UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-QSB
x QUARTERLY
REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 2007.
o
TRANSITION REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934.
FOR
THE
TRANSITION PERIOD FROM ____________ TO _____________
Commission
File Number 0-21931
WI-TRON,
INC.
(Exact
name of small business issuer as specified in its charter)
DELAWARE
|
22-3440510
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
59
LaGrange Street
Raritan,
New Jersey 08869
(Address
of principal executive offices)
(908)
253-6870
(Issuer's
telephone number)
Check
whether the issuer (1) filed all reports required to be filed by Section 13
or
15(d) of the Securities Exchange Act of 1934 during the past 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 o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No x
The
number of shares outstanding of the Issuer's Common Stock, $.0001 Par Value,
as
of June 19, 2007 was 50,528,293.
Transitional
Small Business Format (check one); Yes o No x
WI-TRON,
INC.
FORM
10-QSB
THREE
MONTHS ENDED MARCH 31, 2007
TABLE
OF
CONTENTS
PART
I -
FINANCIAL
INFORMATION
Item
1
|
Financial
Statements (Unaudited):
|
|
|
|
|
|
Balance
Sheets
|
1-2
|
|
|
|
|
Statements
of Operations
|
3
|
|
|
|
|
Statements
of Cash Flows
|
4
|
|
|
|
|
Statement
of Changes in Stockholders' Deficiency.
|
5
|
|
|
|
|
Notes
to Financial Statements
|
6-10
|
|
|
|
Item
2
|
Management's
Discussion and Analysis of Financial
|
|
|
Condition
and Results of Operations
|
11-14
|
|
|
|
Item
3.
|
Controls
and Procedures
|
14
|
|
|
|
PART
II - OTHER INFORMATION
|
|
|
|
|
Item
1. Legal Proceedings
|
15
|
|
|
|
Item
2. Change in Securities
|
15
|
|
|
|
Signatures
|
16
|
|
|
|
Exhibit
31.1
|
17
|
|
|
|
Exhibit
31.2
|
18
|
|
|
|
Exhibit
32.1
|
19
|
|
|
|
Exhibit
32.2
|
20
|
The
following unaudited condensed financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the company believes that the disclosures made are adequate to make the
information not misleading.
It
is
suggested that these condensed financial statements be read in conjunction
with
the financial statements and the notes thereto included in the company’s latest
shareholders’ annual report (Form 10-KSB).
PART
I - FINANCIAL INFORMATION
Item
1.
Financial Statements
WI-TRON,
INC.
BALANCE
SHEETS
ASSETS
(Pledged)
|
|
March
31
2007
|
|
December
31
2006
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
Accounts
receivable, net of allowance for doubtful accounts of
$10,000
and $702 in 2007 and 2006, respectively
|
|
$
|
7,032
|
|
$
|
25,077
|
|
Inventories
|
|
|
97,592
|
|
|
94,587
|
|
Prepaid
expenses and other
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
104,624
|
|
|
119,664
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT - AT COST
|
|
|
|
|
|
|
|
Machinery
and equipment
|
|
|
587,276
|
|
|
587,276
|
|
Furniture
and fixtures
|
|
|
43,750
|
|
|
43,750
|
|
Leasehold
improvements
|
|
|
8,141
|
|
|
8,141
|
|
|
|
|
639,167
|
|
|
639,167
|
|
Less
accumulated depreciation and amortization
|
|
|
(626,719
|
)
|
|
(625,635
|
)
|
|
|
|
12,448
|
|
|
13,532
|
|
|
|
|
|
|
|
|
|
SECURITY
DEPOSITS AND OTHER NON-CURRENT ASSETS
|
|
|
5,500
|
|
|
5,500
|
|
|
|
$
|
122,572
|
|
$
|
138,696
|
|
Note:
The
balance sheet at December 31, 2006 has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements.
The
accompanying notes are an integral part of these financial
statements
WI-TRON,
INC.
