UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
__________________
FORM
10-KSB
__________________
Annual
Report Pursuant to Section 13 or 15(d) of the Securities
Exchange
Act of 1934
For
the
Fiscal Year Ended December 31, 2006
__________________
Commission
File No. 1-10927
SIMTROL,
INC.
A
Delaware Corporation
(IRS
Employer Identification No. 58-2028246)
2200
Norcross Parkway Suite 255
Norcross,
Georgia 30071
(770)
242-7566
Securities
Registered Pursuant to Section 12(b)
of
the
Securities Exchange Act of 1934:
None
Securities
Registered Pursuant to Section 12(g)
of
the
Securities Exchange Act of 1934:
Common
Stock, $.001 par value per share
Check
whether the issuer (1) has filed all reports required to be filed by Section
13
or 15(d) of the Exchange Act during the past 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
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. o
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
registrant’s revenues for the fiscal year ended December 31, 2006 were
$224,692.
The
aggregate market value of the shares of common stock held by non-affiliates
of
the registrant was approximately $7,798,586, based on the closing price of
the
registrant's common stock as quoted on the Over The Counter Bulletin Board
on
April 14, 2007. For the purposes of this response, officers, directors and
holders of 5% or more of the registrant's common stock are considered to be
affiliates of the registrant at that date.
The
number of shares outstanding of the registrant's common stock as of April 14,
2007: 5,760,304 shares of $.001 par value common stock.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the definitive Proxy Statement pertaining to the 2007 Annual Meeting of
Shareholders, only to the extent expressly so stated herein, are incorporated
herein by reference into Part III.
Transitional
Small Business Disclosure Format (check one): Yes o No x
PART
I
FORWARD-LOOKING
STATEMENTS
This
report contains forward-looking statements within the meaning of the federal
securities laws. Forward-looking statements are those that express management’s
views of future events, developments, and trends. In some cases, these
statements may be identified by terminology such as "may," "will," "should,"
"expects," "plans," "intends," "anticipates," "believes," "estimates,"
"predicts," "potential," or "continue" or the negative of such terms and other
comparable expressions. Forward-looking statements include statements regarding
our anticipated or projected operating performance, financial results,
liquidity, and capital resources. These statements are based on management’s
beliefs, assumptions, and expectations, which in turn are based on the
information currently available to management. Information contained in these
forward-looking statements is inherently uncertain, and our actual operating
performance, financial results, liquidity, and capital resources may differ
materially due to a number of factors, most of which are beyond our ability
to
predict or control. Factors that may cause or contribute to such differences
include, but are not limited to, our ability to compete successfully in our
industry and to continue to develop products for new and rapidly changing
markets, and the other risks described under the caption “Factors Affecting
Future Performance” in Item 1 of this Report.
ITEM
1. DESCRIPTION OF BUSINESS.
History
We
were
incorporated under the laws of the State of Delaware on September 19, 1988.
From
1990 to 2001, we primarily designed, manufactured, marketed and supported
hardware-based command and control systems, including videoconferencing systems.
In September 2001 we changed our name from VSI Enterprises, Inc. to Simtrol,
Inc.
General
We
design, develop and market Windows-based software solutions that enable the
command, control and monitoring of otherwise incompatible electronic devices,
particularly corporate audiovisual (“AV”) assets. Our end-to-end solutions are
designed to provide Fortune 1000 corporations, government entities and other
end
users a cost-effective solution to simplify the automation and integration
of AV
and information technology (“IT”) assets.
Over
the
past five years, we have focused our resources to develop proven software
technologies to meet the growing demand for PC-based control systems. The
resulting ONGOERTM
and
OnGuard solutions have the benefit of being less expensive, more customizable,
and more compatible with existing technology infrastructure than the
hardware-based solutions of our historical competitors, AMX Corporation and
Crestron Electronics, Inc. Our solutions also provide easy scalability, as
customers only need to add additional PCs or servers to provide additional
processing power, rather than purchase large-scale proprietary hardware
controllers and touch panels. In addition, much of our sales focus has been
in
AV meeting rooms of large corporations and government agencies, healthcare,
and
in law enforcement where there are usually existing PCs, because adding our
software to these PCs is a compelling cost savings versus adding
closed-architecture hardware. We believe our Windows-based products are very
well suited to meet this demand.
Our
principal executive offices are located at 2200 Norcross Parkway, Suite 255,
Norcross, Georgia 30071 and our telephone number is (770) 242-7566.
Recent
Developments
On
February 15, 2006, Simtrol formed a joint venture with Integrated Digital
Systems, LLC (“IDS”), an integrator based in Livonia, Michigan, to develop and
sell a judicial arraignment software solution based on the success of a
deployment in Oakland County, Michigan. The new joint venture, Justice Digital
Solutions L.L.C., a Michigan limited liability company ("JDS"), was
headquartered in Michigan, with its development staff and testing center located
in Norcross, Georgia.
Under
the
JDS operating agreement, IDS and Simtrol each owned fifty percent of JDS.
IDS
contributed to JDS all of IDS’ interest in a software license agreement between
IDS and the County of Oakland, Michigan Constitutional Corporation, including
the exclusive worldwide rights to copy, modify, market, distribute, and
sublicense the software developed pursuant to the software license agreement
(the “OakVideo Software”). Simtrol contributed to JDS a non-exclusive,
worldwide, royalty-free license to integrate, copy, modify, market, distribute
and sublicense Simtrol’s ONGOER and OnGuard software for use with and into the
OakVideo Software, and Simtrol transferred to JDS any and all exclusive
worldwide rights to copy, modify, market, distribute, and sublicense certain
digital court recording software under development by us. JDS initially launched
a judicial arraignment solution, called Curiax ArraignerTM,
based
on the integration of our products with the OakVideo Software during
2006.
On
November 28, 2006, we signed an agreement to acquire the remaining fifty percent
(50%) membership interest in JDS from IDS. Following the acquisition the Company
owns 100% of JDS.
In
partial consideration for the transfer of the membership interest in JDS from
IDS to us, we will issue 500,000 restricted shares of our common stock to IDS
according to the following installment schedule:
| · |
200,000
restricted common shares of our capital stock to IDS on November
28,
2006;
|
| · |
100,000
restricted common shares of our capital stock to IDS on November
22,
2007;
|
| · |
100,000
restricted common shares of our capital stock to IDS on November
22, 2008;
and
|
| · |
100,000
restricted common shares of our capital stock to IDS on November
22,
2009.
|
In
partial consideration for the transfer of the membership interest in JDS from
IDS to us, JDS will pay IDS five percent of the gross revenues of JDS, from
whatever source derived, during calendar years 2007 and 2008, and two and
one-half percent of the gross revenues of JDS during calendar year
2009.
