-----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, QG2MqMPVa0e3PdY2oUMovrMIG3ycH0vEZrHtuHXzTaoLVrQOyHhXL7B3gg+sVpTC P58vtZdgBwBZAa3xQxQm1Q== 0001227528-08-000166.txt : 20080918 0001227528-08-000166.hdr.sgml : 20080918 20080918162846 ACCESSION NUMBER: 0001227528-08-000166 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20080918 DATE AS OF CHANGE: 20080918 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALCOM, INC CENTRAL INDEX KEY: 0001013453 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ALLIED TO MOTION PICTURE PRODUCTION [7819] IRS NUMBER: 581700840 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-28416 FILM NUMBER: 081078661 BUSINESS ADDRESS: STREET 1: 920 COMMERCE STREET CITY: LAS VEGAS STATE: NV ZIP: 89106-4501 BUSINESS PHONE: 702-385-9000 MAIL ADDRESS: STREET 1: 920 COMMERCE STREET CITY: LAS VEGAS STATE: NV ZIP: 89106-4501 FORMER COMPANY: FORMER CONFORMED NAME: VALCOM INC DATE OF NAME CHANGE: 20040816 FORMER COMPANY: FORMER CONFORMED NAME: VALCOM INC DATE OF NAME CHANGE: 20030213 FORMER COMPANY: FORMER CONFORMED NAME: SBI COMMUNICATIONS INC DATE OF NAME CHANGE: 20030204 10KSB/A 1 lk10ksba093006.txt VALCOM, INC. FORM 10-KSB/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB/A-2 ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006 SECURITIES AND EXCHANGE COMMISSION FILE NUMBER 000-28416 VALCOM, INC. ----------- (Name of small business issuer specified in its charter) Delaware 58-1700840 - -------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 2113A Gulf Boulevard, Indian Rocks Beach, Florida 33785 ------------------------------------------------------- (Address of Principal executive offices) (Zip Code) --------------------------------------------------- (727) 953 - 9778 ---------------- (Issuer's Telephone Number) --------------------------- 2525 North Naomi Street, Burbank, California 91504 -------------------------------------------------- (Former Address of Principal executive offices) (Zip Code) ---------------------------------------------------------- (818) 848-5800 -------------- (Issuer's telephone number) --------------------------- 920 South Commerce Street, Las Vegas, Nevada 89106 -------------------------------------------------- (Former address of principal executive offices) (zip Code) ---------------------------------------------------------- Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: COMMON STOCK, PAR VALUE $0.001 AND PREFERRED STOCK, PAR VALUE $0.001 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ ] YES [ ] NO Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and will not be contained, to the best of the issuer'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. [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] YES [X] NO Issuer's revenues for its most current fiscal year: $1,679,236 Number of common shares outstanding as of September 11, 2008 at $.001 par value: 22,774,349shares. DOCUMENTS INCORPORATED BY REFERENCE: NONE Transitional Small Business Disclosure Format: [ ] YES [X] NO EXPLANATORY NOTE We are filing this Amendment No. 2 on Form 10-KSB/A to our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2006, as originally filed with the Securities and Exchange Commission (the "Commission") on July 31, 2007 (the "Original Filing"), and amended on August 1, 2007 (the "First Amendment") for the purpose of including audited financial information. This Amendment No. 2 does not change any of the information contained in the Original Filing or the First Amendment. This Amendment No. 2 continues to speak as of the date of the Original Filing and we have not updated or amended the disclosures contained therein to reflect events that have occurred since the date of the Original Filing. Accordingly, this Amendment No.2 should be read in conjunction with our filings made with the Commission subsequent to the date of the Original Filing. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS. Certain statements in "Management's Discussion and Analysis or Plan of Operation" below, and elsewhere in this annual report, are not related to historical results, and are forward-looking statements. Forward-looking statements present our expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward- looking statements. Forward-looking statements frequently are accompanied by such words such as "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential" or "continue," or the negative of such terms or other words and terms of similar meaning. Although we believe that the expectations reflected in the forward- looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, or timeliness of such results. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this annual report. Subsequent written and oral forward looking statements attributable to us or to persons acting in our behalf are expressly qualified in their entirety by the cautionary statements and risk factors set forth below and elsewhere in this annual report, and in other reports filed by us with the SEC. INTRODUCTION PLAN OF OPERATION As of September 30, 2006, ValCom, Inc. operations were comprised of the following divisions: 1. Studio Division 2. Rental Division 3. Broadcast Television 4. Film and Television Production; and Animation Division. 5. Live Theater RENTAL ValCom's business includes television production for network and syndication programming, motion pictures, and real estate holdings, however, revenue is primarily generated through the lease of the sound stages and production. ValCom's past and present clients in addition to Paramount Pictures and Don Belisarious Productions, include Warner Brothers, Universal Studios, MGM, HBO, NBC, 20th Century Fox, Disney, CBS, Sony, Showtime, and the USA Network. In addition to leasing its sound stages, ValCom also owns a small library of television content, which is ready for worldwide distribution and several major television series in advanced stages of development. ValCom's Studio Division is composed of two properties: 920 South Commerce which is leased and 41 North Mojave which ValCom has 1/3 equity in the real estate of 7.5 acres, 160,000 square feet of commercial space, giving ValCom a total of 9 sound stages and a recording studio. Corporate offices are located at the Commerce Studios which houses a state-of-the art production studio, broadcast facilities, recording studios, production design construction, animation and post-production. TELEVISION, FILM, & ANIMATION