SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended March 31, 2003
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________ .
Commission file number: 001-15777
Unitrend, Inc.
(Exact name of registrant as specified in its charter)
Nevada 34-1904923
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
4665 West Bancroft St.
Toledo, Ohio 43615
(Address of principal executive offices, including zip code)
(419) 536-2090
(Registrant's telephone number, including area code)
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 [ ]
Number of shares of registrant's common stock outstanding as of March 31, 2003:
70,371,770
UNITREND, INC. AND SUBSIDIARY
FORM 10-QSB
QUARTER ENDED MARCH 31, 2003
Table of Contents
PART I FINANCIAL INFORMATION Page
Item 1. Condensed Financial Statements
Condensed Balance Sheets at March 31, 2003 And December 31, 2002.. 3
Condensed Statements of Operations for the three months
ended March 31, 2003, 2002 and for the period from September
27, 1994 (date of inception) to March 31, 2003.................... 4
Condensed Statements of Cash Flows for the three months ended
March 31, 2003, 2002 and for the period from September 27,
1994 (date of inception) to March 31, 2003........................ 5
Statements of Stockholders' Equity for the three months ended
March 31, 2003 and for the years ended December 31, 2002 and 2001. 6
Notes to Condensed Financial Statements......................... 7-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 8-10
PART II OTHER INFORMATION
Item 1. Legal Proceedings............................................... 10
Item 2. Changes In Securities And Use Of Proceeds....................... 10
Item 3. Defaults Upon Senior Securities................................. 10
Item 4. Submission Of Matters To A Vote Of Security Holders............. 10
Item 5. Other Information............................................... 10
Item 6. Exhibit......................................................... 10
Signatures...................................................... 11
This quarterly report on Form 10-QSB is for the three months ended March 31,2002
This quarterly report modifies and supersedes documents filed prior to this
quarterly report. The Securities and Exchange Commission (SEC) allows us to
"incorporate by reference" information that we file with them, which means that
we can disclose important information to you by referring you directly to those
documents. Information incorporated by reference is considered to be part of
this quarterly report. In addition, information that we file with the SEC in
the future will automatically update and supersede information contained in this
quarterly report. In this quarterly report, "Unitrend," "we," "us" and "our"
refer to Unitrend, Inc.
You should carefully review the information contained in this quarterly report
and in other reports or documents that we file from time to time with the SEC.
In this quarterly report, we state our beliefs of future events and of our
future financial performance. In some cases, you can identify those so-called
"forward-looking statements" by words such as "may," "will," "should," "expects"
"plans," "anticipates," "believes," "estimates," "predicts," "potential," or
"continue" or the negative of those words and other comparable words. You should
be aware that those statements are only our predictions. Actual events or
results may differ materially. In evaluating those statements, you should
specifically consider various factors, including the risks outlined below.
Those factors may cause our actual results to differ materially from any of our
forward-looking statements.
Part I. Financial Information
Item I. Condensed Financial Statements
UNITREND, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
(unaudited) (unaudited)
March 31, 2003 December 31,2002
---------------- ----------------
CURRENT ASSETS
Cash $ 72 $ 52
---------------- ----------------
PROPERTY AND EQUIPMENT, at cost
Land 67,485 67,485
Building and improvements 351,168 351,168
Furniture and fixtures 65,266 65,266
Computer equipment 151,055 151,055
Computer software 46,719 46,719
Automobiles 15,937 15,937
Tooling and dies under construction 1,469,429 1,469,429
---------------- ----------------
2,167,059 2,167,059
Less accumulated depreciation (279,009) (273,925)
---------------- ----------------
Net property and equipment 1,888,050 1,893,134
---------------- ----------------
OTHER ASSETS
Patent licensing costs,
net of accumulated amortization 24,414 24,942
Loan costs, net of accumulated amortization 272 545
---------------- ----------------
Total other assets 24,686 25,487
---------------- ----------------
TOTAL ASSETS $ 1,912,808 $ 1,918,673
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITES
Accounts payable $ 629,105 $ 624,954
