UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-Q/A
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED JUNE 30, 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.
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(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 [ ] 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 October 1, 2009, the
issuer had 44,063,983 shares of its $0.001 par value common stock outstanding.
EXPLANATORY NOTE
On August 21, 2009, Valcom, Inc. (the "Company") filed its Form 10-Q for the
period ended June 30, 2009 without the review of its auditors, Seale and Beers,
CPAs. The Company is filing this 10-Q/A upon the completion of the review of
Seale and Beers, CPAs
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 June 30, 2009 and the results of their operations and
their cash flows for the nine months ended June 30, 2009. These consolidated
financial statements include the accounts of ValCom, Inc. and its subsidiary
companies (together "the Company"). Results for the nine months ended June 30,
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......10
Item 3. Quantitative and Qualitative Market Risk.......................11
Item 4. Controls and Procedures........................................12
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
SEALE AND BEERS, CPAS
PCAOB & CPAB REGISTERED AUDITORS
www.sealebeers.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Valcom, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Valcom, Inc. as of June 30, 2009, and the related condensed consolidated
statements of operations and cash flows for the three-month and nine-month
periods ended June 30, 2009 and 2008. These interim financial statements are
the responsibility of the Corporation's management.
We conduct 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 condensed consolidated financial statements for them to
be in conformity with accounting principles generally accepted in the United
States of America.
The accompanying financial statements have been reviewed assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has an accumulated deficit of $19,239,761 as
of June 30, 2009, which raises substantial doubt about its ability to continue
as a going concern. Management's plans concerning these matters are also
described in Note 3. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/S/ SEALE AND BEERS, CPAS
- ------------------------
Seale and Beers, CPAs
Las Vegas, Nevada
September 29, 2009
6490 WEST DESERT INN RD, LAS VEGAS, NEVADA 89146
(702) 253-7492 FAX: (702)253-7501
VALCOM, INC.
Condensed Consolidated Balance Sheets
ASSETS
June 30, September 30,
2009 2008
(unaudited)
-------------- --------------
CURRENT ASSETS
Cash $ 91,092 $ 86,416
Accounts receivable, net 229,873 -
Prepaid expense 114,934 24,434
-------------- --------------
Total Current Assets 435,899 110,850
-------------- --------------
PROPERTY and EQUIPMENT, net 59,423 76,020
-------------- --------------
OTHER ASSETS
Deposits - -
Other assets 1,000,000 1,000,000
-------------- --------------
Total Other Assets 1,000,000 1,000,000
-------------- --------------
TOTAL ASSETS $ 1,495,322 $ 1,186,870
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 590,775 $ 468,364
Accrued interest payable 227,150 166,061
Deferred income - -
Due to related parties 376,775 86,181
Notes payable 550,000 412,173
Convertible notes payable 140,000 -
-------------- --------------
Total Current Liabilities 1,884,700 1,132,779
-------------- --------------
LONG-TERM
LIABILITIES
Notes payable - -
-------------- --------------
Total Long-Term Liabilities - -
-------------- --------------
TOTAL LIABILITIES 1,884,700 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, 14,691,395 shares issued and outstanding 14,691 9,591
Common stock, 250,000,000 shares authorized at par value
of $0.001, 33,864,158 and 22,776,099 shares
issued and outstanding, respectively 33,864 22,776
Treasury stock, 35,000 shares (23,522) (23,522)
Additional paid-in capital 18,825,312 17,778,314
Accumulated deficit (19,239,761) (17,733,106)
-------------- --------------
Total Stockholders' Equity (Deficit) (389,378) 54,091
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY (DEFICIT) $ 1,495,322 $ 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 Nine Months Ended
June 30, June 30,
2009 2008 2009 2008
------------ ------------ ------------- ------------
REVENUES $ 262,692 $ 190,961 $ 647,896 $ 839,918
COST OF GOODS SOLD - 230 1,453
------------ ------------ ------------- ------------
GROSS MARGIN 262,692 190,731 647,896 838,465
OPERATING EXPENSES
Advertising and marketing 53,141 906 27,036 2,219
Depreciation expense 32,588 6,335 87,965 19,005
General and administrative 522,456 309,420 1,617,933 1,272,568
Asset impairment charge 900,262 900,262
------------ ------------ ------------- ------------
Total Operating Expenses 1,508,447 316,661 2,633,196 1,293,792
------------ ------------ ------------- ------------
LOSS FROM OPERATIONS (1,245,755) (125,930) (1,985,300) (455,327)
------------ ------------ ------------- ------------
OTHER INCOME (EXPENSE)
Gain (loss) on sale of equipment - - - -
Interest expense (22,793) (15,278) (74,190) (45,834)
Other income 200 - 552,835 -
------------ ------------ ------------- ------------
TOTAL OTHER INCOME (EXPENSE) (22,593) (15,278) 478,645 (45,834)
------------ ------------ ------------- ------------
INCOME (LOSS) BEFORE (1,268,348) (141,208) (1,506,655) (501,161)
INCOME TAXES
INCOME TAX EXPENSE - - - -
------------ ------------ ------------- ------------
NET INCOME (LOSS) $ (1,268,348) $ (141,208) $ (1,506,655) $ (501,161)
============ ============ ============= ============
BASIC INCOME (LOSS) PER SHARE $ (0.04) $ (0.01) $ (0.05) $ (0.04)
============ ============ ============= ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 29,443,658 15,078,599 28,320,129 13,627,349
============ ============ ============= ============
The accompanying notes are a integral part of these condensed consolidated financials statements.
