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| ALAN > SEC Filings for ALAN > Form 10-Q on 14-Feb-2013 | All Recent SEC Filings |
14-Feb-2013
Quarterly Report
Forward-Looking Statements: Except for historical information, the statements contained herein are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The words "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "could," "target," "potential," "is likely," "will," "expect" and similar expressions, as they relate to the Company are intended to identify forward-looking statements within the meaning of the "safe harbor" provisions of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, the Company may publish or otherwise make available forward-looking statements of this nature. All such forward-looking statements are based on the expectations of management when made and are subject to, and are qualified by, risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These risks and uncertainties include, but are not limited to, the following factors, among others, that could affect the outcome of the Company's forward-looking statements: general economic and market conditions; the inability to attract, hire and retain key personnel; failure of a future acquired business to further the Company's strategies; the difficulty of integrating an acquired business; unforeseen litigation; unfavorable result of potential litigation; the ability to maintain sufficient liquidity in order to support operations; the ability to maintain satisfactory relationships with lenders; the ability to maintain satisfactory relationships with current and future suppliers; federal and/or state regulatory and legislative action; the ability to implement or adjust to new technologies and the ability to secure and maintain key contracts and relationships. New risk factors emerge from time to time and it is not possible to accurately predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statements. Except as otherwise required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in this Annual Report or in the documents we incorporate by reference, whether as a result of new information, future events, changed circumstances or any other reason after the date of this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
Management's discussion and analysis of financial condition and results of operations are based upon the condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the United States Securities and Exchange Commission. The preparation of our financial statements requires the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an ongoing basis, estimates are revalued, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. These areas include allowances for doubtful accounts, stock-based compensation, income taxes, ongoing litigation, commitments and contingencies, and marketable securities. Our estimates are based upon historical experience, observance of trends in particular areas, information and/or valuations available from outside sources and on various other assumptions that we believe to be reasonable under the circumstances and which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts may materially differ from these estimates under different assumptions and conditions.
The SEC suggests that all registrants list their most "critical accounting policies" in Management's Discussion and Analysis. A critical accounting policy is one which is both important to the portrayal of the Company's financial condition and results and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management has identified the critical accounting policies as those accounting policies that affect its more significant judgments and estimates in the preparation of its consolidated financial statements. The Company's Audit Committee has reviewed and approved the critical accounting policies identified. These policies include, but are not limited to, the classification and valuation of marketable securities, realization of accounts receivable trade, realization of notes receivable, revenue recognition, stock-based compensation, the recorded values of accruals and fair values of assets and liabilities including the Company's contingent liabilities.
Results of Operations
Presented below is management's discussion and analysis of financial condition and results of operations for the periods indicated:
(A) Three months ended December 31, 2012 versus three months ended December 31, 2011
Net Revenues
Net revenues reported for the quarter ended December 31, 2012 were $43,800. No
revenues were reported for the comparable quarter of the prior fiscal year as
the Company had no operating units and was effectively a holding
company. Revenues continue to be inconsistent as water disposal operations
remain in a startup mode. As additional customers are expected to recognize the
savings of using a local water disposal company and improved weather allows
additional oil and gas production activity, we expect revenues to increase.
Cost of Sales
Cost of sales for the three months ended December 31, 2012 of $93,900 consist of
direct labor costs, equipment costs (including depreciation), land lease costs
and other operating costs. Approximately 50% of the cost of goods sold for the
quarter consisted of fixed costs such as depreciation, amortization, accretion
and lease costs.
Selling, General and Administrative Expenses Selling, general and administrative expenses for the quarter ended December 31, 2012 (consisting of corporate expenses, AES selling, general and administrative expense, amortization of stock-based compensation and depreciation expense) was $351,500, an increase of $115,700, or 49.1%, compared to $235,800 reported for the quarter ended December 31, 2011. Corporate expenses for the current quarter was $134,200 and represented a decrease of $101,600, or 43.1%, compared to corporate expenses of $235,800 reported for the comparable quarter ended December 31, 2011. The decrease resulted from billings for accounting services provided to ACC and increased allocation of corporate expense to AES in recognition of increased management time and audit fees. AES operating expense of $183,200 for the quarter ended December 31, 2012 relates to the new Deer Creek Water Disposal facility that initiated operation during the quarter ended September 30, 2012 and represented general overhead associated with the operation. Amortization of stock-based compensation increased to $34,100 for the quarter ended December 31, 2012, from none for the comparable quarter of the prior year. The increase relates to options vesting in the current quarter that were granted in the fourth quarter of fiscal year 2012.
