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 March 31, 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 incorporation) (I.R.S. Employer
Identification No.)
2200 Norcross Parkway, Suite 255
Norcross, Georgia 30071
(Address of principal executive offices, including zip code)
(770) 242-7566
(Issuer's telephone number, including area code)
Indicate by check mark 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|
Indicate 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 April 30, 2005
------------------- --------------
Common Stock, $.001 Par Value 3,722,914
Transitional Small Business Disclosure Format: YES |_| NO |X|
SIMTROL, INC. AND SUBSIDIARIES
Form 10-QSB/A
Quarter Ended March 31, 2005
Index
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheet as of
March 31, 2005........................................... 3
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2005 and 2004............... 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 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.......................................... 10
Item 6. Exhibits 11
2
SIMTROL, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIMTROL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2005
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 96,967
Accounts receivable, net 24,222
Prepaid expenses and other assets 21,009
-------------
Total current assets 142,198
Property and equipment, net 27,856
Other long-term assets 1,840
-------------
Total assets $ 171,894
=============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable 178,961
Accrued expenses 42,308
Deferred revenues 4,167
-------------
Total Current Liabilities 225,436
Commitments and contingencies
Stockholders' deficiency:
Preferred stock, $.00025 par value; authorized
800,000 shares, none issued and outstanding --
Common stock, authorized 40,000,000 shares of
$.001 par value; 3,722,914 issued and outstanding 3,723
Additional paid-in capital 62,823,458
Accumulated deficit (62,880,723)
-------------
Total stockholders' deficiency (53,542)
-------------
Total liabilities and stockholders' deficiency $ 171,894
=============
See notes to condensed consolidated financial statements.
3
SIMTROL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
2005 2004
----------- -----------
Revenues:
Software licenses $ 32,962 $ 25,816
Service 20,333 25,042
----------- -----------
Total revenues 53,195 50,858
Cost of revenues
Software licenses -- 70,522
Service 3,738 --
----------- -----------
Total cost of revenues 3,738 70,522
Gross profit (loss) 49,457 (19,664)
Operating expenses:
Selling, general, and administrative 247,531 271,547
Research and development 132,741 107,349
----------- -----------
Total operating expenses 380,272 378,896
Loss from operations (330,815) (398,560)
Other income/(expenses)
Gain on debt extinguishment -- 254,302
Other income/(expense), primarily finance charges 276 (162,749)
----------- -----------
Total other income (expenses), net 276 91,553
Net loss $ (330,539) $ (307,007)
=========== ===========
Net loss per common share:
Basic and Diluted $ (0.09) $ (0.13)
Weighted average shares outstanding
Basic and diluted 3,720,802 2,336,494
=========== ===========
See notes to condensed consolidated financial statements.
4
SIMTROL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
2005 2004
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash used in operating activities (317,084) (392,565)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) on short-term credit facilities -- (1,200)
Net proceeds from convertible debt -- 479,000
Net proceeds from stock issuances -- 5,000
--------- ---------
Net cash provided by financing activities -- 482,800
Increase (decrease) in cash and cash equivalents (317,084) 90,235
Cash and cash equivalents, beginning of the period 414,051 3,998
--------- ---------
Cash and cash equivalents, end of the period $ 96,967 $ 94,233
========= =========
Supplemental schedule of non-cash investing and financing activities:
Issuance of stock warrants $ -- $ 192,602
--------- ---------
Beneficial conversion feature of convertible debt $ -- $ 127,242
--------- ---------
Common stock issued for investor relations services performed $ 7,900 $ --
--------- ---------
See notes to condensed consolidated financial statements.
5
SIMTROL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 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 March 31, 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 March 31, 2005, the Company had cash and cash equivalents of $96,967. 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 ONOGER product line. On February 4,
2004, the Company issued $575,000 of convertible debt (see Note 5) and continues
to attempt to raise capital. However, there can be no assurance that the Company
will be successful in its attempts to develop and deploy its Ongoer product
line, to 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. The
Company has a net stockholders' deficit as of March 31, 2005 of $53,542.
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.
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Note 3 - Selected Significant Accounting Policies
Principles of Consolidation
The unaudited 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 the 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 earnings per share
because their effects would be anti-dilutive.
March 31, 2005 March 31, 2004
--------------- --------------
Options 435,875 137,525
Warrants 2,792,436 900,923
Convertible Debt -- 488,569
--------- ---------
Total 3,228,311 1,527,017
--------- ---------
Accordingly, basic and diluted earnings per share are identical.
