The information contained in Item 7 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.
We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. This filing contains a number of forward-looking statements which reflect management’s current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events, or developments which management expects or anticipates will or may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results, and non-historical information, are forward looking statements. In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.
Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors which could cause or contribute to such differences include, but are not limited to, the risks to be discussed in our Annual Report on form 10-K and in the press releases and other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Our financial statements are stated in United States Dollars (USD or US $) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to “common stock” refer to the common shares in our capital stock.
General Business Overview:
AlphaPoint Technology, Inc. (“AlphaPoint” or, collectively with its subsidiaries, the “Company”) was incorporated in the State of Delaware on November 13, 2008. AlphaPoint’s legacy business has been helping companies manage their IT assets.
In October 2015, AlphaPoint acquired 100% of the outstanding equity of STR Ltd. in exchange for 58,163,265 shares of its common stock and a promissory note in the amount of $900,000. STR, Ltd. was founded in 2009 to provide revenue acceleration solutions to large organizations through the performance improvement and effective execution of their sales teams. Subsequently, the parties to the SEA believe that the intended benefits have not been realized, and agreed to unwind the transaction and negotiated and finalized the terms of an Unwind Agreement (the “Unwind”). The agreement became effective on May 31, 2016, which essentially unwound the SEA.
AlphaPoint management is currently seeking alternative opportunities in line with their original strategy of acquiring a business in the technology sector that is capable of growth and development.
Application of Critical Accounting Policies and Use of Estimates
Our discussion and analysis of our financial condition and results of operations that follows is based upon our consolidated financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The application of GAAP requires our management to make assumptions, judgments and estimates that affect our reported amounts of assets, liabilities, revenue and expenses, and the related disclosures regarding these items. We base our assumptions, judgments and estimates on historical experience and on various other factors that we believe to be reasonable under the circumstances. Actual results could differ significantly from these estimates under different assumptions or conditions. To the extent that there are material differences between these estimates and actual results, our future financial condition or results of operations will be affected. On a regular basis, we evaluate our assumptions, judgments and estimates.
We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition, allowance for doubtful accounts, stock-based compensation, valuation of acquired intangible assets, goodwill impairment, long-lived asset impairment, and income taxes have the greatest potential impact on our consolidated financial statements. These areas are key components of our results of operations and are based on complex rules which require us to make judgments and estimates. Historically, our assumptions, judgments and estimates in accordance with our critical accounting policies have not materially differed from actual results. For a more detailed discussion of these accounting policies and our use of estimates, refer to Note 1 of our Notes to Consolidated Financial Statements included in this report.
Software Development Costs
The Company accounts for software development costs in accordance with several accounting pronouncements, including FASB ASC 730, Research and Development, FASB ASC 350-40, Internal-Use Software, FASB 985-20, Costs of Computer Software to be Sold, Leased, or Marketed and FASB ASC 350-50, Website Development Costs.
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Costs incurred during the period of planning and design, prior to the period determining technological feasibility, for all software developed for use internal and external, has been charged to operations in the period incurred as research and development costs. Additionally, costs incurred after determination of readiness for market have been expensed as research and development.
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The Company has capitalized certain costs in the development of our proprietary software (computer software to be sold, leased or licensed) for the period after technological feasibility was determined and prior to our marketing and initial sales;
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Website development costs have been capitalized, under the same criteria as our marketed software.
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Capitalized software costs are stated at cost. The estimated useful life of costs capitalized is evaluated for each specific project and is currently being amortized over three to five years. At December 31, 2015, all software and website development costs had been fully amortized.
Long-lived Assets and Intangible Property
Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. The Company did not recognize any impairment losses for any periods presented.
Share-based Payments
Share-based payments to employees, including grants of employee stock options or shares of stock are recognized as compensation expense in the financial statements based on their fair values, in accordance with FASB ASC Topic 718. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The Company may issue restricted stock to consultants for various services. Cost for these transactions is measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is to be measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty’s performance is complete. The fair value of the Company’s common stock is obtained from the trading prices on or near the date of the transaction. The Company may issue shares as compensation in the future period for services associated with the registration of the common shares.
During 2015, the Company issued 2,000,000 shares of common stock to an officer of the Company for services provided. In addition, 200,000 shares were issued to a service provider for services rendered. Compensation expense related to these stock grants totaled approximately $120,000.
Goodwill, Intangible Assets, Long-Lived Assets and Impairment Assessments
Goodwill represents the excess of the purchase price over the fair value of net assets acquired in connection with business combinations accounted for using the purchase method of accounting. Goodwill is not amortized, but instead goodwill is required to be tested for impairment annually and under certain circumstances. The Company performs such testing of goodwill in the fourth quarter of each year, or as events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company currently has one reporting unit for purposes of goodwill impairment testing.
An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the impairment test is unnecessary. The Company completed its assessment of the qualitative factors as of December 31, 2015 and determined that it was not more likely than not that the fair value of the reporting unit was less than its carrying value. There is no goodwill at December 31, 2016.
