Form 10-QSB/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2005
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _____
Commission file number 1-10927
SIMTROL, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 58-2028246
(State of (I.R.S. Employer
incorporation) Identification No.)
2200 Norcross Parkway, Suite 255
Norcross, Georgia 30071
(Address of principal executive offices) (Zip Code)
(770) 242-7566
(Issuer's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months, and (2) has been subject to such filing requirements for the past 90
days.
YES |X| NO | |
Indicate by check mark whether the registrant is a shell company (as defined by
Rule 12b-2 of the Exchange Act).
YES | | NO |X|
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Outstanding at
Class of Securities July 31, 2005
-------------------
Common Stock, $.001 Par Value 3,733,163
SIMTROL, INC. AND SUBSIDIARIES
Form 10-QSB/A
Quarter Ended June 30, 2005
Index
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheet as of
June 30, 2005...................................................... 3
Condensed Consolidated Statements of Operations for the
Three Months and Six Months Ended June 30, 2005 and 2004........... 4
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2005 and 2004............................ 5
Notes to Condensed Consolidated Financial Statements .............. 6
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds............ 12
Item 5. Other Information 12
Item 6. Exhibits............................................................... 13
2
SIMTROL, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIMTROL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
June 30,
ASSETS 2005
----
Current assets:
Cash $ 692,883
Accounts receivable, net 59,173
Prepaid expenses and other assets 25,152
------------
Total current assets 777,208
Property and equipment, net 25,707
Other assets:
Other long term assets 1,149
------------
Total assets $ 804,064
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 175,320
Accrued expenses 36,162
Deferred revenues 31,667
------------
Total Current Liabilities 243,149
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.00025 par value;
800,000 shares authorized:
Series A Convertible Preferred
Stock, 450,000 designated;
364,004 issued and outstanding,
liquidation value $1,092,000 91
Common stock, authorized 40,000,000
shares of $.001 par value;
3,733,163 issued and outstanding 3,733
Additional paid-in capital 63,752,830
Accumulated deficit (63,195,739)
------------
Total stockholders' equity 560,915
------------
Total liabilities and
stockholders' equity $ 804,064
============
See notes to condensed consolidated financial statements.
3
SIMTROL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30 June 30
------------------------- ------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Revenues:
Software licenses $ 20,988 $ 393,240 $ 53,849 $ 419,056
Service 14,484 18,428 34,818 43,470
----------- ----------- ----------- -----------
Total revenues 35,472 411,668 88,667 462,526
Cost of revenues:
Software licenses 584 7,427 584 77,949
Service -- 2,069 3,738 2,069
----------- ----------- ----------- -----------
Total cost of revenues 584 9,496 4,322 80,018
----------- ----------- ----------- -----------
Gross profit 34,888 402,172 84,345 382,508
Operating expenses:
Selling, general, and administrative 229,887 260,036 477,445 531,583
Research and development 120,441 110,358 253,182 217,707
----------- ----------- ----------- -----------
Total operating expenses 350,328 370,394 730,627 749,290
(Loss)/income from operations (315,439) 31,778 (646,282) (366,782)
Other income/(expenses)
Other income/(expense), primarily finance charges 451 (284,587) 727 (447,336)
Debt conversion expense -- (164,155) -- (164,155)
Gain on debt extinguishment -- 394,309 -- 648,611
----------- ----------- ----------- -----------
Total other income/(expenses) 451 (54,433) 37,120 37,120
----------- ----------- ----------- -----------
Net loss (314,988) (22,655) (645,555) (329,662)
Deemed preferred dividend 504,978 -- 504,978 --
----------- ----------- ----------- -----------
Net loss attributable to common stockholders $ (819,966) $ (22,655) $(1,150,533) $ (329,662)
=========== =========== =========== ===========
Net loss per common share, basic and diluted:
Net loss per share $ (0.22) $ (0.01) $ (0. 31) $ (0.13)
=========== =========== =========== ===========
Weighted average shares
outstanding
basic and diluted 3,723,026 2,600,208 3,721,920 2,468,351
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
4
SIMTROL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