Operating Loss
Operating Loss for the quarter ended December 31, 2012 was ($401,600), an
increase of $165,800, or 70.3%, compared to an Operating Loss of ($235,800)
reported for the same quarter of the prior year. The increased operating loss
resulted from increased costs associated with the completion of additional water
disposal capacity at Deer Creek operation and additional selling, general and
administrative expenses.
Other Income and Expense
Net interest income for the quarter ended December 31, 2012 was $5,800, an
improvement of $4,800 when compared to interest income of $1,000 for the quarter
ended December 31, 2011. The increase in interest income related to the ACC note
outstanding.
During the quarter ended December 31, 2012, the Company recorded net gains on sale of marketable securities of $210,200, resulting from the sale of approximately 200,027 shares of its ORBCOMM Common Stock at an average selling price of $3.96 per share, compared to net gains on sale of marketable securities in the comparable quarter of the prior year of $38,700.
Dividends and Redemption
The Company had no dividend expense for either the current quarter ended
December 31, 2012 or the comparable prior year quarter ended December 31,
2011. During the quarter ended December 31, 2011, the Company recorded a net
gain on redemption of the Series B Convertible Preferred Stock of $443,200, net
of $600 of related legal expense. See Note 16 - Shareholders' Equity in Form
10-K for the year ended June 30, 2012 for additional discussion relative to the
redemption of the Series B Convertible Preferred Stock.
Net Income (Loss) Attributable to Common Shareholders Net Loss Attributable to Common Shareholders for the quarter ended December 31, 2012 amounted to ($185,600), or ($.04) per share, compared to net income of $247,100, or $.05 per share, in the comparable quarter of the prior year for reasons discussed above.
Comprehensive Income
Comprehensive Income for the current quarter represents the unrealized change in
market value of the Company's Marketable Securities held at December 31, 2012
compared to the same period of the prior fiscal year. Comprehensive income for
the quarter ended December 31, 2012 consisted of the net value of three
items: 1) the quarter ending market value reclassification adjustment for gain
included in Net Income (Loss) of $210,200; 2) an Unrealized Gain (Loss) on
Marketable Securities, net of tax, of $7,200 resulting from an increase in the
market value of the shares held compared to the cost basis of $2.91 per share
determined as market value on the May 16, 2011 acquisition date, offset by a
reduction in the number of shares from 692,996 at September 30, 2012 to 492,969
at December 31, 2012; 3) the net unrealized gain on marketable securities sold
during the period of $140,400. At December 31, 2012 the Company valued 492,969
shares (net of escrow shares) of ORBCOMM, Inc. Common Stock at $3.92 per share
for a total value of $1,932,400.
(B) Six months ended December 31, 2012 versus six months ended December 31, 2011
Net Revenues
Net revenues reported for the six months ended December 31, 2012 were
$145,000. No revenues were reported for the comparable quarter of the prior
fiscal year as the Company had no operating units and was effectively a holding
company. Revenues continue to be inconsistent as water disposal operations
remain in a startup mode. As additional customers are expected to recognize the
savings of using a local water disposal company and improved weather allows
additional oil and gas production activity, we expect revenues to increase.
Cost of Sales
Cost of sales for the six months ended December 31, 2012 of $158,400 consist of
direct labor costs, equipment costs (including depreciation), land lease costs
and other operating costs. Approximately 57% of the cost of goods sold for the
quarter consisted of fixed costs such as depreciation, amortization, and lease
costs.
Selling, General and Administrative Expenses Selling, general and administrative expenses for the six months ended December 31, 2012 (consisting of corporate expenses, AES selling, general and administrative expense, amortization of stock-based compensation and depreciation expense) was $666,300, an increase of $125,000, or 23.1%, compared to $541,300 reported for the six months ended December 31, 2011. Corporate expenses for the six month period was $330,300 and represented a decrease of $203,200, or 38.1%, compared to corporate expenses of $533,500 reported for the comparable period ended December 31, 2011. The decrease resulted from billings for accounting services provided to ACC and increased allocation of corporate expense to AES in recognition of increased management time and audit fees. AES operating expense of $267,700 for the six months ended December 31, 2012 relates to the new Deer Creek Water Disposal facility that initiated operation during August 2012 and represented general overhead associated with the water disposal operation. Amortization of stock-based compensation increased to $68,300 for the six months ended December 31, 2012, compared to $7,800 for the comparable period of the prior year. The increase relates to options vesting in the current period that were granted in the fourth quarter of fiscal year 2012.
Operating Loss
Operating Loss for the six months ended December 31, 2012 was ($679,700), an
increase of $138,400, or 25.6%, compared to an Operating Loss of ($541,300)
reported for the same period of the prior year. The increased operating loss
resulted from increased costs associated with the completion of additional water
disposal capacity at Deer Creek operation and additional selling, general and
administrative expenses.
