| [×] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the fiscal year ended December 31, 2009 or | ||
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from to | ||
This Amendment No. 1 on Form 10-K/A hereby amends the registrant's annual report on Form 10-K, which the registrant filed with the Securities and Exchange Commission on May 13, 2010. This amendment is being filed in order to amend the date of the auditor's report. At the time of the original filing our auditor was not registered with the Canadian Public Accountability Board ("CPAB") as required to comply with the rules and policies of the Securities Commission in the Province of British Columbia, Canada. Our auditor is now registered with CPAB. There are no other changes to our Form 10-K/A. | ||
| NV | 98-0211652 | |||
| (State or other jurisdiction | (IRS Employer | |||
| of incorporation) | Identification Number) |
| 930 West First Street, Ste 116, North Vancouver, BC | V7P 3N4 | |
| (Address of principal executive offices) | (Zip Code) |
| Title of each class | Name of each exchange on which registered | |
| None | ||
| Title of each class | Name of each exchange on which registered | |
| Common Stock, $.001 par value | Over The Counter Bulletin Board | |
| Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | [ ] Yes [×] No |
| Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. | [ ] Yes [×] No |
| Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | [×] Yes [ ] No |
| Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). | [×] Yes [ ] No |
| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. | [ ] |
| [ ] | Large accelerated filer | [ ] | Accelerated filer | |||
| [ ] | Non-accelerated filer | [×] | Smaller reporting company | |||
| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). | [ ] Yes [×] No |
As of April 15, 2010, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $72,883 based on approximately 8,098,083 shares held by non affiliates at a price of $0.009 per share.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Description of Business. 4
ITEM 1A. Risk Factors 6
ITEM 1B. Unresolved Staff Comments 14
ITEM 2. Properties. 14
ITEM 3. Legal Proceedings. 14
ITEM 4. Reserved. 16
PART II
ITEM 5. Market for Common Equity Related Stockholder Matters And Issuer
Purchases of Equity Securities. 16
ITEM 6. Selected Financial Data 18
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 18
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk. 22
ITEM 8. Financials Statements And Supplementary Data. 22
ITEM 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure. 22
ITEM 9A. Controls and Procedures. 22
ITEM 9B. Other Information. 23
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance. 23
ITEM 11. Executive Compensation. 28
ITEM 12. Security Ownership of Certain Beneficial Owners and 31
Management Related Stockholder Matters.
ITEM 13. Certain Relationships and Related Transactions,
and Director Independence. 32
ITEM 14. Principal Accountant Fees and Services 34
ITEM 15. Exhibits. 36
Signatures 37
ITEM 1. DESCRIPTION OF BUSINESS
Information Regarding Forward Looking Statements
AlphaTrade.com (the "Company" or "we" or "us" or "our") has made forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) in this Annual Report on Form 10-K (the "Annual Report") that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Annual Report, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual re sults may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:
1. Our ability to attract and retain management, and to integrate and
maintain technical information and management information systems;
2. Our ability to generate customer demand for our products;
3. The intensity of competition; and
4. General economic conditions.
Organizational History
AlphaTrade.com was originally incorporated in the State of Nevada on June 6, 1995 as Sierra Gold Development Corp. Our name was changed to Honor One Corporation on October 29, 1998. On January 6, 2001 the name was changed to AlphaTrade.com. In 2001 our common stock commenced trading on OTC Bulletin Board (the "OTCBB") under the symbol "EBNK". On January 14, 2002, our symbol changed to APTD after we effected a reverse split on a 1 for 50 basis. Unless otherwise indicated, share amounts set forth herein have been adjusted to reflect past stock splits.
Our headquarters are located at Suite 116 - 930 West 1st Street, North Vancouver, B.C. V7P3N4, Canada.
Overview
AlphaTrade began as a technology company focused on developing a web based stock quote service that was high quality, comprehensive and affordable. Over the years, we have augmented that product with other complimentary products. The single most important element of our business is our ever expanding database. Every person in our database has an interest in the markets, makes above average income, are independent thinkers, and are receptive to new ideas and products. All of our products are created out of a demand that presented itself from market conditions. Our real time stock quote service is a recognized and welcomed quality alternative to products offered by competitors that require signing long term agreements, they charge much higher prices and have complicated operating instructions.
4
Every new product we developed maintained our standard of high quality and affordability. As of this filing date, we have five diversified and unique revenue streams: real time stock quotes - E-Gate; financial information for websites - E-Trax; advertising, web design and web hosting services.
We have three websites all providing information and services that compliment all of our products -www.alphatrade.com,www.zenobank.com andhttp://finance.alphatrade.com . Our targeted online digital advertising and marketing programs are designed to serve many functions - every company has a need to maximize their advertising dollars.
Our marketing programs are multi-faceted - as visitors cruise our sites they will see many ads we have created. If they have a further interest in the company profiled they will be able to conduct their own due diligence on that company either from E-gate, E-trax or from our finance site. If a company decides to utilize our marketing programs to augment their investor relations or public relations program, we can provide them with E-Trax to ensure they are compliant from a regulatory point of view, and we can definitely give them a tremendous amount of exposure to a database that is proven to have an interest in publicly traded companies. Our marketing programs are much more professional than most investor relations activities that are mainstream for smaller cap companies.
Our own brand has become well recognized and trusted in the financial community. Since January 1999 when we commenced operations, AlphaTrade has prided itself on its ability to evolve. Our mandate is to aggressively build our business in markets that are over charged and fraught with under-performers. Our entire digital advertising business evolved from a lack we noticed in the advertising industry - no one was specifically serving the needs of developing and emerging companies. We launched our advertising program to serve that need and to bring some professionalism to a tainted industry. In the process, our operational costs have been lowered, our database is growing at a fast pace, our web traffic is soaring and our brand is becoming well recognized. This initiative has given us the opportunity to withstand the tremendous negative business envi ronment of 2009. In fact, yet again, AlphaTrade has emerged with a new marketing opportunity that emerged because of the business environment of 2009 when so many people have lost their job. We have initiated a Home Based Business opportunity to allow people to work out of their homes and become sales people selling all of our products. This is yet another example of business diversification that becomes a win win situation for everyone involved.
Business Strategy
Our marketing strategy is building products and creating services that can survive and prosper in all economic times especially those times that are most challenging. Our advertising programs are a significant portion of our revenue now and our web traffic is building constantly. We aggressively market all of our products and services to the financial community. Our strongest revenue growth for 2009 came from our advertising programs and we expect this to continue into 2010.
AlphaTrade's unique positioning in the marketplace is protected by a number of factors: reasonable price, targeted advertisement placement, high volume web traffic, valuable associations, strong networking ability, and worldwide audience.
Our database is expanding as a direct result of our successful advertising promotions. This is generating new business for a variety of our products. 2009 has been a difficult business environment for all companies and we did experience a downturn in all facets of business throughout the year. Since our products are very price conscious, we were able to reduce the migration of clients and are beginning to notice a small resurgence of new business. We fully expect a turbulent business environment over the next year but anticipate new business based on our price point, our large, targeted audience and our success rate for our advertising clients. All these factors favor growth even during a tumultuous business environment.
5
Our overall strategy reflects the attention we are paying to our revenue growth for 2010 and beyond. The Investor and Public relations business is very fragmented and needs some consolidation. This is exactly the type of business environment that requires a multi-pronged approach to get sustained results. AlphaTrade is partnering and networking to build an association of companies that work together to expand the reach and the exposure for all their clients. This approach is providing us with access to new clients and new strategic alliances that provide new opportunities to sell all of our products and services. Every one of our clients are exposed to all of our products and for the most part, can utilize more than one. The Internet public is fickle and expects unique content, interesting material, and clear concise content. ; For the most part, publicly traded companies cannot deliver this information in a form that is interesting to internet traffic so they do not have a lot of website traffic. Our websites accomplishes this for them - people coming to our sites already know they are getting condensed information and if they find it interesting they will make the decision to visit the corporate website. This approach alleviates a lot of unnecessary work for the company and ensure our clients are satisfied. Our goal is to get long term clients by providing services that help them build their business
Employees
We retain, through contracts with corporations, the services of two executive officers on a full time basis. In addition, through a Canadian management company, we employ nine employees/contractors. Our employees are not members of any union, nor have we entered into any collective bargaining agreements. We believe that our relationship with our employees is excellent. We are anticipating hiring additional employees/contractors in the next year to handle anticipated growth.
ITEM 1A. RISK FACTORS.
You should carefully consider the risks described below as well as other
information provided to you in this document, including information in the
section of this document entitled "Information Regarding Forward Looking
Statements." The risks and uncertainties described below are not the only ones
facing the Company. Additional risks and uncertainties not presently known to
our company or that we currently believe are immaterial may also impair our
business operations. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially adversely
affected, the value of our common stock could decline, and you may lose all or
part of your investment.
Risks related to our financial results
--------------------------------------
We have a limited operating history and our limited operating history makes it
difficult to evaluate our business and prospects. We commenced operations in
January 1999 and have conducted limited business operations since that time. As
a result of our short operating history, we have only limited financial data and
business information with which to evaluate our business strategies, past
performance and an investment in our common stock. As a company with a limited
operating history, there are substantial risks, uncertainties, expenses and
difficulties that we are subject to. You should consider an investment in our
company in light of these risks, uncertainties, expenses and difficulties. To
address these risks and uncertainties, we must do the following:
o Successfully execute our business strategy;
o Continue to develop our products and services;
o Respond to competitive developments; and
o Attract, integrate, retain and motivate qualified personnel.
6
We may be unable to accomplish one or more of these objectives, which could cause our business to suffer. In addition, accomplishing one or more of these objectives might be very expensive, which could harm our financial results.
We have incurred significant losses since inception and anticipate that we will continue to incur losses for the foreseeable future.
As of December 31, 2009, we have incurred an accumulated net loss of approximately $41.7 million. Our management believes that while our business and products will be appealing to our current and future customers there is no assurance we will be able to successfully continue to increase our revenues or that our products will be accepted by the market. Furthermore, in light of our significant losses, we will need to generate significant revenues to achieve and sustain profitability. If we do achieve profitability, we may be unable to sustain or increase profitability on a quarterly or annual basis. Any of these factors could cause our stock price to decline.
Management believes that long-term profitability and growth will depend on its ability to:
o Develop the reputation of AlphaTrade as a successful marketing and
advertising company;
o Successfully identify and exploit appropriate opportunities, markets
and products;
o Develop viable strategic alliances; and
o Maintain sufficient volume of inflow of advertising clients.
We will need to raise substantial additional capital to fund our operations, and our failure to obtain funding when needed may force us to delay, reduce or eliminate our products and services.
Our operations have consumed a substantial amount of cash since inception. We expect to continue to spend substantial amounts to:
o develop the reputation of AlphaTrade as a successful marketing and
advertising company;
o maintain and increase the company's human resource including full
time and consultant resources;
o evaluate appropriate opportunities, markets and products; and
o evaluate future products and areas for long term development.
To date, our additional sources of cash have been primarily limited to the sale of our securities and loans from related parties and outside sources. We cannot be certain that additional funding will be available on acceptable terms, if at all. To the extent that we raise additional funds by issuing equity securities or debt convertible debt securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct its business. If we are unable to raise additional capital, when required, or on acceptable terms, we may have to significantly delay, scale back or discontinue our products and services.
7
Risks Related to Our Business
-----------------------------
There are many competitors in the data feed industry. We expect competition to
continue and intensify in the future. We also face competition from discount and
full service brokerage firms that provide similar proprietary services to their
own customer bases.
The market may not continue to accept our products and our E-Gate product. We
generate a large portion of our revenue from subscribers who pay monthly for the
E-Gate service. We do expect that E-Gate will continue to account for a
substantial portion of our revenue for fiscal 2010. Our future financial
performance will depend on increasing acceptance of our current products and on
the successful development, introduction and customer acceptance of new products
and services.
As our subscriber base increases, the amount of revenue from advertising is
expected to increase and the amount we can charge for advertising increases
because the specific demographics of our subscribers is highly attractive for
many companies. If we are unable to continue to generate sufficient revenues
from our new products, our business may be adversely affected and the price of
our stock may decline.
Outside factors may influence our growth and business development.
Outside factors may influence our growth and business development. We expect to
experience significant fluctuations in our future results of operations due to a
variety of factors, many of which are outside of our control, including, but not
limited to the following:
* demand for and market acceptance of our products and services;
* our efforts to expand into different industries;
* introduction of new products and services by us or
our competitors;
* competitive factors that affect our pricing;
* the mix of products and services we sell;
* the timing and magnitude of our capital expenditures, including
costs relating to the expansion of our operations;
* hiring and retention of key personnel;
* changes in generally accepted accounting policies, especially
those related to the recognition of subscription revenue; and
* new government legislation or regulation.
Any of the above factors could have a negative effect on our business and on the
price of our stock, and we may have to significantly delay, scale back or
discontinue our products and services.
Loss of key executives and key personnel and failure to attract qualified
managers and employees could limit our growth and negatively impact our business
operations.
8
If we lose our key executives and key personnel or fail to attract qualified
managers and employees, we may be unable to successfully operate our business. We
depend on the continued contributions of our executive officers and other
technical and marketing personnel to work effectively as a team, to execute our
business strategy and to manage our business. The loss of key personnel or their
failure to work effectively could have a material adverse effect on our
business, financial condition and results of operations. We are not aware of any
named executive officer or director who has plans to leave us or retire.