-------------------------
2005 2004
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash used in operating activities (633,017) (904,619)
----------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of equipment (5,325) --
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on short-term credit facilities -- (156,654)
Payments on long-term debt -- (59,792)
Payments of convertible debt -- (60,000)
Net proceeds from convertible debt -- 479,000
Net proceeds from stock issuances 917,174 1,058,607
----------- -----------
Net cash provided by financing activities 917,174 1,261,161
----------- -----------
Increase in cash 278,832 356,542
Cash, beginning of the period 414,051 3,998
----------- -----------
Cash, end of the period $ 692,883 $ 360,540
=========== ===========
Supplemental schedule of non-cash investing and financing activities:
Issuance of stock warrants $ 412,196 $ 91,202
----------- -----------
Capitalization of Financing Fees $ -- $ 101,400
----------- -----------
Beneficial conversion feature of convertible debt $ -- $ 127,242
----------- -----------
Beneficial conversion feature of preferred stock $ 504,978 $ --
----------- -----------
Issuance of common stock to board members $ 12,300 $ --
----------- -----------
Conversion of debt and accrued interest to common stock $ -- $ 542,825
----------- -----------
Common stock issued for investor relations performed $ 7,900 $ --
----------- -----------
See notes to condensed consolidated financial statements.
5
SIMTROL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(Unaudited)
Note 1 - Nature of Operations and Basis of Presentation
Simtrol, Inc., formerly known as VSI Enterprises, Inc., was incorporated in
Delaware in September 1988 and, together with its wholly-owned subsidiaries (the
"Company"), develops, markets, and supports software-based audiovisual control
systems and videoconferencing products that operate on PC platforms.
The accompanying unaudited condensed consolidated financial statements have been
prepared by the Company in conformity with accounting principles generally
accepted in the United States of America and the instructions of Form 10-QSB. It
is management's opinion that these statements include all adjustments,
consisting of only normal recurring adjustments necessary to present fairly the
financial position, results of operations, and cash flows as of June 30, 2005
and for all periods presented.
Certain information and footnote disclosures normally included in the annual
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. It is
suggested that these unaudited condensed consolidated financial statements be
read in conjunction with the consolidated financial statements and notes thereto
as of December 31, 2004 and for each of the two years ended December 31, 2004
and 2003, which are included in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 2004 filed with the Securities and Exchange
Commission.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
On May 7, 2004, the Company effected a 1:10 reverse split of the Company's
common stock. All share totals have been adjusted to reflect the 1:10 reverse
split for all periods presented.
Note 2 - Going Concern Uncertainty
As of June 30, 2005, the Company had cash of $692,883. The Company does not have
sufficient funds for the next twelve (12) months and has relied on periodic
investments in the form of common stock and convertible debt since the fourth
quarter of 2001 to sustain its operations. The Company currently requires
substantial amounts of capital to fund current operations and for the payment of
past due obligations including operating expenses and the continued development
and deployment of its ONGOER and OnGuard product lines. During the quarter ended
June 30, 2005, the Company issued $1,092,000 of convertible preferred stock.
(see Note 6). On February 4, 2004, the Company issued $575,000 of convertible
debt (see Note 5) and on June 4, 2004, the Company issued $1,250,000 of equity
securities (see Note 6) in a private placement. However, there can be no
assurance that the Company will be successful in its attempts to develop and
deploy its ONGOER and OnGuard product lines, generate positive cash flows or
raise sufficient capital essential to its survival. To the extent that the
Company is unable to generate or raise the necessary operating capital, it will
become necessary to curtail operations. Additionally, even if the Company does
raise operating capital, there can be no assurance that the net proceeds will be
sufficient to enable it to develop its business to a level where it will
generate profits and positive cash flows.
