<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to ____________
Commission File Number 0-12541
SISCOM, INC.
-----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Colorado 84-0899779
- --------------------------------- -----------------------
(State or other jurisdiction IRS Employer
of incorporation or organization) Identification Number
7464 Arapahoe Avenue, Suite B-17, Boulder, Colorado 80303
--------------------------------------------------------------
(Address of Principal Offices) (Zip Code)
Registrant's telephone number, including area code: (303) 449-0442
SATELLITE INFORMATION SYSTEMS COMPANY
--------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (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. [X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 of 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of September 30, 1997, 5,097,687 shares of Common Stock and 4,000,000
shares of Preferred Stock were outstanding.
Transitional Small Business Disclosure Format (Check One): [ ] Yes [X] No
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INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at September 30, 1997 (unaudited) and
June 30, 1997 (audited)
Consolidated Statement of Operations for the Three Months
Ended September 30, 1997 and September 30, 1996 (unaudited)
Consolidated Statement of Cash Flows for the Three Months Ended
September 30, 1997 and September 30, 1996 (unaudited)
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
The interim unaudited financial statements have been prepared by
SISCOM, Inc. ("SISCOM" or the "Company") and, in the opinion of management,
reflect all material adjustments which are necessary to a fair presentation of
the financial position, results of operations and cash flows for the interim
periods presented. Except as otherwise noted, such adjustments consisted only
of normal recurring items. Certain information and footnote disclosure made
in the Company's last annual report on Form 10-KSB have been condensed or
omitted for the interim statements. These statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-KSB for the year ended June 30, 1997. The results of the
interim periods are not necessarily indicative of results which may be
expected for any other interim period or for the full year.
FORWARD-LOOKING STATEMENTS
- --------------------------
In addition to historical information, this Quarterly Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and are thus prospective. The forward-looking
statements contained herein are subject to certain risks and uncertainties
that could cause actual results to differ materially from those reflected in
the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, competitive pressures, changing economic
conditions, those discussed in the Section entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and other
factors, some of which will be outside the control of the Company. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which reflect management's analysis only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements
to reflect events or circumstances that arise after the date hereof. Readers
should refer to and carefully review the information in future documents the
Company files with the Securities and Exchange Commission.
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<TABLE>
SISCOM, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
------
September 30, June 30,
1997 1997
(unaudited) (audited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 129,500 $ 171,300
Receivables:
Trade, less allowance for doubtful
accounts of $10,000 441,000 218,100
Inventory 51,600 27,900
Work in progress 21,300 -
Prepaid expenses and other 1,300 1,200
------------ ------------
Total current assets 644,700 418,500
PROPERTY AND EQUIPMENT
Computer equipment 751,800 618,100
Office furniture and equipment 59,300 59,300
Less accumulated depreciation (476,000) (448,000)
------------ ------------
Net property and equipment 335,100 292,400
SOFTWARE DEVELOPMENT COSTS
(net of accumulated amortization
of $2,283,400 and $2,226,200) 382,800 358,900
OTHER ASSETS 3,600 3,600
------------ ------------
TOTAL ASSETS $ 1,366,200 $ 1,073,400
============ ============
See accompanying notes to these consolidated financial statements.
</TABLE>
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<TABLE>
SISCOM, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
September 30, June 30,
1997 1997
(unaudited) (audited)
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 177,300 $ 37,400
Accrued liabilities and other 50,300 42,600
Unearned revenue 272,400 181,000
------------ ------------
Total current liabilities 500,000 261,000
------------ ------------
MINORITY INTEREST 2,200 2,200
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value;
96,000,000 authorized;
none issued - -
Series A convertible preferred
stock, no par value; 4,000,000
shares authorized, issued and
outstanding 1,000,000 1,000,000
Common stock, no par value;
100,000,000 shares authorized;
5,097,687 shares issued and
outstanding 1,938,900 1,938,900
Accumulated deficit (2,074,900) (2,128,700)
------------ ------------
Total stockholders' equity 864,000 810,200
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 1,366,200 $ 1,073,400
============ ============
See accompanying notes to these consolidated financial statements.
