Securities and Exchange Commission
Washington, D.C., 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report May 31, 2001
---------------------------
=====================================================================
ValCom, Inc.
(Name of small business issuer specified in its charter)
=====================================================================
Delaware 0-28416 58-1700840
-------- ---------- ----------
(State or other Commission File (IRS Employer
jurisdiction of Number Identification Number)
incorporation or
organization)
26030 Avenue Hall - Studio #5, Valencia, California 91355
-----------------------------------------------------
(Address of principal executive offices) (Zip code)
(661) 257-8000
--------------
Issuer's telephone number
=====================================================================
This filing amends the previously filed Form 8-K dated March 19, 2001 of
ValCom, Inc. and relates to the acquisition by ValCom of 100% of the shares
of Half Day Video, Inc. The required financial statements are being filed by
this amendment.
ITEM 7.) FINANCIAL STATEMENTS
Item 1 Unaudited consolidated financial statements of
ValCom, Inc. and Subsidiaries - Consolidation
with (unaudited) Half Day Video, Inc. as of
March 31, 2001
Item 2 Unaudited financial statements of Half Day Video,
Inc. March 31, 2001
Item 3 Audited financial statements of Half Day Video, Inc.
December 2000 & 1999
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
ValCom, Inc. has duly caused this statement to by signed on its behalf by
the undersigned, thereto duly authorized.
Dated: May 30, 2001 ValCom, Inc.
By: /s/ Vince Vellardita
------------------------
Vince Vellardita
ITEM 1
---------
VALCOM, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
UNAUDITED MARCH 31, 2001 AND DECEMBER 31, 2000
-------------------------------------------
Table Of Contents
Page
FINANCIAL INFORMATION
Consolidated Independent Accountants' Review Report 1
Consolidated Balance Sheet 2
Consolidated Statements of Operations 3
Consolidated Statements of Cash Flow 4
Consolidated Statements of Stockholders Equity 6
Notes to Consolidated Financial Statements 7
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
-------------------------------
We have reviewed the accompanying consolidated balance sheet, statement
of operations, and cash flows of ValCom, Inc., and subsidiaries as of
March 31, 2001, and for the three-months period then ended. These financial
statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institure of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such as
opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be
conformity with generally accepted accounting principles.
/s/ Jay J. Shapiro, CPA P.C.
- ----------------------------
JAY J. SHAPIRO, C.P.A.
a professional corporation
May 18, 2001
Encino, California
-1-
Financial Statements
VALCOM, INC. AND SUBSIDIARY
-----------------------------
CONSOLIDATED BALANCE SHEETS
-----------------------------
March 31, Dec.31,
2001 2000
------ -----
(Unaudited) (Audited)
Cash $ 18,660 $ 52,777
Accounts receivable 88,714 116,322
Other receivables 52,634 52,634
Prepaid expenses 14,366 11,569
Property held for sale 3,940,000 3,940,000
------------ -------------
Total Current Assets 4,114,374 4,173,302
------------ -------------
Fixed Assets - net 11,875,160 11,750,687
Production costs 113,660 110,201
Prepaid loan fees 97,711 100,501
Deposits 30,000 30,000
Investment in partnership 113,523 -0-
--------------------------
Total Assets $16,344,428 $ 16,164,691
============== ==============
See accompanying notes to consolidated financial statements
-2-
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accrued wages due stockholder $ 700,000 $ 670,000
Advances due stockholder 236,009 200,508
Loan payable affiliate -0- 150,000
Accrued interest payable 299,240 325,010
Other current liabilities 265,470 55,661
Credit line payable 243,470 110,000
Notes payable -- current portion 1,389,000 1,289,586
Accounts payable 304,831 298,506
----------- ---------
3,438,020 3,099,271
Notes Payable 6,012,346 5,902,919
----------- -----------
Total Liabilities 9,450,366 9,002,190
------------ -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $0.001; 10,000,000 shares
authorized: 1,543,000 shares issued and
outstanding at March 31, 2001 and December 31,
2000 respectively. 1,543 1,543
Common stock, par value $.001; 100,000,000 shares
authorized; 93,331,507 and 90,139,843
shares issued and outstanding
at March 31, 2001 and December 31, 2000
respectively. 93,332 90,140
Additional paid in capital 8,857,206 8,242,899
Retained earnings (deficit) (2,058,019) (1,172,081)
------------ -----------
6,894,062 7,162,501
------------ -----------
$16,344,428 $16,164,691
============ ===========
