AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 2001
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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VALCOM, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 7819 58-1700840
(State or other jurisdiction of (Primary standard industrial (I.R.S. Employer Identification No.)
incorporation or organization) classification code number)
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26030 Avenue Hall, Studio 5
Valencia, California 91355
(661) 257-8000
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
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Vince Vellardita
Chairman, President & CEO
26030 Avenue Hall, Studio 5
Valencia, California 91355
(661) 257-8000
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Gregory Sichenzia, Esq.
Sichenzia, Ross, Friedman & Ference LLP
135 West 50th Street, 20th Floor
New York, New York 10020
(212) 664-1200
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Approximate date of proposed sale
to public: As soon as practicable after this
registration statement becomes effective.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
==================================== ================ ======================= ======================== ================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER SECURITY(1) PRICE(1) FEE
- ------------------------------------ ---------------- ----------------------- ------------------------ ----------------
Common stock, $.001 par value, 6,081,080 $.296 $1,800,000 $450
underlying convertible notes
Common stock, $.001 par value 545,454 $.296 $161,455 $41
underlying warrants
- ------------------------------------ ---------------- ----------------------- ------------------------ ----------------
TOTAL 6,626,534 $1,961,455 $491
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(1) Estimated solely for the purpose of determining the registration fee.
(2) Represents 240% of the number of shares currently issuable upon the
conversion of outstanding notes, issued on June 7, 2001, based on a
conversion pruice of $.296 per share. The actual number of shares to be
issued on conversion is dependent, in part, on the price of the common
stock at the time of conversion.
(3) Common stock issuable upon the conversion of warrants issued in
connection with the June 7, 2001 financing.
--------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
PROSPECTUS
June _____, 2001
VALCOM, INC.
6,626,534 Shares of Common Stock
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This prospectus relates to the resale by the selling stockholders of
up to 6,626,534 shares of our common stock. The selling stockholders may sell
common stock from time to time in the principal market on which the stock is
traded at the prevailing market price or in negotiated transactions. The selling
stockholders are deemed to be underwriters of the shares of common stock, which
they are offering. Please see the "Selling Stockholders" section in this
prospectus for a complete description of all of the selling stockholders.
We will not receive any proceeds from the sale of shares by the
selling stockholders. However, we will receive proceeds upon the exercise of any
warrants that may be exercised by the selling stockholders, if any.
Our common stock is quoted on the Over-the-Counter Bulletin board
under the symbol "VCMI." On June ___, 2001, the closing price of our common
stock was $__ per share.
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This investment involves a high degree of risk. See the "Risk
Factors" beginning on page__.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is complete or accurate. Any representation to the contrary is a
criminal offense.
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TABLE OF CONTENTS
Section Page Number
Prospectus Summary............................................................
Risk Factors..................................................................
Use of Proceeds...............................................................
Dilution......................................................................
Price Range of Common Stock...................................................
Dividend Policy...............................................................
Capitalization................................................................
Selected Financial Data.......................................................
Management's Discussion and
Analysis of Financial Condition and Results of Operation............
Business......................................................................
Management....................................................................
Summary Compensation Table....................................................
Security Ownership of Management and Certain Beneficial Owners................
Description of Capital Stock..................................................
Selling Stockholders..........................................................
Shares Eligible for Future Sale...............................................
Plan of Distribution..........................................................
Experts.......................................................................
Legal Matters.................................................................
Index to Financial Statements ............................................
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the SEC in accordance with registration rights granted to investors. Under this
process, the stockholders named in the "Selling Stockholders" section of this
prospectus, or in any supplement to this prospectus, may sell the common stock
described in this prospectus from time to time. This prospectus provides you
with a general description of the common stock. Each time that selling
stockholders want to offer common stock and have provided us with a notice in
accordance with the terms of their registration rights, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this and any
prospectus supplement together with any additional information described under
the heading "How to Obtain More Information about ValCom, Inc."
2
PROSPECTUS SUMMARY
ValCom, Inc.
Our business................... We primarily lease sound stages. Our business includes television production
for network and syndication programming, motion pictures, sports, internet
and real estate holdings. In addition to leasing our sound stages, we also
have a small library of wholly-owned television content ready for
distribution.
Our properties................. We own six acres of real property and a 120,000 square feet production
facility in Valencia, California, which is currently the studio set for "JAG"
produced by Paramount Pictures and "Power Rangers" produced by Saban
Productions. Our sound stages have been operating at full capacity since
1995. We also lease an additional three acres and 52,000 square feet
production facility that includes two full service sound stages, for a total
of eight sound stages.
Our clients.................... Our past and present clients include Warner Brothers, Universal Studios, MGM,
HBO, NBC, 20th Century Fox, Disney, CBS, Sony, Showtime, and the USA
Network.
Recent Acquisition............ On March 8, 2001, we completed the acquisition of Half Day Video, Inc.
located in Burbank, California. Half Day specializes in supporting the
entertainment industry with television and film equipment rentals. Half Day's
client list includes The Academy Awards, Emmy Awards, NBC, Entertainment
Tonight, MTV, General Hospital and other large entertainment and production
companies.
Our principal offices.......... We maintain executive offices at 26030 Avenue Hall, Studio 5, Valencia California 91355 and
our telephone number is (661) 257-8000.
3
The Offering
Registration rights............ This prospectus is part of a registration statement filed pursuant to registration rights
granted to certain investors.
Common stock outstanding before this
offering................ We have 93,311,507 shares of common stock outstanding prior to this offering.
Common stock offered by the
selling stockholders.... 6,626,534 shares of common stock
Common stock outstanding after this
offering................ Up to 99,938,041 assuming the conversion of all convertible notes and exercise
of all warrants by the selling stockholders.
Use of proceeds................ We will not receive any proceeds from the sale of securities by the selling
stockholders.
Risk factors................... Investing in these securities involves a high degree of risk and immediate and
substantial dilution of your investment. As an investor, you should be able to bear a
complete loss of your investment. See "Risk Factors" and "Dilution" for a more detailed
discussion.
Forward-looking statements...... This prospectus contains forward-looking statements that address, among other
things, our expansion and acquisition strategy, business development, use of
proceeds, projected capital expenditures, liquidity, and our development of
additional revenue sources. The forward-looking statements are based on our
current expectations and are subject to risks, uncertainties and assumptions.
We base these forward-looking statements on information currently available to
us, and we assume no obligation to update them. Our actual results may differ
materially from the results anticipated in these forward-looking statements,
due to various factors.
4
RISK FACTORS
Investing in our securities will provide you with an equity ownership
interest in ValCom, Inc. As one of our shareholders, your investment will be
subject to risks inherent in our business. If any of the following risks
actually occur, our business could be harmed. In that event, the trading price
of our shares might decline, and you could lose all or part of your investment.
You should carefully consider the following factors as well as other information
contained in this prospectus before deciding to invest in shares of our
securities. Additional risks that are not currently known to us or that we deem
immaterial may also harm us and the value of your investment. An investment in
our securities involves a high degree of risk.
We have a history of net losses and negative cash flow and may not be able to
satisfy our cash needs from operations.
We have experienced negative cash flow. We cannot project with
certainty that losses will not continue in the short term as we grow and
integrate our businesses, and that losses will not continue in the long term
should we be unsuccessful in our business and integration efforts. We cannot
know when, if ever, net cash generated by our internal business operations will
support our growth and continued operations.
We will need substantial amounts of additional financing.
We anticipate that we will need substantial amounts of cash for:
o capital expenditures to build and enhance our business;
o operating expenses relating to our business, expansion and integration
efforts;
o potential acquisitions;
o debt service requirements; and
o other general corporate expenditures.
There is a probability that our cash needs will exceed our cash flows
from operating activities through 2001, which means we will have to seek out
additional financing. In addition, we may need to revise our business plan to
respond to competitive and other factors, so our need for cash may increase.
A reduction in demand for studio facilities could lead to a decrease in
revenues.
Content production in foreign countries such as Canada, as a result of
lower production costs and more lenient labor laws in such countries, may reduce
the demand for studio facilities in Los Angeles and the United States generally.
Such decreased demand could diminish our revenues, threaten our sustained
profitability in the future and have a material adverse effect on our business
and results of operations.
5
Our revenues depend on a limited number of film producers.
Our results of operations in any given period depend to a significant
degree upon revenues from a small number of film producers who rent our studios.
In addition, only two film producers, Paramount Productions and Saban
Productions, are contractually obligated to lease any of our studios. Our
failure to rent to a sufficient number of film producers or to increase the
number of film producers during a particular period could adversely affect our
results of operations.
Advances in technology may create alternate forms of entertainment, which may
negatively affect our business.
The entertainment industry in general, and the motion picture industry
in particular, continue to undergo significant changes, primarily due to
technological developments. Due to this rapid growth of technology and shifting
consumer tastes, we cannot accurately predict the overall effect that such
changes may have on the potential revenue from and profitability of
feature-length motion pictures and television programming.
Funding for our capital needs is not assured, and we may have to curtail our
business if we cannot find adequate funding.
We currently have no legally binding commitments with any third parties
to obtain any material amount of additional equity or debt financing. We cannot
assure you that we will be able to obtain any additional financing in the
amounts or at the times that we may require the financing or, if we do obtain
any financing, that it would be on acceptable terms. As a result, we cannot
assure you that we will have adequate capital to implement future expansions and
enhancements of our wireless technology, to maintain our current levels of
operation or to pursue strategic acquisitions. Our failure to obtain sufficient
additional financing could result in the delay or abandonment of some or all of
our development, expansion and expenditures, which could have an adverse effect
on us and on the value of our common stock.
We have a limited history of owning and operating our acquired businesses on a
consolidated basis, which could result in ineffective management of these
businesses.
