SECURITY AND EXCHANGE COMMISSION
Washington. D. C. 20549
FORM 10-Q SB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended August 31, 1996 Commission File No. D-9376
ALPHA SOLARCO INC.
(Exact name of registrant as specified in its charter)
Colorado 31-0944136
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
510 East University Drive, Phoenix, Arizona 85004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (602) 252-3055
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed in Section 13 or 15(d) of the
Security Exchange Act of 1934 during the preceding 12 months ( or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by
this report.
Number of Shares
Class Outstanding as of 08/31/96
No Par Value Common Stock 4,885,052
<PAGE>
ALPHA SOLARCO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
August 31, 1996 and May 31, 1996
(Unaudited)
August 31,
1996 May 31,
(Unaudited) 1996 (A)
ASSETS
Current assets:
Cash and Cash equivalents $ 2,610 $ 50
Subscription receivable 128,000 201,250
Accounts receivable:
Trade 366,837 254,337
Employees 1,000 1,000
Prepaid expenses 23,956 1,536
--------- -------
Total current assets 522,403 458,173
Property and equipment, at cost:
Land 97,500 25,000
Machinery and equipment 416,202 392,579
Furniture and fixtures 94,738 94,098
Leasehold improvements 27,894 27,894
Buildings 1,151,309 107,898
Computer equipment 20,056 20,056
--------- --------
1,807,699 667,525
--------- --------
Less accumulated depreciation (504,329) (494,323)
--------- --------
1,303,370 173,202
--------- --------
Property and equipment held for sale 424,750 549,750
Note receivable - officer 47,899 47,699
Investment in Chinese Joint Venture 89,650 89,650
Investment in CyberAmerica, Inc. 365,625 372,000
Investment in TAC, Inc. 781,200
Other assets 25,733 21,434
--------- -----------
1,734,857 1,080,533
--------- -----------
$ 3,560,630 $ 1,711,908
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 8,553 $ 8,553
Notes payable 452,150 227,149
Accounts payable 533,034 591,977
Accrued liabilities 34,504 18,500
Billings in excess of contract revenue 130,382
---------- -----------
Total current liabilities 1,158,623 846,179
---------- -----------
Long-term debt, less current portion 52,099 52,627
Minority interest in Cyber Solectric 155,184
Stockholders' equity:
Common stock, without par value:
200,000,000
shares authorized and 4,885,052
and 2,770,048
shares issued and outstanding,
respective1y 6,445,241 14,787,416
Accumulated deficit (14,244,142) (13,974,314)
Accumulated loss in investments (6,375)
---------- -----------
2,194,724 813,102
---------- -----------
Total liabilities and stockholders'
equity $ 3,560,630 $ 1,711,908
(A) May 31, 1996 amounts are from the Company's audited financial
statements.
See accompanying notes.
ALPHA SOLARCO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
3 Months Ended August 31,
1996 1995
Revenues:
Net Sales $ 39,618 $ 288,133
Interest 12
Other income 7,243 9,467
--------- ----------
46,861 297,612
--------- ----------
Costs and expenses:
Cost of Sales 94,178 193,671
General and administrative 219,885 284,108
Interest 10,817 1,470
--------- ----------
324,880 479,249
Loss before minority interest (278,019) (181,637)
Minority share of loss in
Cyber Solectric, Inc. 8,191
--------- ----------
Net income (loss) $ (269,828) $ (181,637)
========= ==========
Net income (loss) per share $ (0.06) $ (0.17)
See accompanying notes.
ALPHA SOLARCO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
3 Months Ended August 31,
1996 1995
Cash flows from operating activities:
Net income (loss) $ (269,828) $ (181,637)
---------- -----------
Adjustments to reconcile net gain
(loss) to net cash used in
operating activities:
Minority interest in net income (loss) (8,191)
Depreciation and amortization 10,006 84,146
Decrease (increase) in:
Accounts receivable (112,500) 650
Prepaid expenses (22,420) (265)
Other assets 120,502 (762)
Increase (decrease) in:
Accounts payable (58,943) 94,087
Billings in excess of contract revenue 130,382
-------- -----------
Net cash used in operating activities (210,992) (3,781)
-------- -----------
Cash flows from investing activities:
Capital expenditures (24,263)
-------- -----------
Net cash provided (used by) investing (24,263)
-------- -----------
Cash flow from financing activities:
Net proceeds from issuance of common stock,
stock options and warrants 165,093
Subscription receivable 73,250
Repayments of notes payable and
long-term debt (528)
-------- -----------
Net cash provided by financing activities 237,815
-------- -----------
Net change in cash and cash equivalent 2,560 (3,781)
Cash and cash equivalents:
Beginning of period 50 2,002
-------- ----------
End of period $ 2,610 $ ( 1,779)
======== ==========
See Non Cash Table for Investments and Acquisitions not requiring cash.
