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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 June 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
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(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 No X
(effective date was June 30, 2000). --- ---
The number of shares outstanding of the registrant's common stock as of July 31,
2000 was 12,499,842.
Transitional Small Business Disclosure Format (check one): Yes No N
--- ---
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ALPHACOM, INC
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 2000
INDEX
Part I. Financial Statements
1. Financial Statements
Unaudited Condensed Consolidated Combined Balance Sheets as
December 31, 1999 and June 30, 2000.-------------------------------3
Unaudited Condensed Consolidated Combined Statements of Operations for
three and six months ended June 30, 2000 and 1999------------------4
Unaudited Condensed Consolidated Combined Statements of Cash Flows for
the six months ended June 30, 2000 and 1999------------------------5
Notes to Unaudited Condensed Consolidated Combined Financial
Statements---------------------------------------------------------6
2. Management's Discussion and Analysis or Plan of Operations--------------7
Part II. Other Information--------------------------------------------------9
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Part I
Item 1--Financial Statements
ALPHACOM, INC. AND SUBSIDIARY AND AFFILIATE
(development stage companies)
UNAUDITED CONDENSED CONSOLIDATED COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 3,207 $ 41,445
Notes receivable 500,000 0
Accounts receivable-net 106,671 18,942
Inventories 50,190 21,217
Prepaid expenses 782,235 1,282,278
----------- -----------
1,442,303 1,363,882
Equipment-net 380,081 311,450
Other assets
Patents 205,000 205,000
Deposits and other 88,127 88,127
----------- -----------
TOTAL ASSETS $ 2,115,511 $ 1,968,459
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Notes payable $ 3,607,346 $ 2,701,806
Accounts payable-trade 636,717 779,276
Accrued interest 259,752 183,282
Accrued expenses 384,623 361,022
Accrued consulting fee 0 1,000,000
Deferred compensation 136,918 145,681
Current portion of long-term debt 169,741 169,362
Deferred revenue 108,500 0
----------- -----------
5,303,597 5,340,429
Long-term debt, net of current portion 11,462 16,428
Non-current portion of deferred revenue 990,059 0
----------- -----------
Total liabilities 6,305,118 5,356,857
----------- -----------
Shareholders' deficit
Common stock 267,049 266,849
Additional paid-in capital 1,747,621 747,821
Treasury stock (1,653) (1,653)
Deficit accumulated during the
development stage (6,202,624) (4,401,415)
----------- -----------
Total shareholders' deficit (4,189,607) (3,388,398)
----------- -----------
TOTAL LIABILIES AND SHAREHOLDERS'
DECIFIT $ 2,115,511 $ 1,968,459
=========== ===========
</TABLE>
SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED COMBINED FINANCIAL STATEMENTS
3
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ALPHACOM, INC AND SUBSIDIARY AND AFFILIATE
(development stage companies)
UNAUDITED CONDENSED CONSOLIDATED COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
Three Months Ended Six Months Ended From Inception
June 30, June 30, (April 19,1996
2000 1999 2000 1999 to June 30,2000
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales-Licenses $ 44,041 $ 0 $ 44,041 $ 0 $ 44,041
Product sales 94,651 29,396 187,563 75,152 713,373
Cost of sales 65,562 33,946 192,118 60,044 382,566
-----------------------------------------------------------------------------------------
Gross profit (loss) 73,130 (4,550) 39,486 15,108 374,848
Operating expenses 934,687 568,573 1,660,043 877,782 5,993,479
-----------------------------------------------------------------------------------------
Operating loss (861,557) (573,123) (1,620,557) (862,674) (5,618,631)
Interest expense (94,131) (43,069) (180,652) (89,874) (593,269)
Other 9,276
-----------------------------------------------------------------------------------------
NET LOSS $ (955,688) $ (616,192) $ (1,801,209) $ (952,548) $ (6,202,624)
=========================================================================================
Net loss per share $ (0.08) $ (0.05) $ (0.15) $ (0.08) $ (0.59)
=========================================================================================
Weighted average number of
shares outstanding 12,433,175 12,133,709 12,366,509 12,058,875 10,491,455
=========================================================================================
</TABLE>
SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED COMBINED FINANCIAL STATEMENTS.
