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 June 30, 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 Number)
Incoporation or Organization)
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 June 30, 1995.
Common stock, par value $.10 6,796,901 shares
This report consists of 13 pages.
<PAGE>
INDEX
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets - 3, 4
June 30, 1995 and December 31, 1994
Consolidated Statements of Operations - 5
Three and Six Months Ended June 30, 1995 and 1994
Consolidated Statements of Cash Flows - 6
Six Months Ended June 30, 1995 and 1994
Notes To Consolidated Financial Statements 7, 8
Item 2 Management's Discussion and Analysis of 9 - 10
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 11 - 13
<PAGE>
PART I - FINANCIAL INFORMATION
MOSCOM CORPORATION
And Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 30 December 31
ASSETS 1995 1994*
CURRENT ASSETS: (Unaudited)
Cash and Cash Equivalents
(Including Short-term investments
of $2,856,972 and $1,775,416
respectively) $ 2,956,597 $ 2,152,377
Short-term Investments 1,456,012 1,960,969
Accounts Receivable, trade (net of
allowance for doubtful accounts
of $109,000 and $105,000,
respectively) 4,849,944 3,473,667
Inventories (Note 2) 2,223,747 2,710,228
Prepaid Expenses 199,029 239,002
------------ ------------
Total Current Assets 11,685,329 10,536,243
PLANT AND EQUIPMENT (Note 3): 5,067,230 5,221,322
Less Accumulated Depreciation (3,937,977) (4,268,984)
------------ ------------
Plant and Equipment (Net) 1,129,253 952,338
OTHER ASSETS:
License Fees and Purchased Software
(Net of accumulated amortization
of $682,594 and $569,887,
respectively) 367,928 389,366
Capitalized Software
Development Costs (Net of
accumulated amortization of
$1,815,402 and $1,427,864 2,853,862 2,895,853
respectively)
Other Assets 1,410,453 1,309,683
------------ ------------
Total Other Assets 4,632,243 4,594,902
------------ ------------
TOTAL ASSETS $ 17,446,825 $ 16,083,483
============ ============
See notes to Consolidated Financial Statements.
* Derived from Audited Financial Statements
<PAGE>
MOSCOM CORPORATION
And Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 30 December 31
1995 1994*
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 515,204 $ 510,145
Accrued Compensation and Related Taxes 698,470 778,684
Other Accrued Expenses 1,148,461 469,469
------------ ------------
Total Current Liabilities 2,362,135 1,758,298
Other Long-Term Liabilities 1,060,464 955,464
------------ ------------
3,422,599 2,713,762
STOCKHOLDERS' EQUITY:
Common Stock, par value $.10,
20,000,000 shares authorized; issued
and outstanding, 6,796,901 and
6,743,875, respectively 679,690 674,388
Additional Paid-in Capital 15,137,472 14,945,932
Retained Earnings (1,847,101) (2,261,852)
Cumulative Translation Adjustment 54,165 11,253
------------ ------------
14,024,226 13,369,721
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,446,825 $ 16,083,483
============ ============
See notes to Consolidated Financial Statements.
* Derived from Audited Financial Statements
<PAGE>
MOSCOM CORPORATION
And Subsidiaries
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
(Unaudited)
1995 1994 1995 1994
<S> <C> <C> <C> <C>
SALES $ 4,323,763 $ 3,558,825 $ 8,734,292 $ 7,041,198
COSTS AND OPERATING EXPENSES:
Cost of Sales 1,280,367 1,141,979 2,596,813 2,400,288
Engineering & Software Development 435,865 376,148 875,812 809,038
Selling, General and Administrative 2,380,639 2,052,026 4,717,123 3,947,687
------------ ------------ ------------ ------------
Total Costs and Operating Expenses 4,096,871 3,570,153 8,189,748 7,157,013
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS 226,892 (11,328) 544,544 (115,815)
INTEREST INCOME 68,750 19,450 104,146 58,914
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 295,642 8,122 648,690 (56,901)
INCOME TAXES 49,000 -- 99,000 (15,000)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 246,642 $ 8,122 $ 549,690 $ (41,901)
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE $ .04 $ .00 $ .08 $(.01)
============ ============ ============ ============
</TABLE>
See notes to Consolidated Financial Statements.
