<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1994.
For the Quarterly period ended April 30, 1998
[ ] 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 7,468,002 shares of common stock outstanding having a par value of
$.0002 per share as of April 30, 1998
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE NUMBER
- ------ --------------------- -----------
<S> <C> <C>
Item 1 Consolidated Balance Sheet, 3
April 30, 1998 (unaudited)
Consolidated Statement of Stockholders' Equity, 3
April 30, 1998 (unaudited)
Consolidated Statement of Earnings for Quarter ended 4
April 30, 1998 (unaudited)
Consolidated Statement of Cash Flow For the Quarter ended 6
April 30, 1998 (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 APRIL 30, 1998
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
APR. 30 Apr. 30
Note 0 1998 1997
---- ---------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT:
Cash & equivalents $1,263,236 1,166,937
Accounts receivable & work in progress 338,902 228,040
prepaid expenses & sundry assets 21,465 26,275
---------- ----------
1,623,603 1,421,252
---------- ----------
LONG TERM:
Accounts Receivable and Work in Progress $ - $ 352,334
Capital assets 2 76,465 61,485
---------- ----------
76,465 413,819
---------- ----------
TOTAL ASSETS 1,700,068 1,835,071
========== ==========
LIABILITIES
CURRENT:
Accounts payable & accrued liabilities $ 59,459 $ 64,500
Income taxes payable - net 127,403 108,091
Deferred Income Taxes 54,590 246,400
Unearned revenue - 2,657
---------- ----------
241,452 421,648
---------- ----------
LONG TERM:
Loans payable to directors $ - $ 94,989
---------- ----------
241,452 516,637
---------- ----------
STOCKHOLDERS' EQUITY
Capital stock 3 $ 250,968 $ 245,468
Less Treasury Stock at cost (123,160) -
Share Purchase Warrants 17,000 16,000
Retained Earnings 1,436,253 1,007,984
Unrealized Gain of Investments - 129,332
Foreign exchange adjustment (122,445) (80,350)
---------- ----------
1,458,616 1,318,434
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 1,700,068 1,835,071
========== ==========
</TABLE>
3
<PAGE>
ALPHA BYTES, INC.
CONSOLIDATED STATEMENT OF EARNINGS
QUARTER ENDED APRIL 30, 1998
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
APR. 30 Apr. 30
Note 1998 1997
-------- ---------
<S> <C> <C> <C>
REVENUE $423,767 $ 396,279
-------- ---------
EXPENSES
Professional fees 11,812 -
Wages, management & consulting fees 131,138 $104,089
General and administrative 36,219 48,834
Travel & promotion 34,823 40,485
Amortization 4,885 4,251
Interest 149 (893)
Loss on investments 68,781 -
R&D tax credits claimed - (30,700)
-------- ---------
287,807 166,066
-------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES $135,960 230,213
Provision for income taxes: 47,600 94,353
-------- ---------
NET EARNINGS (LOSS) $ 88,360 $135,860
======== =========
EARNINGS (LOSS) PER SHARE 4 0.012 0.018
======== =========
</TABLE>
4
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AS AT APRIL 30, 1998 - (SEE NOTE 7)
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
Capital Stock Options Treasury Stock
-------------------- --------------- ------------------
Number Number Unrealized Foreign
Number of of Retained Gain on Exchange
of Shares Amount Shares Amount Shares Amount Earnings Investment Adjustment TOTAL
--------- -------- ------- ------ ------- --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AS AT
JANUARY 31, 1997 7,413,002 245,468 164,000 16,000 872,125 343,267 (64,418) 1,412,442
Net earnings 1998 500,768 500,768
Foreign exchange
adjustment for 1998 (63,389) (63,389)
Unrealized holding
gain on restricted
marketable sec. (343,267) (343,267)
Employee Share Opt.
