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 Nine Months ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-20786
ALBARA CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-1076959
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
610 South Frazier
Conroe, Texas, 77301 (409) 539-2992
(Address of principal executive offices) (Issuer's Telephone Number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, no
par value
Check whether the issuer (1) has filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such
report(s), and (2) has been subject to such filing requirements for the past 90
days.
(1) Yes No X (2) Yes X No
--- --- --- ---
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: December 31, 1998 - $0.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the average bid and asked prices of such stock, as of a
specified date within the past 60 days: $361,000 based on 1,003,483 shares held
by non-affiliates and a price of $0.36 per share, which is the average of the
bid and ask price listed on the Bulletin Board for a share of stock on November
3, 1999. As of November 3, 1999, 2,061,503 shares of common stock, no par
value, were outstanding.
PAGE 1 OF 13 PAGES.
THE EXHIBIT INDEX
APPEARS ON PAGE 12.
<PAGE>
PART I
------
FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
- -------------------------------
Financial Statements
- ---------------------
The unaudited financial statements of Albara Corporation for the nine
months ended September 30, 1999 follow. The financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim period represented. The Company's
independent public accountant has not performed a review of the interim
financial information.
It is suggested that these financial statements be read in conjunction with
the financial statements and notes thereto included in the annual report on Form
10-KSB for the year ended December 31, 1998.
Index to Financial Statements
- --------------------------------
Page
----
Balance Sheets - Unaudited September 30, 1999 and Audited 3
December 31, 1998
Unaudited Statements of Operations - Quarter and Nine Months 4
ended September 30, 1999 and September 30, 1998
Unaudited Statements of Cash Flows -Nine Months 6
ended September 30, 1999 and September 30, 1998
Notes to Financials 7
2
<PAGE>
<TABLE>
<CAPTION>
ALBARA CORPORATION
BALANCE SHEETS
Unaudited September 30, 1999, and Audited December 31, 1998
9/30/99 12/31/98
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 450 $ 124,990
TOTAL ASSETS $ 450 $ 124,990
============ ============
LIABILITIES AND EQUITY
Current Liabilities
Accrued Expenses $ 14,925 $ 38,285
Accrued Compensation - officer 0 141,752
Notes Payable 0 3,314
------------ ------------
Total Current Liabilities 14,925 183,351
TOTAL LIABILITIES 14,925 183,351
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, Series C, convertible, no par 0 0
value per share, 185 shares authorized, 185
shares issued.
Preferred stock, Series F, convertible, no par value 14,625 14,625
per share, 250 shares authorized, 195
shares issued.
Common Stock, no par value per share, 3,928,788 3,913,788
6,666,667 shares authorized and
2,061,503 shares issued.
Accumulated Deficit (3,957,888) (3,986,774)
------------ ------------
TOTAL EQUITY (14,475) (58,361)
------------ ------------
TOTAL LIABILITIES AND EQUITY $ 450 $ 124,990
============ ============
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
ALBARA CORPORATION
UNAUDITED STATEMENTS OF OPERATIONS
Quarter and Nine Months ended September 30, 1999 and 1998
Quarter Quarter 9 Months 9 Months
Ended 9/30/99 Ended 9/30/98 Ended 9/30/99 Ended 9/30/98
--------------- --------------- --------------- -------------
SALES $0 $0 $0 $0
<S> <C> <C> <C> <C>
GENERAL AND ADMINISTRATIVE EXPENSES
Professional Fees 7,823 0 10,235 576
Personnel 900 33,000 67,200 99,000
Insurance 0 2,568 1,657 6,565
Property Taxes 0 0 0 0
Other 3,051 201 6,869 3,043
Depreciation 0 3,992 0 11,976
--------------- --------------- --------------- -----------
Total General & Administrative Expenses 11,774 39,761 85,961 121,160
LOSS FROM OPERATIONS (11,774) (39,761) (85,961) (121,160)
--------------- --------------- --------------- -----------
OTHER INCOME (EXPENSE)
Interest income 0 0 944 0
Interest expense 0 (2,182) (66) (10,130)
Other 201 0 5,116 0
--------------- --------------- --------------- -----------
Total Other Income (Expense) 201 (2,182) 5,994 (10,130)
NET LOSS BEFORE FEDERAL INCOME TAX (11,573) (41,943) (79,967) (131,290)
--------------- --------------- --------------- -----------
AND EXTRAORDINARY GAIN
FEDERAL INCOME TAX EXPENSE 0 0 0 0
NET LOSS BEFORE EXTRAORDINARY GAIN ($11,573) ($41,943) ($79,967) ($131,290)
ALBARA CORPORATION
UNAUDITED STATEMENTS OF OPERATIONS
Quarter and Nine Months ended September 30, 1999 and 1998
Quarter Quarter 9 Months 9 Months
Ended 9/30/99 Ended 9/30/98 Ended 9/30/99 Ended 9/30/98
--------------- --------------- --------------- -------------
EXTRAORDINARY GAIN $ 109,853 0 $ 109,853 0
Forgiveness of debt
NET INCOME (LOSS) $ 98,280 ($41,943) $ 29,886 ($131,290)
