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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1O-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 2000
Commission file number: 0-29973
SOLOMON ALLIANCE GROUP, INC.
(Exact name of small business issuer as specified in its charter)
ARIZONA 86-0843235
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3025 WINDWARD PLAZA
SUITE 300
ALPHARETTA, GA 30005
(Address of principal executive offices)
(770) 753-3130
(Issuer's telephone number)
MADISON HOLDINGS, INC.
39 BROADWAY, SUITE 2250
NEW YORK, NEW YORK 10006
(Former Name and Former Address)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 21,834,745 shares as of
October 31, 2000.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
Registrant's Financial Statements are filed herewith following the signature
page.
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with the generally
accepted accounting principles may have been omitted. However, in the opinion
of management, all adjustments (which include only normal recurring accruals)
necessary to present fairly the financial position and results of operations
for the period presented have been made. The results for interim periods are
not necessarily indicative of trends or of results to be expected for the
full year. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Form 8-K, as
amended.
The consolidated financial statements included herein have been subjected to
a limited review by Stokes & Company P.C., independent auditor for the
Company, whose report is included herein as Exhibit 15.
ITEM 2. PLAN OF OPERATION
GENERAL
The Company is a development stage enterprise focused on the emerging
wireless data industry. The Company does not, at this moment, have any
business and is seeking to acquire or merge with other existing, operating
businesses. During March 2000, the Company entered into non-binding letters
of intent to acquire all or part of three separate businesses within the
wireless industry as part of its EXPANSION THROUGH ACQUISITION strategy.
The Company plans to become a leading provider of customized wireless data
communications solutions for individual and business needs. The Company
designs, develops and markets wireless network products and services under
the "Knowledge2Go" brand that provide low-cost, high performance, easy-to-use
IP-based data communications. The products can be used in a broad range of
personal computer and industrial applications.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has had virtually no revenues from
operations and has relied almost exclusively on officer loans, convertible
debenture issues and sale of securities to raise working capital to fund
operations. At September 30, 2000 the company had $ 635 in cash.
The Company intends to continue the development, deployment and
commercialization of its Knowledge2Go services. The timing and amount of
capital expenditures may vary significantly depending on numerous factors
including market acceptance of its services, availability and financial terms
of site agreements for the Company's network infrastructure, technological
<PAGE>
feasibility, availability of modems, and availability of sufficient
management, technical, marketing and financial resources.
The Company will need to raise additional funds through the sale of its
equity or debt securities in private or public financing or through strategic
partnerships in order to complete the deployment and commercialization of
Knowledge2Go. There can be no assurance that such funds will be sufficient to
fund such deployment as planned. If thecompany is unable to obtain needed
funds, it could be forced to curtail or cease its activities.
The company has, in the past, issued shares of common stock to various
parties as payment for services rendered. The company intends to continue
this practice.
Management has instituted a cost reduction program that included a reduction
in labor and fringe costs as well as the operating overhead. In addition, the
Company has converted substantial debt to capital and is actively seeking
additional capital resources. Management believes these factors will
contribute toward achieving profitability
ITEM 3. - FORWARD LOOKING STATEMENTS
When used in this report and in future filings by the company with the
Commission in the Registrants' press release or other public or stockholder
communications, and in oral statements made with the approval of an
authorized executive officer, the words or phrases "WILL LIKELY RESULT", "ARE
EXPECTED TO", "WILL CONTINUE", "IS ANTICIPATED", "ESTIMATE", "PROJECT" or
similar expressions are intended to identify "FORWARD LOOKING STATEMENTS"
within the earning of the Private Securities Litigation Reform Act of 1955.
Such statements are subject to certain risks and uncertainties, including the
Company's liquidity constraints, potential increases in costs and delays,
pending litigation, availability of raw materials, competition, demand for
the product and other proprietary products and delays in the distribution
process that could cause actual results to differ materially from those
presently anticipated or projected. The company wishes to caution readers not
to place undue reliance on any such forward-looking statements which speak
only as of the date made. The company wishes to advise readers that actual
results for future periods to differ materially from any opinions or
statements expressed with respect to future periods in any current statements.
The company does not undertake - and specifically, declines any obligation -
to publicly release the result of any revisions which may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events.