See accompanying notes.
ALPHA SOLARCO INC. AND SUBSIDIARIES
NON CASH TABLE
(Unaudited)
The Company exchanged its stock for an investment in TAC, Inc.
valued at $781,200.
The Company recognized a loss in its investment in CyberAmerica,
Inc. of $6,375.
The Company converted a note payable of $50,000 for stock.
The Company exchanged its stock for an 80% ownership interest in
Cyber Solectric valued at $660,800. See below.
Acquisition of Cyber Solectric, Inc.
Assets:
Land $ 72,500
Building 1,043,411
-----------
$ 1,115,911
===========
Liabilities:
Accounts Payable $ 39,863
Accrued Liabilities 16,004
Note Payable 275,000
------------
330,867
Equity:
Common Stock 1,825
Contribution to Capital 824,175
Net profit (loss) (40,956)
-----------
785,044
-----------
$ 1,115,911
===========
See accompanying notes.
ALPHA SOLARCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
1. Summary of significant accounting policies
Consolidation
The consolidated financial statements include the accounts of
Alpha, its wholly-owned subsidiaries, Alpha Solarco Inc. of Ohio
("Alpha of Ohio"), Alpha Manufacturing Group, Inc.("AMG"),
Solectric Corporation (Solectric"),Cyber Solectric (formerly Cyber
Real Estate), and MSEPG Solar Power Corporation ("Solar
Corporation"). Intercompany accounts and transactions have been
eliminated.
Depreciation
The Company computes depreciation using the straight-line and
accelerated methods, based on the estimated useful lives of the
depreciable assets, as follows:
Buildings 40 years
Machinery and equipment 3 - 7 years
Furniture and fixture 5 - 10 years
Leasehold improvements Life of the improvement or the
lease term, whichever is shorter
Investments
The Company accounts for its investments quarterly and recognizes
gains and losses on its portfolio based upon the market price on
the last trading day of the quarter.
Research and Development
All research and development costs are charged to expense when
incurred. The costs of materials, equipment and facilities that
are constructed or acquired for development activities and that
have alternative future use are capitalized and depreciated over
their estimated useful lives.
Contract Revenue and Cost Recognition
The Company recognizes revenue from fixed-priced contracts on the
percentage-of-completion method, measured by the percentage of
cost incurred to date to estimated total cost for each contract.
That method is used because management considers total cost to be
the best available measure of progress on the contracts. Because
of inherent uncertainties in estimating costs, it is at least
reasonably possible that estimates used will change in the near
term.
Cost of sales includes all direct material and labor costs and
those related to contract performance, such as indirect costs
related to contract performance, such as indirect labor, supplies,
tools, etc. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions, and
estimated profitability nay result in revisions to cost, and
income, which are recognized in the period in which revisions are
determined. Changes in estimated job profitability resulting from
job performance, job conditions and change orders are accounted
for as changes in estimates in the current period.
2. Joint Venture Agreement
On February 18, 1991, Alpha Solarco Inc. of Ohio entered into a
joint venture agreement with Sun Power Systems Ltd. ("Sun"), a
Hong Kong based trading company and Qinhuangdao Electronic
Transistor Manufacturing Plant ("QHD"), a business entity
operating in the Peoples Republic of China, for the formation of a
Chinese joint-venture company called Qinhuangdao Alpha Solar Power
Co., Ltd. (the "Chinese Joint Venture Company").
Under the terms of the Joint Venture, QHD owns a 65% equity
interest in exchange for a cash contribution of $2,400,000; Alpha
Ohio owns a 35% equity interest in exchange for an in-kind
contribution of $650,000 in the form of equipment, and $750,000 in
the form of a technology transfer, and Sun owns a 5% equity
interest in exchange for a nominal in-kind contribution of
$200,000. To date, no operations have transpired and management
has no definitive date as to when operations will commence.
3. Marketable securities
In August, the Company completed the acquisition of Cyber
Solectric (formerly Cyber Real Estate, Inc., a Nevada Corporation.
To consummate the acquisition, the Company exchanged 625,000
shares of its common stock in exchange for 9,000,000 shares of
common stock (approximately 83% interest) of Cyber Solectric.
The combination was accounted for as a purchase and is included in
the consolidated statements as of August 31, 1996. Cyber
Solectric is a development stage real estate company whose sole
operations consist of owning and operating a building in DeKalb,
Illinois.
In August, the Company also exchanged 500,001 shares of common
stock for 200,000 shares of TAC, Inc. a Utah corporation. This
represents approximately two percent of the shares of TAC. TAC
owns a warehouse in Salt Lake City occupied by a NAPA franchise.
