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Form 10-K
Securities and Exchange Commission
Washington, DC 20549
ANNUAL REPORT PURSUANT TO SECTON 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000
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Commission file number 0-17080
UNITRONIX CORPORATION
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(Exact name of registrant as specified in its charter)
New Jersey 22-2086851
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Newbury Street, Peabody, MA 01960
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(Address of principal executive offices)
(Zip Code)
(Registrant's telephone number, including area code)
(978) 535-3912
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Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[X]
1
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
(See definition of affiliate in Rule 405.)
Based upon the latest sale price of the stock as of September 15, 2000, of
$0.140625 per share, the aggregate market value, as of September 14, 2000 of
the shares of common stock held by non-affiliates was $457,123. "Non-
affiliates" includes all share owners of the registrant other than its officers,
directors and owners of more than ten percent of its outstanding stock.
APPLICABLE ONLY TO CORPORATE REGISTRANTS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
9,643,718 shares of common stock, no par value, as of September 15, 2000
DOCUMENTS INCORPORATED BY REFERENCE
NONE
2
PART I
Item 1. BUSINESS
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This report contains statements of a forward-looking nature relating to future
events or future financial results of the Company. Investors are cautioned
that such statements are only predictions and that actual events or results may
differ materially. In evaluating such statements, investors should specifically
consider the various factors identified in this report which could cause actual
events or results to differ from those indicated by such forward-looking
statements.
GENERAL
Unitronix Corporation was founded and incorporated in 1975 in the State of New
Jersey, and operated as a distributor of products manufactured by Digital
Equipment Corporation (DEC, now a division of Compaq Computer Corporation) until
1986. In 1986 the Company purchased the PRAXA software package from Xerox
Corporation and from that time until 1998 was in the business of marketing,
installing and supporting turnkey computer systems incorporating PRAXA and
equipment manufactured by DEC. The Company also separately licensed PRAXA
software to existing users of DEC's VAX and Alpha lines of computers and to
purchasers from other vendors of DEC computer equipment. Since 1998 the Company
has not sold computer equipment and has been in the business of marketing and
supporting PRAXA software.
PRAXA is a Manufacturing Resource Planning (MRPII) system which integrates
manufacturing, distribution and financial applications into one system that
monitors and supports material requirements planning, capacity planning,
factory order and cost control, inventory control, product sales and distri-
bution and financial accounting. MRPII systems were well accepted by manu-
facturing industries by the mid-1980's and were widely adopted by large and
medium sized firms. Sub-sets of MRPII systems are employed by non-manufacturing
firms to help manage specific segments of their businesses, e.g., wholesale
distributors employ the sales, distribution and financial modules of MRPII
systems in their firms while some service companies use only the financial
modules.
PRODUCTS
The Company's software product, PRAXA, is a third generation MRPII system that
was well accepted by the marketplace in the late 1980's and early 1990's. PRAXA
consists of 29 modules that help manufacturing and distribution firms manage
their sales, distribution, manufacturing and accounting functions. PRAXA is
written in COBOL and operates exclusively on DEC's VAX and Alpha computer
systems with the VMS operating system. PRAXA was licensed and installed by
approximately 200 companies at 450 sites, including locations in Mexico and
Canada.
PRAXA succeeded in the marketplace because of its rich functionality and adapt-
ability to the customer's unique needs. The Company continually enhanced the
product by incorporating new features and functions, such as the ability to
schedule and control continuous manufacturing operations. New versions of the
software were released annually until 1993.
3
Beginning in the early 1990's the users of commercial computer software began
to demand products that were easier to use, more readily adaptable to their
needs and less expensive to operate and maintain. Systems built around the
client-server paradigm were thought to fulfill those needs, and most existing
and some new suppliers of manufacturing software mounted major development
projects to bring client-server Enterprise Resource Planning (ERP) systems to
market. The demand for conventional MRPII systems fell dramatically to the
point where sales of PRAXA to new customers amounted to only four systems from
1992 to 2000. Since 1991, the Company's revenues have been generated primarily
from the sale of hardware and PRAXA license upgrades, software support, consult-
ing services and additional PRAXA modules, to existing customers.
COMPUTER EQUIPMENT
Until 1998, the Company was a reseller of computer systems and operating system
software manufactured by Digital Equipment Corporation. All of the sales of
such equipment and software made between 1992 and 1998 were to users of the
PRAXA MRPII system. The Company purchased the equipment and software from one
of the major national distributors of DEC equipment. The distributor that was
supplying the Company with computer equipment declined to renew its agreement
with the Company for 1998 due to the small volume of sales that the Company was
achieving. The Company no longer resells computer equipment and operating
system software.
CUSTOMER SUPPORT
The Company provides "hot-line" support to PRAXA users from its office in
Westmont, New Jersey. This support is in the nature of resolving specific
problems that users encounter in using the PRAXA software. The support group
also develops enhanced versions of PRAXA that are released periodically. The
newest version, release 11.0, has been in full production release since the Fall
of 1997. This release contains the changes needed to handle dates in the
twenty-first century, i.e., it is year 2000 (Y2K) compliant.
PROFESSIONAL SERVICES
The Company provides consulting and training services to PRAXA users. Since
the Company no longer employs any pre-sales or post-sales consultants, all
consulting and training services are being provided by the Company's customer
support and management personnel. This group also provides custom programming
for PRAXA users.
SALES AND MARKETING
The Company employed a National Director of Sales as a full-time sales person
until the end of 1999. Located in the Chicago area, this individual was
responsible for all sales activity for the Company. The primary focus of the
Director of Sales was to sell PRAXA software upgrades and add-ons and computer
system upgrades to existing PRAXA customers. By the end of 1999, the absence
of sales opportunities for the PRAXA software made it uneconomical to employ a
full-time sales person so the Director of Sales was terminated and retained as
a part-time consultant to follow-up on any sales leads that developed. In May,
2000, the consulting contract was terminated because no sales had resulted from
the consulting arrangement. All sales activities are now performed by manage-
ment.
4
PRODUCT DEVELOPMENT
During the period from 1993 through 1998 the Company made two significant
attempts to develop a new Enterprise Resource Planning (ERP) system to sell into
the midmarket. The first attempt, which utilized a mix of Company staff and
consultants, was terminated in early 1997. At the time that the project was
terminated, the Company had expended approximately $1.6 million and the system
was approximately one-half complete. Moreover, the client-server technology
that was incorporated in the product was rapidly falling out of favor with
users because of the high cost of administering and maintaining such systems.
Upon terminating the in-house development project, the Company contracted with
a software development firm to produce an internet-based ERP system. The
contract that was signed with the development firm in mid-1997 was to result in
a completed system by the end of calendar year 1998. This project was term-
inated approximately nine months later, when it became evident that the develop-
ment firm was unable to deliver acceptable software within the time allowed
by the contract.
Discussions with another software development firm were initiated in the third
quarter of fiscal 1999 to have that firm modernize the PRAXA system with a
graphic user interface, relational database and e-commerce capabilities. A
survey of the PRAXA user base that was conducted in early 2000 to determine the
interest in these features indicated that, because of the lateness to market and
the lack of substantial new capabilities, sales of the product probably would
not recoup the development costs. Consequently, all negotiations with the other
software development firm were terminated in the fourth quarter of fiscal 2000.
PRODUCT PROTECTION : TRADEMARKS
As is typical in the software industry, in order to protect its right in the
software, the Company does not "sell" its PRAXA software products, but instead
provides customers with perpetual, fully-paid licenses to use one or more copies
of the software on specifically identified computer systems. The Company also
seeks to protect its proprietary interest in PRAXA through a combination of
copyright laws, trade secret laws, and contractual agreements (including
nondisclosure obligations) with customers, consultants, employees and others.
Existing United States copyright laws provide only limited protection and even
less protection may be available under foreign laws. While the enforceability
of contractual provisions governing confidentiality cannot be assured in all
cases, the Company believes that they tend to deter unauthorized use of the
Company's proprietary information. "PRAXA" and "Unitronix" are registered
federal trademarks of the Company which will expire, unless renewed, on January
14, 2005 and September 20, 2002, respectively.
SALE OF PRAXA BUSINESS SEGMENT
The PRAXA sales and support business is not producing significant returns for
the Company. The cost to upgrade the product to make it competitive in the
current marketplace is prohibitive. Consequently, in August, 2000, the Board of
Directors of the Company directed management to attempt to sell the PRAXA
business and product. Funds derived from the sale of the PRAXA business will
probably be invested in the Company's subsidiaries.
