-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R+L5MTDhSepH4vR27yMkxQsNYFZTXG99aZfnvDyHYHUPR0yNcK0pAPuShjXdI/89 5o81rsn2Pn3HgcuF/r6hDA== 0001038838-01-500628.txt : 20020412 0001038838-01-500628.hdr.sgml : 20020412 ACCESSION NUMBER: 0001038838-01-500628 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011127 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LSI COMMUNICATIONS INC CENTRAL INDEX KEY: 0001084475 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 870627349 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-30786 FILM NUMBER: 1799778 BUSINESS ADDRESS: STREET 1: 112 WEST BUSINESS PARK DR CITY: DRAPER STATE: UT ZIP: 84020 BUSINESS PHONE: 801-572-2555 MAIL ADDRESS: STREET 1: 112 WEST BUSINESS PARK DR CITY: DRAPER STATE: UT ZIP: 84020 10QSB 1 q093001.txt 10-QSB ENDED 9/30/01 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 -OR- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to________________________ Commission File No. 0-30786 LSI COMMUNICATIONS, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Nevada 87-0627349 ------ ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 12244 South Business Park Drive Suite 215 Draper, Utah 84020 801-553-2300 ----------------------------------- (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of 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 [ ] At September 30, 2001, there were 20,261,087 shares of common stock, par value $.001 per share, of the registrant outstanding. Transitional small business disclosure format: Yes [ ] No [X] LSI COMMUNICATIONS, INC. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets: September 30, 2001 and December 31, 2000 ......................................3 Consolidated Statements of Operations: Nine Month Periods Ended September 30, 2001 and September 30, 2000.....5 Consolidated Statements of Operations: Three Month Periods Ended September 30, 2001 and September 30, 2000 ....5 Consolidated Statements of Cash Flows Nine Month Periods Ended September 30, 2001 and September 30, 2000.....6 Note to Consolidated Financial Statements.....................7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.........................8 PART II. OTHER INFORMATION ITEM 1 - Legal Proceedings ............................................12 ITEM 2 - Changes in Securities ........................................12 ITEM 3 - Defaults upon Senior Securities...............................12 ITEM 4 - Submission of Matter to Vote of Security Holders .............12 ITEM 5 - Other Information.............................................12 ITEM 6 - Exhibits and Reports on Form 8-K Page.........................12 SIGNATURES .................................................................13 2
LSI Communications, Inc. Consolidated Balance Sheet Unaudited ASSETS Sept 30, December 31, 2001 2000 --------------- --------------- CURRENT ASSETS Cash & Cash Equivalents $ (10,641) $ 5,270 Inventory - 11,445 Accounts Receivable (Net of allowance of $7,000) 69,109 113,884 Deposits - 26,500 --------------- --------------- Total Current Assets 58,468 157,099 --------------- --------------- PROPERTY & EQUIPMENT (Net of Accumulated Depreciation) 41,235 56,736 --------------- --------------- OTHER ASSETS Deposits & Prepaids 6,076 6,076 Licenses 90,000 - Motion Picture 196,000 - Investment Available for Sale 1,303,750 - --------------- --------------- Total Other Assets 1,595,826 6,076 --------------- --------------- TOTAL ASSETS $ 1,695,529 $ 219,911 =============== =============== 3 LSI Communications, Inc. Consolidated Balance Sheet Unaudited LIABILITIES AND STOCKHOLDERS' EQUITY Sept 30, December 31, 2001 2000 --------------- --------------- CURRENT LIABILITIES Accounts payable $ 125,857 $ 36,290 Accrued expenses 86,565 41,269 Current portion of long-term liabilites 76,196 102,686 Deferred Compensation 134,200 91,000 --------------- --------------- Total Current Liabilities 422,818 271,245 --------------- --------------- LONG TERM LIABILITIES Capital lease obligation 19,667 23,472 Notes payable - - Notes payable-related party 76,196 103,874 Less current portion (76,196) (102,686) --------------- --------------- Total long term Liabilities 19,667 24,660 --------------- --------------- TOTAL LIABILITIES 442,485 295,905 --------------- --------------- STOCKHOLDERS' EQUITY Common stock, authorized 50,000,000 shares of $.001 par value, issued and outstanding 20,261,086 and 11,415,632 shares, respectively 20,261 11,416 Additional Paid-in capital 1,604,106 731,598 Retained Earnings (808,823) (819,008) Accumulated Comprehensive Income 437,500 - --------------- --------------- Total Stockholders' Equity 1,253,044 (75,994) --------------- --------------- TOTAL LIABILITIES & STOCKHOLDERS EQUITY $ 1,695,529 $ 219,911 =============== =============== 4