</TABLE>
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<TABLE>
SISCOM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Three Months
Ended September 30,
---------------------------
1997 1996
------------- ------------
<S> <C> <C>
NET REVENUES:
Software and related services $ 351,000 $ 180,200
Hardware 169,100 37,000
------------ ------------
520,100 217,200
COSTS AND EXPENSES:
Costs of sales 270,100 110,500
Operating, general and
administrative 168,200 101,000
Depreciation 28,000 11,900
Other expense (income) - (28,000)
------------ ------------
$ 466,300 $ 195,400
------------ ------------
NET INCOME $ 53,800 $ 21,800
============ ============
NET INCOME PER COMMON SHARE $ 0.01 * $ 0.00
============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 5,097,687 5,067,700
============ ============
* Less than $.01 per share
See accompanying notes to these consolidated financial statements.
</TABLE>
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<TABLE>
SISCOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Three Months
Ended September 30,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 53,800 $ 21,800
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 85,200 55,000
Settlement of judgment - (26,700)
Sales allowance - -
Equipment for services - 25,800
Minority interest - 500
Changes in operating assets and
liabilities:
Receivables (222,900) (96,800)
Inventories (23,700) (68,400)
Work in progress (21,300)
Prepaid expenses and other (100) (6,300)
Accounts payable 139,900 (38,200)
Accrued liabilities and other 7,700 (125,000)
Unearned revenue 91,400 105,600
------------ ------------
Net cash provided by operating
activities 110,000 (152,700)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (70,700) (48,700)
Capitalized software development
costs (81,100) (40,800)
------------ ------------
Net cash used in investing
activities (151,800) (89,500)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred
stock - 1,000,000
------------ ------------
Net cash provided by financing
activities - 1,000,000
Net increase (decrease) in cash (41,800) 757,800
------------ ------------
CASH AND CASH EQUIVALENTS,
at beginning of period 171,300 89,000
------------ ------------
CASH AND CASH EQUIVALENTS,
at end of period $ 129,500 $ 846,800
============ ============
See accompanying notes to these consolidated financial statements.
</TABLE>
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SISCOM, INC.
NOTES TO FINANCIAL STATEMENTS
(Information for the Period Subsequent to June 30, 1997 is Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES:
------------------------------------------
NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION - SISCOM, Inc.
(SISCOM) was incorporated in the State of Colorado on September 29, 1982.
SISCOM currently operates as a software development company that provides
computer based products and services to the electronic media and sports
industry. In 1995, SISCOM formed a new subsidiary called Event Marketing
Systems International, Inc. ("EMSI, Inc."). Operations of EMSI were
insignificant for the fiscal year 1997 and subsequent periods. The
consolidated financial statements include the accounts of SISCOM and
EMSI. All significant intercompany accounts and transactions have been
eliminated in consolidation.
UNAUDITED INFORMATION - The balance sheet as of September 30, 1997 and
the statements of operations for the three months ended September 30,
1997 and 1996 were taken from the Company's books and records without
audit. However, in the opinion of management, such information includes
all adjustments (consisting only of normal accruals) which are necessary
to properly reflect the financial position of the Company as of September
30, 1997 and the results of operations for the three months ended
September 30, 1997 and 1996. The results of operations for the period
ended September 30, 1997 will not necessarily be indicative of the
operating results for the full year.
INCORPORATION BY REFERENCE - The Company has elected to incorporate by
reference the financial statement disclosures as included in its
previously filed Form10-KSB. Reference should be made in reviewing this
10-QSB to the disclosures contained in the Company's Form 10-KSB for the
fiscal year ended June 30, 1997.
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PART I.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------
The following discussion and analysis should be read in conjunction
with the Financial Statements and Notes thereto appearing elsewhere in this
report.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------
During quarter ended September 30, 1997, SISCOM generated revenue of $520,100
with resulting net income of $53,800 as compared to revenue of $217,200 and
net loss of $21,800 during the same quarter of the prior fiscal year.