5
SUBSIDIARY ACTIVITIES
The Company's majority owned subsidiary, Interactive Mining Technologies, LLC,
(IMT) will soon complete the initial phase of a project that is intended to
result in software to be marketed to the mineral exploration industry. The
envisioned software will assist users in evaluating numerous characteristics of
potential mining sites in order to better predict the probabilities of discover-
ing commercially exploitable mineral deposits. The initial phase of the project
is an evaluation of the techniques that are to be incorporated into the soft-
ware. Management and two mineral exploration experts that have been retained by
IMT are currently evaluating the report that resulted from the initial phase.
If Unitronix management decides to proceed with development of the software
product, outside investors will be sought to provide funds for developing and
marketing the product.
IMT will soon complete development of a demonstration version of an internet
web site that may be developed as a portal to serve the mining, exploration and
investment communities. A market study that IMT performed indicated significant
interest in such a portal by potential users and advertisers. IMT management is
currently discussing a preliminary business plan with potential investors, as
significant funds will be required to develop and market the product.
Enersource Mapping, Inc., the majority owned subsidiary of IMT that was formed
in January, 2000, continued to produce and market tenement maps to parties with
interests in the mining industry. Enersource Mapping has a significant database
of maps that is available to be used by the IMT web portal. In addition,
management plans to develop tenement maps of other mining regions around the
world in the future.
CUSTOMER DEPENDENCE
No single customer accounted for more than 10% of total revenue for the year.
HISTORY OF LOSSES
The Company incurred net losses of $251,647 in fiscal 1998, $19,914 in fiscal
1999 and $61,739 in fiscal 2000. As of June 30, 2000, the Company had an
accumulated deficit of $5,256,010. There can be no assurance that the Company
will be profitable in the future.
CONTROL BY EXISTING STOCKHOLDERS
The Company's directors and their families together own approximately 78% of
the outstanding shares of the common stock of the Company. As a result, these
stockholders are able to exercise control over matters requiring stockholder
approval, including the election of directors, and mergers, consolidations and
sales of the assets of the Company.
EMPLOYEES
At September 15, 2000, the Company employed 6 persons, including 3 in customer
support, 1 in product management, 1 in finance and administration and one
clerical support person. Management believes that the Company's employee
relations are satisfactory.
6
ITEM 2 PROPERTIES
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The Company's executive offices occupy 1600 square feet of rented office space
in Peabody, Massachusetts, at a rental rate of $1,796 per month. The Company is
a tenant at will in this space.
The Company has less than one year remaining on a three year lease for 1,339
square feet of office space in Westmont, New Jersey, for the use of its customer
support and technical services operation. The monthly rent for this facility is
is $1,805 through April 30, 2001, at which time the lease expires. Management
does not expect to renew the lease for this space, and plans to relocate into
smaller, less expensive facilities.
ITEM 3 LEGAL PROCEEDINGS
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On June 30, 1998, the Company filed for arbitration against InterObjects, a
software development firm, for breach of contract and failure to meet
milestones in the development of a new ERP system. The Company made
a prepayment of $300,000 in September of 1997 related to this contract,
all of which was charged to operating expenses in the year ended June 30,
1998. Development of the new system by InterObjects ceased in January, 1998,
and the contract was subsequently terminated. In August, 1999, the Company
settled with InterObjects for the return of the $300,000 prepayment to the
Company, with $50,000 being repaid in August, 1999, and $10,000 plus interest
on the unpaid balance being repaid monthly through September, 2001. The
successor company to InterObjects has made all required installment payments
through September 1, 2000.
The Company filed suit against Computer Management Sciences, Inc. (CMSI) in
the United States District Court for the District of Massachusetts in Boston,
Massachusetts on October 25, 1996. The suit sought damages resulting from the
breach of three contracts by CMSI to develop portions of the client-server ERP
software, such contracts having been entered into in 1995 and 1996. The
Company was seeking an amount in excess of $150,503, which is the amount that
the Company paid to CMSI during the course of the contracts, plus costs,
interest and such other relief that the Court deemed just and equitable. On
January, 17, 1997, CMSI filed a counterclaim in the same Court alleging that
the Company is liable to CMSI in an amount exceeding $200,000 on account of
the Company's alleged breaches of the same contracts. During the third quarter
of fiscal 2000 the Company and CMSI withdrew their respective suits, with CMSI
agreeing to pay the Company $20,000, which was subsequently received by the
Company.
The Company is not currently involved in any legal proceedings.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
The Company did not submit any matters to a vote of the shareholders during the
last quarter of fiscal year 2000.
7
PART II
Item 5 MARKET FOR THE COMPANY'S COMMON STOCK AND
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RELATED SECURITY HOLDER MATTERS
-------------------------------
The Company's Common Stock is currently listed on the over the counter bulletin
board.
The following table sets forth, for the calendar quarters indicated, the high
and low bid prices reported for the Company's Common Stock, by the indicated
source. There were 138 record holders of the Company's Common Stock on
September 18, 2000. The Company believes that there are approximately 450
beneficial shareholders.
Calendar Year Ended December 31, OTC Bulletin Board
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Bid Prices
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High Low
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1998
Third Quarter 0.1250 0.0625
Fourth Quarter 0.0938 0.0200
1999
First Quarter 0.0938 0.0200
Second Quarter 0.1000 0.0100
Third Quarter 0.15625 0.0625
Fourth Quarter 0.3125 0.1400
2000
First Quarter 0.3750 0.0700
Second Quarter 0.1875 0.0625
DIVIDEND POLICY
No dividends have been declared by the Board of Directors. The Board of
Directors currently plans to retain any future earnings for use in the Company's
business.
8
Item 6 SELECTED CONSOLIDATED FINANCIAL DATA
------------------------------------
Summary Consolidated Financial Information
(in thousands, except per share data)
For fiscal year ending June 30,
-------------------------------
CONSOLIDATED INCOME 2000 1999 1998 1997 1996
STATEMENT DATA: ---- ---- ---- ---- ----
Revenue from Operations $521 $856 $1,076 $940 $1,353
Gain (Loss) from Operations (332) 16 (15) (737) (451)
Net Loss (62) (20) (252) (803) (464)
Per Share Data:
Basic and Diluted net Loss
Per Share (.01) (.00) (.03) (.08) (.05)
Shares Used in Computing
Per Share Data 9,489,757 9,456,932 9,456,932 9,456,932 9,456,932
CONSOLIDATED BALANCE SHEET DATA:
Working Capital/(Deficit) $(748) $(615) $(629) $(1,369) $(600)
Total Assets 310 82 213 222 272
Short term debt, including
current maturities of
long-term debt 687 500 545 889 344
Long-term debt, less
current maturities - - - 7 13
Shareholder's equity
(deficit) (1,720) (1,616) (1,545) (1,294) (491)
9
Item 7.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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FISCAL YEAR ENDED JUNE 30, 2000 VS. FISCAL YEAR ENDED JUNE 30, 1999
Total revenue for the year decreased by 39% from the year ended June 30, 1999 to
the year ended June 30, 2000. Revenue from the sale of software licenses
decreased by 95% because no sales were made of the year 2000 compliant version
of PRAXA and only one software license upgrade was sold, during the year ended
June 30, 2000. Revenue from software related services decreased by 12% as
customers continue to migrate to other ERP systems, thus eliminating their need
for PRAXA maintenance and support services. Management expects the migration of
PRAXA users to other systems to continue. The sale of tenement maps by
EnerSource Mapping, Inc., a majority owned subsidiary of the Company that
started operating on February 1, 2000, contributed approximately $32,000 to
fiscal year 2000 revenues.
The cost of software licenses decreased by 87% from the year ended June 30,
1999, to the year ended June 30, 2000, as only one license upgrade was purchased
for the Xentis software that is resold by the Company in conjunction with its
PRAXA software. The cost of services decreased by 8% from the year ended June
30, 1999, to the year ended June 30, 2000, because fewer customers were covered
by support agreements so less time was spent on customer support matters. The
cost of map production is the costs and expenses incurred by EnerSource Mapping,
Inc., during the final five months of fiscal year 2000.
Software development costs of approximately $52,000 were incurred by Interactive
Mining Technologies, LLC, (IMT) a majority owned subsidiary of the Company, in
developing a model to evaluate the techniques that will be incorporated into the
software that IMT plans to develop for sale to the mineral exploration industry.
The results of the modeling phase of this project are currently being evaluated
by IMT management and two mineral exploration experts that have been retained by
IMT. If IMT management elects to proceed with development of the software
product, outside investors will be sought to provide funds for developing and
marketing the software.
The Company terminated its full-time Director of Sales in December, 1999, and
retained him as a part-time sales consultant until May, 2000, at which time his
services were totally eliminated. These moves resulted in a decrease of 35% in
selling expenses from fiscal year 1999 to fiscal year 2000. General and
administrative expenses were approximately the same for both fiscal years.