Current portion of note payable 209,410 211,313
Accrued expenses 1,353,196 1,314,288
---------------- ----------------
Total current liabilities 2,191,711 2,150,555
---------------- ----------------
NOTES PAYABLE - RELATED PARTIES 140,867 99,145
---------------- ----------------
STOCKHOLDERS' EQUITY
Common stock, no par value 3,795,598 3,795,598
Additional paid-in capital 8,023,695 8,023,695
Deficit accumulated in the development stage
(12,239,062) (12,150,321)
---------------- ----------------
Total stockholders' equity (419,769) (331,028)
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 1,912,808 $ 1,918,673
================ ================
UNITREND, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS (UNAUDITED)
(unaudited)
(unaudited) (unaudited) September 27, 1994
Three Months Ended Three Months Ended (Date of Inception)
March 31, 2003 March 31, 2002 to March 31, 2003
---------------- ---------------- ----------------
Sales $ - $ - $ 603
Research and development expenses (24,000) - (553,943)
Selling, general and administrative expenses (58,434) (62,993) (11,371,703)
---------------- ---------------- ----------------
Operating loss (82,434) (62,993) (11,925,043)
Interest income - - 1,546
Interest expense (6,307) (6,869) (291,597)
---------------- ---------------- ----------------
Net loss before cumulative effect of change
in accounting principle (88,741) (69,862) (12,215,094)
Cumulative effect of change in accounting principle - - (23,968)
---------------- ---------------- ----------------
Net loss $ (88,741) $ (69,862) $ (12,239,062)
================ ================ ================
Basic and diluted loss per share:
Before cumulative effect of change in
accounting principle $ (0.00) $ (0.00) $ (0.18)
Cumulative effect of change in
accounting principle - - -
---------------- ---------------- ----------------
Net loss $ (0.00) $ (0.00) $ (0.18)
================ ================ ================
Weighted average shares outstanding used to
compute basic and diluted loss per share 70,371,770 69,895,580 66,927,991
================ ================ ================
UNITREND, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(unaudited)
(unaudited) (unaudited) September 27, 1994
Three Months Ended Three Months Ended (Date Of Inception)
March 31, 2003 March 31, 2002 to March 31, 2003
---------------- ---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (88,741) $ (69,862) $ (12,239,062)
---------------- ---------------- ----------------
Adjustments to reconcile net loss to
net cash used in operating activities:
Change in accounting principle - - 23,968
Options issued for services - - 5,326,989
Depreciation & amortization 5,885 7,385 317,266
Loss on disposal of property
and equipment - - 12,893
Bad debt - - 42,157
Accrued interest income - - (3,091)
Common stock issued for services - - 10,000
Increase in operating liabilities:
Accounts payable 4,151 30,458 629,105
Accrued expenses 38,908 2,146 1,423,138
---------------- ---------------- ----------------
Total adjustments 48,944 39,989 7,782,425
---------------- ---------------- ----------------
Net cash used in operating activities (39,797) (29,873) (4,456,637)
---------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for patent licensing costs - - (31,723)
Purchase of property and equipment - - (2,210,464)
Proceeds from sale of property and
equipment - - 10,941
Loans to related parties - - (18,191)
Loans to other entities - - (23,916)
Repayment from employee - - 3,041
Payment of organizational cost - - (30,168)
---------------- ---------------- ----------------
Net cash provided by (used in )
investing activities - - (2,300,480)
---------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of loan costs - - (5,448)
Loans from stockholder 41,720 34,543 2,800,814
Proceeds from note payable - - 290,000
Payment on note payable (1,903) (4,833) (80,590)
Proceeds from sale of common stock
and exercise of stock options - - 2,619,563
Payments for stock recissions - - (134,170)
Sale of stock subject to recission
for cash - - 1,267,020
---------------- ---------------- ----------------
Net cash provided by financing
activities 39,817 29,710 6,757,189
---------------- ---------------- ----------------
Net increase (decrease) in cash 20 (163) 72
Cash - beginning of period 52 235 -
---------------- ---------------- ----------------
Cash - end of period $ 72 $ 72 $ 72
================ ================ ================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the period
Interest $ 2,097 $ 4,623 $ 143,912
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
The President/Majority Stockholder exercised 476,190 options to purchase stock,
during the period ended March 31, 2002, at a price of $0.50 per share by
forgiving debt of $238,095.