3
VALCOM, INC.
Condensed Consolidated Statements of Stockholders' Equity (Deficit)
(unaudited)
Series B Preferred Stock Series C Preferred Stock Common Stock
Shares Amount Shares Amount Shares Amount
------ ------ --------- ------ ---------- ------
Balance, September 30, 2008 38,000 38 9,591,395 9,591 22,776,099 22,776
Preferred stock issued for
purchase of Faith TV - - 100,000 100 - -
Preferred stock issued for cash - - 5,000,000 5,000 - -
Common stock issued for
services - - - - 2,313,059 2,313
Common stock issued for cash - - - - 5,000,000 5,000
Common stock issued for debt - - - - 3,775,000 3,775
Net loss for the nine months
ended June 30, 2008 - - - - - -
------ ------ ---------- ------- ---------- -------
Balance, June 30, 2009 38,000 $ 38 14,691,395 $14,691 33,864,158 $33,864
====== ====== ========== ======= ========== =======
The accompanying notes are an integral part of these condensed consolidaetd financial statements.
4
VALCOM, INC.
Condensed Consolidated Statements of Stockholders' Equity (Deficit)
(unaudited)
(Continued)
Total
Additional Stockholders'
Treasury Paid-In Accumulated Equity
Stock Capital Deficit (Deficit)
-------- ---------- ----------- ------------
Balance, September 30, 2008 (23,522) 17,778,314 (17,733,106) 54,091
Preferred stock issued for
purchase of Faith TV - 99,900 - 100,000
Preferred stock issued for cash - 245,000 - 250,000
Common stock issued for
services - 188,436 - 190,749
Common stock issued for cash - 95,000 - 100,000
Common stock issued for debt - 418,662 - 422,437
Net loss for the nine months
ended June 30, 2008 - - (1,506,655) (1,506,655)
-------- ----------- ------------ ------------
Balance, June 30, 2009 $(23,522) $18,825,312 $(19,239,761) $ (389,378)
======== =========== ============ ============
The accompanying notes are an integral part of these condensed consolidaetd financial statements.
5
VALCOM, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
For the Nine Months Ended
June 30,
2009 2008
----------- -----------
OPERATING ACTIVITIES
Net loss $(1,506,655) $ (501,161)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation expense 87,965 19,005
Common stock issued for services 190,749 312,300
Impairment of asset 900,262 -
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable (229,873) 100,473
(Increase) decrease in prepaid expenses (90,500) (57,159)
(Increase) decrease in other assets (57,829)
Increase (decrease) in accrued interest payable 61,089 45,834
Increase (decrease) in accounts payable 122,411 (77,716)
Increase (decrease) in deferred income - 265,000
----------- -----------
Net Cash Used in Operating Activities (464,552) 48,747
----------- -----------
INVESTING ACTIVITIES
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 781,437 -
Proceeds from convertible notes payable 140,000 68,100
Increase/Decrease in related parties payables 290,594 -
Proceeds from notes payable 137,827 -
----------- -----------
Net Cash Provided by Financing Activities 1,349,858 68,100
----------- -----------
NET INCREASE IN CASH 4,676 116,847
CASH AT BEGINNING OF YEAR 86,416 5,926
----------- -----------
CASH AT END OF YEAR $ 91,092 $ 122,773
=========== ===========
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.
