Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934
FOR THE FISCAL QUARTER ENDED MARCH 31, 2002
Commission file Number 0-28416
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
==============================================================================
ValCom, Inc.
(Name of small business issuer specified in its charter)
==============================================================================
Delaware 58-1700840
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
26030 Avenue Hall - Studio #5, Valencia, California 91355
-----------------------------------------------------
(Address of Principal executive offices) (Zip code)
(661) 257-8000
--------------
Issuer's telephone number
==============================================================================
Securities registered pursuant to 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock and Preferred Stock
Common Stock $0.001 Par Value - Preferred Stock $0.001 Par Value
----------------------------------------------------------------
(Title of Class)
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 [ X ] NO [ ]
As of March 31, 2002 the Registrant had 9,757,649 shares of its $0.001
par value Common Stock Outstanding.
==============================================================================
May 13, 2002
==============================================================================
Table Of Contents
ValCom, Inc.
FORM 10-QSB
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of 3
March 31, 2002(unaudited) and
September 30, 2001
Condensed Consolidated Statements of Operations 4
for the three and six months ended March 31,
2002 and 2001 (unaudited)
Condensed Consolidated Statements of Cash Flows 5
for the six months ended March 31,
2002 and 2001 (unaudited)
Condensed Consolidated Statement of Changes in 6
Shareholders' Equity for the six months ended
March 31, 2002 (unaudited)
Notes to Condensed Consolidated Financial State- 7-10
ments (unaudited)
Item 2. Management's Discussion and Analysis 11-13
of Financial Condition and Results
of Operations
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of matters to a vote of 14
Security Holders
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
-2-
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
INDEPENDENT AUDITORS' REPORT
To The Board of Directors of
ValCom, Inc. And Subsidiary
We have reviewed the condensed consolidated balance sheet of ValCom, Inc.
and Subsidiary (the "Company") as of March 31, 2002, and the related
condensed consolidated statements of operation for the three-month and
six-month periods ended March 31, 2002, and condensed consolidated statements
of stockholders' equity and cash flows for the six-month period ended March 31,
2002 included in the accompanying Securities and Exchange Commission Form
10-QSB for the period ended March 31, 2002. These condensed consolidated
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute 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 auditing standards generally accepted in the United States
of America, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above
for them to be in conformity with accounting principles generally accepted in
the United States of America.
WEINBERG & COMPANY, P.A.
Los Angeles, California
May 13, 2002
VALCOM, INC. AND SUBSIDIARY
-----------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-----------------------------
March 31, September 30,
2002 2001
------ -----
(Unaudited)
<c> <c>
Current Assets:
Cash $ 153,814 $ 420,857
Accounts receivable, net 315,780 156,179
Other receivables 59,000 74,000
Prepaid development costs 190,817 190,699
Note receivable, related party 1,300,000 1,415,000
------------ -------------
Total Current Assets 2,019,411 2,256,735
------------ -------------
Fixed Assets - net $11,915,931 $11,959,941
Prepaid loan fees 208,831 232,171
Deposits 34,419 31,750
Notes receivable, long-term 100,000 100,000
------------ -------------
Total Assets $ 14,278,592 $ 14,580,597
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Account payable $ 496,386 $ 540,983
Accrued interest 54,731 20,384
Accrued other 241,894 107,824
Credit line payable 148,949 150,837
Notes payable - current portion 95,370 133,405
Production advances, net -0- 765,656
----------- ------------
Total Current Liabilities 1,037,330 1,719,089
Notes Payable 6,558,712 6,636,734
