SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q/A
(Amendment No. 1)
X QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For Quarterly period Ended: September 30, 2008; or
----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT OF 1934
For the transition period to
--------- ----------
Commission File Number: 0-25631
-----------------------
ALPHATRADE.COM
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 98-0211652
------------------------------ ------------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
SUITE 116 - 930 West 1st Street, North Vancouver, B.C. V7P3N4 Canada
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(604 ) 986-9866
-------------------------
(Issuer's telephone number)
Indicate by check mark whether the issuer (1) filed all reports required
to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12
months (or for such shorter period that a registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer", "accelerated filer",
and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ? Accelerated filer ?
Non-accelerated filer ? Smaller reporting company |X|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No |X|
State the number of shares outstanding of the issuer's common equity:
$0.001 par value, as of September 30, 2008, was 52,056,023.
1
This Amendment No. 1 on Form 10-Q/A hereby amends the registrant's
quarterly report on Form 10-Q for the period ended September 30, 2008, which the
registrant filed with the Securities and Exchange Commission on November 14,
2008. This amendment is being filed in order to restate the registrant's
financial statements for the period ended March 31, 2008 in order to correct
certain errors in its revenue recognition related to one of its advertising
contracts.
Report on Form 10-Q/A
For the Quarter Ended September 30, 2008
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements (unaudited)...................... 3
Balance Sheets.......................................4-5
Statements of Operations ............................6-7
Statement of Stockholders' Equity (Deficit)........... 8
Statements of Cash Flows............................9-10
Notes to the Financial Statements .................11-14
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operation 15
Item 3 Quantitative and Qualitative Disclosures About
Market Risk 18
Item 4. Controls and Procedures ............................. 18
Part II. Other Information
Item 1. Legal Proceedings ................................... 18
Item 1A. Risk Factors 20
Item 2. Unregistered Sales of Equity Securities
And Use of Proceeds 20
Item 3. Defaults Upon Senior Securities ..................... 20
Item 4. Submission of Matters to a Vote of Security Holders . 20
Item 5. Other Information ................................... 20
Item 6. Exhibits..............................................21
Signatures........................................... 22
Certifications.....................................23-28
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
3
ALPHATRADE.COM
Balance Sheets
(restated)
ASSETS
------
September 30, December 31,
2008 2007
------------- --------------
(unaudited)
CURRENT ASSETS
Cash $ 355 $ 153,760
Accounts receivable 2,554 28,047
Marketable securities-available for sale 2,370,478 658,858
Marketable securities-available for sale
related party 2,093 5,232
Prepaid expenses 8,900 750
------------ -------------
Total Current Assets 2,384,380 846,647
------------ -------------
PROPERTY AND EQUIPMENT, net 50,467 45,633
------------ -------------
OTHER ASSETS
Investments, at cost 300,000 300,000
------------ -------------
TOTAL ASSETS $ 2,734,847 $ 1,192,280
============ =============
The accompanying notes are an integral part of these financial statements.
4
ALPHATARADE.COM
Balance Sheets
(restated)
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
----------------------------------------------
September 30, December 31,
2008 2007
------------- --------------
(unaudited)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 2,091,429 $ 2,404,822
Bank overdraft 16,038 -
Related party payables 2,626,573 2,190,414
Deferred revenues 214,793 1,130,178
------------ -------------
Total Current Liabilities 4,948,833 5,725,414
------------ -------------
TOTAL LIABILITIES 4,948,833 5,725,414
------------ -------------
STOCKHOLDERS' EQUITY/(DEFICIT)
Preferred shares: $0.001 par value,10,000,000
shares authorized: 2,000,000 Class A and
2,000,000 Class B shares issues and outstanding 4,000 4,000
Common shares: $0.001 par value, 100,000,000
shares authorized: 52,506,023 and 48,589,773
shares issues and outstanding, respectively 52,056 48,590
Stock subscription payable 45,080 28,500
Additional paid-in capital 33,465,069 32,719,057
Accumulated other comprehensive income (1,828,951) (1,647,531)
Accumulated deficit (33,951,240) (35,685,750)
------------ -------------
Total Stockholders' Equity/(Deficit) (2,213,986) (4,533,134)
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY/(DEFICIT) $ 2,734,847 $ 1,192,280
------------ -------------
The accompanying notes are an integral part of these financial statements.