The Company sustained a loss from operations of $331,522 in fiscal year 2000 as
compared with a profit from operations of $16,291 in fiscal 1999, primarily due
to its 39% decrease in revenues. Interactive Mining Technologies and its
majority-owned subsidiary, EnerSource Mapping, accounted for approximately
$274,000 of the loss from operations, while the PRAXA software business
accounted for the remaining $57,000 of the loss.
10
Interest expense increased from $50,756 in fiscal 1999 to $54,839 in fiscal 2000
due to increased borrowings by the Company and its subsidiaries. The Company
realized $17,133 in interest income in fiscal 2000 from the periodic payments
that resulted from the settlement of the dispute with InterObjects. This
settlement also resulted in $300,000 in other income to the Company. This
matter is discussed more fully in the note entitled "Legal Proceedings" in the
financial statements that accompany this report. The Company realized an
additional $31,000 in other income from the forgiveness of debt by certain
creditors, while experiencing $24,000 in other expenses for legal fees to
resolve the matter with InterObjects. The net loss for the Company increased by
210% from fiscal 1999 to fiscal 2000.
FISCAL YEAR ENDED JUNE 30, 1999 VS. FISCAL YEAR ENDED JUNE 30, 1998
Total revenue for the year decreased by 20% from the year ended June 30, 1998
to the year ended June 30, 1999. Revenue from the sale of computer systems
and software licenses decreased by 35%, primarily due to a $200,000 sale of a
corporate-wide PRAXA license in 1998 that was not repeated in 1999. Revenue
from services decreased by 8%, due to a 12% reduction in support revenue that
was partially offset by a 28% increase in consulting revenue. The reduction
in support revenue was due to some customers refusing to renew their PRAXA
support agreements, a condition that management anticipates will continue in
future periods as additional customers convert to other software or elect to
support PRAXA themselves. The increase in consulting revenue was primarily due
to the sale of training services to a new PRAXA customer and to a customer that
purchased the latest release of PRAXA. Management feels that the prospects of
selling additional PRAXA licenses to new customers or to existing users that
may need the year 2000 compliant version of the system are very limited.
The cost of computer systems and software licenses increased by 25% from the
year ended June 20, 1998, to the year ended June 30, 1999, due to the purchase
of Xentis software that is resold by the Company. The purchases of Xentis were
made to resell the product to two customers that upgraded their computer hard-
ware, and to two others that purchased the year 2000 compliant version of
PRAXA.
The cost of services decreased by 14% from the period ended June 30, 1998, to
the period ended June 30, 1999, because there were fewer customers that were
covered by support agreements. No product development costs were incurred in
the year ended June 30, 1999, because the Company curtailed all product develop
ment in the prior year. Selling expenses decreased by 18% from the year ended
June 30, 1998, to the year ended June 30, 1999, because of lower sales commiss-
ions. The 38% increase in general and administrative expenses from fiscal 1998
to fiscal 1999 was due to the salary and expenses for the Company's Director
of Product Development, who is assigned to work with a Consultant to the Board
of Directors to locate business opportunities for the Company. The fees and
expenses for the consultant also contributed to the increase in general and
administrative expenses.
The 23% decrease in total costs and expenses from the year ended June 30, 1998,
to the year ended June 30, 1999, resulted in a profit from operations of
approximately $16,000 in fiscal 1999 as compared with a loss of approximately
$13,500 in fiscal 1998.
11
Interest expense decreased by 48% from 1998 to 1999 due to the higher amount
of notes outstanding during 1998. The conversion of notes payable to certain
shareholders to preferred stock during the final quarter of fiscal 1998 is
discussed below. The Company realized a gain of $14,551 due to the forgive-
ness of debt by certain creditors. The net loss decreased by 92% from fiscal
1998 to fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the working capital deficit was $748,000 as compared to
deficits of $615,000 and $629,000 at June 30, 1999 and 1998, respectively.
During the year ended June 30, 2000, the Company signed a new lending agree-
ment with its principal shareholder that provides for up to $1,000,000 in loans
and letters of credit. At September 15, 2000, the Company owed $257,518 for
principal and accrued interest, and the Company's majority owned subsidiary,
Interactive Mining Technologies, LLC, owed $176,262, for loans that had been
provided for by the lending agreement. These loans bear interest at the rate
of 10% per annum.
Management projects that funds from sources other than the sale of existing
products and related services will be needed if the Company is to continue
to operate. The Company is currently determining if a market exists for the
sale of the PRAXA software business segment. Funds derived from the sale of
the PRAXA business segment would be used by the Company to finance the products
and services that are planned for development by Interactive Mining Tech-
nologies. A sale of this business segment would leave the Company with no
products or services to sell, and the Company would in effect become a holding
company, totally dependent upon the results of its subsidiaries. There can be
no assurances that a buyer can be found for the PRAXA business segment.
The Company is also attempting to raise funds from new investors in order to
finance the IMT venture. In the event that new investors can be found, the
positions held by existing shareholders would be diluted by the issuance of new
shares to the new investors. There can be no assurances that funds can be
raised from new investors, in which case the Company may be forced to cease
operations.
Impact of Recently Issued Accounting Pronouncements
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The Financial Accounting Standards Board recently issued Statement No. 130
("SFAS 130"), "Reporting Comprehensive Income". This statement requires
changes in comprehensive income to be shown in a financial statement that is
displayed with the same prominence as other financial statements. While not
mandating a specific financial statement format, the Statement requires that
an amount representing total comprehensive income be reported. The Statement
is effective for fiscal years beginning after December 15, 1997. Reclass-
ification of financial statements for earlier periods is required for compar-
itive purposes. There were no other items of comprehensive income in the years
reported on.
The FASB also issued Statement No. 131 ("SFAS 131"), "Disclosures about Seg-
ments of an Enterprise and Related Information". This Statement, which super-
sedes Statement No. 14, "Financial Reporting for Segments of a Business Enter-
prise," changes the way public companies report information about segments.
12
The Statement, which is based on the management approach to segment reporting,
includes requirements to report segment information quarterly and entity-wide
disclosures about products and services, major customers, and the material
countries in which the entity holds assets and reports revenues. The Statement
is effective for periods beginning after December 15, 1997. Restatement for
earlier years is required for comparative purposes unless impracticable. The
Company adopted SFAS 131 in the year ended June 30, 1999.
In June, 1998, the FASB issued Statement No. 133 ("SFAS 133"), Accounting
for Derivative Instruments and Hedging Activities" which is effective for
fiscal years beginning after June 15, 1999. The statement establishes account-
ing and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability, measured at its
fair value. SFAS No. 133 also requires that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Adoption of this standard is not expected to have a material
impact on the financial position or results of operations of the Company.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
The information required by this Item is submitted as a separate section of this
report commencing on page 1 attached hereto.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ------- ------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
The Company dismissed the accounting firm of PricewaterhouseCoopers LLP on May
13, 1999, and engaged the firm of Dan Clasby & Company as it's independent cert-
ified public accountants on the same date. The engagement of Dan Clasby &
Company was approved by the Board of Directors of the Company on May 13, 1999.
There had been no disagreements with the former accounting firm during the two
most recent fiscal years ended June 30, 1998, and the interim period up to May
13, 1999, on any matter of accounting principles or practices, financial state-
ment disclosure or auditing scope or procedure or any reportable events. The
former accountant's report on the Company's financial statements for 1998 and
1997 contained no adverse opinion or disclaimer of opinion, and were not qual-
ified or modified as to audit scope or accounting principle. The reports
included a paragraph addressing substantial doubt about the Company's ability
to continue as a going concern. The reports were not qualified or modified as
to any other uncertainties.
13
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------
The executive officers and directors of Unitronix are as follows:
NAME AGE CURRENT POSITION
- ---- --- ----------------
Jack E. Shaw 66 Chairman of the Board, Chief
Executive Officer, Director
Robert C. Crawford 73 Treasurer, Secretary, Director
Dr. Howard L. Morgan 54 Director
Robert G. Sable 60 Director
William C. Wimer 63, Chief Financial Officer,
Vice President of Operations
Mary L. Ready 50 Acting President, and Chief Operating
Officer, Interactive Mining Tech-
nologies, LLC; Chief Executive
Officer, EnerSource Mapping, Inc.
BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS
JACK E. SHAW is Chairman of the Board and Chief Executive Officer of the
Company. He is also Chairman and CEO of Shaw Resources, Inc., a Greenville,
South Carolina-based investment company and real estate developer. Mr. Shaw is
also Chairman of Piedmont Software, Inc., President of Carolina Rentals, Inc.,
and owner of Resort Golf, which operates premier miniature golf courses in
Myrtle Beach, South Carolina. Mr. Shaw is also the largest shareholder of
Unitronix Corporation, holding approximately 50.5% of the outstanding common
shares.