In
conjunction with the above transaction, JDS is required to pay IDS a total
of
$80,000 represented by 100% of the initial $40,000 and 50% of the next $80,000
to be received from a pre-existing customer.
Funding
of Operations
As
of
December 31, 2006, we had a cash overdraft of $1,420. We have relied on periodic
investments in the form of common stock, convertible debt, and notes payable
since the fourth quarter of 2001 to sustain our operations. In March 2007,
we
completed the sale of $3,525,000 of securities in a private placement of 4,700
units (at $750 per unit) consisting of one share of Series B Convertible
Preferred Stock and one warrant to purchase 2,000 shares of our common stock
at
an exercise price of $0.375 per share. Each share of Series B Convertible
Preferred Stock has a conversion price of $0.375 per share (1 Series B
Convertible Preferred share equals 2,000 shares of common stock). The warrants
have three-year terms. We intend to file a resale registration statement on
Form
SB-2 to register the common stock underlying the Series B Convertible Preferred
Stock and the warrants in the private placement. We currently require
substantial amounts of capital to fund current operations and the continued
development and deployment of our ONGOER and OnGuard product lines as well
as
its Curiax Arraigner product. In June 2006, two of our directors exercised
options to purchase 625,000 shares in aggregate for total proceeds to us of
$250,000. We also issued a $37,000 note payable to one member of the board
of
directors on June 9, 2006. On June 30, 2006, we repaid the note plus the accrued
interest at the rate of 10% per annum. We also issued notes payable of $379,000
to one member of the board of directors during 2006. At December 31, 2006,
these
notes plus $8,351 of accrued interest were outstanding.
As
we have not been profitable during any year in our history nor have we created
positive cash flows from operations, these matters raise substantial doubt
about
our ability to continue as a going concern. 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 we be unable to continue as a going
concern.
Products
IT
professionals have long managed corporate assets such as PCs, servers and
routers. During the past few years, most AV products became IP addressable
- a
requirement from IT professionals that wish to manage the AV devices with the
same power and flexibility they use to manage IT assets. IT departments demand
that these devices tie into their existing IT network and wish to use global
IT
tools such as IBM’s NetView, HP’s OpenView, or Computer Associates’ Unicenter to
monitor and manage them. ONGOER and OnGuard complement OpenView, NetView and
Unicenter by passing valuable health/status information to them. IT
professionals need a product to control the devices locally and remotely
(ONGOER) and a product to monitor/manage/diagnose the devices remotely
(OnGuard). Our products support these needs while using industry standard PC
technology.
The
hardware supported by our software is based on the open PC market and comes
from
a variety of companies. Our integration and OEM partners choose from many
familiar brands to receive high quality and competitive pricing and our approach
takes advantage of this high-quality, low-price, and easily available hardware.
PC equipment vendors are able to offer tremendous value because of the enormous
economies of scale inherent in the PC marketplace. Our partners are not locked
into expensive, proprietary controllers, touch panels and connectivity hardware
from AMX and Crestron.
ONGOER
is
computer-based general-purpose device control middleware running as a system
service on a Windows 2000 and onward platform. ONGOER can control any device
using a variety of interfaces, including TCP/IP, IR, IO, Relays, Serial (RS232,
RS422 and RS485), Lanc, and USB. With ONGOER, users can leverage commodity,
off-the-shelf PC hardware to create high-quality, affordable solutions.
ONGOER
control software communicates with the devices in the meeting room as well
as
the OnGuard monitoring software on the server. Devices are controlled locally
as
part of the room application or remotely as a help desk application. Health
and
status information of all devices is tracked real time and proactive alarms
(email or text pages to wireless devices such as pagers or cell phones) are
sent
to service personnel.
Simtrol’s
software-based approach allows flexibility regarding hardware and development
environment. Architecturally, application developers have the capability to
write their graphical user interfaces or applications in various programming
environments such as .NET, Visual Basic, C++, C#, Flash 8, Java, or Builder
(Simtrol’s development environment for simple solutions). The application or GUI
is then displayed on a commodity touch screen and/or mobile device for end-user
use. Because ONGOER uses TCP/IP for command and control signaling,
administrative and diagnostic functions are available via network-based
diagnostics tools.
OnGuard
is server-based asset management and monitoring software. The OnGuard Server
connects to ONGOER via standard TCP/IP networking and monitors devices at remote
locations. OnGuard displays information about device health and status via
a
standard browser interface. Technicians may log in from any place at any time
using standard web browsers to view the entire device control network at a
glance.
Curiax
Arraigner is a web-based client-server, document management system tailored
for
law enforcement and judicial system users, with a unique videoconferencing
and
device control and monitoring element. Overcrowded
courts create dangerous, costly logistical problems for transporting prisoners
and inefficient systems prevent police from being on the street protecting
citizens. Curiax Arraigner allows jurisdictions to a•void
the need to transport prisoners to courthouse for arraignment by integrating
multipoint videoconferencing, court recording, and data workflow and document
management into a unified platform.
Proprietary
Technology
We
regard
our ONGOER, OnGuard, and Curiax Arraigner software as proprietary and have
implemented protective measures of both a legal (copyright) and practical
nature. We derive considerable practical protection by supplying and licensing
only a non-modifiable run-time version to our customers and keeping confidential
all versions that can be modified. By licensing the software rather than
transferring title we, in most cases, have been able to incorporate restrictions
in the licensing agreements, which impose limitations on the disclosure and
transferability of the software. No determination has been made as to the legal
or practical enforceability of these restrictions, or the extent of customer
liability for violations. We have also used trademarks for our
ONGOERTM
control
software and Curiax ArraignerTM
arraignment software due to their unique natures.
Product
Development Strategies
The
AV
world and the IT world are converging, with more and more devices becoming
network enabled. Like PCs and servers, we believe IT departments will demand
AV
products (projectors, audio processors, video codecs, video switchers, cameras,
electronic whiteboards, etc.) be accessible on a corporate network, where they
can be controlled, managed and monitored from centralized and/or remote
locations. ONGOER and OnGuard install on PCs and servers, and support a product
architecture that allows them to control, monitor and manage any device
connected to them via the network.
Markets
Based
on
the long-term objective of becoming the industry standard software for
controlling and monitoring AV devices, management has developed a sales and
marketing strategy to aggressively pursue two vertical markets with the
company’s products: healthcare (particularly advanced operating rooms) and law
enforcement (particularly digital
arraignments and warrants).
Simtrol’s
core value to operating room companies is the replacement of proprietary
architecture with open PC architecture to control and monitor all OR devices.
This provides more technical flexibility, better scalability and a simpler
design while lowering costs.