If we are unable to attract and retain additional qualified personnel, our
future business may suffer.
Our business strategy requires us to attract and retain additional qualified
technical and marketing personnel. We may experience difficulty in recruiting
qualified personnel, which is an intensely competitive and time consuming
process. We may not be able to attract and retain the necessary personnel to
accomplish our business objectives as our business develops and grows.
Accordingly, we may experience constraints that will adversely affect our
ability to satisfy future customer demand in a timely fashion or to support our
customers and operations. This could cause an adverse effect on our business,
financial condition and results of operations.
We will need to increase the size of our organization, and may experience
difficulties in managing growth. We are a small company with a small number of
employees as of December 31, 2009. We expect to experience a period of
significant expansion in headcount, facilities, infrastructure and overhead and
anticipate that further expansion will be required to address potential growth
and market opportunities. Future growth will impose significant added
responsibilities on members of management, including the need to identify,
recruit, maintain and integrate additional independent contractors and managers.
Our future financial performance and its ability to compete effectively will
depend, in part, on our ability to manage any future growth effectively.
If we are unable to protect our intellectual property effectively, we may be
unable to prevent third parties from using our technologies and methods, which
would impair our competitive advantage.
We do not believe that our operations or products infringe on the intellectual
property rights of others. However, there can be no assurance that others will
not assert infringement or trade secret claims against our company with respect
to our current or future technologies or that any such assertion will not
require us to enter into a license agreement or royalty arrangement with the
party asserting the claim. Responding to and defending any such claims may
distract the attention of our management and have an adverse effect on our
business, financial condition and results of operations.
Others may claim in the future that we have infringed their past, current or
future technologies. We expect that participants in our markets increasingly
will be subject to infringement claims as the number of competitors grows. Any
claim like this, whether meritorious or not, could be time-consuming, and result
in costly litigation and possibly result in agreements covering intellectual
property secrets and technologies. These agreements might not be available on
acceptable terms or at all. As a result, any claim like this could harm our
business.
We regard the protection of our copyrights, service marks, trademarks, and trade
secrets as critical to our success. We rely on a combination of patent,
copyright, trademark, service mark and trade secret laws and contractual
restrictions to protect its proprietary rights in products and services. When
9
applicable, we will enter into confidentiality and invention assignment
agreements with employees and contractors, and nondisclosure agreements with
parties we conduct business with in order to limit access to and disclosure of
our proprietary information. These contractual arrangements and the other steps
taken to protect our intellectual property may not prevent misappropriation of
our technology or deter independent third-party development of similar
technologies. We intend to pursue the registration of trademarks and service
marks in the U.S. and internationally. Effective trademark, service mark,
copyright and trade secret protection may not be available in every country in
which its services are made available. In addition, the laws of many foreign
countries do not protect our intellectual property to the same extent as the
laws of the United States. Also, it may be possible for unauthorized third
parties to copy or reverse engineer aspects of our products, develop similar
technology independently or otherwise obtain and use information that we regard
as proprietary. Furthermore, policing the unauthorized use of our products is
difficult.
We principally rely upon contractual restrictions to protect our technology. Our
contracts may not provide significant commercial protection or advantage to us,
and the measures we take to maintain the confidentiality of our trade secrets
may be ineffective. If we are unable to effectively protect our technology, our
competitors may be able to copy important aspects of our products or product
message, which could undermine the relative appeal of our products to customers
and thus could reduce our future sales.
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets or patents that we may obtain, or to
determine the validity and scope of the proprietary rights of others. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on our future operating results.
We substantially rely on third party providers.
Our future success for our financial products depend upon our ability to
We are subject to compliance with securities law, which exposes us to potential
liabilities, including potential rescission rights as further described below.
We have periodically offered and sold our common stock to investors pursuant to
certain exemptions from the registration requirements of the Securities Act of
1933, as well as those of various state securities laws. The basis for relying
on such exemptions is factual; that is, the applicability of such exemptions
10
depends upon our conduct and that of those persons contacting prospective
investors and making the offering. In most of these sales, we have not received
a legal opinion to the effect that these offerings were exempt from registration
under any federal or state law. Instead, we have relied upon the operative facts
as the basis for such exemptions, including information provided by investors
themselves.
If any prior offering did not qualify for such exemption, an investor would have
the right to rescind its purchase of the securities if it so desired. It is
possible that if an investor should seek rescission, such investor would
succeed. A similar situation prevails under state law in those states where the
securities may be offered without registration in reliance on the partial
preemption from the registration or qualification provisions of such state
statutes under the National Securities Markets Improvement Act of 1996. If
investors were successful in seeking rescission, we would face severe financial
demands that could adversely affect our business and operations. Additionally,
if we did not in fact qualify for the exemptions upon which it has relied, we
may become subject to significant fines and penalties imposed by the SEC and
state securities agencies.
Our independent auditors have expressed a going concern qualification in their
report dated June 22, 2010.
Our independent auditors have expressed a going concern regarding our company.
Our ability to continue as a going concern is dependant upon our ability to
achieve a profitable level of operations. We will need, among other things,
additional capital resources. Management's plans include concentrating its
efforts on increasing our subscriber base and increasing our advertising
revenues. We are also exploring the possibility of acquiring companies that are
synergistic with our existing business. However, management cannot provide any
assurances that we will be successful in accomplishing any of its plans.
The availability of a large number of authorized but unissued shares of our
common stock may, upon their issuance, lead to dilution of existing
stockholders.
We are authorized to issue 300,000,000 shares of our common stock and 10,000,000
shares of preferred stock, of which as of December 31, 2009, 53,756,023 shares
of common stock and 4,000,000 shares of preferred stock were issued and
outstanding. In addition, we also have also issued warrants and stock options of
which 47,105,000 are outstanding as of December 31, 2009, and 32,625,000 are
exercisable at a weighted average exercise price of $0.30 to purchase an
equivalent amount of shares of common stock. Assuming exercise of these warrants
and stock options, we will be left with more than 214,000,000 authorized shares
that remain unissued. These shares may be issued by our Board of Directors
without further stockholder approval. The issuance of large numbers of shares,
possibly at below market prices, is likely to result in substantial dilution to
the interests of other stockholders. In addition, issuances of large numbers of
shares may adversely affect the market price of our common stock.
Risks related to our common stock and its market value:
-------------------------------------------------------
There is a limited market for our common stock which may make it more difficult for you to dispose of your stock. Our common stock has been quoted on the OTC Bulletin Board under the symbol “APTD” since January 15, 2001. There is a limited trading volume for our common stock. Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders may be able to sell our common stock.
11
The price of our common stock is extremely volatile and investors may not be
able to sell their shares at or above their purchase price, or at all.
Our stock is presently traded on the OTC Bulletin Board, although there is no
assurance that a viable market will continue. The price of our common stock in
the public market is highly volatile and may fluctuate substantially because of:
* actual or anticipated fluctuations in our operating results;
* changes in or failure to meet market expectations;
* conditions and trends in the financial data and content provider
industry; and
* fluctuations in stock market price and volume, which are
particularly common among securities of technology companies,
particularly new start-up companies.
In addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. These market fluctuations may also
materially and adversely affect the market price of the Company's common stock.
Our common stock is subject to the "penny stock" rules of the SEC and the
trading market in our securities is limited, which makes transactions in our
stock cumbersome and may reduce the value of an investment in our stock.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the definition of a "penny stock," for the purposes relevant to us, as any
equity security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require:
o that a broker or dealer approve a person's account for transactions
in penny stocks; and
o the broker or dealer receive from the investor a written agreement to
the transaction, setting forth the identity and quantity of the penny
stock to be purchased.
In order to approve a person's account for transactions in penny stocks, the
broker or dealer must:
o obtain financial information and investment experience objectives of
the person; and
o make a reasonable determination that the transactions in penny stocks
are suitable for that person and the person has sufficient knowledge
and experience in financial matters to be capable of evaluating the
risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the Commission relating to the penny
stock market, which, in highlight form:
o sets forth the basis on which the broker or dealer made the
suitability determination; and
o that the broker or dealer received a signed, written agreement from
the investor prior to the transaction.
12
Generally, brokers may be less willing to execute transactions in securities
subject to the "penny stock" rules. This may make it more difficult for
investors to dispose of our common stock and cause a decline in the market value
of our stock.
Disclosure also has to be made about the risks of investing in penny stocks in
both public offerings and in secondary trading and about the commissions payable
to both the broker-dealer and the registered representative, current quotations
for the securities and the rights and remedies available to an investor in cases
of fraud in penny stock transactions. Finally, monthly statements have to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.
We do not expect to pay dividends in the future. Any return on investment may be
limited to the value of our stock. We do not anticipate paying cash dividends on
our stock in the foreseeable future. The payment of dividends on our stock will
depend on our earnings, financial condition and other business and economic
factors affecting our company at such time as the board of directors may
consider relevant. If we do not pay dividends, our stock may be less valuable
because a return on your investment will only occur if our stock price
appreciates.
A sale of a substantial number of shares of our common stock may cause the price
of its common stock to decline. If our stockholders sell substantial amounts of
our common stock in the public market, including shares issued upon the exercise
of outstanding options or warrants, the market price of our common stock could
fall. These sales also may make it more difficult for the Company to sell equity
or equity-related securities in the future at a time and price that the Company
deems reasonable or appropriate. Stockholders who have been issued shares in the
Acquisition will be able to sell their shares pursuant to Rule 144 under the
Securities Act of 1933, beginning one year after the stockholders acquired their
shares.
The exercise of our outstanding warrants and options may depress our stock price
We currently have 47,105,000 warrants and options to purchase shares of our
common stock outstanding as of December 31, 2009, of which 32,625,000 are
exercisable at a weighted average exercise price of $0.30 as of equal date. The
exercise of warrants and/or options by a substantial number of holders within a
relatively short period of time could have the effect of depressing the market
price of our common stock and could impair our ability to raise capital through
the sale of additional equity securities.
We may need additional capital that could dilute the ownership interest of
investors.
We require substantial working capital to fund our business. If we raise
13
ITEM 1B. UNRESOLVED STAFF COMMENTS
N/A
ITEM 2. PROPERTIES
Our executive offices are located at Suite 116 – 930 West 1st Street, North
ITEM 3. LEGAL PROCEEDINGS.
We are a defendant in a litigation case pending in the Supreme Court of British
Columbia, Canada. This action was filed on December 23, 2003 and is between
Zacks Investment Services Inc. as Plaintiff and AlphaTrade.com as Defendant. The
case number is S036907. The Plaintiff alleges it is owed the sum of $279,664
pursuant to a licensing Agreement executed by the Plaintiff and the Defendant in
1999. We are vehemently defending our self against this claim. At the request of
the Plaintiff, we have submitted a settlement proposal, for the Plaintiff to
accept the $14,758.58 currently held by the Court as payment in full, which is
currently outstanding.
During the year ending December 31, 2002, a company filed an action against us
in the Supreme Court of British Columbia, Canada claiming unspecified damages.
We filed a Statement of Defense in August, 2002. There has been no further
developments in this action. We plan to vigorously defend ourselves.
Arena Media Networks LLC v. AlphaTrade.com
Supreme Court of the State of New York, County of New York, Index No. 603406/06
Plaintiff Arena Media Networks LLC (“Arena”) commenced this action on or about October 15, 2007 by the filing of a Summons and Complaint. In the Complaint, Arena asserts causes of action for breach of contract, account stated and unjust enrichment against the Company arising from the Company’s alleged failure to pay sums purportedly due Arena pursuant to an agreement in which Arena agreed to place advertising for the Company.
The Company answered the Complaint on February 1, 2008. In its Answer, the Company denies the material allegations of the Complaint and asserts numerous affirmative defenses. This action is presently in the discovery stage. The Company intends to vigorously defend this action.
Center Operating Company v. AlphaTrade.com,
68th Judicial District Court, Dallas County, Texas, Case No. 2009-156001-1
Plaintiff Center Operating Company ("COC") commenced this action against the
Company on or about September 3, 2008 in the District Court of Dallas County,
Texas, Case No. 2009-156001-1. In its Complaint, COC alleges a cause of action
arising from the alleged breach of a Sponsorship Agreement, and seeks damages of
$185,621.
The Company denies the allegations of the Complaint and intends to vigorously
defend this action.
14
Sterling Mets, L.P. and Brooklyn Baseball Company, LLC v. AlphaTrade.com,
Supreme Court of the State of New York, County of Queens Case No. 27541/2008
Plaintiff Sterling Mets, L.P. and Brooklyn Baseball Company, LLC ("Mets") commenced this action against the Company on or about November 12, 2008 in the Supreme Court of the State of New York, County of Queens. In its Complaint, Mets alleges a cause of action arising from the alleged breach of a Sponsorship Agreement, and seeks damages of $650,000. On or about August 28, 2009, the plaintiff moved for summary judgment. The Company opposed this motion and the motion was fully submitted and argued on December 11, 2009. The plaintiff’s motion for summary judgment was denied by the court.
The Company denies the allegations of the Complaint and intends to vigorously defend this action.
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.
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 the end of December 31, 2009, there is no liability for any profit payment to PBR because the Company has a $4.9 million loss in 2009.
