-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B6ZLNgdNeXmfjFoqPh1s1K5wyHBxHfrVg1rGlvEUGgeqlYL1LZ9LR5OxaGoEkrFe QgID+yUZUrggSxpoWAkjRg== 0001013453-01-500024.txt : 20020410 0001013453-01-500024.hdr.sgml : 20020410 ACCESSION NUMBER: 0001013453-01-500024 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALCOM INC /CA/ CENTRAL INDEX KEY: 0001013453 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 581700840 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-28416 FILM NUMBER: 1789726 BUSINESS ADDRESS: STREET 1: 26030 AVENUE HALL STUDIO 5 CITY: VALENCIA STATE: CA ZIP: 91355 BUSINESS PHONE: 6612578000 MAIL ADDRESS: STREET 1: 26030 AVENUE HALL STUDIO 5 CITY: VALENCIA STATE: CA ZIP: 91355 FORMER COMPANY: FORMER CONFORMED NAME: SBI COMMUNICATIONS INC DATE OF NAME CHANGE: 19960502 10QSB 1 k10q-930.txt THIRD QUARTER REPORT Securities and Exchange Commission Washington, D.C., 20549 FORM 10-QSB (Mark one) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal quarter ended September 30, 2001 Commission file Number 0-28416 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ============================================================================== ValCom, Inc. (Name of small business issuer specified in its charter) ============================================================================== Delaware 58-1700840 -------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 26030 Avenue Hall - Studio #5, Valencia, California 91355 ----------------------------------------------------- (Address of Principal executive offices) (Zip code) (661) 257-8000 -------------- Issuer's telephone number ============================================================================== Securities registered pursuant to 12(b) of the Act: None Securities to be registered pursuant to Section 12(g) of the Act: Common Stock and Preferred Stock -------------------------------- Common Stock $0.001 Par Value - Preferred Stock $0.001 Par Value --------------------------------------------------------------- (Title of Class) 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 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 [ X ] NO [ ] As of September 30, 2001 the Registrant had 8,909,401 shares of its $0.001 par value common stock outstanding. ============================================================================== November 14, 2001 ==============================================================================
Table Of Contents VALCOM, INC. FORM 10-QSB INDEX Page PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements 3 Consolidated Balance Sheets as of December 31, 2000 and and September 30, 2001 Consolidated Statements of Operations 5 for the three and nine months ended September 30, 2000 and 2001 Consolidated Statement of Changes 7 of Stockholders' Equity for the nine months ended September 30, 2001 Consolidated Statements of Cash Flows 6 for the nine months ended September 30, 2000 and 2001 Notes to Consolidated Financial State- 8 ments Item 2. Management's Discussion and Analysis 13 of Financial Condition and Results of Operations Part II. OTHER INFORMATION Item 1. Legal Proceedings 15 Item 2. Changes in Securities 16 Item 3. Defaults Upon Senior Securities 16 Item 4. Submission of Matters to a Vote 17 of Security Holders Item 5. Other Information 17 Item 6. Exhibits and Reports on Form 8-K 17 Signatures 18
-2- PART I. FINANCIAL INFORMATION FINANCIAL STATEMENTS VALCOM, INC. AND SUBSIDIARY ----------------------------- CONSOLIDATED BALANCE SHEETS -----------------------------
Sept 30, Dec.31, 2001 2000 ------ ----- (Unaudited) (Audited) Current Assets: Cash $ 421,888 $ 52,777 Accounts receivable 138,088 116,322 Other receivables 89,523 52,634 Prepaid expenses -0- 11,569 Development costs 146,949 110,201 Property held for sale -0- 3,940,000 Notes receivable 1,415,000 -0- ------------ ------------- Total Current Assets 2,211,448 4,283,503 Fixed Assets - net 12,209,933 11,750,687 Prepaid loan fees 255,171 100,501 Deposits 31,750 30,000 Note receivable, long term 100,000 -0- ------------ ------------- Total Assets $14,808,302 $ 16,164,691 ============ ============== See accompanying notes to consolidated financial statements -3- LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accrued wages due stockholder $ -0- $ 670,000 Advances due stockholder -0- 200,508 Loan payable affiliate -0- 150,000 Accrued interest payable 20,384 325,010 Accrued other 132,742 55,661 Credit line payable 150,837 110,000 Notes payable -- current portion 133,405 1,289,586 Accounts payable 505,020 298,506 Production advances, net 751,100 -0- ----------- --------- 1,693,488 3,099,271 Notes payable 7,108,718 5,902,919 ----------- ---------- Total Liabilities $ 8,802,206 $9,002,190 ----------- ---------- Commitments and contingencies Stockholders' equity: Preferred stock, par value $0.001; 10,000,000 shares authorized: 1,538,000 and 1,543,000 shares issued and outstanding at September 30, 2001 and December 31, 2000 respectively. 