See accompanying notes to consolidated financial statements
-3-
VALCOM, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
-------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
(UNAUDITED)
March 31,
2001 2000
----- -----
Revenue:
Rental $ 389,370 $ 380,321
Production 260,000 108,139
Other -0- 6,833
------------ ------------
$ 649,370 $ 495,293
Cost and Expenses:
Production 198,172 123,955
Selling and promotion 45,202 -0-
Depreciation 46,579 55,831
Administrative and general 1,063,979 234,861
----------- -----------
$1,353,932 $ 414,647
----------- -----------
Operating income (loss) ( 704,561) 80,646
Interest expense ( 181,377) (144,187)
----------- -----------
Net Income (loss) ( $885,938) ($63,541)
Basic net income (loss) per share........... ($ 0.01) ($0.00)
============ ===========
Weighted number of shares 91,735,000 89,900,000
------------- -----------
See accompanying notes to consolidated financial statements
-4-
VALCOM, INC. AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOW
------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31,
--------------------------------------
(UNAUDITED)
2001 2000
---- ----
Operating Activities:
Net Income (Loss) ($ 885,938) $ (63,541)
Items Not Requiring Cash:
Depreciation and amortization 49,368 55,831
Stock issued for services 262,500 52,500
------------- ------------
($ 574,070) $ 44,790
------------- ------------
Changes in:
Receivables 27,608 22,846
Mortgage escrow holdback -0- (327,900)
Prepaid expenses ( 2,797) -0-
Other assets -0- (36,245)
Production costs ( 3,459) -0-
Accounts payable and other accrued expenses 190,364 37,573
Loans payable 133,470 -0-
Due to stockholder 65,501 155,000
----------- -----------
$410,687 ($148,726)
=========== ===========
Cash Provided (used) by Operations (163,383) ( 103,936)
Investing Activities:
Acquisition of fixed assets (171,052) ( 17,083)
Investment in partnership (113,523) -0-
----------- -----------
Cash Used by Investing Activities (284,575) ( 17,083)
----------- -----------
Financing Activities:
Principal amount on notes payable 208,841 41,753
Withdrawal of capital contributions 2,000,000
Issuance of stock 205,000
----------- ------------
Cash Provided (Used) by Financial Activities 413,841 (1,958,247)
------------ ------------
Increase (Decrease) in Cash and Cash Equivalents ( 34,117) (2,079,266)
Cash and cash equivalents, beginning of year 52,777 2,279,432
------------ ------------
Cash and cash equivalents, end of year $ 18,660 $ 200,166
============ ============
Supplemental disclosure of cash flow information:
Interest paid $181,377 $114,187
============ ============
Income taxes paid $ 800 $ 1,600
============ ============
See accompanying notes to consolidated financial statements
-5-
VALCOM, INC. AND SUBSIDIARY
---------------------------------------
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
-----------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2001
---------------------------------------
Additional
Common Preferred Paid-in Accumulated
------- ---------- Capital Deficit
Shares Amount Shares Amount ---------- -----------
------- ------- ------ -------
Balance
Jan.1, 2001 90,139,843$90,140 1,543,000 $1,543 $8,101,157 ($1,172,081)
Shares issued
for services 1,500,000 1,500 261,000 ( 218,750)
Shares issued
for debt
retirement 331,664 332 149,668
Shares issued
for cash 410,000 410 204,590
Conversion
of preferred
Acquisition of
Half/Day Video 950,000 950 140,791
Net loss
for the Period ( 667,188)
--------- ------- ----------- --------- --------- ----------
Balance
March
31, 2001 93,331,507 $93,332 1,543,000 $1,543 $8,857,206 ($2,058,019)
========== ======= ========== ========= ========== ===========
See accompanying notes to consolidated financial statements
-6-
VALCOM, INC. AND SUBSIDIARIES
----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
UNAUDITED MARCH 31, 2001 AND DECEMBER 31, 2000
NOTE 1 Summary of Significant Accounting Policies
- -------------------------------------------------
Following is a summary of the significant accounting policies followed
in the preparation of these financial statements, which policies are in
accordance with generally accepted accounting principles:
Organization
- ------------
ValCom, Inc. (the "Company"), formerly SBI Communication, Inc.
was originally organized in the State of Utah on September 23, 1983,
under the corporate name of Alpine Survival Products, Inc. Its name was
subsequently changed to Supermin, Inc. on November 20, 1985. On
September 29, 1986, Satellite Bingo, Inc. became the surviving corporate
entity in a statutory merger with Supermin, Inc. In connection with the above
merger, the former shareholders of Satellite Bingo, Inc. acquired control of
the merged entity and changed the corporate name to Satellite Bingo, Inc.