Pre-trial
proceedings involve the costly and dangerous logistical problems of transporting
prisoners and moving documents across multiple agencies using antiquated methods
that can result in lost documentation, risk to public safety, and inefficiency
at taxpayer expense. Curiax Arraigner helps law enforcement officials avoid
transporting prisoners to the courthouse for arraignment by integrating
multipoint videoconferencing, court recording, data workflow, and document
management into a unified platform.
Competition
We
primarily compete with two companies in the AV control and monitory market,
both
of which have significantly greater resources and market share. Both companies
offer control solutions based on proprietary hardware and software. We offer
control solutions utilizing open PC technology.
Our
two major competitors
in the AV control systems market are AMX® and Crestron Electronics, who combined
currently have close
to
100% of the sales in this market.
AMX,
headquartered in Richardson,
Texas, was established in 1982. This company employs about 400 people, with
dealers and distributors in 40 countries. AMX has a strong foothold in Fortune
500 companies. Typical AMX applications include control of devices in corporate
boardrooms, meeting facilities, professional sporting arenas, museums, hospital
operating rooms, transportation systems, and schools.
Headquartered
in Rockleigh, New Jersey, Crestron designs and manufactures control and
automation systems for corporate, industrial, educational, and residential
markets.
Both
Crestron and AMX offer hardware-based control systems, the cores of which are
proprietary controllers
fitted
with proprietary cards and connectors manufactured by or for them, and running
proprietary operating systems. These proprietary controllers communicate with
controlled devices by means of code written in proprietary languages (each
company has developed its own). Integrators who re-sell systems from each of
these companies must send their technical personnel to training courses offered
by the companies themselves and by several independent
organizations.
Because
ONGOER is a software-based control system designed to run on commodity hardware,
we believe we have several advantages over AMX and Crestron. The PC industry
is
a vast marketplace with enormous economies of scale. Computer hardware including
touch screens, wireless Smart Displays, and serial ports are extremely powerful
and inexpensive. Innovative and wireless network-enabled devices are regularly
introduced into the mass PC market. There are advantages for end customers
in
familiarity and cost compared to proprietary, hardware-based control
systems.
End
customers are also demanding a new breed of proactively monitored control
solutions. Traditional control systems companies are reacting by introducing
PC-like services and interfaces
to PCs
and innovative PC wireless Smart Displays. These PC-like services cannot compete
in terms of price and performance with the much larger PC
marketplace.
Traditional
control systems position themselves to be the central technology and view the
PC
as an "important device." We believe the PC is the central technology and view
traditional hardware control boxes as a declining technology.
We
are
not currently aware of any competitors providing a unified digital arraignment
product similar to our Curiax Arraigner product.
Factors
Affecting Future Performance
The
following summarizes certain of the risks inherent in our business:
We
have limited resources available to service our existing indebtedness and
limited sources of additional working capital.
The
degree to which we are leveraged could have important consequences. For example,
it could:
| · |
make
it more difficult for us to obtain additional financing for working
capital, capital expenditures and other general corporate
purposes;
|
| · |
place
us at a relative competitive disadvantage to our less highly leveraged
competitors; or
|
| · |
make
us more vulnerable to economic
downturns.
|
We
currently have no credit lines available and must satisfy all of our working
capital and capital expenditure requirements from cash provided by operating
activities, from external capital sources or from the sale of
assets.
Our
long-term viability, as well as our ability to meet our future capital
commitments, depends on our financial and operating performance, which is
subject to, among other things, prevailing economic conditions and to certain
other financial, business and other factors beyond our control. We require
additional capital or other funding to finance our operations, as we do not
generate sufficient cash from operations to sustain our operations. If we are
unable to attain sufficient funding, we will not be able to continue to operate.
We can not assure you that projected sales will occur and, therefore, that
our
operating results or other financing activities will be sufficient to meet
debt
and other obligations and future working capital needs.
We
may not be able to achieve or sustain profitability.
After
19
years of operations, we have not reported any profits for a full year of
operations and, as of December 31, 2006, we had an accumulated deficit of $65.4
million. We may not be able to achieve or sustain profitability in the future,
as sales of our ONGOER product have not proven to be sufficient to fund our
operations. As a result, we may incur additional losses and negative cash flow
from operations for the foreseeable future.
If
we fail to secure sufficient capital or fail to create a strong marketing
support team, then our efforts to penetrate new markets could fail, resulting
in
decreased cash flow.
Expanding
our presence in the audiovisual command and control market will require capital
for further software product development and the creation of new sales channels.
The inability to secure sufficient capital or the failure to create a strong
sales channel/marketing support organization could result in a failed effort
to
penetrate these new markets and adversely affect operating results and cash
flow.
We
depend on purchases from a few significant customers and any loss, cancellation,
or reduction of purchases by these customers could harm our
business.
We
currently sell control and monitoring software and service previously sold
videoconferencing systems for a small number of major customers. During the
year
ended December 31, 2006, approximately 80% of our revenue was from five
customers. Further, we do not have long-term contracts with these or any of
our
other customers, so our customers could stop purchasing our products at any
time. The loss of any of our major customers, or any reduction in purchases
by
these customers, could significantly harm our business.
If
we
cannot attract, retain, train or manage our key management or technical
personnel effectively, our ability to develop and sell new products could be
hindered, resulting in a reduction in sales.
Our
development, management of our growth and other activities depend on the efforts
of key management and technical employees. Competition for such persons is
intense. Because we do not have long-term employment agreements with our key
management personnel or technical employees, we could lose one or more of our
key management or technical personnel, which could result in significant harm
to
our business. Our future success is also dependent upon our ability to
effectively attract, retain, train, motivate and manage our employees and
failure to do so could hinder the development and marketing of our products
and
result in a reduction in sales and our customers could shift their purchases
to
our competitors.
Fluctuations
in our quarterly performance could adversely affect our total revenues and
net
income levels.
Our
revenues have historically occurred predominantly in the third month of each
fiscal quarter. Accordingly, our quarterly results of operations are difficult
to predict and delays in the closing of sales near the end of the quarter could
cause quarterly revenues and, to a greater degree, operating and net income
to
fall substantially short of anticipated levels. Our total revenues and net
income levels could also be adversely affected by:
| · |
cancellations
or delays of orders,
|
| · |
changes
in customer base or product mix,
|
| · |
seasonal
patterns of capital spending by
customers,
|
| · |
delays
in purchase decisions due to new product announcements by us or our
competitors, and
|
| · |
increased
competition and reductions in average selling
prices.
|
Our
PC-based control system is unproven technology and may not be accepted by the
industry.
There
is
no industry standard for the control of AV systems. Generally, the market is
dominated by proprietary, closed-architecture control systems by manufacturers
such as AMX and Crestron. Our open-architecture, PC-based control system, which
we believe is superior and provides greater flexibility for end-users than
the
traditional proprietary systems, is a relatively new technology for the market.
