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 DECEMBER 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 [ ] 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 February 22, 2010, the
issuer had _______ shares of its $0.001 par value common stock outstanding.
VALCOM, INC.
FORM 10-Q
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements F-2
Item 2. Management's Discussion and Analysis or Plan of Operation 2
Item 3. Quantitative and Qualitative Market Risk 6
Item 4. Controls and Procedures 6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 7
Item 1A. Risk Factors 7
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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 8
SIGNATURES 9
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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 December 31, 2009 and the results of their operations
and their cash flows for the three months ended December 31, 2009. These
consolidated financial statements include the accounts of ValCom, Inc. and its
subsidiary companies (together "the Company"). Results for the nine months
ended December 31, 2009, are not necessarily indicative of the operations,
which may occur during the year ending September 30, 2009. Refer to the
Company's Annual Report on Form 10- K for the year ended September 30, 2009 for
further information.
VALCOM, INC.
Balance Sheets
December 31, 2009 September 30, 2009
(Unaudited)
----------------- ------------------
Assets
CURRENT ASSETS (unaudited)
Cash $ 103,608 $ 110,846
Restricted cash 60,313 60,230
Accounts receivable, net 96,376 44,303
Prepaid assets 275,000 -
Inventory 424,209 487,324
----------------- ------------------
Total Current Assets 959,506 702,703
FIXED ASSETS, net
Property, equipment and film
library, net 223,991 238,664
Intangible assets, net 257,786 290,695
----------------- ------------------
TOTAL ASSETS $ 1,441,283 $ 1,232,062
================= ==================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,077,052 $ 633,605
Due to related parties 922,027 900,048
Derivative liability, current 8,559 -
Notes payable, net of discount 410,373 378,839
----------------- ------------------
Total Current Liabilities 2,418,011 1,912,492
----------------- ------------------
DEREVATIVE LIABILITY 334,461 -
----------------- ------------------
STOCKHOLDERS' 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 14,691
Common stock, 250,000,000 shares
authorized at par value of $0.001,
40,434,158 and 22,776,099 shares
issued and outstanding, respectively 39,201 39,064
Treasury stock, 35,000 shares (23,522) (23,522)
Additional paid-in capital 19,632,548 19,791,048
Accumulated deficit (20,974,145) (20,501,749)
----------------- ------------------
Total Stockholders' Deficit (1,311,189) (680,430)
----------------- ------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 1,441,283 $ 1,232,062
================= ==================
The accompanying notes are a integral part of these financial statements.
F-2
VALCOM, INC.
Statements of Operations
(Unaudited)
For the Three For the Three
Months Ended Months Ended
December 31, 2009 December 31, 2008
----------------- -----------------
REVENUES $ 191,185 $ 66,269
COST OF GOODS SOLD 123,464 107
----------------- -----------------
GROSS PROFIT 67,721 66,162
OPERATING EXPENSES
Advertising and marketing 537 54,138
Depreciation and amortization 48,672 22,788
General and administrative 363,126 413,616
----------------- -----------------
Total Operating Expenses 412,335 490,542
LOSS FROM OPERATIONS (344,614) (424,380)
OTHER INCOME (EXPENSE)
Interest expense (5,666) (20,343)
Amortization of debt discount (47,172) -
Gain on derivative liabilities 112,347 -
----------------- -----------------
TOTAL OTHER INCOME (EXPENSE) 59,509 (20,343)
----------------- -----------------
LOSS BEFORE INCOME TAXES (285,105) (444,723)
PROVISION FOR INCOME TAXES - -
----------------- -----------------
NET LOSS $ (285,105) $ (444,723)
================= =================
BASIC LOSS PER SHARE (0.01) (0.02)
================= =================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 39,913,506 23,710,964
================= =================
The accompanying notes are a integral part of these financial statements.
F-3
VALCOM, INC.
