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 JUNE 30, 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
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)
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 August 19, 2008 was 75,853,293.
WI-TRON,
INC.
FORM
10-QSB
SIX
MONTHS ENDED JUNE 30, 2008
TABLE
OF
CONTENTS
PART
I -
FINANCIAL
INFORMATION
|
|
|
|
|
Item
1
|
Financial
Statements (Unaudited):
|
|
|
|
|
|
Balance
Sheets
|
1–2
|
|
|
|
|
Statements
of Operations.
|
3
|
|
|
|
|
Statement
of Changes in Stockholders' Deficiency
|
4
|
|
|
|
|
Statements
of Cash Flows
|
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
|
15
|
|
|
|
PART
II -
OTHER
INFORMATION
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
15
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
15
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
15
|
Item
5.
|
Other
Information
|
15
|
Item
6.
|
Exhibits
|
16
|
|
|
|
Signatures
|
17
|
|
|
|
Exhibit
Index
|
18
|
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
|
|
June 30
2008
|
|
December 31
2007
|
|
|
|
Unaudited
|
|
|
|
ASSETS
(Pledged)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
75,396
|
|
|
7,834
|
|
Inventories
|
|
|
31,761
|
|
|
42,500
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
107,157
|
|
|
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
|
|
|
(632,129
|
)
|
|
(629,965
|
)
|
|
|
|
7,038
|
|
|
9,202
|
|
|
|
|
|
|
|
|
|
SECURITY
DEPOSITS AND OTHER NON-CURRENT ASSETS
|
|
|
5,500
|
|
|
5,500
|
|
Total
Assets
|
|
$
|
119,695
|
|
$
|
78,953
|
|
The
accompanying notes are an integral part of these financial
statements
BALANCE
SHEETS
(Continued)
|
|
June 30
2008
|
|
December 31
2007
|
|
|
|
Unaudited
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
Bank
Overdraft
|
|
$
|
35,758
|
|
$
|
-
|
|
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 $52,016 (2008) and $43,016 (2007) -
payment
in default
|
|
|
352,016
|
|
|
343,016
|
|
Accounts
payable
|
|
|
213,296
|
|
|
255,281
|
|
Accrued
expenses and other current liabilities (including delinquent federal
and
state payroll taxes, penalties and interest aggregating $254,865
at June
30, 20
08
and $263,322 at December 31, 2007
|
|
|
410,061
|
|
|
300,097
|
|
Accrued
settlement of litigation
|
|
|
95,000
|
|
|
95,000
|
|
Loans
payable to Tek, Ltd.
|
|
|
1,046,702
|
|
|
908,662
|
|
Loans
payable - officers
|
|
|
6,673
|
|
|
159,511
|
|
Total
current liabilities
|
|
|
2,169,506
|
|
|
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 June 30, 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
70,778,293 and 50,028,293 shares issued and outstanding
at
June 30, 2008 and December 31, 2007, respectively
|
|
|
7,078
|
|
|
5,003
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
26,693,107
|
|
|
26,007,755
|
|
|
|
|
|
|
|
|
|
Accumulated
deficit
|
|
|
(28,749,996
|
)
|
|
(28,005,372
|
)
|
|
|
|
|
|
|
|
|
Total
Stockholders' (Deficiency)
|
|
|
(2,049,811
|
)
|
|
(1,992,614
|
)
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' (Deficiency)
|
|
$
|
119,695
|
|
$
|
78,953
|
|
The
accompanying notes are an integral part of these financial
statements
WI-TRON,
INC.
