<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
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-12541
SISCOM, INC.
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(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
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(Address of Principal Offices) (Zip Code)
Registrant's telephone number, including area code: (303) 449-0442
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(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, 1998, 5,131,973 shares of Common Stock and 5,250,000
shares of Preferred Stock of the Registrant 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, 1998 (unaudited) and
June 30, 1998 (audited)
Consolidated Statement of Operations for the Three Months Ended
September 30, 1998 and September 30, 1997 (unaudited)
Consolidated Statement of Cash Flows for the Three Months Ended
September 30, 1998 and September 30, 1997 (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
--------------------
We have prepared the interim unaudited financial statements and, in our
opinion, they 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 disclosures made in our 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 our Form 10-KSB for the year ended June 30, 1998. 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 in this Quarterly Report 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 our control. You are cautioned
not to place undue reliance on these forward-looking statements, which reflect
our analysis only as of the date hereof. We undertake no obligation to
publicly revise these forward-looking statements to reflect events or
circumstances that arise after the date hereof. You should refer to and
carefully review the information in future documents that we file with the
Securities and Exchange Commission.
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SISCOM, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
(unaudited) (audited)
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<S> <C> <C>
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 65,000 $ 80,000
Receivables:
Trade, less allowance for doubtful
accounts of $2,400 247,500 124,300
Inventory 81,000 16,700
Prepaid expenses and other 4,500 3,300
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Total current assets 398,000 224,300
PROPERTY AND EQUIPMENT
Computer equipment 819,800 805,400
Office furniture and equipment 85,700 85,700
Less accumulated depreciation (583,500) (547,400)
------------- -------------
Net property and equipment 322,000 343,700
SOFTWARE DEVELOPMENT COSTS
(net of accumulated amortization
of $2,554,400 and $2,485,600) 481,000 447,500
OTHER ASSETS 3,500 3,500
------------- -------------
TOTAL ASSETS $ 1,204,500 $ 1,019,000
============= =============
</TABLE>
See accompanying notes to these consolidated financial statements.
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SISCOM, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
September 30, June 30,
1998 1997
(unaudited) (audited)
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 59,900 $ 62,000
Accrued liabilities and other 91,700 29,500
Unearned revenue 178,700 65,400
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Total current liabilities 330,300 156,900
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STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value;
100,000,000 shares authorized; none issued - -
Series A convertible preferred stock,
no par value; 5,250,000 shares authorized
issued and outstanding 1,500,000 1,500,000
Common stock, no par value;
100,000,000 shares authorized;
5,131,973 shares issued and outstanding 1,950,900 1,950,900
Accumulated deficit (2,576,700) (2,588,800)
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Total stockholders' equity 874,200 862,100
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,204,500 $ 1,019,000
============= =============
</TABLE>
See accompanying notes to these consolidated financial statements.
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SISCOM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
1998 1997
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<S> <C> <C>
NET REVENUES:
Software and related services $ 235,800 $ 351,000
Hardware 82,500 169,100
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318,300 520,100
COSTS AND EXPENSES:
Costs of sales 174,500 270,100
Operating, general and administrative 95,700 168,200
Depreciation 36,000 28,000
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$ 306,200 $ 456,300
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NET INCOME $ 12,100 $ 53,800
============= =============
NET INCOME PER COMMON SHARE $ 0.00 $ 0.01
============= =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 5,131,973 5,097,687
============= =============
</TABLE>
* Less than $.01 per share
See accompanying notes to these consolidated financial statements.
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SISCOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 12,100 $ 53,800
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 107,200 85,200
Changes in operating assets and liabilities:
Receivables (123,200) (222,900)
Inventories (64,200) (23,700)
Work in progress - (21,300)
Prepaid expenses and other (1,200) (100)
Accounts payable 2,200 139,900
Accrued liabilities and other 62,200 7,700
Unearned revenue 113,300 91,400
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Net cash provided by operating activities 104,000 110,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (14,300) (70,700)
Capitalized software development costs (104,700) (81,100)
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Net cash used in investing activities (119,000) (151,800)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock - -
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Net cash provided by financing activities - -
Net increase (decrease) in cash (15,000) (41,800)
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CASH AND CASH EQUIVALENTS,
at beginning of period 80,000 171,300
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CASH AND CASH EQUIVALENTS,
at end of period $ 65,000 $ 129,500
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</TABLE>
See accompanying notes to these consolidated financial statements.
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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 - We were
incorporated in the State of Colorado on September 29, 1982. We
currently operate as a software development company that provides
computer based products and services to the electronic media and sports
industry. In 1995, we formed a new subsidiary called Event Marketing
Systems International, Inc. ("EMSI, Inc."). Operations of EMSI were
insignificant for the fiscal year 1998 and subsequent periods. The
consolidated financial statements include our records and the accounts of
EMSI. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Unaudited Information - The balance sheet as of September 30, 1998 and
the statements of operations for the three months ended September 30,
1998 and 1997 were taken from our 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 our financial position as of September 30, 1998 and the
results of operations for the three months ended September 30, 1998 and
1997. The results of operations for the period ended September 30, 1998
will not necessarily be indicative of the operating results for the full
year.
Incorporation by Reference - We have elected to incorporate by reference
the financial statement disclosures included in our previously filed
Form10-KSB. Reference should be made in reviewing this 10-QSB to the
disclosures contained in our Form 10-KSB for the fiscal year ended
June 30, 1998.
