Form 10-Q
Securities and Exchange Commission
Washington, DC 20549
QUARTERLY REPORT PURSUANT TO SECTON 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2002
-------------------------.
Commission file number 0-17080
--------
UNITRONIX CORPORATION
---------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2086851
- --------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Newbury Street, Peabody, MA 01960
---------------------------------------
(Address of principal executive offices)
(Zip Code)
(978) 535-3912
---------------------------------------------------
(Registrant's telephone number, including area code)
- -----------------------------------------------------------------------
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that 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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
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 November 6, 2002
1
UNITRONIX CORPORATION
INDEX
-------
Page Number
-----------
Part I. Financial Information (Unaudited)
Item 1:
Consolidated Balance Sheets-
September 30, 2002 and June 30, 2002 3
Consolidated Statements of Income -
Three Months Ended September 30, 2002 and 2001 4
Consolidated Statement of Changes in Stockholders' Deficit-
Three Months Ended September 30, 2002 5
Consolidated Statements of Cash Flows -
Three Months Ended September 30, 2002 and 2001 6
Notes to Consolidated Financial Statements 7
Item 2:
Management's Discussion and Analysis of Results of 11
Operations and Financial Condition for the Three Months
Ended September 30, 2002
Part II. Other Information 12
2
UNITRONIX CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETS
September 30,
2002 June 30,
(Unaudited) 2002 (1)
ASSETS ----------- --------
CURRENT ASSETS:
Cash $13,501 $12,192
Accounts receivable, net of allowance for doubtful
accounts of $2,372 and $1,865 at September 30 and
June 30, 2002, respectively 9,131 38,495
Subscriptions receivable - 11,500
Prepaid expenses and other current assets 4,147 1,069
Note receivable, net of reserve for bad debt of
$1,827 at September 30 and June 30, 2002, respectively - -
--------- ---------
TOTAL CURRENT ASSETS 26,779 63,256
Property and equipment, at cost less accumulated
depreciation of $315,750 and $315,574 at September 30 and
June 30, 2002, respectively 531 707
Other assets 2,971 2,971
---------- -------
TOTAL ASSETS $30,281 $66,934
========= ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable - related parties $725,774 $715,774
Accounts payable 115,851 101,998
Accrued expenses 20,157 25,073
Accrued interest-related parties 168,352 150,430
Deferred revenue 36,471 41,379
-------- -------
TOTAL CURRENT LIABILITIES 1,066,605 1,034,654
--------- ---------
Long-term notes payable - related parties 100,000 108,500
COMMITMENTS AND CONTINGENCIES
Series A preferred stock, $1 par value, 6% convertible
nonvoting; authorized 1,000,000 shares; 956,728
issued and outstanding at September 30 and June 30,
2002, plus undeclared accumulated dividends of $229,616
at September 30, and June 30, 2002 1,186,344 1,186,344
STOCKHOLDERS' DEFICIT:
Common stock, no par value; authorized 14,000,000 shares;
9,643,718 shares issued and outstanding at
September 30 and June 30, 2002 3,487,912 3,487,912
Additional paid-in capital 3,988 3,988
Accumulated deficit (5,814,568) (5,754,464)
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT (2,322,668) (2,262,564)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $30,281 $66,934
========= ========
(1) Derived from audited financial statements.
See accompanying notes to financial statements.
3
UNITRONIX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
September 30,
2002 2001
------ ------
REVENUE:
PRAXA software licenses - $13,650
PRAXA software related services $48,976 60,786
------- -------
TOTAL REVENUE 48,976 74,436
------- -------
COSTS AND EXPENSES:
Cost of PRAXA related services 19,073 23,246
Mineral exploration project expense 9,070 -
Predictive software development costs 30,182 43,146
PRAXA selling expenses 2,827 1,229
General and administrative 30,006 55,194
------- -------
TOTAL COSTS AND EXPENSES 91,158 122,815
------- -------
(LOSS) FROM OPERATIONS (42,182) (48,379)
INTEREST INCOME (EXPENSE), NET (17,922) (15,164)
------- -------
(LOSS) BEFORE INCOME TAXES (60,104) (63,543)
------- -------
PROVISION FOR INCOME TAXES - -
------- -------
NET (LOSS) $(60,104) $(63,543)
======= =======
Basic and diluted net (loss) per share $(0.01) $(0.01)
======= =======
Shares used in computing basic and
diluted net (loss) per share 9,643,718 9,643,718
======= =======
See notes to financial statements.