PRODUCTION Jeff Franklin, Executive Producer of "Funny Money" and founder of FWE Picture Company began his entertainment career in the music industry managing the careers of music icons George Clinton and Marvin Gaye. Franklin recently began working with Stan Lee on two new pictures, including "Light Speed" and "The Harpy." Cumulatively, theatrical features that Franklin has produced and executive produced, such as "Casper," "Kull-The Conqueror," "Cold Around the Heart," "Stuart Little" and "Stuart Little 2," have grossed over one billion dollars. Franklin has also produced many television series, as well as producing on and off-Broadway. Stan Lee, chairman and chief creative officer of POW!, is the creator and inventor of the modern superhero. A prolific author, Lee revolutionized the comic book industry by creating compelling characters who, despite extraordinary powers and talents, are nonetheless plagued by the same doubts and difficulties experienced by ordinary people. Some of his most enduring characters, like Spider-Man{trademark}, The Hulk{trademark}, and the X- Men{trademark}, have spun off into television programs and feature films. October 1, 2003, we formed New Zoo Revue LLC pursuant to a joint venture agreement with O Atlas Enterprises Inc.,a California corporation. New Zoo Revue LLC was formed for the development and production of "New Zoo Revue" a feature film and television series and marketing of existing episodes. ValCom shall contribute all funding required for the development of the above to a maximum of $1,000,000 and O Atlas shall contribute an exclusive ten (10) year worldwide license in and to all rights, music and characters as its equal contribution towards Capital. The net profit after all expenses will be shared equally by ValCom Inc. and O Atlas. New Zoo Review LLC is expected to generate revenue by 2005 and expected to grow based on our ability to sell the TV Series of New Zoo Revue. CHANNEL 8 IN PALM SPRINGS, CALIFORNIA In connection with our joint venture with New Global Communications, Inc., we own a 45% equity interest in ValCom Broadcasting, LLC, a New York limited liability company, which operates KVPS (Channel 8), an independent television broadcaster in the Palm Springs, California market. VALCOM BURBANK STUDIOS, one of Burbank's television production facilities, with three edit bays, two sound stages and over 25,000 square feet of production support was recently acquired by ValCom, Inc. The Burbank Studios was the home of 'Jeopardy' and the 'Wheel of Fortune' post production for many years in addition to a past client base consisting of: HGTV, D.I.V., History Channel, Discovery, Food Network, Sony Pictures T.V., PAX, MTV, Disney Channel, HBO, ABC, CBS, NBC, Sci Fi, GSN, Comedy Central, VH-1, FOX Television, Lifetime, over a period of 12 years. RESULTS OF OPERATIONS FISCAL YEAR ENDED SEPT. 30, 2006 COMPARED TO FISCAL YEAR ENDED SEP. 30, 2005 Revenues for the year ended September 30, 2006 increased by $843,842 from $930,108 for the same period in 2005 to $1,773,950 for the year ended September 30, 2006. The increase in revenue was principally due to increase in production revenue. Production costs for the year ended September 30, 2006 decreased by $149,235 or 34.70% from $430,082 for the year ended September 30, 2005 to $280,847 for the same period in 2006. The decrease in production costs was principally due to increased control over such costs by management. Selling and promotion costs for the year ended September 30, 2006 increased by $242,047 or 679.05% from $35,645 for the same period in 2005 to $277,692 for the year ended September 30, 2006. The increase was due principally to production increases, requisitions and acquisitions of new entities. Depreciation and amortization expense for the year ended September 30, 2006 decreased by $11,989 or 13.03% from $92,001 for the year ended September 30, 2005 to $80,012 for the same period in 2006. The decrease in depreciation and amortization expense was due to ending of asset cycle. General and administrative expenses for the year ended September 30, 2006 increased by $3,727,476 or 160.88% from $2,316,890 for the year ended September 30, 2005 to $6,044,366 for the same period in 2006. The increase was due principally to increased production. Interest expense for the year ended September 30, 2006 increased by $18,766 or 36.4% from $51,562 for the year ended September 30, 2005 to $70,328 for the same period in 2006. The increase was due principally to new acquisitions of the Burbank Studios. Due to the factors described above, the Company's net loss increased by $3,127,817 or 171.86% from a net loss of $1,820,021 for the year ended September 30, 2005 to a loss of $4,947,838 for the year ended September 30, 2006. STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE See Notes to Consolidated Financial Statements in Part F/S for a description of the Company's calculation of earnings per share. LIQUIDITY AND CAPITAL RESOURCES The Company's consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the consolidated financial statements, the Company has a net loss of $4,947,838 and a negative cash flow from operations of $1,071,929 for the year ended September 30, 2006, and an accumulated deficit of $15,293,188 at September 30, 2006. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Cash totaled $71,612 on September 30, 2006, compared to $276,280 at September 30, 2005. During the fiscal year 2006, net cash used by operating activities totaled $1,071,929 compared to a negative cash flow of $287,110 for the year ended September 30, 2005. A significant portion of operating activities included payments for accounting and legal fees, consulting fees, salaries, and rent. Net cash increase by financing activities for fiscal year 2006 totaled $1,404,501. Net cash used by investing activities during fiscal year 2006 totaled $ 537,240 from purchase of fixed assets and increased expenditures for the purchase of equipment. The above cash flow activities yielded a net cash decrease of $204,668 during fiscal year 2006 compared to a increase of $254,812 during the year ended September 30, 2005. There can be no assurance that the Company will be able to raise capital on terms acceptable to the Company, if at all. Total shareholders' equity decreased to $(1,205,144) in fiscal year 2006. Additional paid in capital increased to $14,016,949 in fiscal year ended September 