BALANCE
SHEETS
LIABILITIES
AND STOCKHOLDERS' DEFICIENCY
|
|
March
31
2007
|
|
December
31,
2006
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
Overdraft
|
|
$
|
57,944
|
|
$
|
36,140
|
|
Secured
note payable in connection with Phoenix investor
rescinded
agreement - payment in default
|
|
|
10,000
|
|
|
10,000
|
|
Accounts
payable, including $126,093 and $69,636 due to
Tek,
Ltd. at March 31, 2007 and December 31, 2006
respectively
|
|
|
322,369
|
|
|
211,700
|
|
Notes
payable issued in connection with private placement of
common
stock, including accrued interest of $11,515
(2006)
and $7,015 (2005) - payment in default
|
|
|
329,516
|
|
|
325,016
|
|
Accrued
expenses and other current liabilities (including
delinquent
federal and state payroll taxes, penalties and
interest
aggregating $96,051 at March 31, 2007
and
$1,822 at December 31, 2006
|
|
|
241,982
|
|
|
197,397
|
|
Loans
payable to Tek, Ltd.
|
|
|
213,005
|
|
|
44,500
|
|
Loans
payable - officers
|
|
|
150,100
|
|
|
150,100
|
|
Total
current liabilities representing total liabilities
|
|
|
1,324,916
|
|
|
974,853
|
|
STOCKHOLDERS'
(DEFICIENCY)
|
|
|
|
|
|
|
|
Convertible
Preferred stock, Series C authorized 5,000,000
shares
of $.0001 par value; NIL and 131,000
shares
issued and outstanding at March 31, 2007 and
December
31, 2006, respectively, with a liquidation
preference
of $2 per share
|
|
|
-
|
|
|
13
|
|
Common
stock - authorized, 100,000,000 shares of $.0001 par
value; shares
50,028,293 and 36,928,293 shares issued
and
outstanding at
March 31, 2007 and December 31,
2006,
respectively
|
|
|
5,003
|
|
|
3,694
|
|
Additional
paid-in capital
|
|
|
26,000,287
|
|
|
25,999,095
|
|
Accumulated
deficit
|
|
|
(27,207,634
|
)
|
|
(26,838,959
|
)
|
|
|
|
(1,202,344
|
)
|
|
(836,157
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
122,572
|
|
$
|
138,696
|
|
|
|
|
|
|
|
|
|
Note:
The balance sheet at December 31, 2006 has been derived from the
audited
financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial
statements.
|
The
accompanying notes are an integral part of these financial
statements
WI-TRON,
INC.
STATEMENTS
OF OPERATIONS
Three
Months Ended March 31
|
|
Three
Months Ended
March
31
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Net
sales
|
|
$14,026
|
|
$40,156
|
|
Cost
of goods sold (net
of inventory write-down of $233,995 in 2002)
|
|
|
43,836
|
|
|
65,522
|
|
Gross
(loss)
|
|
|
(29,810
|
)
|
|
(25,366
|
)
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
149,867
|
|
|
190,444
|
|
Research,
engineering and development
|
|
|
173,340
|
|
|
88,811
|
|
Operating
loss
|
|
|
(353,017
|
)
|
|
(304,621
|
)
|
|
|
|
|
|
|
|
|
Nonoperating
income (expenses)
|
|
|
|
|
|
|
|
Other
income
|
|
|
-
|
|
|
3,292
|
|
Interest
expense
|
|
|
(4,500
|
)
|
|
(4,500
|
)
|
Federal
tax penalties and interest
|
|
|
(10,637
|
)
|
|
(12,827
|
)
|
|
|
|
|
|
|
|
|
Loss
before income taxes.
|
|
|
(368,154
|
)
|
|
(318,656
|
)
|
Provision
for income taxes
|
|
|
520
|
|
|
500
|
|
NET
LOSS
|
|
$
|
(368,674
|
)
|
$
|
(319,156
|
)
|
|
|
|
|
|
|
|
|
Net
loss per share - basic and diluted
|
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding
|
|
|
48,427,182
|
|
|
25,071,878
|
|
The
accompanying notes are an integral part of these financial
statements
WI-TRON,
INC.