UNITREND, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Three Months Ended March 31, 2003
And For the Year Ended December 31, 2002 and 2001
(unaudited)
Deficit
Accumulated
Common Stock Additional During the
---------------- Paid-in Development
Shares Amount Capital Stage Total
---------- ---------- ---------- ------------- ----------
BALANCE -
DECEMBER 31, 2000 69,895,580 3,557,503 8,023,695 (10,667,395) 913,803
Net loss - 2001 - - - (431,989) (431,989)
---------- ---------- ---------- ------------- -----------
BALANCE -
DECEMBER 31, 2001 69,895,580 $3,557,503 $8,023,695 $(11,099,384) $ 481,814
Majority stockholder
exercised options
at $0.50 per share
on January 22, 2002 476,190 238,095 - - 238,095
Net loss - 2002 - - - (1,050,937) (1,050,937)
---------- ---------- ---------- ------------- -----------
BALANCE -
DECEMBER 31, 2002 70,371,770 3,795,598 8,023,695 (12,150,321) (331,028)
========== ========== ========== ============= ===========
Net loss for the
period ended March
31, 2003 - - - (88,741) (88,741)
---------- ---------- ---------- ------------- -----------
BALANCE -
MARCH 31, 2003 70,371,770 $3,795,598 $8,023,695 $(12,239,062) $ (419,769)
========== ========== ========== ============= ===========
UNITREND, INC.
FORM 10-Q SB
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
BASIS OF PRESENTATION
The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are adequate
to make the information presented not misleading.
The unaudited condensed financial statements included herein reflect all
adjustments (which include only normal, recurring adjustments) that are, in the
opinion of management, necessary to state fairly the results for the three month
period ended March 31, 2003. The results for the three month period ended March
31, 2003 are not necessarily indicative of the results expected for the full
fiscal year.
NATURE AND SCOPE OF BUSINESS
Unitrend, Inc. (the Company) a Nevada corporation as of January, 1999, formerly
an Ohio corporation, is a development stage company formed to produce computer
enclosures, power supplies and related products for a national market. The
Company was incorporated on April 11, 1996 as Versa Case, Inc. On May 15, 1996,
the Company changed its name to Unitrend, Inc. The Company's operations to date
have consisted primarily of incidental sales of computer components while the
company personnel have concentrated on the development of its products. To date,
the Company has been issued seven United States patents with three patent
applications pending. The VersaCase patent alone was valued at $9,478,000 by
Robinwood Consulting, an independent firm experienced in the valuation of
intellectual property. We also have five registered trademarks and service
marks. As of March 31, 2003, expenses incurred have been primarily for
administrative support, tooling and product development of the enclosures that
will ultimately be sold, which has resulted in an accumulated deficit in the
development stage of approximately $12,239,000.
On April 16, 1998, the Company formed Osborne Manufacturing, Inc. (OMI) to
produce the Company's products. In 2002, OMI was dissolved because management
now believes that it could save time and money by entering into a contract with
New Product Innovations, Inc. (NPI) to provide turnkey manufacturing of its
product line. NPI is a joint venture between General Electric (GE) and Fitch,
Inc. NPI along with Fitch will complete product development, obtain agency
approvals, engage in product positioning and manufacturing development.
The Company merged with Server Systems Technology, Inc. (SSTI) effective
December 15, 1998. SSTI was the predecessor to the Company and was formed
September 27, 1994. It owns several patents that are key to the Company's
products, but otherwise has ceased its development stage operations when the
Company was formed in April, 1996. SSTI is a related party to the Company since
the two entities have common stockholders.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from these estimates.
RELATED PARTY PAYABLE
There were unsecured notes payable to the President/majority stockholder,
including interest at prime on the first business day of the year, payable in
ten equal installments after the Company is profitable for one year. As of
March 31, 2003 and December 31, 2002, the outstanding balance of the note
Payable to the President/majority stockholder was $140,867 and $99,145,
respectively. On March 31, 2000, our President/majority stockholder forgave
loans to the Company of $2,171,854 and accrued interest of $69,942. The
forgiveness was accounted for as contributed capital.
