-----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, LIJFUwQaAcFIrxSYPPjnoVJbW+GOtxKnaxr23G3IecBrSZ6bILIk5ewAoUNl/wrT sumEMCyOiG/aHyypsm+JMg== /in/edgar/work/0000950152-00-007847/0000950152-00-007847.txt : 20001114 0000950152-00-007847.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950152-00-007847 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALPHACOM INC CENTRAL INDEX KEY: 0000356664 STANDARD INDUSTRIAL CLASSIFICATION: [7389 ] IRS NUMBER: 341868605 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-16065 FILM NUMBER: 761594 BUSINESS ADDRESS: STREET 1: 1035 ROSEMARY BLVD STE I CITY: AKRON STATE: OH ZIP: 44203 BUSINESS PHONE: 3307855555 MAIL ADDRESS: STREET 1: 1035 ROSEMARY BLVD., SUITE I STREET 2: 1035 ROSEMARY BLVD., SUITE I CITY: AKRON STATE: OH ZIP: 44203 10QSB 1 l84604ae10qsb.txt ALPHACOM, INC. 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-QSB (X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarter ended September 30, 2000 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 Number 333-83573 ---------------------- ALPHACOM, INC. (Name of small business issuer as specified in its charter) - -------------------------------------------------------------------------------- NEVADA 34-1868605 ------ ---------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1035 Rosemary Boulevard, Akron, Ohio 44306 (address of principal executive offices) (330) 785-5555 (Registrant's telephone number, including area code) Check whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 __ (effective date was June 30, 2000). The number of shares outstanding of the registrant's common stock as of September 30, 2000 was 14,816,430. Transitional Small Business Disclosure Format (check one): Yes ___ No _N 1 2 ALPHACOM, INC FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 2000 INDEX Part I. Financial Statements 1. Financial Statements Unaudited Condensed Consolidated Combined Balance Sheets as December 31, 1999 and September 30, 2000.--------------------------------------3 Unaudited Condensed Consolidated Combined Statements of Operations for three and nine months ended September 30, 2000 and 1999---------------4 Unaudited Condensed Consolidated Combined Statements of Cash Flows for the nine months ended September 30, 2000 and 1999---------------------5 Notes to Unaudited Condensed Consolidated Combined Financial Statements------------------------------------------------------------6 2. Management's Discussion and Analysis or Plan of Operations-----------------8 Part II. Other Information----------------------------------------------------10 2 3 Part I Item 1--Financial Statements ALPHACOM, INC. AND SUBSIDIARY AND AFFILIATE (development stage companies) UNAUDITED CONDENSED CONSOLIDATED COMBINED BALANCE SHEETS
Sept. 30, December 31, 2000 1999 ------------ ------------ ASSETS Current assets Cash $ 709,189 $ 41,445 Notes receivable 1,015,000 0 Accounts receivable-net 51,868 18,942 Other receivables and advances 252,953 0 Inventories 53,367 21,217 Prepaid expenses 550,780 1,282,278 ------------ ------------ 2,633,157 1,363,882 Equipment - net 413,215 311,450 Other assets Patents 655,000 205,000 Note Receivable 500,000 0 Deposits and other 63,079 88,127 ------------ ------------ TOTAL ASSETS $ 4,264,451 $ 1,968,459 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities Notes payable $ 372,135 $ 2,701,806 Accounts payable -trade 328,948 779,276 Accrued interest 34,227 183,282 Accrued expenses 190,096 361,022 Accrued consulting fee 0 1,000,000 Deferred compensation 0 145,681 Current portion of long-term debt 9,935 169,362 Deferred revenue 135,600 0 ------------ ------------ 1,070,941 5,340,429 Non-current portion of long-term debt 8,903 16,428 Non-current portion of deferred revenue 1,194,334 0 ------------ ------------ Total liabilities 2,274,178 5,356,857 ------------ ------------ Shareholders' equity (deficit) Common stock 269,366 266,849 Additional paid-in capital 10,152,855 747,821 Treasury stock (1,653) (1,653) Deficit accumulated during the development stage (8,430,295) (4,401,415) ------------ ------------ Total shareholders' equity ( deficit) 1,990,273 (3,388,398) ------------ ------------ TOTAL LIABILIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 4,264,451 $ 1,968,459 ============ ============
SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED COMBINED FINANCIAL STATEMENTS 3 4 ALPHACOM, INC AND SUBSIDIARY AND AFFILIATE (development stage companies) UNAUDITED CONDENSED CONSOLIDATED COMBINED STATEMENTS OF OPERATIONS