STATEMENTS
OF CASH FLOWS
Three
Months Ended March 31
|
|
Three
Months Ended
March
31
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(368,674
|
)
|
$
|
(319,156
|
)
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
1,083
|
|
|
1,082
|
|
Amortization
of share based compensation
|
|
|
2,488
|
|
|
2,489
|
|
(Decrease)
increase in allowance for doubtful accounts
|
|
|
(10,000
|
)
|
|
298
|
|
Interest
accrued on notes payable issued in connection
with
private placement of common stock
|
|
|
4,500
|
|
|
4,500
|
|
Changes
in assets and liabilities
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
28,045
|
|
|
8,344
|
|
Inventories
|
|
|
(3,005
|
)
|
|
4,043
|
|
Prepaid
expenses and other assets
|
|
|
-
|
|
|
1,208
|
|
Accounts
payable and accrued expenses
|
|
|
155,254
|
|
|
(74,500
|
)
|
Total
adjustments
|
|
|
178,365
|
|
|
(52,536
|
)
|
Net
cash (used) for operating activities
|
|
|
(190,309
|
)
|
|
(371,692
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Overdraft
|
|
|
21,804
|
|
|
-
|
|
Advances
from Tek, Ltd.
|
|
|
168,505
|
|
|
-
|
|
Officer
loans
|
|
|
-
|
|
|
(14,300
|
)
|
Proceeds
from sale of common stock
|
|
|
-
|
|
|
383,000
|
|
Net
cash provided by financing activities
|
|
|
190,309
|
|
|
368,700
|
|
DECREASE
IN CASH
|
|
|
-
|
|
|
(2,992
|
)
|
Cash
at beginning of period
|
|
|
-
|
|
|
34,998
|
|
Cash
at end of period
|
|
$
|
-
|
|
$
|
32,006
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid for: Interest
|
|
$
|
-
|
|
$
|
-
|
|
Income
taxes
|
|
$
|
520
|
|
$
|
500
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
WI-TRON,
INC.
STATEMENT
OF CHANGES IN STOCKHOLDERS' DEFICIENCY
Three
Months Ended March 31, 2007
|
|
Series
C Convertible
Preferred
Stock
|
|
Common
Stock
|
|
Additional
Paid-In
|
|
Accumulated
|
|
|
|
|
|
Shares
|
|
Par
Value
|
|
Shares
|
|
Par
Value
|
|
Capital
|
|
Deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
AT DECEMBER 31, 2006
|
|
|
131,000
|
|
$
|
13
|
|
|
36,928,293
|
|
$
|
3,694
|
|
$
|
25,999,095
|
|
$
|
(26,838,959
|
)
|
$
|
(836,157
|
)
|
Net
loss for the quarter ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(368,675
|
)
|
|
(368,675
|
)
|
Conversion
of preferred stock into common stock
|
|
|
(131,000
|
)
|
|
(13
|
)
|
|
13,100,000
|
|
|
1,309
|
|
|
(1,296
|
)
|
|
|
|
|
|
|
Amortization
of share based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,488
|
|
|
|
|
|
2,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
AT MARCH 31, 2007
|
|
|
-
|
|
|
-
|
|
|
50,028,293
|
|
|
5,003
|
|
|
26,000,287
|
|
|
(27,207,634
|
)
|
|
(1,202,344
|
)
|
The
accompanying notes are an integral part of these financial
statements
NOTES
TO FINANCIAL STATEMENTS
MARCH
31, 2007
NOTE
A -
ADJUSTMENTS
In
the
opinion of management, all adjustments, consisting only of normal recurring
adjustments necessary for a fair statement of (a) results of operations for
the
three month periods ended March 31, 2007 and 2006 (b) the financial position
at
March 31, 2007 (c) the statements of cash flows for the three month period
ended
March 31, 2007 and 2006 , and (d) the changes in stockholders' deficiency for
the three month period ended March 31, 2007 have been made. The results of
operations for the three months ended March 31, 2007 are not necessarily
indicative of the results to be expected for the full year.
NOTE
B -
UNAUDITED INTERIM FINANCIAL INFORMATION
The
accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all the information and footnotes required
by
generally accepted accounting principles for financial statements. For further
information, refer to the audited financial statements and notes thereto for
the
year ended December 31, 2006 included in the Company's Form 10-KSB filed with
the Securities and Exchange Commission on May 18, 2007.
The
Company's financial statements have been presented on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The liquidity of the Company has been
adversely affected in recent years by significant losses from operations. As
further discussed in Note F, the Company incurred losses of $368,674 for the
three months ended March 31, 2007, has no cash and its working capital declined
by $(365,103) to a deficiency of $(1,220,292) since the beginning of the fiscal
year. Current liabilities still exceed cash and receivables by $1,317,884
indicating that the Company will have substantial difficulty meetings its
financial obligations for the balance of this fiscal year. These factors raise
substantial doubt as to the Company's ability to continue as a going concern.
