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)
|
(Zip
Code)
|
YES
x
|
NO
o
|
YES
o
|
NO
x
|
Class
of
Securities
|
Outstanding
at
August
11, 2006
|
Common Stock, $.001 Par Value |
4,679,812
|
Page
|
|||
PART
I.
|
FINANCIAL INFORMATION | ||
Item 1. |
Financial
Statements (Unaudited):
|
||
Condensed
Consolidated Balance Sheet as of June
30, 2006
|
3
|
||
Condensed
Consolidated Statements of Operations for the Three
Months and Six Months Ended June 30, 2006 and 2005
|
4
|
||
Condensed
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 2006 and 2005
|
5
|
||
Notes
to Condensed Consolidated Financial Statements
|
6
|
||
Item 2. |
Management's
Discussion and Analysis or
Plan of Operation
|
11
|
|
|
|
||
Item 3. |
Controls
and Procedures
|
15
|
|
PART
II.
|
OTHER INFORMATION | ||
Item 2. |
Unregistered
Sales of Equity Securities and Use of Proceeds
|
16
|
|
Item 6. |
Exhibits
|
16
|
June
30,
2006
|
||||
ASSETS
|
||||
Current
assets:
|
||||
Cash
|
$
|
120,807
|
||
Accounts
receivable, net
|
12,583
|
|||
Prepaid
expenses and other assets
|
13,302
|
|||
Total
current assets
|
146,692
|
|||
Property
and equipment, net
|
16,074
|
|||
Total
assets
|
$
|
162,766
|
||
LIABILITIES
AND STOCKHOLDERS' DEFICIENCY
|
||||
Current
Liabilities:
|
||||
Accounts
payable
|
$
|
198,011
|
||
Accrued
expenses
|
41,572
|
|||
Dividend
payable on default of convertible preferred stock
|
938,816
|
|||
Deferred
revenues
|
2,159
|
|||
Total
Current Liabilities
|
1,180,558
|
|||
Commitments
and contingencies
|
||||
Stockholders'
deficiency:
|
||||
Preferred
stock, $.00025 par value; 800,000 shares
authorized:
|
||||
Series
A Convertible Preferred Stock, 450,000 designated and issued, 384,666
issued and outstanding, liquidation value $1,153,998
|
96
|
|||
Common
stock, authorized 40,000,000 shares of $.001
par value; 4,679,812 issued and outstanding
|
4,679
|
|||
Additional
paid-in capital
|
63,745,412
|
|||
Accumulated
deficit
|
(64,767,979
|
)
|
||
Total
stockholders’ deficiency
|
(1,017,792
|
)
|
||
Total
liabilities and stockholders’ deficiency
|
$
|
162,766
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30
|
June
30
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Revenues:
|
|||||||||||||
Software
licenses
|
$
|
29,880
|
$
|
20,988
|
$
|
52,190
|
$
|
53,849
|
|||||
Service
|
5,176
|
14,484
|
22,874
|
34,818
|
|||||||||
Total
revenues
|
35,056
|
35,472
|
75,064
|
88,667
|
|||||||||
Cost
of revenues:
|
|||||||||||||
Software
licenses
|
-
|
584
|
-
|
584
|
|||||||||
Service
|
1,867
|
-
|
1,867
|
3,738
|
|||||||||
Total
cost of revenues
|
1,867
|
584
|
1,867
|
4,322
|
|||||||||
Gross
profit
|
33,189
|
34,888
|
73,197
|
84,345
|
|||||||||
Operating
expenses:
|
|||||||||||||
Selling,
general, and administrative
|
605,603
|
229,887
|
932,198
|
477,445
|
|||||||||
Research
and development
|
119,069
|
120,441
|
242,441
|
253,182
|
|||||||||
Total
operating expenses
|
724,672
|
350,328
|
1,174,639
|
730,627
|
|||||||||
Loss
from operations
|
(691,483
|
)
|
(315,439
|
)
|
(1,101,442
|
)
|
(646,282
|
)
|
|||||
Other
income/(expenses)
|
|||||||||||||
Sale
of intellectual property
|
-
|
451
|
250,000
|
727
|
|||||||||
Other
expense
|
(473
|
)
|
-
|
(301
|
)
|
-
|
|||||||
Total
other income/(expenses)
|
(473
|
)
|
451
|
249,699
|
727
|
||||||||
Net
loss
|
(691,956
|
)
|
(314,988
|
)
|
(851,743
|
) |
(645,555
|
)
|
|||||
|
|
|
|||||||||||
Deemed
preferred dividend
|
-
|
504,978
|
-
|
504,978
|
|||||||||
Dividend
on covenant default of convertible preferred stock
|
298,300
|
-
|
567,566
|
-
|
|||||||||
Net
loss attributable to common stockholders
|
$
|
(990,256
|
)
|
$
|
(819,966
|
)
|
$
|
(1,419,309
|
)
|
$
|
(1,150,533
|
)
|
|
Net
loss per common share, basic and diluted:
|
|||||||||||||
Net
loss per share
|
$
|
(0.24
|
)
|
$
|
(0.22
|
)
|
$
|
(0.