STATEMENTS
OF OPERATIONS (Unaudited)
|
|
Three Months Ended
June 30
|
|
Six Months Ended
June 30
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
75,040
|
|
|
42,200
|
|
$
|
106,221
|
|
$
|
56,224
|
|
Cost
of goods sold
|
|
|
78,315
|
|
|
101,330
|
|
|
153,610
|
|
|
145,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit (loss)
|
|
|
(3,275
|
)
|
|
(59,130
|
)
|
|
(47,389
|
)
|
|
(88,942
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and
administrative
|
|
|
235,648
|
|
|
111,688
|
|
|
441,896
|
|
|
261,553
|
|
Research,
engineering and
development
|
|
|
94,860
|
|
|
110,819
|
|
|
228,595
|
|
|
284,159
|
|
Total
operating expenses
|
|
|
330,508
|
|
|
222,507
|
|
|
670,491
|
|
|
545,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(333,783
|
)
|
|
(281,637
|
)
|
|
(717,880
|
)
|
|
(634,654
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating
income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income and other
income
|
|
|
31
|
|
|
-
|
|
|
169
|
|
|
-
|
|
Interest
expense
|
|
|
(6,761
|
)
|
|
(4,500
|
)
|
|
(11,261
|
)
|
|
(9,000
|
)
|
Tax
penalties and
interest
|
|
|
(7,457
|
)
|
|
(25,309
|
)
|
|
(14,642
|
)
|
|
(35,947
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes.
|
|
|
(347,970
|
)
|
|
(311,446
|
)
|
|
(743,614
|
)
|
|
(679,601
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
490
|
|
|
-
|
|
|
1,010
|
|
|
520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS.
|
|
$
|
(348,460
|
)
|
$
|
(311,446
|
)
|
$
|
(744,624
|
)
|
$
|
(680,121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share - basic and diluted
|
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding
|
|
|
69,459,612
|
|
|
50,028,293
|
|
|
63,840,106
|
|
|
49,232,160
|
|
The
accompanying notes are an integral part of these financial
statements
WI-TRON,
INC.
STATEMENT
OF CHANGES IN STOCKHOLDERS' DEFICIENCY
Six
Months Ended June 30, 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 six months ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
(744,624
|
)
|
|
(744,624
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private
placement of common stock - (February 2008)
|
|
|
15,250,000
|
|
|
1,525
|
|
|
213,475
|
|
|
|
|
|
215,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of share based compensation
|
|
|
|
|
|
|
|
|
4,977
|
|
|
|
|
|
4,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to investor relations firm (February 2008)
|
|
|
2,500,000
|
|
|
250
|
|
|
87,250
|
|
|
|
|
|
87,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to Devendar Bains in settlement
of
note payable (May 2008)
|
|
|
3,000,000
|
|
|
300
|
|
|
149,700
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds
received from private placement escrow in connection with subscription
agreements for 22,995,000 shares to be issued after the increase
in
authorized shares (May and June 2008)
|
|
|
|
|
|
|
|
|
229,950
|
|
|
|
|
|
229,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
AT JUNE 30, 2008
|
|
|
70,778,293
|
|
$
|
7,078
|
|
$
|
26,693,107
|
|
$
|
(28,749,996
|
)
|
$
|
(2,049,811
|
)
|
The
accompanying notes are an integral part of these financial
statements
WI-TRON,
INC.
STATEMENTS
OF CASH FLOWS - UNAUDITED
|
|
Six Months Ended June 30,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Operating
activities:
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(744,624
|
)
|
$
|
(680,121
|
)
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
2,164
|
|
|
2,166
|
|
Amortization
of share based compensation
|
|
|
4,977
|
|
|
4,978
|
|
(Decrease)
increase in allowance for doubtful accounts
|
|
|
|
|
|
9,000
|
|
Interest
accrued on notes payable issued in connection with private placement
of
common stock
|
|
|
9,000
|
|
|
9,000
|
|
Common
shares issued to public relations firm
|
|
|
87,500
|
|
|
-
|
|
Changes
in assets and liabilities
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(67,562
|
)
|
|
15,680
|
|
Inventories
|
|
|
10,739
|
|
|
10,180
|
|
Accounts
payable and accrued expenses
|
|
|
67,979
|
|
|
191,217
|
|
Total
adjustments
|
|
|
114,797
|
|
|
242,221
|
|
Net
cash (used) for operating activities
|
|
|
(629,827
|
)
|
|
(437,900
|
)
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
|
Overdraft
|
|
|
35,758
|
|
|
1,279
|
|
Advances
from Tek, Ltd.
