UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-QSB/A-2
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Period Ended
December 31, 2005 Commission File No. 0-18399
SIRICOMM, INC.
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(Exact name of Company as specified in its Charter)
Delaware 62-1386759
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(State or jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4710 East 32nd Street, Joplin, Missouri 64804
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(Address of Principal Executive Office) (Zip Code)
Company's telephone number, including area code: (417) 626-9971
Former name, former address and former fiscal year,
if changed since last report: N/A
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Indicate by check mark whether the Company (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 a shorter period that the Company was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the Company's Common Stock, $.001 par value,
as of February 13, 2006 was 24,908,713
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PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
Condensed Consolidated Balance Sheet as of
December 31, 2005 3
Condensed Consolidated Statements of Operations for the three
months ended December 31, 2005 and December 31, 2004 4
Condensed Consolidated Statements of Changes in Stockholders' Equity
for the three months ended December 31, 2005 and December 31, 2004 5
Condensed Consolidated Statements of Cash Flows for the three months
ended December 31, 2005 and December 31, 2004 6
Notes to the Condensed Consolidated Financial Statements 7
2
SIRICOMM, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
12/31/2005
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 715,892
Accounts receivable 31,070
Prepaid expenses and other 33,098
-----------
Total current assets 780,060
-----------
Property and Equipment, at cost
Equipment 2,547,001
Network equipment in progress of installation 305,769
-----------
2,852,770
Less accumulated depreciation 539,479
-----------
2,313,291
Software, net of amortization 144,273
-----------
Intangible assets, net of amortization 2,084,994
-----------
Total assets $ 5,322,618
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note payable to bank $ 385,435
Convertible note payable to related party 423,729
Accounts payable 289,650
Accrued salaries 92,170
Other accrued expenses 98,361
Deferred revenue 59,813
-----------
Total current liabilities 1,349,158
-----------
Total liabilities 1,349,158
-----------
Preferred stock - Series A par value $.001; 500,000 shares authorized;
213,417 shares issued and outstanding; dividend rate of $0.025 per share
per quarter commencing March 2004; liquidation preference of $1 per
outstanding share cash payment 277,443
-----------
Stockholders' Equity
Common stock - par value $.001; 50,000,000 shares authorized;
20,162,950 shares issued; 20,072,950 outstanding 20,159
Additional paid-in capital 15,199,181
Deferred compensation (631,176)
Retained deficit (10,802,147)
Treasury stock, at cost (90,000)
-----------
Total stockholders' equity 3,696,017
-----------
Total liabilities and stockholders' equity $ 5,322,618
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See Notes to Condensed Consolidated Financial Statements
3
SIRICOMM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended December 31,
2005 2004
(Unaudited) (Unaudited)
----------- -----------
Revenues $ 153,952 $ 6,273
Operating Expenses:
General and administrative 326,100 150,193
Salaries 317,696 235,337
Satellite access fees 246,543 93,870
Research and development 6,722 12,600
Depreciation and amortization 127,291 7,288
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Total operating expenses 1,024,352 499,288
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Operating loss (870,400) (493,015)
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Other Income (Expense)
Interest income 4,013 1,861
Interest expense (10,477) (4,460)
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(6,464) (2,599)
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Net loss $ (876,864) $ (495,614)
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Add: Dividends declared on preferred stock (5,335) (5,335)
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Loss available to common shareholders $ (882,199) $ (500,949)
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Net loss per share, basic and diluted $ (0.04) $ (0.03)
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Weighted average shares,
basic and diluted 20,104,309 16,270,568
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See Notes to Condensed Consolidated Financial Statements
4
SIRICOMM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Additional
Common Stock Paid-in Deferred Retained Treasury
Shares Amount Capital Compensation Deficit Stock Total
---------- ------- ------------ ---------- ------------ -------- -----------
For the three months ended
December 31, 2004:
Balance, September 30, 2004 16,255,650 $16,252 $ 8,379,044 $ (722,016) $ (6,685,015) $ - $ 988,265
Stock options exercised 26,800 27 26,773 26,800
Stock options issued for services 91,800 91,800
Accrued dividends (5,335) (5,335)
Net loss (495,614) (495,614)
---------- ------- ------------ ---------- ------------ -------- -----------
Balance, December 31, 2004 16,282,450 $16,279 $ 8,492,282 $ (722,016) $ (7,180,629) $ - $ 605,916
========== ======= ============ ========== ============ ======== ===========
For the three months ended
December 31, 2005:
Balance, September 30, 2005 20,092,950 $20,089 $ 15,063,814 $ (631,176) $(9,925,283) $ - $ 4,527,444
Treasury stock purchased, 90,000 shares (90,000) (90,000)
Imputed discount on convertible debt issued 76,271 76,271
Stock and warrants issued for services 40,000 40 49,461 49,501
Exercise of warrants 30,000 30 14,970 15,000
Accrued dividends (5,335) (5,335)
Net loss (876,864) (876,864)
---------- ------- ------------ ---------- ------------ -------- -----------
Balance, December 31, 2005 20,162,950 $20,159 $ 15,199,181 $ (631,176) $(10,802,147) $(90,000) $ 3,696,017
========== ======= ============ ========== ============ ======== ===========
See Notes to Condensed Consolidated Financial Statements.