------------ -----------
Total Liabilities $ 7,596,042 $ 8,355,823
Commitments and contingencies
- -----------------------------
Stockholders' equity:
Preferred stock, par value
$0.001; 10,000,000 shares
authorized: 1,538,000 shares issued and
outstanding at March 31, 2002
and September 30, 2001, respectively 1,538 1,538
common stock, par value $.001;
100,000,000 shares
authorized; 9,757,649 and 8,909,401
shares issued and outstanding at
March 31, 2002 and September 30, 2001,
respectively 9,758 8,909
Additional Paid in capital 9,700,735 9,512,699
Accumulated deficit ( 3,029,481) (3,298,372)
------------- --------------
6,682,550 6,224,774
------------- --------------
Total Liabilities and Stockholders' Equity $ 14,278,592 $ 14,580,597
============= ==============
See accompanying notes to condensed consolidated financial statements
-3-
VALCOM, INC. AND SUBSIDIARY
-------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------------
(UNAUDITED)
-----------
Three Months Ended March 31, Six Months Ended March 31,
--------------------------- --------------------------
2002 2001 2002 2001
---- ---- ---- ----
Revenues:
Rental $ 1,069,148 $ 389,370 $ 1,955,620 $ 523,870
Production 537,039 260,000 3,356,278 297,500
Other 0 0 0 28,791
--------- --------- ---------- ---------
1,606,187 649,370 5,311,898 850,161
--------- --------- ---------- ---------
Expenses:
Production and Develop 381,742 198,172 2,922,632 271,771
Selling and promotion 24,028 45,202 42,113 131,072
Depreciation and
Amortization 82,428 46,579 134,840 215,357
General
and administrative 648,537 1,063,979 1,524,107 1,628,168
-------- ---------- ----------- -----------
Total 1,136,735 1,353,932 4,623,692 2,246,368
-------- ---------- ----------- -----------
Operating Income (loss) 469,452 (704,562) 688,206 (1,396,207)
Interest expense (249,778) (181,377) (419,315) (519,959)
--------- -------- --------- --------
Net Income (loss) $ 219,674 ($ 885,939) 268,891 ($1,916,166)
========= ========== ========= ==========
Net Income (loss) per share
Basic $ 0.02 $ (0.09) $ 0.03 $ (0.21)
========= ========== ========= =========
Diluted $ 0.02 $ (0.09) $ 0.03 $ (0.21)
========= ========== ========= =========
See accompanying notes to condensed consolidated financial statements
-4-
VALCOM, INC. AND SUBSIDIARY
-----------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------
Six months ended
March 31,
------------
2002 2001
---- ----
(Unaudited) (Unaudited)
Operating Activities:
Net Income (Loss) 268,891 ($1,916,166)
Not Requiring Cash:
Depreciation and amortization 134,840 218,147
Stock issued for services 56,088 540,500
------------- ------------
459,819 (1,157,519)
------------- ------------
Changes in:
Receivables (144,601) (11,338)
Prepaid expenses -0- ( 2,797)
Other assets -0- 22,000
Production costs (118) 60,776
Accounts payable and other accrued exp 123,820 259,596
Production deposits (765,656) -0-
------------ -----------
(786,555) 328,237
------------ -----------
Cash Used by Operations (326,736) (829,282)
Investing Activities:
Acquisition of fixed assets ( 67,490) (296,087)
Deposits ( 2,669) 40,500
Acquisition of VEI -0- 80,738
Investment in Partnership -0- (113,523)
Notes receivable payments 115,000 -0-
------------- ------------
Cash Provided (Used) by Investing
Activities 44,841 (288,372)
------------- ------------
Financing Activities:
Principal (payments) borrowings
on notes payable 16,740 449,294
Issuance of stock -0- 330,000
Loan payable -0- 133,470
Credit line payable (1,888) 110,000
Due to stockholder -0- 91,009
------------- ------------
Cash Provided by
Financing Activities 14,852 1,113,773
------------- ------------
Decrease in Cash and
Cash Equivalents (267,043) ( 3,881)
Cash and cash equivalents,
beginning of period 420,857 22,541
------------ ------------
Cash and cash equivalents,
end of period $ 153,814 $ 18,660
============ ============
Supplemental disclosure of cash flow information:
Interest paid $ 384,968 $ 519,959
============ ============
Income taxes paid $ -0- $ 800
============ ============
Supplemental disclosure of non cash Investing
and Financing Activity:
Shares Issued for Retirement of Debt $ 132,797 -
============ ============
See accompanying notes to condensed consolidated financial statements
-5-
VALCOM, INC. AND SUBSIDIARY
---------------------------------------