Statements of Stockholders' Equity (Deficit)
(Unaudited)
(Continued)
Series B Preferred Stock Series C Preferred Stock Common Stock
Shares Amount Shares Amount Shares Amount
------ ------ ---------- ------- ---------- -------
Balance,
September 30,
2009 38,000 $38.00 14,691,395 $14,691 39,064,158 $39,064
Cumulative effect
of change in
accounting principle-
October 1, 2009
reclassification of
embedded feature of
equity-linked financial
instruments to
derivative liabilities
Common stock issued
for services 1,050,000 105
Common stock issued
for cash 320,000 32
Net loss
------ ------ ---------- ------- ---------- -------
Balance,
December 31,
2009 38,000 $38.00 14,691,395 $14,691 40,434,158 $39,201
====== ====== ========== ======= ========== =======
The accompanying notes are a integral part of these financial statements.
F-4
VALCOM, INC.
Statements of Stockholders' Equity (Deficit)
(Unaudited)
(Continued)
Total
Additional Stockholders'
Treasury Paid-In Accumulated Equity
Stock Capital Deficit (Deficit)
-------- ----------- ------------ ------------
Balance,
September 30, 2009 $(23,522) $20,014,218 $(20,724,919) $ (680,430)
Cumulative effect
of change in
accounting principle-
October 1, 2009
reclassification of
embedded feature of
equity-linked financial
instruments to
derivative liabilities (475,533) 35,879 $ (439,654)
Common stock issued
for services 77,895 78,000
Common stock issued
for cash 15,968 16,000
Net loss - (285,105) (285,105)
-------- ----------- ------------ ------------
Balance,
December 31, 2009 $(23,522) $19,632,548 $(20,974,145) $ (1,311,189)
======== =========== ============ ============
The accompanying notes are a integral part of these financial statements.
F-5
VALCOM, INC.
Statements of Cash Flows
For the Three For the Three
Months Ended Months Ended
December 31, December 31,
2009 2008
------------ ------------
OPERATING ACTIVITIES
Net loss $ (285,105) $ (444,723)
Adjustments to reconcile net loss to net
cash used by operating activities:
Stock issued for services 78,000 86,973
Depreciation expense 15,763 22,788
Amortization of intangible assets 32,909 -
Amortization of note discount 47,172 -
Gain on derivative liabilities (112,347) -
Changes in operating assets and liabilities:
Accounts receivable (52,073) (111,877)
Prepaid assets (275,000) 6,109
Inventory 63,115 -
Accounts payable and accrued expenses 443,522 (98,110)
Accounts payable to related party 21,979 -
------------ ------------
Net Cash Used in Operating Activities (22,065) (538,840)
------------ ------------
INVESTING ACTIVITIES
Purchase of property and equipment (1,090) (48,203)
Increase in restricted cash (83) -
------------ ------------
Net Cash Used in Investing Activities (1,173) (48,203)
------------ ------------
FINANCING ACTIVITIES
Proceeds from sale of common stock 16,000 -
Proceeds from note payable - 51,500
Proceeds from related party payable - 482,351
------------ ------------
Net Cash Provided by Financing Activities 16,000 533,851
------------ ------------
NET DECREASE IN CASH (7,238) (53,192)
CASH AT BEGINNING OF YEAR 110,846 86,416
------------ ------------
CASH AT END OF YEAR $ 103,608 $ 33,224
============ ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ 2,500 $ -
Income Taxes $ - $ -
NON CASH FINANCING ACTIVITIES:
Cummulative effect of change in accounting principal $ 455,367 $ -
Common stock issued for debt $ - $ 100,000
Preferred stock issued for subsidiary $ - $ 9,000
Debt issued for subsidiary $ - $ 750,000
Debt assumed in acquisition of subsidiary $ - $ 116,278
The accompanying notes are a integral part of these financial statements.
F-6
VALCOM, INC.
Notes to the Financial Statements
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at December 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,
2009 audited financial statements. The results of operations for the period
ended December 31, 2009 and 2008 are not necessarily indicative of the
operating results for the full years.
Recent Accounting Pronouncements
In June 2008, the FASB issued EITF 07-05, "Determining Whether an Instrument
(or Embedded Feature) is Indexed to an Entity's Own Stock", which was codified
into ASC Topic 815-40-15 effective for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. This topic
addresses the determination of whether an instrument (or an embedded feature)
is indexed to an entity's own stock. If an instrument (or an embedded feature)
that has the characteristics of a derivative instrument under the relative
paragraphs of Statement 133 is indexed to an entity's own stock, it is still
necessary to evaluate whether it is classified in stockholders' equity (or
would be classified in stockholders' equity if it were a freestanding
instrument). The guidance in this topic shall be applied to outstanding
instruments as of the beginning of the fiscal year in which this Issue is
initially applied. The cumulative effect of the change in accounting principle
shall be recognized as an adjustment to the opening balance of retained
earnings (or other appropriate components of equity or net assets in the
statement of financial position) for that fiscal year, presented separately.
