PART I. FINANCIAL
INFORMATION Part 1. Financial Information
Item 1. Index to Financial Statements
SIMS COMMUNICATIONS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Page
Consolidated Balance Sheets at
March 31, 1996 and June 30,
1995................. 3
Consolidated Statements of Income for the
Nine Months Ended March 31, 1996 and 1995.
.
4
Consolidated Statement of Cash Flows for the
Nine Months Ended March 31, 1996.and 1995..
.
5
Consolidated Statement of Stockholders'
Equity for the Nine Months Ended
March 31, 1996... ..
6
Notes to Consolidated Financial Statements......
7 Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations...
11
Part 11. Other Information
12
SIMS COMMUNICATIONS INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31 JUNE
30, 1996
1995
ASSETS (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 306,879
$1,160,085
Franchise receivables 24,789
106,031
Other receivables 209,047
9,603
Inventories 1,316,845
1,318,298
Prepaid expenses 133,345
63,053
Total Current Assets $1,990,905
$2,657,070
PROPERTY AND EQUIPMENT,
Property & Equipment $1,259,874 $
808,089
Less Accumulated Depreciation 244,346
116,224
Net Property & Equipment $1,015,528 $
691,865
OTHER ASSETS
Note receivable $ 150,000 $
150,000
Deferred location costs 84,325
94,150
Deposits 18,160
15,691
Organization Costs -net 5,084
8,017
Total Other Assets $ 257,569 $
267,858
Total Assets $3,264,002
$3,616,793
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 539,351 $
150,518
Bank line of credit 250,000
250,000
Current obligations under capital lease 7,155
7,155
Current maturities of long term debt 103,073
4,923
Stockholders loans 45,462
- -
Franchise deposits and customer deposits 979,862
1,026,049
Total Current Liabilities $1,924,903
$1,438,645
LONG TERM LIABILITIES
Long term debt $ 318,175 $
161,563
Obligations under capital leases 3,280
8,611
Total Long Term Liabilities 321,455
170,174
Total Liabilities
$2,246,358
$1,608,819
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock $.001 par value,
300,000 shares -
- -
authorized, no shares issued or
outstanding.
Preferred stock Series A 24,250 shares,
subscribed 245,000
245,000
June 1995 issued December 1995
Preferred stock Series B $.001 par value,
100,000 shares,
100,000
- -
issued and outstanding March 31, 1996
Common stock $.0001 par value 40,000,000
2,204
2,018 shares authorized, issued and outstanding.
2,205,451 shares (March 1996) and 2,018,710
shares (June 1995)
Additional Paid In Capital $8,930,864
$8,547,550
Accumulated Deficit
$(8,260,424)$(6,786,594)
Total Stockholders Equity $1,017,644 $2,007,974
Total Liabilities and Stockholders'
Equity $3,264,002 $3,616,793
See notes to consolidated financial statements
SIMS COMMUNICATIONS INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS
OF OPERATIONS
For the Three and Nine Months Ended March 1996 and 1995
Three Months Ended Nine Months
Ended March 31, March
31,
1996 1995 1996
1995
Revenues
Equipment & Other $710,985 $38,445
$792,602 $284,145
Franchise - - -
40,750
Rental 344,901 52,806
550,669 132,579
Royalty 5,380 15,907 27,966
65,258
Total revenues 1,061,266 107,158
1,371,237 522,732
Cost of Sales 477,380 85,784
765,500 351,622
----------------- ------------
- -------------------
- ---------------
Gross profit 583,886 21,374
605,737 171,110
Operating expenses
General & Administrative 358,788 419,430
1,310,520 1,279,925
Interest 6,157 86,485 25,278 259,004
Selling & Marketing 326,283 245,836
622,141 301,272
Stock Based Compensation 0 0 0 20,000
Research & Development 13,777 45,300
113,458 68,626
----------------- ------------
- --- -----------------
- ---------------
Total Expenses 705,005 797,051
2,071,397 1,928,827
----------------- ------------
- -------------------
- ---------------
Net Loss ($121,119) ($775,677)
($1,465,660) ($1,757,717)
========== ==========
========== =========
Preferred Stock Dividends 0 0
8,200 0
Net Loss Per Common Share ($0.05)
($0.88) ($0.71) ($2.24)
========== ==========
========== =========
Weighted Average Common 2,205,451
879,935 2,069,154
782,954
Shares Outstanding
==========
========== ==========
=========
See notes to consolidated financial
statements.
