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, 2004
-------------------------.
Commission file number 0-17080
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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.)
2320 East North Street-Suite GG, Greenville, SC 29607
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(Address of principal executive offices)
(Zip Code)
(978) 887-5608
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(Registrant's telephone number, including area code)
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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
----- -----
Indicate by check mark whether the registrant is an accelerated filer(as
defined in Rule 12b-2 of the Act). Yes No X
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There were 9,891,918 shares of common stock, no par value, outstanding at
November 1, 2004
1
UNITRONIX CORPORATION
INDEX
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Page Number
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Part I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited)
Balance Sheets-
September 30, 2004 and June 30, 2004 3
Statements of Income -
Three Months Ended September 30, 2004 and 2003 4
Statement of Changes in Stockholders' Deficit-
Three Months Ended September 30, 2004 5
Statements of Cash Flows -
Three Months Ended September 30, 2004 and 2003 6
Notes to Financial Statements 7
Item 2:
Management's Discussion and Analysis of Results of 12
Operations and Financial Condition for the Three Months
Ended September 30, 2004
Item 4:
Controls and Procedures 13
Part II. OTHER INFORMATION 13
Signatures 14
2
UNITRONIX CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
September 30,
2004 June 30,
(Unaudited) 2004 (1)
ASSETS ----------- --------
CURRENT ASSETS:
Cash $ 4,132 $ (1,212)
Accounts receivable, net of allowance for doubtful
accounts of $340 at September 30 and June 30, 2004 5,801 14,420
Prepaid expenses and other current assets 2,047 2,234
--------- ---------
TOTAL CURRENT ASSETS 11,980 15,442
Property and equipment, at cost less accumulated
depreciation of $287,187 at September 30 and
June 30, 2004, respectively - -
Other assets 4,302 4,302
---------- -------
TOTAL ASSETS $16,282 $19,744
========= ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable - related parties $ 199,727 $ 122,000
Notes payable 2,075 2,975
Accounts payable 134,569 140,334
Accrued expenses 19,582 19,693
Deferred revenue 15,586 20,916
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TOTAL CURRENT LIABILITIES 371,539 305,918
--------- ---------
Long-term notes payable - related parties 159,000 159,000
Long-term debentures, 10% convertible nonvoting;
noncallable, held by related parties, due June 30,
2008 1,073,206 1,047,031
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,
2004, plus undeclared accumulated dividends of
$229,616 at September 30, and June 30, 2004 1,186,344 1,186,344
STOCKHOLDERS' DEFICIT:
Common stock, no par value; authorized 100,000,000
shares; 9,891,918 shares issued and outstanding
at September 30 and June 30, 2004 3,526,263 3,526,263
Additional paid-in capital 3,988 3,988
Accumulated deficit (6,304,058) (6,208,800)
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT (2,773,807) (2,678,549)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $16,282 $19,744
========= ========
(1) Derived from audited financial statements.
See accompanying notes to financial statements.
3
UNITRONIX CORPORATION
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
September 30,
2004 2003
------ ------
REVENUE:
PRAXA software related services $21,397 $32,079
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TOTAL REVENUE 21,397 32,079
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COSTS AND EXPENSES:
Cost of PRAXA related services 16,033 23,956
Mineral exploration project expense 63,235 49,007
General and administrative 11,211 28,633
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TOTAL COSTS AND EXPENSES 90,479 101,596
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(LOSS) FROM OPERATIONS (69,082) (69,517)
INTEREST INCOME (EXPENSE), NET (26,176) (23,711)
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(LOSS) BEFORE INCOME TAXES (95,258) (93,228)
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PROVISION FOR INCOME TAXES - -
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NET (LOSS) $(95,258) $(93,228)
======= =======
Basic and diluted net (loss) per share $(0.01) $(0.01)
======= =======
Shares used in computing basic and
diluted net (loss) per share 9,891,918 9,836,918
======= =======
See notes to financial statements.