Recently, operations have been funded by loans from the Chief Executive
Officer.
As
further discussed in Note F, management is seeking additional financing and
intends to aggressively market its products, control operating costs and broaden
its product base through enhancements of products. The Company believes that
these measures may provide sufficient liquidity for it to continue as a going
concern in its present form. Accordingly, the financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amount and classification of liabilities or any
other adjustments that might be necessary should the Company be unable to
continue as a going concern in its present form.
WI-TRON,
INC.
NOTES
TO FINANCIAL STATEMENTS
MARCH
31, 2007
NOTE
C -
STOCKHOLDERS' EQUITY
At
March
31, 2007, the following 1,370,000 warrants, remained outstanding:
|
(1) |
20,000
exercisable at $1.00 through May 2010
|
|
(2) |
600,000
exercisable at $.20 through August
2009
|
|
(3) |
750,000
exercisable at $.20 through August
2009
|
At
March
31, 2007, the Company had employee stock options outstanding to acquire
2,900,000 shares of common stock at exercise prices of $0.15 to $.20 per
share.
2. |
Private
Placements of Common Stock and
Debt
|
In
August
2005, the Company completed a private placement of common stock and notes
payable aggregating 600,000 shares with $336,000 in cash proceeds as of December
31, 2005. The offering was represented by 6 units at $56,000 each. Each unit
consists of 100,000 shares of common stock and a $50,000 note payable with
interest at 6%. A total of 600,000 shares were issued in this offering for
a
total of $36,000. The notes, aggregating $300,000, are due upon the earlier
of
the Company completing any financing with gross proceeds in excess of
$1,000,000; or March 1, 2006. Since the Company was unable to repay the notes
on
March 1, 2006. The Company requested and all of the investors agreed to a 90
day
extension on the notes until June 1, 2006 and again through November 2006.
The
Company issued warrants to purchase an aggregate of 600,000 shares of common
stock exercisable at $.20 per share. These notes remain unpaid at March 31,
2007, and the Company may continue to seek further similar extensions on an
ongoing basis. No actions have been taken by the note holders to collect the
balance up to and since March 31, 2007 through the date of this
filing.
3. |
Series
C Convertible Preferred Stock
|
As
of
December 31, 2006, there were 131,000 shares of Series C Convertible Preferred
Stock outstanding, 125,000 of which were owned by John Lee, the Chief Executive
Officer and 6,000 of which were owned by Jessica Lee, the former Chief Financial
Officer. Each share of the preferred stock was convertible into 100 shares
of
common stock (13,100,000 shares of common stock). On January 11, 2007, all
of
the 131,000 outstanding preferred shares were converted into 13,100,000 shares
of common stock.
NOTE
D -
LOSS PER SHARE
The
Company complies with the requirements of the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 128, "Earnings
per
Share" ("SFAS No. 128"). SFAS No. 128 specifies the compilation, presentation
and disclosure requirements for earnings per share for entities with publicly
held common stock or potential common stock. Net loss per common share - basic
and diluted is determined by dividing the net loss by the weighted average
number of common stock outstanding.
Net
loss
per common share - diluted does not include potential common shares derived
from
stock options and warrants (see Note C) because they are
antidilutive.
WI-TRON,
INC.
NOTES
TO FINANCIAL STATEMENTS
MARCH
31, 2007
NOTE
E -
LITIGATION
From
time
to time, the Company is party to what it believes are routine litigation and
proceedings that may be considered as part of the ordinary course of its
business. Except for the proceedings noted below, the Company is not aware
of
any pending litigation or proceedings that could have a material effect on
the
Company's results of operations or financial condition.
In
April
2004, a law firm filed a judgment against the Company in the amount of
approximately $40,000 in connection with non-payment of legal fees owed to
it.
Inasmuch as this is a perfection of an already recorded liability, management
does not believe that the judgment will have a material impact on the financial
position of the Company. In March 2005, a settlement was reached whereby the
Company made a down payment of $2,500 and agreed to pay the balance in 24 equal
monthly installments of approximately $1,600.