Cumulative Three Months Ended Nine Months Ended From Inception Sept. 30, Sept. 30, (April 19,1996 2000 1999 2000 1999 to Sept. 30,2000) ----------------------------------------------------------------------------------- Sales-licenses $ 27,125 $ 0 $ 71,166 $ 0 $ 71,166 Product sales 76,384 119,054 263,947 194,206 789,757 Cost of sales 37,318 38,635 229,436 98,679 419,884 ----------------------------------------------------------------------------------- Gross profit 66,191 80,419 105,677 95,527 441,039 Operating expenses 2,241,902 409,654 3,901,945 1,287,436 8,235,381 ----------------------------------------------------------------------------------- Operating loss (2,175,711) (329,235) (3,796,268) (1,191,909) (7,794,342) Interest expense (51,960) (51,142) (232,612) (141,016) (645,229) Other 9,276 ----------------------------------------------------------------------------------- NET LOSS $ (2,227,671) $ (380,377) $ (4,028,880) $ (1,332,925) $ (8,430,295) =================================================================================== Net loss per share $ (0.16) $ (0.03) $ (0.31) $ (0.11) $ (0.79) =================================================================================== Weighted average number of shares outstanding 13,905,753 12,199,042 12,879,590 12,105,598 10,719,075 ===================================================================================
SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED COMBINED FINANCIAL STATEMENTS. 4 5 ALPHACOM, INC. AND SUBSIDIARY AND AFFILIATE (development stage companies) UNAUDITED CONDENSED CONSOLIDATED COMBINED STATEMENT OF CASH FLOWS
Cumulative From Inception Nine Months Ended Nine Months Ended (April 19, 1996 Sept. 30, 2000 Sept. 30, 1999 to Sept. 30, 2000) ------------- ------------- ------------- Cash flows from operations: Net loss $ (4,028,880) $ (1,332,925) $ (8,430,295) Adj. to reconcile net loss to net cash used in operations: Depr. and amort 801,426 64,446 1,044,132 Stock issued for services 1,010,000 215,000 1,313,012 License fee income (71,166) 0 (71,166) Changes in : Accounts receivable (32,926) (4,980) (51,868) Advances (252,953) 0 (252,953) Prepaid expense (18,502) (61,595) (342,280) Inventories (32,150) (23,046) (53,367) Deposits and other 0 6,043 (5,579) Accounts payable (450,328) 164,490 328,948 Accrued interest (1,055) 72,465 182,227 Accrued expenses (284,422) 61,814 180,866 Deferred revenue 901,100 0 901,100 Total adjustments 1,569,024 494,637 3,173,072 Net cash used in operations (2,459,856) (838,288) (5,257,223) Cash flows from investing Distr. of notes receivable (1,015,000) 0 (1,015,000) Purchase of equipment (153,191) (52,618) (530,847) Purchase of patents (450,000) 0 (655,000) Advance on investment (50,000) 0 (57,500) Net cash used in investing: (1,668,191) (52,618) (2,258,347) Cash flows from financing: Proceeds from debt 0 160,000 203,924 Payment of debt (11,952) (6,421) (30,086) Proceeds from notes payable 975,000 816,900 3,741,306 Payment of notes payable (704,707) (76,765) (904,207) Stock issuance costs (73,925) 0 (148,973) Proceeds from sale of stock 4,611,375 0 5,362,795 Net cash provided by financing 4,795,791 893,714 8,224,759 ------------------------------------------------------ Net increase in cash 667,744 2,808 709,189 Cash -beginning of period 41,445 8,332 0 Cash - end of period $ 709,189 $ 11,140 $ 709,189 ======================================================
SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED COMBINED FINANCIAL STATEMENTS. 5 6 ALPHACOM, INC. AND SUBSIDIARY AND AFFILIATE Notes to UNAUDITED Condensed Consolidated Combined Financial Statements Note 1 Basis of Presentation The Company has prepared the accompanying condensed consolidated combined financial statements, without audit, according to the applicable regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in those financial statements prepared according to generally accepted accounting principles have been condensed or omitted. The company believes that the following disclosures are adequate and not misleading. These unaudited condensed consolidated combined financial statements reflect all adjustments (consisting only of normal recurring adjustments) that, in the Company's opinion, are necessary to present fairly the financial position and results of operations of the Company for the periods presented. It is suggested that these unaudited condensed consolidated financial statements are read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Form SB-2 for the fiscal year ended December 31, 1999. Note 2 Going Concern The Company has incurred operating losses since inception and at September 30, 2000 had incurred an unaudited year to date loss of $4,028,880. In addition, the Company has limited revenues to date and a product for which market acceptance remains generally untested. Primarily as a result of these factors, the Company's independent certified public accountants included an explanatory paragraph in their report on the Company's December 31, 1999 consolidated combined financial statements which expressed substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to continue as a going concern. Management of the Company has undertaken certain actions to attempt to address these conditions. These actions include seeking new sources of capital to allow the Company to continue. On June 30, 2000 the Company received an order from the Securities and Exchange Commission declaring its Registration Statement effective pursuant to Section 8(a) of the Securities Act of 1933, as amended. The Company has issued 2,088,261 shares