SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHNAGE
ACT OF 1934
For the quarterly period ended June 30, 1997
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[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from_________________________to_______________________
Commission file number 0-25276
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ALGORHYTHM TECHNOLOGIES CORPORATION
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Exact name of small business issuer as specified in its charter
Nevada 88-0320364
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation)
4330 NW 207th Drive, Miami, FL 33055
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(Address of principal executive offices and Zip code)
(305) 625-0332
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(Issuer'stelephone number, including area code)
Nitros Franchise Corporation (DigiMedia USA, Inc.)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [x] No [ ]
APPLICBLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by Court. Yes No x
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: July 31, 1997: 9,603,556
shares of common stock
Transitional Small Business Disclosure Format (check one): Yes No x
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INDEX
Page
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Part I
Condensed Balance Sheets 3
Statement of Operations 4
Statement of Cash Flows 5
Notes to Condensed Financial Statements 6
Management's Discussion and Analysis or Plan of Operations 7
Part II
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 9
Part 1. Financial Information
Algorythm Technologies Corporation
(f/k/a Nitros Franchise Corporation and Digimedia USA, Inc.)
CONDENSED BALANCE SHEETS
June 30, December 31,
1997 1996
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ASSETS (Unaudited) (Note)
CURRENT ASSETS
Cash $ 21,627 $ 32,079
Accounts receivable -- 57,400
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Total current assets 21,627 89,479
PROPERTY, PLANT AND EQUIPMENT -- 123,675
Less allowances for depreciation -- (75,991)
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-- 47,684
OTHER ASSETS -- 60,613
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$ 21,627 $ 197,776
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,500 $ 26,675
Accrued expenses -- 52,276
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Total current liabilities 5,500 78,951
LONG-TERM DEBT 16,667 16,667
STOCKHOLDERS' EQUITY
Preferred Stock; 1,000,000 shares authorized; $1 par value;
no shares issued or outstanding 37,683 37,683
Common stock; 25,000,000 shares authorized; $.002 par value;
967,397 shares issued and outstanding at December 31,1996 and
8,603,556 shares issued and outstanding at June 30, 1997 17,207 1,935
Additional paid in capital 1,487,052 1,456,324
Accumulated deficit (1,542,482) (1,393,784)
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(540) 102,158
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$ 21,627 $ 197,776
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Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
3
Algorythm Technologies Corporation
(f/k/a Nitros Franchise Corporation and Digimedia USA, Inc.)
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
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1997 1996 1997 1996
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(Note) (Note)
Revenues $ -- $ -- $ -- $ --
Costs and expenses
General and administrative 28,449 -- 56,952 --
Loss on abandonment of property 91,746 -- 91,746 --
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120,195 -- 148,698 --
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Earnings (loss) before taxes (120,195) -- (148,698) --
Income taxes -- -- -- --
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Net earnings (loss) $ (120,195) $ -- $ (148,698) $ --
=========== ========= =========== =========
Net earnings (loss) per share $ (0.054) $ -- $ (0.066) $ --
=========== ========= =========== =========
Weighted average shares outstanding 2,240,090 -- 2,240,090 --
=========== ========= =========== =========
Note: The previous management of the Company failed to file the Quarterly
report on form 10-Q for the period ended June 30, 1996, therefore
the comparative data for that period is not available. It will be
filed by amendment.
See notes to condensed consolidated financial statements.
4
Algorythm Technologies Corporation
(f/k/a Nitros Franchise Corporation and Digimedia USA, Inc.)
STATEMENT OF CASH FLOWS
Three Months Ended Six Months Ended
June 30 June 30
---------------------- ----------------------
1997 1996 1997 1996
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(Note) (Note)
CASH FLOWS FROM OPERATIONS $(27,949) $ -- $(56,452) $ --
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment -- -- -- --
-------- ---------- -------- ----------
Net cash provided by investing activities -- -- -- --
-------- ---------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipt of proceeds from stock sales 46,000 -- 46,000 --
-------- ---------- -------- ----------
Net cash provided by financing activities 46,000 -- 46,000 --
-------- ---------- -------- ----------
NET INCREASE (DECREASE) IN CASH $ 18,051 $ -- $(10,452) $ --
======== ========== ======== ==========
Note: The previous management of the Company failed to file the Quarterly
report on form 10-Q for the period ended June 30, 1996, therefore
the comparative data for that period is not available. It will be
filed by amendment.
See notes to condensed consolidated financial statements.
5
Algorythm Technologies Corporation
(f/k/a Nitros Franchise Corporation and Digimedia USA, Inc.)
Notes to Condensed Financial Statements
(Unaudited)
June 30, 1997
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the six months ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. For further information, refer to the refer to the financial
statements and footnotes thereto included in the Digimedia USA, Inc. annual
report on FORM 10-KSB for the period ended December 31, 1996.
NOTE B - ABANDONMENT OF PROPERTY
During the quarter ended June 30, 1997, the Company has come under new
management. Various options are under consideration concerning a new direction
for the Company. In the meantime, management has abandoned the former corporate
facilities, the remaining lease term was assumed by another party. Additionally,
the Company has written off intangible assets that were deemed to have no future
value.
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Results of Operations
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During the three month period ended June 30, 1997 the Company had no
revenues and had no revenues during the six month period ended June 30, 1997.
