<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FROM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1994.
For the Quarterly period ended July 31, 1997
[ ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from __________ to _________.
Commission File Number: 33-20783-D
ALPHA BYTES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
COLORADO 84-1064958
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
521 BUFFALO AVENUE, NIAGARA FALLS, NEW YORK 14303
------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
716-284-2465
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or such reports), and (2) had been subject to
such filing requirements for the past 90 days.
[X] YES [ ] NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by sections 12, 13, or 15 (d) of the Securities
exchange Act of 1934.
[ ] YES [ ] NO
APPLICABLE ONLY TO CORPORATE ISSUERS
There were 7,413,002 shares of common stock outstanding having a par value of
$.0002 per share as of July 31, 1997
1
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE NUMBER
- ------ --------------------- -----------
<S> <C> <C>
Item 1 Consolidated Balance Sheet, 3
July 31, 1997 (unaudited)
Consolidated Statement of Stockholders' Equity, 3
July 31, 1997 (unaudited)
Consolidated Statement of Earnings for Quarter ended 4
July 31, 1997 (unaudited)
Consolidated Statement of Cash Flow For the Quarter ended 6
July 31, 1997 (unaudited)
Notes to Financial Statements 7 - 8
Item 2 Management Discussion and Analysis of Financial Conditions 9
and Results of Operations
PART II OTHER INFORMATION 10
- ------- -----------------
</TABLE>
2
<PAGE>
ALPHA BYTES, INC.
CONSOLIDATED BALANCE SHEET
AS AT JULY 31, 1997
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
JUL. 31 Jul. 31
Note 1997 1996
---- ---------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT:
Cash & short-term investments $ 590,788 $ 647,896
Marketable Securities - trading 248,884 -
Marketable Securities - restricted 3 411,533 164,697
Accounts receivable & work in progress 215,290 339,784
Income & investment tax credits receivable - -
Prepaid expenses & sundry assets 20,028 3,179
---------- ----------
1,486,523 1,155,556
---------- ----------
LONG TERM:
Accounts Receivable and Work in Progress $ 352,334 $ 82,345
Other Investments - 13,423
Capital assets 4 78,490 48,476
---------- ----------
430,824 144,244
---------- ----------
TOTAL ASSETS 1,917,347 1,299,800
========== ==========
LIABILITIES
Current:
Accounts payable & accrued liabilities $ 108,345 $ 82,602
Income taxes payable - net 110,438 82,923
Vehicle loan - -
Unearned revenue 52,457 3,954
---------- ----------
271,240 169,479
---------- ----------
LONG TERM:
Loans payable to directors 5 $ 79,158 $ 31,203
Loan Payable - 100,000
Deferred Income Taxes 246,400 -
---------- ----------
325,558 131,203
---------- ----------
596,798 300,682
---------- ----------
STOCKHOLDERS' EQUITY
Capital stock 7 $ 245,468 $ 226,448
Share Purchase Warrants 16,000 -
Retained Earnings 1,087,029 848,448
Unrealized Gain of Investments 46,867 -
Foreign exchange adjustment (74,815) (75,778)
---------- ----------
1,320,549 999,118
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 1,917,347 1,299,800
========== ==========
</TABLE>
3
<PAGE>
ALPHA BYTES, INC.
