UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x
QUARTERLY
REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED MARCH 31, 2008.
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
(Exact
name of registrant 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)
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 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
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o |
|
Accelerated filer o |
|
|
Non-accelerated filer o |
|
(Do not check if a smaller reporting
company) |
|
Smaller reporting company x |
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 May 19, 2008 was 93,630,000.
WI-TRON,
INC.
FORM
10-QSB
THREE
MONTHS ENDED MARCH 31, 2008
TABLE
OF
CONTENTS
|
|
|
|
|
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
4.
|
Controls
and Procedures
|
15
|
|
|
|
PART
II - OTHER INFORMATION
|
|
Item
1.
|
Legal
Proceedings
|
15
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
15
|
|
|
|
Item 3. |
Defaults
Upon Senior Securities
|
15
|
|
|
|
Item 4. |
Submission
of Matters to a Vote of Security Holders
|
15
|
|
|
|
Item 5. |
Other
Information
|
15
|
|
|
|
Item 6. |
Exhibits
|
15
|
|
|
|
Signatures
|
16
|
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
|
|
March
31
2008
|
|
December
31
2007
|
|
|
|
(Unaudited)
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
-
|
|
$
|
13,917
|
|
Accounts
receivable, net of allowance for doubtful accounts of $5,872 and
$702 in
2008 and 2007, respectively
|
|
|
17,296
|
|
|
7,834
|
|
Inventories
|
|
|
32,280
|
|
|
42,500
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
49,576
|
|
|
64,251
|
|
|
|
|
|
|
|
|
|
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
|
|
|
(631,047
|
)
|
|
(629,965
|
)
|
|
|
|
8,120
|
|
|
9,202
|
|
|
|
|
|
|
|
|
|
SECURITY
DEPOSITS AND OTHER NON-CURRENT ASSETS
|
|
|
5,500
|
|
|
5,500
|
|
Total
Assets
|
|
$
|
63,196
|
|
$
|
78,953
|
|
Note:
The
balance sheet at December 31, 2007 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
2008
|
|
December
31
2007
|
|
|
|
(Unaudited)
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
Overdraft
|
|
$
|
44,692
|
|
$
|
-
|
|
Secured
note payable in connection with Phoenix investor rescinded agreement
-
payment in default
|
|
|
10,000
|
|
|
10,000
|
|
Notes
payable issued in connection with private placement of common stock,
including accrued interest of $11,515 (2008) and $7,015 (2007) -
payment
in default
|
|
|
347,516
|
|
|
343,016
|
|
Accounts
payable
|
|
|
240,665
|
|
|
255,281
|
|
Accrued
expenses and other current liabilities (including delinquent
federal and state payroll taxes, penalties and interest
aggregating $282,477 at March 31, 2008
and $50,913 at December 31, 2007
|
|
|
313,811
|
|
|
300,097
|
|
Accrued
settlement of litigation
|
|
|
95,000
|
|
|
95,000
|
|
Loans
payable to Tek, Ltd.
|
|
|
938,629
|
|
|
908,662
|
|
Loans
payable - officers
|
|
|
156,673
|
|
|
159,511
|
|
Total
current liabilities representing total liabilities
|
|
|
2,146,986
|
|
|
2,071,567
|
|
STOCKHOLDERS'
(DEFICIENCY)
|
|
|
|
|
|
|
|
Convertible
Preferred stock, Series C authorized 5,000,000 shares of $.0001 par
value;
no shares issued or outstanding at March 31, 2008 and December 31,
2007,
respectively, with a liquidation preference of $2 per
share
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Common
stock - authorized, 100,000,000 shares of $.0001 par value; shares
67,778,293 and 50,028,293 shares issued and outstanding at
March 31, 2008 and December 31, 2007, respectively
|
|
|
6,778
|
|
|
5,003
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
26,310,968
|
|
|
26,007,755
|
|
|
|
|
|
|
|
|
|
Accumulated
deficit
|
|
|
(28,401,536
|
)
|
|
(28,005,372
|
)
|
Total
Stockholders' Deficiency
|
|
|
(2,083,790
|
)
|
|
(1,992,614
|
)
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Deficiency
|
|
$
|
63,196
|
|
$
|
78,953
|
|
Note:
The
balance sheet at December 31, 2007 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 (Unaudited)
|
|
Three
Months Ended
March
31
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
31,183
|
|
$
|
14,026
|
|
Cost
of goods sold
|
|
|
75,295
|
|
|
43,836
|
|
Gross
(loss)
|
|
|
(44,112
|
)
|
|
(29,810
|
)
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
206,250
|
|
|
149,867
|
|
Research,
engineering and development
|
|
|
133,734
|
|
|
173,340
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(384,096
|
)
|
|
(353,017
|
)
|
|
|
|
|
|
|
|
|
Nonoperating
income (expenses)
|
|
|
|
|
|
|
|
Other
income
|
|
|
138
|
|
|
-
|
|
Interest
expense
|
|
|
(4,500
|
)
|
|
(4,500
|
)
|
Federal
tax penalties and interest
|
|
|
(7,186
|
)
|
|
(10,637
|
)
|
|
|
|
|
|
|
|
|
Loss
before income taxes.
