Item 1. Financial Statements.................................. 3
or Plan of Operation .............................. 13
Item 3. Controls and Procedures.............................. 15
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 of Security Holders.. 16
Item 5. Other Information.................................... 16
Item 6. Exhibits and Reports on Form 8-K..................... 17
Signatures........................................... 18
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are a integral part of these financials statements.
The accompanying notes are a integral part of these financials statements.
ALPHATRADE.COM
Statements of Cash Flows
(Unaudited)
For the Six Months Ended
June 30,
---------------------------
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES ------------- -------------
Net income (loss) $ (745,849) $ 1,283,393
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation expense 9,585 9,158
Value of stock options and warrants granted - 14,233
Loss on sale of investments 411,483 97,932
Gain (Loss) on settlement of debt 240,000 (307,972)
Transfer of investments to settle debt 500,000 -
Investments received as payment for
accounts receivable (869,057) (1,305,809)
Common stock issued for services 8,000 321,568
Changes in operating assets and liabilities:
Changes in accounts receivable 1,152,457 (25,099)
Changes in prepaid expenses 1,000 (17,343)
Changes in deferred revenues (5,278) (715,276)
Changes in related party payables 426,502 268,943
Changes in accounts payable and
accrued expenses (1,156,527) (91,408)
------------ ------------
Net Cash Used in Operating Activities (27,684) (467,680)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of securities 66,131 91,418
Purchase of fixed assets - (3,204)
------------ ------------
Net Cash Provided by Investing Activities 66,131 88,214
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash - 190,000
Proceeds from bank overdraft - 22,664
Stock subscriptions payable - 16,580
------------ ------------
Net Cash Provided by Financing Activities - 229,244
------------ ------------
NET DECREASE IN CASH 38,447 (150,222)
CASH AT BEGINNING OF PERIOD 55,650 153,760
------------ ------------
CASH AT END OF PERIOD $ 94,097 $ 3,538
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ 73,279 $ 45,640
Income Taxes $ - $ -
NON CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for services $ 8,000 $ 321,568
Value of stock options and warrants vested $ - $ 14,233
The accompanying notes are an integral part of these financial statements.
8
ALPHATRADE.COM, INC
Notes to ALPHATRADE.COM INC Financial Statements
June 30, 2009 and December 31, 2008
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows at June 30, 2009 and 2008, and for all
periods presented herein, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's December 31,
2008 audited financial statements. The results of operations for the periods
ended June 30, 2009 and 2008 are not necessarily indicative of the operating
results for the full year.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles in the United States of America 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. The ability of the Company to
continue as a going concern is dependent on the Company obtaining adequate
capital to fund operating losses until it becomes profitable. If the Company is
unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other
things, additional capital resources. Management's plan is to obtain such
resources for the Company by obtaining capital from management and significant
shareholders sufficient to meet its minimal operating expenses and seeking
equity and/or debt financing. However management cannot provide any assurances
that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other sources of financing and attain profitable
operations. The accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 - RELATED PARTY PAYABLES
The company accrued an additional $296,441 and $426,502 in related party
payables during the three and six months ended June 30, 2009, respectively. A
majority of this accrual consists of payable related to management fees.
9
ALPHATRADE.COM, INC
Notes to ALPHATRADE.COM INC Financial Statements
June 30, 2009 and December 31, 2008
NOTE 4 - OUTSTANDING COMMON STOCK OPTIONS AND STOCK PURCHASE WARRANTS
The Company uses the instruments identified as stock options and common stock
warrants somewhat interchangeably. Both forms of equity instruments have been
granted as compensation to the Company's officers and directors.
Under FASB Statement 123R, the Company estimates the fair value of each stock
award at the grant date by using the Black-Scholes option pricing model. The
following weighted average assumptions used for grants in the periods ended June
30, 2009 and December 31, 2008: dividend yield of zero percent for all years;
expected volatility of 74.36% and 62.01%; risk-free interest rates of 5.03% and
3.35% and expected lives of 1.0 and 3.0, respectively.
