SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30,1998
SIMS COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 65-0287558
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
18001 Cowan, Suites C & D, Irvine CA 92614
(address of principal executive offices) (Zip Code)
(949) 261-6665
(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) or 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.
Yes_X___ No____
As of November 13,1998 the Company had 9,582,733 shares of Common Stock issued
and outstanding.
Page 1 of 15 Pages
<PAGE>
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
September 30 1998 and June 30, 1998 3-4
Consolidated Statements of Operations for the Three Months
Ended September 30, 1998 and 1997 5
Consolidated Statement of Cash Flows for the
Three Months Ended September 30, 1998 and 1997 6
Consolidated Statement of Stockholders' Equity
for the Three Months Ended September 30, 1998 7
Notes to Consolidated Financial Statements. 8-13
Management's Discussion and Analysis of
Financial Condition and Results of Operations. 14
Other Information 15
<PAGE>
SIMS COMMUNICATIONS INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER JUNE 30,
30,
1998 1998
ASSETS (Unaudited) (Audited)
CURRENT ASSETS
Cash and cash equivalents (Note 2) $341,684 $263,878
Accounts receivables, less allowance for doubtful 147,333 128,984
accounts of $27,584
Inventories 440,905 452,473
Prepaid expenses and other current 196,512 92,667
assets
Notes receivable, current portion 150,000 150,000
-------- -----------
Total Current Assets 1,276,434 1,088,002
PROPERTY AND EQUIPMENT,
Property & Equipment net of accumulated 2,668,337 2,589,447
depreciation of
$1,129,084 at September 30, 1998 and $940,807 at
June 30, 1998
OTHER ASSETS
Notes receivables, less allowance of $400,902 415,360 445,360
Patents, net of accumulated amortization 382,665 401,121
Goodwill, net of accumulated amortization 935,939 952,069
Other 121,355 126,752
------------ -----------
Total Other Assets 1,855,319 1,925,302
------------ ------------
Total Assets $5,800,090 $5,602,751
======== =======
<PAGE>
SIMS COMMUNICATIONS INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER JUNE 30,
30,
1998 1998
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and Accrued Expenses $ 1,085,686 $ 1,142,828
Bank line of credit (Note 2) 250,000 250,000
Current portion of capitalized lease 77,199 16,732
obligations (Note 4)
Current portion of long term debt (Note 3) 664,174 547,794
Franchise deposits and deferred revenue 827,661 827,661
------------ ------------
Total Current Liabilities 2,904,720 2,785,015
LONG TERM LIABILITIES
Long term debt (Note 3) 216,674 500,853
Capitalized lease obligations (Note 4) 392,010 86,674
----------- -----------
Total Long Term Liabilities 608,684 587,527
----------- -----------
Total Liabilities 3,513,404 3,372,542
Commitments and contingencies
-- --
STOCKHOLDERS' EQUITY (Notes 6 and 7))
Preferred stock, Series A, B and C $.001 par value, 125 125
300,000 shares authorized - 50,000 (A), 100,000 (B)
and 149,500 (Undesignated), 125,250 shares issued and
outstanding (liquidation preference of $605,000)
Common stock $.0001 par value 40,000,000 shares 956 796
authorized:
Shares issued and outstanding - 9,564,733
and 7,959,033 at September 30,
1998 and June 30, 1998, respectively
Additional Paid In Capital 24,310,287 22,646,232
Accumulated Deficit (Note 5) (22,024,682) (20,416,944)
------------ ------------
Total Stockholders Equity 2,286,686 2,230,209
------------ ----------
Total Liabilities and Stockholders' Equity $5,800,090 $5,602,751
======== ========
See notes to consolidated financial
statements
<PAGE>
SIMS COMMUNICATIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 1998 and
1997
(Unaudited)
Three Months Ended
September 30
1998 1997
Revenues
Telecommunications $ 40,146 $ 247,324
Financial Processing 57,501 --
Automated Movie Rentals and Sales 240,764 --
Medical Transaction Processing 39,045 --
----------- ------------
Total Revenues 377,456 247,324
Cost of Sales 146,508 169,354
----------- ----------
Gross Profit 230,948 77,970
Operating Expenses
General & Administrative 916,576 500,148
Depreciation and Amortization 221,887 61,889
Selling & Marketing 365,275 154,944
Equity Based Compensation/Services 293,762 682,901
---------- --------------
Total Expenses 1,797,500 1,399,882
----------- ------------
Operating Loss
(1,566,552) (1,321,912)
Other income (expense)
Interest 6,859 8,174
income
Interest (48,045) (33,466)
Expense
----------- ----------
(41,186) (25,292)
----------- ----------
Loss from continuing operations bef (1,607,738 (1,347,204)