However, in circumstances in which a previously bifurcated embedded conversion
option in a convertible debt instrument no longer meets the bifurcation
criteria in Statement 133 at initial application of this topic, the carrying
amount of the liability for the conversion option (that is, its' fair value on
the date of adoption) shall be reclassified to shareholders' equity. Any debt
discount that was recognized when the conversion option was initially
bifurcated from the convertible debt instrument shall continue to be amortized.
The adoption of ASC 815-40-15 effected our consolidated financial position and
results of operations as disclosed in Note 4.
F-7
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 - WARRANT DERIVATIVES
In June 2008, the FASB finalized FASB ASC 815-15, which specifies a procedure
to determine if an equity-linked financial instrument (or embedded feature) is
indexed to its own common stock. FASB ASC 815-15 is effective for fiscal years
beginning after December 15, 2008. A total of 5,209,000 of Valcom's warrants
that were previously classified in equity were reclassified to derivative
liabilities on October 1, 2009 as a result of FASB ASC 815-15. In addition,
certain embedded features related to convertible debt were bifurcated and
recorded as derivative liabilities on October 1, 2009. Valcom estimated the
fair value of these liabilities as of October1, 2009 to be $455,366. In
addition, we recorded a reduction of $475,533 to Additional Paid-in Capital;
$35,879 to Accumulated Deficit and an increase in debt discount of
$15,638. The effect of this adjustment is recorded as a cumulative effect of
change in accounting principle in our consolidated statement of stockholders'
deficit. At December 31, 2010, the derivative liability was marked to market
and had a market value of $343,020. During the three months ended December 31,
2010, we recorded a gain on derivative liabilities totaling $112,347.
NOTE 4- SUBSEQUENT EVENTS
The Company evaluated subsequent events through February 25, 2010 and
determined there were none requiring disclosure.
F-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 December 31, 2009, ValCom, Inc. ("Valcom" or the "Company") operations
were comprised of the following activities:
1. TV Stations and Broadcast Division
2. Film and Television Production
3. Live Theater Event Division
4. Real Estate Channel Auctions
Corporate offices are located at 2113A Indian Rocks Beach, Florida.
Certain statements in "Management's Discussion and Analysis or Plan of
Operation" below, and elsewhere in this annual 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 annual 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 annual report, and in
other reports filed by us with the SEC.
2
INTRODUCTION
PLAN OF OPERATION
As of September 30, 2009, ValCom, Inc. operations were comprised of the
following divisions:
1. BROADCASTING
On August 1, 2008, ValCom signed a letter of intent to acquire 100% of Faith TV
LLC, a Christian TV network operating through 65 television broadcast
affiliates and through IPTV & LPTV networks. On December 15, 2008, Valcom
closed the agreement for the 100% purchase of Faith TV and has re-branded the
network and launched it as "MyFamily TV", a new family focused TV network with
plans to add significantly more broadcast affiliates. My Family TV is a strong
family oriented network with a core established audience and broadcasts to over
50m households on full-time and part-time through its extensive affiliate
network. My Family TV is a new network created for American families,
broadcasting over 80 movies per month and in July 2009 launched Kid Mango, a
daily 3 hour kids block in a venture with Porchlight Entertainment which is
carried on Sky Angel, iLife and on the ION digital channel and featuring major
kids programs including Emmy Award winning titles such as Jakkers, Jay Jay the
Jet Plane and Denis the Menace.
With the acquisition of My Family TV, Valcom now has a library of over 1,000
films, over 200 episodic TV series and more than 500 individual TV one-off
specials and documentary programs.
A major revenue stream for ValCom is network television. The vision of the
company is to follow the path of ABC Family; a network that was purchased for
$1.6 Billion and was later sold for $5.1 Billion. The first network being
built by ValCom is MyFamilyTV , which was acquired by the company in 2008.