4
UNITRONIX CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(Unaudited)
For the Three Months Ended September 30, 2004
Common Stock
-------------- Additional
Shares Paid-in Accumulated Stockholders'
Issued Amount Capital Deficit Deficit
------ ------ ------- ------- -------
Balance,
June 30, 2004 9,891,918 $3,526,263 $3,988 $(6,208,800) $(2,678,549)
Net (loss) (95,258) (95,258)
--------- --------- ------ ---------- -----------
Balance,
September 30, 2004 9,891,918 $3,526,263 $3,988 $(6,304,058) $(2,773,807)
========= ========= ====== =========== ===========
See notes to financial statements.
5
UNITRONIX CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended September 30,
--------------------------------
2004 2003
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(95,258) $(93,228)
Adjustments to reconcile net income (loss)to net
cash provided (used) by operating activities:
Depreciation and amortization - -
Decreases (increases) in operating assets:
Accounts receivable 8,619 15,501
Prepaid expenses and other current assets 187 8,355
Increases (decreases) in operating liabilities:
Accounts payable (5,765) 48,378
Accrued expenses (111) (1,689)
Accrued interest - -
Deferred revenue (5,330) (2,157)
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Net cash provided (used) by operating activities (97,658) (24,840)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 103,902 35,714
Repayments of borrowings (900) -
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Net cash provided by financing activities 103,002 35,714
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Net increase (decrease) in cash 5,344 10,874
Cash at beginning of period (1,212) 1,306
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Cash at end of period $4,132 $12,180
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest - -
Taxes - -
See notes to financial statements.
6
UNITRONIX CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies:
------------------------------------------
Basis of Presentation
- ---------------------
The consolidated financial statements include the accounts of Unitronix Corp-
oration and its wholly owned subsidiaries, 3936449 Canada, Inc. and 1522923
Ontario, Inc. which does business as Unitronix Mining and Exploration. All
significant inter-company accounts and transactions have been eliminated.
Unitronix Corporation ("the Company") focuses on developing products and serv-
ices for the mineral exploration and mining industries and, through two wholly
owned subsidiaries, on mineral exploration activities. The mineral exploration
products and services business segment consists of the business of the Company's
former majority owned subsidiary, Interactive Mining Technologies, LLC, which
had partially developed a mineral potential analysis software tool ("the tool"),
which the Company continued to develop and test. The Company's mineral explor-
ation subsidiaries use the tool to identify mining properties that may be of
value for joint ventures or sale. Although marketing of the tool, now named
Geo-Sleuth, has not commenced, Unitronix Mining and Exploration ("the Explor-
ation Company") staked claims to 143 units in the Sturgeon Lake area of Ontario
and an area to the Northwest that Geo-Sleuth identified as meriting further
examination.
Five investors, two of which are the Company's major shareholders, were granted
an 80% interest in the net income from 82 of the Sturgeon Lake claims and an 80%
interest in the ownership of 61 claims staked in an area Northwest of the
Sturgeon Lake camp in exchange for loans of $129,000 to the Exploration Company.
The funds were used to pay expenses previously incurred in developing and
testing Geo-Sleuth, to pay the costs of staking the claims to several of the
Sturgeon Lake properties, and to pay for professional services associated with
the exploration project. Subsequently, the Company's two major shareholders
loaned an additional $30,000 to the Exploration Company to pay the costs of
staking 240 additional units that are contiguous to the previously staked units,
as recommended by the consulting geologists associated with the exploration
project. The shareholders were granted a 75% interest in the 240 units in
exchange for the loans. The same two shareholders also provided $122,000 in
short term loans to the Exploration Company to fund exploration project
activities.