1,538 1,543 Common stock, par value $.001; 100,000,000 shares authorized; 8,909,401 and 91,198,843 shares issued and outstanding at September 30, 2001 and December 31, 2000 respectively. 8,909 91,190 Additional Paid-in capital 9,037,699 8,241,849 Retained Earnings (deficit) (3,042,050) (1,172,081) ----------- ----------- 6,006,096 7,162,501 ----------- ----------- $14,808,302 $16,164,691 =========== ===========
See accompanying notes to consolidated financial statements -4- VALCOM, INC. AND SUBSIDIARY ------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, ------------------------------------------- (UNAUDITED) ----------- Nine Months Ended Sept 30, Three Months Ended Sept 30, --------------------------- --------------------------
2001 2000 2001 2000 ---- ---- ---- ---- Revenues: Revenues Studio Rental $1,545,178 $1,194,282 $ 613,346 $ 434,952 Production 800,873 420,875 261,447 145,223 Other 105,968 11,354 3,558 ---------- ---------- ---------- ---------- 2,452,019 1,626,511 878,351 580,175 Cost and Expenses: Production 912,905 366,232 302,410 128,703 Selling and promotion 184,981 18,306 52,978 18,306 Depreciation 116,659 167,489 35,040 54,990 General and administrative 2,596,290 1,545,449 618,646 1,061,331 ---------- ---------- ---------- ---------- Total 3,810,835 2,097,476 1,009,074 1,263,330 Operating income (loss) (1,358,816) (470,965) (130,723) (683,155) Interest expenses ( 565,986) (513,570) (224,191) (181,748) Gain on sale of equipment 54,833 54,833 ---------- ---------- ---------- ---------- Net Income (loss) $(1,869,969) $ (984,535) $ (300,081) $ (864,903) ========== ========== ========== ========== Basic net income (loss) per share $ (0.21) $ (0.10) $ (0.03) $(0.10) ========== ========== ========== ==========
See accompanying notes to consolidated financial statements -5- VALCOM, INC. AND SUBSIDIARY ----------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOW ------------------------------------ FOR THE NINE MONTHS ENDED SEPTEMBER 30, -------------------------------------- (UNAUDITED)
2001 2000 ---- ---- Operating Activities: Net Income (Loss) $(1,869,969) $ (984,535) Items Not Requiring Cash: Depreciation and amortization 116,659 167,489 Stock issued for services 280,000 141,565 ----------- ----------- $(1,473,310) $ (675,481) ----------- ----------- Changes in: Receivables ( 58,655) 28,669 Inventory -0- 20,500 Mortgage escrow holdback -0- 327,900 Prepaid expenses 11,569 -0- Notes rceivable (1,415,000) (50,000) Development costs (36,748) (146,436) Property held for sale 3,940,000 -0- Accounts payable and accrued expenses (691,031) 195,882 Production deposits 751,100 -0- Credit line payable 40,837 -0- Loans payable -0- (45,000) Due to stockholder (200,508) 348,477 ----------- ----------- $ 2,341,564 $ 679,992 =========== =========== Cash Provided (used) by Operations 868,254 4,511 Investing Activities: Acquisition of fixed assets (575,905) ( 110,649) Renovation costs -0- (75,000) Deposits ( 1,750) -0- Notes receivable (100,000) -0- Prepaid loan fees (154,670) -0- ----------- ----------- Cash Used by Investing Activities (832,325) (185,649) ----------- ----------- See accompanying notes to consolidated financial statements -6- Financing Activities: Principal amount on notes payable 128,182 ( 34,139) Withdrawal of capital contributions -0- (2,000,000) Issuance of stock 205,000 45,000 ----------- ----------- Cash Provided (Used) by Financial Activities 333,182 (1,989,139) ----------- ----------- Increase (Decrease) in Cash and Cash Equivalents 369,111 (2,170,227) Cash and cash equivalents, beginning of year 52,777 2,279,432 ----------- ----------- Cash and cash equivalents, end of period $ 421,888 $ 109,155 =========== =========== Supplemental disclosure of cash flow information: Interest paid $ 565,986 $ 414,811 =========== =========== Income taxes paid $ 800 $ 1,600 =========== ===========
See accompanying notes to consolidated financial statements VALCOM, INC. AND SUBSIDIARY --------------------------------------- UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY ----------------------------------------------- FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 ---------------------------------------