Through shareholder approval dated March 10, 1988, the name was changed
to name of SBI Communications, Inc. On January 1, 1993, the Company
executed a plan of merger that effectively changed the Company's state of
domicile from Utah to Delaware.
In October 2000, the Company was issued 75,709,965 shares by SBI for
100% of the shares outstanding in Valencia Entertainment International
LLC ("VEI"), a California limited liability corporation. This acquisition has
been accounted for as a reverse acquisition merger with VEI becoming the
surviving entity. The corporate name was changed to ValCom, Inc.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the Company's
four wholly-owned subsidiaries of which only SBI Communications,
Inc. Alabama and Half Day Video, Inc. has activity during the periods
presented. These financial statements include all activities as if the
acquisition occurred on January 1, 1999.
-7-
ValCom, Inc.
------------
Notes to Consolidated Financial Statements
--------------------------------------------
Unaudited March 31, 2001 And December 31, 2000
---------------------------
Note 1 Summary of Significant Accounting Policies (cont'd)
- ----------------------------------------------------------
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could materially differ form those estimates.
Commitments, Risk And Contingencies
- ------------------------------------
Financial instruments that potentially subject the Company to concentrations
of risk consist of trade receivables principally arising from monthly leases
from television producers. Management believes all receivables to be fully
collectible. In addition, the Company has a standby letter of credit for
$30,000 and a price protection agreement with a shareholder for $20,000.
Cash Equivalents
- ----------------
The Company maintains cash and cash equivalents (short-term highly liquid
investments with original maturity less than three months) with various
financial institutions. From time to time, cash balances may exceed
Federal Deposit Insurance Corporation insurance limits.
Fair Value of Financial Instruments
- -----------------------------------
The carrying value of cash, receivables and accounts payable approximates
fair value due to the short maturity of these instruments. The carrying
value of short and long-term debt approximates fair value based on
discounting the projected cash flows using market rates available for
similar instruments. None of the financial instruments are held for
trading purposes.
-8-
ValCom, Inc.
--------------
Notes to Consolidated Financial Statements
--------------------------------------------
Unaudited March 31, 2001 And December 31, 2000
---------------------------
Note 1 Summary of Significant Accounting Policies (cont'd)
- ----------------------------------------------------------
Depreciation
- ------------
For financial and reporting purposes, the Company follows the policy
of providing depreciation an amortization on the straight-line and
accelerated and accelerated declining balance methods over the estimated
useful lives of the assets, which are as follows:
Building 39 years
Building Improvements 39 years
Office Furniture and Equipment 5 to 7 years
Production Equipment 5 to 7 years
Amortization of Prepaid Loan Costs
- ----------------------------------
For financial reporting purposes, costs are amortized on the straight line
method over 10 years, the life of the related loan.
Income Taxes
- ------------
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, which requires the use of the asset
and liability method and recognizes deferred income taxes for the
consequences of "temporary differences" by applying enacted statutory tax
rate applicable to future years differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities.
Related Party Transactions
- --------------------------
From time to time, a shareholder of the Company Advances money to the
Company for operations. All amounts owed to the shareholders are
non-interest bearing ($236,009 at 03/31/01). In addition to advances, the
Company accrued salaries payable to the shareholder totaling $30,000 and
$30,000 for the quarter ended March 31, 2001 and 2000, respectively. All
amounts owed to the shareholders are payable on demand.
-9-
ValCom, Inc.
-------------
Notes to Consolidated Financial Statements
--------------------------------------------
Unaudited March 31, 2001 And December 31, 2000
----------------------------
Note 1 Summary of Significant Account Policies (cont'd)
- -------------------------------------------------------
Stock-Based Compensation
- ------------------------
As provided for in SFAS #123, the Company elected to apply APBO #25
and related interpretations whereby the fair value of stock given is
determined at the grant date.
Impairment of Long-Lived Assets
- -------------------------------
Long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of such assets may not
be recoverable. Determination of recoverability is based on as estimate
of undisclosed future cash flows resulting from the use of the asset and its
eventual disposition. Measurement of an impairment loss for long-lived
assets is based on the fair value of the asset. Long-lived assets to be
disposed of are reported at the lower of carrying amount or fair value less
costs to sell.