|
|
|
138,040
|
|
|
437,121
|
|
Officer
loans
|
|
|
(2,838
|
)
|
|
(500
|
)
|
Funds
received from private placement escrow in connection with subscription
agreements for 22,995,000 shares to be issued after the increase
in
authorized shares
|
|
|
229,950
|
|
|
-
|
|
Proceeds
from private placements of common stock
|
|
|
215,000
|
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
615,910
|
|
|
437,900
|
|
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
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Non-cash
financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of Note Payable to Devendar Bains (former CEO) into 3,000,000 shares
of
restricted common stock
|
|
$
|
150,000
|
|
$
|
-
|
|
WI-TRON,
INC.
Notes
to Financial Statements (Unaudited)
June
30, 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 June 30, 2008 and 2007 (b) the financial position
at
June 30, 2008 (c) the statements of cash flows for the three month period ended
June 30, 2008 and 2007 , and (d) the changes in stockholders' deficiency for
the
three month period ended June 30, 2008 have been made. The results of operations
for the three months ended June 30, 2008 are not necessarily indicative of
the
results to be expected for the full year.
In
February 2008, the Company entered into a letter of intent providing for the
acquisition of all of the outstanding shares of Cellvine in exchange for 85%
of
the outstanding common stock of Wi-tron on a fully diluted basis, leaving the
existing owners of the Company's common stock with 15% on a fully diluted basis.
Among other things, the agreement provides for the conversion of the Tek, Ltd.
debt ($1,046,702 at June 30, 2008) into common stock at $.05 per share. Pursuant
to the merger, the Company will change its name to Cellvine.
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.
Effective
in May 2008, the Company entered into a Promissory Note Settlement Agreement
with Devendar S. Bains, a former executive officer of the Company (former CEO)
whereby 3,000,000 shares of restricted common stock of the Company was issued
in
exchange for debt previously owed by the Company to such person in the amount
of
$150,000.
In
May
2008, the Company entered into a Debt Conversion Agreement with its CEO where
the Company would issue up to 18,500,000 shares of restricted common stock
in
exchange for debt in the amount of $925,000. Such debt will be converted at
the
election of the Company at $0.05 per share. Conversion of such debt will be
at
the Company’s election but is expected to occur prior to the completion of a
merger with Cellvine, Ltd. as disclosed in these Notes.
In
May
and June 2008, the Company received $224,950 from escrow representing the net
proceeds of the private placement sale to accredited investors of 22,995,000
shares of restricted common stock. The shares will be issued after the Company
increases its authorized shares under its charter, or the Company authorizes
a
new series of preferred stock with equivalent voting rights. The subscription
agreements provide for full anti-dilution rights in connection with the Cellvine
merger.
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.
WI-TRON,
INC.
Notes
to Financial Statements (Unaudited)
June
30, 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 WI-TRON, INC. for
the six months ended June 30, 2008, has no cash and its working capital declined
by $55,033 to a deficiency of $2,062,349 since the beginning of the fiscal
year.
Current liabilities exceed cash and receivables by $2,094,110 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.
NOTE
C -
STOCKHOLDERS' EQUITY
At
June
30, 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
June
30, 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
|
From
May
2008 to June 2008, the Company received proceeds in the aggregate amount of
$229,950 as a result of private offerings of restricted common stock to
accredited investors (as defined in Regulation D promulgated under the
Securities Act of 1933, as amended). A total of 22,995,000 shares of restricted
common stock (or 229,950 shares of preferred stock) are issuable in connection
with these offerings.
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 $352,016 including accrued interest
of $52,016 remain unpaid at June 30, 2008. No actions have been taken by the
note holders to collect the balance up to and since June 30, 2008 through the
date of this filing.
WI-TRON,
INC.
