(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
-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 No. 0-30786
LSI COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Nevada 87-0627349
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
112 West Business Park Drive
Draper, Utah 84020
(801) 572-2555
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (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 [ ]
At September 30, 2000, there were 11,415,632 shares of common stock, par value
$.001 per share, of the registrant outstanding.
Transitional small business disclosure format: Yes [ ] No [X]
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LSI COMMUNICATIONS, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets:
September 30, 2000 and December 31, 1999 - 3
Consolidated Statements of Operations:
Nine-Months Periods Ended
September 30, 2000 and September 30, 1999 - 5
Consolidated Statements of Operations:
Three-Month Periods Ended
September 30, 2000 and September 30, 1999 - 6
Consolidated Statements of Cash Flows
Nine-Months Periods Ended
September 30, 2000 and September 30, 1999 - 7
Note to Consolidated Financial Statements - 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - 10
PART II. OTHER INFORMATION
ITEM 1 - Legal Proceedings - - - - 13
ITEM 2 - Changes in Securities - - - - 13
ITEM 3 - Defaults upon Senior Securities - - 13
ITEM 4 - Submission of Matter to Vote of Security Holders- 13
ITEM 5 - Other Information - - - - 13
ITEM 6 - Exhibits and Reports on Form 8-K Page - - 13
SIGNATURES - - - - - - 14
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<TABLE>
<CAPTION>
LSI COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEET
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(UNAUDITED)
ASSETS
September 30, December 31,
2000 1999
------------- -------------
CURRENT ASSETS
<S> <C> <C>
Cash & Cash Equivalents $113,805 $18,393
Inventory 11,521 4,546
Accounts Receivable (Net of allowance of
$7,000 and 13,000, respectively) 69,239 157,829
Notes & Employee Receivable 330 226,800
------------- -------------
Total Current Assets 194,895 407,568
------------- -------------
PROPERTY & EQUIPMENT
(Net of Accumulated Depreciation) 63,434 26,135
------------- -------------
OTHER ASSETS
Deposits & Prepaids 6,076 6,076
------------- -------------
Total Other Assets 6,076 6,076
------------- -------------
TOTAL ASSETS $264,405 $439,779
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
2000 1999
------------- -------------
CURRENT LIABILITIES
Accounts payable $32,802 $22,858
Accrued expenses 24,292 34,410
Customer Deposits 100 -
Current portion of long-term liabilities 103,879 195,081
Deferred Revenue 490 1,962
Deferred Compensation 91,000 91,000
------------- -------------
Total Current Liabilities 252,563 345,311
------------- -------------
LONG TERM LIABILITIES
Notes payable 24,692 37,368
Notes payable-related party 107,704 166,587
Less current portion (103,879) (195,081)
------------- -------------
Total long term Liabilities 8,517 8,874
------------- -------------
TOTAL LIABILITIES 281,080 354,185
------------- -------------
Minority Interest - -
------------- -------------
STOCKHOLDERS' EQUITY
Common stock, authorized 50,000,000 shares of $.001
par value, issued and outstanding 11,415,632 and 8,915,632
shares, respectively 11,416 8,916
Additional Paid-in capital 731,598 731,598
Retained Earnings (759,689) (654,920)
------------- -------------
Total Stockholders' Equity (16,675) 85,594
------------- -------------
TOTAL LIABILITIES & STOCKHOLDERS EQUITY $264,405 $439,779
============= =============
</TABLE>
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<TABLE>
<CAPTION>
LSI COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(UNAUDITED)
For the Period Ended
September 30, September 30,
2000 1999
----------- ------------
REVENUES
<S> <C> <C>
Software Sales $22,785 $99,792
Training Sales 1,112,614 104,034
----------- ------------
TOTAL REVENUES 1,135,399 203,826
----------- ------------
COST OF SALES
Software 257 1,931
Training 341,464 10,158
----------- ------------
TOTAL COST OF GOODS SOLD 341,721 12,089
----------- ------------
GROSS PROFIT 793,678 191,737
----------- ------------
SELLING EXPENSES 259,638 116,069