5
ALPHATRADE.COM
Statements of Operations and Other Comprehensive Income (Loss)
(unaudited)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2008 2007 2008 2007
------------- ------------- ------------- -------------
(restated) (restated)
REVENUES
Subscription revenue $ 757,287 $ 773,818 $ 2,317,050 $ 2,298,473
Advertising revenue 1,060,491 817,523 3,528,786 1,675,992
Other revenue 49,409 19,037 144,553 53,725
------------ ------------ ------------ ------------
Total Revenues 1,867,187 1,610,378 5,990,389 4,028,190
------------ ------------ ------------ ------------
COST OF SALES
Financial content 490,615 364,973 1,431,112 1,262,087
Other cost of sales 396 1,082 2,538 3,875
------------ ------------ ------------ ------------
Total Cost of Sales 491,011 366,055 1,433,650 1,265,962
------------ ------------ ------------ ------------
GROSS PROFIT 1,376,176 1,244,323 4,556,739 2,762,228
------------ ------------ ------------ ------------
OPERATING EXPENSES
Management expense 120,000 - 360,000 240,000
Professional fees 216,500 49,609 884,488 1,111,773
Research and development 123,841 139,971 395,544 327,840
Marketing expense 146,899 1,819,988 639,822 3,276,579
General and administrative 175,398 268,242 429,825 638,067
------------ ------------ ------------ ------------
Total Operating Expenses 782,638 2,277,810 2,709,679 5,594,259
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS 593,538 (1,033,487) 1,847,060 (2,832,031)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Gain (Loss) on sale of assets (47,215) (114,771) (145,147) (48,350)
Gain on settlement of debt - - 307,974 -
Interest expense (95,206) - (275,377) -
------------ ------------ ------------ ------------
Total Other Income (Expense) (142,421) (114,771) (112,550) (48,350)
------------ ------------ ------------ ------------
NET INCOME (LOSS) BEFORE
INCOME TAXES 451,117 (1,148,258) 1,734,510 (2,880,381)
INCOME TAX EXPENSE - - - -
------------ ------------ ------------ ------------
The accompanying notes are a integral part of these financials statements.
6
ALPHATRADE.COM
Statements of Operations and Other Comprehensive Income (Loss)
(unaudited)
(continued)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2008 2007 2008 2007
------------- ------------- ------------- -------------
(restated) (restated)
NET INCOME (LOSS) $ 451,117 $ (1,148,258) $ 1,734,510 $ (2,880,381)
============ ============ ============ ============
OTHER COMPREHENSIVE INCOME (LOSS)$ (527,751) $ - $ (181,420) $ (342,452)
------------ ------------ ------------ ------------
TOTAL COMPREHENSIVE INCOME (LOSS)$ (76,634) $ (1,148,258) $ 1,553,090 $ (3,222,833)
============ ============ ============ ============
BASIC EARNINGS (LOSS) PER SHARE $ 0.01 $ (0.03) $ 0.03 $ (0.07)
============ ============ ============ ============
COMPREHENSIVE BASIC EARNINGS
(LOSS) PER SHARE $ (0.00) $ (0.03) $ 0.03 $ (0.07)
============ ============ ============ ============
FULLY DILUTED INCOME (LOSS)
PER SHARE $ 0.00 $ (0.03) $ 0.01 $ (0.07)
============ ============ ============ ============
COMPREHENSIVE FULLY DILUTED
INCOME (LOSS) PER SHARE $ (0.00) $ (0.03) $ 0.01 $ (0.07)
============ ============ ============ ============
BASIC WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 51,708,336 44,613,473 50,616,857 43,029,594
============ ============ ============ ============
FULLY DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING 118,685,186 44,613,472 117,593,707 43,029,594
============ ============ ============ ============
The accompanying notes are a integral part of these financials statements.
