UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-Q
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED MARCH 31, 2009
Commission file Number 0-28416
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
VALCOM, INC.
--------------------------------------------------------
(Name of small business issuer specified in its charter)
Delaware 58-1700840
------------------------------------ -----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
2113A Gulf Boulevard, Indian Rocks Beach, Florida 33785
-------------------------------------------------------
(Address of Principal executive offices) (Zip code)
(727) 953 - 9778
-------------------------
Issuer's telephone number
Securities registered pursuant to 12(b) of the Act: None Securities to be
registered pursuant to Section 12(g) of the Act:
COMMON STOCK $0.001 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T
({section}232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
[ ] 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]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark 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 a court. Yes [X] 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: As of May 11, 2009, the
issuer had 25,023,158 shares of its $0.001 par value common stock outstanding.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying financial statements are unaudited and are prepared in
accordance with rules and regulations of the Securities and Exchange Commission
for interim quarterly reporting. Accordingly, these financial statements do not
include all disclosures required under generally accepted accounting
principles.
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position of ValCom, Inc.
and subsidiaries as of March 31, 2009 and the results of their operations and
their cash flows for the three months ended March 31, 2009. These consolidated
financial statements include the accounts of ValCom, Inc. and its subsidiary
companies (together "the Company"). Results for the three months ended March
31, 2009, are not necessarily indicative of the operations, which may occur
during the year ending September 30, 2008. Refer to the Company's Annual Report
on Form 10- K for the year ended September 30, 2008 for further information.
VALCOM, INC.
FORM 10-Q
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements...........................................2
Item 2. Management's Discussion and Analysis or Plan of Operation......8
Item 3. Quantitative and Qualitative Market Risk.......................11
Item 4. Controls and Procedures........................................11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..............................................12
Item 1A. Risk Factors...................................................12
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds....12
Item 3. Defaults Upon Senior Securities................................13
Item 4. Submission of Matters to a Vote of Security Holders............13
Item 5. Other Information..............................................13
Item 6. Exhibits.......................................................13
SIGNATURES..............................................................14
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS
VALCOM, INC.
We have reviewed the accompanying consolidated balance sheet of Valcom, Inc. as
of March 31, 2009, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the three-month and six-
month periods ended March 31, 2009 and 2008. These interim financial statements
are the responsibility of the Corporation's management.
We conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists of principally applying analytical procedures and making
inquiries of persons responsible for the financials and accounting matters. It
is substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to such financial statements for them to be in conformity with
accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet of
Valcom, Inc. as of September 30, 2008, and the related consolidated statements
of operations, stockholders' equity (deficit) and cash flows for the year then
ended (not presented herein); and in our report dated January 10, 2009, we
expressed an unqualified opinion with a going concern paragraph on those
financial statements. In our opinion, the information set forth in the
accompanying balance sheet as of September 30, 2008 is fairly stated, in all
material respects, in relations to the balance sheet from which it has been
derived.
/S/ MOORE & ASSOCIATES, CHARTERED
- ---------------------------------
Moore & Associates, Chartered
Las Vegas, Nevada
May 19, 2009
6490 WEST DESERT INN ROAD, LAS VEGAS, NEVADA 89146 (702) 253-7499 FAX:
(702)253-7501
VALCOM, INC.