LSI Communications, Inc. Consolidated Statements of Operations Unaudited For the 3 Months Ended For the 9 Months Ended Sept 30, Sept 30, Sept 30, Sept 30, 2001 2000 2001 2000 --------------- --------------- --------------- --------------- REVENUES Software Sales $ 0 $ 2,589 $ 21,300 $ 22,785 Training Sales 244,222 515,942 550,908 1,112,614 --------------- --------------- --------------- --------------- TOTAL REVENUES 244,222 518,531 572,208 1,135,399 --------------- --------------- --------------- --------------- COST OF SALES Software 0 58 327 257 Training 42,703 187,395 192,017 341,464 --------------- --------------- --------------- --------------- TOTAL COST OF GOODS SOLD 42,703 187,453 192,344 341,721 --------------- --------------- --------------- --------------- GROSS PROFIT 201,519 331,078 379,864 793,678 --------------- --------------- --------------- --------------- SELLING EXPENSES 48,614 156,187 148,202 259,638 PAYROLL 45,622 79,850 192,031 227,755 RESEARCH & DEVELOPMENT - 887 - 3,792 TRAVEL & TRADE SHOW EXPENSE 29,567 22,597 89,078 43,704 GENERAL & ADMINISTRATIVE EXPENSES 71,884 95,008 235,059 363,638 --------------- --------------- --------------- --------------- TOTAL OPERATING EXPENSES 195,687 354,529 664,370 898,527 --------------- --------------- --------------- --------------- OPERATING INCOME (LOSS) 5,832 (23,451) (284,506) (104,849) --------------- --------------- --------------- --------------- OTHER INCOME AND (EXPENSES) Forgiveness of Debt - - - 13,368 Gain on Sale of Warever - - 761,250 Miscellaneous income (expense) (317) (170) (5,049) (5,446) Interest expense (1,740) (2,577) (8,439) (7,843) --------------- --------------- --------------- --------------- Total Other Income and (Expenses) (2,057) (2,747) 747,762 79 --------------- --------------- --------------- --------------- NET INCOME (LOSS) BEFORE INCOME TAXES 3,775 (26,198) 463,256 (104,770) --------------- --------------- --------------- --------------- PROVISION FOR INCOME TAXES - - - - --------------- --------------- --------------- --------------- NET INCOME (LOSS) 3,775 (26,198) 463,256 (104,770) =============== =============== =============== =============== NET INCOME (LOSS) PER SHARE 0.00 (0.00) 0.03 (0.01) =============== =============== =============== =============== WEIGHTED AVERAGE OUTSTANDING SHARES 17,524,129 11,415,632 14,674,192 11,132,785 =============== =============== =============== =============== 5
LSI Communications, Inc. Consolidated Statements of Cash Flows Unaudited For the Period Ended Sept 30, Sept 30, 2001 2000 --------------- --------------- Cash Flows From Operating Activities Net income (loss) $ 463,256 $ (104,770) Non-cash items: Depreciation 15,501 12,351 Bad Debt 35,237 7,000 Issuance of stock 2,045 2,500 Recognition of Deferred Revenue - (491) Deferred Compensation 43,200 - Gain on Sale of Warever (761,250) - (Increase)/decrease in currents assets: Accounts receivable 44,774 94,390 Inventory 11,445 (6,955) Deposits (Current) 26,500 - Increase/(decrease) in currents liabilities: Accounts payable 89,567 9,944 Accrued expense 45,296 (10,148) Customer Deposits - - --------------- --------------- Net Cash Provided (Used) by Operating Activiities 15,571 3,821 --------------- --------------- Cash Flows From Investing Activities Cash received in sale of contract - 226,800 Cash paid for property, equipment and software technology - (49,650) --------------- --------------- Net Cash Provided (Used) by Investing Activiities - 177,150 --------------- --------------- Cash Flows From Financing Activities Factoring Fees - (13,000) Increase in long-term debt 9,600 25,692 Principal payments on long-term debt (41,082) (98,251) --------------- --------------- Net Cash Provided (Used) by Financing Activiities (31,482) (85,559) --------------- --------------- Increase/(decrease) in Cash (15,911) 95,412 Cash and Cash Equivalents at Beginning of Period 5,270 18,393 Cash and Cash Equivalents at End of Period $ (10,641) $ 113,805 Supplemental Cash Flow Information: Cash paid for interest $ (8,439) $ (7,843) Cash paid for income taxes - - 6