5
SIRICOMM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended December 31,
2005 2004
---- ----
(Unaudited) (Unaudited)
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Operating Activities
Net loss $ (876,864) $ (495,614)
Items not requiring cash
Depreciation 127,292 7,288
Stock based compensation for services 49,501 -
Amortization of bandwidth access and license 130,599 -
Current assets (46,875) (2,024)
Deferred revenues 13,252 -
Other current liabilities 31,554 128,401
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Net cash flows used in operating activities (571,541) (361,949)
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Investing Activities
Purchase of furniture and equipment (47,443) (209,992)
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Net cash flows used in investing activities (47,443) (209,992)
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Financing Activities
Net borrowings (repayments) under line of credit, net (21,911) 200,000
Borrowings from related party 500,000 -
Payment of notes payable - (12,396)
Purchase of treasury stock (90,000) -
Proceeds from warrants exercised 15,000 -
Proceeds from sale of common stock - 26,800
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Net cash flows provided by financing activities 403,089 214,404
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Decrease in Cash (215,895) (357,537)
Cash and Cash Equivalents, beginning of period 931,787 1,019,616
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Cash and Cash Equivalents, end of period $ 715,892 $ 662,079
============= =============
Supplemental Cash Flows Information
Interest paid $ 9,381 $ 4,208
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Stock options issued in exchange for prepaid consulting services $ - $ 91,800
============= =============
Imputed discount for warrants issued with convertible debt $ 76,271 $ -
============= =============
Accrued dividends for Series A preferred stock $ 5,335 $ 5,335
============= =============
See Notes to Condensed Consolidated Financial Statements
6
SIRICOMM, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004
(UNAUDITED)
1. Nature of operations and summary of significant accounting policies:
Nature of Operations:
SiriCOMM, Inc., a Delaware corporation (the "Company"), through its wholly
owned subsidiary of the same name, which was incorporated in the State of
Missouri on April 24, 2000, has developed broadband wireless application
service technologies intended for use in the marine and transportation
industries. The Company opened its network in December, 2004 for commercial
operation and has commenced selling its InTouch(TM) Internet Service to
individual subscribers.
Since December, 2004, the Company has commenced revenue producing
operations and continues to market its service technologies, including
satellite communications, wireless networking, and productivity enhancing
software.
Use of Estimates:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Interim Information: Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
reflect all adjustments that are in the opinion of the Company's
management, necessary to fairly present the financial position, results of
operations and cash flows of the Company. Those adjustments consist only of
normal recurring adjustments.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's Form 10-KSB annual report for
fiscal year ended September 30, 2005 filed with the Securities and Exchange
Commission.
The results of operations for the period are not necessarily indicative of
the results to be expected for the full year.
Stock-based Compensation:
The Company accounts for compensation costs associated with stock options
issued to employees under the provisions of Accounting Principles Board
Opinion No. 25 whereby compensation is recognized to the extent the market
price of the underlying stock at the grant date exceeds the exercise price
7
SIRICOMM, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004
(UNAUDITED)
of the option granted. It is the Company's practice to issue stock options
to employees at or above the market value of the Company's stock on the
date of grant. Stock-based compensation to non-employees is accounted for
using the fair-value based method prescribed by Financial Accounting
Standard No. 123 - Accounting for Stock-Based Compensation. The Company
uses the trinomial options-pricing model to determine the fair value of
stock-based compensation and capital contributions.
Had compensation cost for the Company's stock option plan been determined
on the fair value at the grant dates for stock-based employee compensation
arrangements consistent with the method required by SFAS 123, the Company's
net loss and net loss per common share would have been the pro forma
amounts indicated below.
Three Months Ended
December 31,
2005 2004
----------- ----------
Net loss, as reported $ (876,864) $ (495,614)
Less: stock-based employee compensation
under the fair value based method (2,004) (14,669)
---------- ----------
Pro forma net loss under fair value method $ (878,868) $ (510,283)
Net loss per common share-basic and diluted:
As reported $ (0.04) $ (0.03)
Pro forma under fair value method $ (0.04) $ (0.03)
Research and development costs:
The Company incurs costs, associated with computer software to be marketed
in the future. Costs incurred in connection with establishing technological
feasibility have been expensed as research and development costs.
Net loss per share:
Net loss per share represents the net loss available to common stockholders
divided by the weighted average number of common shares outstanding during
the year. Diluted earnings per share reflect the potential dilution that
could occur if convertible preferred stock was converted into common stock.
Diluted net loss per share is considered to be the same as basic net loss
per share since the effect of the issuance of common stock associated with
the convertible stock is anti-dilutive.
8
SIRICOMM, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004
(UNAUDITED)
2. Line of Credit:
During 2004, the Company entered into a line of credit with Southwest
Missouri Bank for the purchase of network infrastructure equipment up to a
maximum of $1,000,000. This note is 80% guaranteed by the U.S. Department
of Agriculture ("USDA") and is secured by the network equipment. This note
is further personally guaranteed by the Company's majority shareholder. The
note is a demand note, but if no demand is made then monthly payments of
accrued interest at an initial rate of 5.5% on the USDA guaranteed portion
and 7.0% on the unguaranteed portion plus monthly principal payments of
$2,358.
3. Convertible Note Payable to Related Party
On December 27, 2005, the Company entered into a loan agreement with
Sunflower Capital, LLC, a limited liability company managed by William P.
Moore, a director of the Company. The loan is in the principal amount of
$500,000 and is evidenced by a convertible promissory note due July 1,
2006. As consideration for Sunflower making the loan, the Company issued to
Sunflower a warrant to purchase 200,000 shares of the Company's common
stock at $1.26 per share. The warrant expires December 15, 2010. A discount
of $76,271 was recorded based on the estimated fair value of the warrant
issued and will be expensed over the life of the loan.
The note mandatorily converts into the Company's units consisting of one
share of common stock and one redeemable common stock purchase warrant
exercisable at $1.50 per share during the period commencing on the date of
issuance and expiring five years thereafter. The note will convert into
such units at the rate of $1.15 per unit upon the closing of a private
placement as described in the Loan Agreement. In the event the private
placement does not close, Sunflower Capital will have the option to convert
the note into shares of the Company's common stock and common stock
purchase warrants at a variable conversion price determined by taking the
value weighted average price of the Company's common stock for the 20
trading days prior to the date the conversion notice is sent to the
Company. In addition, the Company will issue to Sunflower Capital such
number of warrants equal to the number of shares being issued upon
conversion. The exercise price of such warrants shall be equal to the
conversion price plus $0.25. These warrants will be exercisable for a
period of five years from the date of issuance. (See Note 6)
4. Stockholders' Equity:
During the three-months ended December 31, 2005, the Company repurchased
90,000 common shares at a price of $90,000.
