutory employee stock options, the vested portion of which was
valued at $6,022, for his services as President and Chief Executive
Officer of the Company. The factors the Company considered in setting
his compensation include Mr. Custer's leadership in restructuring the
Company, his contribution to the strategic focus and financial
positioning of the Company, 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 the Company specifically incorporates
the report by reference and the report shall not otherwise be deemed
filed under such Acts.
Performance Graph
During the past fiscal year, the Company changed its Standard
Industrial Classification system (SIC) code from 3651 (Household Audio
and Video Equipment) to North American Industry Classification System
(NAICS) code 541512 (Computer Systems Design Services). This change was
made to reflect the current nature of the Company's primary business
activities.
The following graph compares total stockholder returns of the
Company (`uniView") since June 30, 1993 to three indices: (1) the
"NASDAQ Market Index ("NASDAQ");" (2) the aggregate price performance of
equity securities of companies classified under NAICS code 541512 (the
Company's new code) for Computer Systems Design Services ("MG Group");
and (3) the aggregate price performance of equity securities of companies
classified under SIC code 3651 (the Company's old code) for Household
Audio and Video Equipment ("SIC Code").
The total return shown for the Company's stock and for each index
assumes the reinvestment of dividends, even though dividends have never
been declared on the Company's 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 SIC Code
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 SIC code 3651 for consumer electronics
(Household Audio and Video Equipment).
The graph should be viewed in the context of the disposition of
Southwest Memory, Inc. by the Company during fiscal year ended June 30,
1995, the curtailment of the commodity consumer electronics business
operations of the Curtis Mathes Corporation subsidiary during fiscal year
ended June 30, 1996, and the introduction during fiscal year ended June
30, 1997 of the Company's technologically advanced Internet access
uniView products and uniView Xpressway Online Service. Accordingly,
the graph may not necessarily indicate future performance of the Company.
6/30/93 6/30/94 6/30/95 6/30/96 6/30/97 6/30/98
uniView 100.00 312.50 68.80 137.50 90.60 21.60
MG Group 100.00 124.17 161.62 213.95 198.14 249.57
NASDAQ 100.00 109.66 128.61 161.89 195.02 258.52
SIC Code 100.00 149.00 122.80 150.98 176.61 154.49
The foregoing graph is not incorporated in any prior or future
filings of the Company under the 1933 Act or the 1934 Act, unless the
Company specifically incorporates 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 July 31,
1998 with respect to the beneficial ownership of Common Stock by (i)
persons known to the Company 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, 1998 (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
Alscomm, Inc. 800,000(1) 7.97%
16885 Dallas Parkway,
Suite 313
Dallas, Texas 75248
Directors
Patrick A. Custer 344,040(2) 3.43%
Edward M. Warren 82,750(3) 0.82%
Billy J. Robinson 30,389(4) 0.30%
Bernard S. Appel 67,500(5) 0.67%
Executive Officers
Patrick A. Custer 344,040(2) 3.43%
Billy J. Robinson 30,389(4) 0.30%
All Directors and Executive
Officers as a Group 579,629(6) 5.78%
(1) Common shares owned.
(2) Includes 17,500 shares owned outright by Mr. Custer; 20,000 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 20,250 shares owned outright, and 62,500 shares issuable to
Mr. Warren upon exercise of vested nonstatutory stock options.
(4) Includes 17,889 shares owned outright, and 12,500 shares issuable to
Mr. Robinson upon exercise of vested nonstatutory Employee Stock
Options.
(5) Includes 5,000 shares owned outright, and 62,500 shares issuable to
Mr. Appel upon exercise of vested nonstatutory stock options.
(6) Includes 524,679 shares beneficially owned by all directors. Also
includes 1,500 shares owned outright, and 14,500 shares issuable to
Mr. Richardson upon exercise of vested nonstatutory Employee Stock
Options. Also includes 6,695 shares owned outright, and 13,860
shares issuable to Mr. Park upon exercise of vested nonstatutory
Employee Stock Options. Also includes 5,895 shares owned outright,
and 12,500 shares issuable to Mr. O'Mara upon exercise of vested
nonstatutory Employee Stock Options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year ended June 30, 1998, the Company engaged in the
transactions described below with various entities affiliated with the
Company. Management believes these transactions contain substantially
competitive terms as those available from unaffiliated sources.
Transactions with Related Parties
In January 1997 the Company and a limited partnership, CMLP Group,
Ltd. entered into a Joint Venture Agreement relating to the acquisition
and development of certain real estate as the future site of the
Company's corporate offices. The initial capital of the joint venture
consisted of $276,285.27 contributed by CMLP Group, Ltd. and $354,000
contributed by the Company. As of April 15, 1998 no further action had
been taken in furtherance of this project, and the Company purchased
CMLP's share of the Joint Venture for 142,359 restricted par value $.10
common shares of the Corporation in exchange for its undivided 43.835%
interest in the Westgrove Joint Venture (independently valued at
approximately $280,000), which common shares were issued at a price of
$1.9669 per share, which represents 85% of the average closing bid price
of the Common Stock, as reported by NASDAQ, for the five (5) trading days
immediately preceding the date of the transaction. Members of CMLP
Group, Ltd. included Associates Funding Group, Inc., Custer Company,
Inc., Billy J. Robinson, F. Shelton Richardson, Jr., Neal J. Katz, Thomas
W. (Bill) Park, and Thomas P. O'Mara.
Custer Company, Inc., a related party, loaned the Company $250,000
in December 1997. The note included interest only payments monthly at
18% interest per annum. In April 1998, the Company converted this debt
to equity by issuing 147,725 shares of its par value $.10 common stock
for settlement of $256,377 in outstanding principal and accrued interest
as of that date. The common shares were issued at a price of $1.7355 per
share, which represents 75% of the average closing bid price of the
Common Stock, as reported by NASDAQ, for the five (5) trading days
immediately preceding the date of agreement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
Reference is made to page F-2 of this Form 10-K for an index of
all financial statements filed as part of this report.
(2) Financial Statement Schedules
Reference is made to page F-2 of this Form 10-K for an index of
all 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 beginning on sequential
page 66 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, 1998 the Company filed
one Current Report on Form 8-K, dated June 12, 1998 reporting
the Company's acquisition of Video Management, Inc. (including
wholly owned subsidiaries Network America, Inc. and CompuNet
Support Systems, Inc.)
"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/ PAT CUSTER
Patrick A. Custer
President and Chief Executive Officer
September 18, 1998
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/ PAT CUSTER Chairman of the Board, September 18, 1998
Patrick A. Custer President, Chief Executive
Officer and Director
Principal Financial and Accounting Officer
/s/ F. SHELTON RICHARDSON, JR. Vice President, September 18, 1998
F. Shelton Richardson, Jr. Chief Financial Officer
Additional Directors
/s/ BILLY J. ROBINSON Vice President, Secretary, September 18, 1998
Billy J. Robinson General Counsel and Director
/s/ EDWARD M. WARREN Director September 18, 1998
Edward M. Warren
/s/ BERNARD S. APPEL Director September 18, 1998
Bernard S. Appel
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and 1997
ASSETS
------
1998 1997
------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 2,284,988 $ 800,346
Marketable securities - 282,142
Accounts receivable
Trade 1,726,900 -
Due from related parties - 20,000
Notes receivable, current portion,
net of allowance of $29,417 in
1998 and $375,000 in 1997 129,902 35,237
Inventory, net of reserve of
$330,378 in 1998 and $255,115
in 1997 943,048 79,701
Prepaid expenses 166,003 1,918,998
------------ ------------
Total current assets 5,250,841 3,136,424
------------ ------------
PROPERTY AND EQUIPMENT, net 3,305,449 2,319,012
------------ ------------
OTHER ASSETS
Investment in joint venture - 354,000
Notes receivable, less current
portion, net of allowance of
$195,000 in 1998 and $0 in 1997 70,654 291,521
Software development, net of
accumulated amortization of
$1,747,694 in 1998 and $0 in 1997 2,620,996 4,149,748
Licenses, net of accumulated
amortization of $75,416 in 1998
and $16,083 in 1997 1,054,703 1,100,117
Trademark, net of accumulated
amortization of $1,066,931 in
1998 and $822,693 in 1997 3,820,874 4,093,061
Goodwill, net of accumulated
amortization of $218,977 in 1998 1,557,559 -
Other 47,586 30,870
------------ ------------
Total other assets 9,172,372 10,019,317
------------ ------------
TOTAL ASSETS $ 17,728,662 $ 15,474,753
============ ============
-Continued-
See accompanying notes to consolidated financial statements.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
June 30, 1998 and 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
1998 1997
------------ ------------
CURRENT LIABILITIES
Current maturities of long-term debt
including $12,325 in 1998 and $34,000
in 1997 due to related parties $ 3,644,729 $ 301,810
Trade accounts payable 4,224,897 355,894
Accrued and other current liabilities 1,379,753 1,197,194
License fees payable 673,920 660,000
Current maturities of obligations
under capital leases 50,666 38,296
Deferred income 69,889 -
------------ ------------
Total current liabilities 10,043,854 2,553,194
------------ ------------
LONG TERM DEBT, less current maturities 15,495 171,469
OBLIGATIONS UNDER CAPITAL LEASES,
less current maturities 124,425 14,262
WARRANTY PROVISION 244,657 435,193
------------ ------------
Total liabilities 10,428,431 3,174,118
------------ ------------
COMMITMENTS AND CONTINGENCIES
(Notes 2,3,12,13,14 and 18)
STOCKHOLDERS' EQUITY
Preferred stock, cumulative, $1.00
par value; 1,000,000 shares authorized:
Series A, 140,000 shares
(liquidation preference of $140,000) $ 140,000 $ 140,000
Series H, 3 shares (liquidation
preference of $75,000) 3 3
Series K, 9 shares in 1997
(liquidation preference of $1,035,000) - 9
Series L, 1,275 shares in 1997
(liquidation preference of $1,275,000) - 1,275
Series Q, 60 shares in 1998
(liquidation preference of $1,500,000) 60 -
Series 1998-A1, 80 shares in 1998
(liquidation preference of $2,000,000) 80 -
Common stock, $.10 par value; 80,000,000
shares authorized; 10,032,670 and
3,670,919 issued and outstanding at
June 30, 1998 and 1997, respectively 1,003,267 367,092
Additional paid-in-capital 42,480,261 30,317,592
Accumulated deficit, since July 1, 1993
quasi reorganization (36,323,440) (18,525,336)
------------ ------------
Total Stockholders' Equity 7,300,231 12,300,635
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,728,662 $ 15,474,753