=============== =============== =============== =============
LOSS PER COMMON AND
COMMON EQUIVALENT SHARE
Basic before extraordinary gain ($0.01) ($0.03) ($0.05) ($0.09)
Extraordinary gain $ 0.05 $ 0.00 $ 0.07 $ 0.00
Basic $ 0.05 ($0.03) $ 0.02 ($0.09)
Diluted before extraordinary gain ($0.01) ($0.03) ($0.05) ($0.09)
Extraordinary gain $ 0.05 $ 0.00 $ 0.07 $ 0.00
Diluted $ 0.05 ($0.03) $ 0.02 ($0.09)
AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES
Basic 2,061,503 1,461,503 1,661,503 1,461,503
Diluted 2,081,003 1,481,003 1,681,003 1,481,003
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
ALBARA CORPORATION
STATEMENTS OF CASH FLOWS
Nine Months ended September 30, 1999 and 1998
Nine Months Ended
-----------------------
9/30/99 9/30/98
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 29,886 ($131,290)
Adjustments to reconcile net income
to net cash provided by operating activities
Foregiveness of debt (109,853) 0
Depreciation and Amortization 0 11,976
Increase (Decrease) in cash from changes in (35,259) 153,058
---------- -----------
operating working capital
Total Adjustments (145,112) 165,034
---------- -----------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (115,226) 33,744
---------- -----------
NET CASH FROM (USED) IN INVESTING ACTIVITIES 0 0
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of short-term and long-term debt (9,314) (32,332)
---------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (9,314) (32,332)
---------- -----------
NET INCREASE (DECREASE) IN CASH (124,540) 1,412
CASH, BEGINNING 124,990 1,684
---------- -----------
CASH, ENDING $ 450 $ 3,096
========== ===========
INCREASE (DECREASE) IN CASH FROM CHANGES
IN OPERATING WORKING CAPITAL
Accounts Receivable - Affiliate 0 120,000
Accrued Expenses (23,360) (38,642)
Accrued Compensation - officer (11,899) 71,700
---------- -----------
($35,259) $ 153,058
========== ===========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during nine months for interest $ 66 $ 10,138
Cash paid during nine months for income taxes 0 0
Issuance of 600,000 shares of common stock 15,000 0
</TABLE>
See accompanying notes
Assumes AO Def Off went from $18,405 in1989 to $0 in 1990
Assumes payments of Def Off were $4,393 more than the reduction
in AP Def Off
5
<PAGE>
ALBARA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER AND NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND
THE YEAR ENDED DECEMBER 31, 1998
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by the
Company in accordance with the rules and regulations of the Securities and
Exchange Commission and do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to fairly present the financial
position, results of operations and cash flows as of September 30, 1999 and for
all periods presented have been made. These financial statements should be read
in conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1998. No
significant changes in accounting principles have occurred subsequent to
December 31, 1998.
The results of operation for the periods ended September 30, 1999 and 1998
are not necessarily indicative of the results to be expected for the full
year.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Albara Corporation ("Albara") is a Colorado corporation organized in
January, 1988. Albara has always been a holding company and has never conducted
any operations directly. Prior to 1998, Albara, through its former operating
subsidiaries, Micro Business Solutions, Inc., d/b/a "Hardware That Fits", and
Software Technologies, Inc., d/b/a "Helix Technologies", marketed laser printer
consumables and developed, published and marketed software for the Apple
Macintosh microcomputer (the "Macintosh") which is manufactured by Apple
Computer, Inc. ("Apple"). Marketing of its products was performed via direct
response marketing, authorized dealers and value-added resellers. Direct
response marketing is a segment of the retail business where sales are solicited
via advertising and direct mailings supplemented by telephone communications
with little or no face-to-face contact between the seller and the buyer.
In December 1997, due to diminishing sales, the Company sold its Helix
technology to an independent third party, The Chip Merchant, and discontinued
all of its remaining operations. On December 31, 1997, the Company disposed of
its two operating subsidiaries to the President of the Company, Mr. Real
Provencher. The transaction was a non-cash transaction resulting in
transferring $245,000 in assets and $334,000 in liabilities to Mr. Provencher
for a net increase to the Company's stockholder equity of $89,000, the amount by
which such liabilities exceeded such assets. In addition, in early January
1998, one of the Company's former operating subsidiaries now owned by Mr.
Provencher paid the Company $120,000 from the proceeds of the sale of Helix
technology in satisfaction of its outstanding liability to the Company. Since
January 1998, the Company has been a development stage company and no longer has
operations of any kind.
