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 June 30, 2005
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 June 30, 2005:
70,390,770
UNITREND, INC.
FORM 10-QSB
QUARTER ENDED JUNE 30, 2005
Table of Contents
PART I FINANCIAL INFORMATION Page
Item 1. Condensed Financial Statements
Condensed Balance Sheets at June 30, 2005
And December 31, 2004........................................... 3
Condensed Statements of Operations for the three and six months
ended June 30, 2005, 2004 and for the period from September
27, 1994 (date of inception) to June 30, 2005................... 4
Condensed Statements of Cash Flows for the six months ended
June 30, 2005, 2004 and for the period from September 27,
1994 (date of inception) to June 30, 2005....................... 5
Condensed Statements of Stockholders' Equity for the six
months ended June 30, 2005 and for the years ended
December 31, 2004, 2003 and 2002................................ 6
Notes to Condensed Financial Statements......................... 7-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 9-11
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 six months ended June
30, 2005. 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)
June 30, 2005 December 31,2004
---------------- ----------------
CURRENT ASSETS
Cash $ 1,000 $ 427
Accounts receivable 452 384
Prepaid Expenses 2,500 -
Inventory - Finished goods 13,203 3,763
---------------- ----------------
Total current assets 17,154 4,574
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 940,007 940,007
---------------- ----------------
1,637,867 1,637,867
Less accumulated depreciation (320,320) (312,035)
---------------- ----------------
Net property and equipment 1,317,547 1,325,831
---------------- ----------------
OTHER ASSETS
Patent licensing costs,
net of accumulated amortization 19,655 20,713
---------------- ----------------
TOTAL ASSETS $ 1,354,355 $ 1,351,118
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITES
Accounts payable $ 615,783 $ 707,201
Current portion of note payable - 171,047
Accrued expenses 1,092,228 1,209,271
---------------- ----------------
Total current liabilities 1,708,012 2,087,519
---------------- ----------------
NOTES PAYABLE - RELATED PARTIES 357,648 99,846
---------------- ----------------
STOCKHOLDERS' EQUITY
Common stock, no par value 3,805,098 3,805,098
Additional paid-in capital 9,332,592 8,975,592
Deficit accumulated in the development stage
(13,848,994) (13,616,938)
---------------- ----------------
Total stockholders' equity (711,304) (836,248)
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 1,354,355 $ 1,351,118
================ ================
UNITREND, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS (UNAUDITED)
(unaudited)
(unaudited) (unaudited) (unaudited) (unaudited) September 27, 1994
Three Months Ended Three Months Ended Six Months Ended Six Months Ended (Date of Inception)
June 30, 2005 June 30, 2004 June 30, 2005 June 30, 2004 to June 30, 2005
---------------- ---------------- ---------------- ---------------- ----------------
Sales $ - $ 717 $ 68 $ 750 $ 6,608
Cost of Sales (332) (2,048) (567) (2,204) (10,616)
---------------- ---------------- ---------------- ---------------- ----------------
Gross Loss (332) (1,330) (499) (1,454) (4,008)
Research and development
expenses (1,150) - (1,936) - (568,451)
Selling, general and
administrative expenses (114,315) (110,100) (222,007) (246,807) (12,374,995)
---------------- ---------------- ---------------- ---------------- ----------------
Operating loss (115,797) (111,430) (224,442) (248,261) (12,947,454)
Other income - - - - (546,875)
Interest income - - - - 1,546
Interest expense (4,317) (3,421) (7,615) (7,199) (332,244)
---------------- ---------------- ---------------- ---------------- ----------------
Net loss before cumulative
effect of change in
accounting principle (120,114) (114,850) (232,057) (255,460) (13,825,027)
Cumulative effect of
change in accounting
principle - - - - (23,968)
---------------- ---------------- ---------------- ---------------- ----------------
Net loss $ (120,114) $ (114,850) $ (232,057) $ (255,460) $ (13,848,994)
================ ================ ================ ================ ================
Basic and diluted loss
per share:
Before cumulative effect
of change in accounting
principle $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.20)