Additional Common Preferred Paid-in Accumulated ------- ---------- Capital Deficit Shares Amount Shares Amount ---------- ----------- ------- ------- ------ ------- Balance Jan.1, 2001 90,239,843 $90,240 1,543,000 $ 1,543 $8,101,057 $(1,172,081) Acquisition of Half/Day 950,000 950 140,792 Shares issued for services 1,600,000 1,600 278,400 ( 280,000) Shares issued for debt retirement 869,162 869 227,695 Shares issued for cash 410,000 410 204,590 Conversion of preferred 25,000 25 ( 5,000) ( 5) ( 20) Shares Cancelled (5,000,000) (5,000) 5,000 Reverse Split 1:10 (80,184,604)(80,185) 80,185 Net loss for the Period ( 1,589,969) ---------- ------- ---------- --------- ---------- ----------- Balance September 30, 2001 8,909,401 $ 8,909 1,538,000 $ 1,538 $9,037,699 $(3,042,050) ========== ======= ========== ========= ========== ===========
See accompanying notes to consolidated financial statements -7- VALCOM, INC. AND SUBSIDIARY ---------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ UNAUDITED SEPTEMBER 30, 2001 AND DECEMBER 31, 2000 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ------------------------------------------------- Following is a summary of the significant accounting policies followed in the preparation of these financial statements, which policies are in accordance with generally accepted accounting principles: Organization - ------------ ValCom, Inc. (the "Company"), formerly SBI Communication, Inc. was originally organized in the State of Utah on September 23, 1983. Subsequently the Company's state of domicile was changed from Utah to Delaware. In October 2000, the Company was issued 75,709,965 shares by SBI for 100% of the shares outstanding in Valencia Entertainment International LLC ("VEI"), a California limited liability corporation. This acquisition has been accounted for as a reverse acquisition merger with VEI becoming the surviving entity. The corporate name was changed to ValCom, Inc. Principles of Consolidation - --------------------------- The consolidated financial statements include the accounts of the Company and one wholly-owned subsidiary, Half Day Video, Inc. These financial statements include all activities as if the acquisitions occurred on January 1, 2000. Use of Estimates - ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ form those estimates. Commitments, Risk And Contingencies - ------------------------------------ Financial instruments that potentially subject the Company to concentrations of risk consist of trade receivables principally arising from monthly leases from television producers. Management believes all receivables to be fully collectible. In addition, the Company has a standby letter of credit for $30,000 and a price protection agreement with a shareholder for $20,000. Cash Equivalents - ---------------- The Company maintains cash and cash equivalents (short-term highly liquid investments with original maturity less than three months) with various financial institutions. From time to time, cash balances may exceed Federal Deposit Insurance Corporation insurance limits. -8- Fair Value of Financial Instruments - ----------------------------------- The carrying value of cash, receivables and accounts payable approximates fair value due to the short maturity of these instruments. The carrying value of short and long-term debt approximates fair value based on discounting the projected cash flows using market rates available for similar instruments. None of the financial instruments are held for trading purposes. Depreciation - ------------ For financial reporting purposes, the Company follows the policy of providing depreciation an amortization on the straight-line and accelerated declining balance methods over the estimated useful lives of the assets, which are as follows: Building 39 years Building Improvements 39 years Office Furniture and Equipment 5 to 7 years Leasehold Inprovements 5 years Production Equipment 5 to 7 years Amortization of Prepaid Loan Costs - ---------------------------------- For financial reporting purposes, costs are amortized on the straight line method over the life of the related loan. Income Taxes - ------------ The Company provides for income taxes in accordance with Statement of Financial Accounting Standards No. 109, which requires the use of the asset and liability method and recognizes deferred income taxes for the consequences of "temporary differences" by applying enacted statutory tax rate applicable to future years differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. -9- VALCOM, INC. AND SUBSIDIARY ---------------- Notes to Consolidated Financial Statements -------------------------------------------- Unaudited September 30, 2001 And December 31, 2000 ---------------------------- Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) - ------------------------------------------------------- Stock-Based