SECURITIES 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 February 28, 1997 Commission File No. D-9376
ALPHA SOLARCO INC.
(Exact name of registrant as specified in its charter)
Colorado 31-0944136
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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 February 28, 1997
No Par Value Common Stock 4,676,719
<TABLE>
ALPHA SOLARCO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
February 28, 1997 and May 31, 1996
(Unaudited)
<CAPTION>
February 28
1997 May 31,
(Unaudited) 1996
<S> <C> <C>
(A)
ASSETS
Current assets:
Cash and Cash equivalents $ 5,129 $ 50
Subscription receivable 201,250
Accounts receivable:
Trade 309,989 254,337
Employees 2,500 1,000
Prepaid expenses 1,515 1,536
--------- ----------
Total current assets 319,133 458,173
--------- ----------
Property and equipment, at cost:
Land 97,500 25,000
Machinery and equipment 412,673 392,579
Furniture and fixtures 96,232 94,098
Leasehold improvements 45,634 27,894
Buildings 1,135,398 107,898
Computer equipment 20,056 20,056
--------- ----------
1,807,493 667,525
--------- -----------
Less accumulated depreciation (533,564) (494,323)
--------- -----------
1,273,929 173,202
---------- ---------
Property and equipment held for sale 457,250 549,750
Note receivable - officer 52,133 47,699
Investment in Chinese Joint Venture 89,650 89,650
Investment in CyberAmerica, Inc. 45,000 372,000
Investment in TAC, Inc. 187,600
Investment in Cyber Solectric, Inc.
Goodwill net of $124,920 amortization 1,124,194
Other assets 21,020 21,434
--------- ----------
1,976,847 1,080,533
---------- ---------
$ 3,569,909 $ 1,711,908
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 9,437 $ 8,553
Notes payable 3,179,569 227,149
Accounts payable 273,519 591,977
Accrued liabilities 78,797 18,500
--------- ----------
Total current liabilities 3,541,322 846,179
--------- ----------
Long-term debt, less current portion 47,082 52,627
Minority interest in Cyber Solectric 794,598
Stockholders' equity:
Common stock, without par value:
200,000,000
shares authorized and 4,676,719
and 2,770,048
shares issued and outstanding,
respectively 14,690,616 14,787,416
Accumulated deficit (14,583,109) (13,974,314)
Accumulated loss in investments (920,600)
----------- ----------
(813,093) 813,102
----------- ----------
Total liabilities and stockholders'
equity $ 3,569,909 $ 1,711,908
=========== ===========
</TABLE>
(A) May 31, 1996 amounts are from the Company's audited
financial statements.
The accompanying notes are an integral part of these condensed
financial statements.
<TABLE>
ALPHA SOLARCO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
Nine Months Ended February 28,
1997 1996
<S> <C> <C>
Revenues:
Net Sales $ 280,934 $ 1,082,901
Interest 12
Other income: 53,179
Rental income 25,195
Disposal of excess equipment 32,595
---------- --------------
338,724 1,136,092
---------- --------------
Costs and expenses:
Cost of Sales 230,477 603,175
General and administrative 736,312 476,555
Interest 21,593 5,287
---------- --------------
988,382 1,085,017
--------- --------------
Gain (Loss) before minority
interest (649,658) 51,075
Minority share of loss in
Cyber Solectri, Inc. 40,863
--------- --------------
Net income (loss) $ (608,795) $ 51,075
========= ==============
Net income (loss) per share ($0.13) $ 0.04
========== ==============
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
<PAGE>
ALPHA SOLARCO INC. AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended February 28,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (608,795) $ 51,075
Adjustments to reconcile net gain (loss) to net
cash used in operating activities:
Minority interest in net income (loss) (25,881)
Depreciation and amortization 156,498 263,634
Elimination of convertible note 50,000 (5,700)
Decrease (increase) in:
Accounts receivable (57,152) (312,725)
Prepaid expenses 21 (264)
Other assets 414 (4,148)
Increase (decrease) in:
Accounts payable (318,458) (14,710)
Accrued liabilities 60,297 18,795
Billings in excess of contract revenue 0 (327,983)
--------- ---------
Net cash used in operating activities (743,056) (332,026)
--------- ---------
Cash flows from investing activities:
Capital expenditures (1,332)
Net cash provided (used by) investing
activities 0 (1,332)
Cash flow from financing activities:
Net proceeds from issuance of common stock,
stock options and warrants 201,250 1,009,111
Purchase of stock from shareholders (376,235)
Proceeds from notes payable and long term debt 67,663
Repayments of notes payable and long-term debt 546,885 (355,158)
--------- ----------
Net cash provided by financing activities 748,135 345,381
--------- -----------
Net change in cash and cash equivalents 5,079 12,023
Cash and cash equivalents:
Beginning of period 50 2,002
-------- -----------
End of period $ 5,129 $ 14,025
========= ===========
</TABLE>
See Non Cash Table for Investments and Acquisitions
not requiring cash
The accompanying notes are an integral part of these
condensed financial statements.