Cumulative effect of change
in accounting principle - - - - -
---------------- ---------------- ---------------- ---------------- ----------------
Net loss $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.20)
================ ================ ================ ================ ================
Weighted average shares
outstanding used to compute
basic and diluted loss per
share 70,390,770 70,390,770 70,390,770 70,390,770 68,392,819
================ ================ ================ ================ ================
UNITREND, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(unaudited)
(unaudited) (unaudited) September 27, 1994
Six Months Ended Six Months Ended (Date Of Inception)
June 30, 2005 June 30, 2004 to June 30, 2005
---------------- ---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (232,057) $ (255,460) $ (13,848,994)
---------------- ---------------- ----------------
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 9,342 10,372 363,609
Loss on disposal of property
and equipment - - 608,643
Bad debt - - 42,157
Accrued interest income - - (3,091)
Common stock issued for services - - 10,000
Increase in operating assets:
Accounts receivable (68) (700) (452)
Inventory (9,439) 671 (13,203)
Prepaid expenses (2,500) - (2,500)
Increase in operating liabilities:
Accounts payable (91,418) 89,385 615,783
Accrued expenses (117,043) (188,920) 1,307,918
---------------- ---------------- ----------------
Total adjustments (211,126) (89,192) 8,279,822
---------------- ---------------- ----------------
Net cash used in operating activities (443,183) (344,652) (5,569,172)
---------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for patent licensing costs - - (31,723)
Purchase of property and equipment - (28,600) (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) (2,367,038)
---------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of loan costs - - (5,448)
Loans from stockholder 614,803 373,909 4,180,745
Proceeds from note payable - - 290,000
Payment on note payable (171,047) (13,153) (290,000)
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 443,756 370,256 7,937,210
---------------- ---------------- ----------------
Net increase (decrease) in cash 573 (2,996) 1,000
Cash - beginning of period 427 3,178 -
---------------- ---------------- ----------------
Cash - end of period $ 1,000 $ 182 $ 1,000
================ ================ ================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the period
Interest $ 10,430 $ 7,199 $ 184,112
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
The President/Majority Stockholder forgave debt of $357,000 during
the period ended June 30, 2005. The President/Majority
Stockholder also forgave debt of $373,909 during the period ended
June 30, 2004.
UNITREND, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Six Months Ended June 30, 2005
And For the Years Ended December 31, 2004, 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 - 2004 - - - (1,185,679) (1,185,679)
---------- ---------- ---------- ------------- -----------
BALANCE -
DECEMBER 31, 2004 70,390,770 3,805,098 8,975,592 (13,616,938) (836,248)
Majority stockholder
forgives loans on
June 30, 2005 - - 357,000 - 357,000
Net loss for the
period ended
June 30, 2005 - - - (232,057) (232,057)
BALANCE -
JUNE 30, 2004 70,390,770 $3,805,098 $9,332,592 $(13,848,994) $ (711,304)
========== ========== ========== ============= ===========
UNITREND, INC.
FORM 10-Q SB
QUARTER ENDED JUNE 30, 2005
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 six month periods ended June 30, 2005. The results for the three and
six month periods ended June 30, 2005 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 nine United States
patents with seven 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 eight registered trademarks and service marks. As of June 30,
2005, 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 $13,849,000.
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 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 our e-commerce site. As of the date of
this filing, sales have been modest, but we anticipate sales to increase as we
move forward and concentrate on marketing our products through direct and
indirect channels. In mid to late 2005, we hope to finalize any design changes
to the VersaCase product line and Breeze power supply.