On December 15, 2005, the Company issued 25,000 shares of its common stock
to IRG pursuant to a consulting agreement dated November 15, 2005. The
consulting agreement also requires the Company to issue an additional
15,000 shares on or before January 1, 2006 and 10,000 shares on or before
February 1, 2006. Additionally, the consulting agreement calls for the
issuance on January 15, 2006 of 50,000 four year warrants with the
following exercise prices:
9
SIRICOMM, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004
(UNAUDITED)
16,666 at $1.25
16,667 at $1.35
16,667 at $1.45
5. Commitments and Contingencies:
Litigation:
On December 17, 2004, certain officers and directors of the Company were
named defendants in a lawsuit entitled Greg Sanders v. Henry Hoffman et al.
Messrs. Hoffman, Dillman, Mendez and Iler are officers and directors of the
Company, Mr. Thompson is a director of the Company and Mr. Noland is a
former officer and director of the Company. The action alleges fraud,
misrepresentation and breach of fiduciary duty relating to a settlement
agreement entered into between the Company and Mr. Sanders. The complaint
seeks damages in excess of $9,679,903. Although the Company was not named
as a defendant, it will pay all expenses relating to the defense of this
matter. In management's opinion this case is without merit and the
defendants intend on defending this matter vigorously. The defendants
subsequently have answered the complaints and have filed counter claims to
this action as of August 15th, 2005.
6. Subsequent Events:
On January 31, 2006, SiriCOMM, Inc. consummated a private placement of its
securities. The securities sold were units consisting of one share of the
Company's common stock, $.001 par value and one redeemable common stock
purchase warrant. At the closing, the Company sold an aggregate of
4,692,263 units at an aggregate purchase price of $5,396,103, or $1.15 per
unit. At the closing, the Company delivered an aggregate of 4,692,263
shares and 4,692,263 warrants to the purchasers.
Each warrant entitles the holder to purchase one share of common stock at
an exercise price of $1.50 per share commencing on the date of issuance and
expiring at the close of business on the fifth anniversary of the issuance
date. The warrants contain provisions that protect the holder against
dilution by adjustment of the exercise price in certain events including,
but not limited to, stock dividends, stock splits, reclassifications, or
mergers. The Company may redeem the warrants, at a price of $.10 per
warrant, at any time following the issuance date upon not less than 30 days
nor more than 60 days prior written notice if (a) the common stock
underlying the warrants has been registered with the SEC, and (b) the
closing price of the common stock exceeds a 200% premium of the exercise
price of the warrants for 20 out of 30 consecutive trading days.
The placement agent received a commission equal to 5% of the offering price
of the units sold by them in the private placement, a commission equal to 2
1/2% on the 1,764,872 units purchased by Sunflower Capital, LLC and a
financial advisory fee equal to 2% of the offering price of the units sold
in the private placement and a warrant to purchase common stock equal to 5%
of the shares of common stock underlying the units sold in the private
placement at an exercise price of $1.15 per share.
As part of the private placement, the Company entered into a registration
rights agreement with each subscriber who purchased units in the private
10
SIRICOMM, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004
(UNAUDITED)
placement. Under the agreement, the Company, as promptly as reasonably
practicable after closing of the private placement but in no event later
than 30 days following the closing, the Company is obligated to file a
registration statement on Form SB-2, relating to the resale by the holders
of the common stock underlying the units, warrants and placement agent
warrant. If such registration statement is not filed within the required
time frame, or does not become effective within 90 days after closing (or
120 days after closing, if the registration statement is subject to review
by the SEC), the Company has agreed to pay to the investors 1% of the gross
proceeds of the offering for each month in which the Company fails to
comply with such requirements.
Sunflower Capital, LLC, a limited liability company managed by William P.
Moore, a director of the Company, purchased an aggregate of 1,764,872 units
in the offering, which consisted of a new investment of $1,525,000 to
purchase 1,326,087 units and the conversion of the note payable plus
accrued interest in the amount of $4,602 to purchase 438,785 units. (See
Note 3)
11
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Background
SiriCOMM is an application service provider specializing in wireless
Internet connectivity and productivity applications tailored to the highway
transportation industry. The company is guided by its mission of helping truck
fleets to improve productivity, reduce costs, increase safety, and strengthen
security. To achieve that goal, SiriCOMM has deployed a network of SiriCOMM
Wi-Fi hot spots at locations convenient to highway travelers. SiriCOMM's
proprietary network, the foundation for its applications, delivers wireless
broadband connectivity at a fraction of the cost of conventional wireless
networks. By providing both Internet access and a robust application host
platform, SiriCOMM delivers a more responsive and convenient way for all
industry stakeholders to interact with information needed on a regular basis.
Presently, SiriCOMM's network is the most widely available wireless
Internet access network built for the highway transportation market. To date we
have installed over 300 Wi-Fi "hot spots" at major truck stops and weigh
stations and have agreements with leading truck stop chains and weigh station
operators such as Pilot Travel Centers ("Pilot"), Love's Travel Stops ("Loves"),
Freight and More, Inc./DIS - Direct Internet Services and others to install
access points at approximately 430 additional sites.
The Company's network technology is built upon a distributed server
model that uses satellite for data backhaul. This architecture provides key
advantages: 1) the network is truly go-anywhere and operates independently of
any terrestrial-based communication infrastructure; 2) the satellite multicast
features allows data to be simultaneously available at all SiriCOMM Wi-Fi hot
spots; 3) bandwidth management is handled from a single location as opposed to
multiple points that would be required by a nationwide terrestrial network; 4)
the remote server makes each hot spot an extension of fleet operations; and, 5)
proprietary technologies mitigate inherent weaknesses found in conventional
satellite networks.
SiriCOMM completed phase one installations in 2004 and opened the
network for business in January 2005. Initially, network access subscriptions
were limited to only credit card sales through the company's web site. By June
2005 Pilot began offering cash point of sales (POS) subscriptions at its
in-store registers.