7
ALPHATRADE.COM
Statements of Stockholders' Equity/(Deficit)
(restated)
Preferred Stock Common Stock Additional Stock Other Total
---------------- ------------------ Paid-In Subscription Comprehensive Accumulated Stockholder's
Shares Amount Shares Amount Capital Receivable Income Deficit Equity
--------- ------ ---------- ------- ----------- ---------- ------------- ------------- -------------
Balance,
December 31, 2006 4,000,000 $4,000 40,425,027 $40,425 $30,853,661 $ (30,000) $ (717,860) $(31,111,747) $ (961,521)
Common stock issued
for cash at $0.18
per share - - 2,287,500 2,288 454,212 28,500 - - 485,000
Common stock issued
for services at
$0.20 per share - - 5,877,246 5,877 1,052,066 - - - 1,057,943
Value of stock
purchase warrants
granted - - - - 207,728 - - - 207,728
Value of stock
options issued under
the 2007 stock
option plan - - - - 131,540 - - - 131,540
Contributed capital - - - - 19,850 - - - 19,850
Amortization of
prepaid expense - - - - - 30,000 - - 30,000
Net income for the
year ended
December 31, 2007 - - - - - - (929,671) (4,574,003) (5,503,674)
--------- ------ ---------- ------- ----------- --------- ------------ ------------ ------------
Balance,
December 31, 2007 4,000,000 4,000 48,589,773 48,590 32,719,057 28,500 (1,647,531) (35,685,750) (4,533,134)
Common stock issued
for cash at $0.20
per share - - 1,075,000 1,075 196,425 16,580 - - 214,080
Common stock
issued for
services at $0.17
per share - - 2,391,250 2,391 392,210 - - - 394,601
Value of stock
purchase warrants
granted - - - - 14,233 - - - 14,233
Value of stock
options issued
under stock option
plans - - - - 143,144 - - - 143,144
Net income for the
nine months ended
September 30, 2008 - - - - - - (181,420) 1,734,510 1,553,090
--------- ------ ---------- ------- ----------- --------- ------------ ------------ ------------
Balance,
September 30, 2008
(unaudited) 4,000,000 $4,000 52,056,023 $52,056 $33,465,069 $ 45,080 $ (1,828,951) $(33,951,240) $ (2,213,986)
========= ====== ========== ======= =========== ========= ============ ============ ============
The accompanying notes are a integral part of these financials statements.
8
ALPHATRADE.COM
Statements of Cash Flows
(unaudited)
For the Nine Months Ended
September 30,
----------------------------
2008 2007
-------------- -------------
(restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,734,510 $ (2,880,381)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation expense 13,745 10,010
Value of stock options and warrants granted 157,377 103,478
Loss on sale of assets 145,147 48,350
Gain on settlement of debt (307,972) -
Amortization of services prepaid by
common stock - 30,000
Investments received as payment for accounts
receivable (2,135,263) (862,139)
Common stock issued for services 394,601 693,240
Changes in operating assets and liabilities:
Proceeds from bank overdraft 16,038 -
Changes in accounts receivable (34,077) 63,483
Changes in prepaid expenses (8,150) 4,148
Changes in deferred revenues (855,815) 7,050
Changes in related party payables 436,159 1,239,072
Changes in accounts payable and accrued expenses (5,421) 1,239,143
------------- ------------
Net Cash Used in Operating Activities (449,121) (304,546)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of securities 100,215 57,899
Purchase of fixed assets (18,579) (23,396)
------------- ------------
Net Cash Provided by Investing Activities 81,636 34,503
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock subscriptions payable 16,580 -
Common stock issued for cash 197,500 191,000
Contributed capital - 19,850
------------- ------------
Net Cash Provided by Financing Activities 214,080 210,850
------------- ------------
NET DECREASE IN CASH (153,405) (59,193)
CASH AT BEGINNING OF PERIOD 153,760 147,323
------------- ------------
CASH AT END OF PERIOD $ 355 $ 88,130
============= ============
The accompanying notes are an integral part of these financial statements.
9
ALPHATRADE.COM
Statements of Cash Flows
(unaudited)
(continued)
For the Nine Months Ended
September 30,
----------------------------
2008 2007
-------------- -------------
(restated)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ 64,513 $ -
Income Taxes $ - $ -
NON CASH FINANCING ACTIVITIES:
Common stock issued for services
and contributions $ 394,601 $ 693,240
Value of stock options and warrants
granted $ 157,377 $ 103,478
The accompanying notes are an integral part of these financial statements.