SIMS COMMUNICATIONS INC AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
MARCH 31 JUNE 30, 1996 1995
ASSETS (Unaudited)
CURRENT ASSETS
Cash and cash equivalents
$306,879 $1,160,085
Franchise receivables 24,789
106,031
Other receivables 209,047
9,603
Inventories 1,316,845
1,318,298
Prepaid expenses 133,345
63,053
-------------------------------
Total Current Assets
1,990,905 2,657,070
PROPERTY AND EQUIPMENT,
Property & Equipment
1,259,874 808,089
Less Accumulated Depreciation
244,346 116,224
-Net Property & Equipment
1,015,528 691,865
OTHER ASSETS
Note receivable 150,000
150,000
Deferred location costs
84,325 94,150
Deposits 18,160 15,691
Organization Costs -net
5,084 8,017
-------------------------------
-Total Other Assets 257,569
267,858
-------------------------------Total
Assets $3,264,002
$3,616,793
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES
Accounts payable and accrued expenses $539,351 $150,518
Bank line of credit 250,000
250,000
Current obligations under capital lease 7,155 7,155
Current maturities of long term debt
103,073 4,923
Stockholders loans 45,462
- -
Franchise deposits and customer deposits
979,862 1,026,049
Total Current Liabilities
1,924,903 1,438,645
LONG TERM LIABILITIES
Long term debt 318,175
161,563
Obligations under capital leases
3,280 8611
-------------------------------
Total Long Term Liabilities
321,455 170,174
-------------------------------
Total Liabilities 2,246,358
1,608,819
------------------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock $.001 par value, 300,000
shares -
- -
authorized, no shares issued or
outstanding.
Preferred stock Series A 24,250 shares,
subscribed 245,000
245,000
June 1995 issued December 1995
Preferred stock Series B $.001 par
value,
100,000 shares, 100,000
- -
issued and outstanding March 31,
1996 Common stock $.0001 par value
40,000,000
2,204 2,018
shares authorized, issued and
outstanding.
2,205,451 shares (March 1996) and
2,018,710
shares (June 1995)
Additional Paid In Capital
8,930,864 8,547,550
Accumulated Deficit
(8,260,424) (6,786,594) -----------------
- ----------------
Total Stockholders Equity 1,017,644 2,007,974 ------
-------------------------Total
Liabilities and Stockholders' Equity
$3,264,002 $3,616,793
=========== ==========
See notes to consolidated financial statements
0 0
7
SIMS COMMUNICATIONS INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS
OF CASH FLOWS
FOR THE NINE MONTHS ENDING MARCH 31, 1996
AND 1995
(Unaudited)
March 31,
CASH FLOWS FROM OPERATING ACTIVITIES
1996 1995
Net (loss)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation
128,122 38,989
Amortization
15,988 2,934
Interest and compensation expenses converted to equity
156,226
Changes in assets and liabilities:
Inventories
1,453 156,982
Franchise Fee and other receivables (118,202)
70,476 Prepaid Expenses
(70,292) (8,515)
Accounts payable and accrued expenses 388,833
(539,293)
Deferred offering costs
- - (518,819)
Franchise and customer deposits (46,187)
(195,392) Deposits (2,469)
(690)
Deferred location costs
(3,200)
NET CASH FROM (USED IN) OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
(451,785) (316,200)
NET CASH (USED IN) INVESTING ACTIVITIES
(451,785) (316,200)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt
286,137 517,560
Payments on debts
(31,375)
Loans from officers
45,462 (64,841)
Proceeds from issuance of common stock
383,500 6,748,221
Proceeds from issuance of preferred stock 100,000
Payment of preferred stock dividends
(8,200) -
Payments of obligation under capital lease (5,331)
(4,485)
NET CASH PROVIDED BY FINANCING ACTIVITIES
770,193 5,321,508
NET INCREASE (DECREASE) IN CASH
(853,206) 2,410,489
CASH AT BEGINNING OF PERIOD
1,160,085 294,020
CASH AT END OF PERIOD
306,879 2,704,509
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
INFORMATION
Cash paid during the 9 months for interest
$35,913 $196,779
Cash paid during the 9 months for income taxes
$0 $0
See notes to consolidated financial
statements
SIMS COMMUNICATIONS INC AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF STOCKHOLDER'S
EQUITY
FOR THE 9 MONTHS ENDING MARCH 31, 1996
(UNAUDITED)
PREFERRED
COMMON STOCK
SE
SER
ADDITIONAL
NUMBER OF NUMBER OF
NUMBER
OF PAID IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES
AMOUNT CAPITAL DEFICIT TOTAL
Balance - June 3 24,250 $245,000
2,018,871 $2,018 $8,547,550($6,786,594$2,007,974
Net loss -9 months ended (1,465,660)(1,465,660)
March 31, 1996
Issuance of common stock for cash
186,580 186 383,314 $383,500
(at $1.56-$3.437 per share)
Preferred Stock Dividends
(8,200) (8,200)
Sale of Series B 100,000
$100,000
100,000
Preferred Stock
------------- -----------
- --- -----
- -- ---- -------- ---- -----------
- -----
Balance -March 31 24,250 $245,000100,000
$100,000
2,205,451 $2,204 $8,930,864($8,260,454$1,017,614 === ======
=== =======
====== ====== ======== ===
=========
See notes to consolidated financial statements
SIMS COMMUNICATIONS INC. AND SUBSIDIARIES Notes
to Consolidated Financial Statements
Note 1 - Organization and Significant Accounting Policies
Organization
Sims Communications Inc. and Subsidiaries (the Company) was
incorporated in the State of Delaware on August 1, 1991.