These matters raise substantial doubt about the Company's ability to continue as
a going concern. However, the accompanying financial statements have been
prepared on a going concern basis, which contemplate the realization of assets
and satisfaction of liabilities in the normal course of business. The financial
statements do not include any adjustments relating to the recoverability of the
recorded assets or the classification of the liabilities that might be necessary
should the Company be unable to continue as a going concern.
Note 3 - Selected Significant Accounting Policies
6
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.
Loss Per Share
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share", requires the presentation of basic and diluted earnings per share
("EPS"). Basic EPS is computed by dividing loss available to common stockholders
by the weighted-average number of common shares outstanding for the period.
Diluted EPS includes the potential dilution that could occur if options or other
contracts to issue common stock were exercised or converted. The following
equity securities are not reflected in diluted loss per share because their
effects would be anti-dilutive:
June 30, 2005 June 30, 2004
------------- -------------
Options 435,875 347,525
Warrants 4,248,452 2,190,741
Convertible Debt -- 194,217
Convertible preferred stock 1,456,016 --
------------- -------------
Total 6,140,343 2,732,483
------------- -------------
Accordingly, basic and diluted loss per share are identical.
Stock Based Compensation
SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure-an amendment of Financial Accounting Standards Board ("FASB")
Statement No. 123" amends SFAS No. 123, "Accounting for Stock-Based
Compensation", to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based compensation
and the effect of the method used on reported results. The Company continues to
follow the pro-forma disclosures for stock-based compensation as permitted in
SFAS No. 123. The following table illustrates the effect on net loss per share
as if the Company had applied the fair value recognition provisions of SFAS No.
123 to stock-based employee compensation:
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -----------------------
2005 2004 2005 2004
---------- --------- ------------ ---------
Net loss ($314,988) ($22,655) ($645,555) ($329,662)
Add: stock-based employee compensation expense
determined under the intrinsic value method -- -- -- --
Less: stock-based employee compensation expense
determined under fair value-based methods for all
awards (27,851) (14,924) (80,884) (22,712)
---------- --------- ------------ ---------
Pro forma net loss ($342,839) ($37,579) ($726,439) ($352,374)
========== ========= ============ =========
Net loss per share as reported-basic and diluted ($0.22) ($0.01) ($0.31) ($0.13)
Pro forma net loss per share- basic and diluted ($0.23) ($0.01) ($0.33) ($0.14)
Pro forma Information
7
The fair value for options issued during the six months ended June 30, 2005 and
2004 were estimated at the date of grant using a Black-Scholes option-pricing
model to be $25,000 and $256,864, respectively, with the following
weighted-average assumptions:
Assumptions 2005 2004
----------- ---------
Risk-free rate 4.75% 4.00%
Annual rate of dividends 0 0
Volatility 77% 85%
Average life 5 years 7 years
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. The
Company's employee stock options have characteristics significantly different
from those of traded options, and changes in the subjective input assumptions
can materially affect the fair value estimate.
The following summarizes the stock option transactions for the six months ended
June 30, 2005 and 2004:
Weighted
Average
Exercise
Options Price
-------- --------
Options outstanding at January 1, 2004 137,525 $ 13.20
Granted 210,000 2.00
Exercised -- --
Terminated -- --
--------
Options outstanding at June 30, 2004 347,525 $ 6.43
========
Options outstanding at January 1, 2005 410,275 $ 5.66
Granted 50,000 $ 0.77
Exercised --
Terminated (24,400) $ 5.95
--------
Options outstanding at June 30, 2005 435,875 $ 5.08
========
================================================================================
New Accounting Pronouncements
In December 2004, the FASB issued SFAS No. 123R, "Share Based Payment." This
statement is a revision of SFAS Statement No. 123, "Accounting for Stock-Based
Compensation" and supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees, and its related implementation guidance. SFAS No. 123R addresses all
forms of share based payment ("SBP") awards including shares issued under
employee stock purchase plans, stock options, restricted stock and stock
appreciation rights. Under SFAS No. 123R, SBP awards result in a cost that will
be measured at fair value on the awards' grant date, based on the estimated
number of awards that are expected to vest. Upon issuance, SFAS No. 123R
required public companies that file as small business issuers to apply SFAS No.