10
ALPHATRADE.COM
Notes to the Financial Statements
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company
without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at
September 30, 2008 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed
or omitted. It is suggested that these condensed financial statements
be read in conjunction with the financial statements and notes thereto
included in the Company's December 31, 2007 audited financial
statements. The results of operations for the periods ended September
30, 2008 and 2007 are not necessarily indicative of the operating
results for the full years.
NOTE 2 - OUTSTANDING COMMON STOCK OPTIONS AND STOCK PURCHASE WARRANTS
The Company uses the instruments identified as stock options and common
stock warrants somewhat interchangeably. Both forms of equity
instruments have been granted as compensation to the Company's officers
and directors.
Under FASB Statement 123R, the Company estimates the fair value of each
stock award at the grant date by using the Black-Scholes option pricing
model. The following weighted average assumptions used for grants in
the periods ended December 31, 2007 and September 30, 2008: dividend
yield of zero percent for all years; expected volatility of 74.36% and
62.01%; risk-free interest rates of 5.03% and 3.35% and expected lives
of 1.0 and 3.0, respectively.
The general terms of awards such as vesting requirements(usually 1 to 2
years), term of options granted (usually 10 years), and number of
shares authorized for grants of options or other equity instruments are
determined by the Board of Directors. A summary of the status of the
Company's stock options and warrants as of December 31, 2007 and
changes during the periods ended December 31, 2007and September 30,
2008 is presented below:
Weighted Weighted
Options Average Average
and Exercise Grant Date
Warrants Price Fair Value
-----------------------------------
Outstanding, December 31, 2006 39,822,997 $ 0.38 $ 0.38
Granted 13,618,000 0.25 0.25
Expired (1,130,000) 0.72 0.72
Exercised (740,650) 0.76 0.76
Outstanding, December 31, 2007 51,570,347 $ 0.36 $ 0.36
Exercisable, December 31, 2007 35,925,350 $ 0.40 $ 0.40
11
ALPHATRADE.COM
Notes to the Financial Statements
NOTE 2 - OUTSTANDING COMMON STOCK OPTIONS AND STOCK PURCHASE WARRANTS
(Continued)
Weighted Weighted
Options Average Average
and Exercise Grant Date
Warrants Price Fair Value
-----------------------------------
Outstanding, December 31, 2007 51,570,347 $ 0.36 $ 0.36
Granted 9,245,000 0.21 0.21
Expired (2,043,497) 0.73 0.73
Exercised (448,650) 0.25 0.25
Outstanding, September 30, 2008 58,323,200 $ 0.32 $ 0.32
Exercisable, September 30, 2008 36,976,850 $ 0.37 $ 0.37
NOTE 3 - RESTATED FINANCIAL STATEMENTS
The Company has restated its financial statements as of and for the
period ended September 30, 2008 to reflect the reversal of $2,180,912
of advertising revenues not properly recognized in accordance with the
Company's revenue recognition policy. The following summarized
financial statements compare the financial statements before and after
the restatement.