There can be no assurance that we will be able to meet performance
expectations or successfully integrate our acquired business on a timely basis
without disrupting the quality and reliability of service to our customers or
diverting management resources. Our rapid growth has placed and will continue to
place a significant strain on management, our financial resources, and on our
information, operating and financial systems. If we are unable to manage this
growth effectively, it may have an adverse effect on our business, financial
condition and results of operations.
Our recent acquisitions of Half Day, Inc. may have an adverse effect on our
earnings.
We recently acquired Half Day Video, Inc. located in Burbank,
California. Half Day specializes in supporting the entertainment industry with
television and film equipment rentals. Half Day's client list includes The
Academy Awards, Emmy Awards, NBC, Entertainment Tonight, MTV, General Hospital
and other major entertainment and production companies. If we are unable to
effectively integrate these businesses into our existing business, and retain
certain key employee expertise in our organization, it may have an adverse
effect on our earnings or revenue growth.
6
The loss of any of our key executives may have a material adverse effect upon
our operations.
Our success is dependent upon the expertise of the key members of our
management team, particularly our President, CEO and Chairman, Vince
Vellarditas, and Vice President, Ronald Foster. The loss of services from any of
these individuals would have a material adverse effect upon our operations. Our
future success also depends on our continuing ability to attract, train and
retain highly qualified technical, sales, marketing, development and managerial
personnel. If we are unable to hire such personnel on a timely basis, our
business, operating results and financial condition could be adversely affected.
Risks Related To This Offering and Our Common Stock
Our commitments to issue additional common stock may adversely affect the market
price of our common stock and may impair our ability to raise capital.
We currently have outstanding commitments in various forms such as
warrants, and convertible securities to issue a substantial number of new shares
of our common stock. The shares subject to these issuance commitments, to some
degree, will be issued in transactions registered with the Securities and
Exchange Commission and thus will be freely tradable. In many other instances,
these shares are subject to grants of registration rights that, if and when
exercised, would result in those shares becoming freely tradable. An increase in
the number of shares of our common stock that will become available for sale in
the public market may adversely affect the market price of our common stock and,
as a result, could impair our ability to raise additional capital through the
sale of our equity securities or convertible securities.
We may need additional capital that could dilute the ownership interest of
investors.
We require substantial working capital to fund our business. If we
raise additional funds through the issuance of equity, equity-related or
convertible debt securities, these securities may have rights, preferences or
privileges senior to those of the rights of holders of our common stock may
experience additional dilution. We cannot predict whether additional financing
will be available to us on favorable terms when required, or at all. We have
experienced negative cash flow from operations, and expect to experience
significant negative cash flow from operations in the immediate future as we
grow, expand and integrate our businesses. The issuance of additional common
stock by our management, may have the effect of further diluting the
proportionate equity interest and voting power of holders of our common stock,
including investors in this offering.
7
RECENT DEVELOPMENTS
June 7, 2001 Financing
We are registering 6,081,080 shares of common stock underlying a
$750,000 convertible note issued to an accredited investor on June 7, 2001. The
number of shares of common stock issuable upon conversion of the outstanding
convertible notes is 2,533,783 based on a conversion price of $0.296 per share.
We are required to register 240% of this amount, for a total of 6,081,080. In
addition, 545,454 shares underlying warrants are being registered in connection
with these financings. These warrants have an exercise price of $.548 per share.
The notes bear interest at 8% and are convertible into our common stock
at the lesser of:
a) 80% of the average of the three lowest closing bid prices of
our common stock for the ten days immediately prior to
closing; or
b) 80% of the average of the three lowest closing bid prices of
our common stock for the thirty days immediately prior to the
conversion date.
The remaining portion of the notes payable of $750,000 is due June 7,
2003.
8
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be
offered and sold from time to time by the selling stockholders of our company.
There will be no proceeds to our company from the sale of shares of common stock
in this offering. However, we will receive proceeds upon the exercise of any
warrants that may be exercised by the selling shareholders.
DILUTION
Since this offering is being made solely by the selling stockholders and
none of the proceeds will be paid to our company, our net tangible book value
will be unaffected by this offering.
9
MARKET FOR COMMON EQUITY AND RELATED STOCK MATTERS
Our common stock trades on the Over-The-Counter Bulletin Board under
the symbol "VCMI." Trading of our common stock began in 1983. The following
table sets forth the range of high and low bid quotations for our common stock
for each quarter of the last two fiscal years, as reported by the OTC BB. The
quotations represent inter-dealer prices without retail markup, markdown or
commission, and may not necessarily represent actual transactions.
PERIOD HIGH LOW
Year Ended December 31, 1999:
First Quarter................. $.31250 $.13000
Second Quarter................ $.21875 $.12500
Third Quarter................. $.21875 $.01000
Fourth Quarter................ $.30000 $.02000
Year Ended December 31, 2000:
First Quarter................. $.50000 $.11000
Second Quarter................ $.34380 $.93800
Third Quarter................. $3.5313 $.12550
Fourth Quarter................ $.30000 $.23000
Year Ended December 31, 2001:
First Quarter................. $1.5938 $.40620
Second Quarter................ $0.7300 $.30000
The approximate number of holders of record of our common stock,
$.001 par value, as of March 31, 2001, was 3,540.
10
DIVIDEND POLICY
Holders of our common stock are entitled to receive such dividends as
may be declared by our board of directors. No dividends on our common stock have
ever been paid, and we do not anticipate that dividends will be paid on our
common stock in the next fiscal year.
11
CAPITALIZATION
The following table summarizes our long-term obligations and
capitalization as of December 31, 2000. The information in the table should be
read in conjunction with the more detailed combined financial statements and
notes presented elsewhere in this prospectus.
Fiscal Year Ended
December 31, 2000
Stockholders' equity:
Preferred Stock........................................... $1,543
Common Stock.............................................. $90,140
Additional paid-in capital................................ $8,242,899
Deficit................................................... $(1,172,081)
Accumulated other comprehensive income
Net shareholders' equity.................................. 7,162,501
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Total capitalization......................................... 7,162,501
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Additional Information About Financial Presentation
Options and Warrants. Unless this prospectus indicates otherwise, all
information presented in this prospectus assumes no exercise of warrants or
options outstanding.
12
SELECTED FINANCIAL INFORMATION
The information set forth below for the years ended December 31, 2000
and 1999, which is derived from the audited financial statements; and for the
three months ended March 31, 2001 and 2000, which is derived from the unaudited
financial statements, should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements, including the notes thereto and other
financial information, appearing elsewhere in this registration statement.
Three Months Ended Year Ended
March 31, December 31,
2001 2000 2000 1999
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(Unaudited) (Audited)
STATEMENT OF OPERATIONS DATA
Revenues $649,370 $495,293 $1,395,073 $1,474,171
Net income (loss) (885,938) (63,541) (1,891,722) 111,866
Net income (loss)
per share (0.01) (0.01) (.06) 0.01
BALANCE SHEET DATA
Three Months Ended Year Ended
March 31, December 31,
2000 2000 1999
---- ---- ----
Total assets 16,344,428 16,164,691 18,552,228
Working capital 676,354 1,074,031 207,372
Total liabilities 9,450,366 9,002,190 8,422,498
Stockholders' equity 6,894,062 7,162,501 10,130,730
13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read in conjunction with the financial statements and notes
thereto included elsewhere in this prospectus. This document contains certain
forward-looking statements including, among others, anticipated trends in our
financial condition and results of operations and our business strategy. These
forward-looking statements are based largely on our current expectations and are
subject to a number of risks and uncertainties. Actual results could differ
materially from these forward-looking statements. Important factors to consider
in evaluating such forward-looking statements include (i) changes in external
competitive market factors or in our internal budgeting process which might
impact trends in the our results of operations; (ii) unanticipated working
capital or other cash requirements; (iii) changes in the our business strategy
or an inability to execute its strategy due to unanticipated changes in the
industries in which we operates; and (iv) various competitive factors that may
prevent the us from competing successfully in the marketplace.
Plan of Operation
ValCom, Inc. operations at present are comprised of four divisions
o Studio Rental
o Piedmont Alabama Facility - Auto Auction
o Studio Equipment Rental
o Film Production
Studio Rental
We own six acres with six sound stages and two additional leased stages
located in Valencia, California doing business as Valencia Entertainment
International. Seven of the eights stages are leased under long-term contracts
to two major production companies. Rental income for the seven stages should
remain constant at approximately $1,000,000 annually with only small cost of
living increases.
Piedmont Alabama Facility
We developed the property as a venue for auction of automobiles,
antiques and collectible merchandise. $75,000 was spent for renovation of this
property during the past year. Since the implementation of the auction business
plan, this segment has not generated any significant revenues.
During 2001, we continued, on a limited basis, the auction operation
and held concerts and other entertainment events. Currently, management is in
the process of seeking refinancing of the existing property in the amount of
$2,500,000. The funds will be used for the payment of the existing mortgage
loan, which is in default, and for operating capital. We have also executed an
irrevocable offer to sell the property for $4,500,000 expiring July 2001.
Management expects to sell the property at a substantial gain.
14
Studio Equipment Rental
In March 2001, we acquired Half Day Video, Inc., a company that rents
cameras and other production equipment to various production companies on a
short-term basis. With a 5- year equipment financing we intend to purchase
additional equipment costing approximately $350,000.
Film Production
In March 2001, we entered into a joint venture with Woody Fraser
Productions to produce various television productions. Under the terms of the
agreement, we will receive, after certain cost reimbursements, 75% of the net
profits of the venture. In March 2001, the venture signed contracts to produce a
series of 13 episodes and a pilot episode for a cable TV station. Revenue to be
earned under these contracts during 2001 are expected to be $2,400,000. We
expect net income from this project. Follow-on contracts and additional
productions are under consideration.