Condensed Consolidated Balance Sheets
March 31, September 30,
2009 2008
(unaudited)
---------------- ---------------
ASSETS
CURRENT ASSETS
Cash $ 352,106 $ 86,416
Accounts receivable, net 100,063 -
Prepaid expense 36,434 24,434
---------------- ---------------
Total Current Assets 488,603 110,850
---------------- ---------------
PROPERTY and EQUIPMENT, net 284,995 76,020
---------------- ---------------
OTHER ASSETS
Deposits - -
Goodwill 366,278
Other assets 1,250,000 1,000,000
---------------- ---------------
Total Other Assets 1,616,278 1,000,000
---------------- ---------------
TOTAL ASSETS $ 2,389,876 $ 1,186,870
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 341,102 $ 468,364
Accrued interest payable 206,857 166,061
Deferred income - -
Due to related parties 512,282 86,181
Notes payable 898,440 412,173
---------------- ---------------
Total Current Liabilities 1,958,681 1,132,779
---------------- ---------------
LONG-TERM LIABILITIES
Notes payable - -
---------------- ---------------
Total Long-Term Liabilities - -
---------------- ---------------
TOTAL LIABILITIES 1,958,681 1,132,779
---------------- ---------------
STOCKHOLDERS' EQUITY (DEFICIT)
Series B Preferred stock, 1,000,000
shares authorized at par value of
$0.001, 38,000 shares issued and
outstanding 38 38
Series C Preferred stock, 25,000,000
shares authorized at par value of
$0.001, 7,921,666 shares issued and
outstanding 10,041 9,591
Common stock, 250,000,000 shares
authorized at par value of $0.001,
14,647,059 and 10,376,099 shares
issued and outstanding, respectively 25,023 22,776
Treasury stock, 35,000 shares (23,522) (23,522)
Additional paid-in capital 18,391,028 17,778,314
Accumulated deficit (17,971,413) (17,733,106)
---------------- ---------------
Total Stockholders' Equity (Deficit) 431,195 54,091
---------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 2,389,876 $ 1,186,870
================ ===============
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
VALCOM, INC.
Condensed Consolidated Statements of Operations
(unaudited)
For the Three Months Ended For the Six Months Ended
March 31, March 31,
2009 2008 2009 2008
--------------- ---------------- ---------------- ----------------
REVENUES $ 318,935 $ 381,321 $ 385,204 $ 648,957
COST OF GOODS SOLD - 1,223 107 1,223
--------------- ---------------- ---------------- ----------------
GROSS MARGIN 318,935 380,098 385,097 647,734
OPERATING EXPENSES
Advertising and marketing (80,243) 772 (26,105) 1,313
Depreciation expense 32,588 6,335 55,377 12,670
General and administrative 681,754 298,579 1,095,370 963,148
--------------- ---------------- ---------------- ----------------
Total Operating Expenses 634,099 305,686 1,124,642 977,131
--------------- ---------------- ---------------- ----------------
LOSS FROM OPERATIONS (315,164) 74,412 (739,545) (329,397)
--------------- ---------------- ---------------- ----------------
OTHER INCOME (EXPENSE)
Gain (loss) on sale of equipment - - - -
Interest expense (30,894) (15,278) (51,397) (30,556)
Other income 552,475 - 552,635 -
--------------- ---------------- ---------------- ----------------
TOTAL OTHER INCOME (EXPENSE) 521,581 (15,278) 501,238 (30,556)
--------------- ---------------- ---------------- ----------------
INCOME (LOSS) BEFORE INCOME TAXES 206,417 59,134 (238,307) (359,953)
INCOME TAX EXPENSE - - - -
--------------- ---------------- ---------------- ----------------
NET INCOME (LOSS) $ 206,417 $ 59,134 $ (238,307) $ (359,953)
=============== ================ ================ ================
BASIC INCOME (LOSS) PER SHARE $ 0.01 $ 0.00 $ (0.01) $ (0.03)
=============== ================ ================ ================
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 24,834,493 13,976,099 24,148,362 12,776,099
=============== ================ ================ ================
The accompanying notes are a integral part of these condensed consolidated financials statements.
3
VALCOM, INC.