|
|
|
(395,644
|
)
|
|
(368,154
|
)
|
Provision
for income taxes
|
|
|
520
|
|
|
520
|
|
NET
LOSS
|
|
$
|
(396,164
|
)
|
$
|
(368,674
|
)
|
|
|
|
|
|
|
|
|
Net
loss per share - basic and diluted
|
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding
|
|
|
58,903,293
|
|
|
48,427,182
|
|
The
accompanying notes are an integral part of these financial
statements
WI-TRON,
INC.
STATEMENTS
OF CASH FLOWS
|
|
Three
Months Ended
March
31
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Operating
activities:
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(396,164
|
)
|
$
|
(368,674
|
)
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
1,082
|
|
|
1,083
|
|
Amortization
of share based compensation
|
|
|
2,488
|
|
|
2,488
|
|
(Decrease)
increase in allowance for doubtful accounts
|
|
|
|
|
|
(10,000
|
)
|
Interest
accrued on notes payable issued in connection with private placement
of
common stock
|
|
|
4,500
|
|
|
4,500
|
|
Common
shares issued to public relations firm
|
|
|
87,500
|
|
|
-
|
|
Changes
in assets and liabilities
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(9,462
|
)
|
|
28,045
|
|
Inventories
|
|
|
10,220
|
|
|
(3,005
|
)
|
Accounts
payable and accrued expenses
|
|
|
(902
|
)
|
|
155,254
|
|
Total
adjustments
|
|
|
95,426
|
|
|
178,365
|
|
Net
cash (used) for operating activities
|
|
|
(300,738
|
)
|
|
(190,309
|
)
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
|
Overdraft
|
|
|
44,692
|
|
|
21,804
|
|
Advances
from Tek, Ltd.
|
|
|
29,967
|
|
|
168,505
|
|
Officer
loans
|
|
|
(2,838
|
)
|
|
-
|
|
Proceeds
from private placements of common stock
|
|
|
215,000
|
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
286,821
|
|
|
190,309
|
|
|
|
|
|
|
|
|
|
DECREASE
IN CASH
|
|
|
(13,917
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
at beginning of period
|
|
|
13,917
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Cash
at end of period
|
|
$
|
-
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid for: Interest
|
|
$
|
-
|
|
$
|
-
|
|
Income taxes
|
|
$
|
520
|
|
$
|
520
|
|
|
|
|
|
|
|
|
|
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, 2008
|
|
Common
Stock
|
|
Additional
Paid-In
|
|
Accumulated
|
|
|
|
|
|
Shares
|
|
Par
Value
|
|
Capital
|
|
Deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
AT DECEMBER 31, 2007
|
|
|
50,028,293
|
|
$
|
5,003
|
|
$
|
26,007,755
|
|
$
|
(28,005,372
|
)
|
$
|
(1,992,614
|
)
|
Net
loss for the quarter ended March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
(396,164
|
)
|
|
(396,164
|
)
|
Private
placement of common stock
|
|
|
15,250,000
|
|
|
1,525
|
|
|
213,475
|
|
|
|
|
|
215,000
|
|
Amortization
of share based compensation
|
|
|
|
|
|
|
|
|
2,488
|
|
|
|
|
|
2,488
|
|
Shares
issued to investor relations firm
|
|
|
2,500,000
|
|
|
250
|
|
|
87,250
|
|
|
|
|
|
87,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
AT MARCH 31, 2008
|
|
|
67,778,293
|
|
$
|
6,778
|
|
$
|
26,310,968
|
|
$
|
(28,401,536
|
)
|
$
|
(2,083,790
|
)
|
The
accompanying notes are an integral part of these financial
statements
WI-TRON,
INC.