The general terms of awards such as vesting requirements(usually 1 to 2 years),
term of options granted (usually 10 years), and number of shares authorized for
grants of options or other equity instruments are determined by the Board of
Directors. A summary of the status of the Company's stock options and warrants
as of June 30, 2009 and changes during the periods ended December 31, 2008 and
June 30, 2009 is presented below:
Weighted Weighted
Options Average Average
and Exercise Grant Date
Warrants Price Fair Value
-----------------------------------
Outstanding, December 31, 2007 51,570,347 $0.38 $0.38
Granted 9,245,000 0.21 0.21
Expired (5,046,497) 0.47 0.47
Exercised (558,650) 0.25 0.25
Outstanding, December 31, 2008 55,210,200 $0.32 $0.32
Exercisable, December 31, 2008 40,730,200 $0.33 $0.33
-----------------------------------
Outstanding, December 31, 2008 55,210,200 $0.32 $0.32
Granted -0- -0- -0-
Expired (5,415,000) 0.46 0.46
�� Exercised -0- -0- -0-
Outstanding, June 30, 2009 49,795,200 $0.31 $0.31
Exercisable, June 30, 2009 35,315,200 $0.31 $0.31
10
ALPHATRADE.COM, INC
Notes to ALPHATRADE.COM INC Financial Statements
June 30, 2009 and December 31, 2008
NOTE 5 - SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Recent Accounting Pronouncements
--------------------------------
In May 2009, the FASB issued FAS 165, "Subsequent Events". This pronouncement
establishes standards for accounting for and disclosing subsequent events
(events which occur after the balance sheet date but before financial statements
are issued or are available to be issued). FAS 165 requires and entity to
disclose the date subsequent events were evaluated and whether that evaluation
took place on the date financial statements were issued or were available to be
issued. It is effective for interim and annual periods ending after June 15,
2009. The adoption of FAS 165 did not have a material impact on the Company's
financial condition or results of operation.
In June 2009, the FASB issued FAS 166, "Accounting for Transfers of Financial
Assets" an amendment of FAS 140. FAS 140 is intended to improve the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a transfer of
financial assets: the effects of a transfer on its financial position, financial
performance , and cash flows: and a transferor's continuing involvement, if any,
in transferred financial assets. This statement must be applied as of the
beginning of each reporting entity's first annual reporting period that begins
after November 15, 2009. The Company does not expect the adoption of FAS 166 to
have an impact on the Company's results of operations, financial condition or
cash flows.
In June 2009, the FASB issued FAS 167, "Amendments to FASB Interpretation No.
46(R)". FAS 167 is intended to (1) address the effects on certain provisions of
FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable
Interest Entities, as a result of the elimination of the qualifying
special-purpose entity concept in FAS 166, and (2) constituent concerns about
the application of certain key provisions of Interpretation 46(R), including
those in which the accounting and disclosures under the Interpretation do not
always provided timely and useful information about an enterprise's involvement
in a variable interest entity. This statement must be applied as of the
beginning of each reporting entity's first annual reporting period that begins
after November 15, 2009. The Company does not expect the adoption of FAS 167 to
have an impact on the Company's results of operations, financial condition or
cash flows.
11
ALPHATRADE.COM, INC
Notes to ALPHATRADE.COM INC Financial Statements
June 30, 2009 and December 31, 2008
NOTE 5 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements (Continued)
--------------------------------------------
In June 2009, the FASB issued FAS 168, "The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles". FAS
168 will become the source of authoritative U.S. generally accepted accounting
principles (GAAP) recognized by the FASB to be applied by nongovernmental
entities. Rules and interpretive releases of the Securities and Exchange
Commission (SEC) under authority of federal securities laws are also sources of
authoritative GAAP for SEC registrants. On the effective date of this Statement,
the Codification will supersede all then-existing non-SEC accounting and
reporting standards. All other nongrandfathered non-SEC accounting literature
not included in the Codification will become nonauthoritative. This statement is
effective for financial statements issued for interim and annual periods ending
after September 15, 2009.The Company does not expect the adoption of FAS 168 to
have an impact on the Company's results of operations, financial condition or
cash flows.