The company was in the development state since its formation
until fiscal year ending June 30, 1994 when the Company began
earning significant revenue from their planned principal
operations. The Company was formed as a communication company.
Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the nine month period ended March
31, 1996 are not necessarily indicative of the results that may be
expected for the year ended June 30, 1996. For further
information, refer to the consolidated financial statements and
footnotes included in the Company's annual Filing Statement on form
10-KSB.
Principles of Consolidation
The consolidated financial statements includes the accounts of Sims
Communications Inc. and its wholly owned subsidiaries Sims
Franchise Group, Inc., Cellex Communications, Inc., and Sims
Communications International, Inc. All intercompany balances and
transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with
a maturity date of three months or less to be cash equivalents.
Inventories
Inventories consists primarily of automated cellular distribution
centers (ACDC's), cellular phones and other communication equipment
and are recorded at the lower of cost or market determined by the
firstin, first out method.
Property and Equipment
Property and equipment are recorded and depreciated over their
estimated useful lives (5-7 years), utilizing the straight-line
method. Expenditures for maintenance and repairs are charged to
expense as incurred.
Organization Costs
Organization costs have been capitalized and are being amortized
using the straight-line method over
a five year period.
Net Loss Per Common Share
Net loss per common share is based on the weighted average number
of common shares outstanding during each of the respective periods.
Common shares issuable upon exercise of the convertible notes and
common stock equivalents are excluded from the weighted average
number of shares since the effect is antidilutive.
Deferred Offering Costs
Deferred offering costs relate to the February 1995 initial public
offering. The costs were offset against the proceeds of the
offering.
Deferred Location Costs
Deferred location costs relate to expenses associated with the
buyback of certain franchises. These costs are amortized over five
years.
Revenue Recognition
Franchise fees are recognized as revenue, on a straight line
basis, once an agreed upon location has been identified for the
placement of the Automated Cellular Distribution Center (ACDC)
and the location is under contract.
Revenue from the sale of the actual ACDC unit is recognized upon
shipment of the unit to the franchise location. Cash collected
by the Company before all material services and conditions are
substantially performed is recorded as deferred income and
retained as customer deposits. Incremental development costs are
deferred, but not in excess of the deferred revenue and estimated
costs to establish and open the Automated Cellular Distribution
Centers and are expensed when the revenue is recognized.
Royalty Fees
Royalties as allowed by the franchise agreement are accrued on a
percentage of gross sales, as defined, as reported by
franchisees. Research and Development
Research and development costs consist primarily of costs related
to the conceptional formation, design, tooling and development of
prototypes and are expensed as incurred.
Note 2- Notes and Loans Payable
Mar 31,1996
Promissory note payable at 10% interest payable monthly,
commencing Sept. 15, 1995. Balance of principal is payable in
full on September 15, 1996. As additional consideration, the
Company agrees to pay the note holder 15.5% of all profits
received through the Company's agreements with Commonwealth Group
International.
$ 310,348
Note payable - principal and interest payable in monthly
installments of $541 through June 14, 1998. Collateralized by
equipment.
13,320
Note payable - $5,500 principal plus interest payable monthly
through April 1997. Collateralized by receivables.
67,000
Note payable - principal and interest payable in monthly
installments of $3,194 through Jan. 28, 1997. 30,580
421,248
Less: Current Maturities
(103,073) Total
$318,175
Note 3 - Continued Operations.
The accompanying financial statements have been
prepared on a going concern basis which contemplates the
realization of assets and liquidation of liabilities in the
ordinary course of business. In prior years, the Company had
been in the development state and did not begin earning
significant revenues until the middle of fiscal year ended
1994. During the year ending June 1995 and continuing through
the nine months ended March 1996, the Company continued to
suffer recurring losses from operations. During the fiscal
year ended June 30, 1995, the Company completed an initial
public offering, However, cash flows from operations may not
be sufficient to meet future obligations of the Company.
Management is in
the process of effecting a private placement of the Company's
common stock. The funds thus generated are anticipated to
provide liquidity for at least twelve to eighteen months. Note
4 - Deferrals
In recognition of the liquidity concerns of the
company, all compensation, benefits and bonus provisions, as
provided under the employment agreements between the company
and four officers has
been deferred, effective October 1995.
Note 5- Reverse Stock Split
In February 1996, the Board of Directors declared a
1 for 10 stock split. This reverse split was
effective on March 7, 1996, and has been retroactively
reflected on the enclosed financials.
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.
SIMS COMMUNICATIONS, INC.
ByJames J. Caprio
Secretary, VP Finance
Date: May 20, 1996
