SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to _________________
Commission file number 0-25276
ALGORHYTHM TECHNOLOGIES CORPORATION
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Exact name of small business issuer as specified in its charter
Nevada 88-0320364
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(State or other jurisdiction of incorporation) I.R.S. Employer Identification No.
5310 NW 33rd Drive, Ft. Lauderdale, FL 33309
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(Address of principal executive offices and Zip code)
(954) 739-7005
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(Issuer's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
[ ] Yes [x] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by Court. Yes_____ No_____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: April 30, 1998: 12,465,240
shares of common stock
Transitional Small Business Disclosure Format (check one): Yes No x
INDEX
Page
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Part I
Condensed Balance Sheets 3
Statement of Operations 4
Statement of Cash Flows 5
Management's Discussion and Analysis or Plan of Operations 6
Part II
Item 1. Legal Proceedings 7
Item 2. Changes in Securities 7
Item 3. Defaults Upon Senior Securities 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 5. Other Information 7
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
2
Part 1. Financial Information
Algorythm Technologies Corporation
(f/k/a Nitros Franchise Corporation and Digimedia USA, Inc.)
CONDENSED BALANCE SHEETS
31-Mar
1998
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(UNAUDITED)
ASSETS
CURRENT ASSETS
CASH $ 450.00
ACCOUNTS RECEIVABLE $ 133,160.00
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TOTAL CURRENT ASSETS $ 133,610.00
PROPERTY, PLANT AND EQUIPMENT $ 105,808.00
LESS ALLOWANCES FOR DEPRECIATION $ (93,882.00)
$ 11,926.00
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OTHER ASSETS $ 400,052.00
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$ 545,588.00
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 488,753.00
ACCRUED EXPENSES $ 21,469.00
NOTES PAYABLE $ 131,409.00
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TOTAL CURRENT LIABILITIES $ 641,631.00
LONG TERM DEBT $ 16,667.00
STOCKHOLDERS' EQUITY
PREFERRED STOCK; 1,000,000 SHARES AUTHORIZED; $1 PAR VALUE; $ 37,683.00
COMMON STOCK; 25,000,000 SHARES AUTHORIZED; $.002 PAR VALUE;
967,397 SHARES ISSUED AND OUTSTANDING AT DECEMBER 31,1996
AND 12,999,556 SHARES ISSUED AND OUTSTANDING AT MARCH 31,1998 $ 25,999.00
ADDITIONAL PAID IN CAPITAL $ 1,371,694.00
ACCUMULATED DEFICIT $ (1,547,786.00)
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(112,410.00
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$ 545,588.00
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NOTE: THE BALANCE SHEET AT DECEMBER 31,1997 IS NOT YET AVAILABLE AND UPON
COMPLETION THE INFORMATION WILL BE FILED BY AMENDMENT.
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Algorythm Technologies Corporation
(f/k/a Nitros Franchise Corporation and Digimedia USA, Inc.)
STATEMENT OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED THREE MONTHS ENDED
31-Mar 31-Mar
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1998 1997 1998 1997
REVENUES $ 310,696.00 $ - $ 310,696.00 $ -
COST OF SALES $ 176,618.00 $ - $ $176,618.00 $ -
-------------- ------------- ------------- -----------
GROSS PROFIT $ 134,078.00 $ - $ 134,078.00 $ -
COSTS AND EXPENSES
GENERAL AND ADMINISTRATIVE $ 116,674.00 $ 28,503.00 $ 116,674.00 $ 28,503.00
INTEREST $ 2,417.00 $ - $ 2,417.00 $ -
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$ 119,091.00 $ 28,503.00 $ 119,091.00 $ 28,503.00
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EARNINGS (LOSS) BEFORE TAXES $ 14,987.00 $ (28,503.00) $ 14,987.00 $(28,503.00)
INCOME TAXES $ 3,750.00 $ - $ 3,750.00 $ -
-------------- ------------- ------------- -----------
NET EARNINGS (LOSS) $ 11,237.00 $ (28,503.00) $ 11,237.00 $(28,503.00)
=============================== ============================
NET EARNINGS (LOSS) PER SHARE 0.0009 0.0009
WEIGHTED AVERAGE SHARES OUTSTANDING 12950889 12950889
4
Algorythm Technologies Corporation
(f/k/a Nitros Franchise Corporation and Digimedia USA, Inc.)