6
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 June 30, 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 June 30, 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 - INDUSTRY SEGMENTS
In accordance with the provisions of Statement of Financial Accounting
Standards No. 131, (SFAS 131), "Disclosures about Segments of an
Enterprise and Related Information", a company is required to disclose
selected financial and other related information about its operating
segments. Operating segments are components of an enterprise about which
separate financial information is available and is utilized by the chief
operating decision maker ("CODM") related to the allocation of resources
and in the resulting assessment of the segment's overall performance. The
measure used by the Company's CODM is a business segment's gross profit.
As of and for the three months ended June 30, 2009, the Company had three
continuing industry segments.
For the three months For the nine months
ended 6/30/09 ended 6/30/09
---------------------- ----------------------
COSTS COSTS
OF GROSS OF GROSS
SEGMENT NAME REVENUE SALES PROFIT REVENUE SALES PROFIT
- ------------ ------- ----- ------- ------- ----- -------
Studio Rental Division 127,602 - 127,602 279,231 - 279,231
TV Stations 101,210 - 101,210 203,027 - 203,027
Film and Television Production 33,880 - 33,880 165,638 - 165,638
------- ----- ------- ------- ----- -------
Total for Quarter 262,692 262,692 647,896 647,896
======= ===== ======= ======= ===== =======
NOTE 3 - 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.
7
NOTE 4 - 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 in the agreement was 100,000 shares of the Company's Class
C preferred stock valued at $1.00 per share. The Company also paid cash of
$150,000 and issued a note payable for $750,000 for a total purchase price
of $1,000,000. The preferred stock is convertible to shares of the
Company's common stock on a one share for one share basis.
While the Company anticipates future revenues and profits from the
acquisition, as of June 30, 2009, the operations and results have not been
adequate to support the book value of the assets acquired, as estimated by
the Company's management at the time of purchase. Estimation of future
sales could not be determined, and no formal appraisals of the acquired
assets were obtained. Based on the above factors, the Company concluded
that the net book valuation of the film library, the equipment and
intangible totaling $900,262 could not be fully supported and therefore as
of June 30, 2009, the Company deemed the assets impaired and wrote them
off.
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 received payment from Laurus, the Company filed a Request for
Dismissal of its claims, with prejudice, of its actions against Laurus and
Chicago Title. This settlement is reflected as `Other Income' with full
accrual made for legal costs relating to the settlement.
During the second quarter Valcom tested the concept of using television
promotions and the auction format, both live-television and on-line, to
promote the sale of real estate properties. The company's primary focus
has been on REO properties utilizing its production and media promotion
capabilities.
On June 5, 2009, Valcom entered into a conventional convertible note for
$100,000 with a fixed conversion price of $0.10 per share. The note has
an interest rate of 10% and a maturity one year from the date of issuance.
The note may be repaid or converted at the option of the holder. The note
is secured by real estate properties to be sold through an on-line auction
format promoted by television advertising. The proceeds from the sale of
properties purchased with the proceeds shall be shared 50:50 by the holder
and the Company.
On June 9, 2009, Valcom entered into a conventional convertible note for
$40,000 with a fixed conversion price of $0.10 per share. The note has an
interest rate of 10% and a maturity one year from the date of issuance.
The note may be repaid or converted at the option of the holder. The note
is secured by real estate properties to be sold through an on-line auction
format promoted by television advertising. The proceeds from the sale of
properties purchased with the proceeds shall be shared 50:50 by the holder
and the Company.
On June 19, 2009, Valcom entered into an agreement with Florida
Opportunities, Inc. ("FOI"), an investor in real estate properties, to
sell REO properties in an on-line auction format promoted by television
advertising. The company has an agreement with FOI to share in the
profits of the sale of properties on a 50:50 basis after expenses are
deducted through a joint venture, Sun Investment Services, LLC ("Sun").
Sun is jointly owned (50:50) by Valcom and FOI. The Parties are currently
negotiating an operating agreement for Sun with FOI for future auctions.
Valcom is also in active discussion with other entities to market and
promote properties utilizing its real estate promotion and auction format.