Part II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
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ITEM 2. CHANGES IN SECURITIES
None
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 AND REPORTS ON FORM 8-K.
(a) Exhibit(s).
<TABLE>
<CAPTION>
NUMBER DESCRIPTION METHOD OF FILING
------ ----------- ----------------
<S> <C> <C>
27 Financial Data Schedule Filed with this Form 10-QSB
15 Independent Accountant's Report Filed with this Form 10-QSB
</TABLE>
(b) Reports on Form 8-K
1) On May 15, 2000, Solomon filed a Current Report on Form 8-K/A.
2) On March 16, 2000, Solomon filed a Notice of Securities of a
Successor Issuer Deemed to be Registered on Form 8-K12G3.
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.
SOLOMON ALLIANCE GROUP, INC.
By: 11/14/2000 /s/ Thomas I. Weston, Jr.
------------ -------------------------
Thomas I. Weston, Jr.
President
DATED: November 14, 2000
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SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Financial Statements
September 30, 2000 and 1999
(Unaudited)
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS
Consolidated Balance Sheet 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Financial Statements 6 - 8
</TABLE>
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SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 635
Prepaids 3,750
--------------
Total current assets 4,385
PROPERTY AND EQUIPMENT - AT COST
Furniture and office equipment, net of accumulated
depreciation of $25,370 45,545
OTHER ASSETS
Goodwill, net of accumulated amortization of $132,045 488,003
--------------
$ 537,933
==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 172,418
Accrued salaries 146,250
Accrued payroll taxes 49,877
Officer loans 390,839
Note payable 50,000
--------------
Total current liabilities 809,385
--------------
LONG-TERM LIABILITIES
Convertible debentures 5,732
Total long-term liabilities 5,732
--------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.001 par value; 100,000,000 shares
authorized; 23,448,116 shares issued and 21,839,745 outstanding 21,840
Additional paid in capital 1,760,959
Deficit accumulated during development stage (2,059,983)
--------------
(277,184)
--------------
$ 537,933
==============
</TABLE>
3
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SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999,
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999, AND THE
PERIOD FROM OCTOBER 25, 1996 (INCEPTION) TO SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
January 1, 2000 January 1, 1999 July 1, 2000 July 1, 1999 October 25, 1996
to to to to (Inception) to
September 30, September 30, September 30, September 30, September 30,
2000 1999 2000 1999 2000
--------------- --------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
REVENUE
Sales $ - $ 2,400 $ - $ - $ 7,856
COST OF MERCHANDISE SOLD - 2,035 - - 6,989
-------------- -------------- ------------- ------------- ------------
Gross profit - 365 - - 867
-------------- -------------- ------------- ------------- ------------
EXPENSES
Interest 25,762 50,449 11,409 20,927 107,394
Depreciation and amortization 62,413 53,340 22,477 17,673 157,415
Selling and administrative 448,201 948,035 106,418 297,982 2,249,080
-------------- -------------- ------------- ------------- -----------
536,376 1,051,824 140,304 336,582 2,513,889
-------------- -------------- ------------- ------------- -----------
Loss from operations (536,376) (1,051,459) (140,304) (336,582) (2,513,022)
OTHER INCOME AND EXPENSE
Interest income - 1,213 - 533 3,039
------------ ------------ ----------- ----------- ----------
Loss before income tax expense
and extraordinary item (536,376) (1,050,246) (140,304) (336,049) (2,509,983)
INCOME TAXES - - - - -
------------- -------------- ------------- ------------- -----------------
Loss before extraordinary item (536,376) (1,050,246) (140,304) (336,049) (2,509,983)
EXTRAORDINARY ITEM:
Gain on extinquishment of debt, less
applicable tax - 450,000 - - 450,000
-------------- -------------- ------------- ------------- -----------------
Net loss $ (536,376) $ (600,246) $ (140,304) $ (336,049) $ (2,059,983)
============== ============== ============= ============= =================
EARNINGS (LOSS) PER COMMON SHARE:
Loss before extraordinary item $ (0.03) $ (0.09) $ (0.01) $ (0.03)
Extraordinary item - 0.04 - -
============== ============== ============= =============
Net loss $ (0.03) $ (0.05) $ (0.01) $ (0.03)
============== ============== ============= =============
</TABLE>
4
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SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999, AND THE
PERIOD FROM OCTOBER 25, 1996 (INCEPTION) TO SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
October 25, 1996
(Inception) to
September 30,
2000 1999 2000
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from sales $ - $ 2,400 $ 7,856
Interest income - 1,213 3,039
Payments to vendors, suppliers and employees (317,246) (941,663) (1,853,119)
----------- ----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (317,246) (938,050) (1,842,224)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment - (42,020) (51,023)