30, 2006. INTERNAL AND EXTERNAL SOURCES OF LIQUIDITY During the last fiscal year, the Company financed its operations with cash from its operating activities and through sales of equipment and private offerings of its securities to a director of the Company. The Company anticipates that its stock issuances and projected positive cash flow from operations collectively will generate sufficient funds for the Company's operations for the next 12 months. If the Company's existing cash combined with cash from operating activities is not adequate to finance the Company's operations during the next 12 months, the Company will consider one or more of the following options: (1) issuing equity securities in exchange for services, (2) selling additional equity or debt securities or (3) reducing the number of its employees. FUTURE FUNDING REQUIREMENTS The Company's capital requirements have been and will continue to be significant. The Company's adequacy of available funds during the next fiscal year and thereafter will depend on many factors, including whether the Company will be able to: (1) retain its existing tenants (2) rent its production equipment and personnel profitably, (3) develop additional distribution channels for its programming. Assuming funds are available, during the next fiscal year, the Company expects to spend approximately $1,000,000. for facility, equipment and growth. There can be no assurance that additional private or public financing, including debt or equity financing, will be available as needed, or, if available, on terms favorable to the Company. Any additional equity financing may be dilutive to stockholders and such additional equity securities may have rights, preferences or privileges that are senior to those of the Company's existing common or preferred stock. Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on the operating flexibility of the Company. The Company's failure to successfully obtain additional future funding may jeopardize its ability to continue its business and operations. ITEM 7. FINANCIAL STATEMENTS AND SUMMARY FINANCIAL DATA MOORE & ASSOCIATES, CHARTERED ACCOUNTANTS AND ADVISORS PCAOB REGISTERED REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE BOARD OF DIRECTORS VALCOM, INC. We have audited the accompanying consolidated balance sheet of Valcom, Inc. as of September 30, 2006, and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated financial statements of Valcom, Inc. as of September 30, 2005 and 2004 were audited by other auditors whose reports dated December 16, 2005, expressed an unqualified opinion on those statements. We conduct our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Valcom, Inc. as of September 30, 2006, and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 12 to the financial statements, the Company has incurred significant annual losses, which have resulted in an accumulated deficit of $15,293,188 at September 30, 2006, which raises substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 12. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /S/ MOORE & ASSOCIATES, CHARTERED - --------------------------------- Moore & Associates Chartered Las Vegas, Nevada September 17, 2008 2675 S. Jones Blvd. Suite 109, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501 Armando C. Ibarra, C.P.A. Members of the California Society of Certified Public Accountants Registered with the Public Company Accounting Oversight Board To the Board of Directors Valcom, Inc. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We have audited the accompanying consolidated balance sheet of Valcom, Inc. and subsidiaries as of September 30, 2005 and 2004 and the related consolidated statements of operations, changes in shareholders' equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Valcom, Inc., and subsidiaries as of September 30, 2005and 2004, and the results of their operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 14 to the consolidated financial statements, the Company's losses from operations raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ ARMANDO C. IBARRA, C.P.A. - ----------------------------- ARMANDO C. IBARRA, C.P.A. December 16, 2005 Chula Vista, Ca. 91910 371 "E" STREET, CHULA VISTA, CA 91910 TEL: (619) 422-1348 FAX: (619) 422-1465
FINANCIAL STATEMENTS VALCOM, INC. Balance Sheets Assets September 30, September 30, September 30, 2006 2005 2004 ------------- ------------- ------------- CURRENT ASSETS Cash $ 71,612 $ 276,280 $ 21,468 Accounts receivable, net 196,249 87,620 28,767 Production in progress - - 91,201 ------------- ------------- ------------- Total Current Assets 267,861 363,900 141,436 ------------- ------------- ------------- FIXED ASSETS, net 126,700 95,422 3,539,513 ------------- ------------- ------------- OTHER ASSETS Deposits 160,811 8,350 40,631 Other assets 1,000,000 1,150,000 - ------------- ------------- ------------- Total Other Assets 1,160,811 1,158,350 40,631 ------------- ------------- ------------- TOTAL ASSETS $ 1,555,372 $ 1,617,672 $ 3,721,580 ============= ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable and accrued expenses $ 671,580 $ 578,848 $ 496,050 Deferred income - 120,000 - Due to related parties 1,672,456 267,955 100,000 Notes payable 416,480 416,480 386,952 ------------- ------------- ------------- Total Current Liabilities 2,760,516 1,383,283 983,002 ------------- ------------- ------------- LONG-TERM LIABILITIES Notes payable - - 2,468,530 ------------- ------------- ------------- Total Long-Term Liabilities - - 2,468,530 ------------- ------------- ------------- TOTAL LIABILITIES 2,760,516 1,383,283 3,451,532 ------------- ------------- ------------- STOCKHOLDERS' EQUITY (DEFICIT) Series B Preferred stock, 1,000,000 shares authorized at par value of $0.001, 38,000 shares issued and outstanding 38 38 38 Series C Preferred stock, 25,000,000 shares authorized at par value of $0.001, 9,267,416 and 6,517,416 shares issued and 9,267 6,517 4,480 outstanding Common stock, 100,000,000 shares authorized at par value of $0.001, 85,312,064 and 41,883,717 shares issued and outstanding, respectively 85,312 41,884 28,120 Treasury stock, 35,000 shares -23,522 -35 -35 Minority interest - - -133,342 Additional paid-in capital 14,016,949 10,531,335 8,896,116 Accumulated deficit -15,293,188 -10,345,350 -8,525,329 ------------- ------------- ------------- Total Stockholders' Equity (Deficit) -1,205,144 234,389 270,048 ------------- ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 1,555,372 $ 1,617,672 $ 3,721,580 ============= ============= =============