Compensation - ------------------------ As provided for in SFAS #123, the Company elected to apply APBO #25 and related interpretations whereby the fair value of stock given is determined at the grant date. Impairment of Long-Lived Assets - ------------------------------- Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undisclosed future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets is based on the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Revenue Recognition - ------------------- Revenue from licensing of television programming is recognized when the material is available for telecasting by the licensee and when certain other conditions are met. Studio rental revenue is recognized monthly pursuant to written contracts. Note 2 PROPERTY AND EQUIPMENT - ----------------------------- Property and equipment consists of the following:
Sept 30, December 31, 2001 2000 --------- ---------- Land $ 7,392,292 $ 7,392,292 Building 4,028,785 4,028,785 Building improvements 1,154,406 1,240,070 Leasehold improvements 98,175 -0- Office furniture and equipment 71,234 39,500 Production equipment 917,397 519,737 ------------ ----------- $13,662,289 $13,220,384 Less: Accumulated depreciation ( 1,452,355) ( 1,469,697) ------------ ------------- Net Book Value $12,209,934 $11,750,687 ============ =============
-10- VALCOM, INC AND SUBSIDIARY ---------------------------------------- Notes to Consolidated Financial Statements ------------------------------------------ Unaudited September 30, 2001 And December 31, 2000 --------------------------- NOTE 3 BUSINESS ACQUSISTION - --------------------------- In March 2001, the company acquired 100% ownership of Half Day Video, Inc. a California corporation, for 950,000 shares of ValCom, Inc. common stock. The net book value of Half Day Video, Inc. has been determined to be the fair market value of the common stock issued. NOTE 4 PRODUCTION AGREEMENT - -------------------------------- In March 2001 the Company entered into an agreement with Woody Fraser Productions (WFP) to produce various television productions. Under the terms of the agreement the Company will advance WFP $500,000 per year to be used for various development costs. Additionally 25% of the net profits from any productions will be paid to WFP. In March 2001 the venture signed contracts to produce a television series of 13 episodes and a pilot for a cable TV network. NOTE 5 CONVERTIBLE NOTE PAYABLE - ------------------------------- On June 7, 2001 and September 7, 2001 the Company borrowed $750,000 and $250,000 respetively form the Laurus Master Fund, LTD (LMF). The borrowings are evidenced by convertible promissory notes due June 7, 2003 and September 7, 2003. Interest at 8% per annum is payable quarterly. Any or all principal or interest is convertible into common stock of the Company at 80% of the average of the three lowest closing prices during the preceding 60 days. Subsequent to September 30, 2001 $24,565 of the principal and interest was converted to 42,748 shares of common stock. The notes have been included in "Notes Payable" at September 30, 2001. Additionally, with these borrowings common stock purchase warrants were issued to LMF. The warrant entitles LMF to purchase up to 72,727 shares of common stock of the Company at the lesser of $.548 per share or 120% of the average three lowest closing prices during the immediately preceding 10 trading days. NOTE 6 SALE OF EQUITY - ----------------------- Effective September 28, 2001 the Company sold 100% of the outstanding equity of SBI Communications, Inc of Alabama, a Alabama corporation to Ronald C. Foster, an officer, director and shareholder of ValCom, inc. The Company received a promissory note for $1,200,000. The net assets of SBI Communications, Inc of Alabama included the Piedmont property with a carring value of $3,940,000 previously classified as "Property held for sale" and related liabilities including a Mortgage, Accrued interest and amounts due Ronald C. Foster for salaries and advances made to the Company. -11- Following is a Proforma restating the December 31, 2000 balance sheet categories of ValCom, Inc. December 31, 2000 ----------------- Current Assets $ 343,503 Total Assets 13,424,691 Current Liabilites $ 364,271 Total Liabilites 6,267,190 Equity 7,157,501 NOTE 7 LITIGATION - ----------------- On September 14, 2001, an action was filed against Valencia Entertainment International, Inc. and ValCom, Inc. This matter arises from an underlying action wherein plaintiffs obtained judgments against Ricky Rocket Enterprises, Inc. and Time Travelers, Inc. in the amounts of $3,000,000 and $1,200,000, respectively. In this matter, Plaintiffs' first