During the nine months ended June 30, 2009, the Company issued 11,088,059
shares of its common stock and 5,100,000 shares of its Preferred Stock.
8
NOTE 5 - 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.
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.
In May 2008, the FASB issued FSP No. APB 14-1, "Accounting for Convertible
Debt Instruments That May Be Settled in Cash upon Conversion (Including
Partial Cash Settlement)" ("FSP APB 14-1"). FSP APB 14-1 applies to
convertible debt instruments that, by their stated terms, may be settled
in cash (or other assets) upon conversion, including partial cash
settlement, unless the embedded conversion option is required to be
separately accounted for as a derivative under FAS 133. Convertible debt
instruments within the scope of FSP APB 14-1 are not addressed by the
existing APB 14. FSP APB 14-1 requires that the liability and equity
components of convertible debt instruments within the scope of FSP APB 14-
1 be separately accounted for in a manner that reflects the entity's
nonconvertible debt borrowing rate. This requires an allocation of the
convertible debt proceeds between the liability component and the embedded
conversion option (i.e., the equity component). The difference between the
principal amount of the debt and the amount of the proceeds allocated to
the liability component will be reported as a debt discount and
subsequently amortized to earnings over the instrument's expected life
using the effective interest method. FSP APB 14-1 is effective for the
Company's fiscal year beginning January 1, 2009 and will be applied
retrospectively to all periods presented. The adoption of this statement
had little or no effect on the Company's consolidated financial position,
results of operations, and disclosures.
In January 2009, the Company adopted Statement of Financial Accounting
Standards ("SFAS"), No. 161, "Disclosures about Derivative Instruments and
Hedging Activities" ("SFAS 161"), which changes the disclosure
requirements for Derivative instruments and hedging activities. SFAS 161
requires enhanced disclosures about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged
items are accounted for under SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" and its related interpretations, and
(c) how derivative instruments and related hedged items affect an entity's
financial position, financial performance, and cash flows. The adoption of
SFAS 161 did not have a material impact on the condensed consolidated
financial statements.
In January 2009, the Company adopted Emerging Issues Task Force "(EITF")
Issue No. 07-5, Determining Whether an Instrument (or Embedded Feature) is
Indexed to an Entity's Own Stock ("EITF 07-5") effective January 1, 2009.
The adoption of EITF 07-5's requirements can affect the accounting for
warrants and many convertible instruments with certain provisions that
protect holders from a decline in the stock price (or "down-round"
provisions). Warrants and convertible instruments with such provisions may
no longer be recorded in equity. The Company evaluated whether its stock
warrants and the conversion feature in its convertible notes contain
provisions that protect holders from declines in the stock price or
otherwise could results in modification of the exercise price and/or
shares to be issued under the respective agreements based on a variable
that is not an input to the fair value of a fixed-for-fixed option. The
Company determined that the conversion features in the convertible notes
issued in the June 2009 do not contain such provisions.
In April 2009, FASB Staff Position (FSP) No. FAS 107-1 and APB 28-1 was
issued to amend SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments", to require disclosures about fair value of financial
instruments for interim reporting period as well as in annual financial
statements. This FSP also amends APB Opinion No. 28, "Interim Financial
Reporting", to require those disclosures in summarized financial
information at interim reporting periods. FSP No. 107-1 and APB 28-1 is
effective for interim reporting periods ending after June 15, 2009. The
Company determined that the adoption of this guidance does not have a
material impact on the Company's consolidated financial statements.
NOTE 6 - SUBSEQUENT EVENTS
Valcom entered into a Letter of Intent with ABEX Capital, Inc. on July 25,
2009 to invest $2,000,000 into the Company. The agreement is subject to
ABEX satisfactory due diligence and a final agreement with the initial
investment into the Company on or about September 15, 2009. ABEX will
acquire 51% of the fully diluted share-capital of Valcom and receive two
board seats. On September 17, 2009, ABEX Real Estate, Inc., an affiliate
of ABEX Capital, invested $400,000 as its first tranche of its funding
into the Company per the terms of its Letter of Intent. The purchase
price in the agreement was 400,000 shares of the Company's common stock at
$0.05 per share and 400,000 Class C preferred stock valued at $0.05 per
share. The preferred stock is convertible to shares of the Company's
common stock on a one share for one share basis. ABEX also received one
board seat with its first funded tranche. The balance of the investment
is to be funded in four remaining tranches to be funded on or about the
15th of October, November and December 2009 and 30 January 2010.