During the three month period ended June 30, 1997 the Company had general and
administrative expenses of $28,449 and in the six month period ended June 30,
1997 had general and administrative expenses of $56,952.
Liquidity and Capital Resources
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The Company's cash on hand decreased by $10,452 during the six month
period ended June 30, 1997. As shown on the financial statements and notes
thereto, the Company has written off intangible assets that were deemed to have
no future value. The Company has reduced its accounts payable from $26,675 to
$5,500 in the six month period ended June 30, 1997.
During the three month period ended June 30, 1997 the Company realized
$46,000 from the exercise of stock options and applied the funds to working
capital.
As a result of the merger with Nitros Franchise Corporation in May 1997
and the change in management as a result of the merger, the Company is
considering a new direction, including the focusing on internet related
businesses. The Company upon the expiration of its current contract obligations
will discontinue its CD Rom training division.
The Company, in order to implement its new business plan and meet its
obligations will seek to raise capital and/or make acquisitions. There is no
assurance that the Company will be successful in obtaining capital or in making
any acquisition.
The previous management of the Company failed to file the quarterly report
on Form 10-QSB for the period ended June 30, 1996, therefore the comparative
data for that period is not available. It will be filed by amendment when
obtained.
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PART II
Item 1. Legal Proceedings
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None
Item 2. Changes in Securities
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None
Item 3. Defaults Upon Senior Securities
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Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
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1. A special meeting of shareholders was held on May 12, 1997. The
following action was approved by holders of a majority of the shares entitled to
vote: Amending the Certificate of Incorporation to authorize the Registrant to
issue 10,714,285 shares of common stock, par value $.00467 per share. Thereby
giving effect to 7:1 reverse split adopted by the Board of Directors on May 7,
1997.
2. A special meeting of shareholders was held on May 13, 1997. The
following action of the Board of Directors was approved by the holders of a
majority of the shares entitle to vote: 1) approval of the Plan of Merger
between the Registrant and Nitros Franchise Corporation; 2) the change of name
of the Registrant to Nitros Franchise Corporation; 3) the appointment of Jason
Sherman and Alan J. Kvares as directors in place of Kirk J. Girbach and Gene
Farmer.
3. A special meeting of shareholders was held on May 30, 1997. The
following action was approved by the holders of a majority of the shares
entitled to vote: The amendment of the Certificate of Incorporation changing the
number of shares of common stock authorized to be issued and the par value to
25,000,000 shares of common stock, par value $.002 per share.
ITEM 5. OTHER INFORMATION
On May 14, 1997 as a result of the meger between the Registrant and Nitros
Franchise Corporations David Bawarsky received 2,400,889 shares, Alan J. Kvares
received 2,150,889 shares and Jason Sherman received 2,150,889 shares of the
Registrant in exchange for their shares of Nitros Franchise Corporation. This
transaction resulted in a change of management. David Bawarsky was appointed
President, CEO and a director, Alan J. Kvares was appointed Secretary and a
director, and Jason Sherman was appointed Vice President and a director.
Thereafter on July 18, 1997, Telephonetics International, Inc. acquired
2,600,000 shares from Mr. Bawarsky and 2,075,889 shares from Mr. Kvares. This
transaction was reported in a Form 8-K dated August 1, 1997. The table below
represents the information as to security ownership set forth in that filing.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information as of July 23, 1997 of the
Company's Common Stock with respect to the shares owned by its officers,
directors, both individually and as a group, and by the record and/or beneficial
owners of more than 5% of the outstanding amount of such stock.
8
Name and Address Amount and nature of
of beneficial owner beneficial ownership Percentage of Class
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David Bawarsky 6,803,378(1) 68.69%
6184 Vista Linda Lane
Boca Raton, FL 33433
President, CEO, Director
Alan J. Kvares 5,677,489(2) 59.1%
4330 NW 207th Drive
Miami, FL 33055
Secretary, Director
Jason Sherman 1,119,889 11.66%
558402 Arbor Club Way
Boca, Raton, FL 33055
Vice President, Director
Telephonetics International, Inc. 5,677,489 59.1%
4330 NW 207th Drive
Miami, FL 33055
Officers and Directors 6,803,378(1)(2) 80.0%
as a group (5 persons)
________________________
1. Includes 5,677,489 shares owned by Telephonetics International, Inc. and
300,000 shares that Mr. Bawarsky has options to purchase. Mr. Bawarsky is
the President, and a director of Telephonetics International Inc. and he
along with Mr. Kvares are the controlling shareholders of Telephonetics
International, Inc.
2. Includes 5,677 4899 shares owned by Telephonetics International, Inc. Mr.
Kvares is the CEO and a director of Telephonetics International Inc. and
he along with Mr. Bawarsky are the controlling shareholders of
Telephonetics International, Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibit 2.1 - Agreement and Plan of Merger Between DigiMedia USA,
Inc. and Nitros Franchise Corporation, dated May 14, 1997.
B. The Registrant has been advised by the previous management that two
reports on Form 8-K had been filed during the period, but for some reason, they
are not shown as filed by the SEC. The reports are being refiled.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ALGORHYTHM TECHNOLOGIES CORPORATION
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Registrant
Date: August 18, 1997 s/DAVID BAWARSKY
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David Bawarsky, President
Date: August 18, 1997 s/RICHARD ZADANOFF
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Richard Zadanoff, Treasurer
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