CONSOLIDATED STATEMENT OF EARNINGS
QUARTER ENDED JULY 31, 1997
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
NOTES QTR END QTR END
REVENUE JUL.31,'97 JUL.31,'96
---------- ----------
<S> <C> <C> <C>
Sales $ 366,592 $ 626,275
Cost of Sales 10,546 237
---------- ----------
Gross Profit 356,046 626,038
Investment Income 8,750 -
---------- ----------
364,796 626,038
---------- ----------
EXPENSES
Wages, management & consulting fees $ 125,788 $ 91,290
Administrative 93,344 21,072
Travel & promotion 16,944 17,772
Amortization 7,015 5,560
Interest/Foreign exchange gain/loss (441) (3,258)
R&D tax credits claimed (26,700) (29,800)
---------- ----------
215,950 102,636
---------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES $ 148,846 523,402
Provision for income taxes: 69,800 188,100
---------- ----------
NET EARNINGS (LOSS) $ 79,046 $ 335,302
========== ==========
EARNINGS (LOSS) PER SHARE 8 0.012 0.047
========== ==========
</TABLE>
4
<PAGE>
ALPHA BYTES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AS AT JULY 31, 1997 - (SEE NOTE 7)
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Capital Stock Options
----------------- -----------------
Unrealized Foreign
Number Number Retained Gain on Exchange
of Shares Amount of Shares Amount Earnings Investment Adjustment TOTAL
--------- ------- ---------- ------ --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AS AT
JANUARY 31, 1996 7,135,002 225,748 529,841 (76,050) 679,539
Net earnings 1997 342,284 342,284
Foreign exchange
adjustment for 1996 11,632 11,632
Unrealized holding gain on
restricted marketable sec. 343,267 343,267
Shares issued as compensation
for services received 157,850 16,000 16,000
Shares issued as compensation
for services received 278,000 19,720 19,720
--------- ------- ---------- ------ --------- ---------- ---------- ---------
BALANCE AS AT
JANUARY 31, 1997 7,413,002 245,468 157,850 16,000 872,125 343,267 (64,418) 1,412,442
Net earnings for quarter 79,046 79,046
Foreign exchange adjustment 5,535 5,535
Unrealized holding loss on
restricted marketable securities (82,465) (82,465)
--------- ------- ---------- ------ --------- ---------- ---------- ---------
BALANCE AS AT
JULY 31, 1997 7,413,002 245,468 157,850 16,000 1,007,985 46,867 (74,815) 1,320,549
========= ======= ========== ====== ========= ========== ========== =========
</TABLE>
See accompanying notes
5
<PAGE>
ALPHA BYTES, INC.
CONSOLIDATED STATEMENT OF CASH FLOW
QUARTER ENDED JULY 31, 1997
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
QTR END Qtr End
JUL 31, 1997 Jul 31, 1996
------------- -------------
<S> <C> <C>
CASH WAS PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net earnings (loss) $ 79,046 $335,302
Loss on note receivable & sundry investments - -
Amortization 7,015 5,560
Deferred income taxes - -
--------- --------
86,061 340,862
Changes in non-cash working capital items:
Accounts receivable & work in progress 12,750 64,224
Income & investment tax credits received 0 62,045
Prepaid expenses & sundry assets 6,247 1,973
Accounts payable & accrued liability 43,844 1,495
Income taxes payable (net of ITC) 2,347 82,923
Unearned revenue 49,800 ( 22)
--------- --------
201,049 553,498
--------- --------
FINANCING ACTIVITIES
Issue of shares - 700
Loans payable to directors (15,831) (27,303)
Vehicle loan - ( 1,121)
Foreign exchange adjustment 5,535 (3,808)
--------- --------
(10,296) (31,532)
--------- --------
INVESTING ACTIVITIES
Long term accounts receivable - 770
Net purchase of capital assets (24,020) (11,644)
Other Investments - -
Investments (84,284) 1,533
--------- --------
(108,304) ( 9,341)
--------- --------
INCREASE (DECREASE) IN CASH 42,797 512,625
CASH & SHORT TERM INVESTMENTS AT THE
BEGINNING OF THE PERIOD 465,542 135,271
--------- --------
CASH & SHORT TERM INVESTMENTS AT THE
END OF PERIOD 508,339 647,896
========= ========
</TABLE>
6
<PAGE>
ALPHA BYTES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JULY 31, 1997
(Expressed in U.S. dollars)
1. ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
All subsidiaries have been included in the consolidated financial
statements. The consolidated wholly-owned subsidiaries at July 31, 1997,
were as follows:
Alphabytes Computer Corporation (Canada) - ("Alphabytes Canada")
Alpha Bytes Computer Corporation (USA) - ("Alpha Bytes US")
(b) CAPITAL ASSETS
Capital assets are stated at cost less accumulated amortization.
Amortization is calculated at the following annual rates:
Furniture and equipment - 20% declining balance
Vehicles - 30% declining balance
Computer hardware - 30% declining balance
Computer software - 100% declining balance
(c) FOREIGN CURRENCY
The financial statements are expressed in U.S. dollars. Current assets and
liabilities denominated in Canadian dollars at quarter end are translated
into U.S. dollars at the rates of exchange prevailing on that date.