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
-----------------------------------------------
UNAUDITED
---------
Additional
Common Preferred Paid-in Accumulated
------- ---------- Capital Deficit
Shares Amount Shares Amount ---------- -----------
------- ------- ------ -------
Balance
Sept. 30,
2001 8,909,401 $8,909 1,538,000 $ 1,538 $9,512,699 $(3,298,372)
Shares issued
for services 320,500 321 55,767
Shares issued
for debt
retirement 527,748 528 132,269
Net Income
for the
period 268,891
----------- ------- --------- ---------- ---------- ------------
Balance
March
31,2002 9,757,649 $ 9,758 1,538,000 $ 1,538 $9,700,735 $(3,029,481)
========== ======= =========== ======= ========== ===========
See accompanying notes to condensed consolidated financial statements
-6-
VALCOM, INC. AND SUBSIDIARY
----------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(UNAUDITED)
NOTE 1 Summary of Significant Accounting Policies
- -------------------------------------------------
Following is a summary of the significant accounting policies followed
in the preparation of these condensed consolidated financial statements,
which policies are in accordance with accounting principles generally
accepted in the United States of America:
Organization
- ------------
ValCom, Inc. (the "Company"), formerly SBI Communications, 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
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 7,570,997 shares by SBI for
100% of the shares outstanding in Valencia Entertainment International
LLC ("VEI"), a California limited liability company. 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/Presentation
- -----------------------------------------
The consolidated financial statements include the accounts of the Company
and one wholly-owned subsidiary Half Day Video, Inc.
These financial statements include all activities as if the acquisition
occurred on January 1, 2001.
-7-
VALCOM, INC. AND SUBSIDIARY
------------
Notes to Condensed Consolidated Financial Statements
--------------------------------------------
Note 1 Summary of Significant Accounting Policies (cont'd)
- ----------------------------------------------------------
The Company changed its fiscal year to September 30 from December 31 to
better reflect its operating cycle.
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 from 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 related to a lease of the facility.
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. As of March 31, 2002 accounts receivable has been
reported net of a $10,000 allowance for bad debts.
-8-
VALCOM, INC. AND SUBSIDIARY
--------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
(UNAUDITED)
Note 1 Summary of Significant Accounting Policies (cont'd)
- ----------------------------------------------------------
Interim Financial Statements
- ----------------------------
The condensed consolidated financial statements as of March 31, 2002 and for
the three and six months ended March 31, 2002 and 2001 are unaudited. In the
opinion of management, such condensed consolidated financial statements include
all adjustments (consisting only of normal recurring accruals) necessary for
the fair presentation of the consolidated financial position and the
consolidated results of operations. The consolidated results of operations
for the three and six months ended March 31, 2002 and 2001 are not necessarily
indicative of the results to be expected for the full year. The condensed
consolidated balance sheet information as of September 30,2001 was derived
from the audited consolidated financial statements included in the Company's
annual report Form 10-KSB. The interim condensed consolidated financial
statements should be read in conjunction with that report.
Reclassifications
- -----------------
Certain amounts from prior years have been reclassified to conform to the
current year presentation.
NOTE 2 Net Income (loss) Per Share
- ----------------------------------
The Company's Net Income per share was calculated using weighted average
shares outstanding of 9,757,649 and 9,486,795 for the three and six months
ended March 31, 2002. Although convertible preferred stock and convertible
debt are a common stock equivalent, there is only one series of
preferred with a conversion rate of 1 share of common stock for each share
of preferred stock.
