FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1995
Commission File Number 0-13898
MOSCOM Corporation
(Exact name of registrant as specified in its charter)
Delaware 16-1192368
(State or other jurisdiction of (IRS Employer Identification
Incorporation or Organization) Number)
3750 Monroe Avenue, Pittsford, NY 14534
(Address of principal executive offices) (Zip Code)
(716) 381-6000
(Registrant's telephone number, including area code)
N.A.
(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
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 requirement for the past 90 days.
YES [XX] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of March 31, 1995
Common stock, par value $.10 6,782,526 shares
This report consists of 14 pages.
<PAGE>
INDEX
Page
Item 1 Financial Statements
Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 3, 4
Consolidated Statements of Operations -
Three Months Ended March 31, 1995 and 1994 5
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994 6
Notes To Consolidated Financial Statements 7, 8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 11
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 12 - 14
<PAGE>
PART I - FINANCIAL INFORMATION
MOSCOM CORPORATION
And Subsidiaries
CONSOLIDATED BALANCE SHEETS
March 31 December 31
1995 1994*
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents
(Including Short-term investments
of $1,811,955 and $1,775,416
respectively) $ 2,076,646 $ 2,152,377
Short-term Investments 1,558,107 1,960,969
Accounts Receivable, trade (net of
allowance for doubtful accounts of
$112,000 and $105,000,
respectively) 4,543,319 3,473,667
Inventories (Note 2) 2,593,688 2,710,228
Prepaid Expenses 230,557 239,002
----------- -----------
Total Current Assets 11,002,317 10,536,243
PLANT AND EQUIPMENT (Note 3): 5,111,433 5,221,322
Less Accumulated Depreciation (4,050,584) (4,268,984)
----------- -----------
Plant and Equipment (Net) 1,060,849 952,338
License Fees and Purchased Software
(Net of accumulated amortization
of $632,155 and $569,887,
respectively) 330,056 389,366
Capitalized Software
Development Costs (Net of
accumulated amortization of
$1,732,651 and $1,427,864
respectively) 2,840,710 2,895,853
Other Assets 1,370,667 1,309,683
----------- -----------
Total Other Assets 4,541,433 4,594,902
----------- -----------
TOTAL ASSETS $16,604,599 $16,083,483
=========== ===========
See notes to Consolidated Financial Statements.
* Derived from Audited Financial Statements
<PAGE>
MOSCOM CORPORATION
And Subsidiaries
CONSOLIDATED BALANCE SHEETS
March 31 December 31
1995 1994*
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable 559,148 510,145
Accrued Compensation and Related Taxes 723,946 778,684
Other Accrued Expenses 555,588 469,469
----------- -----------
Total Current Liabilities 1,838,682 1,758,298
Other Long-Term Liabilities 1,007,964 955,464
----------- -----------
2,846,646 2,713,762
STOCKHOLDERS' EQUITY:
Common Stock, par value $.10, 20,000,000
shares authorized; issued and
outstanding, 6,782,526 and 6,743,875,
respectively 678,253 674,388
Additional Paid-in Capital 15,091,608 14,945,932
Retained Earnings (2,093,743) (2,261,852)
Cumulative Translation Adjustment 81,835 11,253
----------- -----------
13,757,953 13,369,721
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $16,604,599 $16,083,483
=========== ===========
* Derived from Audited Financial Statements
<PAGE>
MOSCOM CORPORATION
And Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
(Unaudited)
1995 1994
SALES $ 4,410,529 $ 3,482,373
------------ ------------
COSTS AND OPERATING EXPENSES:
Cost of sales 1,316,446 1,258,309
Engineering & software development 439,947 432,890
Selling, general and administrative 2,336,484 1,895,661
------------ ------------
Total costs and operating expenses 4,092,877 3,586,860
------------ ------------
INCOME (LOSS) FROM OPERATIONS 317,652 (104,487)
INTEREST INCOME 35,396 39,464
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 353,048 (65,023)
INCOME TAXES 50,000 (15,000)
------------ ------------
NET INCOME (LOSS) $ 303,048 $ (50,023)
============ ============
NET INCOME (LOSS) PER SHARE $.04 $(.01)
====== ======
See notes to Consolidated Financial Statements.