Transactions in foreign currencies are recorded in U.S. dollars at the
rates of exchange prevailing on the date of transactions. Exchange gains
and losses are reflected in the income.
Exchange gains and losses resulting from the consolidation of the Canadian
subsidiary are reflected as an adjustment to the stockholders equity.
(d) WORK IN PROCESS
The company uses the percentage of completion method of revenue recognition
for its long-term development contracts. The value of unbilled services is
calculated using the contracted billing rates and is included with accounts
receivable and work in process on the balance sheet. The total work in
process at July 31, 1997 is approximately $230,000.
(e) INVESTMENT TAX CREDITS
Investment tax credits are accounted for as a reduction of research and
development costs in the year the credits become available, provided there
is reasonable assurance that they will be realized. Otherwise they are
reflected in the year claimed as a reduction of other expresses.
2. INCOME AND INVESTMENT TAX CREDIT RECEIVABLE
The company has approximately $27,000 of unclaimed investment tax credits
available to reduce future taxes payable. The tax effect of approximately
27,000 of these credits has been reflected in these consolidated financial
statements as a reduction of deferred taxes otherwise payable.
3. INVESTMENTS
During the year ended January 31, 1996 the company received as partial
payment of an account receivable, shares of the customers capital stock
valued at $164,666. This customer is a publicly traded corporation;
however, the company is restricted from selling these share until March,
1997 and consequently, the investment is carried at cost. The customer has
guaranteed that the shares value will not be less than the above value.
The market value of these shares at July 31, 1997 is approximately
$410,000.
7
<PAGE>
ALPHA BYTES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JULY 31, 1997
(Expressed in U.S. dollars)
4. CAPITAL ASSETS
<TABLE>
<CAPTION>
Accumulated Balance
Cost Depreciation 31, JUL 97 31, Jul 96
<S> <C> <C> <C> <C>
Furniture & equipment $ 46,324 $ 28,126 $ 18,198 $ 22,747
Vehicles 38,315 31,213 7,102 10,146
Computer hardware 57,136 19,415 37,721 8,214
Computer software 56,243 5,344 279 5,065
-------- -------- -------- --------
$147,398 $ 84,098 $ 63,300 $ 46,172
-------- -------- -------- --------
</TABLE>
5. LOANS PAYABLE TO DIRECTORS
The loans payable to directors are unsecured, non-interest bearing with no
set terms of repayment.
6. LOAN PAYABLE
There were no outstanding loans payable.
7. CAPITAL STOCK
The company is authorized to issue 30,000,000 common shares. The company had
outstanding options to purchase shares as follows:
<TABLE>
<CAPTION>
DATE ISSUED # OF SHARES EXERCISE PRICE EFFECTIVE DATE EXPIRY DATE
<S> <C> <C> <C> <C>
Oct 31, 1995 54,500 $ 0.01 May 01, 1996 Oct 31, 2000
May 31, 1996 54,500 $ 0.01 Oct 31, 1996 May 31, 2001
Nov. 01, 1996 54,500 $ 0.01 Apr 30, 1997 Nov 01, 2001
</TABLE>
8. EARNINGS (LOSS) PER SHARE
Earnings per share is calculated using the weighted average number of common
shares outstanding and common share equivalents. The average number of
shares outstanding under this assumption would be as follows:
Quarter Ended Jul. 31, 1997 - $7,413,002
9. RELATED PARTY TRANSACTIONS
Rent paid to a shareholder company amount to $4,500 for the quarter ended
Jul 31, 1996.
10. COMMENTS - LEASES OF PREMISES
The company is committed under existing leases to the following minimum
annual rents:
Year ending January 31, 1998 - $ 38,000
1999 - $ 38,000
2000 - $ 39,000
2001 - $ 40,000
2002 - $ 41,000
8
<PAGE>
PART I
------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS
-------------
Alpha Bytes Computer Corporation and Alphabytes Computer Corporation
(together called the Alphabytes Group) work in conjunction with each
other in producing, marketing, installing, and supporting the software
produced by these companies. Alpha Bytes, INC. has no active income save
for the activities of the Alphabytes Group. Therefore, the financial
information regarding the parent company and its two subsidiaries are
presented on a consolidated basis.
