10QSB - Part Two:
NOTE 7 - CAPITAL LEASES [Continued]
Total future minimum lease payments, executory costs and
current portion of capital lease obligations are as follows
for the years ended December 31:
Year ending December 31, Lease Payments
2001 3,499
2002 3,499
2003 3,499
2004 1,749
__________
Total future minimum lease payments $12,246
Less: amounts representing interest
and executory costs (2,140)
__________
Present value of the future minimum
lease payments 10,106
Less: Lease current portion (2,891)
__________
Capital lease obligations
- long term $ 7,215
__________
NOTE 8 - RELATED PARTY TRANSACTIONS
At March 31, 2001, the Company is indebted to related parties
for the following notes payable and advances payable:
2001
___________
11% unsecured note payable due to a shareholder
of the Company, due January 15, 2001 $ 37,978
11% add on interest note payable to Triden Telecom,
Inc. (See Note 1) payable in thirty-six monthly
installments of interest and principal of $3,333
beginning March 15, 2001. 103,271
___________
Total long-term obligations 141,249
Less: current maturities (141,249)
___________
Long-term obligations, excluding current portions $ -
___________
During the three months ended March 31, 2001 and 2000, the
Company recorded interest expenses of $1,842 and $0 on related
party notes payable. During the three months ended March 31,
2001 and 2000 the Company paid $963 and $0 in related party
interest.
11
EDLAM ACQUISITION CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 9 - NOTES PAYABLE
At March 31, 2001 and December 31, 2000, the Company is
indebted for the following notes payable:
2000 1999
___________________
10% notes payable to a financial institution,
due on demand with monthly interest payments
of $750. Secured by property & equipment,
inventory and accounts receivable and the
personal guaranty of the president of the
Company. $ 78,999 $ -
7.95% note payable to a financial institution,
to purchase a vehicle payable in sixty
monthly installments of interest and principal
of $243 beginning October 4, 1999. Secured by
vehicle purchased 9,007 -
8.5% $50,000 note payable to a financial
institution, payable in monthly installments
of interest and principal of $1,026 with the
balance due December 6, 2000. Refinanced at
10%, monthly payments of $1,370 with the
balance due June 15, 2001. Secured by property
& equipment, inventory and accounts receivable
and the personal guaranty of the president of
the Company. 42,272 -
___________________
Total long-term obligations 130,278 -
Less: current maturities (123,155) -
___________________
Long-term obligations, excluding
current portions $ 7,123 $ -
___________________
The estimated aggregate maturities required on long-term debt
at March 31, 2001 are as follows:
2001 $ 123,155
2002 2,432
2003 2,633
2004 2,058
2005 -
Thereafter -
____________
$ 130,278
____________
12
EDLAM ACQUISITION CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 10 - STOCKHOLDERS EQUITY
Preferred Stock - The Company has authorized 10,000,000 share of
preferred stock, $.001 par value, with such rights, preferences
and designations and to be issued in such series as determined by
the Board of Directors. No shares are issued and outstanding at
March 31, 2000.
Common Stock - During December 1999, in connection with its
organization, the Company issued 500,000 shares of its previously
authorized, but unissued common stock. The shares were issued
for cash of $2,000 (or $.004 per share).
During January 2001, Triden Telecom, Inc., purchased 11,000,000
share of the Company's common stock for $55,151 (or $.005 per
share). As a negotiated element of the stock sale the Company
agreed to redeem from its pre-existing stockholders, on a pro
rata basis, 500,000 shares of the Company's common stock at a
total redemption price of $45,000 (or $.09 per share). The sale
resulted in a change in control of the Company wherein the
Company became a majority owned subsidiary of Triden Telecom,
Inc. The former officers of the Company resigned and new
officers were appointed.
On January 18, 2001 the Company entered into a Stock Exchange
agreement and acquired all of the outstanding shares of Digitec
Information Systems, Inc. (Digitec), in a business combination
accounted for as a purchase through the issuance of 1,750,000
common shares of the Company (See Note 2).
During January 2001, the Company issued 2,600,000 shares of
common stock valued at $52,000 in connection with employment
agreements (See Note 12).
Stock Options - During January 2001, the Company recorded $15,000
in compensation expense in accordance with Accounting Principle
Bulletin No. 25 for 1,500,000 options to purchase common shares
at $.01 per share, issued in connections with employment
agreements (See Note 12). The options vested immediately and are
exercisable through January 5, 2006.