Given the relatively short operating history of such PC-based systems, it is
impossible to determine at this time whether or not PC-based systems will gain
wide acceptance in the marketplace. To increase our sales, we must establish
a
greater presence in the AV system control market by convincing AV integrators
and IT Managers and ultimately end-users, to utilize a PC-based control system
rather than the traditional proprietary systems. There can be no assurance
that
use of PC-based control systems, such as our ONGOERTM
,
will be
accepted by the industry. If the use of PC-based AV control systems is not
accepted in the marketplace or if another industry standard is adopted, our
projected sales will not materialize, thereby causing potentially poor financial
performance.
We
rely on third parties for the sale of our products.
Sales
of
our ONGOERTM
and
OnGuard products are primarily made through third-party OEMs and AV integrators.
Generally, we do not have initial access to the end-users of AV systems in
the
marketplace and must, therefore, rely on third parties for the distribution
and
sale of our products. We have entered into dealer agreements with third-party
OEM and AV integrators, such as Telaid and IBM Global Services, for the sale
of
our products. However, such agreements are non-exclusive and such third parties
may, therefore, also sell products that directly compete with ours. In addition,
such agreements may be terminated at any time. If our relationships with such
third-party OEMs and AV integrators were terminated, we would have to seek
a new
distribution channel for our products, which would potentially have a material
adverse effect on our operations.
We
may be unable to accurately evaluate our business and to forecast our prospects,
which may prevent us from meeting the product demands of our potential customers
in a timely manner.
It
is difficult to forecast our future revenues accurately and to plan future
operating expenses. The revenue and income potential of our products and
business are largely
unproven. Although proprietary, closed-architecture AV control systems have
been
sold successfully, the PC-based AV control system is largely unproven. Our
ability to license our ONGOER
software
and achieve success will depend on, among other things, the level of demand
for
PC-based control systems and our capacity to meet demand and performance
standards of our prospective clients.
We
may not be able to maintain or improve our competitive position because we
face
intense competition in the AV control system market from existing competitors
with far greater technical and financial resources and other companies may
enter
the marketplace in the future.
Competition
in the command and control and video communications markets is intense. In
the
command and control market, our primary competitors are AMX, Inc. and Crestron
Electronics, Inc. We compete with AMX and Crestron on features such as ease
of
use, scalability and price. Although we feel that our PC-based system is
superior to the proprietary systems developed by AMX and Crestron in each of
these areas, we do not have the name recognition in the industry that is
currently enjoyed by AMX and Crestron, which may result in fewer sales of our
products. In addition, both AMX and Crestron have greater financial and
personnel resources than we do. Given their market share, resources and
reputation, if either or both of these companies choose to develop a PC-based
control system, it could have a serious adverse effect on our results of
operations. In addition, as use of AV systems becomes more widespread in both
businesses and homes, we expect other competitors, some with significantly
greater technical and financial resources such as Microsoft, to enter the
marketplace. If any such competitors choose to develop their own PC-based
control systems, rather than licensing software from us, it could have a serious
adverse effect on our sales. If we cannot continue to offer new command and
control and videoconferencing products with improved performance and reduced
cost, our competitive position will erode. Moreover, competitive price
reductions may adversely affect our results of operations.
Our
success will depend in part upon our ability to safeguard our proprietary
software.
We
rely
on a combination of patents, copyrights, trade secret laws and licensing
agreements to protect the proprietary software that we have developed as part
of
our business. There can be no assurance that these measures taken by us will
provide significant proprietary protection of our intellectual property or
that
competitors will not be able to legitimately ascertain proprietary information
embedded in our products which are not covered by such measures. In such case,
we may be precluded from preventing our competitors from making use of such
information.
There
are
no pending lawsuits or claims against us regarding infringement of any existing
patents, copyrights or other intellectual property rights of others. There
can
be no assurance, however, that such infringement claims will not be asserted
in
the future, nor can there be any assurance, if such claims are made, that we
will be able to defend such claims successfully or, if necessary, obtain
licenses on reasonable terms. Adverse determinations in any litigation naming
us
could subject us to significant liabilities to third parties, require us to
seek
licenses from third parties and prevent us from selling our products. The
occurrence of any of these events could have a material adverse effect on us.
We
will
also rely on unpatented or copyrighted trade secrets and propriety know-how.
We
generally require our employees, consultants, advisors and prospective partners
to enter into confidentiality agreements. There is no assurance, however, that
these agreements will protect any current or future proprietary information
or
that others will not gain access to or independently develop similar trade
secrets or know-how. Our competitive position and amount of potential future
income will depend in part upon our ability to obtain and maintain copyright
and
other intellectual property protection in various jurisdictions for proprietary
technologies, existing products and products we may develop in the
future.
If
necessary licenses of third-party technology become unavailable to us or become
very expensive, it could adversely impact our business.
We
currently license technology for use in our ONGOER product and may, from time
to
time, be required to license additional technology from third parties to develop
new applications or application enhancements. We cannot assure you that
third-party licenses will be available to us on commercially reasonable terms,
if at all. The inability to obtain any third-party license required to develop
new applications and application enhancements could require us to obtain
substitute technology of lower quality or performance standards or at greater
cost, either of which could have an adverse effect on our business.
Our
success will depend on our ability to adapt to rapid technological
change.
The
AV
industry typically experiences rapid technological change, changing market
conditions and customer demands and the emergence of new industry standards
and
practices that could render our products obsolete. Our future success will
substantially depend on our ability to enhance our products and services,
develop new services and proprietary technology and respond to technological
advances in a timely and cost-effective manner. The development of additional
products and other proprietary information entails significant technical and
business risk. There can be no assurance that we will succeed in developing
and
using new technologies or in adapting our technology and systems to meet
emerging industry standards and customer requirements. If we are unable, for
technical, legal, financial, or other reasons, to adapt in a timely manner
in
response to changing market conditions or customer requirements, or if our
new
products and services do not achieve market acceptance, our business, financial
condition and results of operations would be materially adversely
affected.
The
lack of a developed trading market may make it difficult to sell our
securities.
Trading
of our common stock is conducted on the OTC Bulletin Board. Trading activity
in
our common stock has fluctuated and at times been limited. We cannot guarantee
that a consistently active trading market will develop in the future. A holder
of our common stock may find it difficult to dispose of or to obtain quotations
as to the market value of our common stock.
The
market price for our common stock may be volatile.
The
market price for our common stock could be subject to significant fluctuations
in response to variations in quarterly operating results, announcements of
technological innovations or new products by us or our competitors, or our
failure to achieve operating results consistent with any securities analysts’
projections of our performance.
