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 September 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)
Incorporation 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 September 30, 1995.
Common stock, par value $.10 6,821,873 shares
This report consists of 14 pages.
<PAGE>
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets - 3, 4
September 30, 1995 and December 31, 1994
Consolidated Statements of Operations - 5
Three and Nine Months Ended September 30, 1995 and 1994
Consolidated Statements of Cash Flows - 6
Nine Months Ended September 30, 1995 and 1994
Notes To Consolidated Financial Statements 7, 8
Item 2 Management's Discussion and Analysis of 9 - 11
Financial Condition and Results of Operations
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
September 30 December 31
ASSETS 1995 1994*
CURRENT ASSETS: (Unaudited)
Cash and Cash Equivalents
(Including Short-term investments
of $3,175,176 and $1,775,416
respectively) $ 3,323,484 $ 2,152,377
Short-term Investments 2,063,482 1,960,969
Accounts Receivable, trade (net of
allowance for doubtful accounts
of $95,000 and $105,000,
respectively) 3,795,441 3,473,667
Inventories (Note 2) 2,220,411 2,710,228
Prepaid Expenses 199,640 239,002
------------ ------------
Total Current Assets 11,602,458 10,536,243
PLANT AND EQUIPMENT (Note 3): 5,203,348 5,221,322
Less Accumulated Depreciation (4,056,857) (4,268,984)
------------ ------------
Plant and Equipment (Net) 1,146,491 952,338
OTHER ASSETS:
License Fees and Purchased Software
(Net of accumulated amortization
of $732,785 and $569,887
respectively) 397,589 389,366
Capitalized Software
Development Costs (Net of
$2,128,190 and $1,427,864
respectively) 2,938,492 2,895,853
Other Assets 1,416,166 1,309,683
------------- -------------
Total Other Assets 4,752,247 4,594,902
------------- -------------
TOTAL ASSETS $ 17,501,196 $ 16,083,483
============= =============
See notes to Consolidated Financial Statements.
* Derived from Audited Financial Statements
<PAGE>
MOSCOM CORPORATION
And Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30 December 31
1995 1994*
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 394,193 $ 510,145
Accrued Compensation and Related Taxes 727,283 778,684
Other Accrued Expenses 1,309,734 469,469
------------ ------------
Total Current Liabilities 2,431,210 1,758,298
Other Long-Term Liabilities 1,112,964 955,464
------------ ------------
3,544,174 2,713,762
STOCKHOLDERS' EQUITY:
Common Stock, par value $.10,
20,000,000 shares authorized; issued
and outstanding, 6,821,873 and
6,743,875, respectively 682,187 674,388
Additional Paid-in Capital 15,255,335 14,945,932
Retained Earnings (2,001,047) (2,261,852)
Cumulative Translation Adjustment 20,547 11,253
------------ ------------
13,957,022 13,369,721
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,501,196 $ 16,083,483
============ ============
See notes to Consolidated Financial Statements.
* Derived from Audited Financial Statements
<PAGE>
<TABLE>
MOSCOM CORPORATION
And Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(Unaudited)
1995 1994 1995 1994
-----------------------------------------------------
<S> <C> <C> <C> <C>
SALES $ 3,834,017 $ 3,016,660 $12,568,309 $10,057,858
----------- ----------- ----------- -----------
COSTS AND OPERATING EXPENSES:
Cost of Sales 938,655 1,174,050 3,535,468 3,574,338
Engineering & Software Development 409,835 371,520 1,285,647 1,180,558
Selling, General and Administrative 2,586,083 2,030,498 7,303,206 5,978,185
----------- ----------- ----------- -----------
Total Costs and Operating Expenses 3,934,573 3,576,068 12,124,321 10,733,081
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (100,556) (559,408) 443,988 (675,223)
INTEREST INCOME 82,548 6,644 186,694 65,558
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (18,008) (552,764) 630,682 (609,665)
INCOME TAXES - - 99,000 (15,000)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (18,008) $ (552,764) $ 531,682 $ (594,665)
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE $.00 $(.08) $.08 $(.09)
=========== =========== =========== ===========
</TABLE>
See notes to Consolidated Financial Statements.