ROBERT C. CRAWFORD was elected to the Board of Directors in January, 1993. He
was appointed Treasurer and Secretary on July 1, 1993. Mr. Crawford was
formerly President, Chief Executive Officer and a Director of Dan River, Inc.,
Floor Coverings Division. He is presently Chairman of the Board of Greenville
Technical College in Greenville, South Carolina.
DR. HOWARD L. MORGAN was named a Director in January, 1993. Dr. Morgan is
President of the Arca Group, Inc., a consulting and investment management firm
and has served as President of idealab! New York since March, 2000 and as a
Director of idealab! since February, 1999. Howard previously directed
Renaissance Technologies Corporation's venture capital activities. He also
serves as a Director of Franklin Electronic Publishers, Inc. Infonautics Corp.,
Cylink Corporation, MyPoints.com, Segue Software Corporation and Tickets.com.
ROBERT G. SABLE, ESQ. has been a Director of the Company since February, 1994.
For more than the past five years he has been Chief Executive Officer of Sable
Pusateri Rosen Gordon & Adams, LLC, a law firm located in Pittsburgh that
specializes in commercial law.
14
WILLIAM C. WIMER was named Vice President of Operations in March, 1992, with
responsibility for Customer Support and Professional Services activities. He
assumed responsibility for all accounting activities in 1993, was named
Assistant Treasurer in July, 1994, and Chief Financial Officer in June, 1997.
MARY L. READY was named Acting President and Chief Operating Officer of
Interactive Mining Technologies, LLC, a majority-owned subsidiary of the Company
in November, 1999. Ms Ready was named Chief Executive Officer of EnerSource
Mapping, Inc., a majority-owned subsidiary of Interactive Mining Technologies
in February, 2000. Ms Ready had served as Manager of Product Development for
the Company from 1993 until November, 1999.
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
During the 2000 fiscal year none of the directors, officers or beneficial owners
of more than 10 percent of the Company's common stock failed to file on a timely
basis reports required by Section 16 (a) of the Exchange Act.
Item 11. EXECUTIVE COMPENSATION
- -------- ----------------------
The following table sets forth all compensation awarded to, earned by, or paid
by the Company to the following persons for services rendered in all capacities
to the Company during each of the fiscal years ended June 30, 2000, 1999 and
1998 to: (1)the Company's Chief Executive Officer, and (2) each of the other
officers whose total compensation for the fiscal year ended June 30, 2000,
required to be disclosed in column (c) below exceeded $100,000.
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation
-------------------
(a) (b) (c) (d) (e) (f)
Name and Other Annual All Other
Principal Position Year Salary Compensation Options Compensation
Jack E. Shaw 2000 (1) - - -
Chief Executive 1999 (1) - - -
Officer 1998 (1) - - -
(1) The Company has not paid Mr. Shaw any compensation for his services to date.
COMPENSATION OF DIRECTORS
The Company currently does not compensate directors for their services; it does
reimburse them for reasonable expenses incurred in performing their duties as
directors.
1993 STOCK OPTION PLAN
At June 30, 2000, 1,000,000 shares of common stock were reserved for issuance
or grant under the Unitronix Corporation 1993 Stock Option Plan. The options
are granted to employees, officers, directors and consultants to the Company.
The exercise price for incentive options must be at least 100% of the fair
market value of the common stock as determined by the Option Committee of the
Board of Directors on the date of the grant, as are the rate of exercisability
and the expiration date of the grant. There were no options granted during the
15
year ended June 30, 2000. Options for 20,000 shares were exercised by a Company
employee and options for 70,000 shares expired upon termination of an employee.
At June 30, 2000, there were options for 375,000 shares of common stock
outstanding.
There were 605,000 options available for grant as of June 30, 1999, of which
commitments have been made to grant options for 150,000 shares at an exercise
price of $0.40 per share to a consultant to the Company's majority owned
subsidiary, Interactive Mining Technologies, LLC, and 50,000 shares at an
exercise price of $0.40 per share to the President of EnerSource Mapping, Inc.,
a majority owned subsidiary of Interactive Mining Technologies, LLC. The
Company expects to grant these options during the second quarter of fiscal
year 2001.
SAVINGS AND PROFIT SHARING PLAN
The Company has in effect the Unitronix Corporation Savings and Profit Sharing
Plan (the "Savings Plan"). All employees of the Company who complete one year
of service in which they are credited with at least 1,000 hours of service, and
who have attained the age of 21, are eligible to participate in the profit
sharing portion of the Savings Plan. Any employee who completes one month of
service with the Company and is at least 21 is eligible to contribute under the
401(k) feature of the Plan. If any employee elects to reduce his salary to
contribute to the Plan, the Company may elect to make a matching contribution
to the Savings Plan equal to fifty percent of the amount of such employee's
salary reduction contribution up to six percent of an employee's salary,
resulting in a maximum Company matching contribution of three percent.
On February 1, 1991, the Savings Plan was amended to make the Company's matching
contribution discretionary. Since February 1, 1991 the Company has made no
matching contributions.
Item 12. SECURITY OWNERSHIP OF CERTAIN
-----------------------------
BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------
The following table sets forth information regarding the beneficial ownership of
the Company's common stock as of September 1, 1999, by those persons owning
beneficially 5% or more of such shares, by each director, and by all executive
officers and directors as a group. The persons named in the table have sole
voting and investment power with respect to all shares of common stock which
they own of record.
NAME AND ADDRESS OF SHARES OF PERCENTAGE OF
BENEFICIAL OWNER(1) COMMON STOCK COMMON STOCK
- ------------------ ------------ ------------
Jack E. Shaw (2) 4,873,673 50.5%
Robert C. Crawford 199,391 2.1%
Howard L. Morgan (3) 1,350,000 14.0%
All Directors and Officers
as a Group (5 persons) 6,423,064 66.6%
16
Samuel H. Jones, Jr. 500,000 5.2%
US Route 40
Woodstown, NJ 08098
Jane Shaw (4) 500,000 5.2%
2320 E. North Street
Greenville, SC 29607
(1)The address of each officer and director of the Company listed in the table
is in care of the Company, One Newbury Street, Peabody, MA 01960
(2)Does not include 500,000 shares owned by Jane Shaw, his wife, and a total
of 500,000 shares owned by Ronald Shaw and Donald Shaw, his and her adult
children.
(3)Includes 30,000 shares held in trusts for the benefit of his three children,
Kimberly Morgan, Elizabeth Morgan and Danielle Morgan.
(4)Does not include 4,873,673 shares owned by Jack E. Shaw, her husband, and a
total of 500,000 shares owned by Ronald Shaw and Donald Shaw, his and her adult
children.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
The information required by this Item is set forth under Notes to Financial
Statements "Related Party Transactions", page 10 attached hereto.
PART IV
-------
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
- -------- ---------------------------------------------------------------
A. The following documents are filed as a part of this report:
1.Financial Statements
-------------------- PAGE
----
Report of Independent Accountants 1
Consolidated Balance Sheets at June 30, 2000 and 1999 2
Consolidated Statements of Operations
- Years ended June 30, 2000, 1999 and 1998 3
Consolidated Statements of Changes in Stockholders' Deficit- 4
Years ended June 30, 2000, 1999 and 1998
Consolidated Statements of Cash Flows
- Years ended June 30, 2000, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
17
2.Schedules
---------
SCHEDULE II - Valuation and Qualifying Accounts 19
Schedules not listed above have been omitted because they are not applicable or
are not required or the information required to be set forth therein is included
in the Financial Statements or notes thereto.
3.EXHIBITS (numbers below reference the Exhibit Table of Item 601 of
Regulation S-K)
(3)Articles of Incorporation and By-Laws *
(4)Specimen Common Stock Certificates *
(10)Material Contracts:
10.1 1993 Stock Option Plan **
(27)Financial Data Schedule
*Previously filed with the Securities and Exchange Commission on August 12,
1988, as an exhibit to the Company's S-18 registration statement (File Number
33-22494-NY), such previously filed exhibits incorporated herein by reference.
**Previously filed with the Securities and Exchange Commission on August 29,
1994 as an exhibit to the Company's S-8 registration statement, such previously
filed exhibits incorporated herein by reference.
B. Reports on Form 8-K
The Company did not file any reports on form 8-K during the last quarter of
fiscal year 2000.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
UNITRONIX CORPORATION
BY:/s/William C. Wimer
--------------------
William C. Wimer
Chief Financial Officer and
Vice President, Operations
DATED: September 26, 2000
------------------
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE POSITION DATE
- --------- -------- ----
/s/Jack E. Shaw
- ------------------ Chairman of the Board and September 26, 2000
Jack E. Shaw Chief Executive Officer
/s/Robert C. Crawford
- ------------------ Secretary/Treasurer and September 26, 2000
Robert C. Crawford Director
/s/Howard L. Morgan
- ------------------- Director September 20, 2000
Howard L. Morgan
/s/Robert G. Sable
- --------------------- Director September 26, 2000
Robert G. Sable, Esq.