Condensed Consolidated Statements of Stockholders' Equity (Deficit)
(unaudited)
Total
Series B Series C Additional Stockholders'
Preferred Stock Preferred Stock Common Stock Treasury Paid-In Accumulated Equity
Shares Amount Shares Amount Shares Amount Stock Capital Deficit (Deficit)
------ ------ ---------- ------ ---------- ------- -------- ----------- ------------ ----------
Balance,
September 30,
2008 38,000 38 9,861,666 9,591 22,776,099 22,776 (23,522) 17,778,314 (17,733,106) 54,091
Preferred stock
issued for
purchase of
Faith TV - - 100,000 100 - - - 8,900 - 9,000
Common stock
issued for
services - - - - 869,729 870 - 86,103 - 86,973
Common stock
issued for
debt - - - - 1,000,000 1,000 - 99,000 - 100,000
Net loss for
the three
months ended
December 31,
2008 - - - - - - - - (444,723) (444,723)
------ ------ ---------- ------ ---------- ------- -------- ----------- ------------ ----------
Balance,
December 31,
2008 38,000 $ 38 9,961,666 $ 9,691 24,645,828 $24,646 $(23,522) $17,972,317 $(18,177,829) $ (194,659)
====== ====== ========== ====== ========== ======= ======== =========== ============ ==========
Balance ,
January 01,
2009 38,000 $ 38 9,961,666 $ 9,691 24,645,828 $24,646 $(23,522) $17,972,317 $(18,177,829) $ (194,659)
Preferred stock
issued for cash 5,000,000 350 249,750 250,100
Preferred stock
issued for debt 0
Common stock
issued for 0
services 252,330 252 43,974 44,226
Common stock
issued for
debt 125,000 125 124,987 125,112
Common stock
issued for cash
0 0 0 0
Net Profit/(Loss)
for the three
months ended
March 31, 2009 0 0 0 0 0 0 0 0 206,416 206,416
------ ------ ---------- ------ ---------- ------- -------- ----------- ------------ ----------
Balance,
March 31,
2009 38,000 $ 38 14,961,666 $10,041 25,023,158 $25,023 $(23,522) $18,391,028 $(17,971,413) $ 431,195
====== ====== ========== ====== ========== ======= ======== =========== ============ ==========
The accompanying notes are an integral part of these condensed consolidaetd financial statements.
4
VALCOM, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
For the Six Months Ended
March 31,
2009 2008
---------------- -----------------
OPERATING ACTIVITIES
Net loss (238,307) $ (359,953)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation expense 55,377 12,670
Common stock issued for services 131,199 180,000
Impairment of asset -
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable (100,063) 118,724
(Increase) decrease in prepaid expenses (12,000) (33,680)
Increase (decrease) in accrued interest payable 40,796 30,556
Increase (decrease) in accounts payable (127,262) (73,615)
Increase (decrease) in deferred income 0 265,000
---------------- -----------------
Net Cash Used in Operating Activities (250,260) 139,702
---------------- -----------------
INVESTING ACTIVITIES
Proceeds from sale of equipment - -
Purchase of Other Assets 616,278
Purchase of property and equipment 264,352 -
---------------- -----------------
Net Cash Used in Investing Activities 880,630 -
---------------- -----------------
FINANCING ACTIVITIES
Proceeds from preferred and common stock 484,212 -
Proceeds from note payable 68,100
Increase/Decrease in Related Parties Payables 426,101
Repayment of notes payable 486,267 -
---------------- -----------------
Net Cash Provided by Financing Activities 1,396,580 68,100
---------------- -----------------
NET INCREAsE IN CASH 265,690 207,802
CASH AT BEGINNING OF YEAR 86,416 5,926
---------------- -----------------
CASH AT END OF YEAR 352,106 $ 213,728
================ =================
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ - $ -
Income Taxes $ - $ -
NON CASH FINANCING ACTIVITIES:
Common stock issued for debt $ - $ -
The accompanying notes are an integral part of these condensed consoldiated financial statements.
5
VALCOM, INC.
Notes to the Condensed Consolidated 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 March 31, 2009 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 September 30,
2008 audited financial statements. The results of operations for the period
ended March 31, 2009 are not necessarily indicative of the operating results
for the full years.
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 the financial statements and
the reported amount of revenues and expenses during the reported period. Actual
results could differ from those estimates.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business.
In order to continue as a going concern and achieve a profitable level of
operations, the Company will need, among other things, additional capital
resources and to develop a consistent source of revenues. Management's plans
include investing in and developing all types of businesses related to the
entertainment industry.
The ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plan described in the preceding
paragraph and eventually attain profitable operations. The accompanying
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
NOTE 3 - SIGNIFICANT EVENTS
On December 15, 2008, the Company purchased all shares of FaithTV, LLC making
it a wholly owned subsidiary of the Company. The purchase is reflected in the
financial statements along with the operating results of FaithTV, LLC from
December 16, 2008 through December 31, 2008. The purchase price was 100,000
shares of the Company's preferred stock valued at $0.09 per share. The Company
also paid cash of $150,000 and issued a note payable for $750,000 for a total
purchase price of $909,000. The
NOTE 3 - SIGNIFICANT EVENTS (Continued)
preferred stock is convertible to shares of the Company's common stock on a one
share for one share basis. The purchase price was allocated based upon the fair
value of the assets purchased as follows:
Equipment $250,000
Film Library 250,000
Goodwill 281,732
Net Operating Assets of Faith TV 127,268
--------
Total $909,000
========
On March 24, 2009, Valcom and Laurus Master Fund, Ltd, a company organized
under the laws of the Cayman Islands and Chicago Title Company, a
California Corporation entered into a Settlement Agreement whereby Valcom
resolved its previously asserted claims against Laurus and Chicago Title.
Pursuant to the terms of the Agreement, Laurus agrees to pay the Company
five hundred and fifty thousand dollars ($550,000) which was received by
the Company's attorney on March 30th. Within ten calendar days after the
Company receives payment from Laurus, the Company filed a Request for
Dismissal of its claims, with prejudice, of its actions against Laurus and
Chicago Title and Chicago Title. This settlement is reflected as `Other
Income' with full accrual made for legal costs relating to the settlement.
During the six months ended March 31, 2009, the Company issued 2,247,059 shares
of its common stock and 5,100,000 shares of its Preferred Stock.
NOTE 4 - NEW ACCOUNTING PRINCIPLES
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
163, "Accounting for Financial Guarantee Insurance Contracts-and interpretation
of FASB Statement No. 60". SFAS No. 163 clarifies how Statement 60 applies to
financial guarantee insurance contracts, including the recognition and
measurement of premium revenue and claims liabilities. This statement also
requires expanded disclosures about financial guarantee insurance contracts.
SFAS No. 163 is effective for fiscal years beginning on or after December 15,
2008, and interim periods within those years. SFAS No. 163 has no effect on the
Company's financial position, statements of operations, or cash flows at this
time.
6
NOTE 4 - NEW ACCOUNTING PRINCIPLES (Continued)
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162
sets forth the level of authority to a given accounting pronouncement or
document by category. Where there might be conflicting guidance between two
categories, the more authoritative category will prevail. SFAS No. 162 will
become effective 60 days after the SEC approves the PCAOB's amendments to AU
Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on
the Company's financial position, statements of operations, or cash flows at
this time.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS.
Certain statements in "Management's Discussion and Analysis or Plan of
Operation" below, and elsewhere in this quarterly report, are not related to
historical results, and are forward-looking statements. Forward-looking
statements present our expectations or forecasts of future events. You can
identify these statements by the fact that they do not relate strictly to
historical or current facts. These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of
activity, performance or achievements to be materially different from any
future results, levels of activity, performance or achievements expressed or
implied by such forward- looking statements. Forward-looking statements
frequently are accompanied by such words such as "may," "will," "should,"
"could," "expects," "plans," "intends," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue," or the negative of such terms or other
words and terms of similar meaning. Although we believe that the expectations
reflected in the forward- looking statements are reasonable, we cannot
guarantee future results, levels of activity, performance, achievements, or
timeliness of such results. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of such forward-looking
statements. We are under no duty to update any of the forward-looking
statements after the date of this quarterly report. Subsequent written and oral
forward looking statements attributable to us or to persons acting in our
behalf are expressly qualified in their entirety by the cautionary statements
and risk factors set forth below and elsewhere in this quarterly report, and in
other reports filed by us with the SEC.
INTRODUCTION
PLAN OF OPERATION
As of March 31, 2009, ValCom, Inc. ("Valcom" or the "Company") operations were
comprised of the following divisions:
1. Studio Rental Division
2. TV Stations and Broadcast Division
3. Film and Television Production
4. Distribution
Corporate offices are located at 2113A Indian Rocks Beach, Florida.