============ ============
See accompanying notes to consolidated financial statements.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended June 30, 1998, 1997 and 1996
1998 1997 1996
------------ ------------ ------------
REVENUES:
Net sales of products $ 2,197,507 $ 2,503,512 $ 7,656,836
Revenues from services 280,751 - -
Revenues from Internet
Service Provider 8,955 - -
------------ ------------ ------------
Total Revenue 2,487,213 2,503,512 7,656,836
COST OF REVENUES:
Cost of product sales 1,685,070 2,612,402 6,867,560
Cost of services 295,676 - -
Cost of Internet Service
Provider Service 1,013,621 - -
------------ ------------ ------------
Total Cost of Revenues 2,994,367 2,612,402 6,867,560
------------ ------------ ------------
Gross Margin (507,154) (108,890) 789,276
OPERATING EXPENSES 12,569,050 8,801,723 6,400,523
INVENTORY WRITE-DOWN 869,490 - -
SOFTWARE WRITE-DOWN 3,519,584 - -
------------ ------------ ------------
Operating Loss (17,465,278) (8,910,613) (5,611,247)
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest and other income 354,062 235,404 307,367
Interest expense (306,925) (86,292) (583,433)
------------ ------------ ------------
Total Other Income (Expense) 47,137 149,112 (276,066)
------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND EXTRAORDINARY ITEM (17,418,141) (8,761,501) (5,887,313)
Income tax benefit - 463,035 -
------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY ITEM (17,418,141) (8,298,466) (5,887,313)
EXTRAORDINARY ITEM
Gain on extinguishment of debt,
net of income taxes
of $463,035 in 1997 - 789,426 -
------------ ------------ ------------
NET LOSS $(17,418,141) $ (7,509,040) $ (5,887,313)
============ ============ ============
-Continued-
See accompanying notes to consolidated financial statements.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - Continued
Years ended June 30, 1998, 1997 and 1996
1998 1997 1996
------------ ------------ ------------
Loss from continuing operations
attributable to common
shareholders (Note 1) $(17,809,586) $ (8,325,689) $ (6,187,353)
============ ============ ============
Loss attributable to common
shareholders (Note 1) $(17,809,586) $ (7,536,263) $ (6,187,353)
============ ============ ============
Loss from continuing operations
per share attributable to
common shareholders $ (3.37) $ (2.57) $ (3.55)
============ =========== ============
Gain from extraordinary item per share $ - $ 0.24 $ -
============ =========== ============
Loss per share attributable to
common shareholders $ (3.37) $ (2.33) $ (3.55)
============ =========== ============
Weighted average common shares
outstanding 5,282,511 3,230,759 1,743,201
============ =========== ============
See accompanying notes to consolidated financial statements.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended June 30, 1998, 1997 and 1996
Additional
Common Stock Preferred Stock Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit
------- ---------- -------- ---------- ----------- -------------
BALANCES - June 30, 1995 995,480 $ 99,548 369,762 $ 369,762 $ 7,234,151 $ (4,782,682)
Issuance of Series H preferred
stock for cash - - 55 55 1,287,445 -
Issuance of Series I preferred
stock for cash - - 550 550 494,450 -
Subscriptions for Series I preferred
stock - - 4,835 4,835 4,346,665 -
Conversion of Series G preferred
stock to common 13,690 1,369 (112,458) (112,458) (405,875) -
Conversion of debentures and
demand notes 105,000 10,500 - - 789,500 -
Issuance of common stock for fees
and services 22,200 2,220 - - 149,280 -
Issuance of common stock for
employee compensation 8,300 830 - - - -
Issuance of common stock for cash
and payment of note payable
of $145,280 1,031,710 103,171 - - 5,845,279 -
Exercise of warrants 188,700 18,870 - - 2,452,630 -
Issuance of common stock for fees
on above common stock issuances
for cash 66,040 6,604 - - - -
Dividends paid in cash - - - - - (305,855)
Net loss for the year - - - - - (5,887,313)
--------- ---------- -------- ---------- ----------- -------------
BALANCES - June 30, 1996 2,431,120 243,112 262,744 262,744 22,193,525 (10,975,850)
Redemption of Series G preferred
for cash - - (117,305) (117,305) (1,055,745) -
Conversion of Series H preferred
for common stock 87,907 8,791 (52) (52) (8,739) -
Issuance of Series I preferred
stock for cash - - 800 800 728,200 -
Conversion of Series I preferred
to common stock 520,014 52,001 (6,185) (6,185) (45,816) -
-Continued-
See accompanying notes to consolidated financial statements.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - Continued
Years ended June 30, 1998, 1997 and 1996
Additional
Common Stock Preferred Stock Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit
--------- ---------- -------- ---------- ----------- -------------
Issuance of Series J preferred
stock for cash - $ - 1,625 $ 1,625 $ 1,460,875 $ -
Conversion of Series J preferred
stock for common stock 148,114 14,811 (1,625) (1,625) (13,186) -
Issuance of common stock
for cash 322,000 32,200 - - 3,568,426 -
Issuance of Series K preferred
for cash - - 11 11 983,876 -
Issuance of Series L preferred
stock for cash - - 1,500 1,500 1,423,500 -
Conversion of Series K preferred
for common stock 13,550 1,355 (1) (1) (1,353) -
Issuance of common stock for
warrants exercised 10,000 1,000 - - 81,000 -
Conversion of Series L preferred
stock for common stock 30,380 3,038 (225) (225) 2,813 -
Conversion of Line of Credit note
payable for common stock 107,835 10,784 - - 1,000,216 -
Dividends paid in cash - - - - - (40,446)
Net loss for the year - - - - - (7,509,040)
--------- ---------- -------- ---------- ----------- -------------
BALANCES - June 30, 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)
-Continued-
See accompanying notes to consolidated financial statements.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - Continued
Years ended June 30, 1998, 1997 and 1996
Additional
Common Stock Preferred Stock Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit
------- ---------- ------- ---------- ----------- -------------
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)
========== ========== ======= ========== =========== =============
See accompanying notes to consolidated financial statements.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30, 1998, 1997 and 1996
1998 1997 1996
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(17,418,141) $ (7,509,040) $ (5,887,313)
Adjustments to reconcile net
loss to cash used by
operating activities:
Loss on sales of assets - 1,200 305
Gain on sale of marketable
securities (29,015) - -
Depreciation and amortization 3,168,332 690,504 645,128
Income tax benefit - (463,035) -
Gain on extinguishment of debt - (789,426) -
Provision for bad debts (150,583) 375,000 536,080
Provision for obsolete
inventory 75,263 255,115 (282,457)
Issuance of shares as
employee compensation
and/or financing fees - - 830
Common stock issued for
consulting fees - - 30,000
Write off of note receivable - - 25,000
Write off of investment - - 250,000
Write-down of inventory 869,490 - -
Write-down of software 3,519,584 - -
Changes in assets and
liabilities, net of effects
from acquisitions
and dispositions:
Accounts receivable (270,422) 28,445 990,231
Inventory (1,110,798) 312,113 2,329,882
Prepaid expenses and other 1,752,995 (1,825,081) (460,144)
Restricted cash - 47,423 233,209
Other assets 20,835 (100) 32,720
Accounts payable, accrued
liabilities and other
current liabilities 3,282,626 1,606,388 (363,312)
------------ ------------ ------------
Cash used by operating activities (6,289,834) (7,270,494) (1,919,841)
------------ ------------ ------------
-Continued-
See accompanying notes to consolidated financial statements
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
Years ended June 30, 1998, 1997 and 1996
1998 1997 1996
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and
equipment $ (1,287,459) $ (2,100,359) $ (136,558)
Investment in joint venture - (354,000) -
Software development (3,218,943) (3,649,748) -
Licenses (13,920) (1,113,867) -
Sale of marketable securities 311,157 (282,142) -
Cash balance in company
acquired (disposed) - - (5,342)
Collections on notes receivable 626,785 28,049 1,193
Issuance of note receivable (350,000) (375,000) -
------------ ------------ ------------
Cash used for investing activities (3,932,380) (7,847,067) (140,707)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Checks issued in excess of
cash balances - - (32,852)
Receipts under borrowing arrangements - 1,000,000 -
Change in borrowings under line of
credit agreements - - (2,572,024)
Proceeds from long-term debt 2,500,000 122,062 -
Principal payments on long-term debt (413,888) (642,940) (1,235,147)
Principal payments on capital
lease obligations (24,256) (145,805) (6,207)
Issuances of preferred and common
stock for cash 9,650,000 8,296,105 10,271,421
Redemption of preferred stock for
cash - (1,173,050) -
Receipt of cash for common stock
issued in prior year - 4,351,500 -
Dividends paid (5,000) (40,446) (305,855)
------------ ------------ ------------
Cash provided by financing activities 11,706,856 11,767,426 6,119,336
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,484,642 (3,350,135) 4,058,788
CASH AND CASH EQUIVALENTS, BEGINNING 800,346 4,150,481 91,693
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, ENDING $ 2,284,988 $ 800,346 $ 4,150,481
============ ============ ============
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 64,427 $ 64,231 $ 508,898
============ ============ ============
-Continued-
See accompanying notes to concolidated financial statements
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
Years ended June 30, 1998, 1997 and 1996
1998 1997 1996
------------ ----------- ------------
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for settlement
of cash received under borrowing
arrangements, including $78,356
in accrued interest. $ - $1,078,356 $ -
============ ========== ============
Conversion of debentures and demand
notes into common stock $ - $ - $ 800,000
============ ========== ============
Issuance of common stock for fees
and services $ - $ - $ 151,500
============ ========== ============
Issuance of common stock for
note payable $ 724,114 $ - $ 145,280
============ ========== ============
Sale of inventory parts for note
receivable $ - $ - $ 350,000
============ ========== ============
Issuance of common stock for
subscriptions and receivable $ - $ - $ 4,350,500
============ ========== ============
Issuance of common stock for commission $ - $ - $ 6,604
============ ========== ============
Purchases of property and equipment
for notes payable $ - $ - $ 59,337
============ ========== ============
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 stock with
note payable $ 200,000 $ - $ -
============ ========== ============
Issuance of common stock for dividends $ 374,963 $ - $ -
============ ========== ============
Warrants issued for services $ 432,530 $ - $ -
============ ========== ============
See accompanying notes to consolidated financial statements
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Principles of Consolidation
--------------------------------------------
uniView Technologies Corporation (formerly Curtis Mathes Holding
Corporation) was formed on July 13, 1984. The Company started and
discontinued various operations from its inception through 1994.