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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, 1998 Compared to
Three Months Ended September 30, 1997 (Unaudited)
- -------------------------------------------------------------------------
During quarter ended September 30, 1998, we generated revenue of $318,300 with
resulting net income of $12,100 as compared to revenue of $520,100 and income
of $53,800 during the same quarter of the prior fiscal year.
Revenue
- -------
The following table outlines our revenue mix over the last two fiscal
quarters.
<TABLE>
<CAPTION>
Quarter Ended September 30,
1998 1997
---------------------------------
<S> <C> <C> <C> <C>
Product Sales
Software sales $ 130,000 41% $ 247,000 47%
Hardware sales 82,500 26 169,100 33
Software Services 105,800 33 104,000 20
--------- ---- --------- ----
Total Revenue $ 318,300 100% $ 520,100 100%
========= ==== ========= ====
</TABLE>
Product Sales include the sale of proprietary software and computer hardware
to the sports industry, broadcast and cable media markets. Our principal
products are CDSS(-TM-) and live logging, along with video logging and
retrieval software to the sports industries.
Quarter ended September 30, 1998 software sales revenue decreased by $117,000
from the quarter ended September 30, 1997. For the quarter ended September
30, 1997, product sales were primarily attributable NBA teams interested in
CDSS and our video logging and retrieval software. While the NBA player lock-
out has had a minor negative impact on sales for the same period this year,
we are experiencing modest success in introducing these products to new
markets.
Our hardware sales decreased from approximately $169,100 in the quarter ended
September 30, 1997 to $82,500 during the quarter ended September 30, 1998. In
many cases, we combine software products with hardware purchased and adapted
specifically for the software and the customers' needs. The decrease in
hardware sales is directly related to the decrease in software sales this
quarter.
We have consciously served a niche market of specialized customers. Because
of our minimal marketing efforts, we have historically had to rely upon
revenues from a few substantial installations to large customers. This
reliance has resulted from our limited working capital rather that any
limitations in the scope of the potential markets and customers for our
products. However, prospectively, we believe that we are not dependent on any
one customer as we continue 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, 1998 and 1997.
<TABLE>
<CAPTION>
Quarter Ended September 30,
1998 1997
---------------------------------
<S> <C> <C> <C> <C>
Hardware cost of sales $ 59,000 34% $ 155,400 58%
Direct labor and materials 44,200 25 57,500 21
Software Amortization 71,300 41 57,200 21
--------- ---- --------- ----
Total Cost of Sales $ 174,500 100% $ 270,100 100%
--------- ---- --------- ----
</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, 1998, cost
of sales and services was 55% of total revenue compared with 52% for the same
period in the prior year. Gross margins were 45% in the first quarter of the
current fiscal year and 48% in the same quarter of the prior fiscal year.
While the gross margin has remained relatively consistent, we have changed our
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 us with an
opportunity to carve out an important niche in the sports industry.
The cost of direct labor and materials includes employee hours spent on
supporting our products as well as any materials and supplies directly used in
the process. The total cost of direct labor decreased approximately $13,000
or 20% between quarter ended September 30, 1997 and September 30, 1998. This
decrease between the quarters is primarily a result of a decrease in the
direct labor costs associated with this quarters' sales.
Software amortization costs have increased from $57,200 to $71,300. 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
our proprietary software. Accordingly, the amortization of those costs
increase proportionately with the addition of new software and enhancement of
existing software products.
The increase is a result of replacing an application programmer with a system
level programmer during the previous fiscal year. 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, 1998 decreased by approximately $72,500 or 43% from the quarter ended
September 30, 1997. The majority of the decrease was due to a net decrease in
personnel and resulting payroll tax expense and employee benefits.
Depreciation expense was $36,000 and $28,000 for the three months ended
September 30, 1998 and 1997, respectively. The increase is attributable to
sizable additions over the last year to property and equipment, which
increases were needed in order to upgrade our in house software development
capabilities.
Liquidity and Capital Resources - September 30, 1998 (unaudited) Compared to
June 30, 1998
- ----------------------------------------------------------------------------
Our current working capital surplus, which represents current assets minus
current liabilities, increased during the three months ended September 30,
1998 to $67,700 from $67,400 at year end.
Our primary uses of cash and working capital during the first quarter were
purchases of fixed assets and inventory, of $14,400 and $64,300 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, we continue to use
working capital to add to our capitalized software creation costs. For the
first quarter, capitalized software additions totaled approximately $81,000.
Sources of working capital included increases in unearned revenue of $113,300,
and accrued payables and liabilities of $60,100. These 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. Additionally, we generated net income from operations of
$12,100 over the first quarter.
We believe that inflation has not had a material impact on our results of
operations.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
We are not the subject of any pending material legal proceedings,
nor are any of our managers, int their capacities as manager, the
subject of any pending material legal proceeding.
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, 1998.
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: January 25, 1999 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 CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 4 THROUGH 6 OF THE COMPANY'S FORM 10-QSB FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 65,000
<SECURITIES> 0
<RECEIVABLES> 247,500
<ALLOWANCES> 0
<INVENTORY> 81,000
<CURRENT-ASSETS> 398,000
<PP&E> 905,500
<DEPRECIATION> (583,500)
<TOTAL-ASSETS> 1,204,500
<CURRENT-LIABILITIES> 330,300
<BONDS> 0
0
1,500,000
<COMMON> 1,950,900
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,204,500
<SALES> 0
<TOTAL-REVENUES> 318,300
<CGS> 174,500
<TOTAL-COSTS> 306,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,100
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,100
<EPS-PRIMARY> .002
<EPS-DILUTED> .001
</TABLE>