Revenue Recognition
- -------------------
Revenues from licensing of television programming is recorded when the
material is available for telecasting by the licensee and when certain other
conditions are met. Rental revenue is recognized monthly pursuant to
written contracts.
Note 2 Property and Equipment
- -----------------------------
Property and equipment consists of the following:
March 31, December 31,
2001 2000
--------- ----------
Land $ 7,392,292 $ 7,392,292
Building 4,028,785 4,028,785
Building Improvements 1,244,431 1,240,070
Office Furniture and equipment 56,190 39,500
Production equipment 669,737 519,737
------------ -----------
$13,391,435 $13,220,384
Less: Accumulated depreciation ( 1,516,275) ( 1,469,697)
------------ -------------
Net Book Value $11,875,160 $11,750,687
============ =============
-10-
VALCOM, INC AND SUBSIDIARIES
----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Unaudited March 31, 2001 And December 31, 2000
---------------------------
NOTE 3 BUSINESS ACQUSISTION
- ---------------------------
In March 2001, the company acquired 100% ownership of Half Day
Video, Inc. ("HDV") a California corporation, for 950,000 shares of ValCom,
Inc. common stock. The net book value of Half Day Video, Inc. has been
determined to be the fair market value of the common stock issued and the
balance sheet and operations of HDV are consolidated in these financial
statements as of 3/31/01.
NOTE 4 INVESTMENT IN PARTNERSHIP
- --------------------------------
On March 30, 2001 the Company entered into a partnership with Woody
Fraser Productions to produce various television productions. Under the terms of
the agreement the Company will receive, after certain costs reimbursements,
75% of the net profits of the venture. This investment is beingg accounted for
using the equity method. As of March 31, 2001 the Company has invested
$113,523 in the partnership and the partnership has on earnings to date.
NOTE 5 SUBSEQUENT EVENT
- -----------------------
a) The Company has listed the Piedmont Property of sale at an asking
price of $4,900,000. The net book value at 12/31/2000 as included in Note
#2 is #3.9 million. Management intends on using proceeds to satisfy current
obligations of approximately $2.5 million. Such obligations are
also subject to negotiation.
b) The Company has a letter of intent from as investment firm to raise
$10,000,000 subject to certain conditions including a successful $1,000,000
private placement.
-11-
- -----------------------------------------------------------------------------
ITEM 2
--------
HALF DAY VIDEO, INC.
--------------------
FINANCIAL STATEMENTS
--------------------
MARCH 31, 2001
--------------------
Contents of Report
- ------------------
Page 2 Independent Accountants' Review Report
Page 3 Balance Sheet
Page 4 Statement of Income and Retained Earning
Page 5 Statement of Cash Flows
Page 6 Notes to Financial Statements
-1-
FINANCIAL INFORMATION
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
-------------------------------
We have reviewed the accompanying balance sheet, as of March 31, 2001 and
the related statement of operations and retained earnings and cash flows
for the three months ended March 31, 2001 and 2000. These financial
statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institure of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be
conformity with generally accepted accounting principles.
/s/ Jay J. Shapiro, CPA P.C.
- ----------------------------
JAY J. SHAPIRO, C.P.A.
a professional corporation
May 30, 2001
Encino, California
-2-
Financial Statements
HALF DAY VIDEO, INC.
-----------------------------
BALANCE SHEET
-----------------------------
March 31,
2001
------
(Unaudited)
Cash $ 7,616
Accounts receivable 46,532
------------
Total Current Assets 54,148
------------
Fixed Assets - net 57,767
Due from shareholder 50,000
--------------
Total Assets $ 161,915
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Account payable 13,200
Other current liabilities 12,195
-----------
Total Liabilities 25,395
------------
Commitments and contingencies
Stockholder's equity:
Common stock, no par value; 1,000 shares
authorized; issued and outstanding
at March 31, 2001. 1
Retained Earnings 136,519
------------
136,520
------------
$ 161,915
============
See accountants' review report
-3-
HALF DAY VIDEO, INC.