Our
common stock is subject to “penny stock” regulations and restrictions on initial
and secondary broker-dealer sales.
The
Securities and Exchange Commission (“SEC”) has adopted regulations which
generally define “penny stock” to be any listed, trading equity security that
has a market price less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exemptions. Penny stocks are subject to
certain additional oversight and regulatory requirements. These requirements
may
restrict your ability to sell our common stock.
Research
and Development
Our
product engineering, including our costs associated with design and
configuration of fully developed systems for particular customer applications,
is accounted for in our financial statements as research and development
expenses. During the year ended December 31, 2006 our expenditures for research
and development of new products or new components for our ONGOER and OnGuard
products totaled $416,982, a decrease of 5% from the total expenditures of
$437,374 in 2005.
Employees
As
of
December 31, 2006, we employed nine persons full time, including two executive
officers. Of the full-time employees who were not executive officers, three
were
engaged in research and development, two in service, one in sales, and one
in
information systems. Employee relations are considered good and we have no
collective bargaining contracts covering any of our employees.
ITEM
2. DESCRIPTION
OF PROPERTY.
We
maintain our executive and sales offices in 6,400 square feet of leased office
and warehouse space in Norcross, Georgia, under a 12-month lease extension,
which expires in August 2007. Monthly rent is approximately $3,800 including
common area maintenance charges, taxes, and insurance.
We
believe that our current facilities are adequate for our current
requirements.
ITEM
3. LEGAL PROCEEDINGS.
We
are
not party to any pending legal proceedings.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not
applicable.
PART
II
ITEM
5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES.
From
January 1, 2002 to May 21, 2003, our common stock traded on the OTC Bulletin
Board under the symbol “SMOL.” Our common stock traded on the Pink Sheets under
the symbol “SMOL” from May 22, 2003 to May 6, 2004. From May 7, 2004 to June 17,
2004, our common stock traded on the Pink Sheets under the symbol “SMRL.” On
June 18, 2004, our common stock began trading on the OTC Bulletin Board under
the symbol “SMRL”, where it currently trades.
The
following table sets forth the quarterly high and low bid quotations per share
of common stock on the OTC Bulletin Board and the Pink Sheets as reported for
the periods indicated. These prices also represent inter-dealer quotations
without retail mark-ups, markdowns, or commissions and may not necessarily
represent actual transactions.
|
|
|
HIGH
|
|
LOW
|
|
|
FISCAL
YEAR ENDED DECEMBER 31, 2005
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
1.55
|
|
$
|
0.65
|
|
|
Second
Quarter
|
|
|
1.30
|
|
|
0.70
|
|
|
Third
Quarter
|
|
|
1.10
|
|
|
0.60
|
|
|
Fourth
Quarter
|
|
|
0.75
|
|
|
0.44
|
|
| |
|
|
|
|
|
|
|
|
FISCAL
YEAR ENDED DECEMBER 31, 2006
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
1.25
|
|
$
|
0.51
|
|
|
Second
Quarter
|
|
|
0.75
|
|
|
0.36
|
|
|
Third
Quarter
|
|
|
0.90
|
|
|
0.25
|
|
|
Fourth
Quarter
|
|
|
0.51
|
|
|
0.25
|
|
As
of
April 13, 2007, there were approximately 626 holders of record and in excess
of
4,500 beneficial holders of our common stock.
We
have
never paid cash dividends on our common stock and have no plans to pay cash
dividends in the foreseeable future. The policy of our board of directors is
to
retain all available earnings for use in the operation and expansion of our
business. Whether dividends may be paid in the future will depend upon our
earnings, capital requirements, financial condition, prior rights of any
preferred stockholders, and other relevant factors.
On
December 31, 2006, we issued 14,193 shares of common stock to Board Members
as
compensation in lieu of cash fees for attendance at board meetings during the
three months ended December 31, 2006. On March 31, 2007, we issued 1,937 shares
of common stock to Board Members as compensation in lieu of cash fees for
attendance at board meetings during the three months ended March 31, 2007.
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
following table provides information as of December 31, 2006 regarding the
Company’s compensation plans and arrangements:
Equity
Compensation Plan Information
|
Plan
category
|
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
(a)
|
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(c)
|
|
| |
|
|
|
|
|
|
|
|
Equity
compensation plans approved by
security holders
|
|
|
795,325
|
|
$
|
2.30
|
|
|
-
|
|
|
Equity
compensation plans not approved
by security holders
|
|
|
5,917,437
|
(1) |
$
|
1.46
|
|
|
770,300
|
|
|
Total
|
|
|
6,712,762
|
|
$
|
1.57
|
|
|
770,300
|
|
__________________________
(1)
Includes 733,444 warrants granted to Westminster Securities as placement agent
fees for convertible debt and equity offerings during 2004 and 2005 and 272,400
options granted to employees during 2005. Also includes 1,520,000 options
granted to employees during 2006.
ITEM
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
The
following discussion and analysis should be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere in this
Form 10-KSB.
Overview
We
are an
Atlanta-based software technology company specializing in AV control. We design,
manufacture, market, service and support our ONGOER software control system,
which is designed to run on third-party hardware. Previously, our core business
was the design, manufacture, marketing and servicing of software based command
and control systems, including videoconferencing control systems, through our
wholly owned subsidiary, Videoconferencing Systems, Inc.
Our
command and control solutions allow end users to operate, as a single system,
a
broad range of electronic equipment such as projectors, VCRs, computers, sound
systems, lighting and temperature controls and other audio-video devices in
a
variety of settings. A typical customer is a large, multi-site organization
that
utilizes sophisticated audio, video and communications network technologies
that
require complex command and control solutions. These solutions can be used
in a
variety of settings, including corporate meetings and conferences, distance
learning and judicial arraignment systems. These customers also require superior
after-the-sale service. Historically, we have utilized a direct sales model.
However, in order to attempt to grow sales and to reach and maintain
profitability, management believes that we can better leverage our technological
and service competencies by marketing and selling our products through third
party resellers and system integrators, who specialize in the sale,
installation, support and service of audiovisual equipment, and by entering
new
markets for our control system technology.
During
2000, we undertook a restructuring of our business operations and balance sheet
that was intended to achieve profitable operations and provide positive
operating cash flows. As part of this restructuring, we raised additional equity
capital and paid off debt outstanding at that time. These restructuring
initiatives have enabled us to reposition our product line and to expand our
presence in the AV command and control systems market. This market, which to
some degree overlaps the high-end videoconferencing market historically served
by us, is almost exclusively maintained by thousands of resellers and system
integrators. Our products have been re-engineered such that they may also be
sold through these third party channels. We believe we offer a functionally
superior, lower cost, fully integrated solution which provides command and
control and remote diagnostics for audio, visual and room environment devices,
and for network connectivity.
