<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 Oct 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 7,463,002 shares of common stock outstanding having a par value of
$.0002 per share as of October 31, 1997
1
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE NUMBER
- ------ --------------------- -----------
<S> <C> <C>
Item 1 Consolidated Balance Sheet, 3
October 31, 1997 (unaudited)
Consolidated Statement of Stockholders' Equity, 3
October 31, 1997 (unaudited)
Consolidated Statement of Earnings for Quarter ended 4
October 31, 1997 (unaudited)
Consolidated Statement of Cash Flow For the Quarter ended 6
October 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 OCTOBER 31, 1997
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
OCT. 31 Oct. 31
Note 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT:
Cash & short-term investments $ 148,474 600,594
Marketable Securities - trading 523,364 -
Marketable Securities - restricted 3 461,065 168,896
Accounts receivable & work in progress 311,551 386,473
Income & investment tax credits receivable - -
Prepaid expenses & sundry assets 19,973 10,192
---------- ----------
1,464,427 1,166,155
---------- ----------
LONG TERM:
Accounts Receivable and Work in Progress $ 352,334 $ 82,345
Other Investments - 13,835
Capital assets 4 82,761 48,547
---------- ----------
435,095 144,727
---------- ----------
TOTAL ASSETS 1,899,522 1,310,882
========== ==========
LIABILITIES
Current:
Accounts payable & accrued liabilities $ 57,265 $ 64,309
Income taxes payable - net 128,525 112,401
Vehicle loan - -
Unearned revenue 2,657 4,015
---------- ----------
188,447 180,725
---------- ----------
LONG TERM:
Loans payable to directors 5 $ 52,165 $ 33,296
Loans Payable - -
Deferred Income Taxes 246,400 -
---------- ----------
298,565 33,296
---------- ----------
487,012 214,021
---------- ----------
STOCKHOLDERS' EQUITY
Capital stock 7 $ 250,468 $ 226,458
Share Purchase Warrants 16,000 -
Retained Earnings 1,135,896 932,498
Unrealized Gain of Investments 96,399 -
Foreign exchange adjustment (86,253) (62,095)
---------- ----------
1,412,510 1,096,861
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 1,899,522 1,310,882
========== ==========
</TABLE>
3
<PAGE>
ALPHA BYTES, INC.
CONSOLIDATED STATEMENT OF EARNINGS
QUARTER ENDED OCTOBER 31, 1997
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
NOTES QTR END QTR END
REVENUE OCT.31,'97 OCT.31,'96
---------- ----------
<S> <C> <C>
Sales $ 416,714 $ 357,677
Cost of Sales 1,699 3,494
---------- ----------
Gross Profit 415,015 354,183
Investment Income (38,056) -
---------- ----------
376,959 354,183
---------- ----------
EXPENSES
Wages, management & consulting fees $ 114,315 $ 134,575
Administrative 135,055 32,796
Travel & promotion 28,808 18,792
Bad debts - 46,173
Amortization 5,448 5,030
Interest/Foreign exchange gain/loss 39 1,367
R&D tax credits claimed (30,000) (14,000)
---------- ----------
253,665 224,733
---------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES $ 123,294 129,450
Provision for income taxes: 49,427 45,400
---------- ----------
NET EARNINGS (LOSS) $ 73,867 $ 84,050
========== ==========
EARNINGS (LOSS) PER SHARE 8 0.010 0.011
========== ==========
</TABLE>
4
<PAGE>
ALPHA BYTES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AS AT OCTOBER 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 six month prd. 214,904 214,904
Foreign exchange adjustment (10,397) (10,397)
Unrealized holding loss on
restricted mar. Securities (296,400) (296,400)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE AS AT
JULY 31, 1997 7,413,002 245,468 157,850 16,000 1,087,029 46,867 (74,815) 1,320,549
NET EARNINGS FOR QUARTER 73,867 73,867
FOREIGN EXCHANGE ADJUSTMENT (11,438) (11,438)
UNREALIZED HOLDING LOSS ON
RESTRICTED MARKETABLE SEC. 49,532 49,532
SHARES ISSUED FOR COMPENSATION 50,000 5,000
FOR SERVICES RECEIVED
DIVIDENDS PAID (25,000)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE AS AT
OCTOBER 31, 1997 7,463,002 250,468 157,850 16,000 1,135,896 96,399 (86,253) 1,432,510
========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes
5
<PAGE>
ALPHA BYTES, INC.