Effective January 30, 1998, Curtis Mathes Holding Corporation changed
its name to uniView Technologies Corporation.
During 1996, the Company operated principally as a wholesale
distributor in the consumer electronics industry through its 100% owned
subsidiary Curtis Mathes Corporation (CM). The Company also owns 100%
of FFL, Inc. (FFL), which was involved in real estate and financing
transactions in prior years but which is now inactive. In late 1996,
the Company redirected its focus toward a new product called uniView
which allows the user, through the use of their TV remote control, to
"surf the Internet," receive e-mail, or to search for movies or
programs featuring specific subjects, stars or ratings. The uniView
product was introduced to the market during August 1997.
During 1997, the Company created a new subsidiary, now known as uniView
Xpressway Corporation (Xpressway). Xpressway was created to construct,
own, and operate the Company's new Internet Service Provider (ISP)
which is an Internet "on-ramp" for uniView users and PC users alike.
The ISP service was introduced to the market during August 1997.
Revenues generated from the sale of uniView products and the ISP
service were insignificant during 1998.
Effective April 1998, the Company acquired Video Management, Inc. (VMI)
which through two wholly owned subsidiaries offers implementation of
local area networks, network hardware design, consulting and software
designed systems and customized hardware, personal computer and network
systems. These operations are concentrated in Oklahoma, Texas and
Arkansas.
The accompanying financial statements include the accounts of uniView
Technologies Corporation and its subsidiaries. These entities are
collectively referred to herein as "the Company." All material
intercompany accounts and transactions are eliminated in consolidation.
Cash Equivalents
----------------
The Company considers all highly liquid debt instruments having an
original maturity of three months or less when purchased to be cash
equivalents for purposes of the statement of cash flows.
Marketable Securities
---------------------
Marketable securities are classified as available-for-sale and stated
at fair market value. The historical cost of these securities
approximates their fair market value at June 30, 1997. The Company
owned no marketable securities at June 30, 1998.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Inventory
---------
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 uniView set top boxes. Approximately $207,000 of
total inventory at June 30, 1998 is for uniView set top boxes.
Prepaid Expenses
----------------
Prepaid expenses include approximately $132,800 advanced to an entity
to fund the production of uniView inventory.
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. Replacements
and betterments are capitalized.
Software Development Costs
--------------------------
Software development costs are divided into two categories: uniView set
top box software development costs totaling $1,423,996 at June 30,
1998, net of accumulated amortization and Xpressway Internet Service
Provider software development costs totaling $1,197,000 at June 30,
1998, net of accumulated amortization. Software development costs for
the uniView set top box totaling $2,998,695 were previously capitalized
during fiscal 1997. During 1998, $2,390,695 costs were capitalized.
Amortization commenced in early 1998 once the product was introduced to
the market and is being amortized over 3 years. Amortization expense
for 1998 amounted to $895,897. On an on-going basis, management reviews
recoverability, the valuation and amortization of the capitalized
software development costs. As a part of this review, the Company
considers the undiscounted projected future cash flows in evaluating
the value of the capitalized software development costs. This
evaluation includes a review of the components of the software and the
extent to which these component pieces are to be used in the software
product on a go forward basis. If the undiscounted future cash flows
is less than the stated value, the capitalized software development
costs would be written down to its fair value. During fiscal year 1998,
set top box sales were significantly lower than expected, and future
sales and cash flow projections were revised. As a result of this
review, including management's evaluation of software component pieces
not to be used on a go forward basis, an impairment loss of $3,067,163
was recognized in 1998.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Software Development Costs - Continued
--------------------------
Software development costs for the ISP were capitalized during 1998 and
1997 totaling $828,248 and $1,151,053 respectively. Amortization of
the capitalized ISP costs commenced in 1998 once the product was
introduced to the market and is being amortized over 3 years.
Amortization expense for 1998 amounted to $329,880. As a result of
management's review of the valuation of the ISP software development
costs, an impairment loss of $452,421 was recorded in 1998.
License Fees
------------
The cost of initial license fees and other operating rights acquired
are being amortized on the straight-line method over their remaining
contractual lives of five years. Amortization expense charged to
operations in 1998 and 1997, and 1996 totaled $59,333, $7,750 and $0,
respectively.
Trademark
---------
Trademark represents the value considered to arise from the Curtis
Mathes Corporation name and reputation and consists of the excess of
the purchase price paid over the estimated fair market value of
identifiable net assets acquired in connection with the acquisition of
Curtis Mathes Corporation. The excess purchase price includes amounts
paid to Deutsche Financial Services (DFS), (previously ITT Commercial
Finance Corporation) and unsecured creditors in accordance with the
Curtis Mathes Corporation reorganization (see Note 13). The trademark
is amortized on a straight-line basis over 20 years. Amortization of
the trademark for the years ended June 30, 1998, 1997 and 1996 amounted
to $244,238, $244,238 and $244,264, respectively.
On an on-going basis, management reviews recoverability, the valuation
and amortization of the trademark. As a part of this review, the
Company considers the undiscounted projected future cash flows in
evaluating the value of the trademark. If the undiscounted future cash
flow is less than the stated value, the trademark would be written down
to its fair value.
Goodwill
--------
Goodwill totaling $1,574,480 results from the acquisition by VMI of its
two subsidiaries during 1998. Goodwill is being amortized over its
estimated useful life of 15 years. Amortization expense for 1998
amounted to $16,921.
On an on-going basis, management reviews recoverability, the valuation
and amortization of goodwill. As a part of this review, the Company
considers the undiscounted projected future cash flows in evaluating
the value of goodwill. If the undiscounted future cash flows is less
than the stated value, goodwill would be written down to its fair value.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Research and Development Costs
------------------------------
Research and development costs are charged to operations when incurred
and are included in operating expenses. The amounts charged to expense
in 1998, 1997 and 1996 were $786,360, $516,931 and $11,480, respectively.
Advertising Costs
-----------------
Advertising costs are charged to operations when the advertising first
takes place. Advertising costs charged to expense in 1998, 1997 and
1996 totaled $1,399,362, $1,981,172 and $142,891, respectively.
Income Taxes
------------
The Company utilizes the asset and liability method of accounting for
income taxes. The Company records deferred tax assets and liabilities
for the expected future tax consequences of events that have been
included in the financial statements and income tax returns. Deferred
tax assets and liabilities are determined based on the differences
between financial statement and income tax bases of assets and
liabilities using currently enacted tax rates. Valuation allowances
are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense or benefit is the
tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
Financial Instruments with Off-Balance-Sheet Risk
-------------------------------------------------
In the normal course of business, CM has been a party to financial
instruments with off-balance sheet risk to meet the financing needs of
the CM dealers. These financial instruments principally included
obligations to repurchase defaulted dealer receivables and inventory
financed under CM's dealer floorplan agreement with DFS.
CM's exposure to credit loss in the event of nonperformance by CM
dealers with respect to the repurchase obligations is represented by
the contractual amount of the instruments as discussed in Note 12. CM
uses the same credit policies in evaluating its guarantees as it does
for financial instruments reflected in the Company's financial statements.
Net Loss Per Common Share
-------------------------
Net loss per share of common stock is computed based on the weighted
average number of common shares outstanding during each respective
year. Net loss for purposes of the computation of loss per share is
increased for preferred stock dividends of $391,445, $27,223 and
$300,040 ($0.07, $.00 and $0.17 per common share) for the years ended
June 30, 1998, 1997 and 1996, respectively. Diluted loss per share for
the years ended June 30, 1998, 1997 and 1996 is the same as basic loss
per share since the assumed conversion of convertible securities and
outstanding options would be anti-dilutive.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Quasi Reorganization
--------------------
Effective July 1, 1993, the stockholders and directors of the Company
approved a plan of quasi reorganization. Pursuant to the plan, all
assets and liabilities as of that date were adjusted to estimated fair
value (such adjustments were nominal) and an accumulated deficit of
$4,140,595 was eliminated.
Stock-Based Compensation
------------------------
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123") became effective in fiscal 1997.