Issued as comp, for
services recd 100,000 1,000 1,000
Shares iss. as
compensation for
services received 55,000 5,500 5,500
Purchase of stock on
open mkt. 145,000 (112,332) (112,332)
Dividend paid (5,000) (25,000)
-----------------------------------------------------------------------------------------------------------
BALANCE AS AT
JANUARY 31, 1998 7,468,002 250,968 264,000 17,000 145,000 (112,332) 1,347,893 0 (127,807) 1,375,722
Net earnings for
3 month prd. 88,360 88,360
Foreign exchange
adjustment 5,362 5,362
Purchase of Stock
on open mkt 22,500 (10,828)
-----------------------------------------------------------------------------------------------------------
BALANCE AS AT
APRIL 30, 1998 7,468,002 250,968 264,000 17,000 167,500 (123,160) 1,436,253 0 (122,445) 1,458,616
===========================================================================================================
</TABLE>
See accompanying notes
5
<PAGE>
ALPHA BYTES, INC.
CONSOLIDATED STATEMENT OF CASH FLOW
QUARTER ENDED APRIL 30, 1998
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
APR. 30 Apr. 30
1998 1997
---------- ---------
<S> <C> <C>
CASH WAS PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net earnings (loss) $ 88,360 $ 135,860
Amortization 4,885 4,251
Deferred income taxes - -
---------- ---------
93,245 140,111
Changes in non-cash working capital items:
Accounts receivable & work in progress 327,332 (148,968)
Income & investment tax credits received - 31,684
Income taxes payable (27,882) 108,091
Prepaid expenses & sundry assets (2,848) (3,505)
Accounts payable & accrued liability (32,965) (119,185)
Unearned revenue - (22,051)
---------- ---------
356,882 (13,823)
---------- ---------
FINANCING ACTIVITIES
Issue of shares - -
Issue of employee share options - -
Purchase of stock for treasury (10,828) -
Foreign exchange adjustment 5,362 (15,932)
Dividends paid - -
Loans payable to directors - 94,989
Vehicle loan - -
Loan Payable - -
---------- ---------
(5,466) 79,057
---------- ---------
INVESTING ACTIVITIES
Long term accounts receivable - -
Net purchases of capital assets (9,371) (2,346)
Sundry investments - net - (20,000)
Marketable securities - restricted - -
---------- ---------
(9,371) (22,436)
---------- ---------
INCREASE (DECREASE) IN CASH 342,045 42,797
CASH & EQUIVALENTS BEGINNING OF THE PERIOD 921,191 465,542
---------- ---------
CASH & EQUIVALENTS AT THE END OF PERIOD 1,263,236 508,339
========== =========
</TABLE>
6
<PAGE>
ALPHA BYTES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED APRIL 30, 1998
(EXPRESSED IN U.S. DOLLARS)
1. ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
All subsidiaries have been included in the consolidated financial
statements. The consolidated subsidiaries at April 30, 1998 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) 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.
<TABLE>
<CAPTION>
2. CAPITAL ASSETS
Accumulated Balance
Cost Amortization APR 30, 98 Apr 30, 97
<S> <C> <C> <C> <C>
Furniture & equipment $ 58,209 $( 32,377) $25,832 $18,198
Vehicles 38,315 ( 33,716) 4,599 7,102
Computer hardware 72,004 ( 27,984) 44,020 37,721
Computer software 15,108 ( 13,965) 1,143 279
Leasehold Improvements 1,163 (291) 872 -
-------- --------- ------- -------
$184,799 $ 108,333 $76,466 $63,300
-------- --------- ------- -------
</TABLE>
3. 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>
<S> <C> <C> <C> <C>
DATE ISSUED # OF SHARES EXERCISE PRICE EFFECTIVE DATE EXPIRY DATE
Oct 31, 1995 54,750 $ 0.01 May 01, 1996 Oct 31, 2000
May 31, 1996 54,750 $ 0.01 Oct 31, 1996 May 31, 2001
Nov 01, 1996 54,500 $ 0.01 Apr 30, 1997 Nov 01, 2001
Oct 01, 1997 100,000 $ 0.01 Oct 01, 1997 Oct 01, 2002
</TABLE>
7
<PAGE>
ALPHA BYTES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED APRIL 30, 1998
(EXPRESSED IN U.S. DOLLARS)
4. EARNINGS (LOSS) PER SHARE
Earnings per share is calculated using the weighted average number of
common shares outstanding excluding the dilutive effect of stock options
and all prior periods have been restated. The average number of shares
outstanding under this assumption would be as follows:
Quarter Ended April 30, 1997 - $ 7,468,002
5. COMMENTS - LEASES OF PREMISES
The company is committed under existing leases to the following minimum
annual rents:
Year ending January 31, 1999 - $ 19,000
2000 - $ 21,000
2001 - $ 22,000
2002 - $ 24,000
2003 - $ 4,000
8
<PAGE>
ALPHA BYTES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED APRIL 30, 1998
(EXPRESSED IN U.S. DOLLARS)
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 Alpha Bytes Inc.) work in conjunction with each other
in producing, marketing, installing, and supporting the software
produced by these companies. The financial information regarding the
parent company and its two subsidiaries is presented on a consolidated
basis.