taxes
Income tax benefit
-- --
------------ ------------
Net Loss from Continuing oper ($ 1,607,738) ($1,347,204)
-- 3,839
Income from discontinued operations ------------- ----------
Net Loss ($1,607,738) ($1,343,365)
Basic and Diluted loss per share from continuing ($0.17) ($0.60)
------- -------
operationsBasic and diluted earnings from
discontinued operations -- --
($0.17) ($0.60)
------- -------
Basic and Diluted net loss per share
Weighted Average Common Shares Outstanding 9,443,900 2,222,999
--------- ---------
See notes to consolidated financial statements
<PAGE>
SIMS COMMUNICATIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDING SEPTEMBER 30, 1998 AND
1997
(Unaudited)
September 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES ---- ----
Net loss ($1,607,738 ($1,343,365)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and Amortization 221,887 61,889
Imputed value of options granted for services 64,804 87,751
and interest
Expenses of prior period stock issued -- (7,550)
Stock issued for services 283,645 595,150
Changes in assets and liabilities:
Inventories 11,568 (13,691)
Accounts and other receivables (457) 31,679
Prepaid Expenses and Other Current (103,845) 4,520
Assets
Accounts Payable and Accrued Expenses (46,225) 234,261
Franchise and customer deposits -- (21,135)
----------- ------------
NET CASH USED IN OPERATING ACTIVITIES (1,176,361) (370,491)
CASH FLOWS FROM INVESTING ACTIVITIES
Repayments of notes receivable -- 481
Acquisition costs paid (3,300) --
Capital expenditures (227,667) (3,820)
Change in other assets 5,397 4,201
------------ -----------
NET CASH (USED IN) FROM INVESTING ACTIVITIES (225,570) 862
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt -- 194,000
Payments on debt (100,691) (9,624)
Proceeds from officer loans -- 165,885
Payments on obligations under capital leases (3,257) (774)
Proceeds from capital leases 369,060 --
Net proceeds from issuance of common stock 1,214,625 --
----------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,479,737 349,487
---------- ------------
NET INCREASE (DECREASE) IN CASH 77,806 (20,142)
CASH AND CASH EQUIVALENTS AT BEGINNING OF $263,878 $295,900
PERIOD
---------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $341,684 $ 275,758
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid during the 3 months for interest $42,585 $13,981
Cash paid during the 3 months for interest 0 0
See notes to consolidated financial statements
<PAGE>
SIMS COMMUNICATIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREFERRED STOCK SUBSCRIBED COMMON STOCK
SERIES A SERIES B
NUMBER NUMBER NUMBER ADDITIONAL
OF OF OF PAID IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
Balance - June 30, 1998 25,250 $25 100,000 $100 7,959,033 796 2,646,232 $20,416,944) $2,230,209
Net loss -3 months ended
September 30, (1,607,738) (1,607,738)
1998
Issuance of common stock for cash 1,425,000 142 1,214,483 1,214,625
at $1.00 per share, net of
$210,375 expenses
Issuance of Common Stock
for
Services and Equipment 120,000 12 288,888 288,900
Issuance of common stock
for
Accounts 5,700 1 7,917 7,918
payable
Imputed value of stock
option grants
In exchange for consulting
and other
Services 64,804 64,804
Issuance of common stock
for conversion of notes
payable and accrued
interest
55,000 5 87,963 87,968
-------- ------- --------- ------ ---------- ------ -------- ---------- ----------
Balance - September 30, 25,250 $25 100,000 $ 100 9,564,733 $956 $24,310,287 ($22,024,682 $2,286,686
1998 ======== ======= ====== ====== ========= ===== ========== ============ ========
</TABLE>
<PAGE>
<PAGE>
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 15, 1991. The Company was formed as a communications
equipment company and has expanded its focus to include telecommunication and
cellular and prepaid telephone activities. Currently, the Company provides low
cost, turnkey, point of sale (POS) transaction automation solutions to retailers
and pharmacies. These solutions include a comprehensive network of transaction
processing applications using its patented, intelligent DebitLink POS terminal
with custom software. Functions include processing on-line credit card and
medical reimbursement approvals, processing automated home medical equipment
product orders and payments, processing credit card and ATM charges and payments
and cash-backs, activating prepaid phone cards, obtaining prepaid cellular
service, securing check guaranties and authorizations and tracking customer
affinity programs. Additionally, the Company rents videocassettes and cellular
phones through automated dispensing units.