Notes
to Financial Statements (Unaudited)
June
30, 2008
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.
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 $744,624 and $679,601 for the six months ended
June 30, 2008 and 2007, 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.
WI-TRON,
INC.
Notes
to Financial Statements (Unaudited)
June
30, 2008
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.
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
June 30, 2008, the Company owes $6,673 to the Vice President of Operations
for
loans and unpaid salaries. These balances 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
June 30, 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 $1,046,702.
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 six months ended June 30, 2008, Tek advanced funds to or on
behalf of the Company of $138,040.
Effective
May 2008, the Company entered into a Promissory Note Settlement Agreement with
a
former executive officer of the Company (former CEO) whereby 3,000,000 shares
of
restricted common stock of the Company was issued in exchange for debt
previously owed by the Company to such person in the amount of
$150,000.
WI-TRON,
INC.
Notes
to Financial Statements (Unaudited)
June
30, 2008
In
May
2008, the Company entered into a Debt Conversion Agreement with its CEO where
the Company would issue up to 18,500,000 shares of restricted common stock
in
exchange for debt in the amount of $925,000. Such debt will be converted at
the
election of the Company at $0.05 per share. Conversion of such debt will be
at
the Company’s election but is expected to occur prior to the completion of a
merger with Cellvine, Ltd. as disclosed in these Notes.
In
May
2008, in connection with the Company execution of a Merger Agreement with
Cellvine, Ltd., officers and other persons having employment agreements with
the
Company agreed to terminate such agreements and waive rights to severance in
connection with the completion of the merger with Cellvine Ltd. In exchange,
such officers will receive revised employment agreements and an aggregate of
6,000,000 shares of restricted common stock upon the closing of and conditional
upon the merger with Cellvine Ltd.
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 expired on May 31, 2008.
Tek
is
holding a security deposit of $5,500 in connection with this lease.
Rent
expense, including the Company's share of real estate taxes, utilities and
other
occupancy costs, was
$40,500
and $36,000 for the six months ended June 30, 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
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 June 30, 2008 was $10,000. As yet, no action has
been
taken by Phoenix concerning this default.
NOTE
K -
SUBSEQUENT EVENTS
In
July
and August 2008, the Company received approximately $127,000 of additional
private placement funds from various accredited investors in exchange for the
issuance of either a newly authorized class of preferred stock (at $1.00 per
share, convertible into common stock at a 100 for 1 basis) or the Company's
common stock (at $0.01 per share).
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 June 30, 2008 Compared to the Three
Months Ended June 30, 2007 .
Revenues
for the three months ended June 30, 2008 increased by $32,840 from $42,200
to
$75,040, or 89% compared to the same period in the preceding year. The sales
increases were primarily attributable to amplifier purchases by Cellvine.
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 $153,610 or 104% of sales compared to $101,330 or 240% of sales during
the same period for 2007. Gross margin for the three months ended June 30,
2008
amounted to a loss of $(3,275) ($145,166) compared to a loss of $(59,130)
((140)%), for the three months ended June 30, 2007. The improvement in gross
margin was principally due to improved production efficiencies. While this
was
an improvement, we don't consider it meaningful since our production and sales
levels were so low.
Selling,
general and administrative expenses increased in 2008 by $123,960 to $235,648
from $111,688 in 2007. Expressed as a percentage of sales, the selling, general
and administrative expenses were 416% in 2008 and 465% in 2007. The principal
factors contributing to the increase were professional fees, mostly in
connection with the Cellvine merger.
Research,
engineering and development expenses were $94,860 or 215% of net sales for
the
three months ended June 30, 2008 compared to $110,819 or 505% of net sales
in
2007. In 2008, the principal activity of the business related to the design
and
production of product for OEM manufacturers, particularly for the W-CDMA with
DSP control. The research, engineering and development expenses consist
principally of salary cost for engineers and the expenses of equipment purchases
specifically for the design and testing of the prototype products.
Interest
income was $NIL in 2008 and 2007 because we have had no available cash balances
to invest.