at September 30, 2000 and raised approximately $ 7,407,449. Note 3 Sale of Technology The Company, commencing in the quarter ended June 30, 2000, has begun to license its technology in specific markets through the world. These agreements require an initial license fee plus additional license fees upon the grant of sub-licenses to third parties by the licensee. In addition, the Company receives royalties based on total users of the technology in each market. The Company recognizes revenue on these license agreements on a straight-line basis over the term of the agreements, which is ten years. License fee income recognized on these agreements during the nine months ended September 30, 2000 and 1999 was $71,166 and $-0- , respectively. Deferred Revenue recorded on the balance sheet amounted to $1,329,934 at September 30, 2000. The Company does not record revenue on the additional license fees to be received until payments are received, at which time the revenue is recognized over the remaining term of the original license agreement. The agreements signed at September 30, 2000 require additional minimum license fees of $19,874,000. Note 4 Non-Cash Investing and Financing Activities During the nine months ended September 30, 2000, the Company issued shares as follows for related non-cash transactions: 6 7 757,464 shares to satisfy obligations for rescission shares at $1 per share; 605,937 shares to reduce debt by $3,029,685; 29,600 shares to reduce accrued expenses of $148,000; and 202,000 shares in connection with certain promotion and advertising expenses of $1,010,000. Additionally, in March of 2000, the Company recorded a non-current note receivable in the amount of $500,000 as a partial payment for an initial license fee. Note 5 Notes Receivable The Company made various short-term advances in the form of notes receivable totaling $1,015,000 during the nine months ended September 30, 2000. The notes are classified as current assets and include interest ranging from 8% to 10.5%. 7 8 Item 2 Management's Discussion and Analysis or Plan of Operations This Quarterly Report on Form 10-QSB, including any information incorporated by reference herein, includes "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All of the statements contained in this Quarterly Report on Form 10-QSB, other than statements of historical fact, should be considered forward looking statements. General AlphaCom, Inc. (the "Company" or "AlphaCom"), is a Nevada corporation, incorporated on December 1, 1997 and has as its current address 1035 Rosemary Blvd., Akron, Ohio, 44306. On July 1, 1998 AlphaCom purchased certain limited assets of Alpha Beta Communications, including its distributor base. For presentation purposes the accounts of Alpha Beta Communications have been combined from April 19, 1996. The Company is an innovator in communication technology and will continue to introduce new hi-tech products and services in the rapidly expanding multi-billion dollar Internet, telecommunications and related industries to individual consumers, small and large businesses, government and institutions, both nationally and internationally. GSI-5 -Keeping within the wireless market we became a Value Added Reseller (VAR) for this product. This system provides an asymmetrical (dial-up outbound), high-speed satellite Internet solution for up to 250 simultaneous users or sessions at up to 500 KBPS. Wireline Internet Access and Network Utility (NU)- We have been marketing a traditional dial-up Internet service or wireline service. We expect our NU compression software to increase the average throughput speed by 2 to 5 times. VMSK-Status of Development - Very-Minimum-Shift-Keying (VMSK) is patented. These patents cover an encoding and decoding method that compresses ordinary modulation to transmit digital data at 10 to 25 bits/sec/Hz. VMSK has been demonstrated in the lab to various large companies, our government and foreign governments. The Company anticipates initial deployment by the middle of next year. The VMSK U.S. patents are owned by certain companies owned by Harold Walker. On December 22, 1999, the Company entered into a stock purchase agreement with Mr. Walker for all of his affiliated companies providing for the acquisition by the Company of all proprietary technology related to VMSK for a total purchase price of three million dollars, requiring certain periodic payments in cash. The Company already had obtained a non-exclusive license to utilize the VMSK technology through an earlier agreement with AMC. The Company believes, through its agreement with Mr. Walker, it is authorized to and has commenced, to independently procure the exclusive worldwide patent rights to its improvements in the VMSK technology. Mr. Walker has notified the Company that he believes they failed to timely deliver certain payments under his agreements, and that, it is Mr. Walkers position, the agreement is therefore terminated. The Company totally rejects this claim, and plans to aggressively and vigorously defend its worldwide patents