4
UNITRONIX CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(Unaudited)
For the Three Months Ended September 30, 2002
Common Stock
-------------- Additional
Shares Paid-in Accumulated Stockholders'
Issued Amount Capital Deficit Deficit
------ ------ ------- ------- -------
Balance,
June 30, 2002 9,643,718 $3,487,912 $3,988 $(5,754,464) $(2,262,564)
Net (loss) (60,104) (60,104)
--------- --------- ------ ---------- -----------
Balance,
September 30, 2002 9,643,718 $3,487,912 $3,988 $(5,814,568) $(2,322,668)
========= ========= ====== =========== ===========
See notes to financial statements.
5
UNITRONIX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended September 30,
--------------------------------
2002 2001
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(60,104) $(63,543)
Adjustments to reconcile net income (loss)to net
cash provided (used) by operating activities:
Depreciation and amortization 176 336
Provision for bad debts 506 2,821
Decreases (increases) in operating assets:
Accounts receivable 28,857 981
Subscriptions receivable 11,500 -
Prepaid expenses and other current assets (3,080) (949)
Other assets - 290
Increases (decreases) in operating liabilities:
Accounts payable 13,856 35,198
Accrued expenses (4,916) 5,129
Accrued interest 17,922 15,163
Deferred revenue (4,908) 4,975
------- -------
Net cash provided (used) by operating activities (191) 401
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 10,000 -
Repayments of borrowings (8,500) -
------- -------
Net cash provided by financing activities 1,500 -
------- -------
Net increase (decrease) in cash 1,309 401
Cash at beginning of period 12,192 98
------- -------
Cash at end of period $13,501 $499
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest - -
Taxes - -
See notes to financial statements.
6
UNITRONIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies:
------------------------------------------
Basis of Presentation
- ---------------------
The consolidated financial statements include the accounts of Unitronix
Corporation, its wholly owned subsidiaries, 3936449 Canada, Incorporated and
1522923 Ontario, Incorporated, and its former majority-owned subsidiary,
Interactive Mining Technologies, LLC, and its majority-owned subsidiary,
EnerSource Mapping, Inc. All significant inter-company accounts and trans-
actions have been eliminated.
Unitronix Corporation ("the Company") has historically been in the business of
licensing its PRAXA manufacturing resource planning software, which operates on
VAX and Alpha computers that were previously manufactured by Digital Equipment
Corporation and Compaq Computer Corporation, and providing software maintenance,
training, consulting and custom programming services in conjunction with the
PRAXA software. The Company recently changed its focus so that it is now
concentrating on developing products and services for the mineral exploration,
mining and related industries. This business segment consists of the business
of the Company's former majority owned subsidiary, Interactive Mining Tech-
nologies, LLC, which had partially developed a mineral potential analysis soft-
ware tool ("the tool"), which the Company has continued to develop and test.
The Company also has two wholly owned mineral exploration subsidiaries that use
the tool to identify mining properties that may be of value for joint ventures
or sale. Although marketing of the tool, which has been named Geo-Sleuth, has
not commenced, one subsidiary, 1522923 Ontario, Incorporated, has staked claim
to 128 units in the Sturgeon Lake area of Ontario that were identified through
the use of Geo-Sleuth as meriting further examination. Four investors, two of
which are the Company's major shareholders, were granted a 75% interest in the
Sturgeon Lake claims in exchange for a loan of $100,000 to 1522923 Ontario,
Incorporated, that was used to pay expenses previously incurred in developing
and testing the tool, to pay the costs of staking claims to several properties
in the Sturgeon Lake area that were identified by the tool to merit further
examination, and to pay for professional services associated with the project.