For the quarter ending April 30, 1998 revenues were $423,767 compared
to $396,279 for the similar period ending April 30, 1997. Expenses
were $ 287,807 quarter ended April 30, 1998 versus $166,066 for the
quarter ended on April 30, 1997. The gross profit for the quarter
ending on April 30, 1998 were $135,960 compared to $230,213 for the
period ending April 30, 1997 and the net profit was $ 88,360 on April
30, 1998 compared to $135,860 on April 30, 1997.
The cash and Investment certificates position of the company was
$1,263,236 on April 30, 1998, compared to $508,339 on April 30, 1997.
Retained earnings at the end of April 30, 1998 were $1,436,253
compared to $1,007,984 on April 30, 1997.
In this quarter, the company decided invest its own funds in an effort
to expedite the development of H-NET(R), rather than wait for the
required capital investment to be raised. The company hired Ray Coty
as Vice President of Operations, for the H-NET(R) group & two senior
systems personnel to assist him in this process. The company also
invested in the appropriate hardware required to implement the first
phase of this project. Although overall sales increased, the decline
in the net profits reflect the expenses incurred for these events.
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 April 30, 1998 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 chains in the world.
The company also continued in the implementation of the large
contracts executed during fiscal 1997.
During the current quarter the company plans to continue to
aggressively market the POS/2/, LAB/2 and HO/2/ software. During this
quarter the company expects to release the 32bit version of the HO/2/
system and to start development of the 32bit version of the POS/2/
system.
The company will also continue its development of the H-NET(R) system.
Additional capital commitments made by the company during the first
quarter, will assist in expediting the release of phase I of the H-
NET(R) system.
9
<PAGE>
ALPHA BYTES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED APRIL 30, 1998
(EXPRESSED IN U.S. DOLLARS)
PART II
-------
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
The Company is not a party to any material litigation.
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 Jun 15, 1998
By /s/ Christine Stephens
-----------------------------------
Christine Stephens
Secretary and Director
Date: Jun 15, 1998
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: Jun 15, 1998
By /s/ Christine Stephens
-----------------------------------
Christine Stephens
Secretary and Director
Date: Jun 15, 1998
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> APR-30-1998
<CASH> 282,054
<SECURITIES> 981,182
<RECEIVABLES> 338,902
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,623,603
<PP&E> 184,798
<DEPRECIATION> 108,333
<TOTAL-ASSETS> 1,700,068
<CURRENT-LIABILITIES> 241,452
<BONDS> 0
0
0
<COMMON> 250,968
<OTHER-SE> 1,207,648
<TOTAL-LIABILITY-AND-EQUITY> 1,700,068
<SALES> 423,767
<TOTAL-REVENUES> 423,767
<CGS> 1,142
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 286,665
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 135,960
<INCOME-TAX> 47,600
<INCOME-CONTINUING> 88,360
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88,360
<EPS-PRIMARY> 0.012
<EPS-DILUTED> 0.012
</TABLE>