<PAGE>
MOSCOM CORPORATION
And Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
1995 1994
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 531,682 $ (594,665)
----------- -----------
Adjustments to Reconcile Income (Loss) to Net
Cash Provided by Operating Activities
Depreciation and Amortization 1,514,037 1,337,337
Provision for Losses on Accounts Receivable 18,000 (72)
Provision for Inventory Obsolescence 133,500 199,800
Changes in Assets and Liabilities
Investments (102,513) 1,429,927
Accounts Receivable (339,774) (798,971)
Inventories 356,317 77,894
Prepaid Expenses 39,362 190,375
License Fees (239,605) (97,102)
Software Development Costs (961,408) (1,179,702)
Other Assets (106,483) 7,826
Accounts Payable (115,952) (251,043)
Other Liabilities 157,500 146,250
Other Current Liabilities 798,158 (204,235)
----------- -----------
Net Adjustments 1,151,139 858,284
----------- -----------
Net Cash Provided by Operating Activities 1,682,821 263,619
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property and Equipment (558,039) (151,496)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid (270,877) (134,152)
Exercise of Stock Options and Warrants 375,122 146,052
Stock Retirements (57,920) (135,711)
----------- -----------
Net Cash Flows from Financing Activities 46,325 (123,811)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,171,107 (11,688)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 2,152,377 1,293,999
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,323,484 $ 1,282,311
=========== ===========
<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 September
30, 1995 and 1994 and the results of its operations and cash
flows for the three and nine months ended September 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 nine months
ended September 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 September 30, 1995 and
December 31, 1994 was as follows:
September 30 December 31
1995 1994
------------------------------
Purchased parts and components $ 1,590,625 $ 2,030,800
Work in process 429,967 529,933
Finished goods 199,819 149,495
------------ ------------
$ 2,220,411 $ 2,710,228
============ ============
<PAGE>
(3) PLANT AND EQUIPMENT
The major classifications of plant and equipment at
September 30, 1995 and December 31, 1994 are:
September 30 December 31
1995 1994
------------------------------
Machinery and equipment $ 1,511,639 $ 1,875,572
Computer hardware and software 2,433,503 2,113,911
Furniture and fixtures 963,351 899,164
Demonstration equipment 27,903 86,234
Leasehold improvements 266,952 246,441
------------ ------------
$ 5,203,348 $ 5,221,322
============ ============
<PAGE>
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The Company's sales for the quarter ended September 30, 1995
of $3,834,017 rose 27% from sales of $3,016,660 realized for the
third quarter of 1994. This represents the third consecutive
quarter of record revenues for the Company. Sales for the first
nine months of 1995 total $12,568,309 versus sales of $10,057,858
for the first nine months of 1994, an increase of 25%.
For the comparative quarters ended September 30, 1995 and
1994 the Company experienced growth in all major markets, with
AT&T sales increasing 43%, all other domestic sales increasing
4%, and international sales increasing 22%. For the comparative
nine month periods ending September 30, 1995 and 1994 the
percentage increases in sales to AT&T, other domestic, and
international markets were 25%, 26%, and 22%, respectively.
Especially encouraging has been the performance of the
Company's German subsidiary, MOSCOM GmbH, whose revenues have
increased by 55% from 1994 levels, primarily due to an increasing
demand for the Company's voice and telemanagement products.
The Company continues to realize improvement in gross
margins with cost of sales percentages of 24% and 28% for the
three and nine month periods ended September 30, 1995 being
substantially less than the cost of sales percentages of 39% and
36% for the same three and nine month periods of 1994. The lower
cost of sales percentages reflect a continued shift in the
Company's product mix toward newer software based product
offerings, and away from a number of older version hardware based
products.
Net spending for engineering and software development
expenses of $409,835 for the third quarter of 1995 and $1,285,647
for the first nine months of 1995 compare with spending levels of
$371,520 and $1,180,558 for the respective periods of 1994.
Gross spending levels as depicted in the following chart are down
by 5% from 1994 levels ($2,247,055 vs. $2,360,260). The net
spending increases reflect a lower level of development costs
being capitalized during 1995 than was the case in 1994.
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
Gross Expenditures for
Engineering & Software
Development $ 807,252 $ 711,048 $2,247,055 $2,360,260
Less: Costs capitalized (397,417) (339,528) (961,408) (1,179,702)
---------- ---------- ---------- ----------
Net Engineering & Software
development expense $ 409,835 $ 371,520 $1,285,647 $1,180,558
========== ========== ========== ==========
<PAGE>
The Company is currently in the process of making
significant additions to its engineering and development staffs
to meet the demands of several new development projects being
undertaken as a result of current market opportunities. As a
result, fourth quarter expenditures for engineering and
development expenses will increase over those levels realized
during the first three quarters of 1995.
Expenses for selling, general and administrative expenses as
expected continue to increase over 1994 levels. Total
expenditures of $2,586,083 for the three months ended September
30, 1995, and $7,303,206 for the nine months ended September 30,
1995 represent increases of 27% and 22% respectively, when
compared with the same periods of 1994. As explained in prior
1995 10Q reports the increased spending levels stem from a number
of factors, including; Increases in selling and marketing costs
of MOSCOM GmbH, start up costs and staffing of Global Billing
Services Ltd, and a strengthening of the Company's sales and
support staffs domestically. Selling, general and administrative
costs for the fourth quarter of 1995 should approximate those
incurred during the third quarter.