This statement requires the fair value of stock options and other
stock-based compensation issued to employees to either be included as
compensation expense in the income statement or the pro forma effect on
net income and earnings per share of such compensation expense to be
disclosed in the footnotes to the Company's financial statements. The
Company has adopted SFAS 123 on a disclosure basis only. (See Note 10).
Uses of Estimates and Assumptions
---------------------------------
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities,
and the reported revenues and expenses. Actual results could vary from
the estimates that were used. In particular, judgment is given as to
the useful life and recoverability of the capitalized software
development costs. See previous accounting policy note - Software
Development Costs.
Fair Market Value of Financial Instruments
------------------------------------------
The carrying amount for cash and cash equivalents, notes receivable,
and long-term debt is not materially different than fair market value
because of the short maturity of the instruments and/or their
respective interest rate amounts.
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. Maintenance and warranty revenue are recognized
ratably over the contractual period or as the service is provided.
Amounts received in advance on service contracts are recorded as
deferred income and recognized as the services are performed.
Reclassifications
-----------------
Certain prior year amounts have been reclassified in order to conform
to current year presentation.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Accounting Standards Not Yet Adopted
------------------------------------
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130 "Reporting
Comprehensive Income" ("SFAS No. 130"), which establishes new guidance
for the reporting and display of comprehensive income and its
components. SFAS No. 130 requires that the Company's foreign currency
translation adjustment be included in other comprehensive income. The
Company is not required to adopt the Statement until July 1, 1998 and
does not expect the adoption of these standards to result in material
changes to previously reported amounts.
In July 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information." This Statement expands certain reporting and
disclosure requirements for segments from current standards. In
February 1998, the FASB issued Statement of Accounting Standards No.
132, "Employers' Disclosures about Pensions and Other Post-retirement
Benefits." This Statement revises employers' disclosures about pension
and other post-retirement benefit plans. It does not change the
measurement or recognition of those plans. The Company is not required
to adopt these Statements until July 1, 1998 and is currently
evaluating the disclosure impact of adopting these standards.
In October 1997, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position No. 97-2, "Software Revenue Recognition" (SOP 97-2), which
supersedes Statement of Position No. 91-1. SOP 97-2 will be effective
for all transactions entered into by uniView Technologies Corporation
subsequent to June 30, 1998. The Company is currently evaluating the
impact that SOP 97-2 will have on software license revenue transactions
entered into subsequent to June 30, 1998.
In June 1998, the Financial Accounting Standards Board issued Standard
No. 133 "Accounting for Derivative Instruments and Hedging Activities."
The Standard establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as derivatives)
and for hedging activities. The new Standard is effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999.
The Company does not expect the adoption of the new Standard to have a
material impact on its financial position or results of operations.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
2. ABILITY TO CONTINUE AS A GOING CONCERN
As reflected in the accompanying consolidated financial statements, the
Company incurred losses from continuing operations of $17,418,141,
$8,298,466 and $5,887,313 during the years ended June 30, 1998, 1997
and 1996, respectively. During 1998, 1997 and 1996, the Company also
used substantial cash in operations.
During the second half of fiscal 1996, the Company redirected its focus
toward a new product, uniView. Since the Company's change of focus in
late fiscal 1996, a substantial portion of the Company's resources has
been committed to the development and refining of the uniView
technology. Additionally, the Company has committed a great deal of
financial resources to develop uniView Xpressway, the Company's
Internet Service Provider for both uniView set-top boxes and PC
connectivity. The Company introduced its uniView product to the
market in August 1997 and introduced its ISP services in August 1997,
however, revenue generated during fiscal 1998 was insignificant.
During the second half of fiscal 1998, the Company moved farther away
from consumer electronics toward becoming a technology company and
plans to generate revenues in the future by licensing its technology to
other companies and by rendering technology consulting services to
companies wishing to enter various aspects of the convergence market.
The Company's ability to continue as a going concern will be based on
its ability to obtain the operating funds necessary to continue to fund
this new direction until cash flows generated by operations are
sufficient to meet the cash flow needs of the Company. The Company
plans to continue raising capital through the issuance of common stock,
preferred stock and debt instruments as necessary.
The financial statements do not include any adjustments to reflect the
possible effects on the recoverability and classification of assets or
classification of liabilities which may result from the inability of
the Company to continue as going concern.
3. ACQUISITIONS AND DISPOSITIONS
Video Management, Inc. (VMI)
----------------------------
On 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. VMI was incorporated on
December 15, 1997. The transaction was consummated through the
exchange of 100 percent of the issued and outstanding capital stock of
VMI pursuant to a Stock Purchase Agreement with the sole shareholder of
VMI for 800,000 shares of the Company's par value $.10 common stock.
The purchase price was established through an arms length negotiation
considering historical revenues of NWA and CNSS, VMI's only assets, as
well as the then current market price of the Company's Common Stock.
This transaction has been accounted for as a pooling of interests. The
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
3. ACQUISITIONS AND DISPOSITIONS - Continued
Video Management, Inc. (VMI) - Continued
----------------------------------------
results of operations of VMI are included in the statements of
operations of the Company from VMI's inception, December 1997.
Effective May 13, 1998, VMI acquired 100% of the issued and outstanding
shares of NWA and CNSS, such acquisitions being accounted for as a
purchase. Prior to its acquisition of NWA and CNSS, VMI had no
substantial operations.
Prior to the acquisition, on May 13, 1998, VMI acquired 100% of NWA and
CNSS from DataTell Solutions, Inc. (DataTell) as a result of an
agreement to accept collateral in satisfaction of a debt owing by
DataTell to VMI. Prior to that date, the stock of NWA and CNSS had
been pledged to VMI by DataTell as collateral in a series of note
agreements with VMI.
On May 15, 1998, E. Wade Griffin (Petitioner), an individual, filed an
involuntary petition in bankruptcy against DataTell requesting that an
order for relief be entered against DataTell under Chapter 7 of the
United States Bankruptcy Code. Petitioner alleged in his petition that
DataTell was indebted to him, that DataTell was in default on the
obligation owed to him and that "upon information and belief, DataTell
is generally not paying its debts that are not subject to bona fide
dispute as they become due." DataTell filed a motion to dismiss the
petition, alleging the Petitioner does not satisfy the necessary
requirements and has vigorously contested the proceeding.
The relevance to the Company of this proceeding is that if an order of
relief is entered by the Court, and if certain other 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. DataTell 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.
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 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
and DataTell's Motion to Dismiss and Petitioner's application for an
order for relief is currently set for hearing in October 1998 in the
United States Bankruptcy Court.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
3. ACQUISITIONS AND DISPOSITIONS - Continued
Corporate Network Solutions, LLC
--------------------------------
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 no
interest, 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 the results
of operations have been included from the date of purchase. Resulting
goodwill attributable to this transaction was $174,106. This goodwill
was immediately amortized during fiscal 1998.
4. NOTES RECEIVABLE
Notes receivable at June 30, 1998 and 1997
consist of the following:
1998 1997
------------------------
Note receivable from Inman's Corporation, non-
interest earning, secured by parts inventory
and proceeds from sale of parts inventory. $ 295,171 $ 323,911
Note receivable from ViewCall America, Inc.,
non-interest bearing, secured by borrower's - 375,000
note receivable.
Note receivable from EDnet, earning interest
at 9.5%, secured by receivables of EDnet. 129,417 -
Note receivable from employee, earning
interest at 9.5%, secured by automobile. 384 2,847
Less reserve for doubtful notes receivable (224,416) (375,000)
------------------------
200,556 326,758
Less current portion (129,902) (35,237)
------------------------
Long-term portion $ 70,654 $ 291,521
========================
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
5. INVENTORY
Inventory at June 30, 1998 and 1997 consists of the following:
1998 1997
---------------------------
Consumer electronics products $ 1,273,426 $ 334,816
Less reserve for excess and obsolete
inventory (330,378) 255,115)
---------------------------
$ 943,048 $ 79,701
===========================
6. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1998 and 1997 consist of the
following:
1998 1997
---------------------------
Land $ 646,500 $ -
Equipment 4,609,748 3,137,944
Vehicles 62,757 22,589
Furniture and fixtures 274,557 131,483
Leasehold improvements 176,801 100,490
Computer software 61,554 35,301
Less accumulated depreciation and
amortization (2,526,468) (1,108,795)
---------------------------
Net property and equipment $ 3,305,449 $ 2,319,012
===========================
Equipment under capital leases included above at June 30, 1998 and 1997
amounted to $528,178 and $407,332, respectively, and the related
accumulated amortization amounted to $382,705 and $349,660,
respectively.
Depreciation expense for the years ending June 30, 1998, 1997, and 1996
totaled $1,296,082, $437,448 and $391,331, respectively.
7. BORROWING ARRANGEMENTS AND DEBT
Long-term debt at June 30, 1998 and 1997 consists of the following:
1998 1997
-------------------------
Note payable to a financial institution with
interest at 18%, payable monthly as to
interest only with balloon principal payment
due December 31, 1998, unsecured $ 1,525,886 $ -
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
7. BORROWING ARRANGEMENTS AND DEBT - Continued
Long-term debt at June 30, 1998 and 1997 - Continued
1998 1997
-------------------------
Note payable to financial institution with
interest at 14%, collateralized by accounts
receivable and inventory, due on demand 918,453 -
Note payable to a third party with interest at
6%, payable in eight quarterly installments of
principal of $58,778 due January 1, 1997,
plus interest, collateralized by certain
inventory, currently in dispute 413,144 389,759
Note payable to financial institution with
interest at prime plus 2.625% (11.125% at
6/30/98), due on demand, collateralized by
accounts receivable and inventory 348,299 -
Note payable to an individual investor with
interest at 14%, payable monthly as to
interest only, principal of $250,000, due
March 23, 1999, collateralized by land 250,000 -
Note payable related to acquisition of
subsidiary company, non- interest bearing,
$15,000 payable monthly, secured by the
outstanding common stock of CNS 150,000 -
Note payable to an individual with imputed
interest of 10%, payable in monthly
installments of $1,458, unsecured 29,361 48,959
Note payable to a financial
institution with interest at 10.9%,
payable in monthly installments of
$2,677, collateralized by equipment - 561
Note payable to a financial
institution for purchase of
automobiles 12,756 -
Note payable to Custer Company, Inc.