NEW ACCOUNTING PRONOUNCEMENTS
In April 2003, the Financial Accounting Standards Board issued Statement Number
149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. This Statement amends Statement 133 for decisions made (1) as part
of the Derivatives Implementation Group process that effectively required
amendments to Statement 133, (2) in connection with other Board projects dealing
with financial instruments, and (3) in connection with implementation issues
raised in relation to the application of the definition of a derivative, in
particular, the meaning of an initial net investment that is smaller than would
be required for other types of contracts that would be expected to have a
similar response to changes in market factors, the meaning of underlying, and
the characteristics of a derivative that contains financing components. The
Statement is effective for contracts entered into or modified after June 30,
2003, except as stated below and for hedging relationships designated after June
30, 2003. Management believes that the Statement will not have any impact since
the Company has not entered into any derivative contracts at the present time.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS - FIRST THREE MONTHS OF 2003 COMPARED TO FIRST THREE
MONTHS OF 2002
The Company did not have revenues during the three months ended March 31, 2003
nor during the three months ended March 31, 2002. We expect to begin producing
and selling the Cablety in the second quarter 2003 and the Stable power supply
and VersaCase later in 2003.
We had an operating loss of $82,434 during the three months ended March 31, 2003
as compared to an operating loss of $62,993 during the three months ended March
31, 2002, an increase of 31%. As discussed below, this operating loss increased
primarily because of research and development expenses.
The Company had $24,000 in research and development expenses during the three
months ended March 31, 2003 as compared to zero for the three months ended March
31, 2002. We believe that research and development expenses will increase as we
go forward due to the contract entered into with New Product Innovations, Inc.
(NPI) to provide turnkey manufacturing of our product line. NPI along with
Fitch, Inc. will complete product development, obtain agency approvals, engage
in product positioning and manufacturing development. We anticipate this
spending to continue to increase as we prepare for the final product development
and production of the Cablety, our first product due to reach the market, in the
second quarter of 2003.
Selling, general and administrative expenses decreased to $58,434 during the
three months ended March 31, 2003 as compared to $62,993 during the three months
ended March 31, 2002, a decrease of 7%. We had an increase of approximately
$40,100 in payroll expense as compared to the same time period in 2002. The
decrease in selling, general and administrative expenses was due primarily to a
decrease in professional fees and consulting expense of approximately $28,500
during the three months ended March 31, 2003 as compared to the three months
ended March 31, 2002. Other significant decreases in insurance expense,
contract labor costs and telephone expense were approximately $2,500, $2,400 and
$2,300, respectively.
There were no stock options granted to non-employees during the three months
ended March 31, 2003 or during the three months ended March 31, 2002.
Accounts payable increased to $629,105 for the three months ended March 31, 2003
compared to $624,954 at years end December 31, 2002. Accrued payroll and
related taxes increased to $1,022,951 at March 31, 2002 as compared to $982,808
as years end December 31, 2002 respectively. The Company notified its employees
on January 1, 2001 that due to its financial condition, payment of wages would
cease for an undetermined amount of time. In 2002, the Company decided that
payroll would resume. Our interest expense for the three months ended March 31,
2003 was $6,307 as compared to $6,869 from the same time period last year. This
expense was fairly consistent with the previous time period.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily through public
and private sales of equity securities, as well as through loans from its
President/majority stockholder, Conrad A.H. Jelinger. As of March 31, 2003, the
Company's cash totaled $72. Loans from Mr. Jelinger during the three months
ended March 31, 2003 totaled $41,720. On March 31, 2000, our President/majority
stockholder forgave loans to the Company of $2,171,854 and accrued interest of
$69,942. This was accounted for as contributed capital.
Primary uses of cash for the three months ended March 31, 2003 included $39,797
for the Company's operations and working capital requirements.
Our future capital requirements will depend upon numerous factors, including the
amount of revenues generated from operations, the cost of our sales and
marketing activities and the progress of our research and development
activities, none of which can be predicted with certainty. In December, 2000,
the company filed an SB-2 registration statement with the Securities and
Exchange Commission to register 4,000,000 shares of common stock, at $10.00 per
share in a "Best Efforts" offering. The filing was declared effective on
December 28, 2000. The purpose of the offering was to raise sufficient funds to
enable the company to commence manufacturing of its VersaCase product.