-9-
<page>
VALCOM, INC. AND SUBSIDIARY
--------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------------------
(UNAUDITED)
NOTE 3 SEGMENT INFORMATION
- ---------------------------
Studio Programming Total
--------- ------------ -----------
<s> <c> <c> <c>
For the six months ended
March 31, 2002
- --------------------
Revenues $ 1,955,620 $ 3,356,278 $ 5,311,898
Operating Income 254,560 433,646 688,206
Total Assets 12,449,541 1,829,051 14,278,592
Depreciation and
Amortization 110,340 24,500 134,840
March 31, 2001
- -----------------
Revenues $ 552,661 $ 297,500 $ 850,161
Operating (Loss) Income (1,421,936) 25,729 (1,396,207)
Total Assets 16,182,512 161,916 16,344,428
Depreciation and
Amortization 203,818 11,539 215,357
NOTE 4 LEGAL
- ------------
LITIGATION
On September 14, 2001, an action was filed against Valencia Entertainment
International, Inc. and ValCom, Inc. This matter arises from an underlying
action wherein plaintiffs obtained judgements against Ricky Rocket
Enterprises, Inc. and AJ Time Travelers, Inc. in the amounts of $3,000,000 and
$1,200,000, respectively. In this matter, Plaintiffs' first of two causes of
action alleges that The Company, and other defendants, are alter-egos of Ricky
Rocket Enterprises, Inc. and Time Travelers, Inc. and, therefore, plaintiffs
are entitled to enforce the aforementioned judgments against The Company.
Further, a second cause of action concerning malicious prosecution also
alleges alter-ego liability. Unspecified compensatory and punitive damages are
sought under this cause of action. However, both parties have reached a
settlement agreement at no cost to the Company reguarding this second cause
of action.
Valencia Entertainment was a distributor for AJ Time Travelers, Inc. and
management believes it should not be a party to this action and did not
become the distributor for Time Travelers, Inc. until four
years after the alleged wrong doing occurred. The Company believes the
allegations are without merit and intends to vigorously defend itself. In
addition the Company is indemnified by a related party if any loss relative
to this matter is sustained.
NOTE 5 BASIC AND DILUTED EARNINGS PER SHARE
- -------------------------------------------
Basic and diluted earnings per share for the three and six months ended March
31, 2002 and 2001 are computed as follows:
Three months ended Six months ended
March 31, March 31,
2002 2001 2002 2001
---- ---- ---- ----
<s> <c> <c> <c> <c>
Basic:
Net Income (Loss) $ 219,674 $ (885,939) $ 268,891 $ (1,916,166)
Weighted average
shares outstanding 9,757,649 9,333,151 9,486,795 9,333,151
----------- ----------- ----------- --------------
Basic earning
(loss) per share $ 0.02 $(0.09) $ 0.03 $( 0.21)
=========== =========== =========== ==============
Diluted:
Net Income (Loss) $ 219,674 $ (885,939) $ 268,891 $ (1,916,166)
Interest expense
add back 15,900 0 34,348 0
----------- ----------- ----------- --------------
Adjusted Net Income (Loss) 235,574 (885,939) 303,239 (1,916,166)
Weighted average
shares outstanding 9,757,649 9,333,151 9,486,795 9,333,151
Conversion of
preferred stock to
common 1,538,000 1,538,000
Conversion of debt
to common stock 3,860,306 942,772
----------- ------------ ------------ -------------
Diluted weighted average
common shares 15,155,955 9,333,151 11,967,567 9,333,151
----------- ------------ ------------- ------------
Diluted earning per share $ 0.02 $ ( 0.O9) $ 0.03 $( 0.21)
=========== ============ ============= ============
-10-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
------------
Plan of Operation:
ValCom, Inc. operations at present are comprised of three divisions: 1)
Studio Rental, 2) Studio Equipment Rental, and 3) Film and Television
Production.
Studio Rental
- --------------
The Company owns six improved acres with six sound stages and two
additional leased stages in Valencia California doing business
as Valencia Entertainment International. Seven of the eight stages are
leased under annual contracts to two major production companies.
Rental income for the seven stages should remain constant at approximately
$2,000,000 annually with cost of living increases. Rental income for
the eighth stage increased in August 2001 to $95,000 per month.
Studio Equipment Rental
- -----------------------
In March 2001 the Company acquired with stock, Half Day Video, Inc. a
company which supplies personnel, cameras and other production
equipment to various production companies on a short term basis. As a
result of additional equipment purchases and increased activity, from both
internal and external sources, it is anticipated that Half Day Video revenue
should increase significantly from prior periods.
Film Production
- ---------------
In March 2001, the Company entered into an agreement with Woody
Fraser Productions to produce various television productions on its behalf.