19
UNITRONIX CORPORATION
---------------------
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
JUNE 30, 2000, 1999 AND 1998
----------------------------
UNITRONIX CORPORATION
---------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Page(s)
-------
Independent Auditors' Report 1
Consolidated Balance Sheets as of June 30, 2000 and 1999 2
Consolidated Statements of Operations for the years ended
June 30, 2000, 1999 and 1998 3
Consolidated Statements of Changes in Stockholders' Deficit
for the years ended June 30, 2000, 1999 and 1998 4
Consolidated Statements of Cash Flows for the years ended
June 30, 2000, 1999 and 1998 5
Notes to Consolidated Financial Statements 6-18
Schedule II - Valuation and Qualifying Accounts 19
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors and Stockholders
Unitronix Corporation:
In our opinion, the accompanying financial statements listed in the index
appearing under Item 14(a)(1) on page 17 present fairly, in all material
respects, the financial position of Unitronix Corporation at June 30, 2000,
and 1999, and the results of its operations and its cash flows for the years
ended June 30, 2000 and 1999, in conformity with generally accepted accounting
principles. The financial statements of Unitronix Corporation as of June 30,
1998 were audited by other auditors whose report, dated August 14, 1998,
expressed a qualified opinion on those statements. In addition, in our opinion,
the financial statement schedule listed in the index appearing under Item
14(a)(2) on page 18, presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related financial state-
ments. These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Dan Clasby & Company
September 20, 2000
Page 1
UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
June 30, 2000 and 1999
ASSETS 2000 1999
------ ---- ----
Current assets:
Cash $35,452 $14,328
Accounts receivable, net of allowance for doubtful accounts of
$8,232 and $8,402 at June 30, 2000 and 1999, respectively 48,015 50,658
Prepaid expenses and other current assets 4,339 7,713
Note receivable, current portion 125,000 -
------ ------
Total current assets 212,806 72,699
Note receivable, long term portion 20,833 -
Property and equipment, at cost less accumulated depreciation of $437,671
and $429,296 at June 30, 2000 and 1999, respectively 15,083 6,653
Goodwill, less accumulated amortization of $1,220 and $0
at June 30, 2000, and June 30, 1999, respectively 57,346 -
Other assets 4,328 2,895
------- ------
Total assets 310,396 $82,247
======= =======
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Notes payable - related parties 687,195 300,000
Notes payable - 199,527
Accounts payable 106,653 12,842
Accrued expenses 54,842 77,808
Accrued interest - related party 34,481 7,500
Deferred revenue 77,837 89,736
------- -------
Total current liabilities 961,008 687,413
Commitments and contingencies
Series A preferred stock, $1 par value, 6% cumulative convertible
nonvoting; authorized 1,000,000 shares; 956,728 issued and
outstanding at June 30, 2000, and 1999, net of issuance costs of
$2,200 at June 30, 2000, and $3,300 at June 30, 1999, plus
undeclared accumulated dividends of $114,808 at June 30, 2000,
and $57,404 at June 30, 1999 1,069,336 1,010,832
Stockholders' deficit:
Undesignated capital shares; authorized 0 shares at June 30,
2000 and 2,000,000 shares at June 30, 1999; none outstanding - -
Common stock, no par value; authorized 14,000,000 shares at June 30,
2000 and 12,000,000 shares at June 30, 1999; 9,643,718 and 9,456,932
issued and outstanding at June 30 2000 and 1999, respectively 3,487,912 3,485,412
Additional paid-in capital 48,150 7,090
Accumulated deficit (5,256,010)(5,108,500)
--------- ---------
Total stockholders' deficit (1,719,948)(1,615,998)
--------- ----------
Total liabilities and stockholders' deficit $310,396 $82,247
======== =======
See accompanying notes to financial statements.
Page 2
UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Years Ended June 30, 2000, 1999 and 1998
2000 1999 1998
---- ---- ----
Revenue:
Software licenses $14,971 $318,550 $491,300
Software related services 473,823 537,920 584,799
Maps and related services 31,970 - -
--------- ------- ---------
Total revenue 520,764 856,470 1,076,099
--------- -------- ---------
Costs and expenses:
Cost of software licenses 1,590 12,216 9,797
Cost of software related services 196,641 212,797 247,840
Cost of map production 45,859 - -
Software development costs 51,993 - 310,331
Selling and marketing expenses 98,303 151,655 185,925
General and administrative 457,900 463,511 336,877
--------- --------- ---------
Total costs and expenses 852,286 840,179 1,090,770
--------- --------- ---------
Income (loss) from operations (331,522) 16,291 (14,671)
Interest income (expense), net (37,706) (50,756) (96,976)
Other income (expense), net 307,489 14,551 (140,000)
-------- -------- --------
Loss before income taxes (61,739) (19,914) (251,647)
-------- -------- --------
Provision for income taxes - - -
Net loss $(61,739) $(19,914) $(251,647)
======== ======== ========
Basic and diluted net (loss) per share $(0.01) $(0.00) $(0.03)
======== ======== ========
Shares used in computing basic and diluted net
(loss) per share 9,489,757 9,456,932 9,456,932
======== ========= =========
See accompanying notes to financial statements.
Page 3
UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
-----------------------------------------------------------
Years Ended June 30, 2000, 1999 and 1998
Common Stock Additional Total
Shares Paid-In Accumulated Stockholders'
Issued Amount Capital Deficit Deficit
--------- ---------- ---------- ----------- ------------
Balance, June 30, 1997 9,456,932 $3,485,412 $(4,779,535) $(1,294,123)
Issuance of stock options
to consultant $1,170 - 1,170
Net loss (251,647) (251,647)
--------- ---------- ------ --------- --------
Balance, June 30, 1998 9,456,932 3,485,412 1,170 (5,031,182) (1,544,600)
Net loss (19,914) (19,914)
Unpaid accumulated
preferred dividends (57,404) (57,404)
Expense of issuance of stock
options to consultant 7,020 - 7,020
Amortization of preferred
stock issuance costs (1,100) (1,100)
--------- ---------- ------- --------- ---------
Balance, June 30, 1999 9,456,932 $3,485,412 $7,090 $(5,108,500) $(1,615,998)
Balance, majority owned
subsidiary, December 31, 1999 (28,367) (28,367)
Exercise of employee
stock options 20,000 2,500 2,500
Capital contribution to
subsidiary by minority shareowner 42,160 42,160
Purchase of assets of
Glen Jones Enterprises 156,786
Purchase of internet
domain names 10,000
Net loss (61,739) (61,739)
Unpaid accumulated
preferred dividends (57,404) (57,404)
Amortization of preferred
stock issuance costs (1,100) (1,100)
--------- ---------- ------- --------- ---------
Balance, June 30, 2000 9,643,718 $3,487,912 $48,150 $(5,256,010) $(1,719,948)
See accompanying notes to financial statements.
Page 4
UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Years Ended June 30, 2000, 1999 and 1998
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net loss $(61,739) $(19,914) $(251,647)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 9,595 27,241 45,668
Provision for bad debts (2,560) 4,876 1,638
Non cash income recognized on exchange
of preferred stock for accounts payable - - (10,000)
Non cash expense on issuance of stock
options to consultant - 7,020 1,170
Decreases (increases) in operating assets:
Accounts receivable 2,688 23,407 2,733
Note receivable (145,833) - -
Prepaid expenses and other current assets 3,374 13,666 1,671
Other assets (1,433) 306 (935)
Increases (decreases) in operating liabilities:
Accounts payable 93,811 (37,525) (34,561)
Accounts payable-related party - (2,550)
Accrued expenses (22,966) (16,080) (35,025)
Accrued interest 26,981 (6,750) 79,836
Deferred revenue (11,899) (10,967) 9,409
------- ------- -------
Net cash used by operating activities (109,981) (14,720) (192,593)
------- ------- -------
Cash flows for investing activities:
Purchase of equipment (16,805) - (420)
Purchase of assets of G.E. Jones Enterprises (84,418) - -
------- ------- -------
Net cash used by investing activities (101,223) - (420)
Cash flows from financing activities:
Proceeds from sale of common stock 2,500 - -
Capital contributions to subsidiary by
minority shareholder 42,160 - -
Proceeds from borrowings 440,195 - 535,500
Repayments of borrowings (252,527) (46,418) (296,649)
Issuance costs of preferred stock financing - - (4,400)
------- ------- -------
Net cash provided (used) by financing act. 232,328 (46,418) 234,451
------- ------- -------
Net increase (decrease) in cash 21,124 (61,138) 41,438
Cash at beginning of year 14,328 75,466 34,028
------- ------- -------
Cash at end of year $35,452 $14,328 $75,466
======== ======== ========
Noncash financing activities:
Preferred stock issued for notes payable - - $675,924
Pref. stock issued for accrued interest - - 161,279
Pref. stock issued for accounts payable - - 119,525
Notes payable issued for accounts payable - - 87,421
See accompanying notes to financial statements.