PAYROLL 227,755 53,145
RESEARCH & DEVELOPMENT 3,792 18,300
CONSULTING FEE - 135,000
PRODUCTION FEE - 70,000
GENERAL & ADMINISTRATIVE EXPENSES 407,342 183,507
----------- ------------
TOTAL OPERATING EXPENSES 898,527 576,021
----------- ------------
OPERATING INCOME (LOSS) (104,849) (384,284)
----------- ------------
OTHER INCOME AND (EXPENSES)
Forgiveness of Debt 13,368 -
Miscellaneous income (expense) (5,446) (3,483)
Interest expense (7,843) (3,723)
----------- ------------
Total Other Income and (Expenses) 79 (7,206)
----------- ------------
NET INCOME (LOSS) BEFORE INCOME TAXES (104,770) (391,490)
----------- ------------
PROVISION FOR INCOME TAXES - -
----------- ------------
NET INCOME (LOSS) (104,770) (391,490)
=========== ============
NET INCOME (LOSS) PER SHARE (0.01) (0.06)
=========== ============
WEIGHTED AVERAGE OUTSTANDING SHARES 11,132,785 6,950,178
=========== ============
</TABLE>
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<TABLE>
<CAPTION>
LSI COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(UNAUDITED)
For the Quarter Ended
September 30, September 30,
2000 1999
----------- ------------
REVENUES
<S> <C> <C>
Software Sales $2,589 $24,728
Training Sales 515,942 104,034
----------- ------------
TOTAL REVENUES 518,531 128,762
----------- ------------
COST OF SALES
Software 58 1,359
Training 187,395 10,158
----------- ------------
TOTAL COST OF GOODS SOLD 187,453 11,517
----------- ------------
GROSS PROFIT 331,078 117,245
----------- ------------
SELLING EXPENSES 156,187 105,001
PAYROLL 79,850 17,140
RESEARCH & DEVELOPMENT 887 9,373
CONSULTING FEE - 135,000
PRODUCTION FEE - 70,000
GENERAL & ADMINISTRATIVE EXPENSES 117,605 110,343
----------- ------------
TOTAL OPERATING EXPENSES 354,529 446,857
----------- ------------
OPERATING INCOME (LOSS) (23,451) (329,612)
----------- ------------
OTHER INCOME AND (EXPENSES)
Forgiveness of Debt - -
Miscellaneous income (expense) (170) (2,580)
Interest expense (2,577) (3,076)
----------- ------------
Total Other Income and (Expenses) (2,747) (5,656)
----------- ------------
NET INCOME (LOSS) BEFORE INCOME TAXES (26,198) (335,268)
----------- ------------
PROVISION FOR INCOME TAXES -
----------- ------------
NET INCOME (LOSS) (26,198) (335,268)
=========== ============
NET INCOME (LOSS) PER SHARE (0.00) (0.04)
=========== ============
WEIGHTED AVERAGE OUTSTANDING SHARES 11,415,632 8,779,214
=========== ============
</TABLE>
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<TABLE>
<CAPTION>
LSI COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(UNAUDITED)
For the Period Ended
September 30, September 30,
2000 1999
------------- ------------
Cash Flows From Operating Activities
<S> <C> <C>
Net income (loss) ($104,770) ($391,490)
Non-cash items:
Depreciation 12,351 6,959
Bad Debt 7,000 11,800
Issuance of stock for remaining 15% Warever shares 2,500 -
Consulting Expense paid with stock issuance - 135,000
Recognition of Deferred Revenue (491) -
(Increase)/decrease in currents assets:
Accounts receivable 94,390 42,948
Inventory (6,955) (1,189)
Increase/(decrease) in currents liabilities:
Accounts payable 9,944 29,281
Accrued expense (10,148) 18,537
------------- ------------
Net Cash Provided (Used) by Operating Activities 3,821 (148,154)
------------- ------------
Cash Flows From Investing Activities
Cash received in sale of contract 226,800 -
Cash in Coaching Institute at Acquisition - 35,855
Cash paid for property, equipment and software technology (49,650) (17,272)
------------- ------------
Net Cash Provided (Used) by Investing Activities 177,150 18,583
------------- ------------
Cash Flows From Financing Activities
Factoring Fees (13,000) -
Increase in long-term debt 25,692 165,000
Principal payments on long-term debt (98,251) (47,527)
------------- ------------
Net Cash Provided (Used) by Financing Activities (85,559) 117,473
------------- ------------
Increase/(decrease) in Cash 95,412 (12,098)
Cash and Cash Equivalents at Beginning of Period 18,393 24,418
Cash and Cash Equivalents at End of Period $113,805 12,320
Supplemental Cash Flow Information:
Cash paid for interest $7,843 $3,723
Cash paid for income taxes - -
</TABLE>
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LSI COMMUNICATIONS, INC.