From time to time we may be a defendant and plaintiff in various legal
proceedings arising in the normal course of our business. We are currently not a
party to any material pending legal proceedings or government actions, including
any bankruptcy, receivership, or similar proceedings . In addition, management
is not aware of any known litigation or liabilities involving the operators of
our properties that could affect our operations. Should any liabilities incurred
15
in the future, they will be accrued based on management's best estimate of the
potential loss. As such, there is no adverse effect on our consolidated
financial position, results of operations or cash flow at this time.
Furthermore, our management does not believe that there are any proceedings to
which any of our directors, officers, or affiliates, any owner of record of the
beneficially or more than five percent of our common stock, or any associate of
any such director, officer, affiliate, or security holder is a party adverse to
our company or has a material interest adverse to us.
ITEM 4. RESERVED.
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Currently, our common stock is traded on the OTCBB and quoted under the symbol
"APTD". The high and low bid prices for the Common Stock as reported by our
content provider, Reuters Information Ltd. are listed below. The prices in the
table reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
2009 Fiscal Year - Quarterly Information
High Low
First 0.04 0.02
Second 0.03 0.01
Third 0.03 0.01
Fourth 0.02 0.01
2008 Fiscal Year - Quarterly Information
High Low
First 0.24 0.125
Second 0.18 0.10
Third 0.17 0.05
Fourth 0.09 0.01
Holders
As of December 31, 2009 there were 390 stockholders of record of our common
Dividends
We have never declared any cash dividends and do not anticipate paying such
dividends in the near future. We anticipate future earnings, if any, to be
retained for use in our business. Any future determination to pay cash dividends
will be at the discretion of the Board of Directors and will be dependent upon
our results of operations, financial conditions, contractual restrictions, and
other factors deemed relevant by the Board of Directors. We are under no
contractual restrictions in declaring or paying dividends to our common or
preferred shareholders.
16
We completed a 10% stock dividend to our shareholders of record on July 27, 2007.
Sales of Unregistered Securities
The future sale of presently outstanding "unregistered" and "restricted" common
stock by present members of our management and persons who own more than 5% of
our outstanding voting securities may have an adverse effect on the trading
market for our shares.
The following unregistered securities have been issued since January 1, 2009 and
have been previously disclosed in our Form 10-QSB's unless otherwise noted:
Fiscal year ended December 31, 2009
Valued
Date No. of Shares Title At Reason
March 2009 400,000 Common $0.02 For services
Information regarding our sales of our unregistered securities for the Fiscal
years ended December 31, 2009 and 2008, other then what is set forth above, has
been previously furnished in our Quarterly Reports on Form 10-Q and our Current
Reports on Form 8-K.
All of the above offerings and sales were deemed to be exempt under rule 506 of
Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended. No
advertising or general solicitation was employed in offering the securities. The
offerings and sales were made to a limited number of persons, all of whom were
accredited investors, business associates of our company or executive officers
of our company, and transfer was restricted by us in accordance with the
requirements of the Securities Act of 1933. In addition to representations by
the above-referenced persons, we have made independent determinations that all
of the above-referenced persons were accredited or sophisticated investors, and
that they were capable of analyzing the merits and risks of their investment,
and that they understood the speculative nature of their investment.
Furthermore, all of the above-referenced persons were provided with access to
our Securities and Exchange Commission filings.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Other than the Plans below, we maintain no other equity compensation plan pursuant to which we may grant equity awards to eligible persons.
The following table summarizes our equity compensation plan information as of
December 31, 2009.
17
Number of Shares
Remaining Available
for Future Issuance
Number of Shares to Under Equity
Be Issued upon Weighted-Average Compensation Plans
Exercise of Exercise Price of (Excluding Shares
Outstanding Outstanding Options, Reflected in
Options, Warrants Warrants and Rights Column (a))
Plan Category(1) and Rights) (b) (c)
-------------------- ------------------- ------------------- ----------------
Equity Compensation
plans approved by
stockholders N/A N/A N/A
Equity Compensation
plans not approved
by stockholders 47,105,000 $0.30 14,480,000
Total 47,105,000 $0.30 14,480,000
ITEM 6. SELECTED FINANCIAL DATA
N/A
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Some of the information contained in this Annual Report forward-looking
statements (within the meaning of the Private Securities Litigation Reform Act
of 1995) Some of the statements contained in this Annual Report on Form 10-K
(the "Annual Report") that are not historical facts are "forward-looking
statements" which can be identified by the use of terminology such as
"estimates," "projects," "plans," "believes," "expects," "anticipates,"
"intends," or the negative or other variations, or by discussions of strategy
that involve risks and uncertainties. We urge you to be cautious of the
forward-looking statements, that such statements, which are contained in this
Annual Report, reflect our current beliefs with respect to future events and
involve known and unknown risks, uncertainties and other factors affecting our
operations, market growth, services, products and licenses. No assurances can be
given regarding the achievement of future results, as actual results may differ
materially as a result of the risks we face, and actual events may differ from
the assumptions underlying the statements that have been made regarding
anticipated events. Factors that may cause actual results, our performance or
achievements, or industry results, to differ materially from those contemplated
by such forward-looking statements include without limitation:
1. Our ability to attract and retain management, and to integrate and maintain
technical information and management information systems;
2. Our ability to generate customer demand for our products;
3. The intensity of competition; and
4. General economic conditions.
Overview
We provide a broad array of financial products and services including in depth
market information from all North American exchanges and many of the exchanges in the Middle East. We seek to grow our subscriber base by expanding to other geographic markets to meet the needs of our increasing subscriber base, to diversify the subscriber revenue stream and to mitigate our exposure to regional economic downturns.
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We expanded our core products to include advertising aimed at satisfying the needs of small, mid-sized and large businesses with a desire to target specific demographics. This advertising service is unique in that it is entwined within the financial products and presented to the viewer for long periods during each business day.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates, including those related to uncollectible receivables, revenue recognition, deferred revenue, and contingencies. We base our estimates on historical performance and on various other assumptions that we believe to be reasonable under the circumstances. These estimates allow us to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
We believe the following accounting policies are our critical accounting policies because they are important to the portrayal of our financial condition and results of operations and they require critical management judgments and estimates about matters that may be uncertain. If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations for future periods could be materially affected.
Revenue Recognition
The Company recognizes subscription fees revenue and advertising revenue when the services have been provided. Revenues are recognized when they are realized, realizable and earned. Revenues are recognized on a pro-rata basis in consistent, equal increments over the term of contract.
Advertising revenues are often earned under contracts extending beyond a financial reporting period. The Company generally receives its monthly subscriptions in the month prior to the service being provided.
Accordingly the Company had deferred revenue of $524,383 and $737,010 at December 31, 2009 and 2008, respectively. Cost of sales is comprised of data feed expenses charged by various stock market exchanges. The Company had no customer which accounted for 10% of the revenue during the years ended December 31, 2009 and 2008.
The Company occasionally licenses its technology to some customers. The Company recognizes its license revenue over the term of the license. The Company also develops modified products for customers. The Company recognizes development revenue as the services are performed.
The Company records deferred revenue when it receives cash receipts in advance of performing the related service. These advance payments received are considered a current liability.
Accounts Receivable and Bad Debts
The Company estimates bad debts utilizing the allowance method, based upon past experience and current market conditions. At December 31, 2009 and 2008, the Company had an allowance for bad debts of $4,449 and $3,449, respectively.
Result of Operations for the twelve months ended December 31, 2009 and 2008
During the fiscal year ended December 31, 2009, total revenues were $4,542,531 which is a 25% decrease over fiscal 2008 sales of $6,075,031. The decrease in revenue is mainly from our subscription service and advertising program. This decrease is directly attributable to the global financial market crisis impact and key employee loss.
Subscription revenues decreased to $2,435,251 from $3,027,619 in 2008 which is a 20% decrease. In 2009, to stop the decline in subscribers, we implemented a 15-month promotional program which effectively reduced user loss in comparison with the rate of the financial market decline.
Advertising revenues decreased to $1,858,591 from $2,851,003 in 2008. Although we implemented premium exposure campaigns, the reduced financial activities in the market and the loss of key marketing personnel resulted in the 35% decrease in the advertising revenues.
Our cost of sales is primarily the cost to purchase and disseminate the financial content we provide our customers. For the calendar year ended December 31, 2009 the cost was $1,545,606 compared to $1,854,268 in 2008. The percentage of cost of sales to subscription revenues was 63% in 2009 compared to 61% in 2008 due mainly to price increases from the major financial content providers. Most of our financial content costs are fixed, meaning that the data and exchange providers charge a flat monthly fee. As our subscription volume goes up our cost of sales does not go up proportionately. Accordingly, as revenues increase in 2010 we expect the cost of sales percentage to decline. We also had $270 in other cost of sales in 2009 compared to $2,839 in 2008.
We have contracted with two companies for the services of two of the Company’s officers and directors. The officers do not own these companies but the compensation earned by them is to the future benefit of the officers. Under the terms of the contracts entered into in 2005 the companies are to continue to receive a base salary of $240,000 each per year. The contracts also provide for annual bonuses equal to the annual salary and for stock options based upon performance levels. The companies did not earn bonuses for 2008 and 2009. The total compensation expense to these entities was $480,000 in 2009 and $480,000 in 2008. The contract with one entity has terminated as of December 31, 2009 due to the passing away of the executive officer. We recognized a one time employee death benefit expense of $3,200,000 under the terms of the contract for that executive.
We incurred $342,190 in professional fees in 2009 compared to $1,127,880 in 2008. The sum of $8,000 and $479,451 of this expense was paid in shares of our common stock in 2009 and 2008, respectively. The shares were valued at market value. Professional fees include fees paid to accountants, attorneys and investor relation firms. We have reduced our professional fees by 70% in 2009.
We recorded research and development expense of $257,075 for 2009 compared to $468,884 in 2008. This is a 45% reduction in 2009 compared to 2008. This expense reflects the cost of creating our digital media promotions, website enhancements, and development
20
staff. This is what keeps us at the cutting edge of technology and ensures that our clients, both advertising and our monthly subscribers have the latest in Internet products at their disposal.
We expended $355,648 for marketing in 2009 compared to $678,551 in 2008. This decrease is mainly due to the cancellation of the sports partnerships and lower marketing activities.
Our general and administrative expenses increased by 93% in 2009 from $338,749 to $655,326. The increase was primarily due to office rental charges for additional operating expenses. We expect the general and administrative costs will remain the same level in 2010.
There were $134,468 realized losses in 2009 comparing with $223,068 realized loss in 2008 on sale of marketable securities. There were $892,896 and $792,956 realized losses for other-than-temporary impairment of marketable securities in 2009 and 2008 separately. This loss was a direct result of the decline in the financial markets due to a lower share price in the majority of marketable securities held by the Company.
There was a $240,000 loss on forgiveness of debt in 2009, pertaining to the Company’s earlier write off of a liability in the amount of $240,000, compared with $307,974 gain on forgiveness of debt in 2008.
Total interest expenses were $238,527 and $374,397 in 2009 and 2008 separately. The decrease was mainly due to the related party 536653 B.C Ltd. reducing its loan interest rate from 20% to 3% as of July 1, 2009.
We realized a net loss of ($4,551,358) for the year ended December 31, 2009 compared to a net income of $41,413 for the year ended December 31, 2008. Included in the net loss for 2009 and the net income for 2008 was $8,000 and $770,113 respectively as the value of options and shares issued for services, $892,896 and $792,956 respectively as the Other-than-temporary impairment of marketable securities. Excluding these non-cash expenses, the net loss for 2009 and net income for 2008 would have been ($3,650,462) and $1,604,482, respectively. We are trying to minimize the practice of issuing shares of stock for services.
Liquidity and Capital Resources.
There was no financing from capital raising activity in 2009, compared to $197,500 through private equity offerings in 2008. For the twelve months ended December 31, 2009 we used net cash of $167,672 compared to $582,574 for the same period of 2008 in our operating activities. We had net proceeds from investment activity of $175,919 and $270,384 in 2009 and 2008, respectively.
We expect that our 2010 cash inflows from operations may not be adequate to
cover cash out-flows from operations. We expect that we will need to raise approximately $1,000,000 from either increased advertising revenues, a private placement of our common stock or a loan to meet these commitments.
We are continually investigating acquisition targets and our stock may be required as part of the consideration for any acquisition.
We currently have no material commitments for capital requirements. We believe
that our capital inflows and our equipment infrastructure is adequate to handle
the expected growth in 2010.
We are not aware of any material trend, event or capital commitment, which would potentially adversely affect liquidity. In the event a material trend develops, we believe we will have sufficient funds available to satisfy working capital needs through debt or from funds received from equity sales.
Recent Accounting Pronouncements
In January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary. This amendment to Topic 810 clarifies, but does not change, the scope of current US GAAP. It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160
(now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted FAS 160. The Company does not expect the provisions of ASU 2010-02 to have a material effect on the financial position, results of operations or cash flows of the Company.
In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a limit on the amount of cash that will be distributed is not a stock dividend for purposes of applying Topics 505 and 260. Effective for interim and annual periods ending on or after December 15, 2009, and would be applied on a retrospective basis. The Company does not expect the provisions of ASU 2010-01 to have a material effect on the financial position, results of operations or cash flows of the Company.
In December 2009, the FASB issued Accounting Standards Update 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 167. (See FAS 167 effective date below.)
In December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 166. (See FAS 166 effective date below)
In October 2009, the FASB issued Accounting Standards Update 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing. This Accounting Standards Update amends the FASB Accounting Standard Codification for EITF 09-1. (See EITF 09-1 effective date below.)