<PAGE>
MOSCOM CORPORATION
And Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30
1995 1994
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 549,690 $ (41,901)
------------ ------------
Adjustments to Reconcile Income (Loss)
to Net Cash Provided (Used) by
Operating Activities
Depreciation and Amortization 1,019,692 854,645
Provision for Losses on Accounts Receivable 12,000 (72)
Provision for Inventory Obsolescence 81,750 123,200
Changes in Assets and Liabilities
Investments
504,957 845,663
Accounts Receivable (1,388,277) (1,450,346)
Inventories 404,731 158,022
Prepaid Expenses 39,973 197,036
License Fees (160,823) (92,202)
Software Development Costs (563,991) (840,174)
Other Assets (100,770) 18,740
Accounts Payable 5,059 (80,858)
Other Liabilities 105,000 97,500
Other Current Liabilities 652,750 (155,755)
------------ ------------
Net Adjustments 612,051 (324,601)
------------ ------------
Net Cash Provided (Used) by Operating
Activities 1,161,741 (366,502)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property and Equipment (419,424) (116,056)
------------ ------------
CASH FLOWS Provided (Used) by FINANCING
ACTIVITIES
Dividends Paid (134,939) (134,152)
Exercise of Stock Options and Warrants 212,426 72,649
Stock Retirements (15,584) --
------------ ------------
Net Cash Flows from Financing Activities 61,903 (61,503)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 804,220 (544,061)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 2,152,377 1,293,999
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,956,597 $ 749,938
============ ============
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) GENERAL
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 June 30, 1995 and December 31,
1994 and the results of its operations and cash flows for the three
and six months ended June 30, 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 and six months ended June
30, 1995 are not necessarily indicative of the results to be expected
for a full year's operation.
(2) INVENTORIES
The composition of inventories at June 30, 1995 and December 31,
1994 was as follows:
June 30 December 31
1995 1994
Purchased parts and components $1,605,667 $2,030,800
Work in process 479,136 529,933
Finished goods 138,944 149,495
---------- ----------
$2,223,747 $2,710,228
========== ==========
<PAGE>
3) PLANT AND EQUIPMENT
The major classifications of plant and equipment at June 30, 1995
and December 31, 1994 are:
June 30 December 31
1995 1994
Machinery and equipment $1,471,262 $1,875,572
Computer hardware and
software 2,361,973 2,113,911
Furniture and fixtures 953,129 899,164
Demonstration equipment 28,124 86,234
Leasehold improvements 252,742 246,441
---------- ----------
$5,067,230 $5,221,322
========== ==========
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Sales for the second quarter ended June 30, 1995 of $4,323,763
were 21% higher than sales of $3,558,825 for the second quarter of
1994. Sales for the six month period ended June 30, 1995 were
$8,734,292, or an increase of 24% over the sales of $7,041,198
achieved for the first six months of 1994.
A significant portion of the increase in sales during 1995 is
attributable to the rapid growth of the Company's German subsidiary,
MOSCOM GmbH, which has experienced a 67% growth in sales for the first
six months of this year versus the same six month period of 1994.
This increase results from new distribution contracts with Siemens and
Philips for Emerald CAS for Windows, as well as increased demand for
the Company's Televoice product, and the initial shipments of MVM for
Windows, MOSCOM's voice activated voice mail system.
Sales to the domestic market were up as well, increasing by 24%
over the first six months of 1994. Sales to AT&T are running
approximately 19% ahead of last years pace while sales to the rest of
the domestic marketplace are up 31% from 1994 levels.
The Company has been able to reduce its cost of sales percentage
to 30% for each of the first two quarters of 1995, compared with cost
of sales percentages of 32% and 34% for the three and six month
periods ended June 30, 1994. The lower costs of sales reflect a
combination of a product mix containing a higher content of software
based products, significantly reduced manufacturing overhead costs,
and a lower percentage of amortization expense related to capitalized
software due to higher sales volumes.
Net engineering and software development expenses of $435,865 for
the three month period ended June 30, 1995 compare with $376,148 for
the three months ended June 30, 1994. Net engineering and development
expense of $875,812 for the six months ended June 30, 1995 were 8%
higher than the expense of $809,038 realized for the first six months
of 1994. As the table below indicates, however, gross spending for
engineering and development for both the three and six month periods
ended June 30, 1995 has decreased 13% from prior year levels. The
higher net spending reflects a proportionately lower percentage of
development costs being capitalized during 1995 than was capitalized
in 1994.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Gross Expenditures for
Engineering & Software Development $ 750,212 $ 859,079 $ 1,439,803 $ 1,649,212
Less: Costs Capitalized (314,347) (482,931) (563,991) (840,174)
Net Engineering & Software
Development Expense $ 435,865 $ 376,148 $ 875,812 $ 809,038
============ ============ ============ ============
</TABLE>
<PAGE>
Selling, general, and administrative expenses of $2,380,639 and
$4,717,123 for the three and six months ended June 30, 1995 represent
increases of 16% and 19% over 1994 expense levels for the same periods
of 1994. The increased spending levels stem from three sources.
1. Increased selling and support costs associated with MOSCOM GmbH
required by the significant increase in revenues and customers.