ValCom has already made changes to MyFamilyTV that have increased the overall
value of the network. Some of these changes include: increasing carriage to
over 50m homes in 2009 with agreements with iLife, Sky Angel and Worship TV;
implementing an aggressive effort to secure cable and broadcast coverage in
additional major markets; and adding new original lifestyle programming such as
Extreme Tourist, Kids Cooking for Kids & Tech Close-up. Already ValCom owns
the network free and clear and is operating MyFamilyTV with almost no debt.
ValCom will be acquiring and launching new channels that will grow in value
based on 4 factors: Programming, Distribution, Ad Sales and Low Operational
Expenses. The company has positioned itself to be the U.S. market leader in
live interactive TV auctions, traditional and innovative family programming,
sports and will launch this successful formula to major international markets
in 2010.
Through our joint venture with New Global Communications, Inc., we own 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
2. FILM AND TV PROGRAM PRODUCTION DIVISION / DISTRIBUTION
ValCom's business includes television production for network and syndication
programming, motion pictures, and real estate holdings. Revenue is primarily
generated through the lease of the sound stages and production. Our 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 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 AJ's Time Travelers. Valcom has been commissioned to produce pilots such
as Truster for Fox, It also produces development pilots itself for pitching to
networks such as the New York based sitcom Fuhgedabowit and Lets Do It Again
featuring Frankie Avalon. 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.
October 1, 2003, we formed New Zoo Revue LLC pursuant to a joint venture
agreement with O Atlas Enterprises Inc.,a California corporation. New Zoo Revue
LLC was formed for the development and production of "New Zoo Revue" a feature
film and television series and marketing of existing episodes. The company did
not proceed with the production of the new feature film or series but in 2004,
it did complete a distribution agreement for the DVD with BCI Eclipse for 183
episodes of the New Zoo Revue library. Valcom has not realized significant
revenues from animation to date.
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. Corporate offices are located at 2113A Indian
Rocks Beach, Florida.
In 2009, Valcom produced the documentary feature film `Michel Le Grand is
Music'. The documentary pays tribute to Michel Legrand's five-decade, multiple
award-winning career composing many of the most memorable film and television
scores and songs of all time. ValCom Inc. will premiere the documentary in a
limited week-long theatrical run in New York City on September 18th at the
Coliseum Theater. In addition, the documentary will premiere in Los Angeles on
September 16th at the Laemmle Grand Cineplex 4. "Michel Legrand Is Music"
honors the work of the three-time Academy Award-winning French music composer,
arranger, conductor and pianist Michel Legrand. Legrand composed more than 200
film and television scores and numerous jazz, popular and classical musical
albums. He won Academy Awards for Best Music, Original Song for "The Windmills
of Your Mind" from "The Thomas Crown Affair" (1969), Best Music, Original
Dramatic Score for "Summer of '42" (1971) and Best Music, Original Song for
Barbra Streisand Movie "Yentl" (1983). Academy Award-winning actor Jon Voight
narrates the documentary.
Valcom , through Valencia Entertainment International operates a compete
distribution and syndication service to producers and thus acquire content for
its networks at little or no cost with its ability to guarantee TV broadcast
and provide a launch for further home entertainment distribution on DVD and on-
demand channels through it other relationships. ValCom also has the opportunity
to co-produce film and TV programs 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 then be able to acquire
distribution rights for these productions.
ValCom owns a substantial library of television content with over 1000 films
and it also acquires third party film and TV programming 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, Valcom signed a production and distribution agreement with
XFC, the mixed martial arts promoter for the editing and world-wide
distribution of 13 one hour shows featuring live events promoted by XFC. XFC
events are currently attracting the largest audiences of any mixed martial arts
events promoted in the US
To coincide with the Michel LeGrand live events in Las Vegas in 2010, Valcom is
planning a number of distribution opportunities including the distribution and
syndication of programming based on the live event, music recordings, album and
other related events.