CONSOLIDATED STATEMENT OF CASH FLOW
QUARTER ENDED OCTOBER 31, 1997
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
QTR END Qtr End
OCT 31, 1997 Oct 31, 1996
------------- -------------
<S> <C> <C>
CASH WAS PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net earnings (loss) $ 73,867 $ 84,050
Loss on note receivable & sundry investments - -
Amortization 5,448 5,030
Deferred income taxes - -
--------- ---------
79,315 89,080
Changes in non-cash working capital items:
Accounts receivable & work in progress (96,261) (46,689)
Income & investment tax credits received - -
Prepaid expenses & sundry assets 55 (7,013)
Accounts payable & accrued liability (51,080) (18,293)
Income taxes payable (net of ITC) 18,087 29,478
Unearned revenue (49,800) 61
--------- ---------
(99,684) 46,624
--------- ---------
FINANCING ACTIVITIES
Issue of shares 5,000 10
Loans payable to directors (26,993) 2,093
Dividends paid (25,000) -
Vehicle loan - -
Foreign exchange adjustment (11,438) 13,684
Loan Payable - (100,000)
--------- ---------
(58,431) (84,213)
--------- ---------
INVESTING ACTIVITIES
Long term accounts receivable - -
Net purchase of capital assets (9,719) (5,102)
Other Investments - ( 412)
Investments (274,480) (4,199)
--------- ---------
(284,199) (9,713)
--------- ---------
INCREASE (DECREASE) IN CASH (442,314) (47,302)
CASH & SHORT TERM INVESTMENTS AT THE
BEGINNING OF THE PERIOD 590,788 647,896
--------- ---------
CASH & SHORT TERM INVESTMENTS AT THE
END OF PERIOD 148,474 600,594
========= =========
</TABLE>
6
<PAGE>
ALPHA BYTES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED OCTOBER 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 October 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 October 31, 1997 is approximately $ 150,000.
(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 $30,000 of unclaimed investment tax credits
available to reduce future taxes payable. The tax effect of approximately
$30,000 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 October 31, 1997 is approximately
$450,000.
7
<PAGE>
ALPHA BYTES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED OCTOBER 31, 1997
(EXPRESSED IN U.S. DOLLARS)
4. CAPITAL ASSETS
<TABLE>
<CAPTION>
Accumulated Balance
Cost Depreciation 31, OCT 97 31, Oct 96
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Furniture & equipment $ 67,460 $ 33,077 $ 34,383 $ 20,472
Vehicles 38,315 31,213 7,102 4,604
Computer hardware 63,995 22,722 41,273 20,701
Computer software 13,803 13,800 3 2,770
------------ ------------ ------------ ------------
$ 183,573 $ 100,812 $ 82,761 $ 48,547
------------ ------------ ------------ ------------
</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 Oct. 31, 1997 - $7,463,002
9. RELATED PARTY TRANSACTIONS
Rent paid to a shareholder company amount to $4,500 for the quarter ended
Oct 31, 1997.
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 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 October 31, 1997 revenues were $416,714
compared to $354,677 for the similar period ending October 31, 1996.
Cost of goods sold primarily the cost of hardware and non-Alphabytes
Group software, was $ 1,699 for quarter ended October 31, 1997 versus
$3,494 for the quarter ended on October 31, 1996. The gross profit for
the quarter ending on October 31, 1997 was $376,959 compared to
$354,183 for the period ending October 31,1996
The cash and Investment certificates position of the company was
$671,838 on October 31, 1997, compared to $600,594 on October 31,
1996. Retained earnings at the end of October 31, 1997 was $1,135,896
compared to $932,498 on October 31, 1997. Total assets, as a whole
increased to $1,899,522 on October 31, 1997 from $ 1,310,882 on
October 31, 1996.
For the nine months ending October 31, 1997 revenues were $1,186,976
versus $1,127,463 for the nine months ending October 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
marketing efforts and for the production of marketing material, as
well as the continued development of H-NET(R). Marketing efforts 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 October 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 continued the work on the first and second
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 -----------------------------
Anton Stephens
President and Director
(Principal Executive Officer)
Date Dec 15, 1997
By -----------------------------
Christine Stephens
Secretary and Director
Date: Dec 15, 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 -----------------------------
Anton Stephens
President and Director
(Principal Executive Officer)
Date: Dec 15, 1997
By -----------------------------
Christine Stephens
Secretary and Director
Date: Dec 15, 1997
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 148,474
<SECURITIES> 984,429
<RECEIVABLES> 683,858
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 181,761
<PP&E> 183,573
<DEPRECIATION> 100,812
<TOTAL-ASSETS> 1,899,522
<CURRENT-LIABILITIES> 487,012
<BONDS> 0
0
0
<COMMON> 250,468
<OTHER-SE> 1,162,042
<TOTAL-LIABILITY-AND-EQUITY> 1,899,522
<SALES> 416,714
<TOTAL-REVENUES> 416,714
<CGS> 1,699
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 291,721
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 123,294
<INCOME-TAX> 49,427
<INCOME-CONTINUING> 73,867
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,867
<EPS-PRIMARY> .010
<EPS-DILUTED> .010
</TABLE>