of two causes of action alleges that The Company, and other defendants, are alter-egos of Ricky Rocket Enterprises, Inc. and Time Travelers, Inc. and, therefore, plaintiffs are entitled to enforce the aforementioned judgments against The Company. Further, a second cause of action concerning malicious prosecution also alleges alter-ego liability. Unspecified compensatory and punitive damages are sought under this cause of action. Neither Valencia Entertainment nor ValCom, Inc. had any relationship, at any time to Ricky Rocket Enterprises. Valencia Entertainment was merely a distributor for Time Travelers, Inc. However, we were not a party to this action and did not become the distributor for Time Travelers, Inc. until four years after the alleged wrong doing occurred. The Company believes the allegations are without merit and intends to vigorously defend itself. -12- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction ------------ Plan of Operation: ValCom, Inc. operations at present are comprised of three divisions; 1) Studio Rental, 2) Studio Equipment Rental, and 3) Film and Television Production. Studio Rental - -------------- The Company owns six improved acres with six sound stages and two additional leased stages in Valencia California doing business as Valencia Entertainment International. Seven of the eight stages are leased under annual contracts to two major production companies. Rental income for the seven stages should remain constant at approximately $2,000,000 annually with cost of living increases. Rental income for the eighth stage increased beginning in August 2001 to $95,000 per month. Studio Equipment Rental - ----------------------- In March 2001 the Company acquired for stock Half Day Video, Inc. a company which supplies personnel, cameras and other production equipment to various production companies on a short term basis. As a result of additional equipment purchases and increased activity, from both internal and external sources, it is anticpated that Half Day Video revenue should increase significantly from the prior year. Film Production - --------------- In March 2001 the Company entered into an agreement with Woody Fraser Productions to produce various television productions on its behalf. Under the terms of the agreement the Company will retain, after costs of production, 75% of the net savings derived from any production. In March 2001 the company signed contracts with a Cable Television Network to produce a television series consisting of 13 episodes and a seperate pilot episode for a new potential series. Revenue under these contracts during 2001 will be approximately $2,500,000. In addition to retaining 75% of any possible net savings from the productions, the Company's Half Day Video unit will handle a majority of the production rental needs. Additionally, the Company signed a contract with a different Cable Television Network to produce six (6) epiodes of a television series at a contracted amount of approximately $500,000. After costs of production, the Company will retain 100% of any savings plus a portion of the executive producer fees. Additional productions are in the development process. Revenues will be recognized when all individual programs are available. -13- Results of Operation -------------------- September 30, 2001 and 2000 Comparison As of September 30, 2001 the Company had working capital of $517,960. As of the prior year working capital was $1,074,031. The change was due primarily to increase in production advances. Total assets were $14,408,302 at September 30, 2001 versus $16,164,691 at December 31, 2000 and additionally total liabilities were $8,802,206 and $9,002,190 respectively. The changes in total assets and liabilities are substantially accounted for by above described changes in current assets and liabilities. For the quarter and nine months ended September 30, 2001 the Company had respective revenue of $877,212 and $2,367,070, operating expenses of $1,007,935 and $3,725,886 and net losses of $(300,082) and $(1,869,969). Losses before depreciation and interest were $(40,850) and $(1,187,324) for the quarter and nine month periods. Rental revenue increased $178,394 for the quarter and $350,896 for the nine months compared with the corresponding prior year periods. These increases were the result of the revenue earned from two additional stages and contractual rate increases. Production income increased $116,224 for the quarter from the prior year and $379,998 for the nine months from the prior year. Other income increased $2,419 and $9,665 for the quarter and nine months respectively from the prior year due to the operation of an auto auction