We
used
$1,160,971 in cash from operating activities in 2006, primarily due to our
loss
of $1,462,187.
During
2006, we used $5,200 in investing activities for purchases of equipment. We
received $250,000 from investing activities during February 2006 for the sale
of
our patent technology related to our former videoconferencing business (see
note
6 to the consolidated financial statements). We also issued $52,000 of our
common stock in conjunction with the acquisition of the remaining 50%
interest in a joint venture that we did not previously own (see Note 11 to
the
consolidated financial statements). During 2005, we used $21,660 in investing
activities for purchases of equipment.
Cash
used
in financing activities in 2006 of $12,000 was due to the return of a deposit
received from a potential investor in a cancelled offering at December 31,
2005. We
also
issued a $37,000 note payable to one member of the board of directors on June
9,
2006. The proceeds of this debt were utilized for working capital purposes.
On
June 30, 2006, we repaid the note plus the accrued interest of $213 (see note
5
to the consolidated financial statements). We also received $250,000 from the
exercise of stock options by two members of our board of directors (see note
6
to the consolidated financial statements). During 2006, we issued $379,000
in
notes payable to one member of our board of directors that are outstanding
at
December 31, 2006. See Note 5 to the consolidated financial
statements.
In
2005,
we issued $1,350,000 of convertible preferred stock (proceeds net of offering
costs and sales commissions of $1,162,283, see Note 6 to our consolidated
financial statements). During 2005, we issued 10,000 shares of restricted common
stock valued at $7,900 in exchange for investor relations services performed
for
us by an investor relations consultant. We also issued 32,770 shares of
restricted common stock valued at $26,700 to board members for service during
2005. We also issued 87,984 shares of restricted common stock valued at $36,100
to board members for service during 2006. All amounts were recorded at the
fair
value of the stock on the date of the issuances.
During
2006, our total assets decreased approximately 16% to $285,908 at December
31,
2006 from $338,638 at December 31, 2005. The decrease was due primarily to
our
decreased cash balance at December 31, 2006 due to operating losses during
the
year exceeding the amount we raised through stock option exercises, notes
payable originations, and sales of the patents on our older videoconferencing
technology. Total liabilities increased from December 31, 2005 to December
31,
2006 primarily due to the additional estimated preferred stock payable to Series
A Preferred shareholders at December 31, 2006 due to the quarterly defaults
recorded during 2006 by the terms of the Series A Preferred Stock. See Note
13
to our audited consolidated financial statements.
LIQUIDITY
AND SOURCES OF CAPITAL
General
As
of
December 31, 2006, we had a cash overdraft of $1,420. We have relied on periodic
investments in the form of common stock, convertible debt, and notes payable
since the fourth quarter of 2001 to sustain our operations. There
can be no assurance that we will be successful in our attempts to develop and
deploy our ONGOER and Curiax Arraigner product lines, to generate positive
cash
flows or raise sufficient capital essential to our survival. To the extent
that
we are unable to generate or raise the necessary operating capital, it will
become necessary to curtail operations. Additionally, even if we do raise
operating capital, there can be no assurance that the net proceeds will be
sufficient to enable us to develop our business to a level where we will
generate profits and positive cash flows.
These
matters raise substantial doubt about our ability to continue as a going
concern. 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 we be unable to continue as a going concern.
On
February 15, 2006 we formed a joint venture with Integrated Digital Systems,
LLC
(“IDS”), an integrator based in Livonia, Michigan to develop and sell a judicial
arraignment software solution based on the success of a deployment in Oakland
County, Michigan. The new joint venture, Justice Digital Solutions L.L.C.,
a
Michigan limited liability company ("JDS"), is headquartered in Sterling
Heights, Michigan, with its development staff and testing center located in
Norcross, Georgia.
IDS
contributed to JDS all of IDS’ interest in a software license agreement between
IDS and the County of Oakland, Michigan Constitutional Corporation, including
the exclusive worldwide rights to copy, modify, market, distribute, and
sublicense the software developed pursuant to the software license agreement
(the “OakVideo Software”). We contributed to JDS a non-exclusive, worldwide,
royalty-free license to integrate, copy, modify, market, distribute and
sublicense our ONGOER and OnGuard software for use with and into the OakVideo
Software, and we transferred to JDS any and all exclusive worldwide rights
to
copy, modify, market, distribute, and sublicense certain digital court recording
software under development by us. JDS initially launched a judicial arraignment
solution based on the integration of our products with the OakVideo Software
in
2006.
On
November 28, 2006, we signed an agreement to acquire the remaining fifty percent
(50%) membership interest in JDS from IDS. Following the acquisition we own
100%
of JDS.
In
partial consideration for the transfer of the membership interest in JDS from
IDS to us, we will issue 500,000 restricted shares of its common stock to IDS
according to the following installment schedule:
| · |
200,000
restricted common shares of the Company's capital stock to IDS on
November
28, 2006;
|
| · |
100,000
restricted common shares of the Company's capital stock to IDS on
November
22, 2007;
|
| · |
100,000
restricted common shares of the Company's capital stock to IDS on
November
22, 2008; and
|
| · |
100,000
restricted common shares of the Company's capital stock to IDS on
November
22, 2009.
|
In
partial consideration for the transfer of the membership interest in JDS from
IDS to us, JDS will pay IDS 5% of the gross revenues of JDS, from whatever
source derived, during calendar years 2007 and 2008, and 2.5% of the gross
revenues of JDS during calendar year 2009.
In
conjunction with the above transaction, JDS is required to pay IDS a total
of
$80,000 represented by 100% of the initial $40,000 and 50% of the next $80,000
to be received from a pre-existing customer.
On
January 28, 2007, the Compensation Committee of the board of directors approved
a cash compensation plan for employees equal to a maximum of 20% of gross
revenues, payable on a quarterly basis. On February 1, 2007, we signed an
advisory services agreement (the "Agreement") with Triton Business Development
Services, an Atlanta-based provider of critical business planning, resource
and
development services.
As
a part
of the Agreement, Triton will provide us with financial and strategic planning
services that include capital formation, structure and funding strategies,
investor relations consultation, human resources assessment and development,
and
an organizational review of our processes, practices, and procedures. The term
of the Agreement is 24 months.
Triton’s
compensation will consist of cash and restricted shares of our common stock
over
the term of the Agreement. A monthly cash retainer of $10,000 will be paid
by
us. Additionally, 640,000 restricted shares of our common stock will be
deposited to a restricted account. The 640,000 restricted shares of our common
stock will earned ratably over the 24-month term of the Agreement by
Triton.