On September 21, 2009 the Company entered into a Final Payment and
Settlement Agreement with Mutual Release with the former principals of
Faith TV, LLC. The Company paid off the balance of its note payable of
$450,000 with a negotiated settlement amount of $291,092 based on certain
impairment of assets associated with the acquisition. The Company now has
clear title to the network with no outstanding liens or encumbrances.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2009 VS. JUNE 30, 2008
Revenues for the three months June 30, 2009 increased by $71,731 or 38% from
$190,961 for the three months ended June 30, 2008 to $262,692 for the same
period in 2009. The increase in revenue was principally due to revenues
generated by MyFamilyTV.
Depreciation and amortization expense for the three months ended June 30, 2009
increased to $32,588for the three months ended June 30, 2009 compared to
6,335for the same period in 2008 due to the increased asset base purchased
from FaithTV.
General and administrative expenses for the three months ended June 30, 2009
increased by $213,036 or 69% from $309,420 for the three months ended June 30,
2008 to $522,456 for the same period in 2009. The increase was due principally
to higher operating costs in preparation for the Company's entry into real
estate promotion and auctions.
The asset impairment charge related to the Company's acquisition of FaithTV for
$900,262 during the three months ended June 30, 2009. While the Company
anticipates future revenues and profits from the acquisition, as of June 30,
2009, the operations and results have not been adequate to support the book
value of the assets acquired, as estimated by the Company's management at the
time of purchase. Estimates of future sales could not be determined, and no
formal appraisals of the acquired assets were obtained. Based on the above
factors, the Company concluded that the net book valuation of the film library,
the equipment and intangible assets totaling $900,262 could not be fully
supported and therefore as of June 30, 2009, the Company deemed the assets
impaired and wrote them off.
Interest expense for the three months ended June 30, 2009 increased by $7,515
or 49% from $15,278 for the three months ended June 30, 2008 to $22,793for the
same period in 2009. The increase was due principally to the note for the
purchase of FaithTV.
RESULTS OF OPERATIONS - NINE MONTHS ENDED JUNE 30, 2009 VS. JUNE 30, 2008
Revenues for the nine months June 30, 2009 decreased by $192,022 or 23% from
$839,918 for the nine months ended June 30, 2008 to $647,896 for the same
period in 2009. The decrease in revenue was principally due to the drop in
television production and advertising revenues related to the general economic
slowdown.
Depreciation and amortization expense for the nine months ended June 30, 2009
increased to $87,965 for the nine months ended June 30, 2009 compared to
$19,005 for the same period in 2009 due to the increased asset base purchased
from FaithTV.
General and administrative expenses for the nine months ended June 30, 2009
increased by $345,365 or 27% from $1,272,568 for the nine months ended June 30,
2008 to $1,617,933for the same period in 2009. The increase was due principally
to.
Interest expense for the nine months ended June 30, 2009 increased by $28,356
or 62% from $45,834 for the nine months ended June 30, 2008 to $74,190 for the
same period in 2009. The increase was due principally to the note for the
purchase of FaithTV.
Due to the factors described above, the Company's net loss increased by
$1,005,494 from $501,161 for the nine months ended June 30, 2008 to $1,506,655
for the same period in 2009.
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FUTURE OUTLOOK
During August 2008, the Company emerged from bankruptcy. The Company is seeking
new business opportunities and to reestablish itself in the television and film
production industry. On December 15, 2008, Valcom acquired 100% interest in
Faith TV LLC, now re-branded and launched as "MyFamilyTV," a new family focused
TV network broadcasting through 75 affiliate TV stations as of August 2009 and
with plans to add significantly more affiliates. Currently broadcasting to
over 58 million households, MyFamilyTV has also secured significant program
blocks such as 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, which has been well
received.
During the second quarter Valcom tested the concept of using television
promotions and the auction format, both live-television and on-line, to promote
the sale of real estate properties. The company's primary focus has been on
REO properties utilizing its production and media promotion capabilities.
Valcom entered into an agreement dated June 19, 2009 with Florida
Opportunities, Inc. ("FOI"), an investor in real estate properties, to sell REO
properties in an on-line auction format promoted by television advertising.