CURRENT ASSETS (original) (restated)
Cash $ 355 $ 355
Accounts receivable 4,293,267 2,554
Marketable securities-available for sale 2,370,478 2,370,478
Marketable securities-available for sale
related party 2,093 2,093
Prepaid expenses 8,900 8,900
------------ ------------
Total Current Assets 6,675,093 2,384,380
------------ ------------
PROPERTY AND EQUIPMENT, net 50,467 50,467
------------ ------------
OTHER ASSETS
Investments, at cost 300,000 300,000
------------ ------------
TOTAL ASSETS $ 7,025,560 $ 2,734,847
============ ============
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 2,091,429 $ 2,091,429
Bank overdraft 16,038 16,038
Related party payables 2,626,573 2,626,573
Deferred revenues 1,438,994 214,793
------------- ------------
Total Current Liabilities 6,173,034 4,948,833
------------- ------------
TOTAL LIABILITIES 6,173,034 4,948,833
------------- ------------
12
STOCKHOLDERS' EQUITY/(DEFICIT)
Preferred shares: $0.001 par value,10,000,000
shares authorized: 2,000,000 Class A and
2,000,000 Class B shares issues and outstanding 4,000 4,000
Common shares: $0.001 par value, 100,000,000
shares authorized: 52,506,023 and 48,589,773
shares issues and outstanding,respectively 52,056 52,056
Stock subscription payable 45,080 45,080
Additional paid-in capital 33,465,069 33,465,069
Accumulated other comprehensive income (1,828,951) (1,828,951)
Accumulated deficit (30,884,728) (33,951,240)
------------- ------------
Total Stockholders' Equity/(Deficit) 852,526 (2,213,986)
------------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY/(DEFICIT) $ 7,025,560 $ 2,734,847
============= ============
Subscription revenue $ 2,317,050 $ 2,317,050
Advertising revenue 5,909,699 3,528,786
Other revenue 144,553 144,553
------------- ------------
Total Revenues 8,371,302 5,990,389
------------- ------------
COST OF SALES
Financial content 1,431,112 1,431,112
Other cost of sales 2,538 2,538
------------- ------------
Total Cost of Sales 1,433,650 1,433,650
------------- ------------
GROSS PROFIT 6,937,652 4,556,739
------------- ------------
OPERATING EXPENSES
Management expense 360,000 360,000
Professional fees 884,488 884,488
Research and development 395,544 395,544
Marketing expense 639,822 639,822
General and administrative 629,826 429,825
------------- ------------
Total Operating Expenses 2,909,680 2,709,679
------------- ------------
INCOME FROM OPERATIONS 4,027,972 1,847,060
------------- ------------
OTHER INCOME (EXPENSE)
Gain (Loss) on sale of assets (145,147) (145,147)
Gain on settlement of debt 307,974 307,974
Interest expense (275,377) (275,377)
------------- ------------
Total Other Income (Expense) (112,550) (112,550)
------------- ------------
NET INCOME BEFORE INCOME TAXES 3,915,422 1,734,510
INCOME TAX EXPENSE - -
------------- ------------
13
NET INCOME $ 3,915,422 $ 1,734,510
============= ============
OTHER COMPREHENSIVE INCOME (LOSS) $ (181,420) $ (181,420)
------------- ------------
TOTAL COMPREHENSIVE INCOME (LOSS) $ 3,734,002 $ 1,553,090
============= ============
BASIC EARNINGS PER SHARE $ 0.08 $ 0.03
============= ============
COMPREHENSIVE BASIC EARNINGS PER SHARE $ 0.07 $ 0.03
============= ============
FULLY DILUTED INCOME PER SHARE $ 0.03 $ 0.01
============= ============
COMPREHENSIVE FULLY DILUTED INCOME PER SHARE $ 0.03 $ 0.01
============= ============
BASIC WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 50,616,857 50,616,857
============= ============
FULLY DILUTED WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 117,593,707 117,593,707
============= ============
14
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Form 10-Q.
Forward-looking and Cautionary Statements
This report contains certain forward-looking statements. These statements relate
to future events or our future financial performance and involve known and
unknown risks and uncertainties. These factors may cause our company's, or our
industry's actual results, levels of activity, performance or achievements to be
materially different from those expressed or implied by the forward-looking
statements. In some cases, you can identify forward-looking statements by
terminology such as "may," "will" "should," "expects," "intends," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential," "continue," or
the negative of these terms or other comparable terminology.
These statements are only predictions. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements.
Restated Financial Statements
The Company has restated its financial statements as of and for the period ended
September 30, 2008 to reflect the reversal of $2,180,912 of advertising revenues
because management concluded that the collectability of the subject fees was not
reasonably assured.
Results of Operations.
THREE MONTHS ENDED SEPTEMBER 30, 2008 and 2007
- -----------------------------------------
During the three months ended September 30, 2008, revenue growth slowed due to
the unparalleled turbulence and overall decline in all of the financial markets.
Our advertising business grew minimally as many clients put their marketing and
advertising budgets on hold until the economy picked up or their business
outlook improved. Revenue for 2008's third quarter was $1,867,187, which is a
16% increase over 2007's third quarter revenue of $1,610,378. Advertising
revenues in the third quarter were $1,060,491 in 2008 and $817,523 in 2007. We
revised our advertising pricing to reflect the downturn in the economy so we
could attract new business and to make it easier for clients to make a marketing
buying decision.