4
3. LIVE THEATRE AND EVENT DIVISION
Valcom has a live theatre division responsible for bringing live shows and
events to fruition. In 2006 Valcom produced a theater production called
'Headlights and Tailpipes' which was unveiled at the Las Vegas Stardust hotel
and ran until July 2006. Other events produced included the 2006 Superbowl pre-
game Wrap Bowl Event featuring Young Jeezy, Academy Award winner Ludacris,
Juvenile and Juelz Santana.
Valcom, through its subsidiary, Valencia Entertainment is producing a live
theatre event based on Michel LeGrand and his music scheduled for March 2010 at
the MGM Grand's Garden Arena, Las Vegas and featuring a line-up of major
international recording stars. The event will take place over two nights on
March 26th and 27th and Michel Legrand will be conducting a 66-piece orchestra
and will include guests such as Quincy Jones, Dionne Warwick, Andy Williams,
George Benson, Jon Voight, Patti Page, Steve Lawrence, Melissa Manchster, Neil
Sedaka and Jerry Lewis. The two-night shows will pay musical tribute to come
of Legrand's Academy Award-winning MGM movies including "Yentl", "Thomas Crown
Affair" and "Summer of 42". The superstar extravaganza will also be captured
on film for a made-for-TV-Special to air at a later date.
4. REAL ESTATE AND OTHER BROADCAST EVENT AUCTIONS
In 2009, Valcom pioneered the process of live event auctions covering a wide
range of events for TV broadcast and live webcast. Combining the expertise in
TV production, live event promotion and now as the owner of a broadcast TV
network, the opportunity offers a synergistic approach to such events. In 2008
and 2009, Valcom produced a wide range live TV and webcast events including
1. The Hilton `Make a Wish Foundation' broadcast live from the Hilton mansion
in Beverly Hills in December 2008
2. The Universal Studios `Battlestar Galactica' prop and memorabilia auction by
live web-cast in 2009 over a number of days from the Pasadena Convention
Centre
3. The Grammy Awards `Music Cares' auction as part of the 2009 Grammy Awards
In June 2009, Valcom together with Florida Opportunities, Inc set up Sun
Investments LLC, a 51% subsidiary of Valcom, Inc to develop the business
opportunity of live event and regular real estate auctions on broadcast TV. Sun
Investments will acquire suitable properties and together with Valcom
production studios, My Family TV will produce live auction events. Valcom
acquires additional TV carriage through the purchase of airtime on major
networks and markets the events nationwide.
The first such event took place on June 2009 followed by an event in October
2009 with live broadcast from the Valcom studios media centre in Clearwater,
Florida and broadcast live over 4 hours on My Family TV, the Ion Network with
an auction of over 40 foreclosure properties acquired by Sun Investments. In
November the next event was broadcasted over My Family TV and DSN (Direct
Shopping Netwerk). A series of further live events are planned for 2010.
THREE MONTHS ENDED DECEMBER 31, 2009 VS. DECEMBER 31, 2008
Revenues for the three months December 31, 2009 increased by $124,916 or 189%
from $66,269 for the three months ended December 31, 2008 to $191,185 for the
same period in 2009. The increase in revenue was principally due to the
purchase of MyFamily TV and home sales from Sun Investments.
Production costs for the three months ended December 31, 2009 increased from
$107 for the three months ended December 31, 2008 to $123,464 for the same
period in 2009. The increase was primarily due activity at MyFamily TV and
Sun Investments.
Depreciation and amortization expense for the three months ended December 31,
2009 increased by $25,884 or 114% from $22,788 for the three months ended
December 31, 2008 to $48,672 for the same period in 2009. The increase was due
to the amortization of goodwill related to the purchase of MyFamily TV.
General and administrative expenses for the three months ended December 31,
2009 decreased by $50,490 or 12% from $413,616 for the three months ended
December 31, 2008 to $363,126 for the same period in 2009. The decrease was due
principally to the decrease in consulting fees.
Interest expense for the three months ended December 31, 2009 decreased by
$14,677 or 72 % from $20,503 for the three months ended December 31, 2008 to
$5,666 for the same period in 2009. The decrease was due principally to the
payment of the Abel Income note.
Due to the factors described above, the Company's net loss decreased by
$159,618 from $444,723 for the three months ended December 31, 2008 to $285,105
for the same period in 2009.