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Intangible assets with finite lives are amortized over their estimated useful lives. Refer to Note 4 of our Notes to Consolidated Financial Statements included in this report for a detailed discussion on useful lives over which our intangible assets are amortized. Generally, amortization is based on the straight-line method. There was no impairment expense related to intangible assets during 2016 or 2015.
The Company also evaluates the recoverability of its long-lived assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If such review indicates that the carrying amount of long-lived assets is not recoverable, the carrying amount of such assets is reduced to fair value. There were no impairment charges recorded during 2016 or 2015.
Foreign Currency
The assets and liabilities of STR for which the local currency is the functional currency (Pound Sterling) are translated into U.S. dollars using the exchange rate in effect at each balance sheet date and income and expense accounts are translated using weighted average exchange rates for each period during the year. Translation gains and losses are reported as a component of accumulated other comprehensive income (loss), included within stockholders’ equity. Gains and losses from foreign currency transactions are included in the Company’s consolidated statements of comprehensive loss. Comprehensive loss from foreign currency translation for the year ended December 31, 2015 was $103,424, and transaction gains totaled $11,600 for the period from acquisition to December 31, 2015.
Results of Operations
For the years ended December 31, 2016 and 2015:
Our consolidated revenues were $2,236 and $29,308 for the years ended December 31, 2016 and 2015, respectively. The decrease in revenues from 2015 is the result of a full year of recognition of deferred revenue in 2015 not available in 2016.
Operating expenses were $628,532, and $472,403 for the years ended December 31, 2016
and 2015, respectively. The increase year over year expenses was mainly due to the acquisition of the STR business, which
entailed higher costs for compensation and professional fees.
Net losses incurred in the periods presented have been primarily due to losses from discontinued operations and operating costs. The Company incurred net losses of $835,237 and $891,717 for the years ended December 31, 2016 and 2015, respectively. The decrease in the year over year net loss was due primarily to the increase in operating expenses resulting mainly from the acquisition of STR offset by the gain on disposal of discontinued operations.
We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a technology business enterprise, including the financial risks associated with the limited capital resources currently available to us for the implementation of our business strategies. (See “Risk Factors”). To become profitable and competitive, we must develop the business and marketing plan and execute the plan. Our management will attempt to secure financing through various means including borrowing and investment from institutions and private individuals.
Liquidity and Capital Resources
As reflected in the audited financial statements, at December 31, 2016, we have a deficit in working capital, an accumulated deficit and for the year ended December 31, 2016, we have a net loss and comprehensive loss.
At December 31, 2016, the Company had current assets of $6,902 including $1,413 in cash and $5,489 in prepaids and other assets and current liabilities of $357,933 resulting in a working capital deficit of $351,031.
Until October 15, 2015 we depended on advances from shareholders, to meet any shortfall in meeting our obligations. However, we will require working capital to meet our current shortfall in working capital. If the Company is unable to raise the funds partially through stock offerings, the Company will seek alternative financing through means such as borrowings from institutions or private individuals. There can be no assurance that the Company will be able to raise such funds.
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Consequently, there is doubt about the Company’s ability to continue to operate as a going concern. As reflected in the financial statements we have an accumulated deficit from inception of $3,811,846 and have a net loss from operations of $626,297 and $443,095 for the years ended December 31, 2016 and 2015, respectively. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and execution of its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
If we are unsuccessful at raising sufficient funds, for whatever reason, to fund our operations, the Company may be forced to seek a buyer for our business or another entity with which we could create a joint venture.
Management believes that actions presently being taken to obtain additional funding and execution of its strategic plans provide the opportunity for the Company to continue as a going concern.
Recent Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors’ independence, audit committee oversight, and the adoption of a code of ethics. Our Board of Directors consists of eight (8) individuals who advise our chief executive officer. Our chief executive officer makes decisions on all significant corporate matters such as the approval of terms of the compensation of our executive officers.
The Company has adopted a Code of Ethics and Business Conduct. The Company is in the process of introducing them. The Company has not adopted corporate governance measures such as an audit or other independent committees of our board of directors. If we expand our board membership in future periods to include additional independent directors, the Company may seek to establish an audit and other committees of our board of directors. It is possible that if our Board of Directors included independent directors and if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.
Recent Accounting Pronouncements
See Note 3 in the consolidated financial statements for a discussion of recent accounting guidance.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.
Management Consideration of Alternative Business Strategies
In order to continue to protect and increase shareholder value, management believes that it may, from time to time, consider alternative management strategies to create value for the company or additional revenues. Strategies to be reviewed may include acquisitions, roll-ups, strategic alliances, joint ventures on large projects, and/or mergers.
Management will only consider these options where it believes the result would be to increase shareholder value while continuing the viability of the company.
Inflation
The effect of inflation on our revenues and operating results has not been significant.
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