On
March
16, 2007, we completed the sale of $3,525,000 of securities in a private
placement of 4,700 units (at $750 per unit) consisting of one share of Series
B
Convertible Preferred Stock and one warrant to purchase 2,000 shares of our
common stock at an exercise price of $0.375 per share. Each share of Series
B
Convertible Preferred Stock has a conversion price of $0.375 per share (1 Series
B Convertible Preferred share equals 2,000 shares of common stock). The warrants
have three-year terms.
Three
note holders, including one member of the board of directors, exchanged all
outstanding interest and principal due from us (totaling $710,210) under their
notes payable for units in the private placement. In conjunction with the
exchange, we issued the holders additional warrants to purchase an aggregate
of
710,210 shares of our common stock at an exercise price of $0.375 per share.
The
warrants have five-year terms.
We
intend
to file a resale registration statement on Form SB-2 to register the common
stock underlying the Series B Convertible Preferred Stock, the warrants issued
in conjunction with the exchange of the notes payable, and the warrants in
the
private placement.
The
Company currently anticipates that, as a result of the offering, it has
sufficient capital until late 2008 based on anticipated increases in working
capital expenditures
We
expect
to spend less than $100,000 on capital expenditures in 2007.
Critical
Accounting Policies
We
prepare our consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America. As such, we
are
required to make certain estimates, judgments and assumptions that we believe
are reasonable based upon the information available. These estimates and
assumptions affect the reported amounts of assets and liabilities at the date
of
the financial statements and the reported amounts of revenues and expenses
during the periods presented. The significant accounting policies which we
believe are the most critical to aid in fully understanding and evaluating
our
reported financial results include the following:
| · |
Revenue
recognition.
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 from the sale of hardware
and software is recognized upon the transfer of title when shipped.
Revenue on maintenance contracts is recognized over the term of the
related contract. We had no deferred revenue at December 31, 2006
as we
have discontinued service contracts on our older Omega systems.
|
| · |
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
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.
|
| · |
Impairments
of assets and 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.
|
Results
of Operations
Revenues
Revenues
were $224,692 and $124,646 in 2006 and 2005, respectively. The 80% increase
in
revenues from 2005 to 2006 was primarily due to an increase in software revenues
of $92,241, as software revenues during 2006 included a $78,000 multi-site
sale
to an integrator for implementation at one end user who previously purchased
our
software in 2004. Due to our small customer base, we face the risk of
fluctuating revenues should any of our customers discontinue using our products.
See Note 8 to our consolidated financial statements.
Gross
Profit
Gross
profit as a percentage of revenues was approximately 97% and 96% in 2006 and
2005, respectively.
Selling,
General & Administrative Expenses
Selling,
general and administrative expenses were $1,502,983 and $1,060,926 for 2006
and
2005, respectively. The increase in 2006 compared to 2005 resulted primarily
from the stock-based compensation of $463,973 recorded during the current
period, which included $308,721 recorded in June 2006 to reflect the fair value
of the stock options granted to non-employee directors at that
time.
Research
and Development Expenses
We
charge
research and development costs to expense as incurred until technological
feasibility of a software product has been established. 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. These expensed costs were $416,982 and $437,374 for 2006 and 2005,
respectively. During 2006, stock-based compensation of $41,154 was included
in
research and development expense to record the amortization of the estimated
fair value of the portion of options granted during the current period as well
as previously granted stock options that vested during the current period.
Other
income/(expense)
Other
income/(expense) of
($11,174) and $12,435 for 2006 and 2005, respectively, consisted primarily
of
finance charges and accrued interest on our notes payable originated during
the
current period and primarily of interest earned on our cash balances in
2005.
On
February 15, 2006, Simtrol, Inc. and Acacia Research Corporation (“Acacia”)
entered into an agreement pursuant to which Simtrol sold to Acacia U.S. Patent
No(s). 5515099, 5526037, 5528289, 5568183, 5583565, and 55998209 (the
“Patents”). The patents relate primarily to remote control of video cameras and
other devices used in areas such as videoconferencing and surveillance systems.
The uses of the patented technology include improved remote management of video
camera functions such as pan, tilt, and focus, and improved device control
in a
networked videoconferencing system.
Under
the
terms of the agreement, Simtrol received an initial payment of $250,000 in
March
2006 and will receive ongoing royalty payments of twenty percent of the net
proceeds received by Acacia in connection with (i) the licensing by Acacia
of
the patented technology to third parties and (ii) any successful patent
infringement action commenced by Acacia with respect to the Patents, provided
that Acacia shall be entitled to recoup the initial payment fully prior to
making any royalty payments to Simtrol. This amount was recorded as other income
during 2006.
Net
Loss
Net
loss
for 2006 was $1,462,187 compared to a net loss of $1,366,051 for 2005. The
increase in net loss was due primarily to the stock-based compensation totaling
$469,029 in 2006 to reflect the fair value of the stock options granted to
non-employee directors in June 2006 and to record the amortization of the
estimated fair value of the portion of previously granted stock options that
vested during the current period, offset partially by the $250,000 we received
from licensing our intellectual property related to our older videoconferencing
business in 2006.
Off
Balance Sheet Arrangements
We
do not
have any off-balance sheet arrangements.
ITEM
7. FINANCIAL
STATEMENTS.
The
audited financial statements and related notes required by this item 7 are
included as Exhibit 99.1 of this Report and are incorporated herein by
reference.
ITEM
8. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
Not
applicable.
ITEM
8A. CONTROLS AND PROCEDURES
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Securities Exchange Act reports
is
recorded, processed, summarized, and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. As of December 31, 2006, an evaluation was performed under the
supervision and with the participation of our management, including the Chief
Executive Officer and the Chief Financial Officer, of the effectiveness of
the
design and operation of our disclosure controls and procedures. Based upon
that
evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that our disclosure controls and procedures were effective.
In
connection with its audit of our consolidated financial statements as of
December 31, 2004 and for the years ended December 31, 2003 and 2004, Marcum
& Kliegman LLP advised our management and audit committee that it had
identified a deficiency in internal controls, which was designated a "material
weakness", as defined below. The material weakness indicated that there was
inadequate segregation of duties within our accounting function.
Subsequent
to the 2004 audit, we instituted additional controls consisting of an increased
level of Chief Executive Officer and board of directors oversight. During the
current period, management deemed these additional mitigating controls to be
effective in minimizing the risks associated with the inadequate segregation
of
duties and management believes there is a significant deficiency, rather than
a
material weakness, as defined below, that results from inadequate segregation
of
duties at a detail level within the accounting department.
A
material weakness is a significant deficiency (or a combination of significant
deficiencies) that results in a more-than-remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected.