Interest
expense and tax penalties were $14,218 in 2008 compared to $29,809 in 2007
with
the reduction attributable to a reduction in payroll tax liabilities
outstanding.
Results
of Operations - The Six Months Ended June 30, 2008 Compared to Six Months Ended
June 30, 2007.
Revenues
for the six months ended June 30, 2008 increased by $49,997 from $56,224 to
$106,221, or 89% compared to the six months ended June 30, 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 $153,610 or 104% of sales compared to $145,166 or 240% of sales during
the same period for 2007. The improvement in gross margin was principally due
to
increased sales volume. However, the analysis is not meaningful as sales are
still too low to develop operating efficiencies to improve gross
margins.
Selling,
general and administrative expenses increased in 2008 by $180,343 to $441,896
from $261,553, in 2007. Expressed as a percentage of sales, the selling, general
and administrative (SG&A) expenses were 416% in 2008 and 465% in 2007. The
principal factors contributing to the increase were professional fees, mostly
in
connection with the Cellvine merger. Management believes that costs have been
reduced about as low as operations can sustain.
Research,
engineering and development expenses were 215% of net sales for the six months
ended June 30, 2008 compared to 505% 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.
Interest
expense and tax penalties were $25,903 in 2008 compared to $44,947 in 2007
with
the reduction attributable to a reduction in payroll tax liabilities
outstanding.
As
a
result of the foregoing, the Company incurred net losses of $744,624 or $0.01
per share for the six months ended June 30, 2008 compared with net losses of
$680,121 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 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 June 30, 2008, we had an accumulated
deficit of $28,749,996. Potential immediate sources of liquidity continued
to be
private placements of common stock.
As
of
June 30, 2008, our current liabilities exceeded our cash and receivables by
$2,094,110. Our current ratio was 0.05 to 1.00, but our ratio of accounts
receivable to current liabilities was only 0.03 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 $31,761 in inventory, of which $21,058 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
June 30, 2008, we had a bank overdraft of $35,758 compared to cash in banks
of
$13,917 at December 31, 2007. Accordingly, our cash position declined by $49,675
during 2008. Our cash used for operating activities was $629,827. We received
proceeds from private placements of equity securities of $444,950 during the
six
months ended June 30, 2008. Tek, Ltd., a company wholly owned by John C. Lee,
loaned the Company $138,040 during the six months ended June 30,
2008.
The
allowance for doubtful accounts on trade receivables was $5,872 at June 30,
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 $10,739 to $31,761 in 2008 compared to $42,500 at
December 31 2007, a decrease of 25%.
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.
With
no
remaining cash and no near term prospects of private placements, options or
warrant exercises and reduced revenues, 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.
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 $4,977 of stock-based compensation for
the
three months ended June 30, 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.
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 six
months ended June 30, 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 six months ended June 30, 2008, the Company issued securities as
follows.
In
February 2008, the Company issued 15,250,000 shares of restricted common stock
to various accredited investors for aggregate gross proceeds of
$215,000.
In
May
and June 2008, an escrow agent received investor funds of $225,000 representing
the sale of 22,500,000 restricted common shares (or its equivalent) to various
accredited investors in connection with a private placement.
Proceeds
with respect to the amounts raised were for general working capital purposes
and
to repay outstanding liabilities related to payroll taxes.