Ultimately, the company did not receive sufficient subscriptions to enable to
commence manufacturing operations and the offering terminated with all funds
returned to subscribers. Currently, the company plans to raise sufficient funds
through the advancement of monies by its founder and through a private
placement. The company has enlisted the aid of an outside consulting firm that
will attempt to secure the necessary funding needed to meet the new financial
obligations associated with the contract recently signed with New Product
Innovations, Inc. regarding product development and out-source manufacturing.
While funds advanced and raised from the founder and the outside consulting firm
may enable the company to continue product development and commence out-source
manufacturing, we cannot be certain that the founder will continue to fund our
capital needs. Consequently, we may seek additional funding during the next 24
months through a post effective amendment to the SB-2 registration statement.
There can be no assurance that any additional financing will be available on
acceptable terms, if required. Moreover, if additional financing is not
available, we could be required to reduce or suspend our operations, seek an
acquisition partner or sell securities on terms that may be highly dilutive or
otherwise disadvantageous to existing investors, or investors purchasing stock
offered in the anticipated secondary offering. In the event that neither of the
capital-raising mechanisms described above result in timely usable proceeds to
the Company, we may have a serious shortfall of working capital. We have
experienced in the past, and may continue to experience, operational
difficulties and delays in product development due to working capital
constraints. Any such difficulties or delays could have a material adverse
effect on our business, financial condition and results of operations.
OUTLOOK
The outlook section contains a number of forward-looking statements, all of
which are based on current expectations. Actual results may differ materially.
Our growth strategy is built around five imperatives: maintaining technology
leadership; increasing market share; acquiring other business entities;
leveraging strategic relationships; and the recruiting and retaining of key
personnel.
MAINTAINING TECHNOLOGY LEADERSHIP. The cutting edge of our effort to achieve
technological leadership is to establish a standard for open architecture and
modularity in the computer enclosure industry. Other components, accessories,
and products are in various stages of development. They will be supported by
an aggressive research and development budget.
INCREASING MARKET SHARE. Our entry into the market is estimated at a modest
level to allow us to grow at a reasonable pace. However, we make no
representations or guarantees that we will be able to manage the growth of our
business. Once VersaCase is introduced, we expect that there will be significant
interest across a number of market segments. The VersaCase is unparalleled in
its versatile application as a PC or server enclosure. The ease of access and
scalability will provide numerous benefits to routine and mission-critical users
that will propel and increase market share.
ACQUIRING OTHER BUSINESS ENTITIES. In order to expand our technological and
market capabilities, we may consider the pursuit of other companies. Such
acquisitions may include core and non-core entities. A core entity may be a
research and development group, and a non-core firm could be one that might
enhance our production process.
LEVERAGING STRATEGIC RELATIONSHIPS. We intend to leverage our relationship
with companies that complement our mission. For instance, the uniqueness of
VersaCase technology will create opportunities for us to establish strong
relationships with key distributors. These distributors will be able to offer
their clients a product that is very competitive and distinctive. We have been
approached by distributors to consider a channel relationship or exclusive
position with them. While we must maintain a broader market focus, we may
selectively enter into agreements that would enhance market credibility and
penetration.
RECRUITING AND RETAINING OF KEY PERSONNEL. An entrepreneurial spirit that was
based in creativity, risk and reward drove the birth of this company. We intend
to maintain this quality by offering competitive salary and incentive
compensation. Our overriding human resources philosophy is to build a corporate
culture that supports the success of each employee, as well as the company.
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes In Securities And Use Of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission Of Matters To A Vote Of Security Holders
Not Applicable
Item 5. Other Information
None
Item 6. Exhibit
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Unitrend,
Inc. has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
UNITREND, INC.
Dated: May 12, 2003 By: /S/ CONRAD A.H. JELINGER:
_________________________
Conrad A.H. Jelinger
Chief Executive Officer,
Interim Chief Financial Officer
and President