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED THREE MONTHS ENDED
31-Mar 31-Mar
1998 1997 1998 1997
(NOTE) (NOTE)
CASH FLOWS FROM OPERATIONS $ 10,486.00 $ 10,486.00
CASH FLOWS FROM INVESTING ACTIVITIES: $ - $ -
PURCHASES OF PROPERTY AND EQUIPMENT $ - $ -
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NET CASH PROVIDED BY INVESTING ACTIVITIES $ - $ -
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CASH FLOWS FROM FINANCING ACTIVITIES:
RECEIPT OF PROCEEDS FROM STOCK SALES $ 9,600.00 $ 9,600.00
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 9,600.00 $ 9,600.00
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NET INCREASE (DECREASE) IN CASH $ (886.00) $ (886.00)
============ ============
NOTE: THE PREVIOUS MANAGEMENT OF THE COMPANY FAILED TO FILE A CONDENSED
STATEMENT OF CASH FLOW ON THE QUARTERLY REPORT FORM 10-Q FOR THE PERIOD ENDED
MARCH 31, 1997, THEREFORE THE COMPARATIVE DATA FOR THAT PERIOD IS NOT AVAILABLE.
IT WILL BE FILED BY AMENDMENT.
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Item 2. Management Discussion and Analysis or Plan of Operations
Results of Operations
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During the three month period ended March 31, 1998 the Company had
revenues of $310,696 as against no revenues during the three month period ended
March 31, 1997. This was due to the operations of the Company's subsidiary, ADS
Advertising Corp. ("The Smith Agency"), which was acquired in November 1997.
During the three month period ended March 31, 1998 the Company had general and
administrative expenses of $116,674 as against $28,603 during the three month
period ended March 31, 1997. This was again due to the opertations of The Smith
Agency. That as a result the Company had net earnings of $11,237 for the three
month period ended March 31, 1998 as against a loss of $28,603 for the three
month period ended March 31, 1997.
Liquidity and Capital Resources
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The Company had cash on hand of $450.00 and accounts receiveable,
attributable to The Smith Agency, of $133,160 at the end of the three month
period ended March 31, 1998. The Company at the end of the three month period
ended March 31, 1998 had accounts payable of $488,763, the increase of which and
notes payable of $131,409 attributable to The Smith Agency.
The Company, in order to meet its obligations will seek to raise
capital and/or attempt to increase the revenue of The Smith Agency. There is no
assurance that the Company will be successful in obtaining capital or increasing
the revenue of The Smith Agency. Subsequent to the period ended March 31, 1998,
the Company changed the name of its subsidiary QuikLab Multimedia Centers, Inc.
to Capital Network of America, Corp. which will be engaged in the business of
providing financial advisory services.
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Part II
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
(c) 1. The Registrant sold the following non-registered shares of its
common stock in a private placement pursuant to Rule 506 of Regulation D and
Sec. 4(2) of the Securities Act of 1933, as amended (the "Act") at a price of
$.10 per share:
February 11, 1998 - 26,000 shares, $2,600.00;
February 18, 1998 - 20,000 shares, $2,000.00;
2. March 27, 1998, 50,000 shares of common stock for $5,000.00 ($.10
per share) pursuant to Sec. 4(2) of the Act.
3. On March 24, 1998 the Registrant issued 400,000 shares of its common
stock, pursuant to Sec. 4(2) of the Act, in payment of an outstanding loan of
$40,000 to the Registrant's subsidiary ADS Advertising Corp.