LSI COMMUNICATIONS, INC. NOTE TO FINANCIAL STATEMENTS SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000 (UNAUDITED) 1. Basis of presentation: The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. 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 September 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. The unaudited financial statements should be read in conjunction with the financial statements for the year ended December 31, 2000 and footnotes thereto included in the Company's annual report on Form 10KSB, which are incorporated herein by reference. 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL AND RESULTS OF OPERATIONS This discussion contains forward-looking statements made by the Company pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our current views with respect to such future events. Actual results may vary materially and adversely from those anticipated, believed, estimated or otherwise indicated. Factors that could cause actual results to differ adversely include, without limitation, inability to maintain sources of coaching customers, and lack of consumer demand for new products. We do not undertake to update any forward-looking statement that may be made from time to time by or on our behalf. (a) Introduction We are a technology training company based in Draper, Utah. Our primary subsidiary is Coaching Institute, Inc., which offers fully integrated "coaching" programs designed specifically for sales trainers, seminar leaders, motivational speakers and network marketers who are interested in extending their programs to seminar attendees through one-on-one training. Our group and one-on-one coaching programs are focused toward both individual and corporate clients. Our coaching programs are tailored to assist our clients with personal, technical and professional development and productivity. Our business has completed a shift away from computer software development and sales to a focus on development of our coaching business. Consistent with this change of direction, we sold Warever Corporation, our computer software development and sales subsidiary on June 7, 2001. Over the several quarters prior to the sale of Warever Corporation, our software sales, which were formerly the primary source of our revenues, steadily declined both as a category and in terms of our total gross sales. We currently have no plans to develop or sell software in the foreseeable future. We are continuing to change the marketing strategy for our coaching services by sourcing coaching clients from internal sources rather than from third parties. Just less than half (46%) of our coaching revenues in three-month period ended September 30, 2001 were derived from internally sourced clients. The other half of our coaching related revenues were derived from the fulfillment of contracts referred to us by outside vendors. We continue to seek internally sourced clients because of their superior profit margins. In order to source additional clients, we organized and hosted real estate seminars in several cities during the three-month period ended September 30, 2001. We were able to enter into training contracts with a number of the seminar attendees. Our management is exploring additional revenue sources in the real estate industry. During the three-month period ended September 30, 2001, we acquired Liberty Financial Group of Arkansas and Liberty Financial Group of Wyoming primarily because they are licensed to originate loans in the states 8 of Arkansas and Wyoming, respectively. However, due to our extremely limited operating capital, we do not expect to be in a position to benefit from the two acquisitions in the foreseeable future. Our operating results may fluctuate significantly in the future as a result of several factors, many of which are not within our control. These factors include, but are not limited to, demand for, and acceptance of, our products and services, seasonal trends in the demand for coaching services, need for capital expenditures and costs relating to our expansion, introduction of new services or products, competitive forces, price changes in the coaching industry, and general and industry-wide economic conditions. As a result of changes to the coaching industry, we may make certain service changes or acquisitions, including a possible acquisition of LSI Communications, Inc., or Coaching Institute by another entity, that could materially affect our business, operations, and financial condition. We also expect certain seasonal effects, as they relate to our coaching revenues, due to lower demand during the end of the year holidays and other vacation periods and holidays. Due to all of the aforementioned factors, in some future interim periods, our operating results