22
In October 2009, the FASB issued Accounting Standards Update 2009-14, Software (Topic 985): Certain Revenue Arrangements That Include Software Elements. This update changed the accounting model for revenue arrangements that include both tangible products and software elements. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company does not expect the provisions of ASU 2009-14 to have a material effect on the financial position, results of operations or cash flows of the Company.
In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update addressed the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than a combined unit and will be separated in more circumstances that under existing US GAAP. This amendment has eliminated that residual method of allocation. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company does not expect the provisions ofASU 2009-13 to have a material effect on the financial position, results of operations or cash flows of the Company.
In September 2009, the FASB issued Accounting Standards Update 2009-12, Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). This update provides amendments to Topic 820 for the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent). It is effective for interim and annual periods ending after December 15, 2009. Early application is permitted in financial statements for earlier interim and annual periods that have not been issued. The Company does not expect the provisions of ASU 2009-12 to have a material effect on the financial position, results of operations or cash flows of the Company.
In July 2009, the FASB ratified the consensus reached by EITF (Emerging Issues Task Force) issued EITF No. 09-1, (ASC Topic 470) "Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance" ("EITF 09-1"). The provisions of EITF 09-1, clarifies the accounting treatment and disclosure of share-lending arrangements that are classified as equity in the financial statements of the share lender. An example of a share-lending arrangement is an agreement between the Company (share lender) and an investment bank (share borrower) which allows the investment bank to use the loaned shares to enter into equity derivative contracts with investors. EITF 09-1 is effective for fiscal years that beginning on or after December 15, 2009 and requires retrospective application for all arrangements outstanding as of the beginning of fiscal years beginning on or a fter December 15, 2009. Share-lending arrangements that have been terminated as a result of counterparty default prior to December 15, 2009, but for which the entity has not reached a final settlement as of December 15, 2009 are within the scope. Effective for share-lending arrangements entered into on or after the beginning of the first reporting period that begins on or after June 15, 2009. The Company does not expect the provisions of EITF 09-1 to have a material effect on the financial position, results of operations or cash flows of the Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
N/A
23
ITEM 8. FINANCIAL STATEMENTS
Financial statements as of and for the fiscal years ended December 31, 2009 and 2008 been examined to the extent indicated in their report by Sadler, Gibb & Associates independent certified public accountants, and have been prepared in accordance with Generally Accepted Accounting Principles and pursuant to Regulation S-K as promulgated by the SEC. The aforementioned financial statements are included herein under Item 14 starting with page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting. Our internal control system was designed to
provide reasonable assurance to our management and Board of Directors regarding
the preparation and fair presentation of published financial statements.
Our management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2009. In making this assessment, it used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control--Integrated Framework Based on our
assessment we believe that, as of December 31, 2009, our internal control over
financial reporting is effective based on those criteria.
This annual report does not include an attestation report of the Company's
registered accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission
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 our 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 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.
ITEM 9B. OTHER INFORMATION.
None
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE
The following table sets forth information regarding our directors and executive
officers as of December 31, 2009:
Name Age Position Director Since
------------------- --- ----------------------------------------- --------------
Gordon J. Muir* 56 Founder, Chairman, Chief Executive October 1999
Officer, President and Director
Katharine Johnston* 56 Vice-President January 2005
Director
Lisa McVeigh* 46 Director January 2000
* Member of the audit committee
The term of office of each director of the Company ends at the next annual
meeting of the Company's stockholders or when such director's successor is
elected and qualifies. No date for the annual meeting of stockholders is
specified in the Company's bylaws or has been fixed by the Board of Directors.
The following information sets forth the backgrounds and business experience of
the directors, executive officers and key employees:
GORDON MUIR has served as a Director of AlphaTrade since October 21, 1999. He
became Chief Executive Officer in February, 2000 and resigned from that position
and was appointed Chief Technology Officer in January, 2004. Mr. Muir was reappointed as the President and Chief Executive Officer on August 10th, 2009 due to the illness of Ms. Penny Perfect our former President & CEO. Mr. Muir has been
an independent investor and business consultant since 1990. He was the founder
of Navmaster Technologies, a company credited with developing the first GPS
charting systems for the Marine Industry that relied on optical imaging rather
than computers. He has over 16 years experience in senior level management in a
variety of business mainly in the automotive and industrial industries.
KATHARINE JOHNSTON was appointed as a Director in January, 2005. As the
principal financial officer and VP-Business Operations of AlphaTrade Mrs.
Johnston oversees all AlphaTrade financial transactions and department heads, as
well as interagency relationships with accountants and lawyers. Mrs. Johnston
has been with AlphaTrade since its inception in 1999 and was appointed managing
director in January 2005 and VP-Business Operations in February, 2007. Prior to
AlphaTrade, Mrs. Johnston was a self-employed administrator and legal assistant
for over fifteen years. Knowledgeable in British Columbia securities and
regulatory issues, Mrs. Johnston sat on many financial boards and has vast
experience in the administration and management of public companies. Mrs.
Johnston attended the University of British Columbia.
LISA McVEIGH has served as a Director since January 21, 2000. Ms. McVeigh held the position of Financial Officer with British Columbia Film for over
fourteen years and now is a Financial Consultant. Ms. McVeigh serves on the audit committee for AlphaTrade.com.
Family Relationships
Penny Perfect, our former CEO, President, Chairman and a member of our board of directors passed away on December 27, 2009. She and Gordon Muir, our CEO and a member of our board of directors, were married to each other and both are founding members of Alphatrade.com. There are no other family relationships between any other Directors or executive Officers. With the exception of the foregoing, none of the other directors and executive officers are related by blood, marriage or adoption.
Board Leadership Structure and Role in Risk Oversight
Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined that it is in the best interests of the Company and its shareholders to combine these roles. Mr. Muir currently serves as our Chairman and Chief Executive Officer. Due to the small size and early stage of the Company, we believe it is currently most effective to have the Chairman and Chief Executive Officer positions combined.
Our Audit Committee is primarily responsible for overseeing our risk management processes on behalf of our board of directors.The Audit Committee receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. In addition, the Audit Committee reports regularly to the full Board of Directors, which also considers our risk profile. The Audit Committee and the full Board of Directors focus on the most significant risks facing our company and our company’s general risk management strategy, and also ensure that risks undertaken by our Company are consistent with the Board’s appetite for risk. While the Board oversees our company’s risk management, management is responsible for day - -to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our Board leadership structure supports this approach.
Board Committees
At this time, other then an audit committee, the board has no committees,
including nominating or compensation committee, but we intend to create such
committees following the annual meeting and election of directors.
Audit Committee
The members of the audit committee are Gordon Muir, Katharine Johnston and
Lisa McVeigh.
Code of Ethics
We adopted a Code of Ethics (the "Code of Ethics") applicable to our principal
executive, financial and accounting officer and persons performing similar
functions. In addition, the Code of Ethics applies to our employees, officers,
directors, agents and representatives. The Company's Code of Ethics is intended
to comply with the rules and regulations of the Securities and Exchange
Commission and the rules of the NASDAQ Stock Market. The Code of Ethics is
available, at no cost, from the Company upon written request to Katharine
Johnston, VP Business Development of AlphaTrade.Com, and a copy is annexed as
Exhibit 14 to the Company's Annual Report filed on Form 10-KSB with the SEC on
March 31, 2006.
Compliance with Section 16 of the Exchange Act.
Section 16(a) of the Exchange Act requires our directors, officers and persons
who own more than 10% of a registered class of our equity securities to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Directors, officers and greater than 10% shareholders are required
by SEC regulations to furnish us with copies of all Section 16(a) forms they
file. Based solely upon our review of the copies of such forms that we received
during the fiscal year ended December 31, 2009, we believe that each person who
at any time during the fiscal year was a director, officer or beneficial owner
of more than 10% of our common stock complied with all Section 16(a) filing
requirements during such fiscal year.
Director Compensation
The following table sets forth with respect to the named director, compensation
information inclusive of equity awards and payments made in the fiscal year
ended December 31, 2009.
<TABLE>
<CAPTION>
Fees Change in
Earned Pension Value
or Non-Equity and
Paid Incentive Nonqualified
in Stock Option Plan Deferred All Other
Cash Awards Awards Compensation Compensation Compensation Total
Name ($) ($) ($) ($) Earnings ($) ($)
(a) (b) (c) (d) (e) (f) (g) (5) (h)
--------------------- ------- ------ ----- ------------ ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Penny Perfect (1) -- -- -- -- -- -- --
Gordon Muir (2) -- -- -- -- -- -- --
Katharine Johnston (3) -- -- -- -- -- -- --
Lisa McVeigh (4) -- -- -- -- -- -- --
</TABLE>
(1) Ms. Perfect appointed as a director of the Company effective as of
October 21, 1999.
(2) Mr. Muir appointed as a director of the Company effective as of
October 21, 1999.
(3) Ms. Johnston appointed as a director of the Company effective as of
January 31, 2005.
(4) Ms. McVeigh appointed as a director of the Company effective as of
January 21, 2000.
(5) With the exception of reimbursement of expenses incurred by our named
executive officers during the scope of their employment, none of the
named executive received any other compensation, perquisites,
personal benefits in excess of $10,000.
(6) See Executive Compensation table below for the total amount of
compensation received by Ms. Perfect and Mr. Muir in their capacities
as our executive officers.
Directors that are non-officers of the Company do not receive a cash retainer
annually nor do they receive any remuneration for attendance at a board meeting,
other than reimbursement for travel expenses.
ITEM 11. EXECUTIVE COMPENSATION
The following table provides certain summary information concerning compensation
awarded to, earned by or paid to our Chief Executive Officer and other named
executive officers and directors of our Company whose total annual salary and
bonus exceeded $100,000 (collectively, the "named officers") for fiscal years
ended December 31, 2009 and December 31, 2008.
SUMMARY COMPENSATION TABLE
Long-Term and Other
Annual Compensation Compensation
------------------------------- --------------------------
Number of
Name and Other Securities All Other
Principal Fiscal Annual Underlying Compensation
Positions Year Salary(1) Bonus Comp Options
--------------------------------------------------- ---------------------------
Gordon J. Muir 2009 $240,000
CEO & President 2008 $240,000 -- -- -----
Chairman
Penny Perfect 2009 $240,000
Deceased 2008 $240,000 -- -- -------
(1) We have contracted with two companies for the services of above noted officers and directors. These companies are not owned by the officers but the
compensation earned by them is to the future benefit of the officers. The management fees for 2009 are accrued and remain unpaid. With the exception of reimbursement of expenses incurred by our named executive officers during the scope of their consultancy none of the named executives received any other compensation, perquisites, personal benefits in excess of $10,000.
In addition, we do not have either (i) a plan that provides for the payment of
retirement benefits, or benefits that will be paid primarily following
retirement, including but not limited to tax-qualified defined benefit plans,
supplemental executive retirement plans, tax-qualified defined contribution
plans and nonqualified defined contribution plans, nor (ii) any contract,
agreement, plan or arrangement, whether written or unwritten, that provides for
payment(s) to any of our named executive officers at, following, or in
connection with the resignation, retirement or other termination of any of our
named executive officers, or in connection with the change in control of our
company or a change in any of our named executive officers' responsibilities
following a change in control, with respect to each of our named executive
officers.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information with respect concerning unexercised
options; stock that has not vested; and equity incentive plan awards for each of
our named executive officers outstanding as of the end of our to grants of
options to purchase our common stock under our Stock Incentive Plan to the named
executive officers during the fiscal year ended December 31, 2009.
<TABLE>
<CAPTION>
Option Awards Stock Awards
------------------------------------------------------------------------------ ------------------------------------------------
Equity Equity
Incentive Incentive
Plan Plan Awards:
Market Awards: Market or
Equity Value Number Payout
Incentive of of Value
Plan Shares Unearned of
Awards: Number or Shares, Unearned
Number of Shares Units Units or Shares,
Number of Number of of or Units of Other Units or
Securities Securities Securities of Stock Stock Rights Other
Underlying Underlying Underlying That That That Rights
Unexercised Unexercised Unexercised Option Have Have Have That Have
Options Options Unearned Exercise Option Not Not Not Not
($) ($) Options Price Expiration Vested Vested Vested Vested
Name Exercisable Unexercisable (#) ($) Date ($) ($) (#) ($)
------------------------------------------------------------------------------ ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Penny 14,500,000 750,000 -- $0.42 -- -- -- -- --
Perfect
Gordon
Muir 14,500,000 750,000 -- $0.42 -- -- -- -- --
</TABLE>
Employment Agreements
Effective November 1, 2005 we executed Consulting Agreements with Jupiter
Consultants, Inc. for the services of Penny Perfect and Micro-American, Inc. for
the services of Gordon Muir for a three year term ending October 31, 2008. The
contracts will automatically renew unless terminated by giving notice by either
party. The contracts provide for the same compensation to each of Ms. Perfect
and Mr. Muir as noted below.
(a) Base Salary at a monthly rate of at least US $20,000 to be renewed
annually to be paid in either cash or our common shares.
(b) an annual bonus of two hundred thousand (200,000) common shares
issued by December 31st of each year of the agreement beginning December 31,
2005 and this amount may be upwardly amended at the election of the Board of
Directors. The bonus will increase to one million (1,000,000) shares annually
when AlphaTrade's gross annual revenue reaches $5,000,000.