We continue to focus on increasing the traffic to our stable of websites to
ensure our advertising clients have a highly desirable demographic target
audience. We are experiencing success with building new subscribers to our
business networking site, www.zenobank.com, which was launched last quarter. The
site provides a comprehensive forum for companies, businesses associated with
the financial markets and investors to network using all of the modern,
web-based tools available such as blogs, forums, and chat rooms. Every public
15
company, once they sign up, will have complete and accurate financial data on
their profile pages on ZenoBank - this will ensure they are compliant with all
regulatory policies with respect to investor relations.
Our cost of sales for our financial products is directly related to the price of
our financial feeds and content. Some of these costs are fixed monthly fees and
others are based on the number of users or subscribers. We believe the market
conditions at present will encourage people to save money in every way possible
and with the cost effective products AlphaTrade has in both the E-Gate and
advertising programs, we believe this could be beneficial for us in increasing
our client base for all of our products. For the third quarter of 2008 our cost
of sales was 26% of revenues compared to 36% of revenues in 2007. As our
revenues increase, this percentage may become more favorable in terms of
profitable operations.
We realized a net income of $451,117 for the three months ended September 30,
2008 compared to a loss of $1,148,258 for the three months ended September 30,
2007. This is an increase of $1,599,375 and directly related to the growth of
our advertising business. During 2008 we paid $539,822 to consultants for
marketing fees.
Included in professional fees for 2008 are shares of common stock to investor
relations consultants valued at $73,033 compared to $384,676 in 2007 and stock
options to our employees valued at $143,144 compared to $103,864 in 2007. For
the most part, the investor relations consultants are hired to bring new
advertising clients to the company. We realized related party compensation
expense of $120,000 for both 2008 and 2007.
Our operating expenses decreased to $782,641 in 2008 from $2,277,810 in 2007
mainly due to the fact that we did not renew or we terminated our sports
sponsorships.
Historically, many of our expenses are paid in shares of our common stock. The
expenses are recorded at the fair value of the shares issued. Excluding these
non cash expenses the income (loss) for the three months ended September 30,
2008 and 2007 would have been $667,294 and ($763,582), respectively. The loss in
2007 is almost entirely due to the payments made on behalf of our sports
sponsorships.
NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
- ---------------------------------------------
During the nine months ended September 30, 2008, revenue growth was driven by
our increased advertising business. Revenue for the first three quarters of 2008
was $5,990,389, which is a 49% increase over the revenue for 2007's first three
quarters of $4,028,190. The most substantial growth was advertising and within
that category the largest increase was from referral and repeat business.
Advertising revenue in 2008's first three quarters was $3,528,786 compared to
$1,675,992 in 2007's first three quarters. Our advertising model is unique in
the industry because we have a high traffic website and our audience is
comprised of a specific demographic. We are building a client base of companies
that are seeking brand awareness in combination with building their shareholder
base. Our advertising client base is increasing because we have created
relationships with investor and public relations firms.
16
We continue to focus on increasing the traffic to our stable of websites to
ensure our advertising clients have a highly desirable demographic target
audience. We are experiencing success with building new subscribers to our
business networking site, www.zenobank.com, which was launched last quarter. The
site provides a comprehensive forum for companies, business associated with the
financial markets and investors to network using all of the modern, web-based
tools available such as blogs, forums, and chat rooms. Every public company,
once they sign up, will have complete and accurate financial data on their
profile pages on ZenoBank - this will ensure they are compliant with all
regulatory policies with respect to investor relations.
Our cost of sales for our financial products is directly related to the price of
our financial feeds and content. Some of these costs are fixed monthly fees and
others are based on the number of users or subscribers. We believe the market
conditions at present will encourage people to save money in every way possible
and with the cost effective products AlphaTrade has in both the E-Gate and
advertising programs, we believe this could be beneficial for us in increasing
our client base for all of our products. For the first three quarters of 2008
our cost of sales was 28% of revenues compared to 31% in 2007. As our
advertising revenues increase, this percentage may become more favorable in
terms of profitable operations.
