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 September 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)
5310 NW 33rd Drive, Ft. Lauderdale, FL 33309
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(Address of principal executive offices and Zip code)
(954) 739-7005
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(Issuer'stelephone number, including area code)
4330 NW 207th Drive, Miami, FL 33055
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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: November 7, 1997: 11,923,556
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 8
Signatures 10
Part 1. Financial Information
Algorythm Technologies Corporation
(f/k/a Nitros Franchise Corporation and Digimedia USA, Inc.)
CONDENSED BALANCE SHEETS
September 30, December 31,
1997 1996
----------- -----------
ASSETS (Unaudited) (Note)
CURRENT ASSETS
Cash $ 1,336 $ 32,079
Accounts receivable -- 57,400
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Total current assets 1,336 89,479
PROPERTY, PLANT AND EQUIPMENT -- 123,675
Less allowances for depreciation -- (75,991)
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-- 47,684
OTHER ASSETS 250,500 60,613
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$ 251,836 $ 197,776
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 252,250 $ 26,675
Accrued expenses -- 52,276
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Total current liabilities 252,250 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; $.002 par value;
967,397 shares issued and outstanding at December 31,1996 and
9,603,556 shares issued and outstanding at September 30, 1997 19,207 1,935
Additional paid in capital 1,485,052 1,456,324
Accumulated deficit (1,559,023) (1,393,784)
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(17,081) 102,158
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$ 251,836 $ 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 Nine Months Ended
June 30 June 30
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1997 1996 1997 1996
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(Note) (Note)
Revenues $ -- $ -- $ -- $ 12,400
Costs and expenses
General and administrative 45,044 57,018 73,493 95,142
Loss on abandonment of property -- -- 91,746 --
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45,044 57,018 165,239 95,142
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Earnings (loss) before taxes (45,044) (57,018) (185,239) (82,742)
Income taxes -- -- -- --
----------- --------- ----------- ---------
Net earnings (loss) $ (45,044) (57,018) (185,239) (82,742)
=========== ========= =========== =========
Net earnings (loss) per share $ (0.005) $ -- $ (0.036) $ --
=========== ========= =========== =========
Weighted average shares outstanding 9,270,223 -- 4,583,467 --
=========== ========= =========== =========
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
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1997 1996 1997 1996
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(Note) (Note)
CASH FLOWS FROM OPERATIONS $(20,291) $ -- $(76,743) $ --
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 --
-------- ---------- -------- ----------
Net cash provided by financing activities -- -- 46,000 --
-------- ---------- -------- ----------
NET INCREASE (DECREASE) IN CASH $ 18,051 $ -- $(30,743) $ --
======== ========== ======== ==========
Note: The previous management of the Company failed to file a condensed Statement of Cash Flow on
the Quarterly Report Form 10-Q for the period ended September 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.
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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 nine months ended September 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 September 30, 1997 the Company had no
revenues and had no revenues during the three month period ended September 30,
1996. During the nine month period ended September 30, 1997 the Company had no
revenues against revenues of $12,400 during the nine month period ended
September 30, 1996. During the three month period ended September 30, 1997 the
Company had general and administrative expenses of $45,044 as against $57,018
during the three month period ended September 30, 1996; and in the nine month
period ended September 30, 1997 the Company had general and administrative
expenses of $73,493 as against $95,142 during the nine month period ended
September 30, 1996.
Liquidity and Capital Resources
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The Company's cash on hand decreased by $19,291 during the three month
period ended September 30, 1997 and decreased by $29,743 during the nine month
period ended September 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's accounts payable has increased from $5,500 to
$252,250 in the three month period ended September 30, 1997 and has increased
from $26,675 to $252,250 in the nine month period ended September 30, 1997.
$237,500 of the increase in the accounts payable in the three month period ended
September 30, 1997 is attributable to the aquisition of the rights to the Nitros
Franchise theme restaurant concept.
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. Subsequent to the peroid ended September 30, 1997, the Company
acquired ADS Advertising Corporation a/k/a The Smith Agency, a fully integrated
marketing and advertising firm.
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PART II
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
On July 18, 1997 the Company issued 1,000,000 shares of its Common Stock
to Telephonetics International, Inc. in connection with the acquisition of
Telephonetics' subsidiary, Algorhythm Technologies, Inc. The shares were issued
pursuant to Sec. 4(2) of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
On November 7, 1997, the acquisition by the Registrant of ADS Advertising
Corporation a/k//a the Smith Agency ("ADS") was completed. ADS is in the
business of electronic advertising, has been in business since 1983 and is a
fully integrated marketing and advertising firm. The acquisition was effected by
the exchange of 6,500 shares of ADS for 2,300,000 shares of the Registrant which
were issued to Andrew Smith, the principal of ADS. The financial statements will
be filed within 60 days of the acquisition. Upon the completion of the
acquisition the following changes in the management of the Registrant were
effected: Andrew Smith was appointed President (in place of David Bawarsky) and
a director; David Bawarsky was appointed Secretary, in addition to being CEO and
a director; Alan Kvares resigned as Secretary and a director; Parker Yates
resigned as a director; Jason Sherman resigned as a director, but continues as
Vice President and Treasurer. Mr. Kvares and Mr. Yates resigned to devote more
time to their firm Telephonetics International, Inc.
On November 17, 1997 Dr. Bohdan S. Moroz was appointed to the board of
directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibit 2.2 - Acquisition Agreement Between Algorhythm Technologies
Corporation and ADS Advertising Corporation, dated October 30, 1997.
Exhibit 10.1 - Employment agreement between ADS Advertising
Corporation and Andrew Smith, dated October 30, 1997.
Exhibit 27 - Financial Data Schedule (Electronic filing only).
B. In its 10Q-SB for the period ended June 30, 1997 the Registrant stated
that it had been advised by the previous management that two reports on Form 8-K
had been filed during the period ended June 30, 1997, but for some reason, they
were not shown as filed by the SEC. The reports were refiled in August 1997 and
concern the following:
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May 8, 1997: reducing the authorized shares from 75,000,000 to 10,714,275
which effected a reverse split of 7 to 1.
May 14, 1997: the merger of Nitros Franchise Corporation with the
Registrant; the change of name of the Registrant to Nitros Franchise
Corporation; the resignation of the officers and directors and the appointment
of David Bawarsky, Alan Kvares and Jason Sherman as directors and David Bawarsky
as President and CEO.
During the period ended September 30, 1997, the Registrant also filed the
following 8Ks:
8K dated August 1, 1997: the change in control by the transfer of
4,675,889 shares of common stock in the aggregate by David Bawarsky and Alan J.
Kvares to Telephonetics International, Inc. ("Telephonetics"); the issuance of
1,000,000 shares of common stock by the Registrant to Telephonetics in
connection of the acquisition by the Registrant of Telephonetics' subsidiary
Algorhythm Technologies, Inc. Under Other Events the reporting of the
termination of the proposed merger between the Registrant's subsidiary, Quicklab
Multimedia Centers, Inc. (a Nevada Corporation) and Quicklab Multimedia Centers,
Inc. (a Florida corporation); the change of name of the Registrant to Algorhythm
Technologies Corporation.
8K dated August 20, 1997, reporting under Other Events the signing of the
letter of intent for the acquisiton by the Registrant of ADS Advertising
Corporation.
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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: November 19, 1997 s/ANDREW SMITH
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Andrew Smith, President
Date: November 19, 1997 s/JASON SHERMAN
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Jason Sherman, Treasurer
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