(related party) 12,325 34,000
-------------------------
3,660,224 473,279
Less current portion (3,644,729) (301,810)
-------------------------
Long-term portion $ 15,495 $ 171,469
=========================
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
7. BORROWING ARRANGEMENTS AND DEBT - Continued
The following is a schedule of maturities of long-term debt at June 30, 1998:
1999 $ 3,644,729
2000 15,495
-----------
$ 3,660,224
===========
The weighted average interest rate of borrowings outstanding at June
30, 1998 is 13.7%.
A borrowing arrangement exists whereby the Company under certain
conditions can issue Convertible Preferred stock to an investor group
for up to $6,000,000 in traunches of $2,000,000, each separated by
three months, pursuant to Regulation D under the Securities Act of
1933. One of these conditions requires the trading price of the
Company's common stock to exceed $1.50 during the prior 30 days before
draw down of the next amount. The preferred stock has a mandatory
conversion feature at the end of the term. As of June 30, 1998,
$2,000,000 (Series 1998-A1 preferred stock) of the above $6,000,000 has
been drawn down, with $4,000,000 available subject to the borrowing
conditions.
8. ALLOWANCE FOR WARRANTY CLAIMS
Curtis Mathes Corporation
-------------------------
Warranty costs, where applicable, are recorded by CM upon the sale of
the electronic products based on estimates of failure rates and costs
to repair defective units. A simple average of the failure rates and
repair costs is applied to the total number of units that are under
warranty to establish the allowance for warranty claims. During fiscal
1996, the Company sold all of its remaining parts inventory on hand to
a third party and outsourced repairs and parts servicing for all
warranty obligations. The Company pays fees for the service and repair
of warrantied units.
All electronic products sold up to the date of settlement with DFS
(March 1996) included a four-year parts and labor warranty. Pursuant
to CM's plan of reorganization, CM agreed to continue to extend a parts
only warranty for the time period of the original warranties on units
sold prior to CM's bankruptcy filing on January 27, 1992. The
reorganized CM was required under the plan of reorganization to fully
fund the cost of warranty claims for units sold during the period CM
was in bankruptcy. In addition, CM's plan of reorganization provided
that the reorganized CM fund in a segregated bank account an amount
equal to 1.25% of gross electronic sales to pay warranty claims
subsequent to the reorganization confirmation date (October 1, 1992).
For the year ended June 30, 1997, the Company provided for warranty
allowance at a rate of approximately 5% of sales. During the fiscal
year ended June 30, 1998, no sales were recorded related to the above
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
8. ALLOWANCE FOR WARRANTY CLAIMS - Continued
Curtis Mathes Corporation - Continued
-------------------------------------
warrantied goods; accordingly, no warranty allowance was recorded on
sales for the same period. Management believes that the reserve is
adequate to cover potential warranty claims. Other current liabilities
in the accompanying balance sheets include an allowance for warranty
claims of $82,852 and $171,667 at June 30, 1998 and 1997, respectively
During fiscal 1998, the Company accrued an additional $315,000 for
future potential warranty claims after the previous accrual was largely
depleted towards the end of the fiscal year. Management believes that
the increase in claims was due to one particular line of projection
television units with warranties expiring in December 1998.
Network America, Inc.
---------------------
NWA sells the majority of its products with a 2 year parts and labor
warranty. Warranty expense is established when the items are sold and
is based upon the experience of claims actually made during the prior
year. Allowance for future claims at June 30, 1998 was $40,000.
9. RELATED PARTY TRANSACTIONS
In May 1996, Associates Funding Group, a related entity, converted
97,500 shares of Series G preferred stock with an original basis of
$568,125 to 390,000 shares of common stock. The Company issued 136,900
of these shares and canceled 253,100 shares in satisfaction of the
remaining balance of a note receivable and accrued interest due from
Southwest Memory, Inc. (SMI). The preferred shares were previously
held as collateral on the note receivable from SMI.
During fiscal 1998, the Company purchased the remaining interest of a
Joint Venture Partnership that officers and related parties purchased
during fiscal 1997. The Company issued 142,359 shares of common
stock related to this transaction. No gain or loss is recognizable as
a result of the exchange. Accordingly, at June 30, 1998, the Company
has reclassified this asset as land rather than Investment in Joint
Venture.
Custer Company, Inc., a family trust in which the President of the
Company has a beneficial interest, loaned the Company $250,000 during
fiscal 1998. The terms of the note included interest only payments
monthly at 14%. In April 1998, the Company exchanged 147,725 shares
of common stock for settlement of $256,378 in principal and accrued
interest.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
10. 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, 1998, the Company has issued and outstanding 140,000 Series
A preferred shares, 3 Series H preferred shares, 60 Series Q preferred
shares and 80 Series 1998-A-1 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 Q preferred shares are
convertible as determined in the Certificate of Designation,
redeemable, and carry cumulative dividends of 3%. Series 1998-A-1
preferred shares are convertible based upon conversion ratios as
determined in the Certificate of Designation, redeemable and carry
dividends of 5%.
Dividends of $5,000, $40,446 and $305,855 on preferred stock were paid
in cash during the years ended June 30, 1998, 1997 and 1996,
respectively. Non-cash dividends of $236,703 were paid during the year
ended June 30, 1995, of which $182,747 was paid through the issuance of
additional preferred stock. Non-cash dividends of $374,963 were paid
during the year ended June 30, 1998. Cumulative dividends in arrears
as of June 30, 1998, 1997 and 1996 amounted to $24,340, $12,858 and
$26,081 respectively.
Common Stock
------------
Effective April 24, 1998, the Board of Directors approved amending the
par value of the common stock from $0.01 to $0.10 per share and 10:1
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.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
10. STOCKHOLDERS' EQUITY - Continued
Common Stock - Continued
------------------------
Common stock warrants issued and outstanding as of June 30, 1998 are as
follows:
Shares Exercise Price Issuance Date Term
------ -------------- ------------- ----
15,500 39.40 March 1994 5
3,000 31.25 April 1994 5
4,000 31.25 May 1994 5
3,000 31.25 June 1994 5
2,000 22.50 February 1995 5
10,500 12.50 April 1995 5
124,080 25.00 May 1995 4
1,360 26.50 May 1995 5
59,000 15.00 July 1995 3
7,400 10.00 August 1995 4
125,000 15.00 August 1995 3
20,000 15.00 September 1995 3
5,501 30.00 May 1996 3
2,250 32.80 May 1996 5
4,000 45.00 May 1996 3
5,250 32.80 March 1997 4
10,000 1.54 April 1997 5
20,000 9.40 April 1997 5
5,000 9.40 June 1997 5
75,000 1.10 December 1997 5
60,000 1.50 December 1997 3
25,000 2.20 December 1997 3
23,000 2.50 December 1997 3
2,500 8.75 December 1997 5
1,250 1.90 March 1998 2
15,000 2.50 March 1998 3
80,000 2.30 April 1998 5
10,000 2.21 April 1998 4
500,000 2.50 June 1998 3
200,000 2.80 June 1998 5
100,000 3.00 June 1998 3
200,000 3.00 June 1998 4
10,000 2.21 April 1998 4
No warrants were exercised in 1998. During the year ended June 30,
1997, 100,000 warrants were exercised for total cash proceeds of
$82,000.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
10. STOCKHOLDERS' EQUITY - Continued
Compensatory 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. During 1998, the Company
granted 90,000 options to key employees, which vest over 1.5 years.
During 1997, the Company granted 100,000 options to key employees and
directors, which vest over four years. All other compensatory options
vested immediately upon their grant date.
The Company applies APB Opinion 25 in accounting for it's stock based
compensation awards. During 1998, 1997 and 1996, 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 1998, 1997 and 1996 would have been
increased as follows:
1998 1997 1996
------------ ----------- -----------
Net loss:
As reported $(17,418,141) $(7,509,040) $(5,887,313)
Pro forma (17,483,423) (7,682,011) (5,996,393)
Loss per share:
As reported (3.37) (2.33) (3.55)
Pro forma (3.38) (2.38) (3.61)
Changes in the Company's compensatory options with exercise prices
above, equal to and below market price at the grant date are as
follows:
Above Equal to Below
--------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise Total
Options Price Options Price Options Price Options
--------------------------------------------------------------
Outstanding
at June 30,
1995 9,060 $ 27.80 - $ - - $ - 9,060
Granted in
1996 28,225 20.00 700 7.50 3,200 6.10 32,125
Exercised
in 1996 (17,050) 9.70 (700) 7.50 (1,400) 7.50 (19,150)
Forfeited/
Expired
In 1996 - - - - - - -
--------------------------------------------------------------
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
10. STOCKHOLDERS' EQUITY - Continued
Compensatory Stock Options - Continued
--------------------------------------
Changes in the Company's compensatory options with exercise prices
above, equal to and below market price at the grant date - Continued
Above Equal to Below
--------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise Total
Options Price Options Price Options Price Options
--------------------------------------------------------------
Outstanding
at June 30,
1996 20,235 32.20 - - 1,800 5.00 22,035
Granted in
1997 - - - - 105,350 9.40 105,350
Exercised
in 1997 - - - - (7,150) 8.30 (7,150)
Forfeited/
Expired
in 1997 - - - - - - -
--------------------------------------------------------------
Outstanding
at June 30,
1997 20,235 32.20 - $ - 100,000 9.40 120,235
Price
adjustment
of variable
options - - - - - (8.30) -
Granted
in 1998 2,500 8.75 590,000 2.47 10,000 1.54 602,500
Exercised
in 1998 - - - - - - -
Forfeited/
Expired in
1998 (5,700) 30.00 - - - - (5,700)
--------------------------------------------------------------
Outstanding
at June 30,
1998 17,035 14.64 590,000 $ 2.47 110,000 $ 3.03 717,035
======= ======= ======= =======
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
10. STOCKHOLDERS' EQUITY - Continued
Compensatory Stock Options - Continued
--------------------------------------
A summary of the weighted average grant date fair values of options
with exercise prices above, equal to, and below market price at the
date of grant are as follows:
Above Equal to Below
--------------------------------------
1996 .24 .13 1.29
1997 0 0 .61
1998 .19 .87 0
The following table summarizes information about compensatory stock options
outstanding at June 30, 1998:
Options Outstanding Options Exercisable
------------------------------------ ------------------------
Weighted
Avg. Weighted Weighted
Remaining Avg. Avg.