and all updates concerning VMSK technology. International (Exclusive) Licensing - We have commenced licensing markets outside of North America to sell our products. This activity has picked up substantially as we demo our VMSK product in anticipation 8 9 of deploying this product. This product expands and/or utilizes "bandwidth" to provide a solution for the so called last mile problem. Results of Operations Three Months Ended September 30, 2000 and 1999 Revenues for the quarter ended September 30, 2000 were $103,509 compared to $119,054 for the quarter ended September 30, 1999. Operating costs and expenses totaled $2,241,902 in the quarter ended September 30, 2000 as compared to $409,654 for the same period in 1999. The increases in operating expenses in 2000 are due to increase in wages of $276,039 (increase in personnel), consulting fees of $146,011, legal and accounting fees of $81,515 and promotions of $964,039. Interest expense totaled $51,960 for the quarter ended September 30, 2000 compared to $51,142 for the same period in 1999. The Company expects expenditures to increase in all areas of its business during the next twelve months as development and promotion of existing and new products continues assuming available working capital. Nine Months Ended September 30, 2000 and 1999 Revenues for the nine months ended September 30, 2000 and 1999 were $335,113 and $194,206 respectively. An increase in Internet access subscribers accounted for approximately $69,000 of the increase and the balance of approximately $71,000 results from license revenue. Operating costs and expenses totaled $3,901,945 for the nine months ended September 30, 2000 as compared to $1,287,436 for the same period in 1999. The 2000 operating costs included increases of $673,824 in consulting fees, $975,847 in promotions, $209,627 in legal and accounting fees and $396,524 in wages over the same period in 1999. Interest expense in 2000 was $232,612 compared to $141,016 in 1999 reflecting higher debt. Financial Condition During the nine months ended September 30, 2000 the Company received approximately $1,401,100 in license fees, which includes $1,329,934 deferred at September 30, 2000. The Company recognized $71,166 of license fees in income through September 30, 2000. AlphaCom may issue up to 2,800,000 shares under an SB-2 Registration Statement (effective June 30, 2000 by the Securities and Exchange Commission) which could raise up to $10,400,000 if all shares are sold. Development Stage - Accumulated Deficit The company is a development stage company and has had only limited revenues since its inception. There can be no assurance that the Company will be able to achieve a significant level of sales or attain profitability. The Company's activity has been limited to developing technology, fund raising, initial sales and marketing efforts. There can be no assurance that the Company will be able to grow in the future. As a result, the Company believes that prior results of operations are not necessarily meaningful and should not be relied upon as an indication of future performance. Because of the foregoing factors, among others, the Company is unable to forecast its revenues or the rate at which it will add new customers with any degree of accuracy. There can be no assurance that the Company will ever achieve favorable operating results or profitability. 9 10 Part II - Other Information ITEM 2 - CHANGES IN SECURITIES Unregistered sale of equity securities during the quarter. In July 2000, the Company issued 203,100 shares of Common Stock to four accredited persons for services rendered. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8 -K a. Exhibit Index b. Reports on Form 8 - K ---None SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALPHACOM, INC. (Registrant) BY: /s/ Robert Snyder ____________________________ CEO DATE: November 14 , 2000 ------------------ BY: /s/ Joseph M. Lechiara ________________________ CFO DATE: November 14 , 2000 ------------------ EXHIBIT INDEX Exhibit No. 27 - Financial Data Schedule--------------------------------------11 10 EX-27 2 l84604aex27.txt EXHIBIT 27
5 This schedule contains summary financial information extracted from the consolidated combined financial statements of AlphaCom, Inc. and Affiliate as of September 30, 2000 and for the nine months then ended and for the three months then ended. The schedule is qualified entirely by reference to such consolidated combined financial statements. 9-MOS 3-MOS DEC-31-2000 DEC-31-2000 JAN-01-2000 JUL-01-2000 SEP-30-2000 SEP-30-2000 709,189 709,189 0 0 51,868 51,868 (5,001) (5,001) 53,367 53,367 2,633,157 2,633,157 413,215 413,215 (117,632) (117,632) 4,264,451 4,264,451 1,070,941 1,070,941 0 0 0 0 0 0 269,366 269,366 1,720,907 1,720,907 4,264,451 4,264,451 58,324 3,227 320,589 88,985 15,644 12,929 229,436 37,318 3,901,945 2,241,902 0 0 232,612 51,960 (4,028,880) (2,227,671) 0 0 (4,028,880) (2,227,671) 0 0 0 0 0 0 (4,028,880) (2,227,671) (0.31) (0.16) (0.31) (0.16)
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