The Company and the Exploration Company have agreements with Noranda Incorp-
orated ("Noranda") and Inmet Mining Corporation ("Inmet"), both of which are
international mining companies, that allow the Exploration Company to purchase
the mineral rights to certain properties that are adjacent to or near the
claims staked by the Exploration Company in the Sturgeon Lake camp in 2002. The
obligations and rights of the Company and the Exploration Company in satisfying
these agreements are more fully delineated in the Annual Report on Form 10-K for
the Fiscal Year Ended June 30, 2003, that the Company filed with the U.S.
Securities and Exchange Commission
As of April 30, 2004, the Company and the Exploration Company reported to
Noranda and Inmet a short fall of required earn-in work expenditures as per the
purchase agreements. The agreements required that the Company and the Explor-
ation Company complete in the first year at least $500,000 and $100,000 in
exploration work on the Noranda and Inmet properties respectively. Because
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UNITRONIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. continued
planned winter geophysical and drill testing programs for the properties were
not carried out as equipment and personnel were not available, approximate
unaudited expenditures of $100,000 and $50,000 were incurred on the Noranda and
Inmet projects . Noranda and Inmet have agreed to amend the earn-in purchase
obligations and requirements of the agreements to keep the agreements in good
standing but still require that final aggregate earn-in work expenditures on or
before April 30, 2006, remain at $2,500,000 and $1,000,000 for the Noranda and
Inmet property purchases respectively.
If Unitronix Exploration acquires the rights to the Noranda properties, Noranda
will be entitled to a 1% NSR production royalty. If Unitronix Exploration
acquires the rights to the Inmet properties, Inmet will be entitled to a 2% NSR
production royalty. Both agreements provide for reacquisition of 51% interest
in the properties by the option grantors if they expend at least 200% of the
amounts expended by Unitronix Exploration for further exploration and develop-
ment of the properties, in which case the NSR royalties would no longer be
applicable.
Unitronix Exploration has also been actively conducting an exploration program
on claims staked Northwest of the Sturgeon Lake camp. These properties were
staked as a result of findings from the use of the Geo-Sleuth mineral potential
analysis tool. To date, management has determined that the program results
warrant a significant increase in staking of claims and the optioning of
staked claims from two other parties in the area of interest.
The Company has historically been in the business of licensing its PRAXA manu-
facturing 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 continues to negotiate with Applied Business Systems regarding the use
of PRAXA as the basis for a new system, but on terms that would result in the
Company financing the remainder of the development program and retaining a
controlling interest in the new product. No guarantee can be given that negot-
iations will succeed, that the potential market will warrant the cost of the
undertaking or that funds will be available to finance the project. Previous
attempts to sell the PRAXA business segment have not succeeded, so the Company
will dispose of the business at a future date.
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 $359,559, notes payable to its principal shareholders of
$291,000 and convertible debentures payable that mature in 2008 of $1,073,206,
as of September 30, 2004. Management believes that additional financing is
needed to sustain the Company's operations and repay the notes and the debent-
ures. Management also believes that future income from the mining claims owned
8
UNITRONIX CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1 continued
by the Exploration Company and the claims that may be purchased from Noranda and
Inmet may eventually provide it with the means to generate revenues sufficient
to sustain its operations and repay its debt.
The Company plans to raise additional funds from new and existing investors by
selling shares in its Unitronix Exploration Company. There can be no assurance
that the Company will succeed in obtaining the financing needed 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, 2004 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,
------------------
2004 2003
Numerator: ---- ----
Net (loss) $(95,258) $(93,228)
Preferred dividend 0 0
-------- -------
(Loss) available to common shareholders $(95,258) $(93,228)
======== =======
Denominator:
Weighted average number of shares issued
and outstanding 9,891,918 9,836,918
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 - -
Assumed conversion of convertible debentures - -
--------- ---------
Total shares 9,891,918 9,836,918
========= ==========
Basic and diluted net (loss) per share $(0.01) $(0.01)
========= =========
9
UNITRONIX CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. 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 and
convertible debentures 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 3,837,722, the number
of potential shares resulting from the exercise of convertible preferred stock
was 956,728 and the number of potential shares resulting from the exercise
of convertible debentures was 2,146,412 at September 30, 2004.