may be adversely affected and fall below the expectations of our management and investors. We may also never emerge from our current development stage. In such case, the trading price of our common stock would likely be materially and adversely affected. (b) Results of Operations (i) Nine Month Periods Ended September 30, 2001 and September 30, 2000 Sales Revenues Sales revenues for the Nine Month period ended September 30, 2001 were $572,208, a decrease of $563,191, or 49.6% from $1,135,399 for the Nine Month period ended September 30, 2000. Our coaching related revenue from Coaching Institute, which became our only immediate source of revenue when we disposed of Warever Corporation in July 2001, experienced a revenue decrease of $561,706 or 50.5% to $550,908 from $1,112,614 during the Nine Month period ended September 30, 2000. As discussed in previous reports this year, the cessation of Homes.com's business operations, one of our primary sources of coaching clients, resulted in an immediate, unexpected, contraction of fulfillment contracts and a subsequent reduction in our gross coaching sales. During the remaining part of the Nine Month period ended September 30, 2001, we have focused on directly sourcing new coaching clients through seminars and events sponsored and promoted by Coaching Institute while maintaining relationships with third party companies and individuals, such as SDI Wealth Institute ("SDI"), to market and sell our coaching and training packages, which we fulfill. Third parties remain the largest source of our coaching clients, despite our efforts to source the majority of our coaching clients from internal sources. Our third party client sources receive a referral fee for each coaching client they refer to Coaching Institute, but are not contractually bound to 9 supply Coaching Institute with any minimum number of referrals. Our inability to control or predict the number of client referrals and the relatively low margins from fulfillment of coaching contracts result weakens our ability to gain consistent revenues from clients obtained by third party referrals. In addition, revenues which do result from our relationship with such third parties could end at any time. During the coming months, we intend to continue to organize and host seminars in an effort to increase coaching clients. We believe that these seminars will lead to coaching service contracts. Warever Corporation, our former software sales and development subsidiary, which accounted for 1.4% of our revenues in the Year ended December 31, 2000, had revenues decrease by $1,485 or 6.5% to $21,300 during the Nine Month period ended September 30, 2001 from $22,785 during the comparable period ended September 30, 2000. However, Warever Corporation's revenue increase did not meet our expectations or requirements. As a result, we determined that it was in our best interest to sell Warever Corporation in order to focus on coaching and other activities. Cost of Sales Cost of Sales decreased by $149,377, or 43.7%, to $192,344 in the 2001 Nine Month period from $341,721 in the comparable 2000 Nine Month period. The decrease was attributable to decreased coaching sales and the corresponding reduction in referral commissions. Salaries paid to the coaches who perform the coaching are also included in Costs of Sales. We anticipate that coaching related commissions will decrease as internally sourced coaching clients from our direct marketing efforts increase. However, until we implement an effective method to expand our direct sales, we must continue to rely on commission based referrals. Selling, General and Administrative Expenses General and Administrative expenses decreased by $128,579, or 35.4%, to $235,059 in the 2001 Nine Month period from $363,638 in the 2000 Nine Month period. Selling expenses decreased by $111,436, or 42.9%, to $148,202 in the 2001 Nine Month period from $259,638 in the 2000 Nine Month period. A primary reason for the 2001 Nine Month period decrease is the decreased Coaching Institute sales and the corresponding reduction in salaries and commissions. Payroll related expenses remained steady, decreasing by $35,724, or 15.7%, to $192,031 in the Nine Month period ended September 30, 2001 from $227,755 in the comparable 2000 Nine Month period. The Payroll line item of our Statement of Operations includes all salaries, primarily administrative, not related to selling, marketing or actual coaching. Interest Expense Interest expense increased by $596, or 7.6%, to $8,439 in the 2001 Nine Month period from $7,843 in the 2000 Nine Month period. The increase was primarily due to interest paid on loans from 2000. The loans were required to continue our operations. 