NOTE TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(UNAUDITED)
1. Basis of presentation:
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-QSB and Item 310 of Regulation
S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine months ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. The unaudited financial statements should be read in
conjunction with the financial statements for the year ended December 31, 1999
and footnotes thereto included in the Company's registration statement on Form
10SB12G.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL AND RESULTS OF
OPERATIONS
This discussion contains forward-looking statements made by the Company
pursuant to the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements reflect our current views with
respect to such future events. Actual results may vary materially and adversely
from those anticipated, believed, estimated or otherwise indicated. Factors that
could cause actual results to differ adversely include, without limitation,
inability to maintain sources of coaching customers, and lack of consumer demand
for new products. We do not undertake to update any forward-looking statement
that may be made from time to time by or on our behalf.
(a) Introduction
We are a technology development, sales and training company based in
Draper, Utah. We operate two distinct, but complementary subsidiaries, Warever
Corporation and Coaching Institute, Inc.
Coaching Institute, Inc. offers fully integrated "coaching" programs
designed specifically for sales trainers, seminar leaders, motivational speakers
and network marketers who are interested in extending their programs to seminar
attendees through one-on-one training. By implementing an after-market program
such as one-on-one coaching, companies are able to assist clients' personal
development, create additional profits, and increase client loyalty.
Warever Corporation develops, programs, sells, and markets computer
software packages. Sales of its primary product, Action Plus, a management
assistance software are being phased out. On August 31, 2000, Warever
Corporation released Powerhouse, a sales force automation and personal
productivity software program designed for the real estate industry. We expect
sales of Powerhouse to constitute nearly all of Warever's software sales in the
next few quarters.
(b) Results of Operations
(i) Nine Months Ended September 30, 2000 and September 30, 1999
Sales Revenues
Sale revenues for the nine months ended September 30, 2000 were
$1,135,399, an increase of $931,573, or 573% from $203,826 for the nine months
ended September 30, 1999. The increase in revenues is due to the acquisition of
Coaching Institute and relative increases in training sales. Warever's software
sales, which prior to Coaching Institute's acquisition at the end of the second
quarter of 1999, was our only source of revenues, decreased 129.6% to $22,785
from $99,792 in the first three quarters of 1999. Warever's software sales have
been declining as demand for Action Plus, our primary software
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product reached the end of its product lifecycle and the technology became less
current. Despite the release of Powerhouse on August 31, 2000, we did not have
any significant software sales during September 2000. We intend to market
Powerhouse at real estate seminars in the United States and expect sales of
Powerhouse to result during the fourth quarter of 2000. However, we have
performed no market tests and have insufficient information to adequately assess
the potential demand for Powerhouse.
The overall increase in our sales was due to $1,112,614 in revenues
from Coaching Institute during the nine months ended September 30, 2000.
Coaching Institute's revenues increased $1,008,580 or 969% from $104,034 during
the nine month period ended September 30, 1999. The $104,034 in revenue in the
period ended September 30, 1999 only reflect coaching sales for approximately
three months since the time Coaching Institute was acquired in June 1999.
Coaching Institute's estimated combined revenues both as an independent entity
and a subsidiary of LSI Communications was $281,899 through September 30, 1999,
reflecting more than a 290% increase in coaching revenues compared to the prior
year nine-month period. Further discussion and financial statements related to
Coaching Institute's financials and their impact on our financial statements can
be found in our registration statement on Form 10SB12G as filed with the SEC on
June 23, 2000.
Our management believes that Coaching Institute's revenue increase
trend should continue in the coming quarter. However, despite our increased
coaching related revenues and the increased consumer interest in coaching
services perceived by our management, we cannot ensure that we will be able to
maintain or increase revenues from coaching services.
Cost of Sales
Cost of Sales increased by $329,632, or 2,727%, to $341,721 in the 2000
nine month period from $12,089 in the comparable 1999 nine month period. The
increase was attributable to the acquisition of Coaching Institute and its
relatively expensive product costs. Many of Coaching Institute's clients or
trainees are referred by entities, such as SDI Le Grand, that produce seminars.
We pay commissions to these entities in exchange for their trainee referrals.