<PAGE>
MOSCOM CORPORATION
And Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
1995 1994
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 303,048 $ (50,023)
Adjustments to Reconcile Income (Loss)
to Net Cash Provided by Operating
Activities
Depreciation and Amortization 518,835 441,811
Provision for Losses on Accounts
Receivable 6,000 (72)
Provision for Inventory Obsolescence 30,000 47,500
Changes in Assets and Liabilities
Investments 402,862 552,523
Accounts Receivable (1,075,652) (122,743)
Inventories 86,540 384,727
Prepaid Expenses 8,445 (31,985)
License Fees (43,388) (6,183)
Software Development Costs (249,644) (357,243)
Other Assets (60,984) (53,597)
Accounts Payable 49,003 (206,101)
Other Liabilities 52,500 48,750
Other Current Liabilities 101,963 (221,440)
------------ ------------
Net Adjustments (173,520) 475,947
------------ ------------
Net Cash Provided by Operating Activities 129,528 425,924
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property and Equipment (219,861) (84,721)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid (134,939) (133,536)
Exercise of Stock Options and Warrants 165,125 38,922
Stock Retirements (15,584) __
------------ ------------
Net Cash Flows from Financing Activities 14,602 (94,614)
------------ ------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (75,731) 246,589
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 2,152,377 1,293,999
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,076,646 $ 1,540,588
============ ============
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited consolidated financial statements
include all adjustments of a normal and recurring nature which are, in
the opinion of Registrant's management, necessary to present fairly
Registrant's financial position as of March 31, 1995 and the results
of its operations and cash flows for the three months ended March 31,
1995 and 1994. All significant intercompany accounts and transactions
have been eliminated.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. These
consolidated financial statements should be read in conjunction with
the consolidated financial statements and related notes contained in
the Annual Report for the fiscal year ended December 31, 1994.
Management believes that the procedures followed in preparing
these consolidated financial statements are reasonable under the
circumstances, but the accuracy of the amounts in the financial
statements are in some respect dependent upon facts that will exist,
and procedures that will be accomplished by Registrant later in the
fiscal year.
The results of operations for the three months ended March 31,
1995 are not necessarily indicative of the results to be expected for
a full year's operation.
(2) INVENTORIES
The composition of inventories at March 31, 1995 and December 31,
1994 was as follows:
March 31 December 31
1995 1994
-------------------------------
Purchased parts and components $ 1,820,739 $ 2,030,800
Work in process 625,676 529,933
Finished goods 147,273 149,495
----------- -----------
$ 2,593,688 $ 2,710,228
=========== ===========
<PAGE>
(3) PLANT AND EQUIPMENT
The major classifications of plant and equipment at March 31,
1995 and December 31, 1994 are:
March 31 December 31
1995 1994
------------------------------
Machinery and equipment $ 1,639,542 $ 1,875,572
Computer hardware and software 2,308,743 2,113,911
Furniture and fixtures 872,927 899,164
Demonstration equipment 87,147 86,234
Leasehold improvements 203,074 246,441
------------ ------------
$ 5,111,433 $ 5,221,322
============ ============
(4) Weighted average shares outstanding for the three months ended
March 31, 1994 do not include common stock equivalents, as their
effect on earnings per share would be anti-dilutive.
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Sales of $4,410,529 for the quarter ended March 31, 1995
represent a record first quarter sales volume for the Company and a
27% increase over the $3,482,373 of sales realized for the first
quarter of 1994. Domestic sales for the first quarter of 1995 rose
41% over first quarter 1994 levels on continued strong sales of
Emerald CAS for Windows as well as a strong contribution from INFO/MDR
products. Total AT&T sales were approximately 47% ahead of last years
first quarter results.
