SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended September 30, 2004
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 September 30, 2004: 70,390,770
UNITREND, INC.
FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 2004
Table of Contents
PART I FINANCIAL INFORMATION Page
Item 1. Condensed Financial Statements
Condensed Balance Sheets at September 30, 2004 and December 31,
2003............................................................ 3
Condensed Statements of Operations for the three and nine months
ended September 30, 2004, 2003 and for the period from September
27, 1994 (date of inception) to September 30, 2004.............. 4
Condensed Statements of Cash Flows for the nine months ended
September 30, 2004, 2003 and for the period from September 27,
1994 (date of inception) to September 30, 2004.................. 5
Statements of Stockholders' Equity for the nine months ended
September 30, 2004 and for the years ended December 31, 2003,
and 2002........................................................ 6
Notes to Condensed Financial Statements......................... 7-8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 8-12
PART II OTHER INFORMATION
Item 1. Legal Proceedings............................................... 12
Item 2. Changes In Securities And Use Of Proceeds....................... 12
Item 3. Defaults Upon Senior Securities................................. 12
Item 4. Submission Of Matters To A Vote Of Security Holders............. 12
Item 5. Other Information............................................... 12
Item 6. Exhibit......................................................... 12
Signatures...................................................... 12
This quarterly report on Form 10-QSB is for the three and nine months ended
September 30, 2004. This quarterly report modifies and supersedes documents
filed prior to this quarterly report. The Securities and Exchange Commission
(SEC) allows Unitrend to "incorporate by reference" information that is filed
with them, which means that Unitrend 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 will be filed 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 Unitrend files from time to time with the
SEC. In this quarterly report, Unitrend states Unitrend's beliefs of future
events and of Unitrend's 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 Unitrend's
predictions. Actual events or results may differ materially. In evaluating
those statements, you should specifically consider various factors, including
the risks outlined in this document. Those factors may cause Unitrend's actual
results to differ materially from any of Unitrend's forward-looking statements.
Part I. Financial Information
Item I. Condensed Financial Statements
UNITREND, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
(unaudited) (unaudited)
September 30, 2004 2003
---------------- ----------------
CURRENT ASSETS
Cash $ 1,597 $ 3,178
Accounts receivable 520 -
Inventory - Finished goods 5,957 10,651
---------------- ----------------
Total current assets 8,074 13,829
PROPERTY AND EQUIPMENT, at cost
Land 67,485 67,485
Building and improvements 351,168 351,168
Furniture and fixtures 65,496 65,496
Computer equipment 151,055 151,055
Computer software 46,719 46,719
Automobiles 15,937 15,937
Tooling and dies under construction 1,535,757 1,507,157
---------------- ----------------
2,233,617 2,205,017
Less accumulated depreciation (307,805) (294,261)
---------------- ----------------
Net property and equipment 1,925,812 1,910,756
---------------- ----------------
OTHER ASSETS
Patent licensing costs,
net of accumulated amortization 21,241 22,827
---------------- ----------------
TOTAL ASSETS $ 1,955,126 $ 1,947,412
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITES
Accounts payable $ 742,377 $ 623,626
Current portion of note payable 171,046 185,330
Accrued expenses 1,032,566 1,172,433
---------------- ----------------
Total current liabilities 1,945,989 1,981,390
---------------- ----------------
NOTES PAYABLE - RELATED PARTIES 14,531 -
---------------- ----------------
STOCKHOLDERS' EQUITY
Common stock, no par value 3,805,098 3,795,598
Additional paid-in capital 8,975,592 8,601,683
Deficit accumulated in the development stage (12,786,084) (12,431,259)
---------------- ----------------
Total stockholders' equity (5,394) (33,978)
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 1,955,126 $ 1,947,412
================ ================
UNITREND, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(unaudited)
(unaudited) (unaudited) (unaudited) (unaudited) September 27, 1994
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended (Date of Inception)
Sept 30, 2004 Sept 30, 2003 Sept 30, 2004 Sept 30, 2003 to Sept 30, 2004
---------------- ---------------- ---------------- ---------------- ----------------
Sales $ 5,036 $ - $ 5,786 $ - $ 6,472
Cost of Sales (4,439) - (6,643) - (7,653)
---------------- ---------------- ---------------- ---------------- ----------------
Gross Income/Loss 597 - (857) - (1,181)