VALCOM, INC. Statements of Operations For the Years Ended September 30, ------------------- 2006 2005 2004 ------------ ------------ ------------ REVENUES $ 1,773,950 $ 930,108 $ 1,953,480 COST OF GOODS SOLD 280,847 430,082 151,048 ------------ ------------ ------------ GROSS MARGIN 1,493,103 500,026 1,802,432 OPERATING EXPENSES Advertising and 277,692 35,645 76,299 marketing Depreciation 80,012 92,001 665,525 expense General and administrative 6,044,366 2,316,890 6,351,711 ------------ ------------ ------------ Total Operating Expenses 6,402,070 2,444,536 7,093,535 ------------ ------------ ------------ LOSS FROM OPERATIONS -4,908,967 -1,944,510 -5,291,103 ------------ ------------ ------------ OTHER INCOME (EXPENSE) Gain (loss) on - 176,051 140,451 sale of equipment Interest expense -70,328 -51,562 -854,161 Other income 31,457 - 75,098 ------------ ------------ ------------ TOTAL OTHER INCOME (EXPENSE) -38,871 124,489 -638,612 ------------ ------------ ------------ LOSS BEFORE INCOME TAXES -4,947,838 -1,820,021 -5,929,715 INCOME TAX EXPENSE - - - ------------ ------------ ------------ NET LOSS $ -4,947,838 $ -1,820,021 $ -5,929,715 ============ ============= ============ BASIC LOSS PER SHARE $ -0.08 $ -0.05 $ -0.27 ============ ============= ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 63,597,891 36,257,129 21,913,888 ============ ============= ============ The accompanying notes are an integral part of these financial statements
VALCOM, INC. Statements of Stockholders' Equity (Deficit) Series B Preferred Stock Series C Preferred Stock Series D Preferred Stock ------------------------ ------------------------ ------------------------ Shares Amount Shares Amount Shares Amount ------ -------- --------- -------- --------- -------- Balance, 38,000 $ 38 1,480,000 $ 1,480 1,250,000 $ 1,250 September 30, 2003 Intercompany transfer and discontinued operations - - - - - - Common stock issued for Services - - - - - - Common stock issued for Debt - - - - - - Common stock issued for Cash - - - - - - Preferred - - 2,999,999 3,000 -1,250,000 -1,250 stock conversion Less treasury stock - - - - - - Net loss for the year ended September 30, - - - - - - 2005 ------ -------- --------- -------- --------- -------- Balance, 38,000 38 4,479,999 4,480 - - September 30, 2004 Common stock issued for Services - - - - - - Common stock issued for Cash - - - - - - Preferred stock issued for cash, net - - 2,537,417 2,537 - - Preferred - - -500,000 -500 - - stock conversion Net loss for the year ended September 30, - - - - - - 2005 ------ -------- --------- -------- --------- -------- Balance, 38,000 38 6,517,416 6,517 - - September 30, 2005 Preferred stock issued for Services - - 4,000,000 4,000 - - Common stock issued for Services - - - - - - Common stock issued for Debt - - - - - - Preferred - - -1,250,000 -1,250 - - stock conversion Net loss for the year ended September 30, - - - - - - 2006 ------ -------- --------- -------- --------- -------- Balance, September 30, 2006 38,000 $ 38 9,267,416 $ 9,267 - $ - ====== ========= ========= ======== ========= ========
VALCOM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2006, 2005 and 2004 NOTE 1. DESCRIPTION OF BUSINESS ValCom, Inc and its Subsidiaries' (collectively the Company) businesses include television production for network and syndication programming, motion pictures, and real estate holdings, however, revenue is primarily generated through the lease of the sound stages and production. The Company's past and present clients include movie studios and television networks. In addition to leasing its sound stages, the Company also owns a small library of television content, which is ready for worldwide distribution and several major television series in advanced stages of development. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. BASIS OF PRESENTATION This summary of significant accounting policies of the Company is presented to assist in understanding the consolidated financial statements. The consolidated financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the consolidated financial statements. b. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Valcom, Inc. and four wholly-owned subsidiaries, VEI, which was acquired effective February 2001, and Half Day Video, Inc., which was acquired effective March 2001. ValCom Nevada which was acquired effective March 1, 2004, and New Zoo Revue which was acquired effective October 2003. Investments in affiliated companies over which the Company has a significant influence or ownership of more than 20% but less than or equal to 50% are accounted for under the equity method. The Company has no equity affiliates as of September 30, 2006. All material intercompany transactions and balances have been eliminated in the consolidation. c. 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 the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. d. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standard No. 107, Disclosures About Fair Value of Financial Instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximates fair value due to the short-term maturity of these instruments. The carrying value of notes payable approximates fair value because negotiated terms and conditions are consistent with current market rates as of September 30, 2006 and 2005. e. RECLASSIFICATIONS Certain amounts from prior periods have been reclassified to conform to the current year presentation. f. DEPRECIATION AND AMORTIZATION For financial and reporting purposes, the Company follows the policy of providing depreciation and amortization on the straight-line method over the estimated useful lives of the assets, which are as follows: Buildings 39 years Building Improvements 39 years Production Equipment 5 years Office Furniture and Equipment 5 to 7 years Leasehold Improvements 5 years Autos and Trucks 5 years g. INCOME TAXES The Company has adopted FASB 109 to account for income taxes. The Company currently has no issues which create timing differences that would mandate deferred tax expense. Net operating losses would create possible tax assets in future years, but due to the uncertainty as to the utilization of net operating loss carry forwards, a valuation allowance has been made to the extent of any tax benefit that net