Results of Operation
March 31, 2001 and 2000 Comparison
Working Capital. As of March 31, 2001, we had working capital of
$676,354. As of the prior year working capital was $1,074,031. The change was
due primarily to increase in accruals.
Total Assets and Liabilities. Total assets were $16,344,428 at March
31, 2001 versus $16,164,691 at December 31, 2000 and additionally total
liabilities were $9,450,366 and $9,002,190 respectively. The changes in total
assets and liabilities are substantially accounted for by above described
changes in current assets and liabilities.
Revenue/Operating Expenses/Net Loss. For quarter ended March 31, 2001,
we had revenue of $649,372, operating expenses of $1,453,932 and a net loss of
($885,937). The loss before depreciation and interest for the quarter was
($757,981).
Revenue increased $154,079 from the previous quarter or 31.1%. This
increase was a result of an increase in production revenues, largely, equipment
rental. Although marketing efforts continued during the quarter for two film
production properties, we were unable to negotiate any significant sales
distribution contracts. No revenue was generated from the on-site merchandise
and auto auction at the Piedmont facility.
Production Costs. Production costs for the quarter ended March 31, 2001
compared with the prior quarter have increased from $123,955 to $198,172 or a
59.9% increase. Marketing costs and costs related to the increased production
revenue accounted for most of the production costs in the first quarter 2001.
Management reviews capitalized production costs on a quarterly basis and records
write-offs as needed.
Selling and Promotion Costs. Selling and promotion costs increased
$45,202 from 2000 to 2001. These costs generally were incurred to promote
ValCom's common stock valuation. Depreciation expense decreased $9,252 due to
the fully depreciated status of certain assets.
Administrative and General. For the quarter ended March 31, 2001,
administrative and general costs expenses increased by $829,118 or 353% from
2000 amounts. Significant increases were in the following subcategories:
Item 2001 2000
Legal and accounting $157,836 $23,400
Management consulting 218,750 0
Other costs 229,509 13,643
Salaries 318,022 97,818
Taxes 31,165 0
Rent 108,697 0
Total $1,063,979 $234,861
============= ========
Following are reasons for the increase in subcategories of
administrative and general expenses for the quarter ended March 31, 2001
compared with the quarter ended March 31, 2000.
The $134,436 increase in legal and accounting was due to performance of
audits and preparation of agreements and other legal matters related to the
merger. The $218,750 increase in management consulting was due costs incurred
for reorganization and planning regarding the newly merged company.
The $215,866 increase in other costs consist of numerous relatively
small changes in a variety of categories.
The $31,165 increase in taxes and licenses was due to prior period
under accrual of taxes due.
The $108,697 increase in rent was due to the lease in 2000 of
additional studio space adjacent to the Valencia property.
Interest expense increased $37,190 between the two quarters was due to
increased borrowings.
ValCom did not record any tax expense for either quarter due to taxable
loss or tax loss carry forwards. Our tax loss carry forwards available balance
at the end of fiscal 2000 was in excess of $11 million.
16
Liquidity and Capital Resources
Internal and external source of funding:
We have obtained lines of credit from City National Bank for $400,000
and project positive cash flow from our studio division. We may issue stock for
services as a means of maintaining working capital. We have sufficient funds to
operate for the next 12 months through our use of the credit facility, common
stock issues and projected positive cash flow from our operation of business. We
are in the process of refinancing the Piedmont property for $2,500,000. We also
executed an irrevocable offer to sell the property and equipment for $4,500,000.
We issued a $750,000 convertible note to an accredited investor on June
7, 2001. The number of shares of common stock issuable upon conversion of the
outstanding convertible notes is 2,533,783 based on a conversion price of $0.296
per share. We are required to register 240% of this amount, for a total of
6,081,080. In addition, 545,454 shares underlying warrants are being registered
in connection with these financings. These warrants have an exercise price of
$.548 per share.
No dividends have been declared since our inception nor do we
anticipate that dividends will be declared in the ensuing fiscal year.
Statement Re Computation of Earnings Per Share
See "Notes To Consolidated Financial Statements" included elsewhere in
this filing for a description of our calculation of earnings per share.
17
BUSINESS
Overview
ValCom, Inc. operations at present are comprised of four divisions
o Studio Rental
o Piedmont Alabama Facility - Auto Auction
o Studio Equipment Rental
o Film Production
We maintain corporate offices at 26030 Avenue Hall, Studio 5, Valencia,
California 91355.
Our common shares currently are traded on the Over-The-Counter Bulletin
Board under the trading symbol "VCMI."
In this prospectus, unless otherwise specified or the context otherwise
requires, references to "we", "our" and "ValCom" includes a reference to our
subsidiaries which we beneficially own a majority of the outstanding voting
shares. Our subsidiaries and the percentage of voting shares that we
beneficially own are as follows:
Name of Subsidiary (Jurisdiction) Ownership
- --------------------------------- ---------
278 Auction Plaza, an Alabama corporation 100%
SBI Communications, Inc., a Nevada corporation 100%
SBI Communications, Inc., an Alabama corporation 100%
Valencia Entertainment International, LLC a limited liability corporation 100%
Half Day Video, Inc., a California corporation 100%
History
ValCom, Inc., 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. Our 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, we executed a
plan of merger that effectively changed our state of domicile from Utah to
Delaware.
In October 2000, we were issued 75,709,965 shares by SBI for 100% of
the shares outstanding in Valencia Entertainment International LLC, a California
limited liability corporation. This acquisition has been accounted for as a
reverse acquisition merger with Valencia Entertainment becoming the surviving
entity. The corporate name was changed to ValCom, Inc.
18
Business
Our business includes television production for network and syndication
programming, motion pictures, sports, internet and real estate holdings,
however, revenue is primarily generated through the lease of the sound stages.
We own six acres of real property and a 120,000 square feet production facility
in Valencia, California. This production facility is currently the studio set
for "JAG", produced by Paramount Pictures and "Power Rangers" produced by Saban
Productions. Our sound stages have been operating at full capacity since 1995.
We also lease an additional three acres and 52,000 square feet production
facility that include two full service sound stages, for a total of eight sound
stages.
Our past and present clients include Warner Brothers, Universal
Studios, MGM, HBO, NBC, 20th Century Fox, Disney, CBS, Sony, Showtime, and the
USA Network. In addition to leasing our sound stages, we also have a small
library of wholly owned television content that are ready for distribution.
Joint Venture Agreement With Woody Fraser Productions
On March 30, 2001, we executed a joint venture agreement with Woody
Fraser Productions, in which Woody Fraser Productions would serve exclusively as
a television production company for us. The primary purpose of the joint venture
is to develop and produce various television projects.
Woody Fraser has 25 years of experience as an executive producer in
Hollywood. He operates his own production company, Woody Fraser Productions,
which has created and produced many television shows including the "Dick Cavitt
Show", "Steve Allen Show", "That's Incredible", "Mike Douglas Show", "Good
Morning America", "Richard Simmons", and "The Home Show." Mr. Fraser holds a
Bachelors Degree from Dartmouth College and is a member of the Director's &
Writer's Guilds.
Acquisition of Half Day Video
On March 8, 2001, we completed the acquisition of Half Day Video, Inc.
Half Day is located in Burbank, California and specializes in supporting the
entertainment industry with television and film equipment rentals. Half Day's
client list includes The Academy Awards, Emmy Awards, NBC, Entertainment
Tonight, MTV, General Hospital and other major entertainment and production
companies. Half Day has approximately $847,000 in assets with current revenues
of $609,000. Half Day leases its offices and warehouse facility in Burbank and
will continue to operate and service its clients using its current employees.
Competition
Film Entertainment Overview
Competition in the film entertainment business is diverse and
fragmented, with scores of companies operating at various levels of product
budget and scope. The market is dominated by large Hollywood studios usually
commanding 15 to 20 percent of the domestic market share in any given year.
19
Valencia Entertainment will succeed by choosing its projects and
markets carefully, and by selecting segments and geographic areas in where it
can build proprietary competitive advantages.
Independent Production Companies
Consolidation through acquisition has recently reduced the number of
independent production companies in operation. However, barriers to entry remain
relatively low, and management anticipates that the segments in which it intends
to compete will remain highly competitive.
Our Competitive Position
Our operations are in competition with all aspects of the entertainment
industry, locally, nationally and worldwide.
We experience competition from three market segments:
1) Traditional television, game shows, Reality Television Drama
2) Movies for television an Theatrical Release
3) Other entertainment/media companies
20
Service Marks
We have the following service marks:
Satellite Bingo
International Class 41, production and distribution of television game
Shows, granted Registration Number 1,473,709 on January 19, 1988 to Satellite
Bingo, Inc. for 20 years.
"Hangin With The Boyz"
International Class 25, Clothing, and 41, production and distribution
of television game shows, application filed on March 1, 2000, Serial NO.
75/932,583.
"Who Can You Trust?"
International Class 41, production and distribution of television game
shows, Serial NO. 75/485225, granted on March 9, 1999 for 20 years.
"Fuhgetabowtit"
International Class 41, production and distribution of television game
shows, Serial NO. 75/784,763, application filed on August 26, 1999.
Globalot Bingo
International Class 41, production and distribution of television game
shows, applied for on September 24, 1993, by SBI Communications, Inc.
Rico Bingo
International Class 41, production and distribution of television game
shows, applied for on September 24, 1993, by SBI Communications, Inc.
C-Note
International Class 41, production and distribution of television game
shows, applied for on September 24, 1993, by SBI Communications, Inc.