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
MARCH
31, 2008
NOTE
A -
ADJUSTMENTS AND RECENT DEVELOPMENTS
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, 2008 and 2007 (b) the financial position
at
March 31, 2008 (c) the statements of cash flows for the three month period
ended
March 31, 2008 and 2007 , and (d) the changes in stockholders' deficiency for
the three month period ended March 31, 2008 have been made. The results of
operations for the three months ended March 31, 2008 are not necessarily
indicative of the results to be expected for the full year.
On
May
16, 2008, the Company entered into a Merger Agreement and Plan of Reorganization
(the “Merger
Agreement”)
with Cellvine Ltd., an Israeli corporation (“Cellvine”),
and Wi-Tron
Acquisition Ltd, a newly formed Israeli corporation and wholly owned by the
Company (“Merger
Sub”). Pursuant
to the
Merger Agreement, Cellvine will merge with and into Merger Sub, with Cellvine
being the surviving corporation and becoming a wholly-owned subsidiary of the
Company, and the ratio between the shareholding of the current security holders
of Cellvine (including holders of shares, warrants and options) and the current
security holders of the Company, (including holders of shares, warrants and
options) will be 85 to 15 on a fully diluted basis immediately after the Merger
(the “Merger”).
The Merger
Agreement provides that the Company will also assume all outstanding Cellvine
options and warrants to purchase Cellvine ordinary shares. (see Note K --
Subsequent Events). Among
other things, the agreement provides for the conversion of the Tek, Ltd. debt
($938,629 at March 31, 2008) and
Devendar Bains debt ($150,000 at March 31, 2008) into
common stock at $.05 per share.
In
February 2008, the Company received gross proceeds of $215,000 in connection
with the private placement sale to accredited investors of 15,250,000 shares
of
restricted common stock.
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, 2007 included in the Company's Form 10-KSB filed with
the Securities and Exchange Commission on April 14, 2008.
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 $396,164 for the
three months ended March 31, 2008, has no cash and its working capital declined
by $90,094 to a deficiency of $2,097,410 since the beginning of the fiscal
year.
Current liabilities exceed cash and receivables by $2,129,690 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 and private placements
of
common stock.
WI-TRON,
INC.
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
MARCH
31, 2008
NOTE
C -
STOCKHOLDERS' EQUITY
At
March
31, 2008, 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, 2008, the Company had employee stock options outstanding to acquire
2,800,000 shares of common stock at exercise prices of $0.15 to $.20 per
share.
2. |
Private
Placements of Common Stock and
Debt
|
In
February 2008, the Company received $215,000 in proceeds from the private
placement of 15,250,000 shares of restricted common stock to accredited
investors.
In
August
2005, the Company completed a private placement of common stock and notes
payable. These notes with a total balance of $347,516 including accrued interest
of $11,515 remain unpaid at March 31, 2008. No actions have been taken by the
note holders to collect the balance up to and since March 31, 2008 through
the
date of this filing.
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.
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.
WI-TRON,
INC.
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
MARCH
31, 2008
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 $396,164 and $368,674 for the three months ended
March 31, 2008 and 2007, respectively.
With
no
remaining cash, we could have difficulty meeting our working capital obligations
over the next 12 months. While we may continue to have working capital concerns
after the consummation of the merger with Cellvine, we believe that the merger
will substantially reduce those concerns. Should we be unable to consummate
the
merger with Cellvine, and/or substantially improve our revenues, there may
be
serious adverse consequences and, accordingly, there remains substantial
doubt
in our ability to remain in business over the next 12 months. There can be
no
assurance that the merger with Cellvine will close on or before the scheduled
date or at all. There can further be no assurance that any financing from
other
sources 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 consummate
the
Cellvine merger or obtain financing from other sources could have a material
adverse effect on the Company's business, financial condition and results
of
operations.