123R as of the beginning of the first interim or annual reporting period that
begins after December 15, 2005. In April 2005, the Securities and Exchange
Commission approved a new rule that delays the effective date, requiring small
business issuers to apply SFAS No. 123R in the first annual period after
December 15, 2005. Except for the deferral of the effective date, the guidance
in SFAS No. 123R is unchanged.
The adoption of this pronouncement is not expected to have a material effect on
the Company's financial statements.
8
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets." This Statement amends APB Opinion 29 to eliminate the exception for
nonmonetary exchanges of similar productive assets and replaces it with a
general exception for exchanges of nonmonetary assets that do not have
commercial substance. A nonmonetary exchange has commercial substance if the
future cash flows of the entity are expected to change significantly as a result
of the exchange. The provisions of SFAS No. 153 are effective for nonmonetary
asset exchanges occurring in fiscal periods beginning after June 15, 2005.
Earlier application is permitted for nonmonetary asset exchanges occurring in
fiscal periods beginning after December 16, 2004. The provisions of SFAS No. 153
should be applied prospectively.
The adoption of this pronouncement is not expected to have a material effect on
the Company's financial statements.
Revenue Recognition
Revenues consist of the sale of software control devices, videoconferencing
systems and related maintenance contracts on these systems. The Company sold two
different products during 2005 and 2004: its PC-based software products, ONGOER
and OnGuard, and its older proprietary hardware and software product, Omega.
Revenue from the sale of hardware and software is recognized upon the transfer
of title when shipped. Revenue on maintenance contracts is recognized ratably
over the term of the related sales contract. As of June 30, 2005, there was
$31,667 of deferred revenues.
Note 4 - Commitments and Contingencies
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position or results of operations.
Note 5 - Convertible Debt
On February 4, 2004, the Company completed the sale of convertible notes with a
principal balance of $575,000 ("2004 Debt"), in a private placement to a limited
number of accredited investors, including one Board member who purchased
$15,000. The Company raised net proceeds of $479,000 from the sale (net fee of
$96,000), and the proceeds of the offering were used to fund current operational
and overhead expenses. The interest rate of the notes was 10% per annum and the
conversion price of the notes was $2.00 per share for all principal and accrued
interest. The due date of the notes was August 4, 2004 and the notes were
convertible to shares of common stock at any time before that date.
In conjunction with the issuance of the 2004 Debt, the Company also issued
warrants to the noteholders to purchase an aggregate of 287,500 shares of common
stock with an exercise price of $2.00 per share (fair value of the warrants was
$91,202). Each warrant enabled the holder to purchase the same number of shares
as the holder would receive upon conversion of such holder's notes. The Company
also issued 169,000 warrants to Westminster Securities as a placement fee for
the financing (fair value of the Westminster warrants was $101,400). Noteholders
received additional warrants to purchase an aggregate of 575,000 shares of stock
(fair value of $179,789), which may only be exercised in the event a holder
actually elects to convert his or her notes into the Company's common stock. The
exercise price of the warrants is $2.00 per share of common stock.
Associated with this debt, a beneficial conversion feature of $127,242 was
recorded to reflect the discount on the 2004 Debt based on the relative fair
values of the warrants and conversion feature of the 2004 Debt. For the three
months ended June 30, 2004, $54,427 was expensed as financing costs relating to
the amortization of the beneficial conversion feature and warrant value. For the
six months ended June 30, 2004, $219,144 of financing costs of this type were
expensed.
All the above debt discounts were amortized to financing costs over the term of
the 2004 Debt, except for the $179,789 attributed to the 575,000 warrants that
could be exercised in the event of a conversion of the 2004 Debt. In June 2004,
$525,000 of the 2004 Debt was converted into 271,409 shares of common stock. As
a result, the Company recorded $164,155 of warrant value as debt conversion
expense in June 2004. A total of $50,000 plus all applicable accrued interest
was repaid during June 2004 with proceeds from the sale of common stock.