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 three-month period ended September 30,
1998 are not necessarily indicative of the results that may be expected for the
year ended June 30, 1999. 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., Sims Communications International, Inc. and Link Technologies Inc. and its
wholly owned subsidiaries New View Technologies, Inc., Link Dispensing Systems,
Inc., and Southeast Phone Card, Inc; additionally, the consolidated financial
statements include the accounts of One Medical Services, Corp., Movie Bar
Company USA and Vector Vision 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 video dispensing units, video
cassette players, movie video cassettes, debitlink data transmission units and
other associated miscellaneous parts and equipment and are recorded at the lower
of cost or market determined by the first-in, 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
Note 1 - Organization and Significant Accounting Policies (Continued)
Net Gain / (Loss) Per Common Share
Gain/(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 preferred stock, common stock options and
common stock equivalents are excluded from the weighted average number of shares
since their effect would be anti-dilutive.
<PAGE>
Goodwill
The excess of the cost of the net tangible and identifiable intangible assets of
acquired businesses is stated at cost and is being amortized over seven years.
Revenue Recognition
Rental revenue is recognized upon the completion of the customer phone rental.
Revenues from the sale of equipment are recognized upon delivery and service
revenue is recognized when work Is completed.
Patents
Patent costs are those costs related to filing for patents and the value
allocated to patents based upon the business acquisition of Link Technologies
and subsidiaries. They will be amortized on a straight-line basis based on the
expected useful life over a seven-year period.
Note 2 - Bank Line of Credit
The Company maintains a secured revolving line of credit with a bank for up to
$250,000. The balance at September 30, 1998 was $250,000. The line of credit is
secured by a restricted certificate of deposit with a balance at September 30,
1998 of approximately $250,000. The line of credit bears interest at 5.77% per
annum, payable monthly and expires June 5, 1999.
Note 3 - Notes and Loans Payable
A detailed listing of debt at September 30, 1998 is as follows:
Promissory note payable at 10% interest payable
monthly, commencing Sept. 15, 1995. Balance of principal
is payable in full on September 1999. 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
8% Convertible notes payable, principal due at maturity
dates ranging from August thru May,1998. Debt includes
conversion to common stock feature with conversion rates
ranging from $1.25 to $ 2.50 per share. Additionally, each
note holder was issued options to purchase shares of the
Company's stock 225,000
Note payable - $5,000 principal plus interest (prime
+1%), payable monthly through October, 1998 5,000
Note payable - principal (non-interest bearing) payable in
monthly installments of $1,500 through June, 2000 40,500
Note 3 - Notes and Loans Payable (Continued)
Note payable - corporation, bearing interest at 12%,
monthly Principle and interest payments of $2,500, due
August 2001. Debt includes conversion to common
Stock feature that provides for conversion at any time
while the note is still outstanding at a conversion price
based on the previous five-day average. Collateralized by
substantially all of the company's assets 200,000
,
Note Payable - individual, bearing interest at 10%,principal
and interest due in full on September 20, 1998. Debt includes
conversion agreement that provides for conversion into the
Company's common stock at $1.00 per share from September 13,
1998 until maturity 100,000
-------
Total 880,848
Less: Current Portion ( 664,174)
-------------
Long Term Portion $216,674
Note 4 - Capitalized Lease Obligations
The company leases various office and revenue-producing equipment accounted for
as capitalized leases. The leases bear interest at 16-18% and are payable in
monthly installments. At September 30, 1998, the Company owed $469,209 of which
$77,199 represents the current portion. The terms for the leases vary from 48 to
60 months and the leases are collateralized by the underlying equipment.
Note 5 - Continuing 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 stage and did not begin earning significant revenues
until the middle of fiscal year ended 1994. During the years ending June 1995,
through June 1998, the Company continued to suffer recurring losses from
operations. In fiscal year ended June 30, 1995, the Company completed an initial
public offering for $5.2 million. The consolidated financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern (See Note 8).
Note 6 - Stockholders Equity
During the quarter ended September 30, 1998, the following equity transactions
occurred:
The Company issued 1,425,000 shares of common stock at $1 per share in a private
placement raising $1,214,625 net of $210,375 in offering costs.
The Company issued 120,000 shares of its common stock for $288,888 of services
and equipment received.
The Company issued 5,700 shares of its common stock for $7,917 of professional
services received.
The Company issued options to purchase 70,000 shares of its common stock at
rates ranging from $2 to $2.50 per share. These options expire September, 2001.
$64,804 of expense has been recognized based on imputed values ranging from $.87
to $.93 per option.