The commission costs are included in our consolidated Cost of Sales. Salaries
paid to the coaches who perform the coaching, which is very labor intensive, are
also included in Costs of Sales. The commission and salaries are the primary
cause of the exponential cost of sales increase. Our management is exploring
possible ways to decrease training related cost of sales by increasing the
proportion of our trainees that we acquire from our direct marketing efforts.
However, until we plan and implement an effective method to expand our direct
sales, we must heavily rely on commission based referrals. We expect training
related cost of sales related to continue to mirror training revenues in the
foreseeable future.
Cost of sales related to software should increase relative to sales of
our new software product Powerhouse. Software costs of sales in relation to
software related revenues should remain under 10%.
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Selling, General and Administrative Expenses
General and Administrative expenses increased by $223,835, or 122%, to
$407,342 in the 2000 nine-month period from $183,507 in the 1999 nine-month
period. A primary reason for the 2000 nine-month period increase is the
acquisition of Coaching Institute in the third quarter of 1999. We now have
General and Administrative expenses for two subsidiaries where we only had one
for the majority of the comparable nine month period ended September 30, 1999.
Causes of increased General and Administrative related expenses included a large
increase in telephone expenses, accounting and legal fees.
Selling expenses increased by $143,569, or 123.7%, to $259,638 in the
nine-month period ended September 30, 2000 from $116,069 in the comparable 1999
nine-month period. This increase is the result of Coaching Institute's salaries,
commissions, advertising and general sales expenses that were not present on our
books prior to Coaching Institute's acquisition in June 1999. Selling expenses
related to software sales actually decreased due to retraction of our software
selling efforts during the development phase of Powerhouse. We expect our
selling expenses to increase as we expand coaching services and commence
marketing of the Powerhouse software.
Payroll related expenses increased by $174,610, or 328.5%, to $227,755
in the nine-month period ended September 30, 2000 from $53,145 in the comparable
1999 nine-month period. The Payroll line item of our Statement of Operations
includes all salaries, primarily administrative, not related to selling,
marketing or actual coaching. This increase is generally attributable to the
expansion of our administration to accommodate Coaching Institute and its
growth.
Interest Expense
Interest expense increased by $4,120, or 110.6%, to $7,843 in the 2000
nine-month period from $3,723 in the 1999 nine-month period. The increase was
primarily due to interest paid on loans from 1999. The loans were required to
continue our operations.
Net Loss
Our net loss for the 2000 nine-month period decreased by $286,720, or
73.2%, to a net loss of ($104,770) from a net loss of ($391,490) in the
comparable 1999 period. This decreased net loss is due primarily to the absence
of consulting fees during the 2000 period in contrast to the 1999 nine month
period.
(ii) Three Month Periods Ended September 30, 2000 and September 30,
1999
Revenue grew to $518,531 during the three-month period ended September
30, 2000 compared to $128,762 of revenue recorded during the same period of the
prior year. This represented an increase of 302.7% compared to the prior year
quarter. Increases in costs of sales and operating expenses, and the absence of
consulting fees, consistent with
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the description in the year-to-date comparison above, created a net loss of
$26,198 in the current quarter compared to $335,268 in the prior year period.
(c) Liquidity and Capital Resources
Our liquidity and capital resources as of September 30, 2000 were
$113,805, and as of December 31, 1999 were $18,393, an increase of $95,412 or
518.7%. The cause of this increase was due to the cash received from the sale of
the Karl Malone video and collections of accounts receivable.
At September 30, 2000, our current liabilities exceeded our current
assets by approximately $57,668, with a ratio of current liabilities to current
assets of approximately 1.3 to 1. Inventory levels increased by $6,975 or 153.4%
to $11,521 on September 30, 2000 compared to $4,546 on December 31, 1999. The
primary reason for this increase was the production and accumulation of units of
Powerhouse, our new software product that was completed and released during the
third quarter. Accounts receivable were lower due to collection from one of our
large clients, SDI LeGrand.
We expect to satisfy our cash requirements during the next 12 months
from cash on hand and revenues. However, we are considering raising money
through a stock offering to expand and fund our operations. We have no
commitments for significant capital expenditures over the next 12 months.
II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
not applicable
ITEM 2. CHANGES IN SECURITIES
not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
not applicable
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
not applicable
ITEM 5. OTHER INFORMATION
not applicable
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
No. Description
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
None.
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.
LSI COMMUNICATIONS, INC.
By: /s/ Craig Hendricks
------------------------------
Craig Hendricks
Chief Executive Officer, President
Date 11/10/00
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