REVENUE
- -------
The following table outlines the Company's revenue mix over the last two
fiscal quarters.
<TABLE>
<CAPTION>
Quarter Ended September 30,
-------------------------------------
1997 1996
------------------ ------------------
<S> <C> <C> <C> <C> <C>
Product Sales
Software sales $ 247,000 47% $ 68,600 32%
Hardware sales 169,000 33 37,000 17
Software Services 104,000 20 110,600 51
--------- ----- --------- ----
Total Revenue $ 520,100 100% $ 300,800 100%
========= ==== ========= ====
</TABLE>
Product Sales include the sale of proprietary software and computer hardware
to the sports industry, broadcast and cable media markets. The Company's
principal products are CDSS(-TM-) and live logging, along with video logging
and retrieval software to the sports industries, and NewsPro(-Registered Mark-
), an electronic newsroom management system, for the broadcast industry.
Quarter ended September 30, 1997 software sales revenue increased by $178,400
from the quarter ended September 30, 1996. The increase in sales was a result
of the Company's ability to combine CDSS with its other software products
complemented with FAST hardware. With increased sales to NBA teams, the
current year's basketball season provided the Company with the ability to
establish itself in the sports industry as a known technology provider within
the NBA. The end product and result is to provide NBA teams and their coaches
and professional staff with a powerful and comprehensive coaching tool.
SISCOM's hardware sales increased from approximately $37,000 in the quarter
ended September 30, 1996 to $169,100 during the quarter ended September 30,
1997. This increase of $132,100 directly relates to the sale of the Company's
proprietary software, as noted above. In many cases the Company combines its
software products with hardware purchased and adapted specifically for the
software and the customers' needs.
Gross margins on hardware have traditionally been significantly less than the
gross margin on software and services. Management believes that certain
hardware provider relationships will offer the Company both access to leading
technology and leverage to expand the sale of the Company's software products
and services along with hardware components.
The absolute dollar amount of maintenance revenue decreased approximately
$6,600, in comparison with the same quarter of the prior year. The
proportionate revenue from NewsPro(-Registered Mark-) maintenance decreased
from 51% in the quarter ended September 30, 1996 to 20% for the same quarter
of the current fiscal year. Although NewsPro(-Registered Mark-) maintenance
revenue remains an important component of software services, the Company
believes NewsPro(-Registered Mark-) maintenance revenue will continue to
decrease as a percentage of total software sales and service revenue.
Management believes that SISCOM has consciously served a niche market of
specialized customers. Because of its minimal marketing efforts, the Company
has historically had to rely upon revenues from a few substantial
installations to large customers. This reliance has resulted from the
Company's limited working capital rather that any limitations in the scope of
the potential markets and customers for the Company's products. However,
prospectively, management believes that the Company is not dependent on any
one customer as it continues to identify, develop and market solutions for
existing and new opportunities.
COSTS AND EXPENSES
- ------------------
The following table outlines the cost of sales components for the quarters
ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>
Quarter Ended September 30,
-------------------------------------
1997 1996
------------------ ------------------
<S> <C> <C> <C> <C>
Hardware cost of sales $ 155,400 58% $ 29,900 27%
Direct labor and materials 57,500 21 37,500 34
Software Amortization 57,200 21 43,100 39
--------- ---- --------- ----
Total Cost of Sales $ 270,100 100% $ 110,500 100%
========= ==== ========= ====
</TABLE>
Cost of sales and services includes components for hardware sales, direct
labor and materials used in the manufacture of software, and other expenses
incurred to generate revenue. For the quarter ended September 30, 1997, cost
of sales and services was 52% of total revenue compared with 51% for the same
period in the prior year. Gross margins were 48% in the first quarter of the
current fiscal year and 49% in the same quarter of the prior fiscal year.
While the gross margin has remained relatively consistent, SISCOM has changed
its sales mix between hardware and software over the last few years, with
hardware sales increasing as a percentage of total sales. This increase in
hardware sales is primarily because the proprietary software sold to the
sports industry includes a corresponding hardware component. Although,
software and related services have consistently had a substantially higher
margin than hardware over the years, the current sports related combination of
software and hardware not only appears to be a profitable mix, but provides
the Company with an opportunity to carve out an important niche for itself in
the sports industry.