Page 5
UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. Summary of Significant Accounting Policies:
------------------------------------------
Basis of Presentation and Business
----------------------------------
The consolidated financial statements include the accounts of Unitronix
Corporation, its majority-owned subsidiary Interactive Mining Technologies,
LLC, and its majority-owned subsidiary, Enersource Mapping, Inc. All
significant intercompany accounts and transactions have been eliminated.
Unitronix Corporation (the "Company") operates in two business segments. The
Company licenses PRAXA software, which operates on VAX and Alpha computers
manufactured by Compaq Computer Corporation. The Company also provides
software maintenance, training, consulting and custom programming services
in conjunction with the PRAXA software.
The Company is the majority shareholder of Interactive Mining Technologies,
LLC, (IMT) a South Carolina limited liability company, that is engaged in
developing products and services for sale to the mineral exploration, mining
and related investment industries. IMT currently has no marketable products
or services.
IMT in turn is the majority shareholder of EnerSource Mapping, Inc., (ESM) a
Canadian corporation that is engaged in producing and marketing tenement maps
to the mining, exploration and investment communities. At the present time
Goldsat Mining, Inc., a Canadian corporation engaged in mineral exploration
and development in Canada, is the only other shareholder in both IMT and ESM.
The Company has continued to incur losses from operations and has a working
capital deficit as of June 30, 2000 of approximately $(748,200), notes
payable to its principal shareholder of $599,748 and other notes payable of
approximately $125,000. As a result, management anticipates that new prod-
ucts as well as additional financing will be required in the foreseeable
future to sustain the Company's operations and to repay the notes. Manage-
ment's plans in continuing their operations and to repay the notes include
developing new products and services to sell, raising additional funds from
new and existing investors and generating revenues from the sale of existing
products and services. In addition the Company is evaluating the sale of the
PRAXA software sales and support business. There can be no assurance that
the Company will obtain new products or services to sell, the financing
or the product revenues needed to continue its operations and to repay
the notes. The financial statements do not include any adjustments that
might result from these uncertainties.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported periods. Actual results could differ from those estimates.
page 6
UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. continued
Risks and Uncertainties
-----------------------
The Company is subject to risks common to companies in the high technology
industry including, but not limited to, development by the Company or its
competitors of new technological innovations, dependence on key personnel,
and protection of proprietary technology.
Economic Dependence
-------------------
In the fiscal year ended June 30, 2000, no single customer accounted for
more than 10% of total revenue. In the year ended June 30, 1999, one
customer accounted for approximately 15% of total revenue, and in the year
ended June 30, 1998, one customer accounted for approximately 20% of total
revenue.
Revenue Recognition
-------------------
Effective December 31, 1997, the Company adopted Statement of Position 97-2
(Software Revenue Recognition) issued by the American Institute of Certified
Public Accountants. This statement provides guidance on when revenue should
be recognized, and in what amounts for licensing, selling, leasing or
otherwise marketing computer software. Software revenue and computer system
revenue are generally recognized upon product shipment, provided that no
significant vendor obligation exists and collection of the related receivable
is deemed probable by management. Revenue from software maintenance
contracts is recognized ratably over the contractual period, and other
service revenue is generally recognized as the services are provided.
Software Costs
--------------
The Company capitalizes certain software costs after technological
feasibility of the product has been established and ceases capitalization
when the product is available for general release to customers. Costs
incurred prior to the establishment of technological feasibility are charged
to product development costs. Such costs are amortized on a straight-line
basis over the estimated useful life of three years or the ratio of current
revenue to the total of current and anticipated future revenue, whichever is
greater. The Company did not capitalize any software costs for the years
ended June 30, 2000, 1999 and 1998. All software development costs that had
been capitalized in prior years were completely amortized prior to the year
ended June 30, 1998.
Income Taxes
------------
The Company follows the liability method for accounting for income taxes.
Under this method, deferred tax assets and liabilities are recognized based
on temporary differences between the financial statement and tax bases of
assets and liabilities using current statutory tax rates. A valuation
allowance is required to offset any net deferred assets if, based upon
weighted available evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized.
Page 7
UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. continued
Loss per Common Share
---------------------
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), Earnings per Share, which requires
disclosure of basic earnings per common share and diluted earnings per
common share for all periods presented. The computation of basic and
diluted earnings per share is presented below.
Basic and diluted net loss per share:
- ------------------------------------
For the Years Ended June 30,
---------------------------
2000 1999 1998
---- ---- ----
Numerator:
Net loss $(61,739) $(19,914) $(251,647)
Preferred dividends - - -
-------- ------- ---------
Income available to common shareholders $(61,739) $(19,914) $(251,647)
========= ========= =========
Denominator:
Weighted average number of shares issued
and outstanding 9,489,757 9,456,932 9,456,932
Assumed exercise of options reduced by the
number of shares which could have been
purchased with the proceeds of those options - - -
Assumed conversion of preferred stock - - -
--------- --------- ---------
Total shares 9,489,757 9,456,932 9,456,932
--------- --------- ---------
Basic and diluted net loss per share $ (.01) $ (.00) $ (.03)
========= ========= =========
As a result of a net loss for all periods presented, common stock equivalents
are not included in the calculation of weighted average shares since their
effect would be antidilutive.
Property and Equipment
- ----------------------
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, generally
three to five years, for financial reporting, and accelerated methods for income
taxes. Expenditures for repairs and maintenance which do not increase the
useful life of the related assets are expensed as incurred. Upon retirement or
sale, the cost of the assets disposed of and the related accumulated
depreciation are removed from the accounts; any resulting gain or loss is
credited or charged to income.
Page 8
UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. continued
Reclassification of Prior Year Balances
- ---------------------------------------
Certain reclassifications have been made to prior years' financial statements
to conform to the current presentation.
Recently Issued Accounting Pronouncements
- -----------------------------------------
The Financial Accounting Standards Board has issued Statement No. 130
("SFAS 130"), "Reporting Comprehensive Income". This statement requires
changes in comprehensive income to be shown in a financial statement that is
displayed with the same prominence as other financial statements. While not
mandating a specific financial statement format, the Statement requires that
an amount representing total comprehensive income be reported. The Statement
is effective for fiscal years beginning after December 15, 1997. Reclass-
ification of financial statements for earlier periods is required for compar-
ative purposes. There were no other items of comprehensive income in the
years reported on.
The FASB has also issued Statement No. 131 ("SFAS 131"), "Disclosures about
Segments of an Enterprise and Related Information". This Statement, which
supersedes Statement No. 14, "Financial Reporting for Segments of a Business
Enterprise," changes the way public companies report information about seg-
ments. The Statement, which is based on the management approach to segment
reporting, includes requirements to report segment information quarterly and
entity-wide disclosures about products and services, major customers, and the
material countries in which the entity holds assets and reports revenues. The
Statement is effective for periods beginning after December 15, 1997. Restate-
ment for earlier years is required for comparative purposes unless impractic-
able. Additional information pertaining to segment reporting is provided in
Note 11.
In June, 1998, the FASB issued Statement No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities", which is effective for
fiscal years beginning after June 15, 1999. The statement establishes account-
ing and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability, measured at
its fair value. SFAS N0. 133 also requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met. Adoption of this standard is not expected to have a material
impact on the financial position or results of operations of the Company.
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UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
2. Related Party Transactions:
--------------------------
On October 27, 1993, the Company had entered into a one year agreement that had
provided for its principal shareholder to lend up to $400,000 to the Company.
This agreement was renewed for additional one year periods in 1994 and 1995, but
expired on September 1, 1996, at which time the line of credit had been fully
drawn down. During the period from September 1, 1996, until March 1, 2000, the
principal shareholder continued to provide loans to the Company from time to
time under the terms of the expired agreement, at which time a new lending
agreement that provides for up to $1,000,000 in loans to the Company was signed.
The new agreement expires on March 1, 2005, but can be renewed for successive
one year periods at the option of the shareholder and the Company. At the time
that the new lending agreement was signed, outstanding loans of $338,250 were
owed to the principal shareholder by the Company. At September 15, 2000, the
Company owed $257,518 in principal and accrued interest and the Company's
majority owned subsidiary, Interactive Mining Technologies, LLC, owed $176,262,
that had been provided under the new lending agreement. Loans granted under
both the old and new lending agreements bear interest at the greater of 10% per
annum or two points over the prime rate of interest at the time the loan is
granted. All existing loans bear interest at the rate of 10% per annum.