Under the terms of the agreement, the Company will fund up to $500,000 of
annual production development costs. In return, the Company will retain
after costs of production, 75% of the net savings derived from all
production. In January 2002, the Company signed contracts with a Cable
Television Network to produce the second season of a television series
consisting of 13 episodes. Revenue under this contract during 2002 will be
approximately $2,500,000.
In addition to retaining 75% of any possible net savings from the
productions, the Company's Half Day Video unit will handle a majority of the
production rental needs. Additionally, the Company signed a contract with a
different Cable Television Network to produce six (6) epiodes of a television
series at a contracted amount of approximately $500,000. After costs of
production, the Company will retain 100% of any savings plus a portion of
the executive producer fees. Additional productions are in the development
process. Revenues will be recognized when individual programs are
available.
-11-
Results of Operation
--------------------
Three months ended March 31, 2002 vs March 31, 2001
- -----------------------------------------------------
Revenues for the three months ended March 31, 2002 increased by $956,817 or
147.4% from $649,370 for the three months ended March 31, 2001 to $1,606,187
for the same Period in 2002. The increase in revenue was principally due to
revenues associated with the acquisition of Half Day Video and the joint
venture with Woody Fraser, both of which occurred in March 2001.
Production and development costs for the three months ended March 31, 2002
increased by $183,570 or 92.6% from $198,172 for the three months ended March
31, 2001 to $381,742 for the same period in 2002. The increase in production
costs was principally due to the acquisition of Half Day Video and development
costs incurred with Woody Fraser Productions.
Selling and promotion costs for the three months ended March 31, 2002
decreased by $21,174 or 46.8% from $45,202 for the three months ended March 31,
2001 to $24,028 for the same period in 2002. The decrease was due principally
to decreases in travel and public relation expenses.
-12-
Depreciation and amortization expense for the three months ended March 31, 2002
increased by $35,849 or 77.0% from $46,579 for the three months ended March 31,
2001 to $82,428 for the same period in 2002. The decrease in depreciation
and amortization expense is a result of additional assets being depreciated.
General and administrative expenses for the three months ended March 31, 2002
decreased by $415,442 or 39.1% from $1,063,979 for the three months ended March
31, 2001 to $648,537 for the same period in 2002. The decrease was due
principally to decreases in personnel costs, repairs and maintenance and
telephone and utility costs.
Interest expense for the three months ended March 31, 2002 increased by
$68,401 or 37.7% from $181,377 for the three months ended March 31, 2001 to
$249,778 for the same period in 2002. The increase was due principally
to interest associated with the Laurus Fund loan.
Due to the factors described above, the Company's net income increased by
$1,105,613 from a loss of $885,939 for the three months ended march 31, 2001 to
income of $219,674 for the same period in 2002.
Six months ended March 31, 2002 vs. March 31, 2001
- --------------------------------------------------
Revenues for the six months ended March 31, 2002 increased by $4,461,737 or
524.8% from $850,161 for the six months ended March 31, 2001 to $5,311,898 for
the same period in 2002. The increase in revenue was principally due to
revenues associated with the acquisition of Half Day Video and the joint
venture with Woody Fraser, both of which occurred in March 2001.
Production and development costs for the six months ended March 31, 2002
increased by $2,650,861 or 975.4% from $271,771 for the six months ended
March 31, 2001 to $2,992,632 for the same period in 2002. The increase in
production costs was principally due to the acquisition of Half Day Video and
development costs incurred with Woody Fraser Productions.
Selling and promotion costs for the six months ended March 31, 2002 decreased
by $88,959 or 67.9% from $131,072 for the six months ended March 31, 2001 to
$42,113 for the same period in 2002. The decrease was due principally to
decreases in travel and public relation expenses.
Depreciation and amortization expense for the six months ended March 31, 2002
decreased by $80,517 or 37.4% from $215,357 for the six months ended March 31,
2001 to $134,840 for the same period in 2002. The decrease in depreciation
and amortization expense is a result of certain assets becoming fully
depreciated.
General and administrative expenses for the six months ended March 31, 2002
decreased by $104,061 or 6.4% from $1,628,168 for the six months ended March
31, 2001 to $1,524,107 for the same period in 2002. The decrease ws due
principally to decreases in professional fees and telephone and utility costs.