"The Works"
We obtained an assignment to copyrights for "the Works," copyright
registrations for Globalot Bingo and derivatives: Number PAU 855-931 (June 10,
1986); Number Pau 847-876 (March 11, 1986); Number PAU 788-031 (September 19,
1985); Number PAU 927-410 (November 4, 1986); Number PA 370-721 (February 9,
1988); Number PA 516-494 (January 17, 1991); Number PA 533-697 (January
17,1991); from Satellite Bingo, Inc., to SBI Communications, Inc., dated
September 14, 1993.
21
"The Final Round-The Gabriel Ruelas Story"
We applied for registration of copyright of "The Final Round-The
Gabriel Ruelas Story" on December 2, 2000.
"The Life"
We obtained an assignment of copyright of "The Life", Txu 744-678, June
12, 1996.
"PCH"
We obtained a copyright by assignment of "PCH" Pau 2-040-426, September
12, 1995.
Employees
As of June 1, 2001, we had 15 permanent employees, including two
officers. We also retain the services of property managers who oversee the
facility maintenance and grounds in Alabama. None of our employees are
represented by a labor union or are subject to a collective bargaining
agreement.
LEGAL PROCEEDINGS
From time to time we are subject to litigation incidental to our business
including possible product liability claims. Such claims, if successful, could
exceed applicable insurance coverage. We are not currently a party to any legal
proceedings that we consider to be material.
22
DESCRITPION OF PROPERTY
Our corporate offices are located at 26030 Avenue Hall Studio #5,
Valencia, California. We control nine acres of land in Valencia, California. The
premises are comprised of eight production sound stages and consist of
approximately 300,000 square feet for which 220,000 are owned and the balance
are leased. Offices occupy 60,000 square feet. The balance of the property
consists of loading docks, outdoor sets and 450 parking spaces.
The Company owns a facility in Piedmont, Alabama, which it has owned
since December 16, 1994. The facility is comprised of 80,000 square feet of
usable space under roof, and includes merchandise and auto auction, Restaurant
and other leased area. The facility has been renovated for four lane auto
auctions and the company conducts merchandise and auto auctions, and operates a
restaurant. The First Call System has leased part of the facility.
23
HOW TO OBTAIN MORE INFORMATION ABOUT VALCOM, INC.
We are subject to the informational requirements of the Securities
Exchange Act of 1934, and in accordance therewith file reports, proxy or
information statements and other information with the Securities and Exchange
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
as well as at the following regional offices: Seven World Trade Center, New
York, New York 10048, and Citicorp Center, 500 W. Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C.20549, at prescribed rates. In addition, the Commission
maintains a web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of the Commission's web site is http://www.sec.gov.
We have filed with the Commission, a registration statement on Form SB-2
under the Securities Act of 1933 with respect to the shares of common stock
being offered by its selling shareholders. As permitted by the rules and
regulations of the Commission, this prospectus does not contain all the
information set forth in the registration statement and the exhibits and
schedules thereto. For further information with respect to our common stock
offered by the selling shareholders, reference is made to the registration
statement, and such exhibits and schedules. A copy of the registration
statement, and the exhibits and schedules thereto, may be inspected without
charge at the public reference facilities maintained by the Commission at the
addresses set forth above, and copies of all or any part of the registration
statement may be obtained from such offices upon payment of the fees prescribed
by the Commission. In addition, the registration statement may be accessed at
the Commission's web site. Statements contained in this prospectus as to the
contents of any contract or other document are not necessarily complete and, in
each instance, reference is made to the copy of such contract or document filed
as an exhibit to the registration statement, each such statement being qualified
in all respects by such reference.
24
MANAGEMENT
Executive Officers, Directors, And Key Employees
The executive officers, directors and key employees of our company and
their ages and positions with us as of June 1, 2001 are as follows:
NAME AGE POSITION/TERM
- ---- --- -------------
Vince Vellardita 42 Chief Executive Officer, President and Chairman, since 2000
Stephen A. Weber 52 Director, since 2001
Ronald Foster 59 Secretary Vice President and Director, since 1986
David Weiner 41 Director, since 2001
All directors will serve on the board until our next annual meeting of
the shareholders, or until their successors have been duly elected and qualified
Background of Directors & Officers
Vince Vellardita is currently President, Chief Executive Officer and
Chairman of the Board of ValCom, Inc. Mr. Vellardita was instrumental in having
Valencia Entertainment acquire a 180,000 square feet production facility in
Valencia, California that houses eight film and production sound stages that
have been occupied for the past four years by the hit CBS series "JAG" and Fox's
"Power Rangers." Mr. Vellardita began his career in 1977 as a music producer and
promoter of live shows and is credited with bringing Duran/Duran and U2 to North
America for their first US tours. He also produced a benefit tour for the 1980
Presidential campaign of John Anderson. Mr. Vellardita is a 25-year veteran
production executive with a successful track record that extends throughout many
arms of the Entertainment Industry. While in Nashville, Mr. Vellardita was
responsible for the turn around of a small production house for music into a
television satellite network, housing multiple sound-stages and edit bays. Mr.
Vellardita also increased revenues by bring national accounts to this network.
Mr. Vellardita has been involved in over 10,000 episodes of television and 100
films. After Mr. Vellardita's success in Nashville, he moved to Los Angeles
focusing on film and television where he developed independent production
studios. Mr. Vellardita handled everything from the coordination of sales and
contracts negotiations, to the launching of marketing strategies to lure some of
the biggest names in the television community. These include Paramount, Warner
Brothers, and Disney. Mr. Vellardita does not currently serve as a director of
any other reporting company.
Ron Foster has served as our Chief Executive Officer, President and
Chairman of the Board from 1986 to October 2000. Mr. Foster is presently Vice
President and a Director of ValCom. Mr. Foster has been working with us since
our inception in 1984. Mr. Foster's primary responsibilities include finance,
marketing and technical review. In addition to his responsibilities with ValCom,
Mr. Foster has held a number of other management positions over the years. From
1984 to 1986, he was executive vice president and producer of Pioneer Games of
American Satellite Bingo, in Albany, Georgia. Mr. Foster was also the owner and
operator of Artist Management & Promotions where he was responsible for
coordinating television entertainers, sports figures and other celebrities for
25
department store promotions. Previously, Mr. Foster has served as president and
director of Ed-Phills, Inc., a Nevada corporation, and executive vice president
and member of the Board of Directors of Golden American Network, a California
corporation. From 1984 to 1994, he has also been the president and chief
executive officer of ROPA Communications, Inc., which owned and operated
WTAU-TV-19 in Albany, Georgia. He created and produced "Stock Outlook 87, 88,
and 89," a video presentation of public companies through Financial News Network
(FNN), a national cable network. Mr. Foster also has experience as a technical
director and associate producer for numerous national live sports broadcasts
produced by ABC, CBS and WTBS. Mr. Foster is Director/Producer/Writer of the
Company Interactive Broadcast Programs.
David Weiner received his MBA degree from U.C.L.A. and gained a wide
variety of business experiences early in his career working in the investment
banking and pension fund management arena. He joined the consulting group of
Deloitte and Touche in 1988, where he provided general and corporate finance
consulting services to a wide variety of entertainment, telecommunications, and
direct response clients including K-tel, International, Inc. Mr. Weiner joined
K-tel in 1993, as Vice President of Corporate Development and was appointed
President in September of 1996. His responsibilities included directing all
United States operations of the company as well as its wholly owned subsidiaries
in the United Kingdom, Germany and Finland. Mr. Weiner resigned as President of
K-tel in 1998 to form W-Net, Inc., an Internet and software development and
consulting firm.
Stephen A Weber has over 20 years of background in Finance and
Management and is a certified public accountant. Prior to joining us, Mr. Weber
was the co-founder and President of a publicly traded marketing company that had
annual revenues of $60 million. Mr. Weber was instrumental in negotiating the
sale of the company to a NYSE corporation. Prior to joining ValCom, Mr. Weber,
was a practicing CPA for 13 years, where he was the managing partner for a
regional audit firm. Currently, in addition to his duties at ValCom, Mr. Weber
also consults for a publicly traded Internet company, Genesis Entermedia.com,
Inc. where he sits on the Board of Director and is Chairman of the Audit
Committee.
Meetings of the Board of Directors
Each director is elected to serve for a term of one year until the next
annual meeting of shareholders or until a successor is duly elected and
qualified. There are no family relationships among directors or persons
nominated or chosen by us to become a director. The present term of office of
each director will expire at the next annual meeting of shareholders.
During the fiscal year ended December 31, 2000, the Board of Directors
held 42 meetings of which no director attended fewer than 75% of the total
number of meetings. Outside directors received no cash compensation for their
services, however they were reimbursed for their expenses associated with
attendance at meetings or otherwise incurred in connection with the discharge of
their duties as our directors. None of our officers receives any additional
compensation for his services as a director, and we do not contribute to any
retirement, pension, or profit sharing plans covering our directors.
26
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation we paid to our Chief Executive Officer and our other executive
officers whose income exceeded $100,000 for our last three fiscal years (the
"Named Officers").