5
FUTURE OUTLOOK COMPANY UPDATE
Valcom, through its subsidiary, Valencia Entertainment is producing a live
theatre event based on Michel LeGrand and his music scheduled for March 2010 at
the MGM Grand's Garden Arena, Las Vegas and featuring a line-up of major
international recording stars. The event will take place over two nights on
March 26th and 27th and Michel Legrand will be conducting a 66-piece orchestra
and will include guests such as Quincy Jones, Dionne Warwick, Andy Williams,
George Benson, Jon Voight, Patti Page, Steve Lawrence, Melissa Manchster, Neil
Sedaka and Jerry Lewis. The two-night shows will pay musical tribute to come
of Legrand's Academy Award-winning MGM movies including "Yentl", "Thomas Crown
Affair" and "Summer of 42". The superstar extravaganza will also be captured
on film for a made-for-TV-Special to air at a later date.
Valcom is also actively pursuing opportunities to either merge with or acquire
a television network. At this moment My Family TV has no debt and is operating
near breakeven, growing the network can be done through organic growth or
through an acquisition or merger. Valcom is currently having discussions with
potential targets and evaluating what the best course of action would be. A
merger or acquisition would result in lowering our operating expenses due to
cost efficiency that can be reach and increase of footprint.
There is another live auction planned for March 2010 for our Real Estate
auctions. The company is planning on increasing the frequency to go to 1 a
month and ultimately 1 -2 per week. In addition we are looking for additional
auction events.
There are also several production projects Valcom is looking at and bidding on.
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 $285,105 and a negative cash flow from operations of $22,065 for
the three months ended December 31, 2009, a working capital deficiency of
$1,474,218 and an accumulated deficit of $20,922,163 at December 31, 2009.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern.
Cash (exclusive of restricted cash) totaled $103,608 on December 31, 2009
compared to $110,846 as at December 31, 2008. During the three months ended
December 31, 2009, net cash used by operating activities totaled $22,065
compared to net cash used by operating activities of $538,840 for the
comparable three - month period in 2008. Net cash provided by financing
activities for the three months ended December 31, 2009 totaled $16,000
compared to $533,851for the comparable three-month period in 2008.
The above cash flow activities yielded a net cash decrease of $ 7,238 during
the three months ended December 31, 2009 compared to a decrease of $53,192
during the comparable prior year period.
Net working capital (current assets less current liabilities) was a
$(1,474,218) as of December 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 December 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.
6
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 December 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 2009 Quarter ended December 31, 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 COMPANY
None
ITEM 1A. RISK FACTORS
WE WILL REQUIRE ADDITIONAL FUNDS TO ACHIEVE OUR CURRENT BUSINESS STRATEGY AND
OUR INABILITY TO OBTAIN ADDITIONAL FINANCING COULD CAUSE US TO CEASE OUR
BUSINESS OPERATIONS.
We will need to raise additional funds through public or private debt or sale
of equity to achieve our current business strategy. Such financing may not be
available when needed. Even if such financing is available, it may be on terms
that are materially adverse to your interests with respect to dilution of book
value, dividend preferences, liquidation preferences, or other terms. Our
capital requirements to implement our business strategy will be significant.
However, at this time, we cannot determine the amount of additional funding
necessary to implement such plan. We anticipate requiring additional funds in
order to fully implement our business plan to significantly expand our
operations. We may not be able to obtain financing if and when it is needed on
terms we deem acceptable. Our inability to obtain financing would have a
material negative effect on our ability to implement our acquisition strategy,
and as a result, could require us to diminish or suspend our acquisition
strategy.
If we are unable to obtain financing on reasonable terms, we could be forced to
delay, scale back or eliminate certain product and service development
programs. In addition, such inability to obtain financing on reasonable terms
could have a material negative effect on our business, operating results, or
financial condition to such extent that we are forced to restructure, file for
bankruptcy, sell assets or cease operations, any of which could put your
investment dollars at significant risk.
Except as set forth above, 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, 2009.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
THERE WERE NO SALES OF SECURITIES DURING THIS QUARTER BEING THE FIRST QUARTER
OF 2010
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
NONE
ITEM 5 - OTHER INFORMATION
NONE.
7
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.
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.
8
Dated: March 3, 2010
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)
9