operating losses may generate. h. SHARE-BASED COMPENSATION The Company has adopted the fair value based method of accounting for stock- based employee compensation in accordance with Statement of Financial Accounting Standards Number 123 (REVISED 2004), "Share-Based Payment" (SFAS 123[R]). In accordance with SFAS 123[R], option expense of $-0- and $-0- was recognized for the years ended September 30, 2006 and 2005, respectively. The expense was calculated using the Black-Scholes valuation model. i. REVENUE RECOGNITION Revenues from studio and equipment rentals are recognized ratably over the contract terms. Revenues from the production and licensing of television programming are recognized when the films or series are available for telecast and certain contractual terms of the related production and licensing agreements have been met. j. CONCENTRATION OF CREDIT RISK Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and trade receivables. Concentrations of credit risk with respect to trade receivables are limited due to the clients that comprise our customer base and their dispersion across different business and geographic areas. We estimate and maintain an allowance for potentially uncollectible accounts and such estimates have historically been within management's expectations. Our cash balances are maintained in accounts held by major banks and financial institutions located in the United States. The Company occasionally maintains amounts on deposit with a financial institution that are in excess of the federally insured limit of $100,000. Statement of Financial Accounting Standards No. 105 identifies this as a concentration of credit risk requiring disclosure, regardless of the degree of risk. The risk is managed by maintaining all deposits in high quality financial institutions. The Company had no amounts in excess of federally insured limits at September 30, 2006. k. CASH AND CASH EQUIVALENTS For purposes of financial statement presentation, the Company considers all highly liquid investments with a maturity of three months or less, from the date of purchase, to be cash equivalents. l. TREASURY STOCK Treasury stock is accounted for by the cost method. Issuance of treasury shares is accounted for on a first in, first-out basis. Differences between the cost of treasury shares and the re-issuance proceeds are charged to additional paid- in capital, if reissued. During July 2002, the Company purchased 35,000 shares of its common stock at a total cost of $23,522. No shares have been reissued as of September 30, 2006. m. RECENT ACCOUNTING PRONOUNCEMENTS In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts-and Interpretation of FASB Statement No. 60". SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on the Company's financial position, statements of operations, or cash flows at this time. In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB's amendments to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on the Company's financial position, statements of operations, or cash flows at this time. In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133. This standard requires companies to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company has not yet adopted the provisions of SFAS No. 161, but does not expect it to have a material impact on its consolidated financial position, results of operations or cash flows. In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in developing an estimate of expected term of "plain vanilla" share options in accordance with SFAS No. 123 (R), Share-Based Payment. In particular, the staff indicated in SAB 107 that it will accept a company's election to use the simplified method, regardless of whether the company has sufficient information to make more refined estimates of expected term. At the time SAB 107 was issued, the staff believed that more detailed external information m. RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED) about employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies) would, over time, become readily available to companies. Therefore, the staff stated in SAB 107 that it would not expect a company to use the simplified method for share option grants after December 31, 2007. The staff understands that such detailed information about employee exercise behavior may not be widely available by December 31, 2007. Accordingly, the staff will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007. The Company currently uses the simplified method for "plain vanilla" share options and warrants, and will assess the impact of SAB 110 for fiscal year 2009. It is not believed that this will have an impact on the Company's consolidated financial position, results of operations or cash flows. In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51. This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Before this statement was issued, limited guidance existed for reporting noncontrolling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the consolidated statement of financial position as liabilities or in the mezzanine section between liabilities and equity. This statement improves comparability by eliminating that diversity. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. The effective date of this statement is the same as that of the related Statement 141 (revised 2007). The Company will adopt this Statement beginning March 1, 2009. It is not believed that this will have an impact on the Company's consolidated financial position, results of operations or cash flows. In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business Combinations.'This Statement replaces FASB Statement No. 141, Business Combinations, but retains the fundamental requirements in Statement 141. This Statement establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The effective date of this statement is the same as that of the related FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements. The Company will adopt this statement beginning March 1, 2009. It is not believed that this will have an impact on the Company's consolidated financial position, results of operations or cash flows. In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities-Including an Amendment of FASB Statement No. 115. This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. This option is available to all entities. Most of the provisions in FAS 159 are elective; however, an amendment to FAS 115 Accounting for Certain Investments in Debt and Equity Securities applies to all entities with available for sale or trading securities. Some requirements apply differently to entities that do not report net income. SFAS No. 159 is effective as of the beginning of an entities first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157 Fair Value Measurements. The Company will adopt SFAS No. 159 beginning March 1, 2008 and is currently evaluating the potential impact the adoption of this pronouncement will have on its consolidated financial statements. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this statement does not require any new fair value measurements. However, for some entities, the application of this statement will change current practice. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statements for an interim period within that fiscal year. The Company will adopt this statement March 1, 2008, and it is not believed that this will have an impact on the Company's consolidated financial position, results of operations or cash flows. n. ACCOUNTS RECEIVABLE Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Specific reserves are estimated by management based on certain assumptions and variables, including the customer's financial condition, age of the customer's receivables, and changes in payment histories. As of September 30, 2006 an allowance for doubtful receivables $918,792 was considered necessary. Recoveries of trade receivables previously written off are recorded when received. o. BASIC LOSS PER SHARE The computation of basic and diluted loss per common share is based on the weighted average number of shares outstanding during each period. September 30, 2006 2005 2004 NET LOSS $(4,947,838) $(1,820,021) $(5,929,715) ============ ============ ============ BASIC LOSS PER COMMON SHARE $ (0.08) $ (0.05) $ (0.27) ============ ============ ============ BASIC WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 63,597,891 36,257,129 21,913,888 ============ ============ ============ The computation of loss per common share is based on the weighted average number of shares outstanding during the year plus the common stock equivalents which would arise from the exercise of stock options and warrants outstanding using the treasury stock method and the average market price per share during the year. Common stock equivalents, consisting of 1,572,500 and 1,572,500 in options and -0- and 2,083,334 in warrants were considered but were not included in the computation of loss per share at September 30, 2006 and 2005, respectively, because they would have been anti-dilutive. p. ADVERTISING AND MARKETING The Company expenses advertising costs in the period in which they are incurred. Advertising and marketing expense was $277,692, $35,645 and $76,299 for the years ended September 30, 2006, 2005 and 2004. NOTE 3. PROPERTY AND EQUIPMENT Property and equipment consists of the following at: September September September 30,2006 30,2005 30,2004 --------- --------- --------- Real Estate $ 4,500 $ 4,500 $3,385,357 Production Equipment 723,094 68,708 68,706 Leasehold Improvements 62,677 62,677 62,677 Autos and Trucks 33,971 33,971 33,971 Office Furniture 48,421 44,814 45,971 and Equipment Video Equipment 181,877 181,877 279,021 --------- --------- --------- 1,054,540 396,547 3,875,703 Less: accumulated (380,772) (301,125) (335,592) depreciation impairment allowance (547,068) - - --------- --------- ---------- Net book value $ 126,700 $ 95,422 $3,539,513 ========= ========= ========== Depreciation expense for the years ended September 30, 2006, 2005 and 2004 was$80,012, $92,001 and $665,525, respectively. The Company recorded an impairment allowance for the property equipment of $547,068 due to the bankruptcy filing. NOTE 4. CONVERTIBLE NOTES PAYABLE The following are convertible notes issued in 2004. All of these notes incur interest at 8% per annum with different due dates. Accrued interest of $68,172 is included in accounts payable and accrued expenses in the financial statements. 1. Richard Shintaku $ 30,000 2. AJW Partner 40,000 3. AJW Partner 85,000 4. AJW Qualified 110,000 5. AJW Off Shore 92,500 6. Jeff Gleckman 11,500 7. Condor Financial 39,980 8. New Millenium Capital 7,500 -------- Total $416,480 ======== NOTE 5. RELATED PARTY TRANSACTIONS At September 30, 2005, related party payables represent $267,955 payable to a Director and Shareholder of the Company. At September 30, 2006, related party payables represent $1,672,456 payable to the President of the Company for his salary and various advances to the Company. The advances are non interest bearing and due upon demand. NOTE 6. OTHER ASSETS The Company holds an equity interest in real estate in Las Vegas Nevada which it carries at its cost of $1,000,000. The Company holds a 45% equity interest in Valcom Broadcasting, LLC. which it carries at $-0- after recording an impairment allowance of approximately $225,000. The Company holds a library of video productions which are carried at cost less the estimated valuation allowance of $-0-. The Company has impaired the library of video productions in full due to the uncertainty of recoverability created by the bankruptcy filing. The Company has a deposit of $160,000 against the lease of the studio in Burbank California. The Company ceased making lease payments due to the bankruptcy filing and the deposit was used to settle the lease obligation in 2007. NOTE 7. INCOME TAXES No provision for Federal and state income taxes has been recorded as the Company has incurred net operating losses through September 30, 2006. At September 30, 2006, the Company had approximately $14,867,238 of net operating loss carry-forwards for Federal income tax reporting purposes available to offset future taxable income. Such carry-forwards expire beginning in 2003. Under the Tax Reform Act of 1986, the amounts of and benefits from net operating losses and capital losses carried forward may be impaired or limited in certain circumstances. Events, which may cause limitations in the amount of net operating losses that the Company may utilize in any one year, include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. Deferred tax assets at September 30, 2006 consist primarily of the tax effect of net operating loss carry-forwards, which amounted to approximately $3,716,810. Other deferred tax assets and liabilities are not significant. The Company has