1. STUDIO DIVISION
ValCom's business includes television production for network and syndication
programming, motion pictures, and real estate holdings, however, revenue is
primarily generated through the lease of the sound stages and production.
ValCom's past and present clients include Paramount Pictures, Don Belisarious
Productions, Warner Brothers, Universal Studios, MGM, HBO, NBC, 20th Century
Fox, Disney, CBS, Sony, Showtime, the USA Network, the Game Show Network,
Endemol, BET Home Shopping Network and Sullivan Studios. ValCom's Studio
Division is composed of its studio at 14375 Myerlake Circle, Clearwater,
Florida which houses a state-of- the art production studio, broadcast
facilities, recording studios, production design construction, animation and
post-production.
ValCom, Inc. manages and operates the Tele-Production Center in Clearwater,
Florida. This multi-million dollar state of the art facility in Clearwater,
Florida, is a 33,000 square foot facility that sits on 5 1/2 acres and is a
favorite of all major film studios and television networks. It houses two sound
stages and a Broadcast Center. ValCom offers several flexible studio
configuration options. It offers digital control rooms and studios that are
perfectly suited for music video productions, commercials, television programs,
industrial and training productions, direct response, media and satellite
tours, web casting events and videoconferencing.
8
2. TV STATIONS AND BROADCAST DIVISION
On December 15, 2008, Valcom acquired a 100% interest in Faith TV LLC, now re-
branded and launched as "MyFamily TV", a new family focused TV network
broadcasting through 75 affiliate TV stations , with plans to add significantly
more to this. The re-branding has continued with a new range of programming
scheduled to start in June 2009. The first such new programming MyFamily TV
has secured is the joint venture with Porchlight Entertainment, one of the
world's leading independent suppliers of high quality entertainment, and will
see the launch of a new children's programming block called KidMango. This will
feature major kids titles such as Jay Jay the Jet Plane, Four Eyes and My
Goldfish is Evil.
In addition Valcom has a joint venture with New Global Communications, Inc. and
owns a 45% equity interest in ValCom Broadcasting, LLC, a New York limited
liability company, which operates KVPS (Channel 8), an independent television
broadcaster in the Palm Springs, California market. Valcom has not realized
significant revenues from this joint venture to date.
3. FILM PRODUCTION DIVISION
ValCom has a long history of TV and film production and continuously develops
projects for productions and considers proposals for co-production. ValCom has
developed and produced a number of live action series pilots and full length
feature film projects such as PCH (Pacific Coast Highway) and the 40 episode TV
series A.J.'s Time Travelers. With its integrated studio operation, studio
equipment and post production facility, ValCom has the opportunity to co-
produce by way of the provision of services with the opportunity to defer costs
and also to provide executive producer services to assist with development,
planning, financing and distribution.
In the quarter to March 09, Valcom provided production support for the 51st
Annual Grammy Awards Live Charity Auction and is scheduled to provide the
production support and live web-cast production for the NBC Universal Propworks
`Battlestar Galactica', both events handled by Valcom under its agreement with
the Auction Network.
4. DISTRIBUTION
ValCom also owns a small library of television content, which it distributes
through Valencia Entertainment International. On November 6, 2007, Valencia
Entertainment signed an agreement with Porchlight Distribution Inc. from Santa
Monica Blvd., Los Angeles, for the worldwide distribution of all 40 episodes of
A.J.'s Time Travelers. In December 2008, Valencia signed an agreement with
Xtreme Fighting Championships (XFC) to produce and distribute 13 episodes of
XFC's mixed martial arts fighting championships worldwide and also to
distribute future XFC promoted events for TV broadcast and home entertainment.
In January 2009, XFC also contracted with HD Net to promote and broadcast new
events during 2009 which Valencia will distribute worldwide outside of the HD
Net broadcast.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 200 9 VS. MARCH 31, 2008
Revenues for the three months March 31, 2009 decreased by $62,386 or 16.45%
from $381,321 for the three months ended March 31, 2008 to $318,935 for the
same period in 2009. The decrease in revenue was principally due to reduction
in studio rental revenues.