We market our products and services principally through assorted value
added reseller agreements and a direct sales force. As the trucking industry is
highly fragmented and comprises many small to medium-sized fleets, we use
numerous resellers to maximize our sales reach. Our direct sales force is
focused on the large fleets as well as coordinating the efforts of our value
added resellers. Currently we are continuing to concentrate our sales efforts on
InTouch(TM) while installing additional hot spots across the country. Sales of
Pulse and Beacon will commence once nationwide network density reaches 400-500
sites.
Our senior management team, led by CEO Henry (Hank) Hoffman and
composed primarily of the founders of the Company, has significant experience in
both the transportation and communications industries.
12
We were incorporated as a Delaware corporation under the name DFW
Technologies, Inc., Inc., in March 1989. In 1992, DFW Technologies, Inc. changed
their name to Fountain Pharmaceuticals, Inc. In approximately November 2002, the
shareholders of SiriCOMM, Inc., a privately-held Missouri corporation,
incorporated in 2000 ("SiriCOMM Missouri"), exchanged all of the issued and
outstanding common stock of SiriCOMM Missouri for a controlling interest in
Fountain Pharmaceuticals, Inc. (the "Reverse Transaction"). As part of the
Reverse Transaction, all of the then officers and directors of Fountain
Pharmaceuticals, Inc. resigned and were replaced by persons designated by
SiriCOMM Missouri and the name of Fountain Pharmaceuticals, Inc. was changed to
SiriCOMM, Inc. As a result of the Reverse Transaction, SiriCOMM Missouri became
a wholly-owned subsidiary of the Company and the prior shareholders of SiriCOMM
Missouri became the controlling shareholders, officers and directors of the
Company.
Our corporate address is 4710 East 32nd Street, Joplin, Missouri 64804,
our telephone number is 417-626-9971, and our fax number is 417-782-0475.
Critical Accounting Policies and Estimates:
Our financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make significant
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues, expenses and related disclosure of contingent assets and liabilities.
We evaluate our estimates, including those related to contingencies, on an
ongoing basis. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.
We believe the following critical accounting policy, among others;
involve the more significant judgments and estimates used in the preparation of
our consolidated financial statements:
The Company accounts for compensation costs associated with stock
options and warrants issued to non-employees using the fair-value based method
prescribed by Financial Accounting Standard No. 123 - Accounting for Stock-Based
Compensation. The Company uses the trinomial options-pricing model to determine
the fair value of these instruments as well as to determine the values of
options granted to certain lenders by the principal stockholder. The following
estimates are used for grants in fiscal year 2006: Expected future volatility
over the expected lives of these instruments is estimated to mirror historical
experience of 75%; expected lives of 1-2 years is estimated based on
management's judgment of the time period by which these instruments will be
exercised.
Information Relating To Forward-Looking Statements
When used in this Report on Form 10-QSB, the words "may," "will,"
"expect," "anticipate," "continue," "estimate," "intend," "plans", and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 regarding events, conditions and financial
trends which may affect the Company's future plans of operations, business
strategy, operating results and financial position. Such statements are not
13
guarantees of future performance and are subject to risks and uncertainties and
actual results may differ materially from those included within the
forward-looking statements as a result of various factors. Such factors include,
among others: (i) the Company's ability to obtain additional sources of capital
to fund continuing operations; in the event it is unable to timely generate
revenues (ii) the Company's ability to retain existing or obtain additional
licensees who will act as distributors of its products; (iii) the Company's
ability to obtain additional patent protection for its technology; and (iv)
other economic, competitive and governmental factors affecting the Company's
operations, market, products and services. Additional factors are described in
the Company's other public reports and filings with the Securities and Exchange
Commission. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date made. The Company
undertakes no obligation to publicly release the result of any revision of these
forward-looking statements to reflect events or circumstances after the date
they are made or to reflect the occurrence of unanticipated events.
Fair Value of Equity Instruments
The valuation of certain items, including valuation of warrants or
restricted stock that may be offered as compensation for goods or services
received within its contracts, involve significant estimations with underlying
assumptions judgmentally determined. Warrants are valued using the most reliable
measure of fair value, such as the value of the goods or services rendered, if
obtainable, if such value is not readily obtainable, the valuation of warrants
and stock options are then based upon a trinomial valuation model, which
involves estimates of stock volatility, expected life of the instruments and
other assumptions. As the Company's stock is thinly traded, the amounts recorded
for equity instruments, which are based partly on historical pricing of the
Company's stock, are subject to the assumption used by management in determining
the fair value.
Results of Operations
For the Three Months Ended December 31, 2005, and 2004
Revenues
SiriCOMM generated revenues of $153,952 for the three months ending
December 31, 2005 while generating revenues of only $6,273 during the same
period ending December 31, 2004. Revenues were solely derived from the Company's
offering of its InTouch Internet service. Limited advertising has been conducted
to date and no assurances can be offered that the Company will generate future
revenues from the offering of the In Touch service.
Operating Expenses
Our operating expenses consist of product research and development
costs, general and administrative, selling, depreciation and amortization, as
well as amortization of long-term intangible assets. During the three months
ended December 31, 2005, net operating losses totaled $870,400 as compared to
net operating losses of $493,015 for the three months ended December 31, 2004.
The Company has increased its number of employees in accounting, software
development and customer service which has contributed to the increase in net
operating losses. These expenses are necessary to increase the Company's
infrastructure, support the InTouch service and improve the Company's
administration.
14
General and Administrative Expenses
Our General and Administrative expenses consist of corporate overhead
costs, administrative support, professional fees and amortization of prepaid
consulting fees. For the three months ending December 31, 2005, SiriCOMM's
general and administrative expenses totaled $326,100, or 31.8% of total
operating expenses, while for the three months ended, December 31, 2004 general
and administrative expenses totaled $150,193 or 30.1% of total operating
expenses. General and administrative expenses increased as a result of the
Company's engaging an investor relations and network maintenance costs which
contributed principally to the net operating loss.