Research and development
expenses - (12,258) - (36,258) (566,515)
Selling, general and
administrative expenses (96,188) (83,540) (342,995) (213,208) (11,874,905)
---------------- ---------------- ---------------- ---------------- ----------------
Operating loss (95,591) (95,798) (343,852) (249,466) (12,442,601)
Interest income - - - - 1,546
Interest expense (3,774) (10,278) (10,973) (28,940) (321,061)
---------------- ---------------- ---------------- ---------------- ----------------
Net loss before cumulative
effect of change in
accounting principle (99,365) (106,076) (354,825) (278,406) (12,762,116)
Cumulative effect of
change in accounting
principle - - - - (23,968)
---------------- ---------------- ---------------- ---------------- ----------------
Net loss $ (99,365) $ (106,076) $ (354,825) $ (278,406) $ (12,786,084)
================ ================ ================ ================ ================
Basic and diluted loss
per share:
Before cumulative effect
of change in accounting
principle $ (0.00) $ (0.00) $ (0.01) $ (0.00) $ (0.19)
Cumulative effect of change
in accounting principle - - - - -
---------------- ---------------- ---------------- ---------------- ----------------
Net loss $ (0.00) $ (0.00) $ (0.01) $ (0.00) $ (0.19)
================ ================ ================ ================ ================
Weighted average shares
outstanding used to compute
basic and diluted loss per
share 70,390,770 70,371,770 70,390,770 70,371,770 68,216,984
================ ================ ================ ================ ================
UNITREND, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(unaudited)
(unaudited) (unaudited) September 27, 1994
Nine Months Ended Nine Months Ended (Date Of Inception)
Sept 30, 2004 Sept 30, 2003 to Sept 30, 2004
---------------- ---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (354,825) $ (278,406) $ (12,786,084)
---------------- ---------------- ----------------
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 15,131 17,383 349,508
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 (decrease) in operating assets:
Accounts receivable (520) - (520)
Inventory 4,694 - (5,957)
Prepaid expenses - - -
Increase (decrease) in operating liabilities:
Accounts payable 118,751 21,306 742,377
Accrued expenses (139,867) 94,440 1,248,256
---------------- ---------------- ----------------
Total adjustments (1,811) 133,129 7,746,580
---------------- ---------------- ----------------
Net cash used in operating activities (356,636) (145,277) (5,039,504)
---------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for patent licensing costs - - (31,723)
Purchase of property and equipment (28,600) (31,556) (2,277,022)
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 (28,600) (31,556) (2,367,038)
---------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of loan costs - - (5,448)
Loans from stockholder 388,439 198,577 3,480,628
Proceeds from note payable - - 290,000
Payment on note payable (14,284) (21,150) (118,954)
Proceeds from sale of common stock
and exercise of stock options 9,500 - 2,629,063
Payments for stock recissions - - (134,170)
Sale of stock subject to recission
for cash - - 1,267,020
---------------- ---------------- ----------------
Net cash provided by financing
activities 383,655 177,427 7,408,139
---------------- ---------------- ----------------
Net increase (decrease) in cash (1,581) 594 1,597
Cash - beginning of period 3,178 52 -
---------------- ---------------- ----------------
Cash - end of period $ 1,597 $ 646 $ 1,597
================ ================ ================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the period
Interest $ 6,069 $ 16,975 $ 172,682
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
The President/Majority Stockholder forgave debt of $373,909 during the
period ended September 30, 2004.
UNITREND, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Nine Months Ended September 30, 2004
And For the Years Ended December 31, 2003 and 2002
(unaudited)
Deficit
Accumulated
Common Stock Additional During the
---------------- Paid-in Development
Shares Amount Capital Stage Total
---------- ---------- ---------- ------------- ----------
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)
Majority stockholder
forgives loans and
accrued salary on
December 31, 2003 577,988 577,988
Net loss - 2003 - - - (280,938) (280,938)
---------- ---------- ---------- ------------- -----------
BALANCE -
DECEMBER 31, 2003 70,371,770 3,795,598 8,601,683 (12,431,259) (33,978)
Exercise of stock
options at $0.50
per share on
January 14, 2004 19,000 9,500 - - 9,500
Majority stockholder
forgives loans on
March 31, 2004 - - 136,832 - 136,832
Majority stockholder
forgives loans on
June 30, 2004 - - 237,077 - 237,077
Net loss for the
period ended
September 30, 2004 - - - (354,825) (354,825)
---------- ---------- ---------- ------------- -----------
BALANCE -
SEPTEMBER 30, 2004 70,390,770 $3,805,098 $8,975,592 $(12,786,084) $ (5,394)
========== ========== ========== ============= ===========
UNITREND, INC.
FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 2004
NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
BASIS OF PRESENTATION
The condensed financial statements included herein have been prepared by
Unitrend, Inc., 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, Unitrend, Inc. 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 Unitrend's management, necessary to state fairly the results for the
three and nine month periods ended September 30, 2004. The results for the
three and nine month periods ended September 30, 2004 are not necessarily
indicative of the results expected for the full fiscal year.
NATURE AND SCOPE OF BUSINESS
Unitrend, Inc. (Unitrend) 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.
Unitrend, Inc. was incorporated on April 11, 1996 as Versa Case, Inc. On May
15, 1996, Versa Case, Inc. changed its name to Unitrend, Inc. Unitrend's
operations to date have consisted primarily of incidental sales of computer
components while Unitrend's personnel have concentrated on the development of
Unitrend's products. To date, Unitrend 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. Generally accepted accounting
principles do not allow Unitrend to record this valuation on the balance sheets,
Unitrend can only account for the direct costs involved in obtaining a patent.
Unitrend also has six registered trademarks and service marks. As of September
30, 2004, expenses incurred have been primarily for administrative support,
tooling and product development of the enclosures and power supplies that will
ultimately be sold and tooling, product development and inventory of the wire
management systems that are currently being sold, which has resulted in an
accumulated deficit in the development stage of approximately $12,786,000.
On April 16, 1998, Unitrend formed Osborne Manufacturing, Inc. (OMI) to produce
Unitrend's products. In 2002, OMI was dissolved because Unitrend's management
determined that it could save time and money by entering into a contract with
New Product Innovations, Inc. (NPI) to provide turnkey manufacturing of
Unitrend's 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.
Unitrend merged with Server Systems Technology, Inc. (SSTI) effective December
15, 1998. SSTI was the predecessor to Unitrend and was formed September 27,
1994. SSTI owns several patents that are key to Unitrend's products, but
otherwise SSTI had ceased development stage operations when Unitrend was formed
in April, 1996. SSTI is a related party to Unitrend since the two entities have
common stockholders.
In early 2003, research and development began on the Cablety wire management
system. Designs were finalized and a tool was built to produce the Cablety.
Production of the Cablety began late in the fourth quarter of 2003 and the
Cablety was made available for sale over Unitrend's new e-commerce site.
Unitrend had no significant sales, but anticipate sales to increase as Unitrend
moves forward and concentrates on marketing Unitrend's products. Unitrend hopes
to finalize any design changes to the VersaCase and Stable power supply in late
2004 and intends to produce these two products in the first half of 2005.
On March 1, 2004, Unitrend entered into a contract with Titan Technologies, an
established national sales and marketing group, to market and sell the Cablety,
VersaCase, Stable power supply and any future products developed by Unitrend.