Stock Based Compensation
SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure-an amendment of 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, SFAS No. 148 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 if the Company had applied the fair value
recognition provisions of SFAS 123 to stock-based employee compensation:
Three Months Ended
March 31,
2005 2004
=============================
Net loss as reported ($330,539) ($307,007)
Less: stock-based employee compensation expense
determined under fair value-based methods for all
awards (53,033) (7,789)
-----------------------------
Pro forma net loss ($383,572) ($314,796)
=============================
Net loss per share as reported-basic and diluted ($0.09) ($0.13)
Pro forma net loss per share- Basic and diluted ($0.10) ($0.13)
-------------------------------------------------------------------------------------------------
Pro forma Information
The fair value for options issued during the three months ended March 31, 2005
and 2004 were estimated at the date of grant using a Black-Scholes
option-pricing model to be $25,000 and $0, respectively, with the following
weighted-average assumptions.
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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 three months
ended March 31, 2005 and 2004:
Weighted
Average
Exercise
Options Price
Options outstanding at January 1, 2004 137,525 $13.20
Granted -- --
Exercised -- --
Terminated -- --
--------------------
Options outstanding at March 31, 2004 137,525 $13.20
====================
Options outstanding at January 1, 2005 410,275 $5.66
Granted 50,000 $0.77
Exercised -
Terminated (24,400) $5.95
--------------------
Options outstanding at March 31, 2005 435,875 $5.08
====================
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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. This statement is effective for
public entities that file as small business issuers - as of the beginning of the
first interim or annual reporting period that begins after December 15, 2005.
The adoption of this pronouncement is not expected to have a material effect on
the Company's financial statements.
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.
8
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 March 31, 2005, there was
$4,167 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 (placement
fee of $96,000 was capitalized as financing costs) 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 at the date of origination 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 March 31, 2004, $72,815 was expensed as financing costs relating to
the amortization of the beneficial conversion feature and warrant value.
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 $33,800 of this amount was amortized as a financing expense in the
three months ended March 31, 2004.
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.
9
Note 6 - Stockholders' Deficiency
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.
During the three months ended March 31, 2005, the Company issued 10,000 shares
of restricted common stock in exchange for investor relations services performed
for the Company by an investor relations consultant, valued at $7,900.
Note 7- Major Customers
Revenue from four customers comprised approximately $50,485 (95%) of
consolidated revenues for the three months ended March 31, 2005. At March 31,
2005, related accounts receivable from these customers comprised 100% of
consolidated receivables.
Revenue from three customers comprised approximately $50,858 (100%) of
consolidated revenues for the three months ended March 31, 2004.
Note 8 - Gain on Debt Extinguishment
A gain of $254,302 was recorded during the three months ended March 31, 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. No such settlements were recorded during the three months
ended March 31, 2005.
Note 9 - Subsequent Event
On May 9, 2005 the Board of Directors of the Company designated the preferences,
rights, and limitations of Series A Convertible Preferred Stock, of which up to
450,000 shares may be issued. Each share of Series A Convertible Preferred Stock
has a stated value of $3.00 and is convertible into four shares of common stock.
On May 10, 2005 the Company completed the sale of 90,667 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 $226,000 (offering costs of
approximately $46,000).
Part II - OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In order to raise additional capital to support our operations, we are currently
conducting a private placement of a minimum of $250,000 and a maximum of
$1,250,000 of units consisting of one share of convertible preferred stock and
warrants to purchase two shares of our common stock at an exercise price of
$1.00 per share and two shares of our 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). A copy of the Certificate of Designations establishing the terms of the
preferred stock being sold in the private placement is attached hereto as
Exhibit 3.12.
On May 10, 2005, we completed the sale of 90,667 units for $272,000 in this
private placement to seven accredited investors. We plan to conduct additional
closings in the event we receive additional subscriptions to purchase units in
the private placement.
10
Westminster Securities Corporation is acting as our placement agent in the
offering, and will receive a cash fee equal to 12% of the gross proceeds that we
sell in the private placement and warrants to purchase a number of shares of our
common stock equal to 12% of the number of shares of common stock underlying the
preferred stock and warrants that we sell in the private placement.
The offers and sales of the securities in the private placement are 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 offers and
sales, we will not conduct any general solicitation or advertising, and we will
comply with the requirements of Regulation D relating to the restrictions on the
transferability of the shares issued.
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
Pursuant to 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)
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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.
12