Analysis of samples gathered as part of the test of the tool in the Sturgeon
Lake area is nearing completion.
The accompanying financial statements are unaudited. In the opinion of manage-
ment, all adjustments, which include only normal recurring adjustments necessary
to present fairly the financial position, results of operations, and cash flows
for all periods presented, have been made. The result of operations for interim
periods are not necessarily indicative of the operating results for the full
year.
The Company has continued to incur losses from operations and has a working
capital deficit of $1,039,826, notes payable to its principal shareholder of
$617,274 and other notes payable of $208,500, as of September 30, 2002. Man-
agement believes that new products and additional financing will be required
to sustain the Company's operations and repay the notes. Management believes
that the products and services that are being developed for the mineral explor-
ation and mining industry will eventually provide it with the means to generate
revenues sufficient to sustain its operations and repay its debt. The Company
7
UNITRONIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
continued
plans to raise additional funds from new and existing investors. It is also
attempting to sell the PRAXA software sales and support business. There can
be no assurance that the Company will succeed in developing new products and
in obtaining the financing necessary to continue its operations. The financial
statements do not include any adjustments that might result from these
uncertainties.
Footnote disclosure normally included in financial statements prepared in
accordance with generally accepted accounting principles has been omitted in
accordance with the published rules and regulations of the Securities and
Exchange Commission. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's June
30, 2002 Annual Report on Form 10-K.
2. Net Income (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. Shares used in computing basic and
diluted net income (loss) per share are based on the weighted average shares
outstanding in each period, excluding treasury stock. Basic net income (loss)
per share excludes any dilutive effect of stock options and convertible
preferred stock. Diluted net income per share includes the dilutive effect
of the assumed exercise of stock options using the treasury stock method,
and the assumed conversion of the outstanding convertible preferred stock. The
following table shows the computation of basic and diluted net income per share:
Three Months Ended
September 30,
------------------
2002 2001
---- ----
Numerator:
Net (loss) $(60,104) $(63,543)
Preferred dividend 0 0
-------- -------
(Loss) available to common shareholders $(60,104) $(63,543)
======== =======
Denominator:
Weighted average number of shares issued
and outstanding 9,643,718 9,643,718
Assumed exercise of options reduced by the
number of shares which would have been pur-
chased with the proceeds of those options - -
Assumed conversion of preferred stock - -
--------- ---------
Total shares 9,643,718 9,643,718
========= ==========
Basic and diluted net (loss) per share $(0.01) $(0.01)
========= =========
8
UNITRONIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
continued
As a result of a net loss for all periods presented, common stock equivalents
for the assumed exercise of options and conversion of preferred shares are not
included in the calculation of weighted average shares since their effect would
be antidilutive.
The number of stock options and warrants outstanding was 2,758,092,and the
number of potential shares convertible into common stock from the exercise of
convertible preferred stock was 956,728 as of September 30, 2002.
3. Operating Segments
------------------
The Company organizes its business units into three reportable segments:
manufacturing software licenses and related services; mineral exploration
products and services; and, mineral exploration activities. The segments'
accounting policies are the same as those described in the summary of signif-
icant accounting policies except that interest expense and non-operating income
and expenses are not allocated to the individual operating segments when determ-
ining segment profit or loss. The Company evaluates performance based on profit
or loss from operations before interest and income taxes, not including non-
recurring gains and losses.
A summary of the segment information for the three months ended September 30,
2002 and 2001 is presented below.