Additionally, the $101,400 capitalized as a financing fee for the warrants
granted to Westminster Securities was amortized over the life of the 2004 Debt.
Approximately $67,600 of this amount was amortized as a financing expense in the
three months ended June 30, 2004.
9
During 2001, the Company issued $400,000 of convertible debt to two stockholders
("2001 Debt"). The 2001 Debt accrued interest at prime rate plus 1% (6.5% at the
time), was originally due February 7, 2002 and was collateralized by all of the
assets of the Company. In January 2004, the 2001 Debt was extended to December
31, 2004 and the debt holders agreed to convert all principal and interest to
common stock at the close of the private placement of equity securities.
Additionally, the Company agreed to issue the debt holders warrants to purchase
two shares of stock for each share of stock created by conversion of the 2001
Debt, contingent upon the conversion of the principal note and interest to
common stock.
Note 6 - Stockholders' Equity
During the three months ended March 31, 2004, the Company issued 2,604 shares of
its common stock for gross proceeds of $5,000 ($1.92 per share). Offering costs
were de minimis.
On June 4, 2004, the Company issued 625,000 shares of its common stock for gross
proceeds of $1,250,000 in a private placement of equity to a limited number of
accredited investors. The Company also issued warrants to purchase a total of
625,000 shares of stock to these investors. The exercise price of the warrants
is $2.00 per share.
During the six months ended June 30, 2005, the Company issued 10,000 shares of
restricted common stock valued at $7,900 in exchange for investor relations
services performed for the Company by an investor relations consultant. The
Company also issued 10,249 shares of stock valued at $12,300 to Board Members as
compensation.
During the six months ended June 30, 2005, the Company issued 364,004 units of
securities, with each unit consisting of: one share of Series A Convertible
Preferred Stock, a warrant to purchase two shares of common stock at an exercise
price of $1.00 per common share expiring in five years, and a warrant to
purchase two shares of common stock at an exercise price of $1.25 per common
share expiring in five years, for total gross proceeds of $1,092,000 (net
proceeds of $917,174). The Certificate of Designation establishing the terms of
the Series A Convertible Preferred Stock included the following terms:
o the Holder may convert one share of the preferred stock into four shares
of common stock at any time and without limitation; and
o without approval of a majority of the Series A Preferred Stock Holders,
the Company cannot incur debt in excess of an aggregate of $1.0 million outside
of trade debt in the normal course of business. Such debt may only be secured by
accounts receivables and shall not encumber any copyrights, marketing materials,
software code or any other proprietary technology, software or product
processes, patents or patent licenses of the Company; and
o beginning the quarter ending December 31, 2005 and for every subsequent
quarter the Series A Preferred Stock is outstanding, if the Company's net
working capital (defined as current assets less current liabilities) is less
than twenty five per cent (25%) of the total amount of gross proceeds raised in
the Offering (defined as a "Quarterly Default"), then for each Quarterly
Default, the Holders of the Series A Preferred Stock will receive additional
shares of Series A Preferred Stock equal to 25% of the number of shares of
Series A Preferred Stock held by the Holder at the time of the Quarterly
Default. The net working capital will be tested on a quarterly basis, based on
the Company's most recent Form 10-QSB or Form 10-KSB or other appropriate
filing; and
o Series A Convertible Preferred shares have full voting rights on an "as
converted" basis; and
o the liquidation value of the Series A Preferred Stock is $3.00 per share,
and if the Company at any time while the Series A Preferred Stock is
outstanding, shall offer, sell, grant any option to purchase or offer, sell or
grant any right to reprice its securities, or otherwise dispose of or issue (or
announce any offer, sale, grant or any option to purchase or other disposition)
any common stock or common stock equivalents entitling any person to acquire
shares of common stock, at an effective price per share less than the then
conversion price of $0.75, then the conversion price shall be reduced to equal
the subsequent price. Exempt transactions for purposes of the repricing
provision include the issuance of (a) shares of common stock or options to
employees, officers or directors of the Company pursuant to any stock or option
plan duly adopted by a majority of the non-employee members of the Board of
Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, and (b) securities issued
pursuant to acquisitions or strategic transactions, provided any such issuance
shall only be to a person which is, itself or through its subsidiaries, an
operating company in a business synergistic with the business of the Company and
in which the Company receives benefits in addition to the investment of funds,
but shall not include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities.