(c) In addition, when AlphaTrade reaches gross annual revenue of
$10,000,000 AlphaTrade will grant an option to purchase two million five hundred
thousand (2,500,000) common shares of AlphaTrade's restricted common stock with
an exercise price of $0.40 per share.
(d) Cash Bonus. For each full fiscal year beginning January 1, 2006,
the consultants will be eligible to earn an annual cash bonus in such amount as
shall be determined by the Board of Directors based on the achievement by the
Company of performance goals established by Management for each such fiscal
year, which may include targets related to the earnings before interest, taxes,
depreciation and amortization ("EBITDA") of the Company; provided, that the
Annual Bonus shall be no less than the annual base compensation.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the stock
ownership as of April 15, 2010, of each person�� who is known to be the beneficial owner of more than 5% of our common stock; held directly or
indirectly by each director; or by each person who was our executive officer or
director during the fiscal year ended December 31, 2009, and by our directors
and executive officers as a group.
Shares
Beneficially
Name of Beneficial Owner Owned(1) Percent (2)
The Estate of Penny Perfect 22,941,620 (3) 33%
c/o AlphaTrade.com
Suite 116 – 930 West 1st Street
North Vancouver, B.C.
Gordon Muir 22,716,320 (4) 33%
c/o AlphaTrade.com
Suite 116 – 930 West 1st Street
North Vancouver, B.C.
Katharine Johnston none
c/o AlphaTrade.com
Suite 116 – 930 West 1st Street
North Vancouver, B.C.
Lisa McVeigh none
c/o AlphaTrade.com
Suite 116 – 930 West 1st Street
North Vancouver, B.C.
All current directors and named 45,657,940 66%
officers as a group (3 in all)
(1) The shares are held in various private companies in which the officer
may or may not hold a minority interest. Ms. Perfect and Mr. Muir are spouses.
Accordingly, each spouse's holdings may also be deemed to be beneficially owned by the other.
(2) Percentage ownership is based upon 53,756,023 shares of common stock
outstanding on December 31, 2009 and is calculated separately for each
person on the basis of the actual number of outstanding shares beneficially
owned as of December 31, 2009 and assumes the conversion of preferred shares
held by such person (but not by anyone else).
(3) Includes direct and indirect ownership of common shares and includes
5,000,000 shares to be issued upon the conversion of A Series preferred
Shares and 10,000,000 shares to be issued upon the conversion of B series preferred shares.
(4) Includes direct and indirect ownership of common shares and includes
5,000,000 shares to be issued upon the conversion of A Series preferred
shares and 10,000,000 shares to be issued upon the conversion of B series preferred shares.
Equity Compensation Table
The following table summarizes our equity compensation plan information as of
December 31, 2009.
Number of Shares
Remaining Available
for Future Issuance
Number of Shares to Under Equity
Be Issued upon Weighted-Average Compensation Plans
Exercise of Exercise Price of (Excluding Shares
Outstanding Outstanding Options, Reflected in
Options, Warrants Warrants and Rights Column (a))
Plan Category(1) and Rights) (b) (c)
-------------------- ---------------- ------------------- -------------------
Equity Compensation
plans approved
by stockholders N/A N/A N/A
Equity Compensation
plans not approved
by stockholders 32,625,000 $0.30 14,480,000
Total 32,625,000 $0.30 14,480,000
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships And Related Transactions: Transactions With Related
Persons, Promoters And Certain Control Persons
During the year ended December 31, 2009, two companies owned for the benefit of
the two officers of the Company accrued management fees of $480,000 which was recorded as related party compensation.
Related party payables at December 31, 2009 consisted of the following:
Officer bonuses $ 78,000
Officer accrued wages 863,266
Loan advances 1,615,300
Officer Death benefit liability 3,200,000
----------
$5,756,566
==========
There have not been any other transactions or proposed transactions during the
fiscal years ended December 31, 2009 and 2008, to which we were or is are to be a party, in which our officers, directors or nominees had or are to have a direct or indirect material interest.
Review, Approval or Ratification of Transactions with Related Persons
We believe that the terms of all of the above transactions are commercially
reasonable and no less favorable to us than we could have obtained from an
unaffiliated third party on an arm's length basis. Our policy requires that all
related parties recuse themselves from negotiating and voting on behalf of our
company in connection with related party transactions.
Parents
Not applicable
Promoter and Certain Control Persons
Not applicable.
CORPORATE GOVERNANCE
Board Determination of Independence
-----------------------------------
Our board of directors has determined that Lisa McVeigh is "independent" as that
term is defined by the National Association of Securities Dealers Automated
Quotations ("NASDAQ"). Under the NASDAQ definition, an independent director is a
person who (1) is not currently (or whose immediate family members are not
currently), and has not been over the past three years (or whose immediate
family members have not been over the past three years), employed by the
company; (2) has not (or whose immediate family members have not) been paid more
than $60,000 during the current or past three fiscal years; (3) has not (or
whose immediately family has not) been a partner in or controlling shareholder
or executive officer of an organization which the company made, or from which
the company received, payments in excess of the greater of $200,000 or 5% of
that organizations consolidated gross revenues, in any of the most recent three
fiscal years; (4) has not (or whose immediate family members have not), over the
past three years been employed as an executive officer of a company in which an
executive officer of AlphaTrade has served on that company's compensation
committee; or (5) is not currently (or whose immediate family members are not
currently), and has not been over the past three years (or whose immediate
family members have not been over the past three years) a partner of
AlphaTrade's outside auditor. A director who is, or at any time during the past
three years, was employed by the Company or by any parent or subsidiary of the
Company, shall not be considered independent.
Board of Directors Meetings and Attendance
------------------------------------------
The Board of Directors has responsibility for establishing broad corporate
policies and reviewing our overall performance rather than day-to-day
operations. The primary responsibility of our Board of Directors is to oversee
the management of our company and, in doing so, serve the best interests of the
company and our stockholders. The Board of Directors selects, evaluates and
provides for the succession of executive officers and, subject to stockholder
election, directors. It reviews and approves corporate objectives and
strategies, and evaluates significant policies and proposed major commitments of
corporate resources. Our Board of Directors also participates in decisions that
have a potential major economic impact on our company. Management keeps the
directors informed of company activity through regular communication, including
written reports and presentations at Board of Directors and committee meetings.
We have no formal policy regarding director attendance at the annual meeting of
stockholders, although all directors are expected to attend the annual meeting
of stockholders if they are able to do so. The board of directors held approximately 5 meetings in 2009 either in person or telephonic. During both all of the board meetings, all four board members were present, either by person or on the telephone in the case of the telephonic meetings.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following is a summary of the fees billed to us by Chisholm, Bierwolf & Nilson, LLC,HJ & Associates LLC and Sadler, Gibb & Associates for professional services rendered for the fiscal years ended December 31, 2009 and December 31, 2008:
Fee Category Fiscal 2009 Fees Fiscal 2008 Fees
------------------------- ---------------- ----------------
Audit Fees $60,229 $52,487
Audit-Related Fees 2,353 --
Tax Fees -- --
All Other Fees -- --
---------------- ----------------
Total Fees $62,582 $52,487
Audit Fees. Consists of fees billed for professional services rendered for the audit of our financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by Chisholm, Bierwolf & Nilson, LLC, HJ & Associates, LLC and Sadler, Gibb & Associates in connection with statutory and regulatory filings or engagements.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors
The Audit Committee's policy is to pre-approve all audit and permissible
non-audit services provided by the independent auditors. These services may
include audit services, audit-related services, tax services, and other
services. Pre-approval is generally provided for up to one year, and any
pre-approval is detailed as to the particular service or category of services
and is generally subject to a specific budget. The independent auditors and
management are required to periodically report to the Audit Committee regarding
the extent of services provided by the independent auditors in accordance with
this pre-approval and the fees for the services performed to date. The Audit
Committee may also pre-approve particular services on a case-by-case basis.
ITEM 15. EXHIBITS
The following financial statements for AlphaTrade.com. are filed as a part of
this report:
For the Years Ended December 31, 2009 and 2008 Page
---------------------------------------------- ----
Reports of Independent Registered Certified Public Accounting Firms F-2
Balance Sheets as of December 31, 2009 and December 31, 2008 F-3
Statements of Operations for the years ended December 31, 2009 and
December 31, 2008 F-4
Statements of Stockholders’ Equity (Deficit) for the
years ended December 31, 2009 and December 31, 2008 F-5
Statements of Cash Flows for the years ended December 31, 2009 and
December 31, 2008 F-7
Notes to Financial Statements F-8
The following exhibits are included herein, except for the exhibits marked with a footnote, which are incorporated herein by reference and can be found in the appropriate document referenced.
Exhibit
Number Description
--------------------------------------------------------------------------------
3(i).1 Initial Articles of Incorporation of the Company dated June 6,
1995. (1)
3(i).2 Certificate of Amendment increasing the authorized capital to
25,000,000 shares of common stock, Car value $0.001, and
effected an 80 for one forward split of the outstanding pommon
stock (1)
3(i).3 Certificate of Amendment changing the name of the company to
"Honor One Corporation". (1)
3(i).4 Certificate of Amendment effecting a three for one forward
split of the outstanding Common stock. (1)
3(i).5 Certificate of Amendment pursuant to which the Company
increased the authorized capital of the Company to 100,000,000
shares of common stock; 10,000,000 shares of preferred stock,
par value $0.001; created a series of 2,000,000 shares of
Class A Preferred Stock; and changed its name from "Honor One
Corporation" to "AlphaTrade.com" (1)
3(ii) By-laws of the Company. (1)
10.1* AlphaTrade.com 2005 Stock Incentive Plan. (10)
10.2+ Consulting Agreement dated November 1, 2005 entered into by
and between the Company and Jupiter Consultants, Inc. (3)
10.3+ Consulting Agreement dated November 1, 2005 entered into
by and between the Company and Micro-American, Inc. (3)
14.1 Code of Ethics and Business Conduct for officers, directors
and employees of AlphaTrade.com (3)
21.1 List of subsidiaries of the Company. *
31 Certification by Chief Executive Officer and acting Chief
Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)
of the Exchange Act. *
32 Certification by Chief Executive Officer acting Chief
Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b)
of the Exchange Act and Section 1350 of Chapter 63 of Title 18
of the United States Code. *
+ Compensatory plan or arrangement.
* Filed herewith.
(1) Incorporated by reference to the Company's Form 10-SB/A filed with the
SEC on November 23, 1999.
(2) Incorporated by reference to the Company's Registration Statement filed
on Form S-8 with the SEC on June 22, 2005.
(3) To be filed by an Amendment.
35
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ALPHATRADE.COM
Dated: June 22, 2010 By: /s/ Gordon J. Muir
---------------------
Gordon J. Muir
Chief Executive Officer,
President, Chairman and
Director
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title Date
---------------------- ---------------------------------------- --------------
/s/ Gordon J. Muir Chief Executive Officer, President, June 22, 2010
------------------ Chairman, Director
Gordon J. Muir
/s/ Katharine Johnston Vice President – Business Operations, June 22, 2010
---------------------- Principal Financial Officer and Director
Katharine Johnston
/s/ Lisa McVeigh Director June 22, 2010
----------------------
Lisa McVeigh
ALPHATRADE.COM
AUDIT REPORT OF INDEPENDENT ACCOUNTANTS
AND
FINANCIAL STATEMENTS
December 31, 2009 and 2008
ALHPHATRADE.COM
TABLE OF CONTENTS
Page
Audit Report of Independent Accountants....................................................................................... F-2
Balance Sheets – December 31, 2009 and 2008............................................................................... F-3
Statement of Operations for the Years Ended December 31, 2009 and December 31, 2008............ F-5
Statement of Stockholder’s Equity for the Years Ended December 31, 2009 and 2008................... F-6
Statement of Cash Flows for the Years Ended December 31, 2009 and 2008.................................. F-7
Notes to Financial Statements......................................................................................................... F-8
_______________________________________
SADLER, GIBB & ASSOCIATES, L.L.C.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
AlphaTrade.com
We have audited the accompanying balance sheet of AlphaTrade.com as of December 31, 2009, and the related statements of operations, stockholders’ equity (deficit) 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 audit. The financial statements of AlphaTrade.com as of December 31, 2008, were audited by other auditors whose report dated March 30, 2009 except for Notes 1(n), 7, 8 and 11, dated March 23, 2010, and expressed an unqualified opinion on those statements.
We conduct our audit 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. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audi t 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 financial statements referred to above present fairly, in all material respects, the financial position of AlphaTrade.com as of December 31, 2009, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 9 to the financial statements, the Company has negative cash flow from operations and has deficits in working capital and stockholders’ equity which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 9. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
SADLER, GIBB AND ASSOCIATES, LLC
Salt Lake City, UT
June 22, 2010
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
AlphaTrade.com
Vancouver, BC Canada
We have audited the accompanying balance sheets of AlphaTrade.com at December
31, 2008 and 2007 and the related statements of operations, stockholders' equity
(deficit) and cash flows for the years 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.