at the Piedmont, Alabama property. Production costs increased $432,193 for the quarter and $546,673 for the nine months compared with the corresponding prior year periods. This increase relates to the increase in production income and expensed development costs. Selling and promotion costs increased $34,672 and $166,675 for the quarter and nine months due to the effort to promote the Company. Depreciation expense decreases of $19,950 and $50,830 were due to the fully depreciated status of certain assets. For the nine months ended September 30, 2001, administrative and general costs increased by $1,050,841. This increase was the result of significant increases in Legal and Accounting, Management Consulting, Salaries and Fringes, Taxes and Licenses, Development Costs and Rent Expense catagories for the following reasons: A $34,059 increases in Legal and Accounting was due to the performance of audits and the preparation of agreements and other legal matters related to the merger. A $207,250 increases in Management Consulting was due to costs incurred in the planning and reorganization of the newly merged companies. A $363,252 increase in Development Costs represents costs expended with Woody Fraser Productions for the development of new projects. -14- A $53,172 increase in Taxes and Licenses was due to adjustments made for the under accrual of prior period taxes. A $219,782 increase in Rent was due to the leasing in late 2000 of additional studio space adjacent to the Valencia studio property. A $368,104 increase in Salaries and Fringes was primarily due to management staffing increases. For the quarter ended september 30, 2001, administrative and general costs decreased by $442,685. Thei decrease was the result of significant decreases in Legal and Accounting, Software Consulting and Web Site Development, and Taxes and Licenses catagories for the following reasons: A $72,517 decrease in Legal and Accounting was due to fee renegotiation of prior legal fees. A $192,491 decrease in Software Consulting and Web Site Development was due to completion and discontinuance of the program A $107,774 decrease in Taxes and Licenses was due to adjustments made for prior quarter overaccurals. The Company did not record any income tax expense for either the quarter or the nine months due to its tax loss and tax loss carryforwards. At the end of fiscal 2000, the Company had tax loss carryforwards in excess of $11 million. Capital Resources - ----------------- Internal and external source of funding: - ---------------------------------------- The Company has obtained a line of credit from Laurus Family of Funds. for $2,750,000, to date the Company has drawn $1,000.000. ValCom has sufficient funds to operate for the next 12 months through its use of the credit facility. The Company has sold its Piedmont property. Statement Regarding Computation of Earnings Per Share - ---------------------------------------------- See Notes To Consolidated Financial Statements included elsewhere in this filing for a description of the Company's calculation of earnings per share. PART II--OTHER INFORMATION - -------------------------- ITEM 1. LEGAL PROCEEDINGS - ------------------------- On September 14, 2001, plaintiffs Diane Russomanno and Knowledge Booster, Inc. commenced an action in the Superior Court of the State of California, County of Los Diane Russomanno and Knowledge Booster, Inc. v. Valencia Entertainment International, ValCom, Inc., Vince Vellardita, Tom Grimmett, Nalin Rathod, Aburizal Bakrie, Nirwan Bakrie, Linda Layton, Barak Isaacs, and Does 1 through 20, Case No. BC257989 (Sup. Ct., L.A. Co., C.A.). This matter arises from an underlying action wherein plaintiffs obtained judgments against -15- Ricky Rocket Enterprises, Inc. and Time Travelers, Inc. in the amounts of $3,000,000 and $1,200,000, respectively. In this matter, Plaintiffs' first of two causes of action alleges that we, and other defendants, are alter-egos of Ricky Rocket Enterprises, Inc. and Time Travelers, Inc. and, therefore, plaintiffs are entitled to enforce the aforementioned judgments against us. Plaintiffs seek payment of the judgments in the amount of $4,200,000 plus interest under this cause of action. Further, Plaintiffs second cause of action concerning malicious prosecution also alleges alter-ego liability. Plaintiffs allege that Ricky Rocket Enterprises, Inc. and Time Travelers, Inc. filed a cross-complaint in the underlying litigation without any probable cause and for an improper motive or purpose. Plaintiffs similarly allege that we, and other defendants, are alter egos of Ricky Rocket Enterprises, Inc. and Time Travelers, Inc. are, therefore, liable