<PAGE>
ALPHA SOLARCO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Quarter ended
February 28
1997 1996
Revenues:
Net Sales $ 69,433 $ 133,835
Other income: 7,342
Rental income 7,231
------- --------
$ 76,664 $ 141,177
-------- --------
Costs and expenses:
Cost of Sales $ 45,694 139,462
General and administrative 203,185 176,049
Advertising and promotion 179
Interest 2,985
-------- --------
$ 414,623 318,675
-------- --------
Gain (Loss) before minority
interest $(337,959) $(177,498)
-------- ---------
Minority share of loss in
Cyber Solectric, Inc. 40,863
-------- ---------
Net income (loss) $(297,096) (177,498)
========= ==========
Net income (loss) per share (.06) (0.10)
The accompanying notes are an integral part of these condensed
financial statements.
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 investments of $920,600.
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 $1,250,000.
The Company signed a note payable for $2,500,000 for puts.
The accompanying notes are an integral part of these condensed
financial statements.
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
Goodwill 10 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 thr
current period.
Basis of presentation
The accompanying consolidated financial statements have been
prepared on a going concern basis which contemplates the realization
of assets and liquidation of liabilities in the ordinary course of
business and do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might be necessary
should the company be unable to achieve its business plan and
continue in existence.
The Company's ability to continue its existence is currently
dependent upon its ability to attract additional capital to booster
cash flow and its ability to obtain additional technology transfer
contracts. In addition, management is pursuing the acquisition of
some operating companies in an attempt to establish stable revenues
and cash flows.
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. Notes totalling $2,500,000 were issued to
various members of the Dennehy family on the call of puts. The
Company will receive 208,333 shares of stock in the treasury.
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 $133,543
Estimated earnings 131,416
--------
206,701
Billings to date 230,000
--------
Contract revenue in excess of billing $ 34,959
========
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, 2001) 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 $9,700. The
Company entered into a sub-lease of the Phoenix building with
Skylight Holding Co. with Skylight paying the lease payment of
$9,700. The sub-lease is for five years ending November 15, 2001.
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 November 30, 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
Treasury shares to be returned (208,333)
---------
Shares outstanding at February 28, 1997 4,676,719
11. NASDAQ Delisting
The Company's stock was delisted November 12, 1996 by NASDAQ. Our
asset base and stockholder's equity dropped below the $2,000,000 and
$1,000,000 limits set by NASDAQ as of May 31, 1996. NASDAQ
disallowed certain assets obtained by stock swap in the Quarter that
ended August 31, 1996.
ALPHA SOLARCO INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Quarter Ended February 28, 1997 as Compared to the Year ended May
31, 1996.
On November 30, 1996, on a consolidated basis, Alpha Solarco has
cash and short term investments of $5,129 as compared to $50 as of
May 31, 1996. This change was a result of selling assets and
additional contribution of capital during the current fiscal year.
Also on February 28, 1997 Alpha Solarco has shareholders' equity of
$(813,093) and total assets of $3,569,909 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 six months ended November 30, 1996. Shareholders'
equity decreased due to the Dennehy puts of $2,500.000.