4. Notes Payable
Notes payable represent amounts due private investors of the
Company who lent funds primarily to provide working capital to
keep the companies operational and for the acquisition of AMG.
The notes, which are unsecured, are repayable at various times
during the next year and bear interest at rates upward to 10%.
The acquisition of Cyber Solectric included a note payable of
$275,000, this note is being re-negotiated.
5.Uncompleted Contracts
On June 7, 1996 the Company entered into a $389,250 manufacturing
and sales contract with the Skylight Corporation. The contract
calls for Alpha to provide to Skylight a solar panel manufacturing
facility. Cost, estimated earnings, and billings on the contract
are summarized below:
Cost incurred $17,760
Estimated earnings 21,858
------
39,618
Billings to date 170,000
-------
Billings in excess of
contract revenues $130,382
=======
6. Leases
Prior to the end of fiscal 1994, the Company moved its operations
to Phoenix, Arizona. In anticipation of the move, the Company
entered into a one-year lease agreement expiring May 15, 1995
(extended to November 15,1996) for its office and operations
facility. The lease, which contains an option to renew for four
successive one-year terms, requires monthly rental payments of
$9,438.
7. Net Income (Loss) Per Share
At its annual meeting on November 15, 1995, Alpha's shareholders
approved a 1:100 reverse stock split. Net gain (loss) per share
is based upon the weighted average shares of the Company's common
stock outstanding during each year, after giving effect to the
reverse stock split. Securities whose conversion, exercise or
other contingent issuance have the effect of decreasing the loss
per share amount for the periods have been excluded from the
computation.
10. Common Stock
During the quarter ended August 31, 1996 changes in the number of
shares outstanding were as follows:
Shares outstanding at May 31, 1996 2,770,048
Shares issued for the investment in 500,001
TAC, Inc.
Shares issued for the purchase of
Cyber Solectric 625,000
Shares issued though overseas
private placement 960,003
---------
Shares outstanding at August 31, 1996 4,885,052
ALPHA SOLARCO INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Quarter Ended August 31, 1996 as Compared to the Year ended May
31, 1996.
On August 31, 1996, on a consolidated basis, Alpha Solarco has
cash and short term investments of $2,610 as compared to $50 as of
May 31, 1996. This change was a result of additional contribution
of capital during the current fiscal year. Also on August 31,
1996 Alpha Solarco has shareholders' equity of $2,407,224 and
total assets of $3,773,130 as compared to shareholders' equity of
$813,102 and total assets of $1,711,908 as of May 31, 1996. This
is primarily attributable to the acquisition of Cyber Solectric,
an investment in TAC, Inc., a note payable of $50,000 converted to
stock, and additional equity capital raised during the three
months ended August 31, 1996.
Normal overhead expenses will continue to burden Alpha Solarco and
can be expected to decrease its liquidity. Consequently, Alpha
Solarco has been seeking additional capital from various sources,
including additional contributions to capital and arranging new
debt financing.
Accounts payable were $533,034 and $591,977 as of August 31, 1996
and May 31, 1996, respectively. This change was not unusual in
the ordinary course of business.
Current notes payable were $452,150 and $227,149 as of August 31,
1996 and May 31, 1996, respectively. This increase was primarily
due to the acquisition of Cyber Solectric and an accompanying note
payable of $275,000.
RESULTS OF OPERATIONS
Quarter Ended August 31, 1996 as Compared to the Quarter Ended
August 31, 1995.
For the quarter ended August 31, 1996, Alpha Solarco recognized
revenue of $46,861 which is a result of net sales and other
income. In the quarter the Skylight Corporation contract had
income recognized of approximately $39,618. Alpha Solarco
experienced a net loss of $269,828 or $.06 per share compared to a
net loss for the same period one year earlier of $181,637 or $.17
per share, due primarily to a reduction in sales to $39,618 from
$288,133. The per share decrease is due primarily to an increase
in shares issued and outstanding.
The total consolidated costs and expenses for the quarter ended
August 31, 1996 were $324,880 compared to $479,249 for the same
period one year earlier. The change in cost and expenses is due
to reduced overhead spending and reduced expenditures on the Saudi
contract as it nears completion.
ALPHA SOLARCO, INC.
The financial information included herein is unaudited; however
such information reflects all adjustments (consisting solely of
normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results for interim
periods.
ALPHA SOLARCO, INC.
SIGNATURES
Pursuant to the requirements of the Security Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
ALPHA SOLARCO INC.
/s/ Edward C. Schmidt
Date: 10/3/96 Edward C. Schmidt, President
/s/ Edward C. Schmidt
Date: 10/3/96 Edward C. Schmidt, Treasurer
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