provided a full valuation allowance on the deferred tax assets at September 30, 2006 to reduce such deferred income tax assets to zero, as it is management's belief that realization of such amounts is not considered more likely than not. The following is a reconciliation of the provision for income taxes at the U.S. federal income tax rate to the income taxes reflected in the Statement of Operations: September 30, 2006 September 30, 2005 September 30, 2004 Tax expense (credit) at statutory rate-federal (34)% (34)% (34)% State tax expense net of federal tax (6) (6) (6) ------ ------ ------ Changes in valuation allowance 40% 40% 40% ====== ====== ====== Tax expense at actual rate $ - $ - $ - ====== ====== ====== The components of the net deferred tax asset are summarized below: September 30, September 30, September 30, 2006 2005 2004 ----------- ----------- ----------- Deferred tax asset Net operating losses $ 3,716,810 $ 2,586,338 $ 2,131,768 Less: valuation allowance (3,716,810) (2,586,338) (2,131,768) ----------- ----------- ----------- $ -0- $ -0- $ -0- =========== =========== =========== NOTE 8. COMMITMENTS In May 2005, the Company leased facilities in Las Vegas Nevada. The lease has a term of three years. Initial monthly base rent is $8,250 with no increases, and the initial monthly base rent expense for Burbank is $30,000. Rent expense for the year ended September 30, 2006 and 2005 were $219,535 and $159,905, respectively. The lease obligations were terminated due to the bankruptcy filing and the deposits held by the landlord was used to settle the obligations. NOTE 9. STOCK ACTIVITY a. CONVERTIBLE PREFERRED STOCK At September 30, 2006 and 2005, the Company had three series of convertible Preferred Stock: B, C and D. Series B Preferred Stock has no voting rights, is entitled to receive cumulative dividends in preference to any dividend on the common stock at a rate of 10% per share, per year, to be issued if and when declared by the Board of Directors and can be converted at any time into common stock on a 1 for 5 basis. In the event of any liquidation, the holders of shares of Series B Preferred Stock then outstanding shall be entitled to receive an amount equal to the purchase price per share, plus an amount equal to declared but unpaid dividends thereon, if any, to the date of payment. Series C Preferred Stock has no voting rights, is entitled to receive cumulative dividends in preference to any dividend on the common stock at a rate of 10% per share, per year, to be issued if and when declared by the Board of Directors and can be converted at any time into common stock on a 1 for 1 basis. In the event of any liquidation, the holders of shares of Series C Preferred Stock then outstanding shall be entitled to receive an amount equal to the purchase price per share, plus an amount equal to declared but unpaid dividends thereon, if any, to the date of payment. Series D Preferred Stock has no voting rights, no dividends and can be converted at any time to common stock on a 1 for 1 basis. In the event of any liquidation, the holders of shares of Series C Preferred Stock then outstanding shall be entitled to receive an amount equal to the purchase price per share. With respect to rights on liquidation, Series B, C and D Preferred Stock shall rank senior to the common stock but Series C Preferred Stock shall be senior to both Series B and D Preferred Stock while Series D Preferred Stock shall be junior to both Series B and C Preferred Stock. The Board of Directors declared no dividends for any of the Series of convertible Preferred Stock during the fiscal year ended September 30, 2006. b. WARRANTS During the fiscal year ended September 30, 2003, the Company issued warrants to purchase 2,083,334 shares of the Company's common stock to a director in connection with services provided and to be provided to the company. The weighted average exercise price for the warrants issued was $0.12, and all of the warrants begin to expire in September 2005. No warrants were exercised for the period ending September 30, 2005. NOTE 10. STOCK COMPENSATION PLAN AND NON-QUALIFIED STOCK OPTIONS The Company has a 2001 Employee Stock Compensation Plan (the "ESCP") to enhance its ability to attract, retain and compensate experienced employees, officers, directors and consultants. The effective date of the ESCP is January 2001. A total of 2,600,000 shares of common stock were registered for issuance under the ESCP on three Form S-8 registration statements filed January 16, 2001, March 26, 2001 and October 19, 2001. Pursuant to the ESCP, the Compensation Committee or Board of Directors may award registered shares of the Company's common stock to employees, officers, directors or consultants for cash, property, services rendered or other form of payment NOTE 10. STOCK COMPENSATION PLAN AND NON-QUALIFIED STOCK OPTIONS (CONTINUED) constituting lawful consideration. Plan shares awarded for other than services rendered shall be sold at not less than the fair market value on the date of grant. During the fiscal year ended September 30, 2005, the Company issued an aggregate of 1,572,500 shares of registered common stock to employees, officers, directors and consultants pursuant to the ESCP. The expense recorded during fiscal year 2005 under the ESCP amounted to $151,722 and was based on the closing trading price of the Company's common stock on the date granted. NOTE 11. BANKRUPTCY FILING On August 5, 2008, the United States Bankruptcy Court for the Central District of California entered an Order Confirming Second Amended Plan of Reorganization under Chapter 11 of the Bankruptcy Code (the "Plan") of the Company. The Plan classifies claims and interest in various Classes according to their right to priority of payments as provided in the United States Bankruptcy Code, 11 U.S.C.