We conducted our audits in accordance with the 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. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
controls over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. 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 AlphaTrade.com at December 31,
2008 and 2007 and the results of its operations and its cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has negative cash-flows from operations and a
working capital deficit, which together raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 9. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Chisholm, Bierwolf & Nilson, LLC
Chisholm, Bierwolf & Nilson, LLC
Bountiful, Utah
March 30, 2009
PCAOB Registered, Members of AICPA, CPCAF and UACPA
ALPHATRADE.COM | ||||||||
Balance Sheets | ||||||||
| ||||||||
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|
ASSETS | ||||||||
|
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|
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|
|
|
|
|
|
|
|
| December 31, |
| December 31, | ||
|
|
|
| 2009 |
| 2008 | ||
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|
|
|
|
|
| ||
CURRENT ASSETS |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| Cash |
|
| $ | 63,897 |
| $ | 55,650 |
| Accounts receivable, net |
|
| - |
|
| 1,172,064 | |
| Marketable securities-available for sale |
|
| 552,714 |
|
| 1,558,876 | |
| Marketable securities-available for sale related party |
|
| 1,256 |
|
| 2,093 | |
| Prepaid expenses |
|
| 1,885 |
|
| 1,000 | |
|
|
|
|
|
|
|
|
|
|
| Total Current Assets |
|
| 619,752 |
|
| 2,789,683 |
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, net |
|
| 28,913 |
|
| 45,776 | ||
|
|
|
|
|
|
|
|
|
|
| TOTAL ASSETS |
| $ | 648,665 |
| $ | 2,835,459 |
|
|
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|
|
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|
|
|
|
|
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|
|
|
|
The accompanying notes are an integral part of these financial statements. | ||||||||
ALPHATRADE.COM | ||||||||
Balance Sheets | ||||||||
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LIABILITIES AND STOCKHOLDERS' (DEFICIT) | ||||||||
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| December 31, |
| December 31, | ||
|
|
|
| 2009 |
| 2008 | ||
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| ||
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|
|
|
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|
|
CURRENT LIABILITIES |
|
|
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| ||
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|
|
| Accounts payable and accrued expenses |
| $ | 1,162,451 |
| $ | 2,161,854 | |
| Related party payables |
|
| 5,756,567 |
|
| 2,746,262 | |
| Deferred revenues |
|
| 524,383 |
|
| 737,010 | |
|
|
|
|
|
|
|
|
|
|
| Total Current Liabilities |
|
| 7,443,401 |
|
| 5,645,126 |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
| 7,443,401 |
|
| 5,645,126 | ||
|
|
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COMMITMENTS AND CONTINGENCIES |
|
| - |
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| - | ||
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STOCKHOLDERS' (DEFICIT) |
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| Preferred shares: $0.001 par value, |
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| |
| 10,000,000 shares authorized: 2,000,000 Class A and |
|
|
|
|
|
| |
| 2,000,000 Class B shares issues and outstanding |
|
| 4,000 |
|
| 4,000 | |
| Common shares: $0.001 par value, |
|
|
|
|
|
| |
| 300,000,000 shares authorized: 53,756,023 and 54,076,023 |
|
|
|
|
| ||
| shares issued and outstanding, respectively |
|
| 53,756 |
|
| 54,076 | |
| Stock subscription payable |
|
| 45,080 |
|
| 45,080 | |
| Additional paid-in capital |
|
| 34,606,348 |
|
| 33,921,184 | |
| Accumulated other comprehensive income |
|
| (159,098) |
|
| (40,543) | |
| Accumulated deficit |
|
| (41,344,822) |
|
| (36,793,464) | |
|
|
|
|
|
|
|
|
|
|
| Total Stockholders' (Deficit) |
|
| (6,794,736) |
|
| (2,809,667) |
|
|
|
|
|
|
|
|
|
|
| TOTAL LIABILITIES AND STOCKHOLDERS' |
|
|
|
|
|
|
|
| EQUITY (DEFICIT) |
| $ | 648,665 |
| $ | 2,835,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements. | ||||||||
ALPHATRADE.COM | |||||||||
Statements of Operations and Other Comprehensive Income (Loss) | |||||||||
| |||||||||
|
|
|
|
| For the Year Ended | ||||
|
|
|
|
| December 31, | ||||
|
|
|
|
| 2009 |
| 2008 | ||
REVENUES |
|
|
|
|
|
|
| ||
| Subscription revenue |
|
| $ | 2,435,251 |
| $ | 3,027,619 | |
| Advertising revenue |
|
|
| 1,858,591 |
|
| 2,851,003 | |
| Other revenue |
|
|
| 248,689 |
|
| 196,409 | |
|
|
|
|
|
|
|
|
|
|
|
| Total Revenues |
|
|
| 4,542,531 |
|
| 6,075,031 |
|
|
|
|
|
|
|
|
|
|
COST OF SALES |
|
|
|
|
|
|
| ||
| Financial content |
|
|
| 1,545,606 |
|
| 1,854,268 | |
| Other cost of sales |
|
|
| 270 |
|
| 2,839 | |
|
|
|
|
|
|
|
|
|
|
|
| Total Cost of Sales |
|
|
| 1,545,876 |
|
| 1,857,107 |
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
|
| 2,996,655 |
|
| 4,217,924 | ||
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
| ||
| Management expense |
|
|
| 480,000 |
|
| 480,000 | |
| Bad debt expense |
|
|
| 751,823 |
|
| - | |
| Professional fees |
|
|
| 342,190 |
|
| 1,127,880 | |
| Research and development |
|
|
| 257,075 |
|
| 468,884 | |
| Marketing expense |
|
|
| 355,648 |
|
| 678,551 | |
| Exployee death benefit expense |
|
|
| 3,200,000 |
|
| - | |
| General and administrative |
|
|
| 655,326 |
|
| 338,749 | |
|
|
|
|
|
|
|
|
|
|
|
| Total Operating Expenses |
|
|
| 6,042,062 |
|
| 3,094,064 |
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS |
|
|
| (3,045,407) |
|
| 1,123,860 | ||
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
| ||
| Realized gains (losses) on sale of marketable securities |
|
|
| (134,468) |
|
| (223,068) | |
| Other-than-temporary impairment of marketable securities |
|
|
| (892,896) |
|
| (792,956) | |
| Gain (Loss) on forgiveness of debt |
|
|
| (240,000) |
|
| 307,974 | |
| Interest expense |
|
|
| (238,587) |
|
| (374,397) | |
|
|
|
|
|
|
|
|
|
|
|
| Total Other Income (Expense) |
|
|
| (1,505,951) |
|
| (1,082,447) |
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) BEFORE INCOME TAXES |
|
|
| (4,551,358) |
|
| 41,413 | ||
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE |
|
|
| - |
|
| - | ||
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
| $ | (4,551,358) |
| $ | 41,413 | ||
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS) |
|
| $ | (118,555) |
| $ | 697,861 | ||
|
|
|
|
|
|
|
|
|
|
TOTAL COMPREHENSIVE INCOME (LOSS) |
|
| $ | (4,669,913) |
| $ | 739,274 | ||
|
|
|
|
|
|
|
|
|
|
BASIC EARNINGS (LOSS) PER SHARE |
|
| $ | (0.08) |
| $ | 0.00 | ||
FULLY DILUTED INCOME (LOSS) PER SHARE |
|
| $ | (0.08) |
| $ | 0.00 | ||
BASIC WEIGHTED AVERAGE NUMBER |
|
|
|
|
|
|
| ||
OF SHARES OUTSTANDING |
|
|
| 54,197,009 |
|
| 51,175,987 | ||
FULLY DILUTED WEIGHTED AVERAGE NUMBER |
|
|
|
|
|
|
| ||
OF SHARES OUTSTANDING |
|
|
| 54,197,009 |
|
| 81,175,987 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are a integral part of these financials statements. | |||||||||
ALPHATRADE.COM
Statements of Stockholders' (Deficit)
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Additional |
| Stock |
| Other |
|
|
| Total | |||||
| Preferred Stock |
| Common Stock |
| Paid-In |
| Subscription |
| Comprehensive |
| Accumulated |
| Stockholders' | |||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Payable |
| Income |
| Deficit |
| Equity (Deficit) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007 | 4,000,000 |
| $ | 4,000 |
| 48,589,773 |
| $ | 48,590 |
| $ | 32,959,057 |
| $ | 28,500 |
| $ | (738,404) |
| $ | (36,834,877) |
| $ | (4,533,134) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at $0.15 and $0.20 per share | - |
|
| - |
| 1,075,000 |
|
| 1,075 |
|
| 196,425 |
|
| 16,580 |
|
| - |
|
| - |
|
| 214,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at $0.02 to $0.21 per share | - |
|
| - |
| 4,411,250 |
|
| 4,411 |
|
| 475,040 |
|
| - |
|
| - |
|
| - |
|
| 479,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of stock purchase |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
warrants vested | - |
|
| - |
| - |
|
| - |
|
| 25,652 |
|
| - |
|
| - |
|
| - |
|
| 25,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of stock options issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
under stock option plans | - |
|
| - |
| - |
|
| - |
|
| 265,010 |
|
| - |
|
| - |
|
| - |
|
| 265,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ended December 31, 2008 | - |
|
| - |
| - |
|
| - |
|
| - |
|
| - |
|
| 697,861 |
|
| 41,413 |
|
| 739,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008 | 4,000,000 |
|
| 4,000 |
| 54,076,023 |
|
| 54,076 |
|
| 33,921,184 |
|
| 45,080 |
|
| (40,543) |
|
| (36,793,464) |
|
| (2,809,667) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at $0.02 per share | - |
|
| - |
| 400,000 |
|
| 400 |
|
| 7,600 |
|
| - |
|
| - |
|
| - |
|
| 8,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock canceled | - |
|
| - |
| (720,000) |
|
| (720) |
|
| 720 |
|
| - |
|
| - |
|
| - |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed interest | - |
|
| - |
| - |
|
| - |
|
| 676,844 |
|
| - |
|
| - |
|
| - |
|
| 676,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ended December 31, 2009 | - |
|
| - |
| - |
|
| - |
|
| - |
|
| - |
|
| (118,555) |
|
| (4,551,358) |
|
| (4,669,913) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009 | 4,000,000 |
| $ | 4,000 |
| 53,756,023 |
| $ | 53,756 |
| $ | 34,606,348 |
| $ | 45,080 |
| $ | (159,098) |
| $ | (41,344,822) |
| $ | (6,794,736) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are a integral part of these financials statements. | ||||||||||||||||||||||||
ALPHATRADE.COM | ||||||||
Statements of Cash Flows | ||||||||
| ||||||||
|
|
|
| For the Year Ended | ||||
|
|
|
| December 31, | ||||
|
|
|
| 2009 |
| 2008 | ||
CASH FLOWS FROM |
|
|
|
|
|
| ||
OPERATING ACTIVITIES |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| Net income (loss) |
| $ | (4,551,358) |
| $ | 41,413 | |
| Adjustments to reconcile net income (loss) to |
|
|
|
|
|
| |
| net cash used by operating activities: |
|
|
|
|
|
| |
|
| Depreciation expense |
| # | 16,863 |
| # | 18,435 |
|
| Value of stock options and warrants granted |
|
| - |
|
| 290,662 |
|
| Write off of accounts receivable |
|
| 1,169,000 |
|
| - |
|
| Loss on sale of investments |
|
| 134,468 |
|
| 223,068 |
|
| Other-than-temporary impairment of available-for-sale investments |
|
| 892,896 |
|
| 792,956 |
|
| (Gain) Loss on settlement of debt |
|
| 240,000 |
|
| (307,974) |
|
| Transfer of investments to settle debt |
|
| 500,000 |
|
| - |
|
| Increase of investments from non-cash receipt of advertising revenues |
|
| (814,839) |
|
| (1,204,004) |
|
| Common stock issued for services |
|
| 8,000 |
|
| 479,451 |
| Changes in operating assets and liabilities: |
|
|
|
|
|
| |
|
| Changes in accounts receivable |
| # | 3,064 |
| # | (1,144,017) |
|
| Changes in prepaid expenses |
|
| (886) |
|
| (250) |
|
| Changes in deferred revenues |
|
| (212,627) |
|
| (393,168) |
|
| Changes in related party payables |
|
| 3,687,148 |
|
| 555,848 |
|
| Changes in accounts payable and accrued expenses |
|
| (1,239,401) |
|
| 65,006 |
|
|
|
|
|
|
|
|
|
|
| Net Cash Used in Operating Activities |
|
| (167,672) |
|
| (582,574) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM |
|
|
|
|
|
| ||
INVESTING ACTIVITIES |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| Sale of securities |
|
| 175,919 |
|
| 288,962 | |
| Purchase of fixed assets |
|
| - |
|
| (18,578) | |
|
|
|
|
|
|
|
|
|
|
| Net Cash Provided by Investing Activities |
|
| 175,919 |
|
| 270,384 |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM |
|
|
|
|
|
| ||
FINANCING ACTIVITIES |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| Common stock issued for cash |
|
| - |
|
| 197,500 | |
| Stock subscriptions payable |
|
| - |
|
| 16,580 | |
|
|
|
|
|
|
|
|
|
|
| Net Cash Provided by Financing Activities |
|
| - |
|
| 214,080 |
|
|
|
|
|
|
|
|
|
|
| NET INCREASE (DECREASE) IN CASH |
|
| 8,247 |
|
| (98,110) |
|
| CASH AT BEGINNING OF YEAR |
|
| 55,650 |
|
| 153,760 |
|
| CASH AT END OF YEAR |
| $ | 63,897 |
| $ | 55,650 |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF |
|
| 63,897 |
|
|
| ||
| CASH FLOW INFORMATION |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| CASH PAID FOR: |
|
|
|
|
|
| |
|
| Interest |
| $ | 26,684 |
| $ | 64,513 |
|
| Income Taxes |
| $ | - |
| $ | - |
|
|
|
|
|
|
|
|
|
| NON CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
| |
|
| Common stock issued for services |
| $ | 8,000 |
| $ | 479,451 |
|
| Value of stock options and warrants vested |
| $ | - |
| $ | 290,662 |
|
| Increase of investments from non-cash receipt of |
|
|
|
|
|
|
|
| advertising revenues |
| $ | 814,839 |
| $ | 1,501,911 |
|
| Contributed interest on debt |
| $ | 676,844 |
| $ | - |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements. | ||||||||
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of AlphaTrade.com is presented to assist in understanding the Company’s financial statements. The 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 financial statements.