NOTE
F -
LIQUIDITY
The
Company's financial statements have been presented on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The liquidity of the Company has been
adversely affected in recent years by significant losses from operations. The
Company has incurred losses of $368,674 and $319,156 for the three months ended
March 31, 2007 and 2006, respectively.
With
no
cash and reduced revenues, management believes that the Company will have great
difficulty meeting its working capital and litigation settlement obligations
over the next 12 months. The Company is presently dependent on cash flows
generated from sales and private placements of common stock to meet our
obligations. Our failure to consummate a merger with an appropriate partner
or
to substantially improve our revenues will have serious adverse consequences
and, accordingly, there is substantial doubt in our ability to remain in
business over the next 12 months. There can be no assurance that any financing
will be available to the Company on acceptable terms, or at all. If adequate
funds are not available, the Company may be required to delay, scale back or
eliminate its research, engineering and development or manufacturing programs
or
obtain funds through arrangements with partners or others that may require
the
Company to relinquish rights to certain of its technologies or potential
products or other assets. Accordingly, the inability to obtain such financing
could have a material adverse effect on the Company's business, financial
condition and results of operations.
Management's
plans for dealing with the foregoing matters include:
o Increasing
sales of its high speed internet connectivity products through both individual
customers,
strategic alliances and mergers.
WI-TRON,
INC.
NOTES
TO FINANCIAL STATEMENTS
MARCH
31, 2007
o Decreasing
the dependency on certain major customers by aggressively seeking other
customers in the amplifier markets;
o Partnering
with significant companies to jointly develop innovative products, which has
yielded orders with multinational companies to date, and which are expected
to
further expand such relationships;
o Maintaining
a reduced cost structure through a more streamlined operation by using automated
machinery to produce components for our products;
o Deferral
of payments of officers' salaries, as needed;
o Selling
remaining net operating losses applicable to the State of New Jersey, pursuant
to a special government high-technology incentive program in order to provide
working capital, if possible;
o Reducing
overhead costs and general expenditures.
o Merging
with another company to provide adequate working capital and jointly develop
innovative products.
NOTE
G -
OFFICER LOANS
As
of
March 31, 2007, the Company owes $150,000 to the Chief Technology Officer
(formerly the Chief Executive Officer) for loans and unpaid salaries. The
Company also owes an other officer $100. These balance are non-interest bearing,
unsecured, and have no fixed maturity dates.
NOTE
H -
SEGMENT INFORMATION
The
Company has not pursued its wireless Internet connectivity business since 2003
and is currently operating in one segment.
NOTE
I -
RELATED PARTY TRANSACTIONS
As
of
March 31, 2007, the aggregate balance due to Tek, Ltd. (a company wholly owned
by John C. Lee, the Company's Chairman and Chief Executive Officer) was
$339,098, consisting of loans payable of $213,005 and trade accounts payable
of
$126,093. Due to the Company's lack of available funds requiring C.O.D. terms
from most vendors, Tek purchases parts and leases equipment on behalf of and
for
the benefit of the Company and re-sells the materials or services to the Company
at cost. During the quarter ended March 31, 2007, Tek advanced funds to the
Company of $168,505, allowed deferral of rent payments of $18,000 and sold
the
Company goods and services at cost totaling $38,457. Subsequent to March 31,
2007 through June 19, 2007, Tek advanced funds to the Company $126,000, allowed
deferral of rent payments of $18,000 and sold the Company goods and services
at
cost totaling $20,414.
WI-TRON,
INC.
NOTES
TO FINANCIAL STATEMENTS
MARCH
31, 2007
NOTE
J -
COMMITMENTS AND OTHER COMMENTS
In
July
2004, Tek, Ltd. ("Tek") a company wholly owned by John Lee, entered into a
contract with the existing landlord of the operating premises to purchase the
building. In connection therewith, Tek negotiated a return of the security
deposit and accumulated interest thereon to the Company in the aggregate amount
of $40,160. The Company was leasing the premises on a month to month basis
and
paying rent on a semi-monthly basis. On April 22, 2005, concurrent with the
closing of the purchase of the building by Tek, the Company entered into a
non-cancelable operating lease with Tek which commences on June 1, 2005 and
expires on May 31, 2008. Tek
is
holding a security deposit of $5,500 in connection with this lease.