Summary compensation table
Annual Compensation Long-Term Compensation Awards
Awards Payouts
Restricted
Securities Shares or
Salary Bonus Other Annual Under Options Restricted Share LTIP All Other
Name and Principal Compensation Granted Units Payouts Compensation
Position Year ($) ($) ($) # ($) ($) ($)
- -------------------------- ------- ---------- ---------- ---------------- ---------------- ------------------ ---------- -----------
Vince Vellardita, 2000 120,000 Nil Nil Nil Nil Nil Nil
CEO
- -------------------------- ------- ---------- ---------- ---------------- ---------------- ------------------ ---------- -----------
Ronald Foster, 2000 120,000 Nil Nil Nil Nil Nil Nil
Vice President
- -------------------------- ------- ---------- ---------- ---------------- ---------------- ------------------ ---------- -----------
Ronal Foster, 1999 120,000 $$$ $$$ Nil Nil Nil Nil
CEO
- -------------------------- ------- ---------- ---------- ---------------- ---------------- ------------------ ---------- -----------
Aggregate Options Exercised During the Most Recently Completed
Financial Year and Financial Year-End Option Values. The following table sets
out certain information relating to options exercised by the Named Officer
during the most recent financial year and the value of unexercised in-the-money
options held by such person as of December 31, 2000:
============================ =============== ================== =========================== ================================
Securities Aggregate Value Unexercised Options at Value of Unexercised
Acquired on FY-End in-the-Money Options at FY-End
Exercise Realized (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
Vince Vellardita, Nil Nil Nil Nil
CEO
Ronald Foster, Nil Nil Nil Nil
Vice President
- ---------------------------- --------------- ------------------ --------------------------- --------------------------------
Options Granted During Most Recent Financial Year. The following table sets out
certain information relating to options granted during the most recent financial
year to the Named Executive Officers.
========================== ============== =================== ================= ============================= ==============
Name Securities % of Total Exercise Per Market Value of Securities Expiration
Under Options Granted Underlying Options on the
Options to Employees in Security Date of the Grant
Granted Financial Year ($/Security) ($/Security) Date
- -------------------------- -------------- ------------------- ----------------- ----------------------------- --------------
Vince Vellardita, Nil Nil Nil Nil Nil
CEO
Ronald Foster, Nil Nil Nil Nil Nil
Vice President
========================== ============== =================== ================= ============================= ==============
27
Compensation of Directors
Outside directors received no cash compensation for their services,
however they were reimbursed for their expenses associated with attendance at
meetings or otherwise incurred in connection with the discharge of their duties
as our directors. None of our officers receives any additional compensation for
his services as a director, and we do not contribute to any retirement, pension,
or profit sharing plans covering our directors.
28
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of our
voting securities as of the June 1, by: o each person known by us to
beneficially own 5% or more of the outstanding shares of our voting securities o
each of our directors o our named executive officers o all directors and
executive officers as a group.
As of June 1, 2001, there were 93,311,507 shares of common stock issued and
outstanding. The information set forth in the table and accompanying footnotes
has been furnished by the named beneficial owners.
Number of Shares
Title of Class Identity of Person or Group Beneficially Owned(1) Percent of Class
-------------- --------------------------- --------------------- ----------------
Ronald Foster 4,154,118 4.5%
Common Shares 103 Firetower Road
Leesburg, Georgia 31763
Vince Vellardita 18,077,491 19.4%
Common Shares 26030 Avenue Hall
Valencia, California 91355
E-Blaster International 30,000,000 32.2%
Common Shares JL H,R, Rasuna Said Kav.
B-1 6th Flr.
Jakarta, 12920
Indonesia
Radorm Technology Limited 5,678,247 6.1%
Common Shares Jakarta, 12920
Indonesia
Great Asian Holdings Limit 21,104,227 22.6%
Common Shares Jakarta, 12920
Indonesia
Common Shares All Officers and Directors as a 22,632,109 24.3%
Group (4 persons)
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Unissued common shares
subject to options, warrants or other convertible securities currently
exercisable or convertible, or exercisable or convertible within 60
days, are deemed outstanding for the purpose of computing the
beneficial ownership of common shares of the person holding such
convertible security but are not deemed outstanding for computing the
beneficial ownership of common shares of any other person.
We do not know of any arrangements, the operation of which may, at a
subsequent date, result in a change in control of ValCom.
29
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of (i) 100,000,000 shares of
common stock, par value $.001 per share, of which 93,311,506 shares were issued
and outstanding as of the date hereof, and 10,000,000 shares of "blank check"
preferred stock, of which 1,543,000 shares of preferred issued and outstanding
as of June 1, 2001.
Common Stock
The holders of common stock are entitled to one vote for each share
held of record on all matters to be voted on by the shareholders. The holders of
common stock are entitled to receive dividends ratably, when, as and if declared
by the Board of Directors, out of funds legally available therefor. In the event
of a liquidation, dissolution or winding-up of ValCom, the holders of common
stock are entitled to share equally and ratably in all assets remaining
available for distribution after payment of liabilities and after provision is
made for each class of stock, if any, having preference over the common stock.
The holders of shares of common stock, as such, have no conversion,
preemptive, or other subscription rights and there are no redemption provisions
applicable to the common stock. All of the outstanding shares of common stock
are, and the shares of common stock offered by the selling stockholders hereby,
when issued against the consideration set forth in this prospectus, will be,
validly issued, fully-paid and non-assessable.
Preferred Stock
General. Under our articles of incorporation, our board of directors
is authorized, subject to any limitations prescribed by the laws of the
Delaware, but without further action by our shareholders, to provide for the
issuance of up to 10,000,000 shares of preferred stock in one or more series, to
establish from time to time the number of shares to be included in each such
series, to fix the designations, powers, preferences and rights of the shares of
each such series and any qualifications, limitations or restrictions thereof,
and to increase or decrease the number of shares of any such series (but not
below the number of shares of such series then outstanding) without any further
vote or action by the stockholders. Our board of directors may authorize and
issue preferred stock with voting or conversion rights that could adversely
affect the voting power or other rights of the holders of common stock. The
issuance of preferred stock, for example in connection with a shareholder
right's plan, could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from acquiring, a majority of
our outstanding stock.
Outstanding Warrants
As of June 1, 2001, there were 545, 454 warrants to purchase shares of
our common stock at exercise price of $.548.
Transfer Agent And Registrar
Corporate Stock Transfer, 3200 Cherry Creek Drive, South; Suite 430,
Denver Colorado 80209, acts as transfer agent and registrar for our common and
preferred stock.
30
SELLING STOCKSTOCKHOLDERS
The table below sets forth information concerning the resale of the
shares of common stock by the selling stockholders. We will not receive any
proceeds from the resale of the common stock by the selling stockholders. We
will receive proceeds from the exercise of the warrants. Assuming all the shares
registered below are sold by the selling stockholders, none of the selling
stockholders will continue to own any shares of our common stock.
The following table also sets forth the name of each person who is
offering the resale of shares of common stock by this prospectus, the number of
shares of common stock beneficially owned by each person, the number of shares
of common stock that may be sold in this offering and the number of shares of
common stock each person will own after the offering, assuming they sell all of
the shares offered.
Shares Beneficially Owned Shares Beneficially Owned
Prior to the Offering After the Offering
Total
Name Number Percent Shares Number Percent
Registered (1)
Laurus Master Fund, Ltd. 3,079,237(2) 3.4% 6,626,534 0 0%
The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholder has sole or shared voting power or investment power and
also any shares which the selling stockholder has the right to acquire within 60
days. The actual number of shares of common stock issuable upon the conversion
of the convertible preferred stock is subject to adjustment depending on, among
other factors, the future market price of the common stock, and could be
materially less or more than the number estimated in the table.
(1) Represents 240% of the shares of common stock issuable upon conversion
of notes and all of the shares issuable upon the exercise of warrants
of the selling shareholder. Because the number of shares of common
stock issuable upon conversion of the note is dependent in part upon
the market price of the common stock prior to a conversion, the actual
number of shares of common stock that will be issued upon conversion
will fluctuate daily and cannot be determined at this time. However the
selling shareholder has contractually agreed to restrict its ability to
convert its preferred stock or exercise its warrants and receive shares
of our common stock such that the number of shares of common stock held
by it and its affiliates after such conversion or exercise does not
exceed 4.99% of the then issued and outstanding shares of common stock.
(2) Includes 545,454 shares underlying warrants that are currently
exercisable at an exercise price of $.548 per share. In accordance with
Rule 13d-3 under the Securities Exchange Act of 1934, Laurus Capital
Management, L.L.C. may be deemed a control person of the shares owned
by such entity. David Grin and Eugene Grin are the principals of Laurus
Capital Management, L.L.C.
31
PLAN OF DISTRIBUTION
The selling stockholders may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market, or trading facility
on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. There is no assurance that the selling stockholders
will sell any or all of the common stock in this offering. The selling
stockholders may use any one or more of the following methods when selling
shares:
o Ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers.
o Block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction.
o An exchange distribution following the rules of the applicable exchange
o Privately negotiated transactions
o Short sales or sales of shares not previously owned by the seller
o A combination of any such methods of sale any other lawful method
The selling stockholders may also engage in:
o Short selling against the box, which is making a short sale when the
seller already owns the shares.
o Other transactions in our securities or in derivatives of our
securities and the subsequent sale or delivery of shares by
the stockholder.
o Pledging shares to their brokers under the margin provisions
of customer agreements. If a selling stockholder defaults on a
margin loan, the broker may, from time to time, offer to sell
the pledged shares.
Broker-dealers engaged by the selling stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from selling stockholders in amounts to be negotiated.
If any broker-dealer acts as agent for the purchaser of shares, the
broker-dealer may receive commission from the purchaser in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be considered to be "underwriters" within the
meaning of the Securities Act for such sales. An underwriter is a person who has
purchased shares from an issuer with a view towards distributing the shares to
the public. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may be
considered to be underwriting commissions or discounts under the Securities Act.
32
Because the selling shareholders are deemed "underwriters" within the
meaning of Section 2(11) of the Securities Act, they will be subject to the
prospectus delivery requirements.
We are required to pay all fees and expenses incident to the
registration of the shares in this offering. However, we will not pay any
commissions or any other fees in connection with the resale of the common stock
in this offering. We have agreed to indemnify the selling shareholders and their
officers, directors, employees and agents, and each person who controls any
selling shareholder, in certain circumstances against certain liabilities,
including liabilities arising under the Securities Act. Each selling shareholder
has agreed to indemnify us and our directors and officers in certain
circumstances against certain liabilities, including liabilities arising under
the Securities Act.