The company has an agreement with FOI to share in the profits of the sale of
properties on a 50:50 basis after expenses are deducted through a joint
venture, Sun Investment Services, LLC ("Sun"). Sun is jointly owned (50:50) by
Valcom and FOI and the Parties are currently negotiating an operating
agreement for future auctions. Valcom is also in active discussion with other
entities to market and promote properties utilizing its auction promotion
format.
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 $1,506,655 and a negative cash flow from operations of $464,552for
the nine months ended June 30, 2009, a working capital deficiency of
$1,448,801and an accumulated deficit of $19,239,761 at June 30, 2009. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern.
Cash totaled $91,092 on June 30, 2009 compared to $ 122,773 as at June 30,
2008. During the nine months ended June 30, 2009, net cash used by operating
activities totaled $(464,552) compared to net cash used in operating activities
of $48,747 for the comparable nine-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 nine
months ended June 30, 2009 totaled $1,349,858 compared to $68,100for the
comparable nine-month period in 2008.
The above cash flow activities yielded a net cash increase of $4,676 during the
nine months ended June 30, 2009 compared to an increase of $116,847 during the
comparable prior period in 2008.
Net working capital (current assets less current liabilities) was a deficit of
$1,448,801 as of June 30, 2009. The Company will need to raise funds through
various financings or find a suitable merger partner 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.
SUBSEQUENT EVENTS
On September 22, 2009 the Company entered into a Final Payment and Settlement
Agreement with Mutual Release with the former principals of Faith TV, LLC. The
Company paid off the balance of its note payable of $450,000 with a negotiated
settlement amount of $291,092 based on certain impairment of assets associated
with the acquisition. The Company now has clear title to the network with no
outstanding liens or encumbrances.
On September 22, 2009, the Company entered into a Securities Purchase Agreement
with Abex Real Estate, Inc. whereby Abex would purchase shares that amount of
common stock and Series C Preferred Stock of the Company that would cause Abex
to be the beneficial owner of 51% of the issued and outstanding common stock of
the Company on a fully diluted basis, for an aggregate of purchase price of
$2,000,0000. The Series C Preferred Stock is convertible in to the Company's
common stock at a ratio of one-to-one. Pursuant to the terms of the Securities
Purchase Agreement, the purchase will occur in multiple tranches and, on
September 22, 2009, Abex purchased 4,000,0000 shares of common stock and
4,000,000 shares of Series C Preferred Stock for an aggregate purchase price of
$400,000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
N/A
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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 June 30, 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 2009
Quarter ended June 30, 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 2009 Quarter ended June 30, 2009 that has
materially affected, or is reasonably likely to materially affect, the
Company's internal controls over financial reporting.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
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 April 28, 2009 Valcom issued 1,000,000 shares of its Common Stock at $0.10
per share in lieu of payment of $100,000 toward the note for the acquisition of
FaithTV.
On May 4, 2009 Valcom issued 1,428,571 shares of its Common Stock at $0.07 per
share for cash from Asia Pacific Holdings LTD.
On May 14, 2009 Valcom issued 1,191,000 shares of its Common Stock at $0.05 per
share in a negotiated settlement of $59,550 shared equally between Venturetek
and Krovim related to a violation of their registration rights agreement.
On May 14, 2009 Valcom issued 1,500,000 shares of its Common Stock at $0.05 per
share in lieu of payment of $75,000 toward the note for the acquisition of
FaithTV.
On June 5, 2009 Valcom entered a Participation Agreement with Bay-Gulf
Partners, LLC for a Convertible Note for $100,000. The note is convertible into
Valcom Common Stock at a conversion rate of $0.10 per share or 1,000,000 shares
if converted in total. The note has a one-year term and a 10% interest rate and
may be repaid or converted at the option of Bay-Gulf Partners, LLC.
On June 9, 2009 Valcom entered a Participation Agreement with Bay-Gulf Homes,
LLC for a Convertible Note for $40,000. The note is convertible into Valcom
Common Stock at a conversion rate of $0.10 per share or 400,000 shares if
converted in total. The note has a one-year term and a 10% interest rate and
may be repaid or converted at the option of Bay-Gulf Homes, LLC.
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ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
NONE
ITEM 5 - OTHER INFORMATION
NONE.
ITEM 6 - EXHIBITS.
(A)Exhibits
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, 2007.
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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: Ocotber 5, 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)
14