The
Company is obligated for minimum annual rental payments as follows:
Year
ending December 31
|
|
|
|
2007
|
|
$
|
36,000
|
|
2008
|
|
|
30,000
|
|
|
|
$
|
66,000
|
|
Rent
expense, including the Company's share of real estate taxes, utilities and
other
occupancy costs, was $18,000
and $17,250 for the three months ended ended March 31, 2007 and 2006,
respectively.
2. |
Phoenix
Opportunity Fund II, L.P.
|
On
January 28, 2004, the Company entered into a Subscription Agreement (the
"Agreement") with Phoenix Opportunity Fund II, L.P. ("Phoenix"), to make certain
investments in the Company. Due to a dispute among the Parties with respect
to
the terms of the loan transaction, the Company and Phoenix agreed to rescind
their agreement, and the Company agreed to pay Phoenix in settlement, which
included a $40,000 secured promissory note due March 31, 2005, and bearing
interest at the rate of eight percent per annum secured by substantially all
the
assets of the Company. The Company did not make all of the required payments
due
under the Phoenix rescission agreement, and the Company remains currently
delinquent. The balance due on the note at March 31, 2007 was $10,000. In May
2006, the Company responded to a demand by Phoenix and paid $10,000 leaving
a
balance of $10,000 due as of the date of this filing. As yet, no further action
has been taken by Phoenix concerning this default.
3. |
Delaware
Annual Report Delinquency
|
The
Company is delinquent with certain franchise taxes and filing fees for the
State
of Delaware. Consequently, this delinquency could affect the Company's ability
to amend its certificate of incorporation, issue new classes of stock and,
reorganize its capital structure among other potential ramifications.
Additionally, the Company is delinquent in paying its transfer agent, which
may
limit transferability of shares.
NOTE
K -
SUBSEQUENT EVENTS
From
April 1, 2007 through June 16, 2007, the Company incurred $38,414 in additional
trade accounts payable to Tek, Ltd. and received an additional $126,000 in
loans
from Tek, Ltd. Tek, Ltd. is wholly owned by John C. Lee, the Company's Chairman
and Chief Executive Officer.
WI-TRON,
INC.
MARCH
31, 2007
PART
I - FINANCIAL INFORMATION
Item
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
Financial
Condition and Results of Operations
Results
of Operations - The Three Months Ended March 31, 2007 Compared to Three Months
Ended March 31, 2006.
Revenues
for the three months ended March 31, 2007 decreased by $26,130 from $40,156
to
$14,026, or 65% compared to the three months ended March 31, 2006.
The
majority of the amplifier sales for the three months ended March 31, 2007 were
obtained from the sale of the Wireless Local Loop amplifier products to a major
European customer.
The
Company has continued to develop and refine its amplifier products for the
wireless communications market. Sales and marketing efforts have been focused
on
Asian markets.
Cost
of
sales was $43,836 or 313% of sales compared to $65,522 or 163% of sales during
the same period for 2006. The decline in gross margin was principally due to
insufficient sales volume. The Company is continuing to assess ways to achieve
cost reduction for its products and sales volume increases to improve gross
margins in 2007.
Selling,
general and administrative expenses increased in 2007 by $40,577 to $149,867
from $190,444, in 2006. Expressed as a percentage of sales, the selling, general
and administrative (SG&A) expenses were 1,068% in 2007 and 474% in 2006.
Most of the SG&A expenses are relatively fixed and management has cut costs
about as low as operations can sustain. The actual dollar increase in SG&A
from the previous year was $40,577 or 21%.
Research,
engineering and development expenses were 1,236% of net sales for the three
months ended March 31, 2007 compared to 221% in 2006. In 2007 and 2006, the
principal activity of the business related to the design and production of
product for OEM manufacturers, particularly for the W-CDMA amplifier and 3.5
GHz
single channel products and refinements to the High Speed Internet products.
The
research, engineering and development expenses consist principally of salary
cost for engineers and the expenses of equipment rentals specifically for the
design and testing of the prototype products. The Company's research and
development efforts are influenced by available funds and the level of effort
required by the engineering staff on customer specific projects.
We
had no
interest income in 2007 and 2006 because our excess cash balances which we
have
historically temporarily invested in interest bearing accounts have been fully
depleted.
As
a
result of the foregoing, the Company incurred net losses of $368,674 or $0.01
per share for the three months ended March 31, 2007 compared with net losses
of
$319,156 or $0.01 per share for the same period in 2006.