As further compensation for the risk borne in the past and to be borne in the
future by lending funds to the Company, the new lending agreement provides for
the issuance of immediately exercisable warrants to purchase 338,250 shares of
the common stock of the Company at a price of $0.125 per share. It also
provides for the issuance of immediately exercisable warrants on each
anniversary date of the agreement, such warrants to be for the purchase of the
common stock of the Company at a price that is 25% below the bid price for such
stock on such anniversary date or the most recent trading date for which a bid
price is available, with the number of such warrants so issuable to be equal to
one such warrant for each dollar of total loans outstanding on such anniversary
date.
In July, 1997, a loan of $200,000 was granted to the Company by the Carolina
First Bank. The loan was secured by the pledge of all of the assets of the
Company and by the personal guaranty and pledge of certain personal assets of
the Company's principal shareholder. The loan was renewed on June 20, 1998, for
$199,000 and again on July 28, 1999, for $199,000. On October 29, 1999, the
Company's principal shareholder personally repaid to the bank the principal and
interest due, amounting to $203,202, thereby canceling and discharging all
outstanding obligations from the Company to the bank and creating an obligation
to the principal shareholder in the same amount. On that same date, the Company
issued a note to the principal shareholder in the amount of $203,202, bearing
interest at the rate of 10% per annum. Although no assurances can be given,
management believes that this shareholder does not intend to demand repayment of
the debt and interest outstanding under this note or the lending agreement
discussed above, in the foreseeable future.
The Board of Directors of the Company had previously voted to grant 200,000
shares of common stock to the principal shareholder for the risk assumed in
guaranteeing the $200,000 bank loan, but such shares were never issued. As
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UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
2. continued
compensation for the risk being borne by the principal shareholder and in
recognition of the fact that the previously approved grant of 200,000 shares of
common stock was not satisfied, the Board of Directors voted to grant warrants
for the purchase of 600,000 shares of the Company's common stock at a price of
$0.125 per share to the principal shareholder, and to grant warrants for an
additional 100,000 shares at the end of each fiscal year, beginning with the
fiscal year ended June 30, 2000, for each year that the note remains unpaid.
Another shareholder of the Company had loaned a total of $103,500 to the
Company's majority owned subsidiary, Interactive Mining Technologies, LLC, as of
September 15, 2000.
On June 30, 1998, the Company entered into an agreement to exchange $675,924 of
demand notes outstanding and $152,679 in accrued interest to the principal
shareholder and two other shareholders for 828,603 preferred shares
(see Note 9).
On June 30, 1998, the Company entered into an agreement to exchange $16,125
in accounts payable to an entity controlled by a director of the Company for
16,125 shares of preferred stock (see Note 9).
3. Property and Equipment:
----------------------
The major classes of property and equipment are as follows:
June 30,
---------------
2000 1999
---- ----
Computer equipment $398,953 $387,129
Office furniture and fixtures 53,801 48,820
------- -------
452,754 435,949
Less: accumulated depreciation (437,671) (429,296)
------- -------
$ 15,083 $ 6,653
======= =======
Depreciation expense for the years ended June 30, 2000, 1999 and 1998 was
$8,375, $27,242, and $45,668, respectively.
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UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
4. Income Taxes:
------------
The components of the deferred tax assets and liabilities as of June 30, 2000
and 1999 were as follows:
2000 1999
---- ----
Deferred tax assets:
Net operating loss carryforwards $2,584,064 $ 2,570,501
Tax credits 197,252 197,252
Other 7,189 7,189
--------- ---------
Subtotal 2,788,505 2,774,942
Deferred tax liabilities:
Capitalized software costs - -
Net fixed assets - -
--------- ---------
Subtotal - -
--------- ---------
Valuation allowance $(2,788,505) $(2,774,942)
========= =========
Net deferred tax assets - -
The Company has established a valuation allowance for its net deferred tax
assets due to the uncertainty surrounding their realization.
As of June 30, 1999, the Company has net operating loss carry forwards for
federal income tax purposes of approximately $6,453,000 which expire from the
years 2006 through 2020. The Company also has research and development credits
for federal income tax purposes in the amount of $153,243 available to offset
future income taxes. These credits expire from the years 2007 through 2012.
Due to the Company's issuance of stock, the Company's use of its existing net
operating loss carryforwards may be restricted under Section 382 of the Internal
Revenue Code.
A reconciliation of the provision for income taxes at the federal statutory
income tax rate of 17% for the year ended June 30, 2000, 15% for the year ended
June 30, 1999, and 34% for the year ended June 30, 1998, with the provision
reflected in the financial statements is as follows:
2000 1999 1998
---- ---- ----
Tax expense (benefit) at federal statutory
income tax rate $(10,435) $(2,987) $(85,162)
State income taxes, net of federal benefit (3,828) (1,235) (15,705)
Nondeductible business expenses 700 700 678
Other - - (582)
Credits - - (19,110)
Change in valuation allowance 13,563 3,522 119,881
------- ------- -------
Total tax provision - - -
======= ======= =======
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UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
5. Profit Sharing Plan:
-------------------
The Company has a qualified profit-sharing plan covering substantially all
full-time Company employees. The plan was amended effective July 1, 1986 to
incorporate a "savings" feature under Section 401(k) of the Internal Revenue
Code (IRC), which allows participants to make contributions by salary
reduction subject to annual compensation limits as defined by the IRC.
Certain distributions may be rolled over to a retirement account. The
Company may make matching contributions at a percentage rate determined at
its discretion. Employees vest immediately in their contributions and vest
in the Company contributions over a seven-year period of service.
Contributions under the profit-sharing feature of the plan are discretionary
and determined annually by management. No contributions have been made to
this plan for the years ended June 30, 2000, 1999 and 1998.
6. Notes Payable:
-------------
On August 1, 1993, the Company incurred a $37,937 note payable bearing
interest at 8% due to the Illinois Department of Revenue for settlement of
revenue taxes owed to the State of Illinois. The note was payable in monthly
installments of $527 and expired on July 1, 1999. The note payable balance
as of June 30, 2000 and 1999 is $0 and $527, respectively.
On July 14, 1997, the Carolina First Bank loaned the Company $200,000 in the
form of a demand note that was secured by all of the assets of the Company
and the guarantee of the Company's principal shareholder. The note bears an
annual interest rate of 9% and was due on June 30, 1998. The note was
renewed on June 30, 1998, in the amount of $199,000, bearing interest at the
prime rate, and was renewed again on July 28, 1999, for $199,000 and bearing
interest at the prime rate. On October 29, 1999, the Company's principal
shareholder personally repaid to the bank the principal and interest due,
amounting to $203,202, thereby canceling and discharging all outstanding
obligations from the Company to the bank and creating an obligation to the
principal shareholder in the same amount. On that same date, the Company
issued a note to the principal shareholder in the amount of $203,202, bearing
interest at the rate of 10% per annum.
7. Commitments and Contingencies:
-----------------------------
On May 1, 1998 the Company entered into a lease agreement for its Westmont,
New Jersey office for a period of three years. Rent is payable in monthly
installments of $1,702 during the first year of the lease, $1,753 during the
second year of the lease, and $1,805 during the third and final year of the
lease. The Company occupies the Peabody, Massachusetts location without a
lease, paying monthly rent of $1,796.
At June 30, 2000, the Company's future minimum payments under noncancelable
leases were as follows:
Fiscal year 2001 $ 18,050
Total rental expense was $42,380, $41,346, and $50,160 for the years ended
June 30, 2000, 1999 and 1998, respectively.
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UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
8. Legal Proceedings:
-----------------
The Company filed suit against Computer Management Sciences, Inc. (CMSI) in
the United States District Court for the District of Massachusetts on October
25, 1996. The suit was seeking damages resulting from the breach of three
contracts by CMSI to develop part of a client-server ERP software product,
which contracts having been entered into in 1995 and 1996. The Company
was seeking an amount in excess of $150,503, which is the amount that the
Company paid to CMSI during the course of the contracts, plus costs, interest
and such other relief that the Court deemed just and equitable. On January
17, 1997, CMSI filed a counterclaim in the same Court alleging that the
Company was liable to CMSI in an amount exceeding $200,000 on account of the
Company's alleged breaches of the same contracts. During the year ended June
30, 2000, the Company and CMSI withdrew their respective suits against each
other, upon payment of $20,000 to the Company by CMSI.