Range of Number Contractual Exercise Number Exercisable
Exercise Price Outstanding Life Price Exercisable Price
- -------------------------------------------------------------------------------
$1.10 - $45.00 717,035 3.34 years $3.92 672,270 $4.72
The fair value of each option granted is estimated on the grant date
using the Black-Scholes option-pricing model. The model requires the
input of subjective assumptions. The following assumptions were made
in estimating the fair value of all compensatory stock options:
1998 1997 1996
---------------------------------------------
Dividend yield 0% 0% 0%
Risk-free interest rate 6% 6% 6%
Expected volatility 79% 60% 60%
Expected life 0.5 - 2.5 years 4.75 years 1.47 years
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
11. INCOME TAXES
A reconciliation of income tax expense (benefit) computed by applying
the U.S. federal tax rates to loss from continuing operations before
income taxes and extraordinary items and recorded income tax expense
(benefit) is as follows:
1998 1997 1996
---------------------------------------
Tax expense (benefit) at
statutory rate $(5,922,168) $(2,978,911) $(2,001,687)
State income taxes, net of federal
income tax effect (506,109) (260,216) (175,313)
Meals and entertainment 7,323 5,998 -
Amortization of goodwill 92,544 90,689 -
Change in estimate for prior years 355,846 1,213,485 -
Change in valuation allowance 5,972,564 1,465,920 2,177,000
---------------------------------------
$ - $ (463,035) $ -
=======================================
The components of the Company's deferred income taxes at June 30, 1998
and 1997 are as follows:
1998 1997
------------------------
Current:
Inventory reserve $ 122,141 $ 94,316
Bad debt reserve 18,275 138,638
Warranty reserve 63,465 169,618
Accrued contingency 110,910 -
Deferred revenue 25,838 -
Valuation allowance (340,629) (402,572)
------------------------
$ - $ -
========================
Noncurrent:
Goodwill 63,798 -
Depreciation (812) (73,747)
Warranty reserve 89,686 160,891
Software development costs (968,982) (1,534,162)
Stock option compensation 159,906 -
Net operating loss carryforward 13,013,732 7,831,025
Valuation allowance (12,357,328) (6,384,007)
------------------------
- -
------------------------
Total $ - $ -
========================
At June 30, 1998, the Company has net operating loss carryforwards for
Federal income tax purposes of approximately $35,400,000 which may be
used to offset future taxable income, subject to provisions of the
Internal Revenue Code Section 382, and will expire in various amounts
in the years 2008 through 2013 if not utilized.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
12. COMMITMENTS AND CONTINGENCIES
One of the Company's subsidiaries, uniView Marketing Corporation (UMC),
has been named as a respondent by Davis A/S (Davis) in a commercial,
international arbitration proceeding filed on May 26, 1998. Davis
claims that UMC breached a contract to purchase and sell large-screen
projection television sets. Davis seeks approximately $9,756,703 in
damages, based on claims for lost profits and out-of-pocket expenses.
UMC has filed a formal response to the arbitration claim, claiming that
Davis materially breached the Agreement by failing to provide product
of merchantable quality, and by failing to timely provide the "new
product" contracted for in the Agreement. Settlement discussions are
ongoing and 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 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 International Chamber of Commerce Court of
Arbitration.
During 1996 and 1995, CM transferred receivables from qualified dealers
to DFS under a repurchase agreement. The agreement requires CM, in the
event of default by the dealer, to repurchase property that is
collateral (inventory consisting of consumer electronic products) for
the financing provided to the Curtis Mathes dealer. CM is contingently
liable to DFS for the portion of the receivable that is defaulted
through non-payment or non-recovery of the collateral. The maximum
contingent liability at June 30, 1998 was approximately $66,000. In
conjunction with the settlement agreement with DFS, all dealer
financing programs were canceled effective August 1, 1996.
In the normal course of business, the Company is involved in various
product liability and other lawsuits. The Company has accrued $300,000
in connection with these items, which is management's estimate of the
potential ultimate aggregate settlement amount and related costs.
The Company leases equipment under capital leases and office and
purchase facilities under long-term noncancelable operating leases.
The leases carry no renewal options.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
12. COMMITMENTS AND CONTINGENCIES - Continued
The following is a schedule of future minimum lease payments at June
30, 1998:
Operating Capital
Leases Leases
-----------------------------
1999 $ 537,027 $ 74,758
2000 280,378 69,838
2001 123,780 64,153
2002 49,150 49,599
-----------------------------
$ 990,335 258,348
Less amount representing interest (83,257)
-----------
Present value of net minimum lease
payments including current
maturities of $50,666 $ 175,901
===========
Rental and lease expense under operating leases for the years ended
June 30, 1998, 1997 and 1996 was approximately $698,032, $476,000 and
$459,000, respectively.
Also see Licensing Fees and Royalties Commitments - Note 18.
13. CURTIS MATHES CORPORATION REORGANIZATION
On October 1, 1992, (which occurred prior to the Company's acquisition
of CM) the Bankruptcy Court for the Eastern District of Texas confirmed
CM's plan of reorganization ("Plan"), subject to certain positive and
negative covenants. The Plan provided for the following key
provisions, which affect the ongoing operations of the reorganized CM.
Warranty Costs
--------------
The reorganized CM assumed the warranties for the original warranty
periods for units that were sold prior to CM filing for bankruptcy
(pre-petition). The warranty assumed covers parts with a cost in
excess of $15 for the remaining term of the warranty period.
Treatment of DFS Allowed Unsecured Claim
----------------------------------------
The DFS allowed unsecured claim was identified as "class twelve" in the
Plan and could not exceed $2,600,000. Beginning on the effective date
of the Plan, CM was required to contribute up to $400,000 as needed to
fund anticipated losses on certain specific home entertainment units
financed by DFS. Additionally, in February 1993, CM began remitting to
DFS on a monthly basis an amount equal to 1% of the Company's gross
sales for the preceding month. CM paid DFS approximately $71,260 and
$216,000 for the years ended June 30, 1996 and 1995, respectively, and
approximately $136,000 for the eight-month period ended June 1994. All
remaining amounts due under this claim were settled in March 1996.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
14. MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK
The Company's customers are located throughout the United States but
concentrated in Texas, Oklahoma and Arkansas. Two customers accounted
for 12% and 11%, respectively, of the Company's total revenues in 1998.
During 1997, no single customer accounted for 10% or more of the
Company's net sales. In addition, at June 30, 1998, two customers'
accounts comprised approximately 36% of the total trade accounts
receivable balance.
Financial instruments subject to credit risk consist primarily of cash,
accounts and notes receivable and notes payable. Cash is at risk to
the extent that it exceeds Federal Deposit Insurance Corporation
insured amounts (approximately $1,986,000 at June 30, 1998). To
minimize risk, the Company places its cash and with high credit quality
financial institutions. The significant portion of notes receivable is
secured by the parts inventory included in the sale. Accounts
receivable are generally not secured. Management provides an allowance
for doubtful accounts, which reflects its estimate of the uncollectable
receivables. In the event of non-performance, the maximum exposure to
the Company is the recorded amount of receivable at the balance sheet
date.
15. BUSINESS SEGMENT INFORMATION
During 1997 and 1996 the Company was engaged primarily in the
distribution of consumer electronic products. In 1998, it was
primarily engaged in computer sales and services. The following tables
set forth-certain information with respect to the years ended June 30:
1998 1997 1996
-----------------------------------------
Net revenues:
Computer sales and service $ 2,356,065 $ - $ -
Consumer electronics 131,148 2,503,512 7,656,836
-----------------------------------------
Consolidated $ 2,487,213 $ 2,503,512 $ 7,656,836
=========================================
Operating loss:
Computer sales and service $ (2,541,457) $ - $ -
Consumer electronics (9,055,366) (6,229,880) (3,478,435)
Real estate and other (29,017) - -
Corporate (5,485,376) (1,982,294) (1,825,445)
-----------------------------------------
Total operating loss (17,111,216) (8,212,174) (5,303,880)
Less interest expense (306,925) (86,292) (583,433)
-----------------------------------------
Loss from continuing operations $ (17,418,141) $(8,298,466) $ (5,887,313)
=========================================
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
15. BUSINESS SEGMENT INFORMATION - Continued
1998 1997 1996
-----------------------------------------
Identifiable assets:
Computer sales and service $ 4,506,207 $ - $ -
Consumer electronics 5,402,397 13,620,173 6,356,795
Real estate and other 470 - 29,487
Corporate 7,819,588 1,854,580 8,824,124
-----------------------------------------
$ 17,728,662 $15,474,753 $ 15,210,406
=========================================
Depreciation, amortization and
write-down:
Computer sales and service $ 1,406,356 $ - $ -
Consumer electronics 4,845,475 501,310 436,122
Real estate and other 29,017 189,194 1,226
Corporate 271,335 - 207,780
-----------------------------------------
$ 6,552,183 $ 690,504 $ 645,128
=========================================
Capital Expenditures:
Computer sales and service $ 1,287,459 $ - $ -
Consumer electronics - 1,689,685 194,667
Corporate - 410,674 1,228
Less capital expenditures paid
for other than by cash - (28,882) (59,337)
-----------------------------------------
$ 1,287,459 $ 2,071,477 $ 136,558
=========================================
16. RETIREMENT PLAN
Prior to subsidiary Curtis Mathes Corporation filing bankruptcy in
1992, the subsidiary had a defined benefit plan, which covered
substantially all full-time employees. The Company believed that all
liability for funding of the Plan had been discharged in bankruptcy.