We realized net income of $1,734,510 for the first three quarters ended
September 30, 2008 compared to a loss of $2,880,381 for the first three quarters
ended September 30, 2007. This is an increase of $4,614,891 and directly related
to the growth of our advertising business. During the first nine months of 2008,
none of our sports partnerships were active. In some cases, we terminated the
sports sponsorship program for lack of tangible results and in some cases, we
terminated due to breaches. To date in2008 we paid a total of $158,445 to a
number of our sports sponsorship programs. During 2008 we paid $481,377 to
consultants for marketing fees.
Included in professional fees for 2008 are shares of common stock to investor
relations consultants valued at $394,601 compared to $693,240 in 2007 and stock
options to our employees valued at $157,377 compared to $103,478 in 2007. For
the most part, the investor relations consultants are hired to bring new
advertising clients to the company. We realized related party compensation
expense of $360,000 for both 2008 and 2007. Our operating expenses decreased to
$2,709,680 in 2008 from $5,594,259 in 2007 mainly due to the fact that we did
not renew or we terminated our sports sponsorships.
Historically, many of our expenses are paid in shares of our common stock. The
expenses are recorded at the fair value of the shares issued. Excluding these
non cash expenses the income (loss) for the first half of 2008 and 2007 would
have been $2,286,488 and ($2,083,663), respectively. The loss in 2007 is almost
entirely due to the payments made on behalf of our sports sponsorships.
Liquidity and Capital Resources.
We have consistently been financed through loans from related parties and from
raising capital through private equity offerings. We used $449,121 and $304,546
of cash in our operating activities in the first nine months of 2008 and 2007,
respectively. For the nine months ended September 30, 2008 and 2007 we received
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cash totaling $214,080 and $210,850 from the issuance of our common stock and
contributed capital. We expect that in the next twelve months the cash generated
by our operations will be adequate to cover our operating expenses.
Given the right circumstances, we would entertain a secondary financing if it
would ensure our growth could be greatly fast-tracked otherwise we will focus on
building our business via revenue growth. Currently, we do not have any
definitive plans for a secondary financing.
We currently have no material commitments for major capital expenditures.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
N/A
Item 4. Controls and Procedures
As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of management,
including our chief executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934. Based upon that evaluation, our chief executive officer
and principal financial officer concluded that our disclosure controls and
procedures are not effective to cause the material information required to be
disclosed by us in the reports that we file or submit under the Exchange Act to
be recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms. Management determined that due to the
lack of personnel with adequate knowledge, experience and training of United
States Generally Accepted Accounting Principles, the Company's disclosure
controls and procedures were not effective as of September 30, 2008. There have
been no significant changes in our internal controls or in other factors which
could significantly affect internal controls subsequent to the date we carried
out our evaluation.
PART II - OTHER INFORMATION.
Item 1. Legal Proceedings.
AlphaTrade.com is the Defendant in litigation pending in the Supreme Court of
British Columbia, Canada. This action was filed on December 23, 2003 and is
between Zacks Investment Services, Inc. as Plaintiff and AlphaTrade.com as
Defendant. The case number is 5036907.
The Plaintiff alleges that it is owed the sum of $279,664 pursuant to a
licensing Agreement executed by the Plaintiff and the Defendant in 1999.
Alphatrade is aggressively defending itself against this claim.
During the year ending December 31, 2002, a company filed an action against
AlphaTrade in the Supreme Court of British Columbia, Canada claiming unspecified
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damages. AlphaTrade filed a Statement of Defense in August, 2002. There has been
no further developments in this action. AlphaTrade plans to vigorously defend
itself.
Arena Media Networks LLC v. AlphaTrade.com
Supreme Court of the State of New York, County of New York, Index No. 603406/06
- -------------------------------------------------------------------------------
Plaintiff Arena Media Networks LLC ("Arena") commenced this action on or about
October 15, 2007 by the filing of a Summons and Complaint. In the Complaint,
Arena asserts causes of action for breach of contract, account stated and unjust
enrichment against the Company arising from the Company's alleged failure to pay
sums purportedly due Arena pursuant to an agreement in which Arena agreed to
place advertising for the Company.