On June 30, 1998, the Company filed for arbitration against InterObjects, a
software development firm, for breach of contract and failure to meet
milestones in the development of a new ERP system. The Company made
a prepayment of $300,000 in September of 1997 related to this contract,
all of which was charged to operating expenses in the year ended June 30,
1998. Development of the new system by InterObjects ceased in January, 1998,
and the contract was subsequently terminated. In August, 1999, the Company
settled with InterObjects for the return of the $300,000 prepayment to the
Company, with $50,000 being repaid in August, 1999, and $10,000 plus interest
on the unpaid balance being repaid monthly through September, 2001. The
successor company to InterObjects has made all required installment payments
through September 1, 2000.
9. Supplemental Disclosure of Cash Flow Information:
-------------------------------------------------
Cash paid (received) for interest and taxes for the periods indicated were
as follows:
Year Ended June 30,
------------------
2000 1999 1998
---- ---- ----
Interest, net $13,299 $53,942 $17,140
Taxes 615 2,631 1,831
10. Preferred Stock:
---------------
On June 30, 1998, the Company converted $675,924 in notes payable, $119,525
in accounts payable and $161,279 in accrued interest into 956,728 shares of
mandatory redeemable, convertible, Series A preferred stock $1.00 per share
par value("preferred stock"). The preferred stock has a 6% cumulative
dividend feature and has no voting rights. The Company incurred $4,400 in
issuance costs associated with the preferred stock offering and has netted
them against the preferred stock carrying amount on the balance sheet. These
costs are being accreted from the date of issue until the date of the
mandatory redemption.
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UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
10. continued
The preferred stock is convertible at the option of the holder into common
stock of the Company. The number of shares of common stock into which
each share of preferred stock may be converted is determined by dividing
$1.00 by the preferred stock conversion price as indicated below:
$1.00 per share of common stock for the period from June 30, 1998 through
June 30, 2000
$1.50 per share of common stock for the period from June 30, 2000 through
June 30, 2001
$2.00 per share of common stock for the period from June 30, 2001 through
June 30, 2002
The Company is required to redeem, within 30 days after June 30, 2002, each
share of preferred stock outstanding as of June 30, 2002 for an amount equal
to the sum of $1.00 per share, plus dividends payable as of June 30, 2002.
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of the Company, the holders of the preferred stock are
entitled to be paid an amount equal to the greater of (a) $1.00 per share
plus all accrued but unpaid preferred dividends or (b) the amount that would
be distributable to the shareholders of the preferred stock if those holders
converted the preferred stock as indicated above.
11.Stock Option Plan:
-----------------
During fiscal 1994 the Company adopted the 1993 Stock Option Plan (the
"Plan"), and reserved 1,000,000 shares of common stock for issuance under the
Plan. Under the Company's incentive and nonqualified stock option plan,
incentive stock options can be granted to employees entitling them to
purchase shares of common stock within one to ten years from the date of
grant at option prices equal to or above the fair market value at the date of
grant. Nonqualified stock options are generally granted under the same
terms. The exercise price for incentive stock options may not be less than
the fair market value of the common stock on the date of the grant (or 110%
of fair market value in the case of employees or officers holding 10% or more
of the total combined voting power of all classes of stock of the Company).
The vesting period for the options is determined by the option committee at
the time of the grant.
In October 1995, the FASB issued SFAS NO. 123, "Accounting for Stock-Based
Compensation." SFAS NO. 123 is effective for periods beginning after
December 15, 1995. SFAS NO. 123 requires that companies either recognize
compensation expense for grants of stock, stock options, and other equity
instruments based on fair value, or provide pro forma disclosure of net
income and earnings per share in the notes to the financial statements. The
Company adopted the disclosure provisions of SFAS NO. 123 in 1996 and has
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UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
11. continued
applied APB Opinion 25 and related interpretations in accounting for its
plans. Had compensation costs for the Company's stock-based compensation
plan been determined and recognized based on the fair value at the grant
dates as calculated in accordance with SFAS NO. 123, the Company's net loss
for the years ended June 30, 2000, 1999 and 1998 would have been as follows:
2000 1999 1998
---- ---- ----
Net Loss Net Loss Net Loss
-------- -------- --------
Reported $(61,739) $(19,914) $(251,647)
Pro forma $(62,018) $(20,034) (253,207)
During fiscal 1998, the Company granted 210,000 options of which 90,000 were
granted to an outside consultant. The cost associated with these 90,000
options amounted to $8,190,of which $7,020 and $1,170 were charged to expense
in 1999 and 1998, respectively, in accordance with SFAS NO. 123.
The fair value of each stock option was estimated on the date of grant using
the Black-Scholes option-pricing model. The following weighted-average
assumptions were used in the valuation of the options:
June 30, 2000 June 30, 1999 June 30, 1998
Expected life 2 years 2 years 2 years
Expected volatility 150% 150% 150%
Dividend yield 0% 0% 0%
Risk-free interest rate 5.72% 5.60% 5.58%
A summary of the status of the Company's stock option plan as of June 30, 2000,
1999, and 1998, and changes during each of the years then ended, is presented
below:
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UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
11. continued
Weighted
Average
Exercise
Number of Price per
Shares Share
--------- ---------
Options outstanding at June 30, 1997 258,000 . 125
Options granted 210,000 . 125
Options exercised 0 -
Options canceled (3,000) . 125
-------
Options outstanding at June 30, 1998 465,000 . 125
Options granted 0 -
Options exercised 0 -
Options canceled 0 -
--------
Options outstanding at June 30, 1999 465,000 . 125
Options granted 0 -
Options exercised 20,000 . 125
Options canceled (70,000) . 125
-------
Options outstanding at June 30, 2000 375,000 . 125
========
There were 375,000 options exercisable as of June 30, 2000.
The following table summarizes information about stock options outstanding
at June 30, 2000
Options Outstanding Options Exercisable
------------------------------------------------ -----------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life Price Exercisable Price
- -------- ----------- ----------- -------- ----------- ----------
$.125 375,000 5.81 years $.125 375,000 $.125
There are 605,000 options available for grant as of June 30, 1999, of which
commitments have been made to grant options for 150,000 shares at an exercise
price of $0.40 per share to a consultant to the Company's majority owned
subsidiary, Interactive Mining Technologies, LLC, and 50,000 shares at an
exercise price of $0.40 per share to the President of EnerSource Mapping, Inc.,
a majority owned subsidiary of Interactive Mining Technologies, LLC. The
Company expects to grant these options during the second quarter of fiscal
year 2001.
The effects of applying SFAS NO. 123 in this disclosure are not indicative of
future amounts. SFAS NO. 123 does not apply to awards made prior to 1995.
Additional awards in future years are anticipated.
Page 17
UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
12.Operating Segments
------------------
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," in fiscal 1999. SFAS No. 131 established standards
for reporting information about operating segments in the Company's financial
statements. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision making group, in
deciding how to allocate resources and in assessing performance. The Company's
chief operating decision maker is the Chief Executive Officer of the Company.
The Company organizes its business units into three reportable segments:
software licenses; software related services; and, mineral exploration products
and services. The segments' accounting policies are the same as those
described in the summary of significant accounting policies except that interest
expense and non-operating income and expenses are not allocated to the
individual operating segments when determining segment profit or loss. The
Company evaluates performance based on profit or loss from operations before
interest and income taxes not including nonrecurring gains and losses.
Reconciliation of Segment Information
-------------------------------------
2000 1999 1998
---- ---- ----
Software Licenses:
Revenue 14,971 $318,550 $491,300
Costs and expenses 211,078 409,407 617,209
-------- -------- ---------
(Loss) for segment (196,107) (90,857) (125,909)
Software Related Services:
Revenue 473,823 537,920 584,799
Costs and expenses 335,386 430,772 473,561
-------- -------- ---------
Income for segment 138,437 107,148 111,238
Mineral Exploration Products
and Services:
Revenue 31,970 - -
Costs and expenses 305,822 - -
-------- -------- ---------
(Loss) for segment (273,852) - -
------- ------- -------
Total (loss) for segments (331,522) $16,291 $(14,671)
======= ======== =========
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UNITRONIX CORPORATION AND SUBSIDIARIES
--------------------------------------
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
---------------------------------------------
Col. A Col. B Col. E Col. D Col. E
- ------ ------ ------ ------ ------
Balance at Charged to
Beginning Costs and Balance at
Description of Period Expenses Deductions* End of Period
----------- ----------- ---------- ---------- -------------
Year ended June 30, 2000:
Allowance for doubtful
accounts $8,402 $3,901 $(4,071) $8,232
Year ended June 30, 1999:
Allowance for doubtful
accounts 3,526 4,876 0 8,402
Year ended June 30, 1998:
Allowance for doubtful
accounts 4,996 1,638 3,108 3,526
*Write-off (recovery) of bad debts
Page 19