However, it was determined in 1996 that funding of the plan for prior
year's service has not been relieved. Therefore, the Company accrued
the amount of the unfunded plan liability as measured January 1, 1995,
resulting in recognition of approximately $171,000 in pension cost for
the year ended June 30, 1996.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
16. RETIREMENT PLAN - Continued
The following table sets forth the funded status of the Company's
defined pension plan:
Actuarial present value of benefit obligations:
1998 1997
-----------------------
Accumulated benefit obligation $712,835 $708,186
-------- --------
Projected benefit obligation 712,835 708,186
Plan assets at fair value 615,352 618,503
-------- --------
Excess projected benefit obligation 97,483 89,683
Increase due to an assumption change 57,151 -
Net Pension Liability $154,634 $ 89,683
-----------------------
Net pension cost includes the
following components:
Interest on unfunded liability $ 6,952 $ 21,227
Actuarial loss (848) (3,360)
-----------------------
Net pension cost $ 6,104 $ 17,867
=======================
The weighted average assumed discount rate used in determining the
actuarial present value of the projected benefit obligation for 1998
and 1997 was 7.00% and 7.75%, respectively. The weighted average
assumed rate of return on pension plan assets for 1998 and 1997 was
7.00% and 7.75%, respectively.
17. INVESTMENT IN JOINT VENTURE
During 1997, the Company entered into a joint venture agreement with
CMLP Group, Ltd. (CMLP), a related party. The joint venture entity,
Westgrove Joint Venture (Westgrove), was organized for the purposes of
purchasing and managing a particular tract of land. CMLP, a limited
partnership, is jointly owned by the Company's officers, members of
management, and other related parties. Associates Funding Group, Inc.
a related party, is CMLP's general partner. Management and control of
Westgrove is maintained by CMLP.
The carrying amount of the investment represents the Company's initial
contribution. The agreement entitled the Company to a 56 percent
ownership and earnings allocation. The investment was accounted for
under the equity method of accounting for 1997. During fiscal year
1998, the Company issued common stock to each of the other partners, in
exchange for their respective interests to complete a 100% ownership in
the partnership. This investment in the joint venture has now been
reclassified as land to properly reflect the nature of the asset.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
17. INVESTMENT IN JOINT VENTURE - Continued
After obtaining 100% ownership of the partnership, the Company borrowed
$250,000 with the land as collateral for the loan.
18. LICENSING FEES AND ROYALTIES COMMITMENTS
During 1998 and 1997, the Company entered into numerous licensing
agreements with third parties. These agreements provide for the
licensed use by the Company of certain proprietary technologies, and
vary in their terms and conditions. Each agreement required an initial
payment, which has been capitalized and included in licensing fees at
year-end. Pursuant to these agreements, the Company also committed to
future royalties and minimum periodic payments.
Future minimum payments for the years ended June 30 under these
licensing agreements are as follows:
1999 $ 1,000,000
2000 1,800,000
2001 1,050,000
2002 750,000
-----------
$ 4,600,000
===========
During fiscal 1997, the Company entered into an agreement for the
licensed use of certain technology. Under the terms of the agreement,
the Company is obligated to pay future royalties (subject to minimum
amounts disclosed above) based on uniView units shipped as follows:
First 100,000 units $4.00 per unit
Next 250,000 units $3.50 per unit
Next 650,000 units $3.00 per unit
Next 1,000,000 units $2.75 per unit
Above 2,000,000 units $2.50 per unit
During fiscal 1997, the Company entered into an agreement for the
licensed use of a computer software operating system. Under the terms
of the agreement, the Company is obligated to pay future royalties
based on manufactured uniView units as follows:
First 40,000 units No royalty
Next 60,000 units 10.00 (British pounds) per unit
Next 100,000 units 8.00 (British pounds) per unit
Next 200,000 units 6.00 (British pounds) per unit
Next 400,000 units 5.00 (British pounds) per unit
Next 800,000 units 4.00 (British pounds) per unit
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
19. EXTRAORDINARY ITEM
The extraordinary item of $789,426, net of income tax of $463,035, in
1997 represents a gain on forgiveness of debt by DFS. Effective March
9, 1996, the Company and DFS entered into an agreement to settle
amounts due from CM to DFS. Under the agreement, all but $500,000 and
future repurchase liabilities was forgiven subject to payment in full
of the remaining $500,000 on or before April 8, 1997. At June 30,
1996, the Company owed DFS $300,000 of this amount. During 1997, the
Company paid DFS $200,000 in cash. The remaining $100,000 was paid by
the Custer Company, Inc., a related party who assumed the receivable
from DFS.
20. YEAR 2000
The Company's assessment of its Year 2000 issues is not complete,
however, the Company has taken actions to assess the nature and extent
of the work required to make its systems, products and infrastructure
Year 2000 ready. The Company intends to work toward making its
internal information technology Year 2000 ready, which may include
replacing or updating existing computer systems as needed.
Additionally, the Company plans to evaluate the Year 2000 readiness of
its consultants, vendors and suppliers. Where the Company determines
that critical consultants, vendors or suppliers are not Year 2000
ready, the Company will monitor their progress and take appropriate
actions. The Company believes it is taking the necessary steps to
resolve year 2000 issues and, based on current progress and future
plans, the Company believes that the Year 2000 date change will not
significantly affect the Company's ability to deliver products and
services to its customers on a timely basis; however, given the
uncertain consequences of failure to resolve significant year 2000
issues, there can be no assurance that any one or more such failures
would not have a material adverse effect on the Company. The Company
has not determined the cost of completing its compliance with the Year
2000.
UNIVIEW TECHNOLOGIES CORPORATION
(Formerly Curtis Mathes Holding Corporation) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and 1996
VALUATION AND QUALIFYING ACCOUNTS
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, 1996
Allowance for doubtful
Accounts $ (77,034) $ - $ 77,034 $ - $ -
Inventory obsolescence
reserve (229,675) 118,672 111,003 - -
Note receivable
reserve - (613,114) - - (613,114)
Year ended June 30, 1997
Inventory obsolescence
reserve - (255,115) - - (255,115)
Note receivable
reserve (613,114) - (375,000) 613,114 (375,000)
Year ended June 30, 1998
Inventory obsolescence
Reserve (255,115) (75,263) - - (330,378)
Note receivable
reserve (375,000) (224,417) - 375,000 (224,417)
UNIVIEW TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Sequential
Number Description of Exhibits Page
2.1 Memorandum of Sale and Purchase Agreement (CMC) for the
acquisition of Curtis Mathes Corporation (filed as Exhibit "A"
to the Company's quarterly report on Form 10-Q for the quarter
ended December 31, 1993 and incorporated herein by reference.)
N/A
2.2 Memorandum of Sale and Purchase Agreement (WRC) for the
acquisition of certain assets of Whitaker Repair Company, Inc.
(filed as Exhibit "B" to the Company's quarterly report on Form
10-Q for the quarter ended December 31, 1993 and incorporated
herein by reference.) N/A
2.3 Stock Purchase Agreement dated as of June 12, 1998 between the
Company and Alscomm, Inc. (filed as Exhibit "2" to the
Company's Current Report on Form 8-K originally filed with the
Commission on June 26, 1998 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, defining the rights of
security holders (filed as Exhibit "3(ii)" to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 1997 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 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
4.3 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
4.4 Form of warrant issued in connection with Series J Preferred
Stock (filed as Exhibit "4.5" to the Company's Current Report
on Form 8-K dated April 23, 1997 and incorporated herein by
reference.) N/A
4.5 Series K Preferred Stock terms and conditions (filed as Exhibit
"4.4" to the Company's Current Report on Form 8-K dated May 16,
1997 and incorporated herein by reference.) N/A
4.6 Form of subscription agreement for Series K Preferred Stock
(filed as Exhibit "4.5" to the Company's Current Report on Form
8-K dated May 16, 1997 and incorporated herein by reference.)
N/A
4.7 Form of warrant issued in connection with Series K Preferred
Stock (filed as Exhibit "4.4" to the Company's Current Report
on Form 8-K dated May 23, 1997 and incorporated herein by
reference.) N/A
4.8 Series L Preferred Stock terms and conditions (filed as Exhibit
"4.5" to the Company's Current Report on Form 8-K dated May 23,
1997 and incorporated herein by reference.) N/A
4.9 Form of subscription agreement for Series L Preferred Stock
(filed as Exhibit "4.6" to the Company's Current Report on Form
8-K dated May 23, 1997 and incorporated herein by reference.)