Results of Operations: Quarter Ended September 30, 1999 Compared to the
-----------------------------------------------------------------------
Quarter Ended September 30, 1998
--------------------------------
The following discussion should be read in conjunction with the Financial
Statements and related notes thereto included elsewhere in this Form 10-QSB and
in the Company's 1998 annual report on Form 10-KSB. The operations of the
Company were discontinued in December 1997, and the subsidiaries conducting
those operations were disposed of at that time. The Company has not conducted
business operations of any kind since the disposition of these operating
subsidiaries. Since December 31, 1997, the Company has been a development stage
company with no operations.
Sales: The Company is a development stage holding company with no sales or
revenues.
General and administrative expenses: General and administrative expenses
for the quarter ended September 30, 1999, decreased $28,000, from $40,000 to
$12,000, a 70% decrease compared to the third quarter of 1998. This decrease is
attributed to eliminating officer salaries of $33,000 per quarter and a
reduction in depreciation and insurance expenses as a result of the sale of the
Company's building and property in November 1998 offset by an increase in legal
and other expenses associated with producing the annual report and preparing for
an acquisition. In 1999, insurance expenses will be substantially reduced and
the Company will not incur depreciation expenses associated with the property.
7
<PAGE>
Extraordinary gain: On July 1, 1999, the Company agreed to issue 600,000
shares of common stock to Mr. Provencher, President of the Company, to resolve
the Company's outstanding accrued compensation balance of $130,853 at June 30,
1999. Based on the bid and ask prices of its stock on the date awarded, the
shares were recorded as having a value of $15,000. A total of $6,000 was paid
in cash and the remaining $109,853 was recorded as an extraordinary gain.
Net Income/Loss: Net income for the quarter ended September 30, 1999 was
$98,000 as compared to net loss of $42,000 in the third quarter of 1998. This
improvement is attributed to: (i) an extraordinary gain of $110,000; (ii)
eliminating officer salaries of $33,000 per quarter in the third quarter of
1999; and (iii) reduced depreciation and insurance expenses as a result of the
sale of the Company's building and property in November 1998.
Results of Operations: Nine Months Ended September 30, 1999 Compared to the
---------------------------------------------------------------------------
Nine Months Ended September 30, 1998
------------------------------------
Sales: The Company is a development stage holding company with no sales or
revenues.
General and administrative expenses: General and administrative expenses
for the nine months ended September 30, 1999, decreased $35,000, from $121,000
to $86,000, a 29% decrease compared to the first nine months of 1998. This
decrease is attributed to eliminating officer salaries of $33,000 per quarter in
the third quarter of 1999 and the reduction in depreciation and insurance
expenses as a result of the sale of the Company's building and property in
November 1998 offset by an increase in legal and other expenses associated with
producing the annual report and preparing for an acquisition. In 1999,
insurance expenses will be substantially reduced and the Company will not incur
depreciation expenses associated with the property.
Extraordinary gain: On July 1, 1999, the Company agreed to issue 600,000
shares of common stock to Mr. Provencher, President of the Company, to resolve
the Company's outstanding accrued compensation balance of $130,853 at June 30,
1999. Based on the bid and ask prices of its stock on the date awarded, the
shares were recorded as having a value of $15,000. A total of $6,000 was paid in
cash and the remaining $109,853 was recorded as an extraordinary gain.
Net Income/Loss: Net income for the nine months ended September 30, 1999 was
$30,000 as compared to a net loss of $131,000 in the first nine months of 1998.
This improvement is primarily attributed to: (i) an extraordinary gain of
$110,000; (ii) eliminating officer salaries of $33,000 per quarter in the third
quarter of 1999; and (iii) reduced depreciation and insurance expenses as a
result of the sale of the Company's building and property in November 1998.
Liquidity and Capital Resources
- ----------------------------------
Since inception, the Company has suffered from limited availability of
working capital. Bank lines of credit have been limited and in some instances
have required the personal guaranty of the
Company's President, Mr. Provencher. Over the past few years, the Company has
not had access to
8
<PAGE>
any external sources of working capital. All working capital requirements have
been met by internally generated cash flows from the sale of its Helix
technology and real property as described below.
On April 16, 1993, the Company entered into a loan transaction with Barbara
A. Provencher, Secretary and Director of the Company. The Company borrowed
$150,000 bearing interest at prime rate plus 2% (i.e., 8% per annum in 1998).
The Company agreed to make monthly principal and interest installment payments
of $12,500 with a final payment of the remaining principal and interest due on
October 15, 1993. The Company repaid this obligation in full in early 1999. At
December 31, 1998, the note payable had a balance of approximately $3,000.
