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 November 30, 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 11/30/96
No Par Value Common Stock 4,885,052
ALPHA SOLARCO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
November 30, 1996 and May 31, 1996
(Unaudited)
November 30,
1996 May 31,
(Unaudited) 1996 (A)
ASSETS
Current assets:
Cash and Cash equivalents $ 3,706 $ 50
Subscription receivable 0 201,250
Accounts receivable:
Trade 261,471 254,337
Employees 1,000 1,000
Prepaid expenses 1,515 1,536
_______ ________
Total current assets 267,692 458,173
________
Property and equipment, at cost:
Land 97,500 25,000
Machinery and equipment 510,449 392,579
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
__________ _______
1,905,269 667,525
__________ _______
Less accumulated depreciation (525,901) (494,323)
__________ _______
1,379,368 173,202
__________ ________
Property and equipment held for sale 457,250 549,750
Note receivable - officer 50,233 47,699
Investment in Chinese Joint Venture 89,650 89,650
Investment in CyberAmerica, Inc. 253,125 372,000
Investment in TAC, Inc. 225,000
Investment in Cyber Solectric, Inc.
Goodwill net of $62,460 amortization 1,186,654
Other assets 21,020 21,434
_________ _________
2,282,932 1,080,533
_________ ___________
$ 3,929,992 $ 1,711,908
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 12,966 $ 8,553
Notes payable 452,150 227,149
Accounts payable 455,476 591,977
Accrued liabilities 39,774 18,500
Billings in excess of contract revenue 23,299
_______ ________
Total current liabilities 983,665 846,179
_______ ________
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 4,885,052
and 2,770,048
shares issued and outstanding,
respectively 7,190,616 14,787,416
Accumulated deficit (14,410,894) (13,974,314)
Accumulated loss in investments (675,075)
----------- ------------
2,104,647 813,102
----------- ------------
Total liabilities and
stockholders' equity $ 3,929,992 $ 1,711,908
========== ============
(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.
ALPHA SOLARCO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
6 Months Ended November 30,
1996 1995
Revenues:
Net Sales $ 211,501 $ 949,066
Interest 12
Other income: 45,837
Rental income 17,964
Disposal of excess equipment 32,595
-------- --------
262,060 994,915
-------- --------
Costs and expenses:
Cost of Sales 184,783 463,713
General and administrative 533,127 300,327
Interest 21,593 2,302
-------- -------
739,503 766,342
-------- -------
Gain (Loss) before minority
interest (477,443) 228,573
Minority share of loss in
Cyber Solectric, Inc. 40,863
---------- ----------
Net income (loss) $ (436,580) $ 228,573
=========== ==========
Net income (loss) per share $ (0.09) $ 0.12
=========== ==========
The accompanying notes are an integral part of these condensed
financial statements.<PAGE>
ALPHA SOLARCO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended November 30,
1996 1995
Cash flows from operating activities:
Net income (loss) $ (436,580) $ 228,573
Adjustments to reconcile net gain
(loss) to net
cash used in operating activities:
Minority interest in net income (loss) (25,881)
Depreciation and amortization 94,038 179,488
Elimination of convertible note 50,000 (5,700)
Decrease (increase) in:
Accounts receivable (7,134) (100,770)
Prepaid expenses 21 (264)
Other assets 414 (7,861)
Increase (decrease) in:
Accounts payable (136,501) (42,048)
Accrued liabilities 21,274 (24,500)
Billings in excess of contract revenue 23,299 (407,793)
-------- ---------
Net cash used in operating activities (417,050) (180,875)
-------- ---------
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 0 850,711
Purchase of stock from shareholders (376,235)
Proceeds from notes payable and long term
debt 67,663
Subscription receivable 201,250
Repayments of notes payable and long-term
debt 219,456 (361,668)
-------- ----------
Net cash provided by financing
activities 420,706 180,471
-------- ----------
Net change in cash and cash equivalents 3,656 (1,736)
Cash and cash equivalents:
Beginning of period 50 2,002
-------- ---------
End of period $ 3,706 $ 266
======== =========
See Non Cash Table for Investments and Acquisitions not requiring cash
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 $675,075.
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 accompanying notes are an integral part of these condensed
financial statements.
ALPHA SOLARCO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Quarter ended
November 30,
1996 1995
Revenues:
Net Sales $ 171,883 $660,933
Other income: 36,370
Rental income 17,964
Disposal of excess equipment 25,352
-------- ---------
$ 215,199 $697,303
-------- ---------
Costs and expenses:
Cost of Sales $ 90,605 170,042
General and administrative 313,242 115,566
Advertising and promotion 653
Research and development
Interest 10,776 832
-------- --------
$ 414,623 287,093
-------- --------
Gain (Loss) before
minority interest $(199,424) $410,210
--------- --------
Minority share of loss in
Cyber Solectric, Inc. 32,672
--------- --------
Net income (loss) $(166,752) $410,210
========== ========
Net income (loss) per share (0.03) $0.38
The accompanying notes are an integral part of these condensed
financial statements.
ALPHA SOLARCO INC.
NOTES TO CONDENSED 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
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 the 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.
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 $104,180
Estimated earnings 102,521
-------
206,701
Billings to date 230,000
--------
Billings in excess of
contract revenues $ 23,299
========
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.
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
---------
Shares outstanding at
November 30, 1996 4,885,052
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.
<PAGE>
ALPHA SOLARCO INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Quarter Ended November 30, 1996 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 $3,706 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 November 30, 1996 Alpha Solarco has shareholders'
equity of $2,104,647 and total assets of $3,929,992 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.
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 $455,476 and $591,977 as of November
30, 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
November 30, 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 November 30, 1996 as Compared to the Quarter Ended
November 30, 1995.
For the quarter ended November 30, 1996, Alpha Solarco
recognized revenue of $215,199 which is a result of net sales and
other income. In the quarter the Skylight Corporation contract had
income recognized of approximately $167,083. Alpha Solarco
experienced a net loss of $166,752 or $.03 per share compared to a
net income for the same period one year earlier of $410,210 or
$.38 per share, due primarily to a reduction in sales to $171,883
from $660,933. 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 November 30, 1996 were $414,623 compared to $287,093 for the
same period one year earlier. The change in cost and expenses is
an increase in overhead due to Cyber Solectric.
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.
<PAGE>
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.
<PAGE>
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: 1/20/97 /s/ Edward C. Schmidt
Edward C. Schmidt, President
Date: 1/20/97 /s/ Edward C. Schmidt
Edward C. Schmidt, Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 3,706
<SECURITIES> 478,125
<RECEIVABLES> 261,471
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 267,692
<PP&E> 1,905,269
<DEPRECIATION> 525,901
<TOTAL-ASSETS> 3,929,992
<CURRENT-LIABILITIES> 983,665
<BONDS> 0
0
0
<COMMON> 17,190,616
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,929,992
<SALES> 211,501
<TOTAL-REVENUES> 262,060
<CGS> 184,783
<TOTAL-COSTS> 739,503
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,776
<INCOME-PRETAX> (166,752)
<INCOME-TAX> 0
<INCOME-CONTINUING> (166,752)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (166,752)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