----------- ----------- -----------
NET CASH USED BY INVESTING ACTIVITIES - (42,020) (51,023)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans 322,311 49,387 399,211
Repayments of loans (6,900) (10,000) (43,800)
Proceeds from convertible debentures - 872,937 1,289,900
Proceeds from warrants - - 2,500
Proceeds from issuance of common stock - 51,890
Proceeds from acquisition of subsidiary - - 194,181
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 315,411 912,324 1,893,882
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (1,835) (67,747) 635
CASH at beginning of period 2,470 78,386 -
----------- ----------- -----------
CASH at end of period $ 635 $ 10,639 $ 635
=========== =========== ===========
RECONCILIATION OF NET LOSS TO NET CASH
USED BY OPERATING ACTIVITIES:
Net Loss $ (536,376) $ (600,246) $(2,059,983)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization 62,413 53,340 157,415
Issuance of stock for services 30,000 - -
Accrued interest not paid 15,29 53,276 96,171
Debt forgiveness - (450,000) (450,000)
(Increase) decrease in assets:
Employee receivables 5,719 (5,719) -
Prepaids (3,750) (25,068) (3,750)
Increase (decrease) in liabilities:
Accounts payable (6,739) 66,284 191,795
Accrued salaries 101,250 (56,250) 146,250
Accrued payroll taxes 14,943 26,333 49,877
----------- ----------- -----------
NET CASH USED BY OPERATING ACTIVITIES $ (317,246) $ (938,050) $(1,872,224)
=========== =========== ============
</TABLE>
5
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SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 2000 and 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF ORGANIZATION
Solomon Alliance Group, Inc. was incorporated in the State of Arizona on
October 25, 1996. The Company was incorporated for the purpose of seeking
potential business ventures. The Company is classified as a development stage
enterprise because it has had no significant operations since its inception.
In 1998, the Company decided to target the emerging wireless data industry
and on July 17, 1998 the Company acquired 100% of the common stock of Visual
Link Wireless, Inc. (VLW), which became a wholly owned subsidiary. VLW was a
startup company in the wireless data industry focusing on applications for
the mobile professional. On August 5, 1999, the Company acquired MPTG
Communications, Inc., another startup company that designed wireless data
devices for niche markets. During the fourth quarter of 1999 the Company was
reorganized and is now repositioning itself to take advantage of new
opportunities in the wireless industry. On March 8, 2000, the Company
acquired 100% of the common stock of Madison Holdings, Inc., which became a
wholly owned subsidiary.
Solomon is positioning itself to be a premier wireless data solutions
provider in the new and rapidly expanding wireless data market. Under the
Knowledge2Go brand, it focuses on integrated wireless Internet products and
services for both the business to business and personal use markets. In
addition, Solomon plans to expand into other segments of the industry through
selected acquisitions and joint ventures.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All material intercompany
accounts, transactions, and profits are eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers deposits that can be redeemed on demand and investments
that have original maturities of less than three months, when purchased, to
be cash equivalents. As of September 30, 2000, the Company had no cash
equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Expenditures for major additions
and improvements are capitalized, and minor replacements, maintenance, and
repairs are charged to expense as incurred. When property and equipment are
retired or otherwise disposed of, the cost and accumulated depreciation are
removed from the accounts and any resulting gain or loss is included in the
results of operations for the respective period. Depreciation is provided
over the estimated useful lives of the related assets using the straight-line
method for financial statement purposes. The Company uses other depreciation
methods (generally accelerated) for tax purposes where appropriate. The
estimated useful lives for significant property and equipment categories are
as follows:
Computers and Equipment 5 years
Office Furniture and Fixtures 5 years
6
<PAGE>
SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (Continued)
Nine Months Ended September 30, 2000 and 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
USE OF ESTIMATES
Preparing the Company's financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure 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.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets, including tax loss and credit carryforwards, and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Deferred income tax expense represents the change during the
period in the deferred tax assets and deferred tax liabilities. The
components of the deferred tax assets and liabilities are individually
classified as current and non-current based on their characteristics.
Deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. As of September 30, 2000 there were
no deferred tax assets or liabilities.
GOODWILL
The excess of acquisition cost over the fair value of net assets (goodwill)
of Visual Link Wireless, Inc. (VLW), the Company's operating subsidiary, and
Madison Holdings, Inc. (MHI), are being amortized using the straight-line
method over 5 and 10 years, respectively. Management believes that there has
been no impairment of the goodwill as reflected in the Company's consolidated
financial statements as of September 30, 2000. The Company has adopted
reduced periods of amortization reflecting the approximate utility of the
purchased goodwill. VLW is subject to changes occurring in the high-tech
communications industry and MHI's utility is limited to access to the capital
markets. Cost in excess of net assets of VLW and MHI, net of amortization,
was $160,111, and $327,892 as of September 30, 2000. Amortization for the
three months ending September 30, 2000 and 1999 was $18,931 and $14,127,
respectively.
EARNINGS PER SHARE
Basic net earnings (loss) per common share (EPS) is computed by dividing net
earnings (loss) applicable to common shareholders by the weighted-average
number of common shares outstanding during the period. Diluted net earnings
(loss) per common share is determined using the weighted-average number of
common shares outstanding during the period, adjusted for the dilutive effect
of common stock equivalents, consisting of shares that might be issued upon
the conversion of debt. In periods where losses are reported, the
weighted-average number of common shares outstanding excludes common stock
equivalents, because their inclusion would be anti-dilutive. The average
shares outstanding for basic EPS during the third quarter of
7
<PAGE>
SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (Continued)
Nine Months Ended September 30, 2000 and 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
2000 and 1999, were 21,371,742 and 11,454,000, respectively; and, 21,591,393
and 11,454,000 for the nine months ended September 30, 2000 and 1999.
GOING CONCERN
As shown in the accompanying consolidated financial statements, the Company
has incurred recurring losses from operations, and as of September 30, 2000,
the Company's current liabilities exceeded its current assets by $805,000 and
its total liabilities exceeded its total assets by $277,184. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management has instituted a cost reduction program that included a
reduction in labor and fringe costs as well as the operating overhead. In
addition, the Company has converted substantial debt to capital and is
actively seeking additional capital resources. Management believes these
factors will contribute toward achieving profitability. The financial
statements do not include any adjustments that might be necessary if the
Company is unable to continue as a going concern.
NOTE B - CAPITAL STOCK
The Company has entered into an agreement with a consultant to provide up to
500,000 shares of the Company's stock, in the form of warrants or options,
for compensation of services which have been provided and are to be provided
in the near future. The price to the consultant for these shares is $0.10 per
share. As of September 30, 2000 the Company has issued 300,000 shares in
connection with these services.
In connection with this agreement the Company has issued its warrant for
150,000 shares. The warrant expires on March 2, 2005. As of September 30,
2000, none of the shares under this warrant have been acquired.
NOTE C - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
2000
----
<S> <C>
Noncash Investing and Financing Activities:
Conversion of Debentures to Common Stock $ 695,400
Conversion of Accrued Interest to Common Stock $ 57,991
Acquisition of Madison Holdings, Inc. in exchange for
the Company's common stock $ 337,200
300,000 shares common stock issued for services $ 30,000
</TABLE>
8
<PAGE>
SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (Continued)
Nine Months Ended September 30, 2000 and 1999
NOTE D - RELATED PARTY TRANSACTIONS
As of September 30, 2000, the Company has borrowed $589,808 for its
operations from an officer. Of this amount $390,839 is represented by direct
loans to the Company and $52,719 is included in the Company's accounts
payable. All loans and advances bear interest at 8% per annum. The amounts
are due on demand and unsecured.
9