The Company accounts for stock based compensation in accordance with Financial
Accounting Standards Board Statement No. 123, "Accounting for Stock Based
Compensation," ("FAS 123") which encourages, but does not require, companies to
recognize compensation expense for grants of stock, stock options and other
equity instruments to employees. FAS 123 requires the recognition of expense for
such grants, described above, to acquire goods and services from all
non-employees. Additionally, although expense recognition is not mandatory for
issuances to employees, FAS 123 requires companies that choose not to adopt the
new fair value accounting rules to disclose pro forma net income and earnings
per share information using the new method.
The Company has adopted the disclosure-only provisions of FAS 123. Accordingly,
no compensation cost has been recognized for the issuances of stock options to
employees. For the three months ended September 30, 1998, employees of the
Company were issued options to purchase 90,000 shares of the Company's stock at
$2.50 per share expiring Sept. 2001 (unrecognized imputed charge of $78,633)
Note 7- Business Segments
The Company has four reportable segments: telecommunications, financial
processing, automated movie rentals and medical transaction processing. The
telecommunications segment is responsible for the sale and processing of
cellular telephone rentals prepaid cellular phone cards and other
telecommunications related services. The financial processing segment has
developed, in conjunction with the Company's intelligent "Debit Link" system, a
monetary transaction processing platform that eliminated the need for ATM's used
primarily in major fast food chains. The automated movie rentals segment rents
videocassettes through automated dispensing units in hotels, primarily Florida
and California. The medical transaction processing segment has developed, in
conjunction with the Company's intelligent "Debit Link" systems, communications
and transaction processing platform which allows pharmacies to access on-line
credit card and medical reimbursement approval and automated product ordering
and payment.
Operating results and other financial data are presented for the four reportable
segments of the Company for the three months ended September 30, 1998 and 1997.
Net revenue includes sales to external customers within the segment. Cost of
goods sold includes costs associated with net revenue within the segments.
Segment income (loss) does not include general and administrative expenses,
other income (expense) items or income taxes. Identifiable assets for each
operations segment consist of cash, receivables, inventory, prepaid expenses,
net machinery and equipment and goodwill. Corporate assets are patents:
Note 7- Business Segments (Continued)
<TABLE>
<S> <C> <C> <C> <C> <C>
Net- Cost of Depreciation Segment Profit Identifiable
Revenues Sales & Amort. (Loss) Assets
September 30, 1998:
Tele-
Communications- $ 40,146 $ 12,650 $111,581 $(84,085) $2,021,982
Financial Processing- $ 57,501 $ 42,576 $ 15,904 $ (979) $ 797,236
Automated
Movie Rental- $240,764 $ 77,459 $ 56,435 $106,870 $1,519,491
Medical
Transaction
Processing- $ 39,045 $ 13,823 $ 19,512 $ 5,710 $1,078,716
Corporate & Other- -- -- $ 18,455 $(18,455) $ 382,665
----------------------------------------------------------------------
Consolidated $377,456 $146,508 $221,887 $ 9,061 $5,800,090
Net- Cost of Depreciation Segment Profit Identifiable
Revenues Sales & Amort. (Loss) Assets
September 30, 1997:
Tele-
Communications- $247,324 $169,354 $ 45,891 $ 32,079 $4,888,185
Financial Processing- -- -- -- -- --
Automated
Movie Rental- -- -- -- -- --
Medical
Transaction
Processing- -- -- -- -- --
Corporate & Other- -- -- $ 12,105 $(12,105) $ 462,836
---------------------------------------------------------------------
dated $247,324 $169,354 $ 57,996 $ 19,974 $5,351,021
</TABLE>
Note 8 - Subsequent Events
On November 9, 1998, the Company entered into a Strategic Business Alliance
Agreement ("the agreement") with Bergen Brunswig Drug Company ("Bergen"), a
subsidiary of Bergen Brunswig Corp. whereby Bergen will exclusively locate and
operate the Company's One Medical Service System order-processing and platforms
within Bergen's selected customer locations. Under the terms of the agreement,
Bergen will make available to the Company its advertising and marketing
resources and will equally share profits derived from the platforms. Bergen
further agrees to remit to the Company an amount equal to 2% of the home medical
equipment net sales resulting from the One Medical Service System locations. The
term of the agreement is for 3 years and will be automatically renewed for
successive one-year periods.