The Company answered the Complaint on February 1, 2008. In its Answer, the
Company denies the material allegations of the Complaint and asserts numerous
affirmative defenses. This action is presently in the discovery stage. The
Company intends to vigorously defend this action.
Professional Bull Riders, Inc. v. AlphaTrade.com,
United Stated District Court, District of Colorado, Case No. 08-cv-01017 (MSK)
Plaintiff Professional Bull Riders, Inc. ("PBR") commenced this action against
the Company on or about April 15, 2008 in the District Court of Pueblo County,
Colorado, Case No. 2008CV527. The Company removed this action to the United
States District Court for the District of Colorado on May 15, 2008. In its
Complaint, PBR alleges two causes of action arising from the alleged breach of a
Sponsorship Agreement, as amended, and the alleged breach of a settlement
agreement, and seeks damages of over $1,500,000.
The Company denies the material allegations of the Complaint and intends to
vigorously defend this action.
Tommy G Productions, LLC v. AlphaTrade.com,
District Court, Pueblo County, Colorado, Case No. 2008CV1008
Plaintiff Tommy G Productions ("Tommy G") commenced this action against the
Company on or about June 27, 2008 in the District Court of Pueblo County,
Colorado, Case No. 2008CV1008. In its Complaint, Tommy G alleges a cause of
action arising from the alleged breach of a Sponsorship Agreement, and seeks
damages of $30,000.
The Company is required to answer or move with respect to the Complaint on or
before August 10, 2008. The Company denies the allegations of the Complaint and
intends to vigorously defend this action.
Center Operating Company v. AlphaTrade.com,
68th Judicial District Court, Dallas County, Texas, Case No. 2009-156001-1
Plaintiff Center Operating Company ("COC") commenced this action against the
Company on or about September 3, 2008 in the District Court of Dallas County,
Texas, Case No. 2009-156001-1. In its Complaint, COC alleges a cause of action
arising from the alleged breach of a Sponsorship Agreement, and seeks damages of
$185,621.
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The Company denies the allegations of the Complaint and intends to vigorously
defend this action.
We are subject to potential liability under contractual and other matters and
various claims and legal actions which may be asserted. These matters arise in
the ordinary course and conduct of our business. While the outcome of the
potential claims and legal actions against us cannot be forecast with certainty,
we believe that such matters should not result in any liability which would have
a material adverse effect on our business.
Item 1A. Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
The following unregistered securities have been issued since January 1st, 2008:
Valued
Date No. of Shares Title At Reason
Jan./2008 400,000 Common $0.20 For cash
Jan./2008 440,750 Common $0.20 For services
Feb./2008 300,000 Common $0.20 For cash
Feb./2008 480,000 Common $0.20 For services
March/2008 45,000 Common $0.20 For services
March/2008 25,000 Common $0.20 For cash
April/2008 10,000 Common $0.17 For services
May/2008 520,000 Common $0.17 For services
June/2008 415,000 Common $0.17 For services
June/2008 300,000 Common $0.20 For cash
July/2008 130,500 Common $0.165 For services
Aug./2008 150,000 Common $0.13 For services
Aug./2008 200,000 Common $0.16 For services
Sept./2008 50,000 Common $0.15 For cash
The above noted shares were issued in private, isolated transactions without
registration under the Securities Act. The shares were issued in reliance on the
exemption provided by Rule 506 and/or Section 4(2) of the Securities Act as a
transaction by an issuer not involving a public offering to Consultants or to
companies owned or controlled by Consultants or Officers of AlphaTrade.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
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Item 6. Exhibits.
(a) Exhibits
Exhibit 31.1 Certification of C.E.O. Pursuant to Section 302 of
the Sarbanses-Oxley Act of 2002.
Exhibit 31.2 Certification of Principal Accounting Officer
Pursuant to Section 302 of the Sarbanses-Oxley Act of
2002.
Exhibit 32.1 Certification of C.E.O. Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Exhibit 32.2 Certification of Principal Accounting Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
(b) Report on Form 8-K
None
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SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
ALPHATRADE.COM
Date: March 19, 2009 /s/ Penny Perfect
----------------------------
President / Director
Date: March 19, 2009 /s/ Katharine Johnston
----------------------------
Principal Accounting Officer
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