Interest expense for the six months ended March 31, 2002 decreased by $100,644
or 19.4% from $519,959 for the six months ended March 31, 2001 to $419,315
for the same period in 2002. The decrease was due principally to
interest rate reductions.
Due to the factors described above, the Company's net income increased by
$2,185,057 from a loss of $1,916,166 for the six months ended March 31, 2001
to income of $268,891 for the same period in 2002.
Trends events of uncertainties :
- -------------------------------
The studios rented by the Company are on one year extensions of
previous long term leases. The options expire at various dates during 2002.
If these productions are canceled, it is unlikely lease options would be
extended. An uncertainty may exist regarding the Company's ability to rent
the properties at profitable amounts.
Capital Resources
- -----------------
Internal and external source of funding:
- ----------------------------------------
The Company projects positive cash flow from its studio division.
ValCom may issue stock for services as a means of maintaining working
capital. Additionally, the Company is currently seeking refinancing of its
Studio real estate sufficient to provide approximately $1,500,000 in working
capital.
ValCom has sufficient funds to operate for the next 12 months through its
refinancing, common stock issues and projected positive cash flow from its
operation of business.
Statement Regarding Computation of Earnings (Loss) Per Share
- -------------------------------------------------------------
See Notes To Condensed Consolidated Financial Statements included elsewhere
in this filing for a description of the Company's calculation of earnings
per share.
-13-
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 14, 2001, plaintiffs Diane Russomanno and Knowledge
Booster, Inc. commenced an action in the Superior Court of the State of
California, County of Los Angeles Diane Russomanno and Knowledge
Booster, Inc. v. Valencia Entertainment International, ValCom, Inc., Vince
Vellardita, Tom Grimmett, Nalin Rathod, Aburizal Bakrie, Nirwan Bakrie, Linda
Layton, Barak Isaacs,and Does 1 through 20, Case No. BC257989 (Sup. Ct., L.A.
Co.,C.A.). This matter arises from an underlying action wherein plaintiffs
obtained judgments against Ricky Rocket Enterprises, Inc. and AJ Time Travelers,
Inc. in the amounts of $3,000,000 and $1,200,000, respectively. In this
matter, Plaintiffs' first of two causes of action alleges that we, and other
defendants, are alter-egos of Ricky Rocket Enterprises, Inc. and AJ Time
Travelers, Inc. and, therefore, plaintiffs are entitled to enforce the
aforementioned judgments against us. Plaintiffs seek payment of the
judgments in the amount of $4,200,000 plus interest under this cause
of action.
Further, Plaintiffs second cause of action concerning malicious
prosecution also alleges alter-ego liability. Plaintiffs allege that Ricky
Rocket Enterprises, Inc. and AJ Time Travelers, Inc. filed a cross-complaint
in the underlying litigation without any probable cause and for an improper
motive or purpose. Plaintiffs similarly allege that we, and other defendants,
are alter-egos of Ricky Rocket Enterprises, Inc. and AJ Time Travelers, Inc.
are therefore liable for such malicious prosecution. Plaintiffs seek
unspecified compensatory and punitive damages under this cause of action.
Both parties have reached a settlement at on cost to the Company regarding
this second cause of action.
We believe the allegations are without merit and intend to vigorously
defend ourselves.
ITEM 2. CHANGES IN SECURITIES
In October 2001, the company issued 243,000 shares of common stock for
consulting services. Also in December, the company issued 52,500 shares of
common stock to employees as bonuses and 25,000 shares for stage rental
services.
During the three months ended December 31, 2001, the Company issued
527,748 shares of common stock to Laurus Fund for the retirement of a debt
in the amount of $132,269 and interest.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
EXHIBITS DESCRIPTION
11 Statement re: computation of per share
earnings
(B) REPORTS ON FORM 8-K:
No 8-K were filed
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersign
thereunto duly authorized.
ValCom, Inc.
Date: May 13, 2002 By: /s/Vince Vellardita
-------------------------------------
Vince Vellardita Chairman of the
Board and Chief Executive Officer
(principal executive officer)
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