On November 11, 1998, the Company completed a business transaction with MedCard
Management Systems, Inc. ("MedCard") whereby they acquired MedCard's assets,
including the exclusive rights to the MedCard name and The MedCard System
software and network. The MedCard System is a unique electronic processing
system that consolidates insurance eligibility verification and processes
medical claims and approval of credit card/debit card payments within 30
seconds. Consideration for the transaction included cash of $450,000, 100,000
shares of restricted Company common stock, options to purchase 350,000 shares of
common stock, plus royalties on future sales.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operation-Three Months Ending September 30, 1998
During the three month period ended September 30, 1998, total revenues amounted
to $377,456 versus last year's revenue of $247,324. The company is in a state of
transition with its expansion focused on Financial Processing, Medical
Transaction Processing and Automated Movie Rentals. These business segments
produced revenues of $57,501, $39,045 and $240,764, respectively for the quarter
ended September 30, 1998. There were no comparable operations for the quarter
ended September 30, 1997. Conversely, there has been a gradual decline in the
emphasis on telecommunications operations with current September, 1998 calling
card and long distance revenues of $40,146 versus $85,080 in the prior period.
Gross profit for the three months ended September 30, 1998 totalled $230,948
with a margin of 61% due to the introduction of the higher gross margin of the
new business segments. The comparable margin last year was $77,970 or 31%.
Currently, the financial processing operation has more than 650 units placed in
the field and has established both east and west coast marketing headquarters to
rapidly expand the related customer base. The Medical transaction processing
segment has 75 field units and the Company has recently signed a major strategic
alliance agreement whereby Bergen Brunswig Corp. will market and operate the
company's processing platforms (see Note 8).
Selling, marketing and general and administrative expenses are higher for the
quarter ended September 30, 1998 compared to the same period last year as a
result of several factors. In the current quarter, the Company incurred
significant start-up costs related to its new line of business focus and the
expansion of its other business segments. Expenses related to prior operations
and agreements in place, which are being assuaged, compounded an increase in
general and administrative expenditures. This was partially offset by the
savings realized in the current quarter by the downsizing of facilities and the
reduction in personnel. Stock-based compensation and services totalled $293,762
for the three months ended September 30, 1998 compared to $682,901 for the same
period last year reflecting a conservation of these resources by management.
The Company discontinued its cellular activation business in the prior fiscal
year resulting in a $3,839 profit for this activity being deconsolidated and
reclassified as "discontinued."
Liquidity and Sources of Capital
During the quarter ended September 30, 1998, the Company's operating cash
requirement was $1,176,361, attributable to a net loss of $1,607,738 mitigated
by non-cash charges for depreciation and amortization ($221,887) and stock and
option based services ($348,449). This shortfall was primarily funded by the net
sale of common stock for $1,216,625 and proceeds from capitalized leases on
ATM/Scrip machines (transaction processing division) of $369,060. Partially
offsetting this funding were capital expenditures of $227,667 (primarily for
ATM/Scrip units placed in the field) and debt repayments of $100,691.
The increase in prepaid expenses and other current assets reflects $45,000 worth
of advances to Medcard Management Systems, Corp. (see Note 8).
The $1,343,365 net loss for the comparable prior period was funded by a $595,150
charge for stock based compensation (to conserve cash), increases in payable and
accruals of $234,261, proceeds of $194,000 in private placement of the Company's
convertible debt and officer loans of $165,885.
<PAGE>
Part II
Item 2. Changes in securities and use of proceeds.
In July 1998, the Company sold 1,402,500 shares of its common stock at $1.00 per
share, to a group of private investors. Net proceeds to the Company from the
sale of these shares were $1,172,125 net of $230,375 in offering related
expenses.
Item 6. Exhibits and reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 30, 1998.
No exhibits are filed with this report.
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.
By:/s/ Mark Bennett
Mark Bennett
President
/s/ Ian Hart
Ian Hart
Chief Financial Officer
Date: November 20, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 341,684
<SECURITIES> 0
<RECEIVABLES> 174,917
<ALLOWANCES> 27,584
<INVENTORY> 440,905
<CURRENT-ASSETS> 1,276,434
<PP&E> 3,797,421
<DEPRECIATION> 1,129,084
<TOTAL-ASSETS> 5,800,090
<CURRENT-LIABILITIES> 2,904,720
<BONDS> 0
0
125
<COMMON> 956
<OTHER-SE> 2,285,605
<TOTAL-LIABILITY-AND-EQUITY> 5,800,090
<SALES> 377,456
<TOTAL-REVENUES> 377,456
<CGS> 146,508
<TOTAL-COSTS> 1,797,500
<OTHER-EXPENSES> 41,186
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,607,738)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,607,738)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,607,738)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