Salaries
For the three months ending December 31, 2005, SiriCOMM incurred
salaries of $317,696, representing 31.0% of operating expenses, as compared to
$235,337, or 47.1%, of total operating expenses for the three months ended
December 31, 2004. The Company has increased its personnel in accounting and
customer support to operate its InTouch ISP service.
Satellite Access Fees
With the opening of the network for introduction of its InTouch
service, the Company will incur bandwidth costs associated with providing this
service and its other products. The contract with its satellite provider
provides for a fixed monthly cost per site which will increase as the Company
adds additional sites. Satellite access fees for the three months ending
December 31, 2005 were $246,543, or 24.1% of total operating expenses, as
compared to $93,870, or 18.8% of total operating expenses, for the three months
ending December 31, 2004. With the signing of an agreement with Sat-Net in
February 2005, the Company is now amortizing intangible satellite access that
was the benefit derived from this agreement. The Company expensed $126,009 as
the non-cash amortization for the three months ending December 31, 2005
Depreciation and Amortization
Depreciation expense was $127,291 for the three month period ending
December 31, 2005 as compared to $7,288 for the same period ending December 31,
2004 due to the increase in the network infrastructure.
Interest Expense
For the three months ending December 31, 2005, interest expense was
$10,477 as compared to $4,460 during the three months ended December 30 , 2004.
The increase in interest expense is attributable to the Company increasing its
borrowing on its equipment line to $385,435 from $309,604 during the same period
ending December 31, 2004, and an increase in interest rates.
Liquidity
We continue to finance our operations entirely from invested funds and
limited borrowing for capital expenditures. No assurances can be given that
15
revenues will increase sufficiently to cover operating expenses or that the
Company can continue to attract capital under terms favorable to it
shareholders.
As of December 31, 2005, our current assets including cash and cash
equivalents, investments, accounts receivables and other current assets amounted
to approximately $780,060. Current liabilities amounted to $1,349,158 and
include notes payable to Southwest Missouri Bank and Sunflower Capital, LLC,
accounts payable, accrued salaries, and other accrued expenses.
As an emerging wireless applications services provider, we are involved
in a number of business development projects, continued network installation and
general operating capital requirements that will continue to require external
capital to finance the Company as it introduces its applications within its
business model. No assurances can be given as to the industry's willingness to
purchase the Company's products or services.
As we continue to ramp-up our business and obtain new ISP contracts,
the Company believes that it has adequate liquidity and that we can achieve a
positive cash flow on a monthly basis by the end of September 2006. The Company
is dedicating its efforts currently to building its Internet Service and growing
its network site density in order to facilitate the launch of its other planned
software products.
Capital Resources
On December 27, 2005, the Company entered into a Loan Agreement with
Sunflower Capital, LLC. The loan is in the principal amount of $500,000 and is
evidenced by a Convertible Promissory Note due July 1, 2006. As consideration
for Sunflower making the loan, the Company issued to Sunflower a warrant to
purchase 200,000 shares of the Company's common stock at $1.26 per share. The
warrant expires December 15, 2010. The estimated fair value of the warrants
required a discount of $76,271 be recorded against the note. This discount will
be expensed over the life of the loan.
The Note mandatorily converts into the Company's units consisting of
one share of common stock and one redeemable common stock purchase warrant
exercisable at $1.50 per share during the period commencing on the date of
issuance and expiring five (5) years thereafter. As discussed below, the Note
converted into such units at the rate of $1.15 per unit on February 1, 2006.
On January 31, 2006, the Company consummated the private placement of
its securities pursuant to a Placement Agent Agreement entered into between it
and Sanders Morris Harris, Inc. as Placement Agent dated December 12, 2005. The
securities sold were units consisting of one share of the Company's common
stock, $.001 par value and one redeemable Common Stock purchase warrant. At the
closing, the Company sold an aggregate of 4,692,263 Units at an aggregate
purchase price of $5,396,103 or $1.15 per unit. At the closing the Company
delivered an aggregate of 4,692,263 Shares and 4,692,263 Warrants to the
purchasers.
Each Warrant entitles the holder to purchase one Share of Common Stock
at an exercise price of $1.50 per share commencing on the date of issuance and
expiring at the close of business on the fifth anniversary of the issuance date.
The Warrants contain provisions that protect the holder against dilution by
adjustment of the exercise price in certain events including, but not limited
to, stock dividends, stock splits, reclassifications, or mergers. The Company
may redeem the Warrants, at a price of $.10 per Warrant, at any time following
16
the issuance date upon not less than 30 days nor more than 60 days prior written
notice if (a) the Common Stock underlying the Warrants has been registered with
the SEC, and (b) the closing price of the Common Stock exceeds a 200% premium of
the exercise price of the Warrants for 20 out of 30 consecutive trading days.
Under the terms of the Agency Agreement, the Placement Agent received a
commission equal to 5% of the offering price of the Units sold in the Private
Placement, a financial advisory fee equal to 2% of the offering price of the
Units sold in the Private Placement and a Warrant to purchase Common Stock equal
to 5% of the shares of Common Stock underlying the Units sold in the Private
Placement at an exercise price of $1.15 per share.
As part of the Private Placement, the Company entered into a
registration rights agreement with each subscriber who purchased Units in the
Private Placement. Under the Registration Rights Agreement, the Company, as
promptly as reasonably practicable after closing of the Private Placement but in
no event later than 30 days following the closing, the Company is obligated to
file a registration statement on Form SB-2, relating to the resale by the
holders of the Common Stock underlying the Units, Warrants and Placement Agent
Warrant. If such Registration Statement is not filed within the required time
frame, or does not become effective within 90 days after closing (or 120 days
after closing, if the Registration Statement is subject to review by the SEC),
the Company has agreed to pay to the investors 1% of the gross proceeds of the
offering for each month in which the Company fails to comply with such
requirements.
Sunflower Capital, LLC, a limited liability company managed by William
P. Moore, a director of the Company, purchased an aggregate of 1,764,872 Units
in the offering, which consisted of a new investment of $1,525,000 to purchase
1,326,087 Units and the conversion of the Note plus accrued interest in the
amount of $4,602 to purchase 438,785 Units.