International sales accounting for 27% of first quarter revenues
were virtually unchanged from 1994's first quarter which included a
$475,000 shipment of INFO/MDR to Mercury Communications Ltd in
England. This shortfall was made up for by a strong performance by
the Company's German subsidiary, MOSCOM GmbH, whose first quarter
sales of over $836,000 represented an increase of 51% over sales
revenue generated during the first quarter of 1994. The increase in
MOSCOM GmbH sales was especially gratifying in that it highlighted the
breadth of the Company's available international product lines, with
sales of the GCM, Emerald, MVM, and InfoVoice product lines all
increasing significantly over first quarter 1994 results.
The Company also announced a new contract with Siemens A.G.
during the first quarter for Hicom GCM, representing the third
generation of stand-alone call accounting products sold to Siemens and
a replacement for the current GCM product. We have also received an
order from Siemens AG valued at over one million dollars for Emerald
CAS for Windows, marking the first time Siemens will be selling a
MOSCOM call accounting software product. This order will be filled
over a period of two to four years.
The gross margin percentage realized on shipments of 70% for the
first quarter of 1995 was significantly higher than the 64% gross
margin achieved for the first quarter of 1994. The increased margin
resulted from a combination of three factors:
combination of volume and product mix equivalent to 1% of sales
revenues.
A reduction of manufacturing overhead costs stemming from a
streamlining and restructuring of various overhead functions begun
late in 1994 equal to 2% of sales.
Other manufacturing costs (primarily the amortization of
capitalized software) as a percentage of sales declined from 11.8% of
sales for the first quarter of 1995, to 8.3% of first quarter 1995
sales, mainly due to the higher sales volume.
Net engineering and software development expenses for the first
quarter of 1995 of $439,947 were just slightly higher than the
$432,890 of net expense incurred during the first quarter of 1994 due
to a lower level of development expenditures being capitalized. Gross
<PAGE>
spending for engineering and development, however, was reduced from
$790,133 for the first quarter of 1994 to $689,591 for the first
quarter of 1995.
The following table highlights the effects of net and gross
engineering and development expenses, as well as the capitalization
and amortization of development costs, and their impact on the
financial results for the respective quarterly periods.
Three Months Ended
March 31
1995 1994
Gross Expenditures for Engineering
& Software Development $ 689,591 $ 790,133
Less: Costs capitalized 249,644 357,243
----------- -----------
Net Engineering & Software
development expense $ 439,947 $ 432,890
=========== ===========
Costs Amortized (included in
Cost of Sales) $ 304,787 $ 245,336
=========== ===========
Selling, general and administrative expenses of $2,336,484 or 53%
of sales for the quarter ended March 31, 1995 compared with an expense
level of $1,895,661 or 54% of sales for the quarter ended March 31,
1994. The increased level of spending reflects the expansion of the
sales and support staffs of both MOSCOM GmbH, the Company's German
subsidiary, and the Company's domestic operations that was begun late
in the first quarter of 1994, a program which continued throughout the
year. Though total spending for selling and marketing costs will
continue to exceed 1994 levels for the balance of 1995, it is expected
overall sales volume than they accounted for during 1994.
Net income of $303,048 representing $.04 per share for the first
quarter of 1995 compared to a net loss of $50,023 or a loss of $.01
per share for the same quarter of 1994.
Liquidity and Capital Resources
Total cash in the bank and under investment at March 31, 1995 of
$3,634,753 compared with cash positions of $4,113,346 at December 31,
1994, and $4,344,235 at March 31, 1994. Working capital ratios for
the same three periods referenced above were 6.0, 6.0, and 6.9,
respectively.
<PAGE>
Accounts receivable at the end of the first quarter of 1995 of
$4,543,319 were significantly higher than the $3,213,096 of
receivables at the same date last year due to the strong 1995 sales
volume. As a result the Company anticipates a significant increase
during the second quarter in its already strong cash position.