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 $273,519 and $591,977 as of February 28, 1997
and May 31, 1996, respectively. This change was not unusual in the
ordinary course of business.
Current notes payable were $3,179,569 and $227,149 as of February
28, 1997 and May 31, 1996, respectively. This increase was
primarily due to the acquisition of Cyber Solectric and an
accompanying note payable of $275,000 and the Dennehy puts of
$2,500,000.
RESULTS OF OPERATIONS
Quarter Ended February 28, 1997 as Compared to the Quarter Ended
February 29, 1996.
For the quarter ended February 28, 1997, Alpha Solarco recognized
revenue of $76,664 which is a result of net sales and other income.
In the quarter the Skylight Corporation contract had income
recognized of approximately $58,258. Alpha Solarco experienced a
net loss of $297,096 or $.06 per share compared to a net loss for
the same period one year earlier of $177,498 or $.10 per share, due
primarily to a reduction in sales to $76,664 from $141,177. The
per share decrease is due primarily to an increase in shares issued
and outstanding and lack of new contracts.
The total consolidated costs and expenses for the quarter ended
February 28, 1997 were $414,623 compared to $318,675 for the same
period one year earlier. The change in cost and expenses is an
increase in overhead due to Cyber Solectric.
Additional Capital Needs-Hindrance/Continued Operation.
Alpha Solarco must raise additional capital in order to continue
business. At present efforts to raise additional capital are
hindered by the Demand Notes held by the families of two directors,
Charles and Wilson Dennehy. The family has made claims that $2.5
million is owed to them and they have demanded the Company
Technology as collateral. Under the terms of this agreement, the
Dennehys may convert this debt into stock after January 14, 1998.
This in effect would give the Dennehys at least 30% (possible 80%)
control of the Company and they would have the same amount of stock
as prior to the 100:1 reverse split in November of 1995 as well as
cause a minimum 50% (possible 400%) dilution of the current
shareholders value. Management does not agree with this claim by
the Dennehy's which is under review by our auditors and legal
counsel. There is a high probability that the president (key man) of
the Company will resign if this problem is not resolved by the end
of May, 1997. An offer for removing the Dennehy brothers from the
Board of Directors and buying their claim of technology as
collateral, and returning it to the Company, is being considered by
a U.S. Company. Investors are being made aware of this problem
since this would seriously effect the future value of the Company
stock. Any investor should be prepared to lose his entire
investment in the event that Alpha Solarco can no longer continue
operations.
AS INDICATED BY THE FOREGOING STATEMENT, INVESTMENT IN THE COMPANY
STOCK SHOULD ONLY BE MADE BY THOSE PERSONS WHO CAN AFFORD TO LOSE
THEIR ENTIRE INVESTMENT. THE PRICE AT WHICH THE COMPANY STOCK WILL
BE TRADED IN THE OVER-THE-COUNTER MARKET IS NOT NECESSARY INDICATIVE
OF THE ACTUAL OR UNDERLYING VALUE OF SUCH SHARES. THE COMPANY'S
FUTURE PROSPECTS ARE EXTREMELY UNCERTAIN AND THERE CAN BE NO
ASSURANCE THAT THE COMPANY WILL REMAIN A VIABLE BUSINESS ENTITY IN
THE FUTURE.
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.
Date: 4/18/97 /s/ Edward C. Schmidt, President
Edward C. Schmidt, President
Date: 4/18/97 /s/ Edward C. Schmidt, Treasurer
Edward C. Schmidt, Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 5,129
<SECURITIES> 1,446,444
<RECEIVABLES> 312,489
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 319,133
<PP&E> 2,264,743
<DEPRECIATION> 533,564
<TOTAL-ASSETS> 3,569,909
<CURRENT-LIABILITIES> 3,541,322
<BONDS> 0
0
0
<COMMON> 14,690,616
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,569,909
<SALES> 280,934
<TOTAL-REVENUES> 338,724
<CGS> 230,477
<TOTAL-COSTS> 988,382
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,593
<INCOME-PRETAX> (608,795)
<INCOME-TAX> 0
<INCOME-CONTINUING> (608,795)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (608,795)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