a. Organization and Business Activities AlphaTrade.com was incorporated under the laws of the State of Nevada on June 6, 1995 as Sierra Gold Development Corp. It then changed its name to Honor One Corporation on October 29, 1998 and on January 6, 2001 changed its name to AlphaTrade.com (the Company). The Company provides both real-time and delayed stock market quotes to subscribers via the Internet.
b. Depreciation
The cost of the property and equipment is depreciated over the estimated useful life of 5 years. Depreciation is computed using the straight-line method when the assets are placed in service.
c. Accounting Method
The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a December 31 year-end.
d. Cash and Cash Equivalents
For the purpose of the statement of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.
e. 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.
f. Concentrations of Credit Risk
The Company maintains its cash in one commercial account at a major financial institution. Although the financial institution is considered creditworthy and has not experienced any losses on its deposits, at December 31, 2009 and 2008, the Company's cash balance exceeded Federal Deposit Insurance Corporation (FDIC) limits by approximately $-0- and $-0-. The Company’s advertising revenues are often collected in the form of marketable securities which are subject to limited liquidity and fluctuations in price.
g. Income Taxes
Deferred taxes are provided on a liability method whereby deferred operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
h. Revenue Recognition and Deferred Revenue
The Company follows the guidance of ASC 605 in recognizing subscription fees revenue and advertising revenue when the services have been provided. Revenues are recognized when they are realized, realizable and earned. Revenues are recognized ratably, in consistent and equal increments, over the term of contract.
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Advertising revenues are often earned under contracts extending beyond a financial reporting period. The Company generally receives its monthly subscriptions in the month prior to the service being provided. Accordingly the Company had deferred revenue of $524,383 and $737,010 at December 31, 2009 and 2008, respectively. Cost of sales is comprised of data feed expenses charged by various stock market exchanges. The Company had no customer which accounted for 10% of the revenue during the years ended December 31, 2009 and 2008.
The Company occasionally licenses its technology to some customers. The Company recognizes its license revenue over the term of the license. The Company also develops modified products for customers. The Company recognizes development revenue as the services are performed.
The Company records deferred revenue when it receives cash receipts in advance of performing the related service. These advance payments received are considered a current liability, and are amortized to revenue over the term of the service contract.
i. Recently Issued Accounting Pronouncements
In January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary. This amendment to Topic 810 clarifies, but does not change, the scope of current US GAAP. It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160
(now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted FAS 160. The Company does not expect the provisions of ASU 2010-02 to have a material effect on the financial position, results of operations or cash flows of the Company.
In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic 505):
Accounting for Distributions to Shareholders with Components of Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a limit on the amount of cash that will be distributed is not a stock dividend for purposes of applying Topics 505 and 260. Effective for interim and annual periods ending on or after December 15, 2009, and would be applied on a retrospective basis. The Company does not expect the provisions of ASU 2010-01 to have a material
effect on the financial position, results of operations or cash flows of the Company.
In December 2009, the FASB issued Accounting Standards Update 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 167. (See FAS 167 effective date below.)
In December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 166. (See FAS 166 effective date below)
In October 2009, the FASB issued Accounting Standards Update 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing. This Accounting Standards Update amends the FASB Accounting Standard Codification for EITF 09-1. (See EITF 09-1 effective date below.)
In October 2009, the FASB issued Accounting Standards Update 2009-14, Software (Topic 985): Certain Revenue Arrangements That Include Software Elements. This update changed the accounting model for revenue arrangements that include both tangible products and software elements. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15,2010. Early adoption is permitted. The Company does not expect the provisions of ASU 2009-14 to have a material effect on the financial position, results of operations or cash flows of the Company.
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
i. Recently Issued Accounting Pronouncements (Continued)
In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update addressed the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than a combined unit and will be separated in more circumstances that under existing US GAAP. This amendment has eliminated that residual method of allocation. Effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company does not expect the provisions ofASU 2009-13 to have a material effect on the financial position, results of operations or cash flows of the Company.
In September 2009, the FASB issued Accounting Standards Update 2009-12, Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). This update provides amendments to Topic 820 for the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent). It is effective for interim and annual periods ending after December 15,2009. Early application is permitted in financial statements for earlier interim and annual periods that have not been issued. The Company does not expect the provisions of ASU 2009-12 to have a material effect on the financial position, results of operations or cash flows of the Company.
In July 2009, the FASB ratified the consensus reached by EITF (Emerging Issues Task Force) issued EITF No. 09-1, (ASC Topic 470) "Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance" ("EITF 09-1"). The provisions of EITF 09-1, clarifies the accounting treatment and disclosure of share-lending arrangements that are classified as equity in the financial statements of the share lender. An example of a share-lending arrangement is an agreement between the
Company (share lender) and an investment bank (share borrower) which allows the investment bank to use the loaned shares to enter into equity derivative contracts with investors. EITF 09-1 is effective for fiscal years that beginning on or after December 15,2009 and requires retrospective application for all arrangements outstanding as of the beginning of fiscal years beginning on or after December 15,2009. Share-lending arrangements that have been terminated as a result of counterparty default prior to
December 15, 2009, but for which the entity has not reached a final settlement as of December 15, 2009 are within the scope. Effective for share-lending arrangements entered into on or after the beginning of the first reporting period that begins on or after June 15,2009. The Company does not expect the provisions of EITF 09-1 to have a material effect on the financial position, results of operations or cash flows of the Company.
j. Advertising
The Company follows the policy of charging the costs of advertising to expense as incurred. Advertising expense for the years ended December 31, 2009 and 2008 was $128,420 and $204,167, respectively.
k. Stock Options
In April 2005, the Company adopted the fair value based method of accounting for stock-based employee compensation. The Company uses the Black-Scholes valuation model to value and record expenses relative to share based payments when granted and vested.
l. Financial Content
The Company's cost of sales is the cost of the stock quotation data it purchases from the various stock markets to which its customers subscribe. At December 31, 2009 and 2008, the Company's accounts payable included $563,321 and $611,237, respectively, due to various markets and quotation services.
m. Accounts Receivable and Bad Debts
The Company evaluates accounts receivable for potential bad debts utilizing the allowance method, based upon past experience and current market conditions, on a quarterly basis. At such time collection of the receivable is determined to be doubtful, or if the promised securities have fallen in value to the point where their liquidation would not satisfy the balance of the receivable, the
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Company allows for the account in full. At December 31, 2009 and 2008, the Company had an allowance for bad debts of $4,449 and $3,449, respectively.
n. Marketable Securities-Available for Sale
The Company occasionally receives marketable securities as compensation for its advertising services. The Company's marketable securities are classified as "available for sale" because it is managements' intent to sell them within the year. All of the Company’s available for sale securities are equity securities. Accordingly, the Company originally recognizes the shares at the fair value of the services performed. The shares are evaluated quarterly using the specific identification method. Any unrealized holding gains or losses are reported as Other Comprehensive Income and as a separate component of stockholder's equity. Realized gains and losses and other-than-temporary impairments are included in earnings.
A company related to the Company by common management issued shares of common stock for advertising services, which are classified as available for sale.
Marketable Securities-Available for Sale are as follows:
Balance, December 31, 2007 $ 664,090
Marketable securities received for services in 2008 1,201,911
Transfer of investments at cost 300,000
Realized losses (223,068)
Unrealized gains or losses 410,992
Other-than-temporary impairment (792,956)
-------------
Balance, December 31, 2008 1,560,969
Marketable securities received for services in 2009 426,247
Realized losses (134,468)
Unrealized gains or losses (405,882)
Other-than-temporary impairment (892,896)
--------------
Balance, December 31, 2009 $ 553,970
========
Marketable Securities-Available for Sale $ 552,714
Marketable Securities-Available for sale-related party 1,256
--------------
Balance, December 31, 2009 $ 553,970
========
n. Marketable Securities-Available for Sale (Continued)
Amortized Gross Gross Fair
Cost Unrealized Unrealized Market
Basis Gains Loss Value
--------- ---------- ----------- --------
Available-for-sale
Securities $713,068 $81,375 $(240,473) $553,970
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
o. Fair Value of Financial Instruments
The Company's financial instruments include cash, trade accounts receivable, and accounts payable and accrued expenses. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at December 31, 2009 and December 31, 2008.
The Company also follows the provisions of ASC 820 with respect to its marketable securities. The disclosures of required under its provisions are as follows:
Assets measured at fair value on a recurring basis:
December 31, 2009
Trading securities $ 553,970
==========
Quoted Prices in Active Markets for identical assets $ 553,970
Significant Other Observable Inputs -
Significant Unobservable Inputs -
--------------
Total $ 553,970
==========
Assets measured at fair value on a non recurring basis:
Long lived assets held and used $ 28,913
===========
Quoted Prices in Active Markets for identical assets $ -
Significant Other Observable Inputs 28,913
Significant Unobservable Inputs -
--------------
Total $ 28,913
===========
p. Common Stock Issued for Products and Services
The Company at times issues shares of its common stock to non-employees in exchange for various services and/or products. The Company determines the fair value of the common stock by noting the closing market quote on the date of issuance.
q. Loss Contingencies
The Company has been involved in various legal disputes in which judgment and/or outcome is uncertain. The Companyaccounts for loss contingencies relating to its litigation based upon the likelihood of a negative result, and if the amount of the result can be reasonably estimated.
r. Operating Segments
The Company aggregates its operations into one reportable business segment. The Company records and earns revenues from both subscriptions and advertising. Each class of revenue is produced in a similar manner and marketed to similar customers. Distribution methods are similar. Because of these factors, the Company has determined it to be unnecessary to segregate these two revenue streams as independent business segments.
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
s. Investments
The Company accounts for its investment in non marketable securities using the cost method because the shares held are less than 20% of the outstanding shares of the investee. The investment was received as compensation for advertising services performed during 2009. The Company evaluates securities for other-than-temporary impairment at least on a yearly basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to the length of time and amount of the loss relative to cost, the nature and financial condition of the issuer and the ability and intent of the Company to hold the investment for a time sufficient to allow any anticipated recovery in fair value. There were no securities with unrealized losses which management considers to be other-than-temporary impairments at December 31, 2009. When cost investments become marketable they ar e reclassified to Market Securities-Available for Sale. Investments are as follows:
Balance, December 31, 2007 $ 300,000
Restricted investments received
for services in 2008 -
Realized gains and losses -
Investments reclassified as
Marketable Securities-Available for Sale (300,000)
Unrealized gains and losses -
--------------
Balance, December 31, 2008 -
Restricted investments received
for services in 2009 -
Realized gains and losses -
Investments reclassified as
Marketable Securities-Available for Sale -
Unrealized gains and losses -
--------------
Balance, December 31, 2009 $ -
=========
NOTE 2 - PROPERTY AND EQUIPMENT
Property and Equipment are recorded at cost, less accumulated depreciation. Depreciation and amortization on capital leases and property and equipment are determined using the straight-line method over the estimated useful lives (usually 5 years) of the assets or terms of the leases. The following is a summary of the Company's major categories of property and equipment:
December 31,
2009 2008
Office equipment $ 44,179 $ 44,179
Computer equipment 197,138 197,138
Software 68,175 68,175
Less accumulated depreciation (280,579) (263,716)
------------- ------------
$ 28,913 $ 45,776
======== ========
Depreciation expense for the years ended December 31, 2009 and 2008 was $16,863 and $18,435, respectively. Expenditures for maintenance and repairs are expensed when incurred and betterments are capitalized.
NOTE 3 - CAPITAL STOCK
Common Stock:
The Company has one class of common stock. Each share of common stock is entitled to one vote in matters submitted to the Company's shareholders. The common shares are not entitled to any dividends or liquidation rights except as may be determined by the board of directors.
During March 2009, the Company issued 400,000 shares of its common stock for services valued at $0.02 per share.
On September 15, 2009, the Company's board of directors canceled 720,000 shares issued from the 2008 Stock Option Plan of the Corporation to various employees and consultants for services at a price of $0.05 per share. The shares were issued on October 23, 2008.
During 2008, the Company issued 4,411,250 shares of its common stock for services valued from $0.02 to $0.21 per share for total consideration of $479,451. The Company also issued 1,075,000 shares for cash from $0.15 to $0.20 per share for total consideration of $214,080.
Preferred Stock:
The Company has 2,000,000 outstanding shares of convertible Class "A" preferred stock with the following features: Each preferred share is convertible into five common shares, Each holder of Class "A" preferred shares is entitled to five (5) votes (which can be voted prior to conversion) for every preferred share held to vote on any matters brought before the shareholders of the Company.