The first product for sale is the Cablety and it will be marketed through
various channels including, but not limited to, value added re-sellers (VARs),
original equipment manufacturers (OEMs) and Internet sales. Unitrend will
modify distribution plans as demanded by the markets Unitrend serves in order to
maximize efficiency throughout all channels of distribution. In March 2004,
R & R Plastics began building two high volume production tools for the Cablety
with new industrial/military "Safety Wire" capabilities molded into it. This
tool was completed in June. Each tool is a four-cavity mold and together are
capable of producing 35,000 kits per week. Molding, assembly and distribution
of the Cablety components will be performed by a local outside vendor. In April
2004, Unitrend along with a representative from Titan Technologies participated
in RetailVision Spring 2004. RetailVision Spring 2004 is a trade show that
allows the manufacturer to sit face to face with potential retailers and
distributors in the computer industry. Unitrend presented to representatives
that comprise approximately 90% of the computer industry's manufacturers and/or
distributors. Positive results of this show include agreements signed with
Micro Center, Inc., TigerDirect.com, Zones, Inc. and Advanced Computer Products,
Inc. (ACP). Micro Center, Inc. offers a huge selection of competitively priced,
high-quality products, and a wealth of information to help customers make
informed buying decisions. Micro Center has twenty nationwide retail stores
along with an online retail site. Currently, the Cablety may be purchased at
www.microcenter.com. TigerDirect.com carries the world's largest selection of
computer components, making them the reseller of choice for the
"build-it-yourselfer." Zones, Inc. and their affiliates are single-source,
multi-vendor direct marketing resellers of name-brand information technology
products to the small to medium sized business market, enterprise and public
sector accounts and sells product through outbound and inbound call center
account executives, specialty print and e-catalogs, and the Internet. ACP is a
west coast based computer component retailer that has been in business for
twenty-six years. ACP is a worldwide wholesale distributor of new and used
computers, computer parts and peripherals. In the third quarter 2004, Unitrend
exhibited at the Zones Accessories Training Fair and at the Gartner System
Builders Summit.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires Unitrend's 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, which
accrue interest at prime on the first business day of the year, payable in ten
equal installments after Unitrend is profitable for one year. As of September
30, 2004 and December 31, 2003, the outstanding balances of the notes payable to
the President/majority stockholder were $14,531 and zero, respectively. On June
30, 2004 Unitrend's President/majority stockholder forgave loans to Unitrend of
$237,077. On March 31, 2004, Unitrend's President/majority stockholder forgave
loans to Unitrend of $136,832. The President/majority stockholder also forgave
debt of $432,240, accrued interest of $22,280 and accrued salary of $199,352
during the year ended December 31, 2003. On March 31, 2000, Unitrend's
President/majority stockholder forgave loans to Unitrend of $2,171,854 and
accrued interest of $69,942. The forgiveness was accounted for as contributed
capital.
NEW ACCOUNTING PRONOUNCEMENT
None
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS - THIRD QUARTER OF 2004 COMPARED TO THIRD QUARTER OF 2003
Unitrend had no significant revenues in the quarter ended September 30, 2004 or
in the quarter ended September 30, 2003. In the fourth quarter 2003, Unitrend
began to produce and sell the Cablety wire management system. Revenues were
modest during the third quarter of 2004 because Unitrend had just begun to
implement Unitrend's recently completed marketing program. This program will
include, but not be limited to, trade and consumer advertising, public relations
and trade shows. Unitrend anticipates not being classified as a development
stage enterprise sometime during late 2004.
Unitrend had an operating loss of $95,591 during the quarter ended September 30,
2004 as compared to an operating loss of $95,798 during the quarter ended
September 30, 2003, a decrease of 0.22%. This loss was consistent with the same
time period during the previous year.
Unitrend had zero in research and development expenses during the three months
ended September 30, 2004 as compared to $12,258 for the three months ended
September 30, 2003. Unitrend believes that research and development expenses
will increase as Unitrend goes forward due to a contract entered into with NPI
to provide turnkey manufacturing of Unitrend's product line. NPI along with
Fitch, Inc. will complete product development, obtain agency approvals, engage
in product positioning and manufacturing development. Unitrend anticipates this
spending to continue to increase as Unitrend continues to produce the Cablety,
the first product that was made available to the market in the fourth quarter of
2003 and for the final product development and production of the Stable power
supply and VersaCase.
There was zero spent on tooling in the three months ended September 30, 2004 as
compared to $31,556 spent in the three months ended September 30, 2003. The
difference is due to the 2003 launch of the initial tool used for the production
of the Cablety wire management system. Unitrend anticipates that there will be
an increase in tooling costs as Unitrend moves forward with the production phase
of Unitrend's products.
Selling, general and administrative expenses increased to $96,188 during the
quarter ended September 30, 2004 as compared to $83,540 for the quarter ended
September 30, 2003, an increase of 15%. This change was due primarily to
increases in trade show expense and marketing expense of approximately $11,500
and $7,500 incurred during the quarter ended September 30, 2004 as compared to
the quarter ended September 30, 2003. Unitrend did not incur any other
significant increases during the quarter ended September 30, 2004 as compared to
the quarter ended September 30, 2003. Unitrend experienced decreases in
professional fees, auto expense and repair and maintenance expense that were
approximately $5,800, $1,000 and $820, respectively as Unitrend continued its
efforts to cut costs to decrease Unitrend's need for cash.