10 Net Income Our net income for the 2001 Nine Month period increased by $568,026, or 542.2%, to net income of $463,256 from a net loss of (104,770) in the comparable 2000 period. This transformation to net income from years of net loss is due almost exclusively to the sale of Warever being booked as income, which was a one-time event. Moreover, the income from the sale of Warever was restricted stock in Success Financial Services Group, Inc. (US OTC: "SFSG") a company traded on the "pink sheets", that does not report to the SEC and has extremely low trading volume for its securities. We emphasize that had it not been for the sale of Warever Corporation, our net loss for the nine month period ended September 30, 2001 would have remained. In addition, it is very possible that the price of the stock could be dramatically reduced due to a sell-off by one or more shareholders. In addition, we were issued restricted securities which cannot be sold into the market for at least one year. In the event we are unable to sell our stock at or near its current listed price, the entire amount we show as income could be transformed into a loss. Due to the abrupt loss of coaching and training referrals from Homes.com and other third party client sources in the early part of the 2001, our general business operations have been relatively weak during the Nine Month period ended September 30, 2001. However, it appears that we are recovering from the shock caused by the loss of Homes.com's business and we believe that we will continue to source coaching leads and clients from internally sponsored seminars to maintain our net profit in coming quarters. (ii) Three Month Periods Ended September 30, 2001 and September 30, 2000 Revenue decreased to $244,222 during the three-month period ended September 30, 2001 compared to $518,531 of revenue recorded during the same period of the prior year. This represented a decrease of 52.9% compared to the prior year quarter. As discussed, the loss of revenues resulted from the loss of third party client sources and the cessation of software revenues due to the sale of Warever Corporation. However, we had a net income of $3,886 during the three-month period ended September 30, 2001 compared to a net loss of ($26,198) recorded during the same period of the prior year. The three-month period ended September 30, 2001 is the first quarter in approximately two years that we have shown a net quarterly gain. (c) Liquidity and Capital Resources Our liquidity and capital resources as of September 30, 2001 were ($10,641), and as of September 30, 2000 were $113,805, a decrease of $124,446 or 109.3%. The cause of this decrease was due to funds being used for operations during the latter half of the Year ended December 31, 2000 and the Nine Month period ended September 30, 2001. At September 30, 2001, our current liabilities exceeded our current assets by approximately $364,350, with a ratio of current liabilities to current assets of approximately 7.2 to 1. Inventory levels decreased by $11,445 or 100% 11 to $0.00 on September 30, 2001 compared to $11,445 on December 31, 2000. The reason for this decrease was the sale of Warever along with all units of PowerHouse. Accounts receivable were lower due to collection from SDI. Due to the dramatic decrease in referrals from SDI and Homes.com, we do not expect to satisfy our cash requirements during the next 12 months from cash on hand and revenues. We are considering raising money through a stock offering or loans fund our operations. Our inability to raise cash through debt or equity could adversely affect our ability to continue as a going concern. We have no commitments for significant capital expenditures over the next 12 months. II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS not applicable ITEM 2. CHANGES IN SECURITIES not applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES not applicable ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS not applicable ITEM 5. OTHER INFORMATION not applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit No. Description not applicable (b) 8-K Reports not applicable 12 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. LSI COMMUNICATIONS, INC. By: /s/ Craig Hendricks ----------------------------------- Craig Hendricks Chief Executive Officer, President Date 11/10/01 13 -----END PRIVACY-ENHANCED MESSAGE-----