On December 31, 1997, the Company sold its Helix technology along with related
trademarks and copyrights to an independent third party, The Chip Merchant for
the sum of $120,000. After the completion of that sale the subsidiary was
disposed of. The cash from the sale of Helix technology was paid to the Company
in early January 1998 (see below).
On December 31, 1997, the Company disposed of its two operating
subsidiaries to the President of the Company, Mr. R al Provencher. The
transaction was a non-cash transaction resulting in transferring $245,000 in
assets and $334,000 in liabilities to Mr. Provencher for a net increase to the
Company's stockholder equity of $89,000. In addition, in early January 1998,
one of the Company's former operating subsidiaries now owned by Mr. Provencher,
paid the Company $120,000 from the proceeds of the sale of Helix technology in
satisfaction of its outstanding liability to the Company.
In November 1998, the Company sold its land and building for the sum of
$401,000 net of certain selling expenses. After repayment of the outstanding
mortgage balance and taxes of $177,000, this transaction provided the Company
$216,000 of cash.
As of December 31, 1998, the Company had net tax loss carryforwards of
approximately $528,000 which begin to expire in 2008. (See Note D in the
Financial Statements and related notes included in the Company's 1998 annual
report on Form 10-KSB for additional information about the Company's tax
position).
On July 1, 1999, the Company agreed to issue 600,000 shares of common stock
to Mr. Provencher, President of the Company, to resolve the Company's
outstanding accrued compensation balance of $130,853 at June 30, 1999. Based on
the bid and ask prices of its stock on the date awarded, the shares were
recorded as having a value of $15,000. The remaining $115,853 was recorded in
the financial records of the Company as an extraordinary gain.
9
<PAGE>
Plan of Operation
- -------------------
The Company does not currently have any external sources of working
capital. The Company's officers and directors (the "Management") have not
entered into any commitments for research and development or for capital
expenditures. However, the limited working capital availability of the company
will suffice to cover general and administrative expenses excluding salaries for
its officers throughout the remainder of this year. No additional employees
are expected in the foreseeable future.
While the Company has not engaged in any business activities since December
1997, Management believes that it may be possible to recover some value for the
stockholders by restructuring the Company to effect a business combination
transaction with a suitable privately-held company that has both business
history and operating assets.
On September 3, 1999, the Company entered into a binding letter of intent
to acquire Leapfrog Smart Products, Inc., ("LEAPFROG") a private corporation
headquartered in Orlando, Florida. LEAPFROG is dedicated to designing,
developing, licensing and marketing Smart Card applications and related database
management systems and services. The Smart Card is a wallet-sized plastic card
with an embedded computer chip carrying a myriad of accessible data that is
retrievable on demand and capable of fully integrating a variety of everyday
functions with strict security features.
On October 25, 1999, the Company entered into a Plan and Agreement of
Merger to acquire LEAPFROG. This transaction will be structured as a reverse
acquisition whereby the existing shareholders of LEAPFROG will obtain control of
the Company. The Company intends to call a shareholders' meeting for the
purpose of effecting a 1 for 10 reverse split of the Company's common stock,
increasing the number of authorized shares of common stock, changing the name of
the Company from "Albara Corporation" to "Leapfrog Smart Products, Inc." and
electing a new Board of Directors to take office on the effective date of the
acquisition. The acquisition shall become effective shortly after the
completion of the Company's shareholder meeting. On the effective date, the
shareholders of LEAPFROG shall receive 4,717,559 shares of the Company's common
stock. In addition, the Company shall reserve 1,511,950 shares of common stock
for possible issuance in connection with LEAPFROG options and warrants. The
existing shareholders of the Company shall hold 397,671 shares of the Company's
common stock.
Upon completion of this business combination transaction, there can be no
assurance that the combined companies will have sufficient funds to undertake
any significant development, marketing and manufacturing activities.
Accordingly, the combined companies may be required to either seek additional
debt or equity financing or obtain funding from third parties, in exchange for
which the combined companies might be required to issue a substantial equity
position. There is no assurance that the combined companies will be able to
obtain additional financing on terms acceptable to the combined companies.
10
<PAGE>
PART II
-------
OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
-------------------------
None.
ITEM 2. CHANGES IN SECURITIES
-----------------------------
None.
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 FORM 8-K
----------------------------------------
a.) EXHIBITS
None.
b.) REPORTS ON FORM 8-K
Filed November 3, 1999, Item 5, Other Events, Exhibit 10.20-Plan and
Agreement of Merger.
11
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ALBARA CORPORATION
By: /s/ REAL PROVENCHER
------------------------
Real Provencher
President and Chief Financial Officer
DATE: November 15, 1999
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 15
<BONDS> 0
0
15
<COMMON> 3929
<OTHER-SE> (3959)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (12)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 110
<CHANGES> 0
<NET-INCOME> 98
<EPS-BASIC> .05
<EPS-DILUTED> .05
</TABLE>