-------------------------------
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
-------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
(UNAUDITED)
March 31,
2001 2000
----- -----
Revenue:
Production $ 254,567 $ 133,140
------------ ------------
Cost and Expenses:
Production 146,763 48,066
Depreciation 11,539 18,727
Administrative and general 100,905 89,927
----------- -----------
259,207 155,720
----------- -----------
Operating income (loss) ( 4,640) ( 22,580)
Interest expense ( 581) ( 1,432)
----------- -----------
Net income (loss) ( $ 5,221) ($24,012)
Retained earnings, beginning 141,470 171,480
------------- -----------
Ratained earnings, ending $ 136,519 $ 152,468
============= ===========
See accountants' review report
-4-
HALF DAY VIDEO, INC.
-----------------------------------------
STATEMENTS OF CASH FLOWS
------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31,
--------------------------------------
(UNAUDITED)
2001 2000
---- ----
Operating Activities:
Net Income (Loss) ($ 5,221) $ (24,012)
Items Not Requiring Cash:
Depreciation and amortization 11,539 18,727
------------- ------------
6,318 ( 5,285)
------------- ------------
Changes in:
Receivables ( 4,665) ( 12,250)
Accounts payable and other accrued expenses 10,973 14,529
Due to/from stockholder ( 50,000) 5,000
------------- -----------
( 43,692) 7,279
------------- -----------
Increase (Decrease) in cash and cash equivalents ( 37,374) 1,994
Cash and cash equivalents, beginning of period 44,990 $ 2,738
------------ ------------
Cash and cash equivalents, end of period $ 7,616 $ 4,732
============ ============
Supplemental disclosure of cash flow information:
Interest paid $ -0- $ 1,432
============ ============
Income taxes paid $ -0- $ 800
============ ============
See accountants' review report
-5-
HALF DAY VIDEO, INC.
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
------------------------------------------
UNAUDITED MARCH 31, 2001
NOTE 1 Summary of Significant Accounting Policies
- -------------------------------------------------
Following is a summary of the significant accounting policies followed
in the preparation of these financial statements, which policies are in
accordance with generally accepted accounting principles:
Organization
- ------------
Half Day Video, Inc. (the "Company"), was organized in the State of California
on August 8, 1988.
In March 2001, ValCom, Inc. acquired 100% of the outstanding common stock
of the Company.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could materially differ form those estimates.
Commitments, Risk And Contingencies
- ------------------------------------
Financial instruments that potentially subject the Company to concentrations
of risk consist of trade receivables principally arising from production
services and equipment rental. Management believes all receivables to be fully
collectible.
Cash Equivalents
- ----------------
The Company maintains cash and cash equivalents (short-term highly liquid
investments with original maturity less than three months) with various
financial institutions. From time to time, cash balances may exceed
Federal Deposit Insurance Corporation insurance limits.
Fair Value of Financial Instruments
- -----------------------------------
The carrying value of cash, receivables and accounts payable approximates
fair value due to the short maturity of these instruments. The carrying
value of short and long-term debt approximates fair value based on
discounting the projected cash flows using market rates available for
similar instruments. None of the financial instruments are held for
trading purposes.
-6-
Half Day Video, Inc.
--------------
Notes to Financial Statements
--------------------------------------------
Unaudited March 31, 2001
---------------------------
Note 1 Summary of Significant Accounting Policies (cont'd)
- ----------------------------------------------------------
Depreciation
- ------------
For financial and reporting purposes, the Company follows the policy
of providing depreciation an amortization on the straight-line and
accelerated and accelerated declining balance methods over the estimated
useful lives of the assets, which are as follows:
Office Furniture and Equipment 5 to 7 years
Production Equipment 5 to 7 years
Income Taxes
- ------------
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, which requires the use of the asset
and liability method and recognizes deferred income taxes for the
consequences of "temporary differences" by applying enacted statutory tax
rate applicable to future years differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities.
Related Party Transactions
- --------------------------
From time to time, the former shareholder of the Company advanced money
to the Company for operations. All amounts owed to this shareholders are
non-interest bearing. The Company leases on a month to month basis its
facilities from this shareholder. At March 31, 2001, this stockholder owed
the Company $50,000 and said receivable is payable on demand.
-7-
Half Day Video, Inc.
-------------
Notes to Financial Statements
--------------------------------------------
Unaudited March 31, 2001
----------------------------
Note 1 Summary of Significant Account Policies (cont'd)
- -------------------------------------------------------
Impairment of Long-Lived Assets
- -------------------------------
Long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of such assets may not
be recoverable. Determination of recoverability is based on as estimate
of undisclosed future cash flows resulting from the use of the asset and its
eventual disposition. Measurement of an impairment loss for long-lived
assets is based on the fair value of the asset. Long-lived assets to be
disposed of are reported at the lower of carrying amount or fair value less
costs to sell.