2. Start up costs associated with Global Billing Services Ltd, the
Company's new service bureau subsidiary in the United Kingdom,
particularly during the second quarter.
3. A strengthening of the Company's domestic sales and support staffs.
It is expected that 1995 selling and administrative costs will
continue to exceed 1994 levels during the third and fourth quarters.
Interest income earned on investments of $68,750 for the quarter
ended June 30, 1995 compares with $19,450 for the quarter ended June
30, 1994. For the six month periods ended June 30, 1995 and 1994
interest income increased from $58,914 to $104,146.
Net income of $246,642 or $.04 per share for the quarter ended
June 30, 1995 compared with net income of $8,122 or $.00 per share for
the same quarter of 1994. Net income of $549,690 or $.08 per share
for the six months ended June 30, 1995, compared with a net loss of
$41,901, a loss of $.01 per share for the first six months of 1994.
Liquidity and Capital Resources
The Corporation's total cash and investment position at June 30,
1995 was $4,412,609. This compares with cash and investment positions
of $4,113,346 at December 31, 1994 and $3,260,445 at June 30, 1994.
Working capital ratios for these three periods were 5.0, 6.0, and 5.9
respectively.
Accounts receivable have risen by approximately $1.4 million
dollars during the first half of 1995 due primarily to timing, and
increased revenues, but are expected to be reduced significantly
during the third quarter of 1995.
Inventories of $2,223,747 at June 30, 1995 have decreased from
$2,710,228 at December 31, 1994 and $2,899,594 at June 30, 1994, with
further decreases anticipated over the balance of the year.
Other accrued expenses have increased from $469,469 at the end of
1994 to $1,148,461 at June 30, 1995. The increase is attributable to
deferred revenues from billings to AT&T for services to be performed
later in the year at which time the associated revenues will be
recognized, and the liability reduced.
Spending on capital equipment additions of $419,424 during the
first half of 1995 are running well ahead of the $116,056 expended
during the first half of 1994, primarily due to the initial investment
in equipment and furnishings for Global Billing Services Ltd., the
Company's new subsidiary in England. Capital requirements during the
second half of the year are expected to return to more normal levels.
<PAGE>
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(1) Registrant's Consolidated Financial Statements for the three
and six months ended June 30, 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 June 30, 1995.
<PAGE>
Exhibit A: (2)
MOSCOM CORPORATION
and Subsidiary
<TABLE>
Calculations of Earnings Per Share
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Primary
Net Income (Loss) $ 246,642 $ 8,122 $ 549,690 $ (41,901)
============ ============ ============ ============
Weighted Common Shares Outstanding 6,786,405 6,706,937 6,775,975 6,696,204
Dilutive Effect of Stock Options After
Application of Treasury Stock Method 175,819 253,912 181,793 126,956
------------ ------------ ------------ ------------
Weighted Average Shares Outstanding 6,962,224 6,960,849 6,957,768 6,823,160
============ ============ ============ ============
Income (Loss) Per Common
and Common Equivalent Share $ .04 $ .00 $ .08 $(.01)
============ ============ ============ ============
Assuming Full Dilution
Net Income (Loss) $ 246,642 $ 8,122 $ 549,690 $ (41,901)
============ ============ ============ ============
Weighted Average Shares Outstanding 6,962,224 6,960,849 6,957,768 6,823,160
Additional Dilutive Effect of Stock
Options and Warrants after Application
of Treasury Stock Method -- -- -- --
------------ ------------ ------------ ------------
Weighted Average Shares Outsatnding 6,962,224 6,960,849 6,957,768 6,823,160
============ ============ ============ ============
Income (Loss) Per Common
and Common Equivalent Share $ .04 $ .00 $ .08 $(.01)
============ ============ ============ ============
</TABLE>
<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: August 14, 1995
_____________________________________
Albert J. Montevecchio, Chairman of the Board
President and CEO
Date: August 14, 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> JUN-30-1995
<CASH> 2,956,597
<SECURITIES> 1,456,012
<RECEIVABLES> 4,849,944
<ALLOWANCES> 109,000
<INVENTORY> 2,223,747
<CURRENT-ASSETS> 11,685,329
<PP&E> 5,067,230
<DEPRECIATION> 3,937,977
<TOTAL-ASSETS> 17,446,825
<CURRENT-LIABILITIES> 2,362,135
<BONDS> 0
<COMMON> 679,690
0
0
<OTHER-SE> 13,344,536
<TOTAL-LIABILITY-AND-EQUITY> 17,446,825
<SALES> 4,323,763
<TOTAL-REVENUES> 4,323,763
<CGS> 1,280,367
<TOTAL-COSTS> 4,096,871
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 295,642
<INCOME-TAX> 49,000
<INCOME-CONTINUING> 226,892
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 246,642
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