A
significant deficiency is a control deficiency (or combination of internal
control deficiencies) that adversely affects our ability to initiate, authorize,
record, process, or report external financial data reliably in accordance with
GAAP such that there is a more-than-remote likelihood that a misstatement of
our
annual or interim financial statements that is more than inconsequential will
not be prevented or detected. The standard specifies that a misstatement
is inconsequential if a reasonable person would conclude, after considering
the
possibility of further undetected misstatements, that the misstatement, either
individually or when combined with other misstatements, would clearly be
immaterial to the financial statements. If a reasonable person could not
reach such a conclusion regarding a particular misstatement, that misstatement
would be more than inconsequential.
ITEM
8B. OTHER INFORMATION
Not
applicable.
PART
III
ITEM
9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH
SECTION 16(a) OF THE EXCHANGE ACT.
The
information required by this Item is contained in our definitive Proxy Statement
to be delivered to stockholders in connection with our 2007 Annual Meeting
of
Stockholders (the “2007 Proxy Statement”) and is incorporated herein by
reference.
ITEM
10. EXECUTIVE
COMPENSATION.
Richard
Egan, Chief Executive Officer, has a current annual salary of $150,000. Stephen
Samp, Chief Financial Officer and Secretary, has a current annual salary of
$125,580. Neither employee has any employment contract nor does either employee
have any defined incentive bonus plan currently.
ITEM
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
The
information required by this Item is contained in the 2007 Proxy Statement
and
incorporated herein by reference.
ITEM
12. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.
The
information relating to certain relationships and related transactions contained
in the 2007 Proxy Statement is incorporated herein by reference.
ITEM
13. Exhibits.
The
following exhibits are filed with or incorporated by reference into this report.
The exhibits which are denominated by an asterisk (*) were previously filed
as a
part of, and are hereby incorporated by reference from either (i) the Company’s
Registration Statement on Form SB-2 (File No. 333-128420) filed with the
Securities and Exchange Commission on September 19, 2005, (referred to as “2005
SB-2”), (ii) the Post-Effective Amendment No. 1 to the Company's Registration
Statement on Form S-18 (File No. 33-27040-D) (referred to as “S-18 No. 2”),
(iii) Post-Effective Amendment No. 2 to the Company's Registration Statement
on
Form S-18 (File No. 33-27040-D) (referred to as “S-18 No. 3”), (iv) the
Company's Registration Statement Form S-1 (File No. 33-85754) (referred to
as
“S-1”); (v) the Company's Annual Report on Form 10-K for the year ended December
31, 1993 (referred to as “1993 10-K”); (vi) the Company's Annual Report on Form
10-K for the year ended December 31, 1994 (referred to as “1994 10-K”); (vii)
the Company’s Annual Report on Form 10-K for the year ended December 31, 1998,
as amended (referred to as “1998 10-K/A”), (viii) the Company's Form S-8
Registration Statement (File No. 333-18239), (referred to as “Warrant Plan
S-8”), (ix) the Company's Form S-8 Registration Statement (File No. 333-18237),
(referred to as “Option Plan S-8”), (x) the Company's Registration Statement on
Form S-3 amended January 31, 1999 (“1999 S-3”), and (xi) the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2001 (referred to as
“2001 10-Q”).
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Exhibit
No.
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Description
of Exhibit (SEC Commission File number 001-10927)
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3.1
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Certificate
of Incorporation of the Company, as amended through March 8, 2007
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*3.2
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Amended
Bylaws of the Company as presently in use (S-18 No. 2, Exhibit
3.2)
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4.1
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Certificate
of Incorporation of the Company, as amended (filed herewith as Exhibit
3.1)
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4.2
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Amended
Bylaws of the Company as presently in use (filed herewith as Exhibit
3.2)
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*10.3
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1991
Stock Option Plan (S-18 No. 3, Exhibit 10.1(a))
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*10.3.1
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Amendment
No. 1 to 1991 Stock Option Plan (1993 10-K)
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*10.3.2
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Amendment
No. 2 to 1991 Stock Option Plan (S-1)
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*10.3.3
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Amendment
No. 3 to 1991 Stock Option Plan (S-1)
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*10.3.4
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Amendment
No. 4 to 1991 Stock Option Plan (Option Plan S-8, Exhibit
4.5)
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*10.3.5
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Amendment
No. 5 to 1991 Stock Option Plan (1998 10-K/A, Exhibit
10.3.5)
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*10.4
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1995
Performance Warrant Plan (Warrant Plan S-8, Exhibit
4.1)
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*10.5
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1994
Employee Stock Purchase Plan (1994 10-K)
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*10.6
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License
Agreement between ACIS, Inc. and the Company dated September 9, 1999
(1999
S-3)
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*10.7
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First
Amendment and Modification of ACIS, Inc. warrant agreement dated
September
7, 2001 (2001 10-Q, Exhibit 10.2)
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*10.8
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ACIS
Technology License Agreement between ACIS, Inc. and the Company dated
September 27, 2001 (2001 10-Q, Exhibit 10.1)
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10.9
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Triton
Business Development Services Engagement Agreement dated January
31,
2007
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21.1
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Subsidiaries
of the Company
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23.1
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Consent
of Marcum & Kliegman LLP
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31.1
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Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
302 of
the Sarbanes-Oxley Act of 2002, of the President and Chief Executive
Officer
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31.2
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Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
302 of
the Sarbanes-Oxley act of 2002, of the Chief Financial
Officer
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32.1
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Certifications
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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99.1
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Independent
Registered Public Accounting Firm's Report and Financial Statements
Previously
filed
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ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The
information required by this Item is contained in the 2007 Proxy Statement
and
incorporated herein by reference.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) 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.
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SIMTROL,
INC. |
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By: |
/s/ Richard
W. Egan |
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Richard
W. Egan, Chief Executive
Officer |
Date:
April 17, 2007
Pursuant
to the requirements of the Securities Exchange Act of 1934, the following
persons in the following capacities have signed this report below on the dates
indicated.
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Signature
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Title
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Date
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/s/
Larry M. Carr
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Chairman
of the Board
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April
17, 2007
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Larry M. Carr
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/s/
Richard W. Egan
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Chief
Executive Officer
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April
17, 2007
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Richard W. Egan
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/s/
Stephen N. Samp
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Chief
Financial Officer
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April
17, 2007
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Stephen N. Samp
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(Principal
Financial and
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Accounting
Officer)
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/s/
Dallas S. Clement
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Director
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April
17, 2007
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Dallas S. Clement
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/s/
Julia B. North
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Director
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April
17, 2007
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Julia B. North
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/s/
Edward S. Redstone
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Director
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April
17, 2007
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Edward S. Redstone
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/s/
Adam D. Senter
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Director
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April
17, 2007
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Adam D. Senter
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/s/
Thomas J. Stallings
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Director
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April
17, 2007
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Thomas J. Stallings
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