Production costs for the three months ended March 31, 2009 decreased by $1,223
from $1,223 for the three months ended March 31, 2008 to $0 for the same period
in 2009. The decrease in production costs was principally due to reduction in
studio rental production. Depreciation and amortization expense for the three
months ended March 31, 2009 was $32,588 compared to $6,335for the three months
ended March 31, 2008.
9
General and administrative expenses for the three months ended March 31, 2009
increased by $383,175 or 128% from $298,579 for the three months ended March
31, 2008 to $681,754 for the same period in 2008. The decrease was due
principally to acquisition of My Family TV expense.
Interest expense for the three months ended March 31, 2009 increased by $15,616
or 102% from $15,278 for the three months ended March 31, 2008 to $30,894 for
the same period in 2009.
SIX MONTHS ENDED MARCH 31, 2009 VS. MARCH 31, 2008
Revenues for the six months March 31, 2009 decreased by $263,753 or 40.6% from
$648,957 for the six months ended March 31, 2008 to $385,204f or the same
period in 2009. The decrease in revenue was principally due to a reduction in
studio rental revenues.
Production costs for the six months ended March 31, 2009 decreased by $1,116 or
91% from $1,223 for the six months ended March 31, 2008 to $107or the same
period in 2009. The decrease in production costs was principally due to a
reduction in studio rental production.
Depreciation and amortization expense for the six months ended March 31, 2009
was $55,377 compared to $12,670 for the six months ended March 31, 2008.
General and administrative expenses for the six months ended March 31, 2009
increased by $132,222 or 13.7% from $963,148 for the six months ended March 31,
2008 to $1,095,370 for the same period in 2009. The increase was due
principally to the acquisition of My Family TV.
Interest expense for the six months ended March 31, 2009 increased by $20,841or
68.2% from $30,556 for the six months ended March 31, 2008 to $51,397for the
same period in 2009. The increase was due principally to additional activity
relating to the acquisition of My Family TV.
Other Income increased by $552,635 compared to $0 in the six months to March
31, 2008.
Due to the factors described above, the Company's net loss decreased by
$121,646, from $359,953 for the six months ended March 31, 2008 to $238,307 for
the same period in 2009.
FUTURE OUTLOOK COMPANY UPDATE
On December 15, 2008, Valcom acquired a 100% interest in Faith TV LLC, now re-
branded and launched as "MyFamily TV", a new family focused TV network
broadcasting through 75 affiliate TV stations as of February 2009 and with
plans to add significantly more affiliates to this. Currently broadcasting to
over 17 million households, MyFamily TV has also secured significant program
blocks such the joint venture with Porchlight Entertainment, one of the world's
leading independent suppliers of high quality entertainment, to launch a new
children's programming block called KidMango. This will feature major kids
titles such as Jay Jay the Jet Plane, Four Eyes and My Goldfish is Evil.
Valcom also signed a three- year facilities and production agreement for
television programming and related services with the Auction Network, a live-
bid-to-picture interactive auction entertainment network that offers audiences
compelling interactive programming merging the sport and spirit of live auction
with the ability to watch, bid and win live, real-time, in H-D from anywhere in
the world. These include the production of the 51st Annual Grammy Awards Live
Charity Auction Benefiting MusiCares and Christmas with the Stars Celebrity
Auction Benefits the Make-A-Wish Foundation hosted by Kathy, Rick, and Paris
Hilton. Valcom will also broadcast some of these auction events on MyFamily TV.
Valcom, together with various partners, has advanced plans to produce live TV
auctions events and in particular real estate auction.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's condensed consolidated financial statements have been prepared,
assuming that the Company will continue as a going concern. The Company has a
net loss of $238,307 and a negative cash flow from operations of $250,260 for
the six months ended March 31, 2009, a working capital deficiency of $1,470,078
and an accumulated deficit of $17,971,413 at March 31, 2009. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.