The aforementioned securities have been and will be issued under the
exemption from registration provided in Section 4(2) of the Act.
The cash proceeds of the above sales of securities of the Company will
be used for general corporate purposes in developing the Company's planned
services.
Contractual Obligations and Commercial Commitments
Contractual obligations as of December 31, 2005 are as follows:
Payments Due by Period
----------------------------------------------------------------
Contractual Less than
Obligations Total 1 year 1-3 years 4-5 years After 5 years
-----------------------------------------------------------------------------------------------
Line of credit and note
payable $ 809,164 $ 809,164 $ - $ - $ -
-----------------------------------------------------------------------------------------------
Operating leases - - - - -
-----------------------------------------------------------------------------------------------
Total contractual cash
obligations $ 809,164 $ 809,164 $ - $ - $ -
-----------------------------------------------------------------------------------------------
17
Recent Accounting Pronouncements
In December 2003, the FASB issued Interpretation No. 46 (revised),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,"
("FIN 46R"). FIN 46R addresses how a business enterprise should evaluate whether
it has a controlling financial interest in an entity through means other than
voting rights and, accordingly, should consolidate the variable interest entity
("VIE"). Fin 46R replaces FIN46 that was issued in January 2003. All public
companies were required to fully implement FIN 46R no later than the end of the
first reporting period ending after March 15, 2004. The adoption of FIN 46R had
no impact on SiriCOMM's financial condition or results of operations.
On December 16, 2004, the Financial Accounting Standards Board (FASB)
issued FASB Statement No. 123 (revised 2004), Share-Based Payment, which is a
revision of FASB Statement No. 123, Accounting for Stock-Based Compensation.
Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees, and amends FASB Statement No. 95, Statement of Cash Flows. The
approach to accounting for share-based payments in Statement 123(R) is similar
to the approach described in Statement 123. However, Statement 123(R) requires
all share-based payments to employees, including grants of employee stock
options, to be recognized in the financial statements based on their fair values
and no longer allows pro forma disclosure as an alternative to financial
statement recognition. The Company will be required to adopt Statement 123(R) in
the first quarter of its year ending September 30, 2007. The Company has not
determined what financial statement impact Statement 123(R) will have on the
Company.
OFF BALANCE SHEET ARRANGEMENTS
We do not have any off balance sheet arrangements.
Item 3: Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company's management, under the supervision of and with the participation of
the Company's Chief Executive Officer and Chief Financial Officer, has evaluated
the effectiveness of SiriCOMM's disclosure controls and procedures, as such term
is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as of the end of the period covered by
this Quarterly Report on Form 10-QSB. Management has concluded that its
disclosure controls and procedures were still not effective as of December 31,
2005 as follows:
o we did not have adequate transaction controls over the
accounting review and process of certain unusual or complex
transactions;
o we did not have a systematic and documented program of
internal controls and procedure over our accounting and
financial reporting process to ensure that unusual or complex
transactions are recorded, processed, summarized and reported
on a timely basis in our financial disclosures; and
18
o there is a need for the improved supervision and training of
our accounting staff.
In connection with the restatement described below, management determined that a
material weakness existed in SiriCOMM's internal control over financial
reporting for the year ended September 30, 2004. Because of this material
weakness, management determined that SiriCOMM's disclosure controls and
procedures were not effective as of September 30, 2004 to ensure that all
material information required to be included in SiriCOMM's reports filed or
submitted under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission. As stated in more detail below, this determination was in
response to the identified weakness and not part of management's assessment of
internal controls that will be required to be included in our annual report on
Form 10-KSB for our fiscal year ending September 30, 2007. Disclosure controls
and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Act is accumulated and communicated to the
issuer's management, including it's principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure. To address this material
weakness, SiriCOMM's management, with the assistance of its accounting
consultant, continues to perform additional analysis of our accounting
procedures and the need for additional personnel in our accounting department
to ensure that SiriCOMM's consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States of
America. Accordingly, management believes that (i) the consolidated financial
statements, as restated, fairly present in all material respects SiriCOMM's
financial condition, results of operations and cash flows for the periods
presented, and (ii) this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report.
Consideration of the Restatement
On December 10, 2003, SiriCOMM issued an aggregate of 213,417 shares of its
Series A Preferred Stock to two investors upon conversion of debt in the
aggregate principal amount of $200,000 plus accrued interest of $13,417. These
shares were accounted for on the Company's balance sheet as part of its
permanent equity. Because the Series A Preferred Stock provided the holder the
right to redeem those shares at any time commencing three (3) years from the
date of issuance, those shares should have been classified as temporary equity.
As a result of the foregoing, management restated its September 30, 2004 annual
consolidated financial statement as well as its interim consolidated financial
statements for the quarters ended December 31, 2004, March 31, 2005 and June 30,
2005. The reclassification of the Series A Preferred Stock did not effect the
Company's results of operations for any of the above listed periods.
Internal Control over Financial Reporting
As a result of Section 404 of the Sarbanes-Oxley Act of 2002 and the rules
issued thereunder, the Company will be required to include in its Annual Report
on Form 10-KSB for the year ending September 30, 2007 a report on management's
assessment of the effectiveness of the Company's internal control over financial
reporting. The Company's independent auditor will also be required to attest to
19
and report on management's assessment. Current auditing standards provide that a
restatement is a strong indicator of a material weakness in the Company's
internal control over financial reporting. Considering this guidance, the
Company has evaluated these methodological errors and has concluded that the
restatement resulted from a material weakness in the Company's internal control,
which the Company believes it has since remediated. This process of assessment
and remediation is not of the scope and did not include rigorous documentation
of internal controls which will be required under Section 404. In that regard,
management did not prepare a report in conformity with paragraph (a) of Item 308
which should have contained the following:
o a statement of management's responsibility for establishing
and maintaining adequate internal control over financial
reporting;
o a statement identifying the framework used by management to
evaluate the effectiveness of the Company's internal control
over financial reporting;
o management's assessment of the effectiveness of the Company's
internal control over financial reporting as of September 30,
2005, including a statement as to whether or not it is
effective; and
o a statement that the Company's external auditor has issued an
attestation report on management's assessment.