The cost of direct labor and materials includes employee hours spent on
supporting the Company's products as well as any materials and supplies
directly used in the process. The total cost of direct labor increased
approximately $20,000 or 53% between quarter ended September 30, 1996 and
September 30, 1997. This increase between the quarters is a direct result of
increased sales and the corresponding direct materials and labor necessary to
support those sales.
Software amortization costs have increased from $43,100 to $57,200. Software
creation costs have a direct relationship with the amount of time and effort
spent by programmers dedicated to working on the creation and enhancement of
the Company's proprietary software. Accordingly, the amortization of those
costs increase proportionately with the addition of new software and
enhancement of existing software products. To meet growing sales and software
needs, the Company added one full time programmer subsequent to the end of the
prior year first quarter. This has resulted in increased additions to
capitalized software creation costs and an increase in the related
amortization of those costs.
Operating, general and administrative expenses for the quarter ended September
30, 1997 increased by approximately $67,200 or 67% from the quarter ended
September 30, 1996. The majority of the increase was due to a net increase in
personnel and resulting payroll tax expense and employee benefits.
Depreciation expense was $28,000 and $11,900 for the three months ended
September 30, 1997 and 1996, respectively. The increase is attributable to
sizable additions over the last year to property and equipment, which
increases were needed in order to upgrade the Company's in house software
development capabilities.
LIQUIDITY AND CAPITAL RESOURCES - SEPTEMBER 30, 1997 (UNAUDITED) COMPARED TO
JUNE 30, 1997
- ------------------------------------------------------------------------
SISCOM's current working capital surplus, which represents current assets
minus current liabilities, decreased during the three months ended September
30, 1997 to $144,700 from $157,500 at year end.
The Company's primary uses of cash and working capital during the first
quarter were purchases of fixed assets and inventory, of $70,700 and $23,700
respectively. This increase in capital assets included additions and upgrades
to the computer equipment used in software development and customer support.
Inventory additions represented purchases of equipment for work in progress on
existing purchase orders and contracts. In addition, the Company continues to
use working capital to add to their capitalized software creation costs. For
the first quarter capitalized software additions totaled approximately
$81,000.
Sources of working capital were increases in unearned revenue of $91,400, and
accrued payables and liabilities of $147,600. Such increases in current
liabilities are typically the result of timing. In the case of payables the
increase is related to purchases to fulfill ongoing contracts and purchase
orders. The increase in unearned revenue is attributable to the timing of
annual renewals on maintenance contracts, and reserving for unearned income on
progress billings. Furthermore, the Company generated net income from
operations of $53,800 over the first quarter.
Management believes that inflation has not had a material impact on its
results of operations.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor any of its management in their capacities as
such is the subject of any pending material legal proceedings.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fiscal quarter ended September 30, 1997.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
Exhibit 27 Financial Data Schedule
Reports on Form 8-K:
None
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
SISCOM, INC.
Date: November 19, 1997 By: /s/ Michael J. Ellis
------------------- --------------------------------------
Michael J. Ellis, President, Chairman
and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS FOUND ON PAGES 4
THROUGH 6 OF THE COMPANY'S FORM 10-QSB FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 129,500
<SECURITIES> 0
<RECEIVABLES> 441,000
<ALLOWANCES> 10,000
<INVENTORY> 51,600
<CURRENT-ASSETS> 644,700
<PP&E> 335,100
<DEPRECIATION> 476,000
<TOTAL-ASSETS> 1,366,200
<CURRENT-LIABILITIES> 500,000
<BONDS> 0
0
1,000,000
<COMMON> 1,938,900
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,366,200
<SALES> 520,100
<TOTAL-REVENUES> 520,100
<CGS> 270,100
<TOTAL-COSTS> 466,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 53,800
<INCOME-TAX> 0
<INCOME-CONTINUING> 53,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,800
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