Other Income and Expense
Net interest income for the six months ended December 31, 2012 was $12,000, an
improvement of $11,200 when compared to interest income of $800 for the same
period ended December 31, 2011. The increase in interest income related to the
ACC note outstanding and the Symbius investment.
During the six months ended December 31, 2012, the Company recorded net gains on the sale of its Symbius investment of $86,800, and a gain of $491,000 on the sale of 602,915 shares of its ORBCOMM Common Stock at an average selling price of $3.72 per share. During the same period of the prior year the Company recorded a net gain on sale of marketable securities of $38,700, resulting from the sale or transfer of approximately 408,790 shares of its ORBCOMM Common Stock at an average selling price of $3.01 per share.
Dividends and Redemption
The Company had zero dividend expense for the six months ended December 31, 2012
compared to $30,500 in dividend expense for the comparable period of the prior
year. The decrease resulted from the retirement of all Series D and Series E
Convertible Preferred Stock in June 2011 and the repurchase of all the Series B
Convertible Preferred Stock in December 2011 resulting in a gain on redemption
of $443,200 reported in the prior year. See Note 16 - Shareholders' Equity in
Form 10-K for the year ended June 30, 2012 for additional discussion relative to
the redemption of the Series B Convertible Preferred Stock.
Net Loss Attributable to Common Shareholders Net Loss Attributable to Common Shareholders for the six months ended December 31, 2012 amounted to ($89,700), or ($.02) per share, compared to a net loss of ($89,100), or ($.02) per share, in the comparable period of the prior year for reasons discussed above.
Comprehensive Income
Comprehensive Income for the six month period ended December 31, 2012 represents
the unrealized change in market value of the Company's Marketable Securities
held at December 31, 2012 compared to the same period of the prior fiscal
year. Comprehensive income for the quarter ended December 31, 2012 consisted of
the net value of three items: 1) the quarter ending market value
reclassification adjustment for gain included in Net Income (Loss) of $491,000;
2) an Unrealized Gain on Marketable Securities, net of tax, of $325,300
resulting from an increase in the market value of the shares held at the end of
the period compared to the cost basis of $2.91 per share, determined as market
value on the May 16, 2011 acquisition date; 3) the net unrealized gain on
marketable securities sold during the period of $280,000. At December 31, 2012
the Company valued 492,969 shares (net of escrow shares) of ORBCOMM, Inc. Common
Stock at $3.92 per share for a total value of $1,932,400.
Liquidity and Capital Resources
The Company's current assets at December 31, 2012 exceeded current liabilities by $2,926,600, resulting in a current ratio of 10.7 to 1. At June 30, 2012, current assets exceeded current liabilities by $3,473,900 reflecting a current ratio of 4.8 to 1. The reduction in net current assets at December 31, 2012 versus June 30, 2012 was due primarily to purchases in Land, Property and Equipment of ($861,200) and the sale of Marketable Securities - Restricted the Company held in ORBCOMM, Inc.
Accounts receivable of $4,100 represents the outstanding billings at December 31, 2012 of the AES water disposal operation that initiated operations during August 2012. Other receivables totaling $35,700 represents billings for accounting services and interest of $20,700 and a $15,000 vendor advance.
Cash used in operations for the six month period ended December 31, 2012 was
($1,002,300), an increase of ($425,800), or 73.9% compared to the ($576,500)
reported for the same period of the prior year. The increase in net cash used in
operations for the six months ended December 31, 2012 was due primarily to
increases in operating losses for the six months ended December 31, 2012
compared to the same period of the prior year and decreases in accounts payable
and accrued expenses.
Cash provided by investing activities for the six month period ended December 31, 2012 was $1,733,200, an increase of $605,100, or 53.6% compared to the $1,128,100 provided for the same period of the prior year. The increase was primarily due to higher proceeds from the sale of marketable securities during the period, offset by the purchases of land, property, and equipment.
Cash used by financing activities for the six month period ended December 31, 2012 was ($200,000) compared to cash provided by financing activities of $132,500 for the period of the prior year, a change of ($332,500). The change was primarily due to the $200,000 note payable paid during the current period as compared to the proceeds received from exercise of stock options in the prior period of $151,200.
During the fiscal year ending June 30, 2013, the Company expects to meet its working capital and other cash requirements with its current cash reserves and sales of marketable securities as required. However, the Company may require additional working capital for future operations. While the Company believes that it will succeed in attracting additional required capital and will generate capital from future operations, there can be no assurance that the Company's efforts will be successful. The Company's continued existence is dependent upon its ability to achieve and maintain profitable operations, identify profitable acquisition/merger candidates and/or successfully invest its capital.
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