WI-TRON,
INC.
MARCH
31, 2007
Liquidity
and Capital Resources
Liquidity
refers to our ability to generate adequate amounts of cash to meet our needs.
We
have been generating the cash necessary to fund our operations from private
placements. We have incurred a loss in each year since inception. It is possible
that we will incur further losses, that the losses may fluctuate, and that
such
fluctuations may be substantial. As of March 31, 2007, we had an accumulated
deficit of $27,207,634. Potential immediate sources of liquidity continued
to be
loans from our Chief Executive Officer and private placements of common
stock.
As
of
March 31, 2007, our current liabilities exceeded our cash and receivables by
$1,317,884. Our current ratio was 0.08 to 1.00, but our ratio of accounts
receivable to current liabilities was only 0.01 to 1.00. This indicates that
we
will have significant difficulty meeting our obligations as they come due.
We
are carrying $97,592 in inventory, of which $39,726 represents component parts.
Because of the lead times in our manufacturing process, we will likely need
to
replenish many items before we use everything we now have in stock. Accordingly,
we will need more cash to replenish our component parts inventory before we
are
able realize cash from all of our existing inventories.
As
of
March 31, 2007, we had a bank overdraft of $57,944 compared to $36,140 at
December 31, 2006. Our overdraft increased $21,804 during 2007. Our cash used
for operating activities was $21,804. We received no proceeds from private
placements of equity securities during the quarter ended March 31, 2007. Tek,
Ltd., a company wholly owned by John C. Lee, loaned the Company $168,505 during
the quarter ended March 31, 2007. Additionally, we incurred accounts payable
to
Tek of $56,457.
The
allowance for doubtful accounts on trade receivables was $10,000 at March 31,
2007. Because of our relatively small number of customers and low sales volume,
accounts receivable balances and allowances for doubtful accounts do not reflect
a consistent relationship to sales. We determine our allowance for doubtful
accounts based on a specific customer-by-customer review of collectiblity.
Our
inventories decreased by $3,005 to $97,592 in 2007 compared to $94,587 at
December 31, 2006, a decrease of 3%.
The
Company continues to explore strategic relationships with ISP's, customers
and
others, which could involve jointly developed products, revenue-sharing models,
investments in or by the Company, or other arrangements. There can be no
assurance that a strategic relationship can be consummated.
In
the
past, the officers of the Company have deferred a portion of their salaries
or
provided loans to the Company to meet short-term liquidity requirements. Where
possible, the Company has issued stock or granted warrants to certain vendors
in
lieu of cash payments, and may do so in the future. There can be no assurance
that any additional financing will be available to the Company on acceptable
terms, or at all. If adequate funds are not available, the Company may be
required to delay, scale back or eliminate its research, engineering and
development or manufacturing programs or obtain funds through arrangements
with
partners or others that may require the Company to relinquish rights to certain
of its technologies or potential products or other assets. Accordingly, the
inability to obtain such financing could have a material adverse effect on
the
Company's business, financial condition and results of operations.
WI-TRON,
INC.
MARCH
31, 2007
With
no
remaining cash and no near term prospects of private placements, options or
warrant exercises and reduced revenues, we believe that we will have great
difficulty meeting our working capital and litigation settlement obligations
over the next 12 months. We are presently dependent on cash flows generated
from
sales and loans from officers to meet our obligations. Our failure to consummate
a merger. or substantially improve our revenues will have serious adverse
consequences and, accordingly, there is substantial doubt in our ability to
remain in business over the next 12 months. There can be no assurance that
any
financing will be available to the Company on acceptable terms, or at all.
If
adequate funds are not available, the Company may be required to delay, scale
back or eliminate its research, engineering and development or manufacturing
programs or obtain funds through arrangements with partners or others that
may
require the Company to relinquish rights to certain of its technologies or
potential products or other assets. Accordingly, the inability to obtain such
financing could have a material adverse effect on the Company's business,
financial condition and results of operations.
Critical
Accounting Policies
1.
REVENUE RECOGNITION
Revenue
is recognized upon shipment of products to customers because our shipping terms
are F.O.B. shipping point. And there are generally no rights of return, customer
acceptance protocols, installation or any other post-shipment obligations.