For the first quarter ending July 31, 1997 revenues were $366,592 as
compared to $626,275 for the similar period ending July 31, 1996. Cost
of goods sold primarily the cost of hardware and non-Alphabytes Group
software, was $10,546 for quarter ended July 31, 1997 as compared to
$237 for the quarter ended on July 31, 1996. The gross profit for the
quarter ending on July 31, 1997 was $356,046 compared to $626,038 for
the period ending July 31,1996
The cash and Investment certificates position of the company was
$508,339 on July 31, 1997, as compared to $647,896 on July 31, 1996.
Retained earnings at the end of July 31, 1997 was $1,087,029 as compared
to $848,448 on July 31, 1997.Total assets, as a whole increased from
$1,299,800 on July 31, 1996 to $1,917,347 on July 31, 1997.
For the six months ending July 31, 1997 revenues were $770,262 as
compared to $769,786 for the six months ending July 31, 1996.
Management believes that Alpha Bytes, INC. ("the Company") has the cash
funds and necessary liquidity to meet the needs of the company over the
next year, assuming sales and development efforts conform to the
standards historically set.
However, to fully maximize the potential presented by the key events
presented below, management believes that approximately $3,000,000 will
need to be raised. The funds will be primarily used to increase the
marketing effort and for the production of marketing material, as well
as the continued development of H-NET(R). Marketing effort would be
increased by hiring an appropriate number of sales staff, and by
increasing the number of national and regional industry trade shows and
conferences attended. It is anticipated that the funds will be raised
through private placement or a secondary offering in the current fiscal
year.
CURRENT PLANS
-------------
The key events that occurred over the quarter end July 31, 1997 were the
marketing of the cross-platform, windows (Registered Trade Mark of
Microsoft, Inc.) compatible version of its Home Office Management
(HO/2/) system, the Point Of Sale(POS/2/) system and the Lab Management
(LAB/2/) systems. This integrated product line is currently being
installed in some of the largest Ophthalmic chain in the world. The
company also began work on the second of the major contracts executed in
the previous year.
During the current quarter the company plans to continue to aggressively
market the POS/2/, LAB/2/ and HO/2/ software as well as continue to
market the H-AID software. During this quarter the company plans to
complete development of a managed care module that will be capable of
administering hundreds to Insurance plans.
This module will integrate with both the HO/2/ and LAB/2/ software and
provide chains with a full complement of integrated, managed care
related software products for the Ophthalmic community.
The company will also continue its development of the H-NET(R).
9
<PAGE>
PART II
-------
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
The Company is not a party to any material litigation, except a
claim by HEARx that the company is not entitled to the shares
issued to it on March 15, 1995 for services rendered. Management
feels the claim is without merit. It is not possible to determine
when this matter will be resolved, and consequently, the total due
has been reflected in these financial statements as a long term
asset.
ITEM 2. CHANGES IN SECURITIES
- ------- ---------------------
There were no changes in the Security position of the Company
during the current quarter.
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 FROM 8-K
- ------- --------------------------------
NONE.
10
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act 1934, the Registrant duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Alpha Bytes INC.
By /s/ Anton Stephens
-----------------------------
Anton Stephens
President and Director
(Principal Executive Officer)
Date Sep 12, 1997
By /s/ Christine Stephens
-----------------------------
Christine Stephens
Secretary and Director
Date: Sep 12, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, This
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By /s/ Anton Stephens
-----------------------------
Anton Stephens
President and Director
(Principal Executive Officer)
Date: Sep 12, 1997
By /s/ Christine Stephens
-----------------------------
Christine Stephens
Secretary and Director
Date: Sep 12, 1997
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 590,788
<SECURITIES> 660,417
<RECEIVABLES> 587,652
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,838,857
<PP&E> 173,854
<DEPRECIATION> 95,364
<TOTAL-ASSETS> 1,917,347
<CURRENT-LIABILITIES> 596,798
<BONDS> 0
0
0
<COMMON> 245,468
<OTHER-SE> 1,075,081
<TOTAL-LIABILITY-AND-EQUITY> 1,917,347
<SALES> 366,592
<TOTAL-REVENUES> 375,783
<CGS> 10,546
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 216,391
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 148,846
<INCOME-TAX> 69,800
<INCOME-CONTINUING> 79,046
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79,046
<EPS-PRIMARY> .011
<EPS-DILUTED> .011
</TABLE>