NOTE 6 - LAWSUITS SETTLEMENTS
Professional Bull Riders, Inc. v. AlphaTrade.com,
-------------------------------------------------
United Stated District Court, District of Colorado, Case No. 08-cv-01017 (MSK)
On May 21, 2009, the Company entered into a Release and Settlement Agreement
with PBR (the "PBR Settlement Agreement"), pursuant to which the Company and PBR
agreed to settle all disputes and claims arising from and relating to the
Company's sponsorship agreement with the PBR. Pursuant to the PBR Settlement
Agreement, the Company agreed to transfer an aggregate of 300,000 shares of
common stock of two unrelated entities held for investment purposes by the
Company. In addition, the Company agreed to make payments to PBR, for each of
its 2009, 2010 and 2011 fiscal years, equal to the lesser of $100,000 or 30% of
the Company's net profit for each fiscal year. As of June 30, 2009, the Company had not transferred the 300,000 shares to the unrelated entities.
Tommy G Productions, LLC v. AlphaTrade.com,
--------------------------------------------
District Court, Pueblo County, Colorado, Case No. 2008CV1008
On May 28, 2009, the Company entered into a Settlement Agreement and Mutual
Release with Tommy G (the "Tommy G Settlement Agreement"), pursuant to which the
Company and Tommy G agreed to settle all disputes and claims arising from and
relating to the Company's sponsorship agreement with Tommy G for aggregate
consideration of $10,000.
NOTE 7 - SUBSEQUENT EVENTS
Management has evaluated subsequent events as of August 13, 2009 and report that
there are no subsequent events to report.
12
Item 2. Management's Discussion and Analysis of Financial Condition or Plan of
Operations
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Form 10-Q.
Forward-looking and Cautionary Statements
This report contains certain forward-looking statements. These statements relate
to future events or our future financial performance and involve known and
unknown risks and uncertainties. These factors may cause our company's, or our
industry's actual results, levels of activity, performance or achievements to be
materially different from those expressed or implied by the forward-looking
statements. In some cases, you can identify forward-looking statements by
terminology such as "may," "will" "should," "expects," "intends," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential," "continue," or
the negative of these terms or other comparable terminology.
These statements are only predictions. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements.
Results of Operations.
SIX MONTHS ENDED JUNE 30, 2009 AND 2008
-----------------------------------------
During the three and six months ended June 30, 2009, revenue growth began to
decline due to the unparalleled turbulence and overall decline in all of the
financial markets. Our advertising business was adversely affected as many
clients put their marketing and advertising budgets on hold. Revenue for the
three and six months ended June 30, 2009 was $1,149,932 and $2,901,078,
respectively. This is a decline of 54% and 30% over the three and six months
ended June 30, 2008, which had revenues of $2,505,818 and $4,123,202.
Advertising revenues for the three and six month period ended June 30 were
$473,453 and $1,519,299 in 2009 and $1,660,240 and $2,468,295 in 2008. In
addition, we had $731,732 in deferred revenue to be realized in subsequent
quarters. This deferred revenue is derived from our long term advertising and
marketing which was not realized in this quarter. We revised our advertising
model from a price point to accommodate new client interest and to make it
easier for clients to make a marketing buying decision.
We continue to focus on increasing the traffic to our stable of websites to
ensure our advertising clients have a highly desirable demographic target
audience. We are experiencing success with building new subscribers to our
business networking site, www.zenobank.com. The site provides a comprehensive
forum for companies, businesses associated with the financial markets and
investors to network using all of the modern, web-based tools available such as
blogs, forums, and chat rooms. Every public company, once they sign up, will
have complete and accurate financial data on their profile pages on ZenoBank -
this will ensure they are compliant with all regulatory policies with respect to
investor relations.
Our cost of sales for our financial products is directly related to the price of
our financial feeds and content. Some of these costs are fixed monthly fees and
others are based on the number of users or subscribers.
13
We believe the market conditions at present will encourage people to save money
in every way possible and with the cost effective products AlphaTrade has in
both the E-Gate and advertising programs, we believe this could be beneficial
for us in increasing our client base for all of our products. For the three and
six months ended June 30, 2009 our cost of sales was 35% and 28% of revenues
compared to 18% and 23% of revenues for the same periods in 2008. The increase
in cost of sales was due to the decline in advertising revenues as a percentage
of our total revenues.