Inventories at March 31, 1995 of $2,593,688, were down from
$2,710,228 at the end of 1994. Management continues to monitor the
inventory levels carefully and hopes to realize further reductions
over the balance of the year.
Capital equipment additions during the first quarter of 1995 were
$219,861 consisting mainly of computer equipment and office
furnishings for the Global Billing Services Ltd, the subsidiary
established by the Company to provide billing and operations support
services to CATV and telecommunications companies in the United
Kingdom
The Company continues to maintain an unsecured revolving line of
credit arrangement with a commercial bank for a maximum of $3,000,000
at an interest rate of the lower of the bank's prime rate of interest
or the bank's offered rate of interest. The Company must pay
quarterly a loan commitment fee of 1/4% per annum of the difference
between the maximum amount available under the line less loans
outstanding at the end of each quarter. The line of credit
arrangement is subject to certain financial covenants relating
primarily to the Company's current ratio, tangible net worth,
liabilities to tangible net worth and a limit on the amount of
dividends declared or paid each year. This agreement expires on
January 31, 1996.
Given its strong financial condition, the Company believes that
it has sufficient resources from existing cash reserves and credit
agreements to meet its financial needs over the next twelve months.
<PAGE>
Item 6: Exhibits and Reports on Form 8-K
(1) Registrant's Consolidated Financial Statements for the three
months ended March 31, 1995 and 1994 are set forth in Part I,
Item 1 of this Quarterly Report on Form 10-Q.
(2) Calculation of earnings per share.
Registrant did not file and was not required to file any current
reports on Form 8-K during the quarter ended March 31, 1995.
<PAGE>
Exhibit A: (2)
MOSCOM CORPORATION
and Subsidiary
Calculations of Earnings Per Share
Three Months Ended
March 31
Primary 1995 1994
Net Income (Loss) $ 303,048 $ (50,023)
=========== ==========
Weighted Common Shares Outstanding 6,765,545 6,685,470
Dilutive Effect of Stock Options
After Application of Treasury Stock
Method 187,766 --
----------- -----------
Weighted Average Shares Outstanding 6,953,311 6,685,470
=========== ===========
Income (Loss) Per Common
and Common Equivalent Share $.04 $(.01)
===== ======
Assuming Full Dilution
Net Income (Loss) $ 303,048 $ (50,023)
=========== ===========
Weighted Average Shares Outstanding 6,953,311 6,685,470
Additional Dilutive Effect of Stock
Options and Warrants after
Application of Treasury Stock Method -- --
----------- -----------
Weighted Average Shares Outstanding 6,953,311 6,685,470
Income (Loss) per Common Share
Assuming Full Dilution $.04 $(.01)
==== ======
<PAGE>
SIGNATURES
Pursuant to 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.
MOSCOM CORPORATION
REGISTRANT
Date: May 10, 1995
_____________________________________
Albert J. Montevecchio, Chairman of the Board
President and CEO
Date: May 10, 1995
_____________________________________
Ronald C. Lundy
Treasurer (Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,076,646
<SECURITIES> 1,558,107
<RECEIVABLES> 4,543,319
<ALLOWANCES> 112,000
<INVENTORY> 2,593,688
<CURRENT-ASSETS> 11,002,317
<PP&E> 5,111,433
<DEPRECIATION> 4,050,584
<TOTAL-ASSETS> 16,604,599
<CURRENT-LIABILITIES> 1,838,682
<BONDS> 0
<COMMON> 678,253
0
0
<OTHER-SE> 13,079,700
<TOTAL-LIABILITY-AND-EQUITY> 16,604,599
<SALES> 4,410,529
<TOTAL-REVENUES> 4,410,529
<CGS> 1,316,446
<TOTAL-COSTS> 4,092,877
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 353,048
<INCOME-TAX> 50,000
<INCOME-CONTINUING> 317,652
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 303,048
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