Cash totaled $352,106 on March 31, 2009 compared to $213,728 as at March 30,
2008. During the six months ended March 31, 2009, net cash used by operating
activities totaled $250,260 compared to net cash used in operating activities
of $139,702 for the comparable six-month period in 2008. A significant portion
of operating activities included payments for interest and production
development costs. Net cash provided by financing activities for the six months
ended March 31, 2009 totaled $1,398,580 compared to $68,100 for the comparable
six-month period in 2008.
The above cash flow activities yielded a net cash increase of $265,690 during
the six months ended March 31, 2009 compared to an increase of $207,802 during
the comparable prior year period.
Net working capital (current assets less current liabilities) was a negative
$1,479,078 as of March 31, 2009. The Company will need to raise funds through
various financings to maintain its operations until such time as cash generated
by operations is sufficient to meet its operating and capital requirements.
There can be no assurance that the Company will be able to raise such capital
on terms acceptable to the Company, if at all.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
N/A
ITEM 4. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management is responsible for establishing and maintaining a system of
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Exchange Act) that is designed to ensure that information required to be
disclosed by the Company in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
specified in the Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the issuer's management, including its principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure.
Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an
evaluation with the participation of the Company's management, including Vince
Vellardita, the Company's Chief Executive Officer and Chief Financial Officer
("CEO/CFO"), of the effectiveness of the Company's disclosure controls and
procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the
three months ended March 31, 2009. Based upon that evaluation, the Company's
CEO /CFO concluded that the Company's disclosure controls and procedures are
not effective to ensure that information required to be disclosed by the
Company in the reports that the Company files or submits under the Exchange
Act, is recorded, processed, summarized and reported, within the time periods
specified in the SEC's rules and forms, and that such information is
accumulated and communicated to the Company's management, including the
Company's CEO /CFO, as appropriate, to allow timely decisions regarding
required disclosure.
CHANGES IN INTERNAL CONTROLS.
Our management, with the participation the Principal Executive Officer and
Principal Accounting Officer performed an evaluation as to whether any change
in our internal controls over financial reporting occurred during the Quarter
ended March 31, 2009. Based on that evaluation, the Company's CEO/CFO concluded
that no change occurred in the Company's internal controls over financial
reporting during the Quarter ended March 31, 2009 that has materially affected,
or is reasonably likely to materially affect, the Company's internal controls
over financial reporting.
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PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
VALCOM V. CHICAGO TITLE COMPANY AND THE LAURUS MASTER FUND
On March 24, 2009, the Company and Laurus Master Fund, Ltd, a company organized
under the laws of the Cayman Islands ("Laurus") and Chicago Title Company, a
California Corporation ("Chicago Title") entered into a Settlement Agreement
whereby the Company resolved it's previously asserted claims against Laurus and
Chicago Title.
Pursuant to the terms of the Settlement Agreement, Laurus agrees to pay the
Company five hundred and fifty thousand dollars ($550,000) within ten days of
the signing of the Settlement Agreement. Within ten calendar days after the
Company receives payment from Laurus, the Company shall file a Request for
Dismissal of its claims, with prejudice, of its actions against Laurus and
Chicago Title and Chicago Title shall file a Request for Dismissal of its
claims against Laurus.
VALCOM, INC. V. PTL PRODUCTIONS, INC., TROY LINGER, CHRIS LENTO DBA BRENTWOOD
MAGAZINE,
Case number SC094099. This matter involves breach of contract and fraud against
the Defendants for $380,000 filed on June 1, 2007 in the Superior Court of Los
Angeles, Santa Monica District alleging breach of contract, specific
performance, injunctive relief, declaratory relief, accounting and negligence.
In this matter, Valcom is the plaintiff and sued the defendants for breach of
contract with respect to Valcom's purchase of Brentwood Magazine. The parties
are in settlement discussions and anticipate a settlement of this case at any
time.
ITEM 1A. RISK FACTORS
There have been no material changes from the Risk Factors described in our
Annual Report on Form 10-K for the fiscal year ended September 30, 2008.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On November 25, 2008, the Company executed a convertible debenture in the
principal amount of $100,000 payable to Able Income Fund, LLC convertible at
the lower of (1) the VWAP for the three Regular Trading Days (which need not be
consecutive) selected by the Holder from the 20 trading days ending on the
trading day immediately before the relevant conversion date, multiplied by 70%
or (2) $0.10 and warrants to purchase 400,000 shares of the Company's common
stock at an exercise price of $0.10 per share. The Company paid off the note in
February 2009.