During the three and six month period ended June 30 we realized a net loss of
$435,670 and $745,849 in 2009 and a net income of $1,422,282 and $1,283,393 in
2008. This is a decrease of $1,857,952 and $2,029,242, respectively. We are
generating referrals and long term, established relationships with marketing and
public relations firms. During the three and six months ended June 30, 2009 we
paid $108,571 and $164,209 in marketing fees.
Included in professional fees for 2009 are shares of common stock to investor
relations consultants valued at $-0- and $8,000 for the three and six month
periods, respectively. For the same periods in 2008 this expense was $14,233 and
$103,478. For the most part, the investor relations consultants are hired to
bring new advertising clients to the company. We realized related party
compensation expense of $120,000 and $240,000 for the three and six month ended
June 30, 2009 and 2008.
Our operating expenses decreased to $592,409 and increased to $2,077,169 in 2009
from $829,487 and $1,927,039 in 2008 mainly due to a large write down in
non-cash accounts receivable. The $1,031,477 bad debt expense recognized during the six months ended June 30, 2009 was deemed appropriate by management during a subsequent analysis of accounts receivable. Management determined that collection of these receivables was unlikely due to some previously unforeseen factors. Subsequent to this significant write-down of accounts receivable we have initiated a policy to more aggressively analyze and allow for doubtful receivables, so as to avoid recognizing such a large bad debt expense in any single future reporting period.
The Company recognized Other Expenses totaling $595,170 and $846,349 for the three and six months ended June 30, 2009, respectively, compared to Other Income of $204,087 and $29,869 during the comparable periods of 2008. The current period’s Other Expenses includes a $240,000 loss on forgiveness of debt, pertaining to the Company’s forgiveness of a receivable in the amount of $240,000 during the period.
Historically, many of our expenses are paid in shares of our common stock. The
expenses are recorded at the fair value of the shares issued. Excluding these
non-cash expenses the income (loss) for the three months ended June 30 would
have been ($435,670) and ($737,849) for 2009 and $1,436,515 and $1,386,871,
respectively.
Liquidity and Capital Resources.
We have consistently been financed through loans from related parties and from
raising capital through private equity offerings. We used $27,684 and $467,680
of cash in our operating activities in the six months ended June 30, 2009 and
2008, respectively. Cash provided by investing activities for the same periods
in 2009 and 2008 were $66,131 and $88,214, respectively. Cash received through
financing activities totaled $-0- and $229,244 from the issuance of our common
stock and contributed capital. We expect that in the next twelve months the cash
generated by our operations will be adequate to cover our operating expenses.
Given the right circumstances, we would entertain a secondary financing if it
would ensure our growth could be greatly fast-tracked otherwise we will focus on
building our business via revenue growth. Currently, we do not have any
definitive plans for a secondary financing.
14
We currently have no material commitments for major capital expenditures.
Dependence on Key Personnel
We are dependent on the services of Gordon Muir, the Chief Executive Officer of
the Company. The loss of Mr. Muir, or other key executives and personnel, or the
inability to attract and retain the additional highly skilled employees required
for the expansion of our activities, may have a material adverse effect on our
business or our future operations.
Item 3. Controls and Procedures
As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of management,
including our chief executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934. Based upon that evaluation, our chief executive officer
and principal financial officer concluded that our disclosure controls and
procedures are not effective to cause the material information required to be
disclosed by us in the reports that we file or submit under the Exchange Act to
be recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms. There have been no significant changes
in our internal controls or in other factors which could significantly affect
internal controls subsequent to the date we carried out our evaluation.
PART II - OTHER INFORMATION.
Item 1. Legal Proceedings.
Professional Bull Riders, Inc. v. AlphaTrade.com,
United Stated District Court, District of Colorado, Case No. 08-cv-01017 (MSK)
Plaintiff Professional Bull Riders, Inc. ("PBR") commenced this action against
the Company on or about April 15, 2008 in the District Court of Pueblo County,
Colorado, Case No. 2008CV527. The Company removed this action to the United
States District Court for the District of Colorado on May 15, 2008. In its
Complaint, PBR alledged two causes of action arising from the alleged breach of
a Sponsorship Agreement, as amended, and the alleged breach of a settlement
agreement, and seeks damages of over $1,500,000.