36
|
)
|
$
|
(0.31
|
)
|
|
Weighted
average shares outstanding
|
|||||||||||||
basic
and diluted
|
4,051,760
|
3,723,026
|
3,958,047
|
3,721,920
|
Six
Months Ended
|
|||||||
June
30,
|
|||||||
2006
|
2005
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
cash used in operating activities
|
$
|
(664,944
|
)
|
$
|
(633,017
|
)
|
|
CASH
FLOWS USED IN INVESTING ACTIVITIES:
|
|||||||
Purchases
of equipment
|
-
|
(5,325
|
)
|
||||
Deposit
returned from cancelled offering
|
(12,000
|
)
|
-
|
||||
Net
cash used in investing activities
|
(12,000
|
)
|
(5,325
|
)
|
|||
|
|||||||
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Proceeds
from sale of intellectual property
|
250,000
|
-
|
|||||
Net
proceeds from stock option exercises
|
250,000
|
- | |||||
Proceeds
from note payable issuance
|
37,000
|
-
|
|||||
Repayment
of note payable
|
(37,000
|
)
|
-
|
||||
Net
proceeds from stock issuances
|
-
|
917,174
|
|||||
Net
cash provided by financing activities
|
500,000
|
917,174
|
|||||
Increase/(decrease)
in cash
|
(176,944
|
)
|
278,832
|
||||
Cash,
beginning of the period
|
297,751
|
414,051
|
|||||
Cash,
end of the period
|
$
|
120,807
|
$
|
692,883
|
|||
Supplemental
schedule of non-cash investing and financing activities:
|
|||||||
Issuance
of stock warrants
|
$
|
-
|
$
|
412,196
|
|||
Beneficial
conversion feature of preferred stock
|
$
|
-
|
$
|
504,978
|
|||
Issuance
of common stock to board members
|
$
|
20,900
|
$
|
12,300
|
|||
Dividend
payable on covenant default of convertible preferred stock
|
$
|
567,566
|
$ | - | |||
Common
stock issued for investor relations performed
|
$
|
-
|
$
|
7,900
|
|||
Issuance
of stock options to Board members
|
$
|
308,721
|
$
|
-
|
June
30, 2006
|
June
30, 2005
|
||||||
Options
|
1,689,175
|
435,875
|
|||||
Warrants
|
4,938,737
|
4,248,452
|
|||||
Convertible
preferred stock
|
1,800,000
|
1,456,016
|
|||||
Total
|
8,427,912
|
6,140,343
|
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||
|
2005
|
2005
|
|||||
|
|||||||
Net
loss
|
($314,988
|
)
|
($645,555
|
)
|
|||
|
|||||||
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
|
)
|
(80,884
|
)
|
|||
|
|||||||
Pro
forma net loss
|
($342,839
|
)
|
($726,439
|
)
|
|||
|
|||||||
Net
loss per share as reported-basic and diluted
|
($0.22
|
)
|
($0.31
|
)
|
|||
Pro
forma net loss per share- basic and diluted
|
($0.23
|
)
|
($0.33
|
)
|
Assumptions
|
2006
|
2005
|
|||||
|
|
|
|||||
Risk-free
rate
|
5.21
|
%
|
4.75
|
%
|
|||
Annual
rate of dividends
|
0
|
0
|
|||||
Volatility
|
92
|
%
|
77
|
%
|
|||
|
|||||||
Average
life
|
2.7
years
|
5
years
|
Options
|
Shares
|
Weighted-
Average
Exercise
Price
|
Weighted-Average
Remaining
Term
|
Aggregate
Intrinsic
Value
|
|||||||||
Outstanding
January 1, 2006
|
1,075,775
|
$
|
2.46
|
||||||||||
Granted
|
1,340,000
|
$
|
0.40
|
||||||||||
Exercised
|
(625,000
|
)
|
$
|
0.40
|
|||||||||
Terminated
|
(101,600
|
)
|
$
|
1.20
|
|||||||||
Outstanding
at June 30, 2006
|
1,689,175
|
$
|
1.65
|
6.5
|
$
|
2,276,219
|
|||||||
Exercisable
at June 30, 2006
|
1,163,295
|
$
|
1.98
|
5.4
|
$
|
2,007,709
|
Nonvested
Shares
|
Shares
|
Weighted-Average
Grant-Date Fair
Value
|
|||||
Outstanding
at January 1, 2006
|
702,427
|
$
|
0.74
|
||||
Granted
|
-
|
||||||
Vested
|
(76,547
|
)
|
$
|
1.34
|
|||
Forfeited
|
(100,000
|
)
|
$
|
0.58
|
|||
Outstanding
at June 30, 2006
|
525,880
|
$
|
0.68
|
· |
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. At June 30, 2006, the Company