On March 1, 2004, Unitrend entered into a contract with Titan Technologies, an
established national sales and marketing group, to market and sell our current
products and any future products developed by Unitrend. The first product that
has been sold by the Company is the Cablety, with initial sales focus on large
domestic distributors and original equipment manufacturers (OEMs). We will
modify our distribution plans as demanded by the markets we serve in order to
maximize efficiency throughout all channels of distribution. In March 2004, R &
R Plastics began building a high volume production tool for the Cablety with new
industrial/military "Safety Wire" capabilities molded into it. This tool was
completed in June 2004. 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 and Zones, Inc. 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. The
Cablety is available for purchase at www.zones.com. In August 2004, Unitrend
exhibited at the Zones Accessories Training Fair where representatives from
Unitrend showed the benefits of using our product line. This show was attended
by only Zones sales and marketing representatives in order for them to learn
about all the products that Zones carries. In September 2004, Unitrend attended
the Gartner System Builders Summit. This show is the leading event for the
white box market. Vendors and resellers meet at this show to explore new
technologies and build strategic relationships. Unitrend established
relationships with interested vendors for when our product line is in full
production.
In early April 2005, Unitrend exhibited at the FOSE trade show. FOSE is the
most comprehensive technology event serving the government marketplace. The U.S.
government is the largest buyer of technology in the world, which made this show
the most efficient way for Unitrend to reach government customers. At this show
we introduced the Breeze power supply and the "new" flame orange Cablety with
the industrial/military safety wire capabilities. We also exhibited the
VersaCase and Cablety kits. Many government agencies reviewed our products and
gave us positive feedback. Many leads were made to place beta units within the
government for testing.
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
In the past, 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 Unitrend is profitable for one year. As
of June 30, 2005 and December 31, 2004, the outstanding balance of the note
payable to the President/majority stockholder was $357,648 and $99,846,
respectively. On June 30, 2005, June 30, 2004 and March 31, 2004 Unitrend's
President/majority stockholder forgave loans to Unitrend of $357,000, $237,077
and $136,832, respectively. 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. The forgiveness was accounted for as
contributed capital.
NEW ACCOUNTING PRONOUNCEMENTS
None
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS - SECOND QUARTER OF 2005 COMPARED TO SECOND QUARTER
OF 2004
Unitrend had no significant revenues in the quarter ended June 30, 2005 or in
the quarter ended June 30, 2004. Revenues were nonexistent during the second
quarter of 2005 because Unitrend had changed its primary focus from promoting
sales of the Cablety to the research and development of the Breeze power supply,
Viking modular computer case and incorporating the Cablety into this system.
Unitrend anticipates not being classified as a development stage enterprise
sometime during 2006.
Unitrend had an operating loss of $115,797 during the quarter ended June 30,
2005 as compared to an operating loss of $111,430 during the quarter ended June
30, 2004, an increase of 4%. Selling, general and administrative expenses
remained somewhat consistent when comparing the two years.
Selling, general and administrative expenses increased to $114,315 during the
quarter ended June 30, 2005 as compared to $110,100 for the quarter ended June
30, 2004, an increase of 4%. The slight increase in selling, general and
administrative expenses was due primarily to some increases and decreases in
expenses. Unitrend experienced increases in professional fees, repair and
maintenance expense and storage expense of approximately $13,800, $7,300 and
$2,400 during the quarter ended June 30, 2005 as compared to the same time
period in 2004. Professional fees increased during the second quarter of 2005
compared to the second quarter of 2004 because of our continued use of
Unitrend's outside attorneys for patent related matters, reviewing contracts and
general legal work. Unitrend also had some building repairs that needed to be
made during the second quarter 2005 as compared to the second quarter 2004.
Parkview Metals increased the storage fee for storing the tools to be used in
the metal components of the VersaCase. The only significant decreases in other
selling, general and administrative expenses during the three months ended June
30, 2005 as compared to the three months ended June 30, 2004 were in litigation
expense and payroll expense. Payroll expense decreased because an employee
voluntary reduced their salary in an effort to cut costs.
There were no stock options granted to non-employees during the three months
ended June 30, 2005 or during the three months ended June 30, 2004.
RESULTS OF OPERATIONS - FIRST SIX MONTHS OF 2005 COMPARED TO FIRST SIX MONTHS OF
2004
Unitrend had no significant revenues during the six months ended June 30, 2005
or during the six months ended June 30, 2004. Revenues were modest during the
first six months of 2005 because Unitrend had changed its primary focus from
promoting sales of the Cablety to the research and development of the Breeze
power supply, Viking modular computer case and incorporating the Cablety into
this system. Unitrend anticipates not being classified as a development stage
enterprise sometime during 2006.