WI-TRON,
INC.
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
MARCH
31, 2008
NOTE
G -
OFFICER LOANS
As
of
March 31, 2008, 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 $6,673. These balance are non-interest
bearing, unsecured, and have no fixed maturity dates.
On
May
14, 2008, this officer agreed to convert the debt into 3,000,000 shares of
the
Company's restricted common stock.
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, 2008, the aggregate balance due to Tek, Ltd. (a company wholly owned
by John C. Lee, the Company's Chairman and Chief Executive Officer) was
$938,629. 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, 2008, Tek advanced funds to or
on
behalf of the Company of $29,967. Subsequent to March 31, 2008 through May
19,
2008, Tek advanced funds to the Company $3,435, allowed deferral of rent
payments of $13,500 and sold the Company goods and services at cost totaling
$16,935.
NOTE
J -
COMMITMENTS AND OTHER COMMENTS
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 $13,500 for the remaining term of the
lease.
Rent
expense, including the Company's share of real estate taxes, utilities and
other
occupancy costs, was
$20,250
and $18,000 for the three months ended March 31, 2008 and 2007,
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"), which was
later
rescinded. 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
WI-TRON,
INC.
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
MARCH
31, 2008
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, 2008 was $10,000. As yet, no action has been taken
by Phoenix concerning this default.
NOTE
K --
SUBSEQUENT EVENT
On
May
16, 2008, the Company entered into a definitive Merger Agreement and Plan
of
Reorganization (the “Merger
Agreement”)
with Cellvine Ltd., an Israeli corporation (“Cellvine”),
and Wi-Tron
Acquisition Ltd, a newly formed Israeli corporation and wholly owned by
the
Company (“Merger
Sub”).
Pursuant to the
Merger Agreement, Cellvine will merge with and into Merger Sub, with Cellvine
being the surviving corporation and becoming a wholly-owned subsidiary
of the
Company, and the ratio between the shareholding of the current security
holders
of Cellvine (including holders of shares, warrants and options) and the
current
security holders of the Company, (including holders of shares, warrants
and
options) will be 85 to 15 on a fully diluted basis immediately after the
Merger
(the “Merger”).
The Merger
Agreement provides that the Company will also assume all outstanding Cellvine
options and warrants to purchase Cellvine ordinary shares.
There
is
currently no public market for Cellvine ordinary shares. The Company's
common
stock is traded on the OTC Bulletin Board under the symbol “WTRO.”
Following the
Merger, it is anticipated that the combined companies' common stock will
continue to trade on the OTC Bulletin Board.
Upon
effectiveness of the Merger ans subject to shareholder approval, the Company
will amend its certificate of incorporation to change its name to “Cellvine
Inc.” All
of the
current directors of the Company will resign, and the Cellvine shareholders
shall determine all of the directors of the Company effective as of the
consummation of the Merger.
Immediately
prior to the closing of the Merger Agreement, it is anticipated that the
Company
will conduct and close on a private placement to raise approximately $3
million
through the sale of units, with each unit consisting of one share of common
stock and a warrant to purchase 0.62 share of common stock. The units will
only
be offered to accredited investors.
Immediately
after the closing under the Merger Agreement, the Company will affect a
reverse
split, whereby each 120 issued and outstanding shares of its common stock
shall
automatically be converted into and become one share of common stock.
The
closing of the Merger is subject to the satisfaction of a number of conditions
such as, without limitation, shareholder approvals from both the Company
and
Cellvine for the Merger, the receipt of regulatory approvals inIsrael,
the
completion of the private placement described above, a total pre-closing
Company
debt amount of not more than $300,000. The Company expects the Merger to
close
prior to August 31, 2008. If the Merger has not been completed by August
31,
2008, either Wi-Tron or Cellvine may terminate the Merger
Agreement.
In
connection with the execution of the Merger Agreement, John Chase Lee and
Devendar Bains agreed to convert an aggregate of approximately $1,100,000
of the
Company’s debt owed to Mr. Lee and Mr. D. Bains at a rate of $0.05 per share.
Certain of the shares issuable to Mr. Lee pursuant to this debt conversion
will
not be issued until after shareholders of the Company amend the Company’s
certificate of incorporation to increase the total amount of authorized
common
stock.