If the selling stockholder notifies us that they have a
material arrangement with a broker-dealer for the resale of the common stock,
then we would be required to amend the registration statement of which this
prospectus is a part, and file a prospectus supplement to describe the
agreements between the selling stockholder and the broker-dealer.
33
SHARES ELIGIBLE FOR FUTURE SALE
Shares Outstanding and Freely Tradable After Offering. Upon completion
of this offering, we will have approximately 99,938,041 shares of common stock
outstanding. The shares to be sold by the selling stockholders in this offering
will be freely tradable without restriction or limitation under the Securities
Act, except for any such shares held by "affiliates" of Globus, as such term is
defined under Rule 144 of the Securities Act, which shares will be subject to
the resale limitations under Rule 144.
Rule 144. In general, under Rule 144, as currently in effect, a person
(or persons whose shares are aggregated) who has beneficially owned shares for
at least one year, including an affiliate of us, would be entitled to sell,
within any three-month period, that number of shares that does not exceed the
greater of 1% of the then-outstanding shares of common stock (approximately
999,380 shares after this offering) or the average weekly trading volume in the
common stock during the four calendar weeks immediately preceding the date on
which the notice of sale is filed with the Commission, provided certain manner
of sale and notice requirements and requirements as to the availability of
current public information about us is satisfied. In addition, affiliates of
ours must comply with the restrictions and requirements of Rule 144, other than
the one-year holding period requirement, in order to sell shares of common
stock. As defined in Rule 144, an "affiliate" of an issuer is a person who,
directly or indirectly, through the use of one or more intermediaries controls,
or is controlled by, or is under common control with, such issuer. Under Rule
144(k), a holder of "restricted securities" who is not deemed an affiliate of
the issuer and who has beneficially owned shares for at least two years would be
entitled to sell shares under Rule 144(k) without regard to the limitations
described above.
Effect of Substantial Sales on Market Price of Common Stock. We are
unable to estimate the number of shares that may be sold in the future by our
existing shareholders or the effect, if any, that such sales will have on the
market price of the common stock prevailing from time to time. Sales of
substantial amounts of common stock, or the prospect of such sales, could
adversely affect the market price of the common stock.
34
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon
for ValCom by Sichenzia, Ross, Friedman & Ference LLP, New York, New York.
EXPERTS
Our financial statements as at December 31, 2000 and for the years
ended December 31, 2000 and 1999 have been included in this prospectus in
reliance on the report of Jay J. Shapiro, Certified Public Accountant, as given
upon the authority of said firm as experts in accounting and auditing.
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
In March 20, 2000, Daniel Ratliff and Company, independent certified
public accountants, engaged as the principal accountant to audit the prior
financial statements of the company, resigned. The resignation resulted from the
company moving its corporate offices to the west coast in Glendale, California
and the conclusion that the Company would be better served through the
engagement of a local Certified Public Accounting firm. The Company elected to
utilize the services of Jay J. Shapiro, CPA of Encino, California.
The decision to change accountants was approved by the Board of
Directors of the company. There have been no disagreements with the former
accountant on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of the former accountant, would have cause it
to make reference to the subject matter of the disagreements in connection with
its report for 1998 and 1999. The Company has filed with the Securities and
Exchange Commission an 8-K dated March 29, 2000 disclosing this action. The
Company has requested that the former accountants furnish them with letter
stating whether they agree with the statements made by the registrant, and, if
not, stating the respects in which they do not agree as indicated in Item 4. A
copy of this letter was filed by Exhibit with an 8-K.
35
Financial Statements
--------------------
The audited consolidated balance sheet of the Company for its years ended
December 31, 2000 and audited 1999 and the related consolidated statements of
operations, stockholder's equity and cash flows are submitted herewith.
CONTENTS OF REPORT
- -------------------------------------------------------------------------------
Consolidated Independent Auditor's Report F-1
Consolidated Balance Sheet F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Cash Flow F-4
Consolidated statements of Stockholders Equity F-6
Notes to Consolidated Financial Statements F-7/F-16
To the Board of Directors
ValCom, Inc.:
We have audited the accompanying consolidated balance sheets of ValCom, Inc. and
subsidiaries (the "Company") as of December 31, 2000 and 1999, and the related
consolidated statements of operations, stockholders' equity restated and cash
flows for each of the years ended December 31, 2000. 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 consolidated financial position of the Company as of
December 31, 2000 and 1999, and the consolidated 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
April 4, 2001
F-1
VALCOM, INC AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
DECEMBER 31
-----------
2000 1999
---- ----
Cash ............................................................... $ 7,787 $ 2,278,694
Accounts receivable ................................................ 74,455 106,812
Mortgage escrow holdback ........................................... -0- 327,900
Other receivables .................................................. 52,634 -0-
Prepaid expenses ................................................... 11,569 -0-
Property held for sale ............................................. 3,940,000 -0-
----------- -----------
Total Current Assets ............................................... $ 4,086,445 $ 2,713,406
----------- -----------
Fixed Assets - net ................................................. $11,681,381 15,700,154
Production costs ................................................... 110,201 28,000
Prepaid loan fees .................................................. 100,501 111,668
Deposits ........................................................... 30,000 -0-
----------- -----------
Total Assets ....................................................... $16,008,528 $18,553,228
=========== ===========
See accompanying notes to consolidated financial statements
F-2
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accrued wages due stockholder ....................... $ 670,000 $ 550,000
Advances due stockholder ............................ 200,508 95,136
Loan payable affiliate .............................. 150,000 -0-
Accrued interest payable ............................ 325,010 199,000
Other current liabilities ........................... 42,461 -0-
Credit line payable ................................. 110,000 -0-
Notes payable -- current portion .................... 1,289,586 1,489,717
Accounts payable .................................... $ 297,285 172,181
------------ ------------
3,084,850 2,506,034
Total Payable ....................................... 5,902,919 5,916,464
------------ ------------
Total Liabilities ................................... $ 8,987,769 $ 8,422,498
============ ============
Commitments and contingencies (Note 5)
Stockholders' equity:
Preferred stock, par value $0.001; 10,000,000 shares
authorized: 1,543,000 and 1,653,000 shares issued and
outstanding at December 31, 2000 and December 31,
1999, respectively .................................. 1,543 1,653
Common stock, par value $.001; 100,000,000 shares
authorized; 90,139,843 and 9,693,878
shares issued and outstanding
at December 31, 2000 and 1999 respectively .......... 90,140 9,694
Additional Paid in capital .......................... 8,101,157 9,399,742
Retained Earnings (deficit) ......................... (1,172,081) 719,641
------------ ------------
7,020,759 10,130,730
------------ ------------
$ 16,008,528 $ 18,553,228
============ ============
See accompanying notes to consolidated financial statements
F-3
VALCOM, INC. AND SUBSIDIARIES
-------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
-------------------------------------
[CAPTION]
December 31,
2000 1999
----- -----
Revenue
Rental ....................... $ 1,328,782 $ 1,214,171
Production ................... 37,500 260,000
Other ........................ 28,791 -0-
------------ ------------
$ 1,395,073 $ 1,474,171
Cost and Expenses:
Production ................... 273,217 83,049
Selling and promotion ........ 104,176 89,017
Depreciation ................. 271,714 135,376
Administrative and general ... 1,786,610 603,275
------------ ------------
$ 2,435,717 $ 910,717
------------ ------------
Operating income (loss) ......... (1,040,644) 563,454
Interest Expense ................ (851,078) (451,588)
------------ ------------
Net Income (loss) ............... ($ 1,891,722) $ 111,866
Basic net income (loss) per share ($ .06) ($ .01)
============ ============
Weighted number of shares ....... 29,805,000 9,900,000
------------ ------------
See accompanying notes to consolidated financial statements
F-4
VALCOM, INC. AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOW
------------------------------------
[CAPTION]
December 31
-----------
2000 1999
---- ----
Operating Activities:
Net Income (Loss) ............................... ($1,892,722) $ 111,866
Items Not Requiring Cash:
Depreciation and amortization ............... 271,714 135,376
Stock issued for services ................... 628,915 -0-
Other ....................................... 2,167 -0-
----------- -----------
($ 988,926) $ 247,242
----------- -----------
Changes in:
Receivables ................................. 307,623 (58,686)
Other assets ................................ (101,034) (21,830)
Accounts payable and other accrued expenses . 403,575 -0-
Loans payable ............................... 110,000 -0-
Due to stockholder .......................... 265,372 20,000
----------- -----------
$ 985,536 $ 290,756
=========== ===========
Cash Provided (used) by Operations .............. (33,390) 537,998
Investing Activities:
Acquisition of fixed assets ................. (192,941) (39,531)
----------- -----------
Cash Used by Investing Activities ........... (192,942) (39,531)
Financing Activities:
Principal amount on notes payable ........... (213,676) -0-
Principal payments on former mortgage ....... -0- (152,000)
Repayment of former mortgage ................ -0- (3,261,165)
Proceeds from mortgage refinancing .......... -0- 5,664,997
Withdrawal of capital contributions ......... (2,000,000) (480,440)
Issuance of stock ........................... 169,100 -0-
----------- -----------
Cash Provided (Used) by Financial Activities (2,044,576) 1,771,392
----------- -----------
Increase (Decrease) in Cash and Cash Equivalents (2,270,907) 2,269,859
Cash and cash equivalents, beginning of year (2,278,694) 8,835
----------- -----------
Cash and cash equivalents, end of year ...... $ 7,787 $ 2,278,694
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid ............................... $ 651,078 $ 299,000
=========== ===========
Income taxes paid ........................... $ 800 $ 800
=========== ===========
See accompanying notes to consolidated financial statements
F-5
VALCOM, INC. AND SUBSIDIARY
---------------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
-----------------------------------------------
YEAR ENDED DECEMBER 31, 2000 AND 1999
---------------------------------------
Additional
Common Preferred Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
Balance
January 1
1999 11,140,878 $ 11,141 1,693,000 $ 1,653 $ 11,825,094 (9,751,767)
Cancellation
Common Stock ....... (1,447,000) (1,447) (88,991)
Recapitalization of
VEI ................ (2,336,361) 10,359,542
Net Income .........