Unitrend had an operating loss of $224,442 during the six months ended June 30,
2005 as compared to an operating loss of $248,261 during the six months ended
June 30, 2004, a decrease of 10%. As discussed below, this change is due to
decreases in selling, general and administrative expenses.
Unitrend had $1,936 in research and development expenses during the six months
ended June 30, 2005 as compared to zero for the six months ended June 30, 2004.
Unitrend believes that research and development expenses will increase as
Unitrend goes forward. NPI will complete product development, obtain agency
approvals, engage in product positioning and manufacturing development for the
Breeze power supply and Viking modular computer case. Unitrend anticipates this
spending to continue to increase as Unitrend continues to develop new and
innovative products for the computer industry. There was nothing spent on
tooling during the first six months of 2005 as compared to $28,600 spent on
tooling during the first six months of 2004. Our management anticipates tooling
costs to increase as Unitrend moves forward.
Selling, general and administrative expenses decreased to $222,007 during the
six months ended June 30, 2005 as compared to $246,807 during the six months
ended June 30, 2004, a decrease of 10%. This change was due primarily to
decreases in litigation expense, payroll expense and t rade show expense of
approximately $19,500, $16,800 and $8,400 during the six months ended June 30,
2005 as compared to the same time period in 2004. Payroll expense decreased
because an employee voluntary reduced their salary in an effort to cut costs.
The Company experienced the decrease in trade show expense because of the
difference in fees associated with the 2005 FOSE trade show as compared to the
2004 RetailVision trade show in the same time period last year. Unitrend
experienced increases in marketing expense, repair and maintenance expense and
storage expense of approximately $10,000, $7,500 and $2,400. Marketing expense
increased as Unitrend continued to create a public awareness of Unitrend and
Unitrend's products. Unitrend also had some building repairs that needed to be
made during the six months ended June 30, 2005 as compared to the six months
ended June 30, 2004. Parkview Metals also increased the storage fee for storing
the tools to be used in the metal components of the VersaCase during this same
time period.
There were no stock options granted to non-employees during the six months ended
June 30, 2005 or during the six months ended June 30, 2004.
Accounts payable decreased to $615,783 for the six months ended June 30, 2005
compared to $707,201 at years end December 31, 2004. Accrued payroll and
related taxes decreased to $813,589 at June 30, 2005 as compared to $863,160 at
years end December 31, 2004, 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 six months ended June 30, 2005 was $7,615 as compared
to $7,199 from the same time period last year.
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 June 30, 2005,
Unitrend's cash totaled $1,000, accounts receivable totaled $452 and prepaid
expenses totaled $2,500. Loans from Mr. Jelinger during the six months ended
June 30, 2005 totaled $614,803. Mr. Jelinger forgave $357,000 of these loans on
June 30, 2005. He forgave $373,909 of debt in 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. This was accounted for as contributed
capital.
For the six months ended June 30, 2005, primary uses of cash for Unitrend's
operations and working capital requirements totaled $443,183. Primary uses of
cash for Unitrend's investing requirements for the six months ended June 30,
2004 was zero. Net cash provided by financing activities totaled $443,756.
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 line.
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/or through a private
placement. While funds advanced and raised from the founder 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.
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 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. The Cablety was introduced to the market in the fourth quarter of
2003 and we experienced modest sales. We anticipate sales to grow as we add the
Breeze power supply and Viking chassis to our product line. Once these products
are introduced, we expect that there will be significant interest across a
number of market segments. The VersaCase product line 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 Cablety,
Breeze and 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
In 2004, Unitrend filed a claim for damages in the Wayne County Circuit Court,
State of Michigan, against a third party. Unitrend seeks $1,000,000 plus
exemplary damages, including actual costs and attorney's fees. If Unitrend is
able to recover damages, it will be used to purchase additional assets.
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: August 12, 2005 By: /S/ CONRAD A.H. JELINGER:
_________________________
Conrad A.H. Jelinger
Chief Executive Officer,
Interim Chief Financial Officer
and President