During the quarters ended September 30, 2004 and September 30, 2003 there were
no stock options granted under our 1999 Stock Option Plan.
RESULTS OF OPERATIONS FIRST NINE MONTHS OF 2004 COMPARED TO FIRST NINE MONTHS OF
2003
Unitrend had no significant revenues during the nine months ended September 30,
2004 or during the nine months ended September 30, 2003. In the fourth quarter
2003, Unitrend began to produce and sell the Cablety wire management system.
Revenues were modest during the first nine months of 2004 because Unitrend had
just begun to implement Unitrend's recently completed marketing program at the
end of this nine month time period. This program will include, but not be
limited to, trade and consumer advertising, public relations and trade shows.
Unitrend anticipates not being classified as a development stage enterprise
sometime during late 2004.
Unitrend had an operating loss of $343,852 during the nine months ended
September 30, 2004 as compared to an operating loss of $249,466 during the nine
months ended September 30, 2003, an increase of 38%. As discussed below, this
operating loss increased due to increases in selling, general and administrative
expenses during the nine months ended September 30, 2004.
Unitrend had zero in research and development expenses during the nine months
ended September 30, 2004 as compared to $36,258 for the nine months ended
September 30, 2003. Unitrend believes that research and development expenses
will increase as Unitrend goes forward due to the contract entered into with New
Product Innovations, Inc. (NPI) to provide turnkey manufacturing of Unitrend's
product line. NPI along with Fitch, Inc. will complete product development,
obtain agency approvals, engage in product positioning and manufacturing
development. Unitrend anticipates this spending to continue to increase as
Unitrend continues to produce the Cablety, the first product that was made
available to the market in the fourth quarter of 2003 and for the final product
development and production of the Stable power supply and VersaCase. There was
$28,600 spent on tooling during the first nine months of 2004 and $31,556 spent
on tooling and dies during the first nine months of 2003, Unitrend's management
anticipates this to continue to increase as Unitrend moves forward.
Selling, general and administrative expenses increased to $342,995 during the
nine months ended September 30, 2004 as compared to $213,208 during the nine
months ended September 30, 2003, an increase of 61%. This change was due
primarily to increases in trade show expense, professional fees, litigation
expense, marketing expense and stock registration expense of approximately
$27,400, $23,700, $19,500, $15,000 and $11,100 during the nine months ended
September 30, 2004 as compared to the same time period in 2003. Professional
fees and litigation expense increased during the nine months ended September 30,
2004 compared to the nine months ended September 30, 2003 because of an increase
in the use of Unitrend's outside attorneys for patent related matters, reviewing
contracts and general legal work. Unitrend experienced the increase in trade
show expense because of the fees associated with the 2004 RetailVision trade
show, the Zones Accessories Training Fair and the Gartner System Builders Summit
as compared to a trade show expense of zero in the same time period last year.
For 2004, the State of Nevada significantly increased yearly stock registration
fees, which greatly impacted Unitrend's stock registration expense for the first
nine months of 2004 as compared to the first nine months of 2003. Marketing
expense increased as Unitrend began creating a public awareness of Unitrend and
Unitrend's products. There were no significant decreases in other selling,
general and administrative expenses during the nine months ended September 30,
2004 as compared to the nine months ended September 30, 2003.
There were no stock options granted to non-employees during the nine months
ended September 30, 2004 or during the nine months ended September 30, 2003
under our 1999 Stock Option Plan.
Accounts payable increased to $742,377 for the nine months ended September 30,
2004 compared to $623,626 at years end December 31, 2003. Accrued payroll and
related taxes increased to $858,092 at September 30, 2004 as compared to
$749,310 at years end December 31, 2003, respectively. Unitrend notified all
Unitrend employees on January 1, 2001 that due to insufficient funding, payment
of wages would cease for an undetermined amount of time and employees could
remain, if they should choose to, on a voluntary basis. In 2002, Unitrend
decided that payroll expense would resume and has accrued wages since then.
Unitrend's interest expense for the nine months ended September 30, 2004 was
$10,973 as compared to $28,940 from the same time period last year. This
expense decreased due to Mr. Jelinger forgiving loans made to Unitrend and
agreeing to not incur interest on current or future loans that he may make to
Unitrend.