WI-TRON,
INC.
MARCH
31, 2008
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, 2008 Compared to Three Months
Ended March 31, 2007.
Revenues
for the three months ended March 31, 2008 increased by $17,157 from $14,026
to
$31,183, or 122% compared to the three months ended March 31, 2007.
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 $75,295 or 241% of sales compared to $43,836 or 313% of sales during
the same period for 2007. 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 2008 by $56,383 to $206,250
from $149,867, in 2007. Expressed as a percentage of sales, the selling, general
and administrative (SG&A) expenses were 661% in 2008 and 1,068% in 2007.
Most of the SG&A expenses are relatively fixed and management has cut costs
about as low as operations can sustain.
Research,
engineering and development expenses were 429% of net sales for the three months
ended March 31, 2008 compared to 1,236% in 2007. In 2008 and 2007, 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 2008 and 2007 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 $396,164 or $0.01
per share for the year ended March 31, 2008 compared with net losses of $368,674
or $0.01 per share for the same period in 2007.
Liquidity
and Capital Resources
Liquidity
refers to our ability to generate adequate amounts of cash to meet our needs.
We
have been
WI-TRON,
INC.
MARCH
31, 2008
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, 2008, we had an accumulated deficit of $28,401,536.
Potential immediate sources of liquidity continued to be loans from our Chief
Executive Officer and private placements of common stock.
As
of
March 31, 2008, our current liabilities exceeded our cash and receivables
by
$2,129,690 and our current ratio was 0.02 to 1.00. While this indicates that
we
will have difficulty meeting our obligations as they come due, we are hopeful
that the merger with Cellvine will help to mitigate this concern, although
we
may still have need for additional liquidity after its consummation. We are
carrying $32,280 in inventory, of which $21,577 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, 2008, we had a bank overdraft of $44,692 compared to cash in banks
of
$13,917 at December 31, 2007. Accordingly, our cash position declined by $58,609
during 2008. Our cash used for operating activities was $300,738. We received
proceeds from private placements of equity securities of $215,000 during the
quarter ended March 31, 2008. Tek, Ltd., a company wholly owned by John C.
Lee,
loaned the Company $29,967 during the quarter ended March 31, 2008.
The
allowance for doubtful accounts on trade receivables was $5,872 at March 31,
2008. 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 $10,220 to $32,280 in 2008 compared to $42,500 at
December 31 2007, a decrease of 24%.
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, 2008
With
no
remaining cash, we could have difficulty meeting our working capital obligations
over the next 12 months. While we may continue to have working capital concerns
after the consummation of the merger with Cellvine, we believe that the merger
will substantially reduce those concerns. Should we be unable to consummate
the
merger with Cellvine, and/or substantially improve our revenues, there may
be
serious adverse consequences and, accordingly, there remains substantial
doubt
in our ability to remain in business over the next 12 months. There can be
no
assurance that the merger with Cellvine will close on or before the scheduled
date or at all. There can further be no assurance that any financing from
other
sources 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 consummate
the
Cellvine merger or obtain financing from other sources 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, 2008
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, 2008.
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.
WI-TRON,
INC.
MARCH
31, 2008
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 continued to be ineffective 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, 2007, which remained in effect during the
quarter ended March 31, 2008, there were no other changes during such
quarter.
PART
II - OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
See
Note
E to the Company's financial statements set forth in Part I.
ITEM
2. UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During
the first quarter ended March 31, 2008, the Company issued securities as
follows.
In
February 2008, the Company issued 15,250,000 shares or restricted common stock
to various accredited investors for aggregate gross proceeds of
$215,000.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM
5. OTHER INFORMATION
None
ITEM
6. EXHIBITS
31.1
Certification
of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
31.2
Certification
of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32.1
Certification
of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification
of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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:
May 20, 2008
|
By:
|
/s/
John C. Lee
|
|
Name:
|
John
C. Lee
|
|
Title:
|
Chief Executive Officer and Director
|
Dated:
May 20, 2008
|
By:
|
/s/
Tarlochan S. Bains
|
|
Name:
|
Tarlochan
S. Bains
|
|
Title:
|
Vice President and Principal Accounting Officer
|