Revenue Recognition
- -------------------
Revenues for equimpment rented of production services provided are reconded
immediately following the rental period or time the services were rendered.
Note 2 Property and Equipment
- -----------------------------
Property and equipment consists of the following:
March 31,
2001
---------
Production equipment 519,737
Less: Accumulated depreciation (461,970)
------------
Net Book Value $ 57,767
============
NOTE 3 BUSINESS ACQUSISTION
- ---------------------------
In March 2001, the Company was acquired 100% by ValCom, Inc., a
Delaware Corporation. The acquisition was accounted for as a pooling of
interests and ValCom issued 950,000 shares of common stock for 1,000 shares
of the Company.
-8-
- ----------------------------------------------------------------------------
ITEM 3
---------
HALF DAY VIDEO, INC
---------------------
AUDITED FINANCIAL STATEMENTS
--------------------
DECEMBER 31, 2000 AND 1999
--------------------
Financial Statements
--------------------
The audited consolidated balance sheet of the Company for its years ended
December 31, 2000 and audited 1999 and the related statements of operations,
stockholder's equity and cash flows are submitted herewith.
CONTENTS OF REPORT
- -------------------------------------------------------------------------------
Independent Accountants Report 2
Balance Sheet 3
Statements of Operations and Retained Earnings 4
Statements of Cash Flow 5
Notes to Financial Statements 7
-1-
To the Board of Directors
Half Day Video, Inc.:
We have audited the accompanying balance sheet of Half Day Video,
Inc. (the "Company") as of December 31, 2000 and 1999, and the related
statements of operations and retained earnings and cash flows for each of
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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company
as of December 31, 2000 and 1999, and the results of its operations
and its cash flows for each of the years then ended in conformity with
generally accepted accounting principles.
/s/JAY J. SHAPIRO, C.P.A.
a professional corporation
Encino, California
May 30, 2001
-2-
Financial Statements
HALF DAY VIDEO, INC.
-----------------------------
AUDITED BALANCE SHEETS
-----------------------------
AS OF DECEMBER 31,
December 31,
2000 1999
------ ------
Cash $ 44,990 $ 2,738
Accounts receivable 41,867 40,715
------------ ---------
Total current assets 86,857 43,453
------------ ---------
Fixed assets - net 69,306 144,210
-------------- ---------
Total assets $ 156,163 $187,663
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Account payable $ 13,200 $ 13,200
Other current liabilities 1,222 3,682
----------- ---------
Total Liabilities 14,422 16,882
----------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock, no par value; 1,000 shares
authorized; issued and outstanding
at December 31, 2000 and 1999. 1 1
Retained earnings 141,740 170,780
------------ ---------
141,741 170,781
------------ ---------
$ 156,163 187,663
============ =========
See accompanying notes to financial statements
-3-
HALF DAY VIDEO, INC.
-------------------------------
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
(AUDITED)
December 31,
2000 1999
----- -----
Revenue:
Production $ 607,004 $ 484,201
------------ ------------
Cost and Expenses:
Production 170,758 91,033
Depreciation 74,904 74,905
Administrative and general 388,950 345,419
----------- -----------
$ 634,612 $ 511,357
----------- -----------
Operating income (loss) ( 27,608) ( 27,156)
Interest Expense ( 1,432) -0-
----------- -----------
Net Income (loss) ( $ 29,040) ($27,156)
Retained earnings, beginning 170,780 197,937
------------- -----------
Ratained earnings, ending $ 141,740 $ 170,780
============= ===========
See accompanying notes to financial statements
-4-
HALF DAY VIDEO, INC.
-----------------------------------------
STATEMENTS OF CASH FLOWS
------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------
(AUDITED)
2000 1999
---- ----
Operating Activities:
Net Income (Loss) ($ 29,040) $ (27,156)
Items Not Requiring Cash:
Depreciation and amortization 74,904 74,905
------------- ------------
$ 45,864 $ 47,749
------------- ------------
Changes in:
Receivables ( 1,152) 21,420
Accounts payable and other accrued expenses ( 2,460) ( 17,934)
Due from stockholder -0- ( 18,649)
Note payable -0- ( 34,862)
----------- -----------
($ 3,612) ($ 50,025)
=========== ===========
Increase (Decrease) in Cash and Cash Equivalents 42,252 ( 2,276)
Cash and cash equivalents, beginning of period 2,738 $ 5,014
------------ ------------
Cash and cash equivalents, end of year $ 44,990 $ 2,738
============ ============
Supplemental disclosure of cash flow information:
Interest paid $ -0- $ 1,432
============ ============
Income taxes paid $ -0- 800
============ ============
See accompanying notes to financial statements
-5-
HALF DAY VIDEO, INC.