for 1999 ........... 111,866
Balance
Dec.31, 1999 ....... 9,693,878 9,694 1,653,000 1,653 (9,399,742) 719,641
Shares issued
for services ....... 2,736,000 2,736 616,515 (458,250)
Shares issued
for assets ......... 100,000 100 12,400
Shares issued
for cash ........... 900,000 900 169,100
Conversion
of preferred ....... 1,100,000 1,100 (110,000) (110) (900)
Withdrawal of
capital contribution (2,000,000)
Retirement upon
merger ............. (100,000) (100) (19,900)
Acquisition of
VEI ................ 75,709,965 75,710 (75,710)
Net loss
for 2000 ........... (1,433,472)
------------ ------------ ------------ ------------ ------------ ------------
Balance
December
31, 2000 ........... 90,139,843 $ 90,140 1,543,000 $ 1,543 $ 8,101,157 ($ 1,172,081)
============ ============ ============ ============ ============ ============
See accompanying notes to consolidated financial statements
F-6
VALCOM, INC. AND SUBSIDIARIES
----------------------------------------
NOTES TO CONSOLIDATED 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
- ------------
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 and
four wholly-owned subsidiaries of which only SBI Communications, Inc. - Alabama
has activity during the two-year period ended 12/31/00. These financial
statements include all activities as if the acquisition occurred on January 1,
1999.
F-7
ValCom, Inc.
------------
Notes to Consolidated Financial Statements
--------------------------------------------
December 31, 2000 and 1999
---------------------------
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.
F-8
ValCom, Inc.
--------------
Notes to Consolidated Financial Statements
--------------------------------------------
December 31, 2000 and 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:
Building 39 years
Building Improvements 39 years
Office Furniture and 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
($200,508 at 12/31/00). In addition to advances, the Company accrued salaries
payable to the shareholder totaling $120,000 and $130,000 for the years ended
December 2000 and 1999, respectively. All amounts owed to the shareholders are
payable on demand.
F-9
7 ValCom, Inc.
-------------
Notes to Consolidated Financial Statements
--------------------------------------------
December 31, 2000 and 1999
----------------------------
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 and additional disclosures are provided in Note 7.
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 at December 31, consists of the following:
2000 1999
[CAPTION] ------ ------
Land $7,392,292 $8,224,792
Building $4,028,785 $7,136,285
Building Improvements $1,240,070 $1,065,179
Office Furniture and equipment $ 39,500 $ 21,450
------------ -----------
$12,700,647 $16,447,706
Less: Accumulated depreciation ( 1,019,266) ( 747,552)
------------ -------------
Net Book Value $11,681,381 $15,700,154
============ =============
F-10
VALCOM, INC AND SUBSIDIARIES
----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
December 31, 2000 and 1999
---------------------------
NOTE 3 Notes Payable
- ---------------------
The following is a summary of the Company's Notes Payable at year end.
December 31,
-------------
2000 1999
----- ------
Promissory note payable to First
Fidelity Investment and Loan due
in monthly installments of principal
and interest of $54,648 at 10.03%
per annum. The rate is variable
dependent on the 6 month US T-Bill
rate. The note is secured by a
deed of Trust on the Valencia
Studio property. The note
matures December 2009. $5,961,324 $6,000,000
Promissory note payable to private
lender due with interest at 12% per
annum and was due July, 1999. The
note is secured by a Deed of Trust
on the Piedmont property and is
presently delinquent. $1,050,000 $1,050,000
Various other loans, short-term, 8.00%
- -11.00% Interest 181,181 356,181
--------------- -------------
Total $7,192,505 7,406.181
Less: Current Maturities 1,289,586 1,489,717
-------------- ---------------
Notes Payable $5,902,919 $5,916,464
=============== ==============
Maturities on the notes are as follows:
2001 $1,289,586
2002 64,521
2003 71,277
2004 78,740
2005 86,986
Thereafter $5,601,396
-------------
$7,192,505
=============
The Company's average short-term weighted interest rate is 10% and 9%
respectively for 2000 and 1999.
F-11
VALCOM, INC. AND SUBSIDIARY
---------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
December 31, 2000 and 1999
----------------------------
NOTE 4 Income Taxes
- ---------------------
Deferred income tax assets and liabilities are summarized as follows at December
31,2000:
Deferred tax assets attributable to
operating loss carry forwards $4,300,000
Valuation allowance due to uncertainty
surrounding realization of operating
loss carry forwards ($ 4,300,000)
------------
Total deferred taxes $ 0
============
The Company has available at December 31, 2000, unused operating loss carry
forwards, which may be applied against future taxable income, that expire as
follows:
Amount of Unused Expiration During
Operating Loss Year Ended
Carry Forwards December 31
--------------- ----------------
$ 200,000 2001
$ 550,000 2002
$ 1,200,000 2003
$ 300,000 2004
$ 490,000 2007
$ 340,000 2008
$ 320,000 2009
$ 650,000 2010
$ 1,050,000 2011
$ 700,000 2012
$ 3,836,000 2013
$ 289,000 2014
$ 1,892,000 2015
-------------
$11,817,000
-------------
F-12
VALCOM, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
December 31, 2000 and 1999
----------------------------
NOTE 5 Commitments
- ------------------
In May 2000 the Company leased additional facilities adjacent to its location in
Valencia. The lease has a term of five years. Initial monthly base rent is
$29,000 with annual increases until 2004 when base rent will be $34,585. During
fiscal 2000, the Company recognized $173,650 rent expense.
The Company has various employment agreements with certain officers,
shareholders and key employees which expire beginning in 2002. These agreements
provide for compensation aggregating $300,000 per annum.
NOTE 6 Net Loss Per Share
- -------------------------
The Company's net loss per share was calculated using weighted average shares
outstanding for 2000 and 1999, respectively. Although convertible preferred
stock is a common stock equivalent, with a conversion rate of 5 shares of common
stock for each share of preferred stock conversion has not been included in the
calculation of earnings per share as it would be antidilutive.
NOTE 7 Stockholders' Equity
- ---------------------------
In December 1999, the Company place a stop order on 1,447,000 shares of common
stock for non-performance under contract.
In January 2000, the Company issued 200,000 shares of its common stock for cash
of $5,000 and financial marketing services with a fair value of $7,500.
In January 2000, Valencia Entertainment International, LLC distributed
$2,000,000 to its partners. This amount was accounted for as a reduction of
partners' capital.
F-13
ValCom, Inc.
-------------
Notes to Consolidated Financial Statements
-----------------------------------------
December 31, 2000 and 1999
--------------------------
NOTE 7 Stockholders' Equity (cont'd)
- -------------------------------------
In February 2000, the Company issued 400,000 shares of restricted stock for the
origination of a $150,000 loan from two parties.
In June 2000, the Company issued 100,000 shares for $25,000 cash.
In June 2000, the Company issued 100,000 shares for $20,000 cash. These shares
were sold to VEI and were therefore retired upon merger in October 2000.
In October 2000, the Company split its common stock on a 2-for-1 basis changed
par value of its preferred stock from $5.00 to $.001 per share and issued
75,709,965 post-split shares of common stock to the partners of Valencia
Entertainment International, LLC. The consolidated financial statements have
been retroactively restated for the split.
In November 2000, the Company issued 200,000 shares of restricted stock for
legal services at fair value. A price guarantee of $0.50 accompanied the
issuance.
In December 2000, the Company issued 6,000 shares of restricted stock to
employees of the Company. These shares were valued at $0.50 per share.
In December 2000, the Company issued 500,000 shares of restricted stock as
satisfaction of a debt of $250,000.
In December 2000, the Company issued 500,000 shares of restricted common stock
for cash of $125,000.
In December 2000, the Company issued 1,000,000 shares of restricted common stock
for management consulting and legal services with a fair value of $175,000.
F-14
ValCom, Inc.
--------------
Notes to Consolidated Financial Statements
---------------------------------------------
December 31, 2000 and 1999
--------------------------
NOTE 8 Segment Information
- --------------------------
The Company has two segments - studio operations and production/distribution of
television programming.
Studio Programming
------- -------------
Identifiable assets $15,898,327 $110,201
=========== =============
Revenues 1,357,573 37,500
=========== =============
Operating Profits (losses) ($804,927) ($235,717)
=========== =============
NOTE 9 Subsequent Events
- ------------------------
a) In 2001, the Company acquired 100% ownership of Half/Day Video, Inc.,
a California corporation, for 950,000 shares of ValCom, Inc. Common Stock.
If this transaction took place on January 1, 2000, the revenues, net loss
and net loss per share would be $3,395,000, ($3,644,000), and ($.12),
respectively.
b) In January 2001, the Company adopted an Employee Stock Compensation Plan.
Such plan provides for issuance of shares of common stock to compensate
employees, consultants, and other professionals engaged by the Company. The
Company issued 1,500,000 shares for services by consultants valued at $262,500.
c) The Company has listed the Piedmont Property of sale at an asking price of
$4,500,000. The net book value at 12/31/2000 as included in Note #2 is #3.9
million. Management intends on using proceed to satisfy current obligations of
approximately $2.5 million. Such obligations are also subject to negotiation.
d) 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.