The Company was also not required to obtain and has not obtained its independent
auditors' report with respect to this voluntary assessment. In an effort to
bolster existing controls and prepare for the required management assessment of
internal controls over financial reporting which will be required to be included
in the Company's annual report on Form 10-KSB for the year ending September 30,
2007, the Company retained an accounting consultant in November, 2005 to assist
in the documentation, assessment and development of more effective internal
control under the criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria).
A material weakness is a control deficiency or combination of control
deficiencies that results in more than a remote likelihood that a material
misstatement of the annual or interim consolidated financial statements will not
be prevented or detected. As of September 30, 2004, SiriCOMM did not maintain
effective control over financial reporting to ensure the Series A preferred
stock was accurately presented or that the accounting treatment related to the
redeemable shares was appropriately reviewed to ensure compliance with
accounting principles generally accepted in the United States of America. The
transaction related to these redeemable shares was non-routine in nature.
Specifically, the Company did not have adequate controls over the classification
of the Series A preferred shares subject to redemption requests nor the proper
evaluation of the relevant accounting literature related to such shares. This
material weakness resulted in a restatement of SiriCOMM's financial statements.
As of December 31, 2005, the Company still lacked the personnel and technical
expertise necessary to insure that a material weakness did not exist at that
time.
A significant deficiency is a control deficiency, or combination of control
deficiencies, that adversely affects the Company's ability to initiate,
authorize, record, process, or report external financial data reliably in
accordance with generally accepted accounting principles such that there is more
20
than a remote likelihood that a misstatement of the Company's annual or interim
financial statements that is more than inconsequential will not be prevented or
detected. We have better defined the roles of certain of our personnel relating
to internal controls over financial reporting and are disclosing the following
significant deficiencies:
o The Director of Support Services has significant abilities to
perform functions in the purchasing cycle, including updating
vendor files, recording transactions, and accessing signed
checks.
o The Chief Executive Officer has the ability to perform EDI
transactions and approving and signing checks with little or
no oversight from other members of management.
o The Chief Financial Officer can perform most functions
associated with the purchasing cycle, including signing check
which is predominantly done in the absence of the Chief
Executive Officer.
o The Director of Support Services can perform most functions
within the payroll cycle, including file maintenance,
recording of transactions and adjusting payroll data.
o The Director of Support Services can perform most functions in
the revenue and accounts receivable cycle including, billing
customers, recording revenue transactions, submitting credit
card remittances and reconciling the bank statements.
o The Company has not established adequate procedures to
properly accrue for goods and services rendered.
Management's Response to the Material Weakness and Significant Deficiencies
In response to the material weakness and significant deficiencies described
above, we have undertaken the following initiatives with respect to our internal
controls and procedures that we believe are reasonably likely to improve and
materially affect our internal control over financial reporting. We anticipate
that remediation will be continuing throughout fiscal 2006, during which we
expect to continue pursuing appropriate corrective actions, including the
following:
o Preparing appropriate written documentation of our financial
control procedures. The Company did not begin this process
during the quarter ended December 31, 2005. The Company
intends to complete written documentation of its financial
control procedures during the fiscal quarter ended September
30, 2006;
o In November, 2005 we hired an outside accounting consultant
who has acted as our interim controller. The Company has been
actively recruiting a full time controller to be added to our
finance department;
o Scheduling training for accounting staff to heighten awareness
of generally accepted accounting principles applicable to
complex transactions. The Company did not begin training its
21
accounting staff during the quarter ended December 31, 2005.
The Company intends to complete the training in the fiscal
quarter ended September 30, 2006;
o As of December 31, 2005 we did not begin strengthening our
internal review procedures in conjunction with our ongoing
work to enhance our internal controls so as to enable us to
identify and adjust items proactively. The Company did not
begin this process during the quarter ended December 31, 2005.
The Company intends to complete the strengthening of its
internal review procedure during the fiscal quarter ended
September 30, 2006;
o In November 2005 we engaged an outside accounting consultant
to support our Sarbanes-Oxley Section 404 compliance
activities and to provide technical expertise in the selection
and application of generally accepted accounting principles
related to complex transactions to identify areas that require
control or process improvements and to consult with us on the
appropriate accounting treatment applicable to complex
transactions;
o During the quarter ended December 31, 2005, upon the advice of
our outside accounting consultant, we made certain procedural
changes with respect to the Company's billing process; and
o As stated above, during the quarter ended December 31, 2005 we
established adequate procedures to properly accrue for goods
and services rendered to insure they are recorded in the
proper reporting period.
To date, we have retained an outside accounting consultant to assist the Company
in strengthening our controls and procedures. The actions described in the above
bullet points were changes to our internal controls that is reasonably likely to
materially affect our internal control over financial reporting. Our management
and Audit Committee will monitor closely the implementation of our remediation
plan. The effectiveness of the steps we intend to implement is subject to
continued management review, as well as Audit Committee oversight, and we may
make additional changes to our internal control over financial reporting.
Management expects that all material weaknesses will be cured by September 30,
2007.
We cannot assure you that we will not in the future identify further material
weaknesses in our internal control over financial reporting. We currently are
unable to determine when the above-mentioned material weaknesses will be fully
remediated. However, because remediation will not be completed until we have
added finance staff and strengthened pertinent controls, we believe the
aforementioned material weakness and significant deficiencies may continue to
exist. The Company has yet to develop procedures to adequately assess financial
statement and disclosure reporting requirements so that regulatory filings are
accurate and complete.
22
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
On December 17, 2004, Henry Hoffman, Kory Dillman, David Mendez, Tom
Noland, Richard Iler and Terry Thompson were named defendants in a lawsuit
entitled Greg Sanders v. Henry Hoffman et al. Messrs. Hoffman, Dillman, Mendez
and Iler are officers and directors of the Company, Mr. Thompson is a director
of the Company and Mr. Noland is a former officer and director of the Company.