Interest income earned on the investment of surplus cash
balances has amounted to $186,694 for the first nine months of
1995, versus $65,558 of interest income earned during the first
nine months of 1994. The improvement in income results from
positive cash flows generated from operations during 1995,
allowing for higher balances available for investment, coupled
with the rebound in the bond market seen this year, after last
years extremely poor showing.
The net loss of $18,008 for the third quarter of 1995
compared with a net loss of $552,764 for the third quarter of
1994. For the first nine months of 1995 the Company has
generated net income of $531,682 or $.08 per share, versus a net
loss of $594,665 or a loss of $.09 per share for the first nine
months of 1994.
Liquidity and Capital Resources
The Company's total cash and investment position at
September 30, 1995 was $5,386,966, up significantly from
$4,113,346 at December 31, 1994 and $3,208,554 at September 30,
1994. Working capital ratios for these three periods were 4.8,
6.0 and 6.3 respectively.
Accounts receivable, which had risen to a high of $4,849,944
at June 30, 1995 primarily due to the timing of second quarter
shipments, have been reduced to $ 3,795,441 at September 30,
1995.
Inventories continue to be reduced, with total inventories
of $2,220,411 at September 30, 1995 comparing with inventory
values of $2,710,228 and $2,777,203 at December 31, 1994 and
September 30, 1994 respectively. Further reductions in inventory
balances are expected to occur during the fourth quarter of 1995.
<PAGE>
Capital equipment additions for the first nine months of
1995 of $558,039 compared with $151,496 for the same nine months
of 1994, the increase mainly attributable to new equipment and
furnishing for Global Billing Services Ltd, the Company's new
subsidiary in England.
The Company has 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. There have
been no borrowings under this agreement. The agreement expires
January 31, 1996.
Given its cash and current ratio positions, the Company
believes that it will have sufficient resources from existing
cash reserves and credit agreements to meet its financial needs
over the next twelve months, and beyond.
<PAGE>
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on From 8-K
(1) Registrant's Consolidated Financial Statements for the three and
nine months ended September 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 September 30, 1995.
<PAGE>
<TABLE>
Exhibit A: (2)
MOSCOM CORPORATION
and Subsidiary
Calculations of Earnings Per Share
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Primary
Net Income (Loss) $ (18,008) $ (552,764) $ 531,682 $ (594,665)
=========== =========== =========== ===========
Weighted Common Shares
Outstanding 6,809,706 6,710,957 6,787,219 6,701,221
Dilutive Effect of Stock
Options After Application of
Treasury Stock Method - - 121,195 -
----------- ----------- ----------- -----------
Weighted Average Shares Outstanding 6,809,706 6,710,957 6,908,414 6,701,221
=========== =========== =========== ===========
Income (Loss) Per Common and
Common Equivalent Share $.00 $(.08) $.08 $(.09)
=========== =========== =========== ===========
Assuming Full Dilution
Net Income (Loss) $ (18,008) $ (522,764) $ 531,682 $ (594,665)
=========== =========== =========== ===========
Weighted Average Shares
Outstanding 6,809,706 6,710,957 6,908,414 6,701,121
Additional Dilutive Effect of
Stock Options and Warrants
after Application of Treasury
Stock Method - - - -
----------- ----------- ----------- -----------
Weighted Average Shares Outstanding 6,809,706 6,710,957 6,908,414 6,701,121
=========== =========== =========== ===========
Income (Loss) per Common Share
Assuming Full Dilution $.00 $(.08) $.08 $(.09)
=========== =========== =========== ===========
</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: NOVEMBER 9, 1995
_____________________________________
Albert J. Montevecchio, Chairman of the Board
President and CEO
Date: NOVEMBER 9, 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> SEP-30-1995
<CASH> 3,323,484
<SECURITIES> 2,063,482
<RECEIVABLES> 3,795,441
<ALLOWANCES> 95,000
<INVENTORY> 2,220,411
<CURRENT-ASSETS> 11,602,458
<PP&E> 5,203,348
<DEPRECIATION> 4,056,857
<TOTAL-ASSETS> 17,501,196
<CURRENT-LIABILITIES> 2,431,210
<BONDS> 0
<COMMON> 682,187
0
0
<OTHER-SE> 13,274,835
<TOTAL-LIABILITY-AND-EQUITY> 17,501,196
<SALES> 3,834,017
<TOTAL-REVENUES> 3,834,017
<CGS> 938,655
<TOTAL-COSTS> 3,934,573
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 18,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (18,008)
<INCOME-TAX> 0
<INCOME-CONTINUING> (100,556)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,008)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