Three Months Ended
September 30,
------------------
2002 2001
---- ----
Manufacturing software licenses
and related services:
Revenue $48,976 $74,436
Costs and expenses 32,642 61,271
-------- -------
Income (loss) for segment 16,334 13,165
-------- -------
Mineral exploration products
and services:
Revenue - -
Costs and expenses 45,005 61,544
-------- -------
Income for segment (45,005) (61,544)
-------- -------
Mineral exploration activities:
Revenue - -
Costs and expenses 13,511 -
-------- -------
Income for segment (13,511) -
-------- -------
Total income (loss) for segments $(42,182) $(48,379)
======== =======
9
UNITRONIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
continued
4. Related Party Transactions
--------------------------
During the three month period ended September 30, 2002, two shareholders loaned
the Company $10,000 to be used to pay operating expenses. The loans bear
interest of 10% per annum.
10
UNITRONIX CORPORATION
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
FORWARD LOOKING STATEMENTS
- --------------------------
In addition to historical information, this Quarterly Report contains forward-
looking statements. The forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those reflected in such forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which reflect
management's opinions only as of the date hereof. The Company undertakes no
obligation to revise or publicly release the results of any revision to these
forward-looking statements. Readers should carefully review the risk factors
described in other documents the Company files from time to time with the SEC,
including the Annual Report on Form 10-K for the fiscal year ended June 30,
2002.
The analysis of the Company's financial condition, capital resources and
operating results should be viewed in conjunction with the accompanying
financial statements, including the notes thereto.
RESULTS OF OPERATIONS
- ---------------------
First Quarter Ended September 30, 2002, Compared to the First Quarter Ended
- ---------------------------------------------------------------------------
September 30, 2001
- ------------------
Revenue for the period ended September 30, 2002, decreased by 34% from the like
period in 2001. The only revenue realized in the 2002 period was from PRAXA
related services, which decreased by 19% from the 2001 period due to fewer PRAXA
customers using the Company's software support, training and consulting serv-
ices. PRAXA customers are continuing to migrate to more current manufacturing
management software, resulting in decreased demand for support services. Man-
agement anticipates that this trend will continue as the Company has no plans
to enhance the PRAXA software or to develop or acquire another manufacturing
software product.
The cost of providing the PRAXA related services decreased by 18% from the
quarter ended September 30, 2001 to the quarter ended September 30, 2002,
which was in line with the decrease in revenue from this sector. Develop-
ment costs for the mineral potential analysis software decreased by 30% from
the 2001 period to the 2002 period because the software is now in the testing
phase, utilizing less manpower than was used during the development phase.
General and administrative expenses decreased by 45% because the Company's
product development manager is now totally assigned to the mineral potential
analysis software project. The decrease of 26% in total costs and expenses
from the period ended September 30, 2001, to the period ended September 30,
2002, resulted in a decrease of 13% in the loss from operations in the 2002
period.
11
UNITRONIX CORPORATION
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
(continued)
Liquidity and Capital Resources
- -------------------------------
As of September 30, 2002, the working capital deficit was $1,039,826 as compared
to a deficit of $971,398 at June 30, 2002. The increased deficit is due to
lower accounts receivable and subscriptions receivable balances and higher notes
payable, accounts payable and accrued interest payable balances at September 30.
Management projects that capital from sources other than operations will be
required to bring its mineral potential analysis tool, Geo-Sleuth, to market
and to fund the operations of its mineral exploration subsidiaries. The Company
anticipates raising this capital through the private placement of stock in the
Company. This plan will require that new shares be authorized by the current
shareholders, as there is not sufficient stock available to execute the plan.
The shares held by existing shareholders will be diluted to the extent that
new stock is issued. There can be no assurance that the Company will be able
to raise these additional funds and failure to do so may have a material adverse
impact on the Company's business and operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not currently involved in any legal proceedings.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
None
B. Reports on Form 8-K
The Company did not file any reports on Form 8-K during this quarter.
12
Signatures
Pursuant to the requirements 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
Date: November 7, 2002
By: /s/William C. Wimer
---------------
William C. Wimer
Vice President, Operations and
Chief Financial Officer
13