NOTE 11 - INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 Accounting
for Income Taxes [FASB 109]. FASB 109 requires the Company to
provide a net deferred tax asset or liability equal to the
expected future tax benefit or expense of temporary reporting
differences between book and tax accounting and any available
operating loss or tax credit carryforwards. At March 31, 2001
and December 31, 2000, the total of all deferred tax assets were
$189,642 and $0 and the total of the deferred tax liabilities
were $2,840 and $0. The amount of and ultimate realization of
the benefits from the deferred tax assets for income tax purposes
is dependent, in part, upon the tax laws then in effect, the
Company's future earnings, and other future events, the effects
of which cannot presently be determined. Because of the
uncertainty surrounding the realization of the deferred tax
assets, the Company has established a valuation allowance of
$186,802 and $0 as of March 31, 2001 and December 31, 2000, which
has been offset against the deferred tax assets. The net
increase in the valuation allowance during the three months ended
March 31, 2001 amounted to approximately $186,802.
As of March 31, 2001, the Company has net tax operating loss
[NOL] carryforwards available to offset its future income tax
liability. The NOL carryforwards have been used to offset
deferred taxes for financial reporting purposes. The Company
has federal NOL carryforwards of approximately $455,000 that
expire in 2019 and 2021.
13
EDLAM ACQUISITION CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Employment agreement - On March 8, 2000, the Company's subsidiary
entered into a two year employment agreement with its controller.
The agreement provides for salaries totaling $28,000 per year.
During January 2001, the Company's subsidiary entered into a five
year employment agreements with its President. The agreement
provides for salaries totaling $60,000 per year, the issuance of
750,000 shares of common stock of Triden Telecom, Inc. valued at
$.02 per share as a signing bonus, and the issuance of 500,000
stock options to purchase common stock of Triden Telecom, Inc. at
$.025 per share. The agreement also contains a termination
without cause provision that would entitle the President to
receive one half of the remaining salaries under the agreement.
The employment agreement also provides for disability and death
benefits
During January, 2001, the Company entered into a five year
employment agreement with its newly appointed President. The
agreement provides for salaries totaling $100,000 per year
increasing 10% per year on the amount received in salary the
previous year, a one time payment of $200,000 on the first
anniversary of the date of this agreement, the issuance of
1,750,000 shares of common stock valued at $.02 per share, the
issuance of 1,000,000 options to purchase the Company's common
stock at $.01 per share and a 3% stock bonus as may be determined
from time to time by the Board of Directors of the Company,
taking into account the performance of the Company in relation to
the annual business plan. The agreement also contains a
termination with cause provision that would entitle the President
to receive one half of the remaining salaries under the agreement
if terminated with cause. The President cannot be terminated
without cause during the term of the agreement. The employment
agreement also provides for disability and death benefits
During January 2001, the Company entered into a five year
employment agreement with its newly appointed Chief Financial
Officer. The agreement provides for salaries totaling $25,000
per year, the issuance of 850,000 shares of common stock valued
at $.02 per share, the issuance of 500,000 options to purchase
the Company's common stock at $.01 per share. The agreement also
contains a termination without cause provision that would entitle
the Chief Financial Officer to receive one half of the remaining
salaries under the agreement. The employment agreement also
provides for disability and death benefits
NOTE 13 - GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplate continuation of the Company as a going concern.
However, the Company has current liabilities in excess of current
assets and has not yet been successful in establishing profitable
operations. These factors raise substantial doubt about the
ability of the Company to continue as a going concern. In this
regard, management is proposing to raise any necessary additional
funds not provided by operations through additional sales of its
common stock. There is no assurance that the Company will be
successful in raising this additional capital or achieving
profitable operations. The financial statements do not include
any adjustments that might result from the outcome of these
uncertainties.
14
EDLAM ACQUISITION CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 14 - LOSS PER SHARE
The following data show the amounts used in computing loss per
share for the periods presented:
For the Three Months
Months Ended March 31,
__________________________
2001 2000
_____________ ___________
Loss from continuing operations
available to common
shareholders (numerator) $(178,872) $ (885)
_____________ ___________
Weighted average number of
common shares outstanding
used in loss per share for
the period (denominator) 13,963,333 500,000
_____________ ___________
15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND PLAN OF OPERATION
The Company, prior to the acquisition of Digitec in January
2001, had no active business operations. After the acquisition,
the Company assumed the business plan of Digitec. The following
is management's discussion of the operations of the Company's
wholly owned subsidiary, Digitec, for the three months ended
March 31, 2001.