{section} 101 et seq. (the "Bankruptcy Code"). The Plan provides that upon payment of all obligations pursuant to the Plan, the Company shall be discharged of liability for payment of debts, claims and liabilities incurred before confirmation of the Plan, to the extent specified in {section}1141 of the Bankruptcy Code. The Plan provides for the treatment of each Class, and for the cash payments that each Class of creditors will receive (and for the existing equity interests and rights that equity security holders will retain) under the Plan. The effective date of the Plan is contemplated to be on or about August 15, 2008 (the "Effective Date"). The Company plans to fund the Plan through cash on hand and accumulated by the Effective Date to pay off the allowed Priority Unsecured Tax claims of potentially $191,164.05, and the first month's payment of approximately $17,000 plus interest to its non-priority unsecured creditors. The Company has on hand approximately $170,000 and estimates that it will have almost $300,000 available for disbursement on the Effective Date. The Company has entered into numerous contracts in order to assure a steady rate of business-generated cash flow and funding of the Company through the full and complete consummation of the Plan. On the Effective Date, unexpired leases and executory contracts shall be assumed as obligations of the reorganized Company. The Order of the Court approving the Plan constitutes an order approving the assumption of each lease and contract. Within 120 days of the entry of the order confirming the Plan, the Company will file a status report with the Court explaining what progress has been made toward consummation of the confirmed Plan. The status report shall be served on the United States Trustee, the twenty largest unsecured creditors, and those parties who have requested notice. Further status reports shall be filed every 120 days and served on the same entities until the Plan is fully consummated. All persons or entities holding preferred or common stock in the Company are referred to in the Plan as "Interest Holders". The pre-existing pre-petition equity ownership interests and rights of all Interest Holders will be left intact and unimpaired. The Company, pursuant to the terms of the Plan, is contemplating the issuance of approximately 38,000,000 shares of common stock to insiders who are also debt holders of the Company who have the pre-petition, pre-existing right to receive equity for debt. Of the total amount of common shares contemplated to be issued, a majority of the common shares are to be issued to insiders of the Company. NOTE 12. GOING CONCERN The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. Historically, the Company has incurred significant annual losses, which have resulted in an accumulated deficit of $15,293,188 at September 30, 2006 which raises substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company increasing sales to the point it becomes profitable. The Company may need to raise additional capital for marketing to increase its sales. If the Company is unable to increase sales sufficiently or obtain adequate capital, it could be forced to cease operation. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty. Management plans to increase sales by increasing its marketing program and to obtain additional capital from the private placement of shares of its common stock. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. BANKRUPTCY DISMISSAL VEI filed a voluntary chapter 11 bankruptcy petition on April 7, 2003 and obtained the status of Debtor in Possession. After successfully settling the debts owed to secured creditors through sale of property as per court order dated June 3,2004 VEI applied to the United States Bankruptcy Court, Central District of California, San Fernando Valley Division for a Motion to dismiss Chapter 11 Bankruptcy case ("the Motion"). The Court on August 3, 2004, having considered the Motion and pleadings filed in support thereof, having heard argument of counsel, finding that notice was proper, and for good cause appearing therefore, ordered (1) The Motion granted (2) Debtor's Chapter 11 bankruptcy case dismissed. On October 5, 2004, Valcom, Inc. and Valencia Entertainment International, LLC, commenced a lawsuit in the Los Angeles Superior Court, State of California, against Chicago Title Company and Laurus Master Fund, Ltd. The suit seeks an accounting of the amount due in connection with a non-judicial foreclosure of a deed of trust securing a promissory note executed by Valcom and Valencia. It also alleges that Chicago Title breached its trustee's duties and Laurus breached the terms of the promissory note and deed of trust securing it. Valcom's attorney has expressed his belief that the lawsuit it meritorious but at this stage in the proceeding, he is unable to state how much, if any, will be recovered in the lawsuit. On June 14, 2006, the defendants won a summary judgment motion. Valcom has filed for a new trial and will vigorously fight for the shareholders. ITEM 13. EXHIBITS Ex. 31.1 Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Ex. 32.1 Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the issuer caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: September 18, 2008 VALCOM, INC., a Delaware Corporation By: /s/ Vince Vellardita ---------------------- Vince Vellardita Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Accounting and Financial Officer) In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the issuer and in the capacities and on the dates indicated. SIGNATURE TITLE DATE - --------- ----- ----- By: /s/ Vince Vellardita Chief Executive Officer, September 18, 2008 -------------------- Chairman of the Board Vince Vellardita By: /s/ Richard Shintaku Director September 18, 2008 ---------------------- Richard Shintaku By: /s/ Frank O Donnell Director September 18, 2008 --------------------- Frank O Donnell EX-1 2 ex_31-1.txt EXHIBIT 31.1 EXHIBIT 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Vincent Vellardita, certify that: 1. I have reviewed this annual report on Form 10-KSB/A-2 of ValCom, Inc. for the year ended September 30, 2006; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. September 18, 2008 By: /s/ Vince Vellardita ---------------------- Vince Vellardita Chief Executive Officer, Chief Financial Officer EX-2 3 ex_32-1.txt EXHIBIT 32.1 EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of ValCom, Inc. (the "Company") on Form 10-KSB/A-2 for the year ended September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Vincent Vellardita, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. A signed original of this written statement required by Section 906 has been provided to ValCom, Inc. and will be retained by ValCom, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. September 18, 2008 By: /s/ Vince Vellardita ---------------------- Vince Vellardita Chief Executive Officer, Chief Financial Officer (Principal Executive Officer) -----END PRIVACY-ENHANCED MESSAGE-----