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
(a)
(2) Exhibits
|
1.1(1)
|
|
Form
of Underwriting Agreement
|
1.2(1)
|
|
Form
of Selected Dealer Agreement
|
1.3(1)
|
|
Form
of Agreement Among Underwriters
|
3.1(1)
|
|
Certificate
of Incorporation of the Company
|
3.2(1)
|
|
Certificate
of Merger (Delaware)
|
3.3(1)
|
|
Certificate
of Merger (New Jersey)
|
3.4(1)
|
|
Agreement
and Plan of Merger
|
3.5(1)
|
|
By-Laws
of the Company
|
3.6(2)
|
|
Certificate
of Designation of Series A Preferred Stock
|
3.7(3)
|
|
Certificate
of Amendment to the Certificate of Incorporation
|
4.1(1)
|
|
Specimen
Certificate for shares of Common Stock
|
4.2(1)
|
|
Specimen
Certificate for Warrants
|
4.3(1)
|
|
Form
of Underwriter’s Purchase Option
|
4.4(1)
|
|
Form
of Warrant Agreement
|
10.1(1)
|
|
1996
Incentive Stock Option Plan
|
10.2(1)
|
|
Employment
Agreement between the Company and Devendar S. Bains
|
10.3(1)
|
|
Employment
Agreement between the Company and Tarlochan Bains
|
10.4(1)
|
|
Employment
Agreement between the Company and Nirmal Bains
|
10.5
|
|
Intentionally
Omitted
|
10.6
|
|
Intentionally
Omitted
|
10.7(1)
|
|
Agreement
between the Company and Electronic Marketing Associates,
Inc.
|
10.8(1)
|
|
Agreement
between the Company and Link Microtek Limited.
|
10.9(1)
|
|
Agreement
between the Company and ENS Engineering.
|
10.10(4)
|
|
Settlement
Agreement between John Chase Lee and the Company
|
10.11(5)
|
|
2005
Stock Option Plan
|
10.12*
|
|
Merger
Agreement and Plan of Reorganization
|
14(6)
|
|
Code
of Ethics
|
|
|
|
31.1*
|
|
Certification
of Principal Executive Officer Pursuant to Section 302 of
the
|
|
|
Sarbanes-
Oxley Act of 2002 (18 U.S.C. Sec. 1350).
|
31.2*
|
|
Certification
of Principal Accounting Officer Pursuant to Section 302 of
the
|
|
|
Sarbanes-Oxley
Act of 2002 (18 U.S.C. Sec. 1350).
|
32.1*
|
|
Written
Statement of Principal Executive Officer Pursuant to Section 906
of
the
|
|
|
Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350).
|
32.2*
|
|
Written
Statement of Principal Accounting Officer Pursuant to Section 906
of
the
|
|
|
Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section
1350).
|
|
(1)
|
Incorporated
by Reference to the Company’s Registration Statement on Form SB-2, No.
333-11015.
|
|
(2)
|
Incorporated
by Reference to the Company’s Current Report on Form 8-K filed on August
3, 1999.
|
|
(3)
|
Incorporated
by Reference to the Company’s Current Report on Form 8-K filed on November
9, 2005.
|
|
(4)
|
Incorporated
by Reference to the Company’s Current Report on Form 8-K filed on July 21,
2005.
|
|
(5)
|
Incorporated
by Reference to the Company’s Annual Report for December 31, 2005 on Form
10-KSB filed on April 6, 2006.
|
|
(6)
|
Incorporated
by Reference to the Company’s Annual Report for December 31, 2006 on Form
10-KSB filed on May 18, 2007.
|
*
Filed
herewith.
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:
August
19, 2008
|
By:
|
/s/ John
C. Lee
|
|
Name:
|
John
C. Lee
|
|
Title:
|
Chief
Executive Officer and Director
|
|
|
|
Dated:
August
19, 2008
|
By:
|
/s/ Tarlochan
S. Bains
|
|
Name:
|
Tarlochan
S. Bains
|
|
Title:
|
Vice
President and Principal Accounting Officer
|
EXHIBIT
INDEX
Exhibit
|
|
|
No.
|
|
Description
|
10.12
|
|
Merger
Agreement and Plan of Reorganization
|
31.1
|
|
Certification
of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002 (18 U.S.C. Sec. 1350).
|
31.2
|
|
Certification
of Principal Accounting Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. Sec. 1350).
|
32.1
|
|
Written
Statement of Principal Executive Officer Pursuant to Section 906
of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
|
32.2
|
|
Written
Statement of Principal Accounting Officer Pursuant to Section 906
of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
1350).
|