10
The Company shall use its best efforts to cause a registration statement to
become effective within one hundred and twenty (120) days from the final closing
date or, if earlier, within five (5) days of Commission clearance to request
acceleration of effectiveness. The number of shares designated in the
registration statement to be registered shall include all of the registrable
securities and shall include appropriate language regarding reliance upon Rule
415 to the extent permitted by the Commission. The Company will notify the
holders of the Series A Preferred Stock of the effectiveness of the registration
statement within five (5) trading days of such event. In the event that this
effectiveness requirement is not met, the Company will pay the Investor (pro
rated on a daily basis), as partial compensation for such failure and not as a
penalty one and one half percent (1.5%) of the purchase price of the registrable
securities purchased from the Company and held by the Investor for each month
(or portion thereof) until such registration statement has been filed. Upon
effectiveness of the a registration statement for the common shares that result
from conversion of Series A Preferred Stock, if the Company fails to deliver to
the holder the common shares resulting from the conversion within three trading
days, the Company shall pay to such holder, in cash, as liquidated damages and
not as a penalty, for each $3,000 of stated value of Series A Preferred Stock
being converted, $30 per trading day (increasing to $100 per trading day after
three trading days and increasing to $120 per trading day six trading days after
such damages begin to accrue).
In connection with the issuance of the securities above, $412,196 of the net
proceeds received was allocated to the fair value of the warrants granted to
purchase 1,456,016 shares of common stock, and a beneficial conversion feature
of $504,978 was recorded to reflect the discount on the common shares that would
result from the conversion of the Series A Preferred Stock, based on the
relative fair values of the warrants and conversion feature of the Series A
Preferred Stock. This beneficial conversion feature is recorded as a dividend to
the preferred stockholders in the condensed consolidated statement of
operations.
On July 15, 2005, the Company issued 345,444 warrants to Westminster Securities
as a placement fee for the above financing. The exercise price of the warrants
is $0.75 per share of common stock.
Note 7- Major Customers
Revenue from four major customers of $75,700 comprised 85% of consolidated
revenues for the six months ended June 30, 2005. At June 30, 2005, related
accounts receivable from these companies comprised $58,882 (99%) of consolidated
receivables.
Revenue from a customer of $424,461 comprised approximately 92% of consolidated
revenues for the six months ended June 30, 2004. At June 30, 2004, related
accounts receivable from this company comprised $427,430 (96%) of consolidated
receivables.
Note 8 - Gain on Debt Extinguishment
Gains of $394,309 and $648,611 were recorded during the three months and six
months ended June 30, 2004 as a result of the Company entering into various
settlement agreements with vendors. The gains were recorded at the time of the
final payments under the various agreements. The Company had no similar
transactions during the six months ended June 30, 2005.
Note 9 - Subsequent Events
On July 15, 2005, the Company issued 345,444 warrants to purchase shares of
common stock to Westminster Securities as a placement fee for the offering that
closed on that date. The exercise price of the warrants is $0.75 per share of
common stock.
11
On July 21, 2005, the Company granted a total of 275,000 stock options to
employees. The options have a four-year vesting period and were granted at an
exercise price equal to the fair value of the Company's common stock on that
date.
On August 15, 2005, the Company completed the sale of 85,996 units consisting of
one share of Series A Convertible Preferred Stock, a warrant to purchase two
shares of common stock at an exercise price of $1.00 per share, and a warrant to
purchase two shares of common stock at an exercise price of $1.25 per share. Net
proceeds to the Company were approximately $255,000 (offering costs of
approximately $3,000).