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ALPHACOM, INC. AND SUBSIDIARY AND AFFILIATE
(development stage companies)
UNAUDITED CONDENSED CONSOLIDATED COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
From Inception
Six Months Ended Six Months Ended (April 19, 1996
June 30, 2000 June 30, 1999 to June 30, 2000
--------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from operations:
Net loss $(1,802,209) $ (952,548) $(6,202,624)
Adjustments to reconcile
net loss to net cash used in
operations:
Depreciation and
amortization 531,246 55,037 773,909
Stock issued for
services -0- 215,000 303,012
License fee income (44,041) -0- (44,041)
Changes in ;
Accounts receivable (87,729) 8,332 (106,671)
Prepaid expense 43 (61,422) (323,735)
Inventories (28,973) (21,817) (50,190)
Deposits and other -0- -0- (80,627)
Accounts payable (142,559) 104,699 636,717
Accrued interest 76,470 34,655 259,752
Accrued expenses 14,838 36,372 480,126
Deferred revenue 642,600 -0- 642,600
Total adjustments 961,852 370,856 2,490,852
Net cash used by operations: (839,357) (581,692) (3,711,772)
Cash flows from investing:
Purchase of equipment (99,834) (29,249) (477,490)
Purchase of patents -0- -0- (205,000)
Advance on investment -0- -0- (7,500)
Net cash used in investing: (99,834) (29,249) (689,990)
Cash flows from financing:
Proceeds from debt -0- 50,000 203,924
Payment of debt (4,587) (4,443) (22,721)
Proceeds from notes payable 1,025,000 606,900 3,791,306
Payment of notes payable (119,460) (42,015) (318,960)
Proceeds from sale of stock -0- -0- 751,420
Net cash provided by financing: 900,953 610,442 4,404,969
-----------------------------------------------
Net increase (decrease) in cash (38,238) (499) 3,207
Cash -beginning of period 41,445 8,332 0
Cash - end of period $ 3,207 $ 7,833 $ 3,207
===============================================
</TABLE>
SEE NOTES TO UNAUDITED CONDENSED CONSOLIDATED COMBINED FINANCIAL STATEMENTS.
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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 June 30, 2000
had incurred an unaudited year to date loss of $1,801,209. In addition, the
Company has a working capital deficiency, 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 is in the process of obtaining various state regulatory approvals
and anticipates the issuance of 2,800,000 shares of stock to raise approximately
$10,400,000 within the next 30 days.
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 six months ended June 30, 2000 and 1999 was $44,041
and $-0- , respectively.
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 June 30, 2000 require additional minimum license fees of $10,535,000.
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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.
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 of deploying this
product. This product expands and/or utilizes "bandwidth" to provide a solution
for the so called last mile problem.
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 end of this year.
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Results of Operations
Three Months Ended June 30, 2000 and 1999
Revenues for the quarter ended June 30, 2000 were $138,692 compared to $29,396
for the quarter ended June 30, 1999. Operating costs and expenses totaled
$934,687 in the quarter ended June 30, 2000 as compared to $568,573 for the same
period in 1999. The increases in operating expenses in 2000 are due to increase
in wages (increase in personnel) and consulting fees ($266,667). Interest
expense totaled $94,131 for the quarter ended June 30, 2000 compared to $43,069
for the same period in 1999 as a result of increased debt. 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.
Six Months Ended June 30, 2000 and 1999
Revenues for the six months ended June 30, 2000 and 1999 were $231,604 and
$75,152 respectively. An increase in Internet access subscribers accounted for
approximately $100,000 of the increase and the balance result from license
revenue. Operating costs and expenses totaled $1,660,043 for the six months
ended June 30, 2000 as compared to $877,782 for the same period in 1999. The
2000 operating costs included increases of $533,334 in consulting fees, $56,000
in selling expenses and $120,000 in wages over the same period in 1999. Interest
expense in 2000 was $180,652 compared to $89,874 in 1999 reflecting higher debt.
Financial Condition
During the quarter ended June 30, 2000 the Company received approximately
$1,150,000 in license fees, which includes $1,098,559 deferred at June 30, 2000.
The Company recognized $44,041 of license fees in income through June 30, 2000.
AlphaCom will 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.
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Part II - Other Information
ITEM 2 - CHANGES IN SECURITIES
Unregistered sale of equity securities during the quarter.
In April 2000, the Company issued 200,000 shares of Common Stock to a consulting
firm in accordance with a contract signed in December 1999. The shares issued
eliminated a $1,000,000 liability and the consulting fee is being amortized over
a twelve-month period which commenced on December 15, 1999.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a shareholders meeting held on May 10, 2000, the following items were voted
on and approved by the shareholder in person or by proxy:
1. Added the following directors; Mr. J. Bruce Hunsicker; Dr. Marion A.
Ruebel; Mr. Frank A. Wahl; and Joseph M. Lechiara
2. Amended the By-Laws to require 66% vote to remove a director
3. Amended By-Laws to require 75% vote to amend the By-Laws
4. Amend the Articles of Incorporation to require a 75% vote to approve a
merger, waivable by the board of directors.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8 -K
a. Exhibit Index
b. Reports on Form 8 - K ---None
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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: August 14, 2000
---------------
BY: /s/ Joseph M. Lechiara
-------------------------------
CFO
DATE: August 14, 2000
---------------
EXHIBIT INDEX
Exhibit No. 27 - Financial Data Schedule----------------------------------11
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