for such malicious prosecution. Plaintiffs seek unspecified compensatory and punitive damages under this cause of action. We believe the allegations are without merit and intend to vigorously defend ourselves. ITEM 2. CHANGES IN SECURITIES - ----------------------------- In January the company issued 160,000 shares of common stock at $1.75 per share for services. In February the company issued 41,000 shares of common stock for cash. In March the Company issued 33,166 shares of common stock to individuals for the retirement of a debt in the amount of $150,000 and interest. In March the Company issued 95,000 shares of common stock to individuals for the acquisition of Half-Day Video. In April the Company issued 25,000 sharesof common stock for the acquisition of Woody Fraser Productions. In April the Company cancelled 59,700 shares of common stock previously issued to Robert Nathan and Ernest C. Wille. In April the Company re-issued 25,000 shares of common stock, under the S-8 Employee Compensation Plan to three individuals for consulting services. In May the Company cancelled 20,000 shares of it's common stock previously issued to Valencia Entertainment. In May the Company cancelled a second return of 59,700 shares of common stock previously issued to Robert Nathan and Ernest C. Wille. In May, 5,000 shares of preferred shares were converted to 25,000 shares of common. In August 20,000 shares were issued to correct a previous issue error to a shareholder. On July 10, 2001 the Company's SB-2 SEC File No. 333-63346 became effectived, which registered 662,653 share of common stock. There were 53,750 common shares issued in the third quarter from this registration. On July 17, 2001 Vince Vellardita cancelled and retired 5,000,000 shares of common stock. These shares were returned to the treasury. ITEM 3. DEFAULTS UPON SENIOR SECURITIES - --------------------------------------- None. -16- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ----------------------------------------------------------- A) a) The Company held its 2001 annual Meeting of Stockholders on May 22, 2001. b) Vince Vellardita, Stephen A. Weber, Ronald Foster, and David Weiner were elected as directors of the Company. c) 1) Votes casts for each nominee for director were as follows:
For Against Abstain Non-Votes ---- ---------- --------- ------------ Mr. Vellardita 8,460,521 -0- -0- 448,880 Mr. Weber 8,460,521 -0- -0- 448,880 Mr. Foster 8,460,521 -0- -0- 448,880 Mr. Weiner 8,460,521 -0- -0- 448,880
B) Reverse Split of Shares ------------------------ On August 15, 2001, the Company's Board of Directors approved an amendment to the Company's Amended and Restated Certificate of Incorporation to effect a one-for-ten reverse stock split (the "Reverse Split") of the Company's issued and outstanding Common Stock (the "Existing Common"). On August 15, 2001, the amendment was approved in a written consent executed by the holders of more than a majority of the outstanding shares of Common Stock. Approval by the Board of Directors and by the holders of a majority of the outstanding shares of Common Stock is adequate under Delaware law to effect the amendment. ITEM 5. OTHER INFORMATION - ------------------------- None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- EXHIBITS AND REPORTS ON FORM 8-K AND OTHER FORMS (A) EXHIBITS: EXHIBITS DESCRIPTION 11 Statement re: computation of per share earnings (B) REPORTS ON FORM 8-K, AND DEFR 14A: Edgar Filings: April 6 - 8-K/A Item 2 Acquisition Woody Fraser Productions May 11 - DEFR14A Proxy Statement: Matters to be brough before shareholders for meeting of May 22, 2001 May 31 - 8-K Item 7 Financial Statements Half Day Video -17- (C) Registration Statement June 19 - SB-2 Registration Statement (D) September 5 - DEF 14 C Proxy Statement. SIGNATURES ------------ In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ValCom, Inc. Date: NOVEMBER 13, 2001 By: /s/Vince Vellardita ------------------------------------- Vince Vellardita Chairman of the Board and Chief Executive Officer (principal executive officer) EX-11 3 bex11-14.txt COMPUTATION OF EARNINGS PER COMMON SHARE EXHIBIT 11 VALCOM, INC. COMPUTATION OF EARNINGS PER COMMON SHARE FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 Computation of earnings per common share
Nine Months Nine Months Ended Ended Sept. 30, 2001 Sept. 30, 2000 -------------- -------------- Shares outstanding: 8,909,401 8,716,512 Weighted average shares outstanding 8,909,401 8,716,512 Net loss $ (1,869,696) $ (984,535) Preferred Dividend -- -- -------------- -------------- Total (1,869,696) (984,535) Net loss per share $ (0.21) $ (0.11)
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