On May 21, 2009, the Company entered into a Release and Settlement Agreement
with PBR (the "PBR Settlement Agreement"), pursuant to which the Company and PBR
agreed to settle all disputes and claims arising from and relating to the
Company's sponsorship agreement with the PBR. Pursuant to the PBR Settlement
Agreement, the Company agreed to transfer an aggregate of 300,000 shares of
common stock of two unrelated entities held for investment purposes by the
Company. In addition, the Company agreed to make payments to PBR, for each of
its 2009, 2010 and 2011 fiscal years, equal to the lesser of $100,000 or 30% of
the Company's net profit for each fiscal year.
Tommy G Productions, LLC v. AlphaTrade.com, District Court, Pueblo County,
Colorado, Case No. 2008CV1008
Plaintiff Tommy G Productions ("Tommy G") commenced this action against the
Company on or about June 27, 2008 in the District Court of Pueblo County,
Colorado, Case No. 2008CV1008. In its Complaint, Tommy G alleges a cause of
action arising from the alleged breach of a Sponsorship Agreement, and seeks
damages of $30,000.
15
On May 28, 2009, the Company entered into a Settlement Agreement and Mutual
Release with Tommy G (the "Tommy G Settlement Agreement"), pursuant to which the
Company and Tommy G agreed to settle all disputes and claims arising from and
relating to the Company's sponsorship agreement with Tommy G for aggregate
consideration of $10,000.
Equistock Incorporated and Nicholas Thomas v. AlphaTrade.com
U.S. District Court for the Southern District of Texas, Houston Division
Civil Action No. 4:09-CV-01645
Plaintiffs Equistock and Thomas ("Plaintiffs") initiated this action in April
2009 with the filing of their Original Petition in the state district courts of
Harris County, Texas. The lawsuit arises from a marketing agreement between
Equistock and AlphaTrade whereby AlphaTrade provided advertising and marketing
services to Equistock on behalf of Equistock's client, Dalrada Financial, Inc.
The Plaintiffs have asserted claims for breach of contract, quantum meruit,
breach of the duty of good faith and fair dealing, and damage to business
goodwill and are seeking $1.19 million in damages.
AlphaTrade has answered the Original Petition by denying these claims and
removed the case to U.S. District Court for the Southern District of Texas,
Houston Division. Additionally, AlphaTrade has asserted counterclaims against
Plaintiffs for fraud, negligent misrepresentation, deceptive trade practices,
fraudulent inducement, and breach of contract and is seeking approximately
$257,000 in damages.
This action is currently in the discovery stage. AlphaTrade intends to
vigorously defend the claims made against it and pursue its counterclaims.
Item 2. Changes in Securities.
The following unregistered securities have been issued since January 1st, 2009:
Valued
Date No. of Shares Title At Reason
March 2009 400,000 Common $0.02 For services
The above noted shares were issued in private, isolated transactions without
registration under the Securities Act. The shares were issued in reliance on the
exemption provided by Rule 506 and/or Section 4(2) of the Securities Act as a
transaction by an issuer not involving a public offering to Consultants or to
companies owned or controlled by Consultants or Officers of AlphaTrade.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
On August 10, 2009, the Board of Directors of the Company authorized
the removal of Penny Perfect as Chief Executive Officer of the Company. Ms.
16
Perfect shall continue to serve as President and on the Board of Directors of
the Company.
On August 10, 2009, the Board of Directors appointed Gordon Muir as
Chief Executive Officer of the Company. Mr. Muir has served as a director of the
Company since October 21, 1999 and became Chief Technology Officer in January
2004. He also previously served as the Company's Chief Executive Officer from
February 2000 through January 2004.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 31.1 Certification of C.E.O. Pursuant to Section 302 of the
Sarbanses-Oxley Act of 2002.
Exhibit 31.2 Certification of Principal Accounting Officer Pursuant
to Section 302 of the Sarbanses-Oxley Act of 2002.
Exhibit 32.1 Certification of C.E.O. Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2 Certification of Principal Accounting Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
(b) Report on Form 8-K
None
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