All
of our products are custom built to customer specifications. We provide an
industry standard one-year limited warranty under which the customer may return
the defective product for repair or replacement.
2.
INVENTORIES
Inventories
are stated at the lower of cost or market; cost is determined using the
first-in, first-out method. As virtually all of our products are made to
customer specifications, we do not keep finished goods in stock except for
completed customer orders that have not been shipped. Our work-in-progress
generally consists of customer orders that are in the process of manufacture
but
are not yet complete at the period end date. We review all of our components
for
obsolescence and excess quantities on a periodic basis and make the necessary
adjustments to net realizable value as deemed necessary.
3.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Because
of our small customer base, we determine our allowance for doubtful accounts
based on a specific customer-by-customer review of collectiblity. Therefore,
our
allowance for doubtful accounts and our provision for doubtful accounts may
not
bear a consistent relationship to sales but we believe that this is the most
accurate and conservative approach under our circumstances.
WI-TRON,
INC.
MARCH
31, 2007
4.
USE OF
ESTIMATES
In
preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required
to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date
of the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates. The principal areas
that we use estimates in are: allowance for doubtful accounts; work-in-process
percentage of completion; accounting for stock based employee compensation;
and
inventory net realizable values.
5.
STOCK-BASED EMPLOYEE COMPENSATION
The
proforma disclosures previously permitted are no longer an alternative to
financial statement recognition. Accordingly, the Company has adopted FASB
Statement No. 123R and has recognized $2,488 of stock-based compensation for
the
three months ended March 31, 2007.
6.
LOSS
PER SHARE
Statement
of Financial Accounting Standards No.128 (SFAS No. 128), Earnings per Share,
specifies the computation, presentation and disclosure requirements for earnings
per share for entities with publicly held common stock or potential common
stock.
Net
loss
per common share - basic and diluted is determined by dividing the net loss
by
the weighted average number of shares of common stock outstanding. Net loss
per
common share - diluted does not include potential common shares derived from
stock options and warrants because they are antidilutive.
7.
SEGMENT INFORMATION
We
discontinued our internet business to concentrate on our core competence, which
is in the amplifier business. Accordingly, we currently operate in one
segment.
Item
3. CONTROLS AND PROCEDURES
As
required by Rule 13a-15(b) under the Securities Exchange Act of 1934
(the"Exchange Act"), the Company's management, with the participation of the
Company's Chief Executive Officer ("CEO") and Principal Financial Officer,
evaluated the effectiveness of the Company's disclosure controls and procedures
as of the end of the period covered by this report in reaching a reasonable
level of assurance that the information required to be disclosed by the Company
in the reports that it files with the Securities and Exchange Commission (“SEC”)
is recorded, processed, summarized and reported within the time period specified
in the SEC's rules and forms. Based upon that evaluation, the CEO and Principal
Financial Officer concluded that the Company's disclosure controls and
procedures were effective as of the end of the period covered by this
report.
As
required by Exchange Act Rule 13a-15(d), the Company's management, including
the
Chief Executive Officer and Principal Financial Officer, conducted an evaluation
of the Company's internal control over financial reporting to determine whether
any changes occurred during the fiscal quarter ended March 31, 2007 that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting. Based on that evaluation,
other than the changes reported in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 2006, which remained in effect during the
quarter ended March 31, 2007, there were no other changes during such
quarter.
WI-TRON,
INC.
MARCH
31, 2007
PART
II - OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
See
Note
E to the Company's financial statements set forth in Part I.
ITEM
2. CHANGE IN SECURITIES
During
the first quarter ended March 31, 2007, the Company issued securities as
follows.
On
January 11, 2007, John C. Lee converted 125,000 shares of preferred stock into
12,500,000 shares of common stock.
On
January 11, 2007, Jessica Lee converted 6,000 shares of preferred stock into
600,000 shares of common stock.
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly
authorized.
|
|
WI-TRON,
INC.
|
|
|
|
|
|
|
Dated:
June 19, 2007
|
By: |
/s/
John C. Lee
|
|
Name: |
John
C. Lee
|
|
Title: |
Chief
Executive Officer and Director
|
|
|
|
Dated:
June 19, 2007
|
By: |
/s/
Tarlochan S. Bains
|
|
Name: |
Tarlochan
S. Bains
|
|
Title: |
Vice
President and Principal Accounting Officer
|