Part II - OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the quarter ended June 30, 2005, we issued 364,004 shares of our Series A
Convertible Preferred Stock for gross proceeds of $1,092,000 (each Series A
Convertible Preferred shares may be converted into four shares of common stock),
in a private placement to a limited number of accredited investors. The Company
also issued warrants to purchase a total of 728,008 shares of common stock to
these investors, with an exercise price of the warrants of $1.00 per share, and
warrants to purchase a total of 728,008 shares of common stock at an exercise
price of $1.25 per share. In conjunction with the sale, we issued warrants to
Westminster Securities to purchase 345,444 shares of our common stock at a
purchase price of $0.75, as a placement fee. The proceeds of this offering were
used to fund working capital requirements.
In January 2005, we issued 10,000 shares of common stock in exchange for
investor relations services provided to us by an investor relations consultant.
In June 2005, we issued 12,249 shares of common stock to Board Members as
compensation for board meetings. The offer and sale of the shares were exempt
from the registration requirements of the Securities Act of 1933 (the "Act")
pursuant to Rule 506 and Section 4(2) of the Act. In connection with the sales,
we did not conduct any general solicitation or advertising, and we complied with
the requirements of Regulation D relating to the restrictions on the
transferability of the shares issued.
ITEM 5. OTHER INFORMATION
Private Placement of Securities
In order to raise additional capital to support our operations, on August 15,
2005, the Company completed the sale of 85,996 units consisting of one share of
Series A Convertible Preferred Stock, a warrant to purchase two shares of common
stock at an exercise price of $1.00 per share, and a warrant to purchase two
shares of common stock at an exercise price of $1.25 per share. Each share of
preferred stock has a stated value of $3.00 and is convertible into shares of
common stock of the Company at a conversion price of $0.75 (resulting in each
share being convertible into four shares of common stock). Net proceeds to the
Company were approximately $255,000 (offering costs of approximately $3,000).
The offer and sale of the shares were exempt from the registration requirements
of the Securities Act of 1933 (the "Act") pursuant to Rule 506 and Section 4(2)
of the Act. In connection with the sales, we did not conduct any general
solicitation or advertising, and we complied with the requirements of Regulation
D relating to the restrictions on the transferability of the shares issued. The
purchasers represented their intention to acquire the securities for investment
purposes only and not with a view to the distribution thereof, and either
received adequate information about the Company or had access to such
information through employment or other relationships.
Director Compensation
Effective June 30, 2005, the board of directors of the Company has authorized
the Company to pay fees to the members of the Company's board of directors for
their attendance at board and committee meetings, as follows: (i) $1,000 for
each board meeting attended in person, (ii) $500 for each board meeting attended
by telephone conference, and (iii) $200 for each committee meeting attended in
person or by telephone conference. These fees are paid as of the last day of
each fiscal quarter, in shares of the Company's stock issued pursuant to the
Company's 2002 Equity Incentive Plan, with such shares valued based on the most
recent closing trading price of the Company's common stock on the
Over-the-Counter Bulletin Board as of the last day of each fiscal quarter.
12
ITEM 6. EXHIBITS
31.1 Certification of the Chief Executive Officer pursuant to Exchange Act Rule
13a-14(a).
31.2 Certification of the Chief Financial Officer pursuant to Exchange Act Rule
13a-14(a).
32.1 Certification 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 Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIMTROL, INC.
Date: August 22, 2005 /s/ Richard W. Egan
--------------------------------------------
Chief Executive Officer
(Principal executive officer)
/s/ Stephen N. Samp
--------------------------------------------
Chief Financial Officer
(Principal financial and accounting officer)
13
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
31.1 Certification of the Chief Executive Officer pursuant to
Exchange Act Rule 13a-14(a).
31.2 Certification of the Chief Financial Officer pursuant to
Exchange Act Rule 13a-14(a).
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
14