N/A
4.10 Series M Preferred Stock terms and conditions, as amended on
July 11, 1997 (filed as Exhibit "4.7" to the Company's
Registration Statement on Form S-3 filed with the Commission on
August 18, 1997 and incorporated herein by reference.) N/A
4.11 Series N Preferred Stock terms and conditions, as amended
(filed as Exhibit "4.7" to the Company's Registration Statement
on Form S-3 filed with the Commission on May 13, 1998 and
incorporated herein by reference.) N/A
4.12 Form of Securities Subscription Agreement for Series M and
Series N Preferred Stock (filed as Exhibit "99.2" to the
Company's Registration Statement on Form S-3 filed with the
Commission on November 25, 1997 and incorporated herein by
reference.) N/A
4.13 Series Q Preferred Stock terms and conditions (filed as Exhibit
"4.6" to the Company's Current Report on Form 8-K dated June
12, 1998 and incorporated herein by reference.) N/A
4.14 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
4.15 Form of warrant issued in connection with the Pacific C
ontinental Agreement (filed as Exhibit "4.9" 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
4.16 Series 1998-A1 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 July 20, 1998 and incorporated
herein by reference.) N/A
4.17 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
10.1 Floorplan Purchase Agreement dated as of October 27, 1992
between Curtis Mathes Corporation and Deutsche Financial
Services Corporation (f/k/a ITT Commercial Finance Corp.)
(filed as Exhibit "10.13" to the Company's annual report on
Form 10-K for the fiscal year ended June 30, 1995 and
incorporated herein by reference.) N/A
10.2 Amendment to Floorplan Purchase Agreement dated as of April 30,
1993 between Curtis Mathes Corporation and Deutsche Financial
Services Corporation (f/k/a ITT Commercial Finance Corp.)
(filed as Exhibit "10.14" to the Company's annual report on
Form 10-K for the fiscal year ended June 30, 1995 and
incorporated herein by reference.) N/A
10.3 Financing Program Agreement dated as of October 27, 1992
between Curtis Mathes Corporation and Deutsche Financial
Services Corporation (f/k/a ITT Commercial Finance Corp.)
(filed as Exhibit "10.15" to the Company's annual report on
Form 10-K for the fiscal year ended June 30, 1995 and
incorporated herein by reference.) N/A
10.4 Amendment to Financing Program Agreement dated as of November
6, 1992 between Curtis Mathes Corporation and Deutsche
Financial Services Corporation (f/k/a ITT Commercial Finance
Corp.) (filed as Exhibit "10.16" to the Company's annual report
on Form 10-K for the fiscal year ended June 30, 1995 and
incorporated herein by reference.) N/A
10.5 Amendment to Financing Program Agreement dated as of April 15,
1993 between Curtis Mathes Corporation and Deutsche Financial
Services Corporation (f/k/a ITT Commercial Finance Corp.)
(filed as Exhibit "10.17" to the Company's annual report on
Form 10-K for the fiscal year ended June 30, 1995 and
incorporated herein by reference.) N/A
10.6 Amendment to Financing Program Agreement dated as of September
8, 1993 between Curtis Mathes Corporation and Deutsche
Financial Services Corporation (f/k/a ITT Commercial Finance
Corp.) (filed as Exhibit "10.18" to the Company's annual report
on Form 10-K for the fiscal year ended June 30, 1995 and
incorporated herein by reference.) N/A
10.7 Asset Purchase Agreement between Curtis Mathes Marketing
Corporation and Hughes Training, Inc. dated as of October 25,
1994, relating to the purchase of the RealView technology
(filed as Exhibit "10.20" to the Company's annual report on
Form 10-K for the fiscal year ended June 30, 1995 and
incorporated herein by reference.) N/A
10.8 Lease Agreement by and between Terry N. Worrell, Sharon C.
Worrell, and Kay Y. Moran, Trustee, as Landlord, and Curtis
Mathes Corporation, as Tenant, dated October 27, 1994
pertaining to the property utilized as the Corporate
headquarters (filed as Exhibit "10.9" to the Company's annual
report on Form 10-K for the fiscal year ended June 30, 1997 and
incorporated herein by reference.) N/A
10.9 Letter of Intent dated April 29, 1996 between Curtis Mathes
Corporation, Warranty Repair Corporation, and Inman's
Corporation relating to CM warranty service (filed as Exhibit
"10.23" to the Company's annual report on Form 10-K for the
fiscal year ended June 30, 1996 and incorporated herein by
reference.) N/A
10.10 Warranty Service Agreement dated May 10, 1996 between Curtis
Mathes Corporation, Warranty Repair Corporation, and Inman's
Corporation relating to CM warranty service (filed as Exhibit
"10.24" to the Company's annual report on Form 10-K for the
fiscal year ended June 30, 1996 and incorporated herein by
reference.) N/A
10.11 Memorandum of Asset Purchase Agreement dated June 19, 1996
between Warranty Repair Corporation and Inman's Corporation
relating to sale of WRC's parts inventory (filed as Exhibit
"10.25" to the Company's annual report on Form 10-K for the
fiscal year ended June 30, 1996 and incorporated herein by
reference.) N/A
10.12 Promissory Note from Inman's Corporation to Warranty Repair
Corporation dated June 19, 1996 relating to sale of WRC parts
inventory (filed as Exhibit "10.26" to the Company's annual
report on Form 10-K for the fiscal year ended June 30, 1996 and
incorporated herein by reference.) N/A
10.13 Security Agreement dated June 19, 1996 between Inman's
Corporation and Warranty Repair Corporation relating to sale of
WRC parts inventory (filed as Exhibit "10.27" to the Company's
annual report on Form 10-K for the fiscal year ended June 30,
1996 and incorporated herein by reference.) N/A
10.14 Manufacturing and Consulting Services Agreement dated as of
December 6, 1996 between Curtis Mathes Marketing Corporation
and McDonald Technologies International, Inc., relating to the
manufacture of Curtis Mathes uniViewT set-top units (filed as
Exhibit "10.3" to the Company's quarterly report on Form 10-Q
for the quarter ended March 31, 1997 and incorporated herein by
reference.) N/A
10.15 Joint Venture Agreement dated as of January 20, 1997 between
Curtis Mathes Marketing Corporation and CMLP Group, Ltd.
pertaining to a tract of land located in the Beltwood North-
Trinity Addition to the City of Carrollton, Dallas County,
Texas(filed as Exhibit "10.23" to the Company's annual report
on Form 10-K for the fiscal year ended June 30, 1997 and
incorporated herein by reference.) N/A
10.16 RiscOS Licence and Development Agreement dated as of February
20, 1997 between Curtis Mathes Marketing Corporation and Acorn
Computers Limited, relating to the license and development of
the Curtis Mathes uniViewT technology (filed as Exhibit "10.4"
to the Company's quarterly report on Form 10-Q for the quarter
ended March 31, 1997 and incorporated herein by reference.)
N/A
10.17 Technology License and Distribution Agreement dated as of March
28, 1997 between Curtis Mathes Marketing Corporation and Sun
Microsystems, Inc., relating to a license of the Java
technology (filed as Exhibit "10.5" to the Company's quarterly
report on Form 10-Q for the quarter ended March 31, 1997 and
incorporated herein by reference.) N/A
10.18** Employment Contract with Mr. Custer dated as of April 7, 1997
(filed as Exhibit "10.26" to the Company's annual report on
Form 10-K for the fiscal year ended June 30, 1996 and
incorporated herein by reference.) N/A
10.19** Employment Contract with Mr. Robinson dated as of April 7, 1997
(filed as Exhibit "10.27" to the Company's annual report on
Form 10-K for the fiscal year ended June 30, 1996 and
incorporated herein by reference.) N/A
10.20** Stock Option Agreement with Mr. Appel dated as of April 7, 1997
(filed as Exhibit "10.28" to the Company's annual report on
Form 10-K for the fiscal year ended June 30, 1996 and
incorporated herein by reference.) N/A
10.21** Stock Option Agreement with Mr. Warren dated as of April 7,
1997 (filed as Exhibit "10.29" to the Company's annual report
on Form 10-K for the fiscal year ended June 30, 1996 and
incorporated herein by reference.) N/A
10.22 Agreement dated as of August 26, 1997 between Curtis Mathes
Marketing Corporation and Davis A.S. relating to the
manufacture and marketing of large-screen projection television
sets (filed as Exhibit "10.1" to the Company's quarterly report
on Form 10-Q for the fiscal quarter ended September 30, 1997
and incorporated herein by reference.) N/A
10.23 Promissory Note dated December 23, 1997 from the Company to
Geneva Reinsurance Company Ltd. in the original principal sum
of $2,000,000 (filed as Exhibit "10.1" to the Company's
quarterly report on Form 10-Q for the fiscal quarter ended
March 31, 1998 and incorporated herein by reference.)N/A
21* Subsidiaries of the Company. 73
27* Financial Data Schedule (for EDGAR filing purposes only.) 74
99.1 Agreement between the Company and Pacific Continental
Securities Corp. dated as of June 3, 1998 (the "Pacific
Continental Agreement.") (filed as Exhibit "99.1" 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
99.2 Agreement between the Company and J.P. Carey, Inc. dated as of
August 8, 1997 (the "J.P. Carey Agreement")(filed as Exhibit
"99.2" to the Company's Registration Statement on Form S-3
originally filed with the Commission on August 18, 1997 and
incorporated herein by reference.) N/A
99.3 Form of Securities Subscription Agreement for Series Q
Preferred Stock (filed as Exhibit "99.3" 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
99.4 Form of Registration Rights Agreement for holders of Series Q
Preferred Stock (filed as Exhibit "99.4" 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
99.5 Form of Stock Purchase Agreement for Series 1998-A1 Preferred
Stock (filed as Exhibit "99.5" 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
99.6 Form of Registration Rights Agreement for holders of Series
1998-A1 Preferred Stock (filed as Exhibit "99.6" 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
_______________
* Filed herewith.
** Management contract or compensation plan or arrangement required to
be filed as a exhibit pursuant to Item 14 (c).