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,
2004 and 2003 is presented below.
Three Months Ended
September 30,
------------------
2004 2003
---- ----
Manufacturing software licenses
and related services:
Revenue $21,397 $32,079
Costs and expenses 16,033 23,956
-------- -------
Income (loss) for segment 5,364 8,123
-------- -------
Mineral exploration products
and services:
Revenue - -
Costs and expenses - -
-------- -------
Income for segment - -
-------- -------
Mineral exploration activities:
Revenue - -
Costs and expenses 74,446 77,640
-------- -------
Income for segment (74,446) (77,640)
-------- -------
Total income (loss) for segments $(69,082) $(69,517)
======== =======
10
UNITRONIX CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. Related Party Transactions
--------------------------
During the quarter ended September 30, 2004, the Company's major shareholders
loaned $10,000 to the Company to fund administrative expenses and the Company's
Chief Executive Officer loaned approximately $68,000 to the Exploration Company
to fund exploration project activities.
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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,
2004.
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, 2004, Compared to the First Quarter Ended
- ---------------------------------------------------------------------------
September 30, 2003
- ------------------
Revenue for the period ended September 30, 2004, decreased by 33% from the like
period in 2003. The only revenue realized in both quarterly periods was from
PRAXA related services. PRAXA customers are continuing to migrate to more
current manufacturing management software, resulting in decreased demand for
support services. Management 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 mineral exploration project and
the exploration products and services business sectors have not generated
any revenue to date, and it cannot be projected with any certainty when and if
these business sectors may generate revenue.
The cost of providing the PRAXA related services decreased by 33% from the
quarter ended September 30, 2003 to the quarter ended September 30, 2004,
which was in line with the decrease in revenue from this sector. No develop-
ment costs for the Geo-Sleuth software and no selling expenses were incurred in
the first quarter for either year. Mineral exploration project expenses
incurred by the Exploration Company increased by 29% from the 2003 period to the
2004 period, because of costs associated with the ongoing exploration activities
in the Sturgeon Lake area. General and administrative expenses were 60% lower
in the 2004 period than in the 2003 period. The decrease of 11% in total costs
and expenses and the 33% decrease in revenues from the period ended September
30, 2003, to the period ended September 30, 2004, resulted in a minor decrease
in the loss from operations in the 2004 period.
12
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, 2004, the working capital deficit was $359,559 as compared
to a deficit of $290,476 at June 30, 2004. The increased deficit is due to
lower accounts receivable and higher notes payable.
Management projects that capital from sources other than operations will be
needed to further assess the mineral potential of the properties that the
Company's subsidiaries have staked and optioned and may identify in the future
as being worthy of further investigation. The Company anticipates raising this
capital through the sale of stock in its Unitronix Exploration subsidiary.
There can be no assurance that the Company will be able to raise additional
funds and failure to do so may have a material adverse impact on the Company's
business and operations.
Item 4. Controls and Procedures
-----------------------
(a) Evaluation of disclosure controls and procedures. Our chief executive
officer and our chief financial officer, after evaluating the effectiveness
of the Company's "disclosure controls and procedures" (as defined in the
Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of a date
(the "Evaluation Date") within 90 days before the filing date of this quarterly
report, have concluded that as of the Evaluation Date our disclosure controls
and procedures were adequate and designed to ensure that material information
relating to us and our consolidated subsidiaries would be made known to them by
others within those entities.
(b) Changes in internal controls. There were no significant changes in our
internal controls or to our knowledge, in other factors that could signif-
icantly affect our disclosure controls and procedures subsequent to the
Evaluation Date.
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.
13
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 12, 2004
By: /s/William C. Wimer
-------------------
William C. Wimer
Vice President of Operations and
Chief Financial Officer
14