F-15
VALCOM, INC. AND SUBSIDIARIES
-----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
December 31, 2000 and 1999
---------------------------
NOTE 10 Restatement of Financial Statements
- -------------------------------------------
The balance sheet and statement of stockholders' equity as of December 31, 1999
and for the 12, months then ended have been restated to reflect a reversal of
preferred stock cancellation. Originally in 1998, 1,500,000 shares of preferred
sock with a par value of $5.00 per share was issued in connection with the
purchase of the Company's building and land in Piedmont, Alabama. The preferred
shares were canceled due to non-performance under the sale contract. It now has
been determined that the cancellation should not be recorded unless or until the
preferred stock certificates are surrendered to the Company. The reversal is
necessary based on new information received by the Company.
F-16
Table Of Contents
ValCom, Inc.
INDEX
Page
FINANCIAL INFORMATION
Consolidated Financial Statements F-19
Consolidated Balance Sheets as of
December 31, 2000 and
and March 31, 2001
Consolidated Statements of Operations F-20
for the three months ended
March 31, 2000 and 2001
Consolidated Statement of Changes F-21
in Shareholders' Equity for the three
months ended March 31, 2001
Consolidated Statements of Cash Flows F-22
for the three months ended March 31,
2000 and 2001
Notes to Consolidated Financial State- F-23
ments
F-17
INDEPENDENT ACCOUNTANTS' 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
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 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
F-18
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
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
F-19
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) ($0.00)
============ ===========
Weighted number of shares 91,735,000 89,900,000
------------ -----------
See accompanying notes to consolidated financial statements
F-20
VALCOM, INC. AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOW
------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31,
--------------------------------------
(UNAUDITED)
2001 2000
---- ----
Operating Activities:
Net Income (Loss) ($ 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
F-21
VALCOM, INC. AND SUBSIDIARY
---------------------------------------
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY
-----------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2001
---------------------------------------
Additional
Common Preferred Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
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 ..... 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
F-22
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 and
four wholly-owned subsidiaries of which only SBI Communications, Inc. Alabama
has activity during the periods presented. These financial statements include
all activities as if the acquisition occurred on January 1, 1999.
F-23
ValCom, Inc.
------------
Notes to Consolidated Financial Statements
--------------------------------------------
Un-audited 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.
F-24
ValCom, Inc.
--------------
Notes to Consolidated Financial Statements
--------------------------------------------
Un-audited 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.
F-25
ValCom, Inc.
-------------
Notes to Consolidated Financial Statements
--------------------------------------------
Un-audited 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 equipmen t 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
============ ===========
F-26
VALCOM, INC AND SUBSIDIARIES
----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Un-audited March 31, 2001 And December 31, 2000
---------------------------
NOTE 3 BUSINESS ACQUSISTION
- ---------------------------
In March 2001, the company acquired 100% ownership of Half Day Video,
Inc. 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.
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.
F-27
================================================================================
6,626,534 SHARES OF
COMMON STOCK
VALCOM, INC.
-----------------
PROSPECTUS
-----------------
THE DATE OF THIS PROSPECTUS IS
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Indemnification of Directors and Officer
The corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of the state of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have the
power to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, vote of the stockholders or disinterested Directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, Officer, Employee or Agent and shall inure to
the benefit of the heirs, executors and administrators of such person.
The Board of Directors of the Company may also authorize the Company to
indemnify employees or agents of the Company, and to advance the reasonable
expenses of such persons, to the same extent, following the same determinations
and upon the same conditions as are required for the indemnification of and
advancement of expenses to directors and officers of the Company. As of the date
of this Registration Statement, the Board of Directors has not extended
indemnification rights to persons other than directors and officers.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act of 1933, as amended (the "Securities Act") and
is therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the securities offered hereby.
SEC registration fee....................... $ 500
Accountants' fees and expenses............. 20,000
Legal fees................................. 25,000
Transfer agent's and warrant agent's fees
and expenses............................. 500
----------
Total........................................... $46,000
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Description Date Shares
1/1/98-12/31/98 None
1/1/99-12/31/99 None
Stock issued for cash and services Richard Abbenante 1/12/00 200,000
Stock issued for services Douglas Scott 2/7/00 266,666
Stock issued for services Douglas Scott 2/10/00 133,334
Stock issued for services Brad Tate 3/13/00 200,000
Stock issued for services Jo Ann 3/13/00 200,000
Stock issued for services Lisa Williams 6/7/00 30,000
Stock issued for fixed asset Vince Vellardita 6/7/00 100,000
Stock issued for cash Papes Capital Services 6/15/00 200,000
Preferred shares converted Martin Nickelsen 7/15/00 100,000
Preferred shares converted Ron Foster 7/15/00 900,000
Preferred shares converted The Peter Pappas Trust 7/21/00 100,000
Stock issued for services Nimish Patel 12/12/00 20,000
Stock issued for services Andrew F. Polltet Trust 12/12/00 140,000
Stock issued for services Erick Richardson 12/12/00 40,000
Stock issued for cash Jeff Gleckman 12/15/00 500,000
Stock issued for services Beth Grover 12/18/00 250
Stock issued for services Melissa Wohl 12/18/00 250
Stock issued for services Jesus Martinez 12/18/00 500
Stock issued for services Rigoberto Bahena 12/18/00 500
Stock issued for services Lal Rati 12/18/00 500
Stock issued for services Charlotte Larsen 12/18/00 500
Stock issued for services Tracy Sciarrino 12/18/00 500
Stock issued for services Earl Kuester 12/18/00 500
Stock issued for services Linda Layton 12/18/00 500
Stock issued for services Adam Kliarsky 12/18/00 500
Stock issued for services Jeff Huntley 12/18/00 500
Stock issued for services Steve Weber 12/18/00 500
Stock issued for services James Warnock 12/18/00 500
Stock issued for debt cancellation The Peter Pappas Trust 12/19/00 500,000
Stock issued for services Todd Moore 1/26/01 250,000
Shares issued for Half Day purchase Clay Harrison 2/27/01 950,000
Shares issued to VEI upon merger Vince Vellardita 3/16/01 18,077,491
Shares issued to VEI upon merger Kristen Gleckman 3/16/01 50,000
Shares issued to VEI upon merger Steve Weber 3/16/01 500,000
Shares issued to VEI upon merger Jo-Ann Srebnik 3/16/01 100,000
Shares issued to VEI upon merger E-Blaster International Ltd. 3/16/01 30,000,000
Shares issued to VEI upon merger Random Technology Ltd. 3/16/01 5,678,247
Shares issued to VEI upon merger Great Asian Holdings Pte. Ltd. 3/16/01 21,104,227
Stock issued for debt cancellation The Scott Family Trust 3/27/01 110,548
Stock issued for debt cancellation Douglas Scott 3/27/01 221,116
Stock issued for cash Raj Mitta 3/29/01 100,000
Stock issued for cash Samin Tan 3/29/01 90,000
Stock issued for cash Manoj Kumar Samtani 3/29/01 50,000
Stock issued for cash Nalin Rathod 3/29/01 50,000
Stock issued for cash Bismarka Kurniawan 3/29/01 10,000
Stock issued for cash Arie K. Kresnadi 3/29/01 28,000
Stock issued for cash T. R. Seetharaman 3/29/01 10,000
Stock issued for cash Sanjeev Gupta 3/29/01 30,000
Stock issued for cash Vino Nasution 3/29/01 10,000
Stock issued for cash Juliandus Tobing 3/29/01 10,000
Stock issued for cash Harlin Rahardjo 3/29/01 22,000
Stock issued for services Shirley C. Nathan 3/30/01 100,000
Stock issued for investment Woody Fraser 3/30/01 250,000
Except as otherwise disclosed, each of the foregoing issuances of securities was
made in reliance on Section 4(2) of the Securities Act of 1933, as amended.
ITEM 27. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
2.1 Memorandum of Agreement for the acquisition of Half Day Video, Inc. (1)
2.2 Merger Agreement (2)
3.1 Articles of Incorporation of the Company(2)
3.2 Bylaws of the Company(3)
4.1 Convertible Note
4.2 Subscription Agreement
4.3 Warrant
5.1 Opinion of Sichenzia, Ross & Friedman, LLP
10.1 Joint Venture Agreement with Woody Fraser (2)
16.1 Letter on Change in Certifying Accountant(4)
21.1 List of Subsidiaries
23.1 Consent of Sichenzia, Ross & Friedman, LLP (included in Exhibit 5.1)
23.2 Consent of accountants
* To be filed by amendment.
(1) Incorporated by referenced to the Form 8-K filed by ValCom on April 6, 2001
(2) Incorporated by referenced to the Form 10SB File # 000-28416
(3) Incorporated by referenced to the Form 10KSB File # 000-28416
(4) Incorporated by referenced to the Form 8-K filed by ValCom on March 29, 2000
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file a post-effective amendment to this Registration Statement
during any period in which offers or sales are being made:
(i) to include any Prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually, or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) ((S)230.424(b) of this Chapter) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement of any
material change to such information in the Registration Statement.
(2) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
this offering.
(3) To provide to the Underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.
(4) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and this offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(5) That, insofar as indemnification for liabilities arising from the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(6) That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
SIGNATURES
In accordance the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirement for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Valencia, California on June 19, 2001.
VALCOM, INC.
By: /s/ Vince Vellardita
Vince Vellardita, President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933,
this registration statement has been signed below by the following persons on
behalf of the Company in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
--------- --------- ----
/s/ Vince Vellardita President, Chief Executive Officer and Chairman June 19, 2001
Vince Vellardita
/s/ Steve Weber Director June 19, 2001
Steve Weber
/s/ Ronald Foster Vice President, Secretary & Director June 19, 2001
Ronald Foster
/s/ David Weiner Director June 19, 2001
David Weiner