The Company has 2,000,000 outstanding shares of convertible Class "B" preferred stock with the following features: Each preferred share is convertible into ten common shares, Each holder of Class "B" preferred shares is entitled to ten (10) votes (which can be voted prior to conversion) for every preferred share held to vote on any matters brought before the shareholders of the Company. In case of liquidation of the Company each preferred share has a priority to assets in the amount of $1.00 per share.
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.
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 year ended December 31, 2008: dividend yield of zero percent; expected volatility of 76.05%; risk-free interest rates of 4.25% and expected lives of 1.0. There were no grants during the year ended December 31, 2009.
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 December 31, 2009 and changes during the years ended December 31, 2009 and 2008 is presented below:
NOTE 4 - OUTSTANDING COMMON STOCK OPTIONS AND STOCK PURCHASE WARRANTS (CONTINUED)
Weighted Weighted
Options Average Average
and Exercise Grant Date
Warrants Price Fair Value
-------------- -------- ----------
Outstanding, December 31, 2007 51,570,347 $ 0.38 $ 0.38
Exercisable, December 31, 2007 35,925,350 $ 0.40 $ 0.40
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
========= ====== ======
Weighted Weighted
Options Average Average
and Exercise Grant Date
Warrants Price Fair Value
-------------- -------------- -------------
Outstanding, December 31, 2008 55,210,200 $ 0.32 $ 0.32
Granted - - -
Expired (8,105,200) 0.43 0.43
Exercised - - -
-------------- ------------- ---------------
Outstanding, December 31, 2009 47,105,000 $ 0.30 $ 0.30
========== ====== ========
Exercisable, December 31, 2009 32,625,000 $ 0.30 $ 0.30
=========== ====== =========
Outstanding Exercisable
------------------------- --------------------
Weighted
�� Average Weighted Weighted
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/09 Life Price at 12/31/09 Price
---------------------- ----------- ----------- ---------- --------------- ----------------------
$ 0.35 4,000,000 4.87 $ 0.35 4,000,000 $ 0.35
0.22 6,000,000 15.54 0.22 2,000,000 0.22
0.35 20,000 1.89 0.35 20,000 0.35
0.45 15,000,000 3.01 0.45 15,000,000 0.45
0.25 4,500,000 5.54 0.25 4,500,000 0.25
0.32 4,500,000 6.08 0.32 3,375,000 0.32
0.21 6,000,000 1.44 0.21 3,000,000 0.21
$ 0.15 7,085,000 2.66 0.15 730,000 $ 0.15
--------------- ---------------
47,105,000 32,625,000
========= =========
NOTE 5 - RELATED PARTY TRANSACTIONS
Compensation
------------
During the year ended December 31, 2009, two companies owned for the benefit of the two officers of the Company received compensation of $240,000 separately, which was recorded as related party compensation. No bonus was awarded for 2009.
During the year ended December 31, 2008, two companies owned for the benefit of the two officers of the Company received compensation of $240,000 separately, which was recorded as related party compensation. No bonus was awarded for 2008.
Related Company
---------------
The principal accounting officer of the Company is an officer in a Canadian company, which pays the Canadian bills for the Company. All of the Company's liabilities denominated in Canadian dollars have been converted to US dollars at the monthly exchange rate and are included in related party payables. The Canadian company was owed $282,148 and $10,435 as of December 31, 2009 and 2008, respectively.
A related party, 536653 B.C. Ltd., has made cash advances to the Company. During 2009, 536653 B.C. Ltd. contributed accrued loan interest of $676,844 to the Company and reduced the interest rate charged on the cash advances from 20% to 3% per annum as of July 1, 2009.
Related party payables consisted of the following:
December 31,
2009 2008
Officer bonuses $ 78,000 $ 78,000
Officer accrued wages 581,119 578,330
Cash advances 1,897,448 2,089,932
Officer death benefit liability 3,200,000 -
----------------- ----------------
$ 5,756,567 $ 2,746,262
========= =========
Komodo, Inc.
------------
The Company is holding marketable securities in Komodo, Inc., a related company, valued at $1,256 and $2,093, respectively as of December 31,2009 and 2008. In 2007 and 2006, the Company was paid shares of Komodo, Inc. for its advertising services.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Office Lease
------------
The Company leases office space as a part of a sublease on a month-to-month basis. Rent expense for the years ended December 31, 2009 and 2008 was $178,876 and $111,598, respectively, which includes common area maintenance charges. The sublease is from a related party who has a commitment through December 2011.
Litigation
----------
The Company is a defendant in a litigation case pending in the Supreme Court of British Columbia, Canada. This action was filed on December 23, 2003 and is between Zacks Investment Services Inc. as Plaintiff and the Company as Defendant. The case number is S036907. The Plaintiff alleges it is owed the sum of $279,664 pursuant to a licensing Agreement executed by the Plaintiff and the Defendant in 1999. The Company is vehemently defending itself against this claim. At the request of the Plaintiff, we have submitted a settlement proposal, for the Plaintiff to accept the $14,758.58 currently held by the Court as payment in full, which is currently outstanding.
NOTE 6 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Litigation (Continued)
----------
During the year ending December 31, 2002, a company filed an action against the Company in the Supreme Court of British Columbia, Canada claiming unspecified damages. The Company filed a Statement of Defense in August, 2002. There has been no further developments in this action. The Company plans to vigorously defend itself.
Arena Media Networks LLC v. AlphaTrade.com
Supreme Court of the State of New York, County of New York, Index No. 603406/06 Plaintiff Arena Media Networks LLC (“Arena”) commenced this action on or about October 15, 2007 by the filing of a Summons and Complaint. In the Complaint, Arena asserts causes of action for breach of contract, account stated and unjust enrichment against the Company arising from the Company’s alleged failure to pay sums purportedly due Arena pursuant to an agreement in which Arena agreed to place advertising for the Company.
The Company answered the Complaint on February 1, 2008. In its Answer, the Company denies the material allegations of the Complaint and asserts numerous affirmative defenses. This action is presently in the discovery stage. The Company intends to vigorously defend this action.
Center Operating Company v. AlphaTrade.com,
68th Judicial District Court, Dallas County, Texas, Case No. 2009-156001-1 Plaintiff Center Operating Company ("COC") commenced this action against the Company on or about September 3, 2008 in the District Court of Dallas County, Texas, Case No. 2009-156001-1. In its Complaint, COC alleges a cause of action arising from the alleged breach of a Sponsorship Agreement, and seeks damages of $185,621.
The Company denies the allegations of the Complaint and intends to vigorously defend against this action.
Sterling Mets, L.P. and Brooklyn Baseball Company, LLC v. AlphaTrade.com,
Supreme Court of the State of New York, County of Queens Case No. 27541/2008 Plaintiff Sterling Mets, L.P. and Brooklyn Baseball Company, LLC ("Mets") commenced this action against the Company on or about November 12, 2008 in the Supreme Court of the State of New York, County of Queens. In its Complaint, Mets alleges a cause of action arising from the alleged breach of a Sponsorship Agreement, and seeks damages of $650,000. On or about August 28, 2009, the plaintiff moved for summary judgment. The Company opposed this motion and the motion was fully submitted and argued on December 11, 2009. The plaintiff’s motion for summary judgment was denied by the court.
The Company denies the allegations of the Complaint and intends to vigorously defend against this action.
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 the Company whereby the Company 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.
The Company 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, the Company 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. the Company intends to vigorously defend the claims made against it and pursue its counterclaims.
NOTE 6 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Litigation (Continued)
----------
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 the end of December 31, 2009, there is no liability for any profit payment to PBR because the Compa ny has a $4.9 million loss in 2009.
From time to time we may be a defendant and plaintiff in various legal proceedings arising in the normal course of our business. We are currently not a party to any material pending legal proceedings or government actions, including any bankruptcy, receivership, or similar proceedings . In addition, management is not aware of any known litigation or liabilities involving the operators of our properties that could affect our operations. Should any liabilities incurred in the future, they will be accrued based on management's best estimate of the potential loss. As such, there is no adverse effect on our consolidated financial position, results of operations or cash flow at&nb sp; this time. Furthermore, our management does not believe that there are any proceedings to
which any of our directors, officers, or affiliates, any owner of record of the beneficially or more than five percent of our common stock, or any associate of any such director, officer, affiliate, or security holder is a party adverse to our company or has a material interest adverse to us.The Company is subject to potential liability under contractual and other matters and various claims and legal actions, which may be asserted. These matters arise in the ordinary course and conduct of business. While the outcome of the potential claims and legal actions cannot be forecast with certainty, the Company believes that such matters should not result in any liability which would have a material adverse effect on its business.
Settlement Agreement
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 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. There is no payment to PRB based on 2009 net loss.
NOTE 7 - INCOME TAXES
The Financial Accounting Standards Board ASC 740 which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. As a result of the implementation of ASC 740, the Company performed a review of its material tax positions. The Company has determined that it has no unrecognized tax benefit, which would affect the effective tax rate.
At December 31, 2009, the Company had net operating loss carryforwards of approximately $10,782,244 that may be offset against future taxable income from the year 2009 through 2029. No tax benefit has been reported in the December 31, 2009 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years. Net deferred tax assets consist of the following components as of December 31, 2009 and 2008:
NOTE 7 - INCOME TAXES (CONTINUED)
2009 2008
--------------- ---------------
Deferred tax assets:
NOL carryover $ 4,590,336 $ 4,505,428
Contribution carryover 4,678 4,678
Capital loss 715,641 79,759
Depreciation - 2,284
Accrued expenses 1,282,320 34,320
Deferred tax liabilities: - -
Valuation allowance (6,592,975) (4,626,469)
--------------- -----------------
Net deferred tax asset $ - $ -
========= ==========
The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 39% to pretax income from continuing operations for the years ended December 31, 2009 and 2008 due to the following:
2009 2008
----------------------------
Book Income (Loss) $ (1,775,030) $ 15,737
Stock for services/options 3,120 300,344
Impairment of investments 543,229 301,323
Depreciation (2,284) -
Accrued related party payable 1,248,000 -
Valuation allowance (17,035) (617,404)
--------------- ----------------
$ - $ & nbsp; -
========= =========
The reconciliation of US Federal statutory income tax rate to the effective income tax rate is as follows:
2009 2008
----------------------------
United States 39 % 39%
Loss Carryovers (39%) 39%
-----------------------------
Effective income tax rate -
======= ========
The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.
The Company includes interest arising from the underpayment of income taxes in the statements of operations in interest expense and penalties in operating expenses. As of December 31, 2009 and 2008, the Company had no accrued interest or penalties related to uncertain tax positions.
The tax years that remain subject to examination by major taxing jurisdictions are for the years ended December 31, 2009, 2008 and 2007.
NOTE 8 - BASIC (LOSS) PER SHARE
Basic (loss) per share is calculated by dividing the Company's net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company's net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. Common stock equivalents include convertible preferred stock and stock purchase options and warrants at exercise prices equal to or below the market price of the common stock. Incremental shares have been considered in the computation of diluted earnings per share. 32,625,000 and 40,730,200 of common stock purchase options and warrants of were considered and excluded in t he computation of diluted shares outstanding at December 31, 2009 and 2008, respectively.
December 31,
2009 2008
---------------- ---------------
Income (Loss) (numerator) $ (4,551,358) $ 41,413
--------------- --------------
Basic Shares (denominator) 54,197,009 51,175,987
--------------- --------------
Diluted Shares
Convertible preferred stock - 30,000,000
Options and warrants - -
--------------- ----------------
Total Diluted Shares 54,197,009 81,175,987
--------------- ----------------
Basic per share amount $ (0.08) $ 0.00
--------------- --------------
Fully diluted per share amount $ (0.08) $ 0.00
========= =========
NOTE 9 - 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 recorded negative cash flow from operations and has a deficit in its working capital as well as in its stockholders' equity, which together raises substantial doubt about its ability to continue as a going concern.
In order to continue as a going concern and achieve a profitable level of operations, the Company will need, among other things, to increase sales of its advertising and subscription services.
Management's plans to continue as a going concern include the following items: 1) Concentrating its efforts on increasing the number of subscribers to its stock-tracking product, known as e-gate thereby increasing sales and increasing the advertisers on the Company's web site and email program. 2) Continuing to increase its gross profit percentage by increasing sales.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the aforementioned plan and eventually 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 10- GAIN (LOSS) ON SETTLEMENT OF DEBT
During the year ended December 31, 2009 the Company negotiated a settlement of the litigation regarding certain liabilities pertaining to its advertising operations for an amount greater than the amount of the originally-recorded liability. The result was recorded as a loss on settlement of debt in the amount of $240,000.
During the year ended December 31, 2008 the Company incurred liabilities with an unrelated third-party pertaining to its advertising operations. Through various legal negotiations, these liabilities were settled and satisfied for an amount less than the amount of the originally-recorded liability. The result was recorded as a gain on settlement of debt in the amount of $307,974.
NOTE 11 - SUBSEQUENT EVENTS
Management has evaluated subsequent events and determined that there are no subsequent events to report.
| Exhibit Number | Description of Exhibit | |
| EX-31.1 | Certifications required under Section 302 of the Sarbanes-Oxley Act | |
| EX-31.2 | Certifications required under Section 302 of the Sarbanes-Oxley Act | |
| EX-32.1 | Certifications required under Section 906 of the Sarbanes-Oxley Act | |
| EX-32.2 | Certifications required under Section 906 of the Sarbanes-Oxley Act |