failed
to meet the net working capital test and a Quarterly Default will
exist
upon the filing of this Form 10-QSB. As a result, the holders of
the
Series A Preferred Stock as of March 31, 2006 will receive an additional
155,365 shares of Series A Preferred Stock and, therefore, the Company
recorded a dividend payable on the covenant default of convertible
preferred stock of $298,300 as of June 30,
2006.
|
· |
Revenue
recognition.
Our revenue recognition policy is significant because our revenue
is a key
component of our results of operations. In addition, our revenue
recognition determines the timing of certain expenses. We follow
very
specific and detailed guidelines in measuring revenue; however, certain
judgments affect the application of our revenue policy. Revenue results
are difficult to predict, and any shortfall in revenue or delay in
recognizing revenue could cause our operating results to vary
significantly from quarter to quarter and could result in future
operating
losses. Revenue consists of the sale of software control devices,
videoconferencing systems and related maintenance contracts on these
systems. We sold two different products during the presented periods:
our
PC-based software products ONGOER and OnGuard, and our older proprietary
hardware and software product, Omega. Revenue on the sale of hardware
is
recognized upon shipment. We recognize revenue from ONGOER software
sales
upon shipment as we sell the product to audiovisual integrators.
Revenue
on Omega maintenance contracts is recognized over the term of the
related
contract.
|
· |
Capitalized
software research and development costs.
Our policy on capitalized software costs determines the timing of
our
recognition of certain development costs. In addition, this policy
determines whether the cost is classified as development expense
or is
capitalized. Software development costs incurred after technological
feasibility has been established are capitalized and amortized, commencing
with product release, using the greater of the income forecast method
or
on a straight-line basis over the useful life of the product. Management
is required to use professional judgment in determining whether
development costs meet the criteria for immediate expense or
capitalization.
|
· |
Impairment
of Assets/Investments.
We record impairment losses on assets and investments when events
and
circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets
are less
than the carrying amount of those items. Our cash flow estimates
are based
on historical results adjusted to reflect our best estimate of future
market and operating conditions. The net carrying value of assets
not
recoverable is reduced to fair value. Our estimates of fair value
represent our best estimate based on industry trends and reference
to
market rates and transactions.
|
Exhibit
No.
|
Description
|
|
3.1*
|
Certificate
of Incorporation as amended through April 22, 2005 (SB-2, Exhibit
3.1)
|
|
3.2*
|
Amended
Bylaws of the Company as presently in use (S-18 No. 1, Exhibit
3.2)
|
|
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.
|
SIMTROL,
INC.
|
||
|
|
|
Date: August 11, 2006 | /s/ Richard W. Egan | |
Chief Executive Officer (Principal
executive officer)
|
||
/s/ Stephen N. Samp | ||
Chief
Financial Officer
(Principal
financial and accounting officer)
|
||
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.
|