The action was brought in the Circuit Court of Jackson County, Missouri at
Kansas City (04CV236387). The action alleges fraud, misrepresentation and breach
of fiduciary duty relating to a settlement agreement entered into between the
Company and Mr. Sanders. The Company is not a party to this lawsuit. The
complaint seeks damages in excess of $9,679,903. The defendant's filed a motion
to dismiss which was denied by the Court. The defendants have subsequently filed
counter claims against the plaintiff as part of their answer on August 18th,
2005. The Company will pay all expenses relating to the defense of this matter.
In management's opinion this case is without merit and the defendants intend on
defending this matter vigorously.
Item 2: Changes in Securities and Use of Proceeds
(a) None
(b) None
(c) On December 15, 2005, the Company issued 25,000 shares of its
common stock to IRG pursuant to a consulting agreement dated November 30, 2005.
The consulting agreement also requires the Company to issue an additional 15,000
shares on or before January 1, 2006 and 10,000 shares on or before February 1,
2006. Additionally, the consulting agreement calls for the issuance on January
15, 2006 of 50,000 four (4) year warrants with the following exercise prices:
16,666 at $1.25
16,667 at $1.35
16,667 at $1.45
On December 27, 2005, the Company entered into a Loan Agreement with Sunflower
Capital, LLC. The loan is in the principal amount of $500,000 and is evidenced
by a Convertible Promissory Note due July 1, 2006. As consideration for
Sunflower making the loan, the Company issued to Sunflower a warrant to purchase
200,000 shares of the Company's common stock at $1.26 per share. The warrant
expires December 15, 2010.
The Note mandatorily converts into the Company's units consisting of one share
of common stock and one redeemable common stock purchase warrant exercisable at
$1.50 per share during the period commencing on the date of issuance and
expiring five (5) years thereafter. As discussed below, the Note converted into
such units at the rate of $1.15 per unit on February 1, 2006.
On January 31, 2006, the Company consummated the private placement of its
securities pursuant to a Placement Agent Agreement entered into between it and
Sanders Morris Harris, Inc. as Placement Agent dated December 12, 2005. The
securities sold were units (the "Units") consisting of one share of the
23
Company's common stock, $.001 par value and one redeemable Common Stock purchase
warrant (the "Warrants"). At the closing, the Company sold an aggregate of
4,692,263 Units at an aggregate purchase price of $5,396,103 or $1.15 per Unit.
At the closing the Company delivered an aggregate of 4,692,263 shares of Common
Stock and 4,692,263 Warrants to the purchasers.
Each Warrant entitles the holder to purchase one share of Common Stock at an
exercise price of $1.50 per share commencing on the date of issuance and
expiring at the close of business on the fifth anniversary of the issuance date.
The Warrants contain provisions that protect the holder against dilution by
adjustment of the exercise price in certain events including, but not limited
to, stock dividends, stock splits, reclassifications, or mergers. The Company
may redeem the Warrants, at a price of $.10 per Warrant, at any time following
the issuance date upon not less than 30 days nor more than 60 days prior written
notice if (a) the Common Stock underlying the Warrants has been registered with
the SEC, and (b) the closing price of the Common Stock exceeds a 200% premium of
the exercise price of the Warrants for 20 out of 30 consecutive trading days.
Under the terms of the Agency Agreement, the Placement Agent received a
commission equal to 5% of the offering price of the Units sold by them in the
Private Placement, a commission equal to 2 1/2% on the 1,764,872 Units purchased
by Sunflower Capital, LLC and a financial advisory fee equal to 2% of the
offering price of the Units sold in the Private Placement and a Warrant to
purchase Common Stock equal to 5% of the shares of Common Stock underlying the
Units sold in the Private Placement at an exercise price of $1.15 per share.
As part of the Private Placement, the Company entered into a registration rights
agreement with each subscriber who purchased Units in the Private Placement.
Under the Registration Rights Agreement, the Company, as promptly as reasonably
practicable after closing of the Private Placement but in no event later than 30
days following the closing, the Company is obligated to file a registration
statement on Form SB-2, relating to the resale by the holders of the Common
Stock underlying the Units, Warrants and Placement Agent Warrant. If such
Registration Statement is not filed within the required time frame, or does not
become effective within 90 days after closing (or 120 days after closing, if the
Registration Statement is subject to review by the SEC), the Company has agreed
to pay to the investors 1% of the gross proceeds of the offering for each month
in which the Company fails to comply with such requirements.
Sunflower Capital, LLC, a limited liability company managed by William P. Moore,
a director of the Company, purchased an aggregate of 1,764,872 Units in the
offering, which consisted of a new investment of $1,525,000.05 to purchase
1,326,087 Units and the conversion of the Note plus accrued interest in the
amount of $4,602 to purchase 438,785 Units.
The aforementioned securities have been and will be issued under the exemption
from registration provided in Section 4(2) of the Act.
The cash proceeds of the above sales of securities of the Company were used for
general corporate purposes in developing the Company's planned services.
(d) Not Applicable
24
Item 3.: Defaults upon Senior Securities
None
Item 4.: Submission of Matters to a Vote of Security Holders
None
Item 5.: Other Information
None
Item 6.: Exhibits
The following exhibits are filed as part of this report:
31.1 Certification of Chief Executive Officer of Periodic
Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
31.2 Certification of Chief Financial Officer of Periodic
Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
32.1 Certification of Chief Executive Officer pursuant to
18 U.S.C. Section 1350
32.2 Certification of Chief Financial Officer pursuant to
18 U.S.C. Section 1350
25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: May 5, 2006 SIRICOMM, INC.
By: /s/ Henry P. Hoffman
-----------------------------------------
Henry P. Hoffman, President and
Chief Executive Officer
By: /s/ J. Richard Iler
-----------------------------------------
J. Richard Iler, Executive Vice President
and Chief Financial Officer
26