LIQUIDITY AND CAPITAL RESOURCES
Unitrend has financed operations since inception primarily through public and
private sales of equity securities, as well as through loans from Unitrend's
President/majority stockholder, Conrad A.H. Jelinger. As of September 30, 2004,
Unitrend's cash totaled $1,597 and accounts receivable totaled $520. Loans from
Mr. Jelinger during the nine months ended September 30, 2004 totaled $388,439.
Mr. Jelinger forgave $237,077 of these loans on June 30, 2004 and $136,832 of
these loans on March 31, 2004. Mr. Jelinger forgave debt of $432,240, accrued
interest of $22,280 and accrued salary of $199,352 during the year ended
December 31, 2003. On March 31, 2000, Mr. Jelinger forgave loans to Unitrend of
$2,171,854 and accrued interest of $69,942. This was accounted for as
contributed capital.
For the nine months ended September 30, 2004, primary uses of cash for
Unitrend's operations and working capital requirements totaled $356,636. Primary
uses of cash for Unitrend's investing requirements for the nine months ended
September 30, 2004 totaled $28,600 due to the launch of two high volume tools to
be used in the production of the Cablety wire management system.
Unitrend's future capital requirements will depend upon numerous factors,
including the amount of revenues generated from operations, the cost of sales
and marketing activities and the progress of research and development
activities, none of which can be predicted with certainty. In December, 2000,
Unitrend 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 SB-2 registration statement was declared
effective on December 28, 2000. The purpose of the offering was to raise
sufficient funds to enable Unitrend to commence manufacturing of the VersaCase
product. Ultimately, Unitrend did not receive sufficient subscriptions to
enable to commence manufacturing operations and the offering terminated with all
funds returned to subscribers. Currently, Unitrend plans to raise sufficient
funds through the advancement of monies by Unitrend's founder. While funds
advanced and raised from the founder may enable Unitrend to continue product
development and commence out-source manufacturing, Unitrend's management cannot
be certain that the founder will continue to fund Unitrend's capital needs.
Consequently, Unitrend 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, Unitrend
could be required to reduce or suspend 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
Unitrend, there may be a serious shortfall of working capital. Unitrend has
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 the 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.
Unitrend's growth strategy is built around five imperatives: maintaining
technological 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 Unitrend's effort to
achieve technological leadership is to establish a standard for open
architecture and modularity in the computer enclosure industry. Other Unitrend
components, accessories, and products are in various stages of development and
will be supported by an aggressive research and development budget.
INCREASING MARKET SHARE. Unitrend's entry into the market is estimated at a
modest level to allow for growth at a reasonable pace. However, Unitrend makes
no representations or guarantees that Unitrend's management will be able to
manage the growth of the business. The Cablety was introduced to the market in
the fourth quarter of 2003 and Unitrend experienced modest sales. Unitrend
anticipates sales to grow as Unitrend moves further into 2004. Once VersaCase
is introduced, Unitrend expects 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 Unitrend's technological
and market capabilities, Unitrend 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 Unitrend's production process.
LEVERAGING STRATEGIC RELATIONSHIPS. Unitrend intends to leverage
relationships with companies that complement Unitrend's mission. For instance,
the uniqueness of Cablety, Stable and VersaCase technology will create
opportunities for Unitrend to establish strong relationships with key
distributors. These distributors will be able to offer their clients a product
that is very competitive and distinctive. Unitrend has been approached by
distributors to consider a channel relationship or exclusive position with them.
While Unitrend must maintain a broader market focus, Unitrend 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 Unitrend. Unitrend
intends to maintain this quality by offering competitive salary and incentive
compensation. Unitrend's overriding human resources philosophy is to build a
corporate culture that supports the success of each employee, as well as
Unitrend.
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. Exhibits and Reports on Form 8-K
(a) List of Exhibits
99. Additional Exhibits
Exhibit 99.1 Certification Under Section 906 of Sarbanes-Oxley Act
of 2002
(b) Reports on form 8-K
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: November 11, 2004 By: /S/ CONRAD A.H. JELINGER
_________________________
Conrad A.H. Jelinger
Chief Executive Officer,
Interim Chief Financial Officer
and President