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On January 6, 2009, the Company and Omnireliant Holdings, Inc. ("Omnireliant")
entered into a Note Purchase Agreement whereby the Company sold to Omnireliant
a 10% Secured Convertible Promissory Note with a conversion price of $0.10 per
share and a warrant to purchase 1,000,000 shares of the Company's Common Stock
at an exercise price of $0.20 per share. The note may also be converted by the
purchase by the Omnireliant from the Company of broadcast airtime or commercial
slots at an agreed discount to the standard published rate card for such
airtime or commercial slots.
On February 5, 2009, the Company entered into a Share Purchase Agreement with
Rainy Day Holdings LLC for the purchase of
Five Million Shares of ValCom Series C Preferred Stock. Series C Preferred
Stock is convertible to ValCom Common Stock on a one to one basis at any time.
This investment was accompanied by the invitation to Carl Austin Powers to join
the Board of Directors of ValCom Inc. and Mr. Powers joined the Board of ValCom
on February 5, 2009 and also joined the company in a full time capacity, under
a 3 year agreement as Executive Vice President of Sales and Marketing.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
NONE
ITEM 5 - OTHER INFORMATION
On February 5, 2009, Carl Austin Powers entered into a three year agreement
with Valcom to become Executive Vice President of Sales and Marketing. On
February 5, 2009, Mr. Powers joined the board of directors of Valcom.
ITEM 6 - EXHIBITS.
(A) Exhibits
10.1 Form of Note Purchase Agreement dated January 6, 2009 between Valcom, Inc.
and Omnireliant Holdings, Inc. (Incorporated by reference to the Company's
Current Report on Form 8-K, filed with the Securities and Exchange Commission
on January 9, 2009)
10.2 Form of 10% Secured Promissory Note dated January 6, 2009 between Valcom,
Inc. and Omnireliant Holdings, Inc. (Incorporated by reference to the Company's
Current Report on Form 8-K, filed with the Securities and Exchange Commission
on January 9, 2009)
10.3 Form of Security Agreement dated January 6, 2009 between Valcom, Inc. and
Omnireliant Holdings, Inc. (Incorporated by reference to the Company's Current
Report on Form 8-K, filed with the Securities and Exchange Commission on
January 9, 2009)
10.4 Form of Warrant dated January 6, 2009 between Valcom, Inc. and Omnireliant
Holdings, Inc. (Incorporated by reference to the Company's Current Report on
Form 8-K, filed with the Securities and Exchange Commission on January 9, 2009)
10.5 Memorandum of Understanding by and between Valcom, Inc. and Jeremiah's
International Trading CO. Inc. dated February 5, 2009 (Incorporated by
reference to the Company's Current Report on Form 8-K, filed with the
Securities and Exchange Commission on February 12, 2009.
31.1 Certification by Chief Executive Officer and Chief Financial Officer
pursuant to Section 302 of Sarbanes Oxley Act of 2002.
32.1 Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350.
The Company incorporates by reference all exhibits to its Form 10-K for the
year ending September 30, 2008.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: May _20, 2009
VALCOM, INC., A DELAWARE CORPORATION
By: /s/ Vince Vellardita
---------------------
Vince Vellardita
Chief Executive Officer (Principal
Executive Officer) and Chief Financial
Officer (Principal Accounting and
Financial Officer)
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the issuer and in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
- -------------------------- ------------------------ ------------
By: /s/ Vince Vellardita Chief Executive Officer, May 20, 2009
---------------------- Chairman of the Board
Vince Vellardita
By: /s/ Richard Shintaku Director May 20, 2009
--------------------
Richard Shintaku
By: /s/ Frank O Donnell Director May 20, 2009
-------------------
Frank O Donnell
By: /s/ Carl Austin Powers Director May 20, 2009
----------------------
Carl Austin Powers
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