Results of Operations of Digitec - Three Months Ended March 31,
2001.
Digitec had net sales of $174,020 for the three months ended
March 31, 2001. Cost of goods sold were $129,707 for the three
months ended March 31, 2001, which costs represent 75% of net
sales.
General and administrative expenses for the three months
ended March 31, 2001 were $209,550, which consisted of general
corporate administration, legal and professional expenses,
accounting and auditing costs, lease payments, advertising, and
depreciation and amortization costs. Digitec also paid $5,182 in
selling expenses bringing the Company's total operating expenses
to $214,732 for the three months ended March 31, 2001. In
addition, interest expense for the same period was $8,453.
Due to the foregoing, Digitec realized a net loss of
$178,872 for the three months ended March 31, 2001.
Liquidity and Capital Resources
Digitec has suffered recurring losses from operations.
During the three months ended March 31, 2001, Digitec's net loss
was $178,872. As of March 31, 2001, Digitec had a working
capital deficit of $384,284. During the three months ended March
31, 2001, Digitec's operations used net cash of $45,987. These
matters raise substantial doubt about the Digitec's ability to
continue as a going concern. During the three months ended March
31, 2001, Triden, an entity with a controlling interest in the
Company loaned Digitec $59,500, and refinanced an existing note
payable in the amount of $48,586. The combined notes carry an
11% interest rate and are payable in 36 monthly installments in
the amount of $3,333 each. In addition, the Company obtained
$25,000 of additional funding through the sale of its common
stock. However, Digitec may need additional capital to finance
future operations until its business objectives are implemented
and generate sufficient revenue to sustain the business.
Management is attempting to raise additional capital to fund
future operations and provide working capital; however, there can
be no assurance that additional funding will be available or, if
available, that it will be available on acceptable terms or in
required amounts. If management does not obtain financing, there
is no assurance that Digitec or the Company will succeed in
achieving profitable operations.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
In January 2001, the Company issued 17,850,000 shares of
restricted common stock as identified in the following table.
Name Shares Issued Consideration Paid
Triden Telecom, Inc. 11,000,000 $55,151
James M. Roberts 1,750,000 1,000 shares of Digitec stock
16
Robert S. Hardy 1,750,000 Signing bonus to 5 year
employment contract
Holly V. Grant 850,000 Signing bonus to 5 year
employment contract
Monica L Seeliger 450,000 $4,500
P. K. Harris 400,000 $4,000
Tamara S. Landers 200,000 $2,000
Sonya Y. Sneed 100,000 $1,000
Leah G. Sparks 450,000 $4,500
Jeffrey S. Sexton 450,000 $4,500
Roland D. Burson, Jr. 200,000 $2,000
Susan J. Aaron 250,000 $2,500
In January 2001, the Company issued options to purchase 1,500,000
shares of restricted common stock at $0.01 per share, which expire
January 5, 2006. The following table details the transaction.
Name Options Issued Consideration Paid
Robert S. Hardy 1,000,000 Consideration under
employment contract
Holly V. Grant 500,000 Consideration under
employment contract
The above-mentioned shares and options were all issued in
reliance on the exemption from registration set forth in Section
4(2) of the Securities Act. No brokers were involved in the
transactions and no commissions were paid to any person. On the
basis of their position with the Company or engagement by the
Company, the Company believes each of the purchasers was either
accredited or sophisticated and had such knowledge of the
business and financial condition of the Company so as to make an
informed investment decision.
Exhibits and Reports on Form 8-K.
Reports on Form 8-K
A Form 8-K and an amended Form 8-K was filed with the SEC on
February 2, 2001 and April 4, 2001, respectively. The Forms 8-K
were filed under "Item 1. Changes in Control of Registrant" and
"Item 2. Acquisition or Disposition of Assets," which detailed
the Company's transactions with Triden and Digitec.
Exhibits
None
17
SIGNATURES
In accordance with the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned thereunto
duly authorized.
EDLAM ACQUISITION CORPORATION
Date: May 15, 2001 /s/ Robert S. Hardy
President and Chief Executive Officer
Date: May 15, 2001 /s/ Holly V. Grant
Chief Financial Officer |