----------------------------------------
NOTES TO AUDITED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 2000 AND 1999
NOTE 1 Summary of Significant Accounting Policies
- -------------------------------------------------
Following is a summary of the significant accounting policies followed
in the preparation of these financial statements, which policies are in
accordance with generally accepted accounting principles:
Organization
- ------------
Half Day Video, Inc. (the "Company"), was organized in the State of California
on August 8, 1988. The Company provides production equipment and services to
the entertainment industry.
In March 2001, ValCom, Inc. acquired 100% of the outstanding common stock
of the Company.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could materially differ form those estimates.
Commitments, Risk And Contingencies
- ------------------------------------
Financial instruments that potentially subject the Company to concentrations
of risk consist of trade receivables principally arising from production
services and equipment rental. Management believes all receivables to be fully
collectible.
Cash Equivalents
- ----------------
The Company maintains cash and cash equivalents (short-term highly liquid
investments with original maturity less than three months) with various
financial institutions. From time to time, cash balances may exceed
Federal Deposit Insurance Corporation insurance limits.
Fair Value of Financial Instruments
- -----------------------------------
The carrying value of cash, receivables and accounts payable approximates
fair value due to the short maturity of these instruments. The carrying
value of short and long-term debt approximates fair value based on
discounting the projected cash flows using market rates available for
similar instruments. None of the financial instruments are held for
trading purposes.
-6-
Half Day Video, Inc.
--------------
Notes to Audited Financial Statements
--------------------------------------------
December 31, 2000 & 1999
---------------------------
Note 1 Summary of Significant Accounting Policies (cont'd)
- ----------------------------------------------------------
Depreciation
- ------------
For financial and reporting purposes, the Company follows the policy
of providing depreciation an amortization on the straight-line and
accelerated and accelerated declining balance methods over the estimated
useful lives of the assets, which are as follows:
Office Furniture and Equipment 5 to 7 years
Production Equipment 5 to 7 years
Income Taxes
- ------------
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, which requires the use of the asset
and liability method and recognizes deferred income taxes for the
consequences of "temporary differences" by applying enacted statutory tax
rate applicable to future years differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities.
Related Party Transactions
- --------------------------
From time to time, the former shareholder of the Company advanced money
to the Company for operations. All amounts owed this shareholder are
non-interest bearing. The Company leases on a month to month basis its
facilities from this shareholder. Rent expense was $ 27,000 om 1999 and
$37,800 in 2000.
-7-
Half Day Video, Inc.
-------------
Notes to Audited Financial Statements
--------------------------------------------
December 31, 2000 And 1999
----------------------------
Note 1 Summary of Significant Account Policies (cont'd)
- -------------------------------------------------------
Impairment of Long-Lived Assets
- -------------------------------
Long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of such assets may not
be recoverable. Determination of recoverability is based on as estimate
of undisclosed future cash flows resulting from the use of the asset and its
eventual disposition. Measurement of an impairment loss for long-lived
assets is based on the fair value of the asset. Long-lived assets to be
disposed of are reported at the lower of carrying amount or fair value less
costs to sell.
Revenue Recognition
- -------------------
Revenues for equipment rented or production serives performed are recorded
immediately following the rental period or period when services are rendered.
Note 2 Property and Equipment
- -----------------------------
Property and equipment consists of the following:
December 31, December 31,
2000 1999
--------- ---------
Production equipment $ 519,737 $ 519,737
Less: Accumulated depreciation ( 450,431) ( 375,527)
------------ ------------
Net Book Value $ 69,306 $ 144,210
============ ============
NOTE 3 BUSINESS ACQUSISTION
- ---------------------------
In March 2001, the Company was acquired 100% by ValCom, Inc., a
Delaware Corporation. The transaction was accounted for as a pooling of
interests and ValCom issued 950,000 shares of common stock for 1,000 shares
of the Company's stock. ValCom, Inc. has provided certain "price protection"
to the sole shareholder of the Company and has a one year option to buy
the Company's real estate owned by the shareholder for $600,000.
-8-