d/b/a The Smith Agency.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
In April 1998 the Registrant's wholly owned subsidiary, QuikLab
Multimedia Centers, Inc., a Nevada Corporation,. changed its name to Capital
Network of America Corp., a Nevada corporation. ("the Subsidiary"). The
Subsidiary will be engaged in the business of providing financial advisory
services. The following individuals were appointed as officers and directors of
the Subsidiary: Kirk J. Girrbach, President, Assistant Secretary, Chairman of
the Board of Directors; Anthony J. Ard, Vice President, Secretary and director;
Douglas A. Stepelton, Vice President, Treasurer and a director; Andrew Smith,
director. The Subsidiary entered into five (5) year employment contracts with
Girrbach, Stepleton and Ard each of whom will receive a salary of $100,000 per
year with a 10% increase per year commencing January 1, 1999. No salary will be
paid until the Subsidiary obtains revenue (the unpaid salary will be accrued)
and the individuals have agreed to pay the expenses of the Subsidiary until
revenue is produced to pay the expenses, for a period of not more then one (1)
year. As provided in the contracts the Registrant issued 525,000 shares of its
common stock to Kirk Girrbach, 500,000 shares of its common stock to Douglas
Stepleton and 500,000 shares of its common stock to Anthony Ard upon the signing
of the employment contracts.
In March 1998 the Registrant issued the following shares of its common
stock: 80,162 shares to Kirk Girrbach; 24,783 shares to Douglas A. Stepleton;
and 38,556 shares to Gene Farmer. These shares represented
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the return of shares loaned to the Registrant on May 14, 1997 by these
individuals.
On April 21, 1998 Kirk J. Girrbach was appointed a director of the
Registrant.
In an agreement dated May 12, 1998, among David Bawarsky, the
Registrant's CEO, Secretary and director, and Telephonetics International Inc.
and Alan J. Kvares, Telephonetics and Kvares, in consideration of Bawarsky
severing his relationship , including his ownership interest, with
Telephonetics, agreed to transfer 5,675,889 shares owned by Telephonetics to
Bawarsky (this includes the 2,600,000 shares transferred by Bawarsky and the
2,075,889 shares transferred by Kvares respectively to Telephonetics in July
1997). Bawarsky through his relationship with Telephonetics had a beneficial
interest in these shares and was an indirect owner and shared dispositive and
voting rights of these shares. As a result of this agreement Bawarsky will have
direct ownership of these shares.
In regard to the issuance of 2,300,000 shares of common stock to Andrew
Smith in connection with the acquisition of ADS Advertising Corp. by the
Registrant on November 7, 1997, David Bawarsky has agreed to donate to the
Registrant 2,300,000 shares which are to be reissued by the Registrant to Andrew
Smith.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibit 2.1 - Agreement and Plan of Meger Between DigiMedia
USA, Inc. and Nitros Franchise Corporation, dated May 14, 1997, incorporated by
reference to the Registrant's 10-QSB for the period ended June 30, 1997.
Exhibit 2.2 - Acquisition Agreement Between Algorhythm
Technologies Corporation and ADS Advertising Corporation, dated October 30,
1997, incorporated by reference to the Registrant's 10-QSB for the period ended
September 20, 1997.
Exhibit 3.1 - Registrant's Articles of Incorporation as
amended.
Exhibit 3.2 - Registrant's Bylaws.
Exhibit 10.1 - Employment agreement between ADS Advertising
Corporation and Andrew Smith, dated October 30, 1997, incorporated by reference
to the Registrant's 10-QSB for the period ended September 30, 1997.
Exhibit 10.2 - Employment agreement between Capital Network of
America, Corp. and Kirk J. Girrbach, dated April 13, 1998.
Exhibit 10.3 - Employment agreement between Capital Network of
America, Corp. and Douglas A. Stepelton, dated April 13, 1998.
Exhibit 10.4 - Employment agreement between Capital Network of
America, Corp. and Anthony J. Ard, dated April 13, 1998.
B. During the period ended March 31, 1998, the Registrant filed the
following 8Ks:
8K dated January 6, 1998: filing of the financial statements of ADS
Advertising Corporation d/b/a The Smith Agency, in connection with its merger
with the Registrant as of November 7, 1997.
8K dated January 26, 1998, 8KA dated February 9, 1998, and 8KA-1 dated
March 1, 1998 , reporting the change of independent accountants by the retaining
of M.A. Cabrera & Company P.A.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ALGORHYTHM TECHNOLOGIES CORPORATION
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Registrant
Date: May 20, 1998 s/DAVID BAWARSKY
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DAVID BAWARSKY, CEO
Date: May 20, 1998 s/JASON SHERMAN
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Jason Sherman, Treasurer
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