LevelBlox, Inc. - FORM 10-Q - November 10, 2016

Attached files

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EX-31 - RULE 13A-14(A) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER - LevelBlox, Inc.	ex_31-1.htm
EX-31 - RULE 13A-14(A) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER - LevelBlox, Inc.	ex_31-2.htm
EX-32 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 906 - LevelBlox, Inc.	ex_32-2.htm
EX-32 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT SECTION 906 - LevelBlox, Inc.	ex_32-1.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016


o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number 333-173028

AlphaPoint Technology, Inc.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)	26-3748249 (IRS Employer Identification No.)

6371 Business Blvd. Suite 200

Sarasota, FL 34240

(Address of principal executive offices) (Zip Code)

(941) 907-8822

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 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 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 þ No o

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

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. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

(Do not check if smaller reporting company)

Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of October 28, 2016, the Company had 77,413,259 shares of Common Stock outstanding.

ALPHAPOINT TECHNOLOGY, INC. and Subsidiaries

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2016

TABLE OF CONTENTS


	Page

PART I – FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements	2

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3. Quantitative and Qualitative Disclosure about Market Risk	14

Item 4. Controls and Procedures	14


PART II – OTHER INFORMATION

Item 1. Legal Proceedings	15

Item 1A. Risk Factors	15

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	15

Item 3. Defaults Upon Senior Securities	15

Item 4. Mine Safety Disclosures	15

Item 5. Other Information	15

Item 6. Exhibits	15

Signatures	16

- 1 -

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AlphaPoint Technology, Inc. and Subsidiaries

Consolidated Balance Sheets


	September 30, 2016 (Unaudited)			December 31, 2015 (Audited)

ASSETS
Current assets:
Cash and cash equivalents	$	28,210		$	44,625
Prepaid and other current assets		3,065			—
Note receivable		10,050			—
Assets of discontinued operations		—			738,343
Total current assets		41,325			782,968

Assets of discontinued operations		—			3,490,270
Total assets	$	41,325		$	4,273,238

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	113,886		$	43,344
Accrued expenses		175,006			24,129
Deferred revenue and customer deposits		—			2,236
Related party payable		6,900			6,500
Liabilities of discontinued operations		—			1,613,276
Total current liabilities		295,792			1,689,485

Liabilities of discontinued operations		—			458,072
Total liabilities		295,792			2,147,557

Contingencies (Note 5)

Stockholders’ (deficit) equity
Common stock, 500,000,000 shares authorized, $0.01 par value, 77,413,259 and 135,576,524 issued and outstanding at September 30, 2016 and December 31, 2015		774,133			1,355,766
Additional paid-in capital		2,686,683			3,849,948
Accumulated other comprehensive loss		—			(103,424	)
Accumulated deficit		(3,715,283	)		(2,976,609	)
Total stockholders’ (deficit) equity		(254,467	)		2,125,681
Total liabilities and stockholders’ (deficit) equity	$	41,325		$	4,273,238

The accompanying notes are an integral part of these consolidated financial statements.

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AlphaPoint Technology, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Loss

(Unaudited)


	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015

Revenue	$	325		$	4,284		$	2,236		$	20,925
Cost of revenue		—			—			—			—
Gross profit		325			4,284			2,236			20,925

Operating expenses:
Compensation		26,404			12,600			228,348			34,500
Professional fees		67,210			17,129			207,778			74,886
General and administrative		34,687			8,184			95,843			30,199
Depreciation and amortization		—			—			—			10,000
Total operating expenses		128,301			37,913			531,969			149,585

Loss from operations of continuing operations		(127,976	)		(33,629	)		(529,733	)		(128,660	)

Legal Settlement		(33,800	)		—			(33,800	)		—
Interest Expense		—			(5,132	)		—			(13,626	)

Loss of continuing operations		(161,776	)		(38,761	)		(563,533	)		(142,286	)

Discontinued operations:
Loss from operations of discontinued operations		—			—			(674,626	)		—
Gain from disposal of discontinued operations		—			—			499,485			—
Gain (loss) on discontinued operations		—			—			(175,141	)		—

Net income (loss)	$	(161,776	)	$	(38,761	)	$	(738,674	)	$	(142,286	)

Earnings (loss) per share, basic and diluted
Continuing operations		0.00			(0.00	)		(0.01	)		(0.00	)
Discontinued operations		—			—			0.00			—
Earnings (loss) per share, basic and diluted	$	0.00		$	(0.00	)	$	(0.01	)	$	(0.00	)

Weighted average shares outstanding primary and dilutive		77,413,259			58,450,000			109,679,012			106,464,724

Comprehensive loss:
Net loss	$	(161,776	)	$	(38,761	)	$	(738,674	)	$	(142,286	)
Foreign currency translation adjustment		—			—			(88,440	)		—
Reclassification adjustment for amounts included in Gain from disposal of discontinued operations		—			—			191,864			—
Comprehensive loss	$	(161,776	)	$	(38,761	)	$	(635,250	)	$	(142,286	)

The accompanying notes are an integral part of these consolidated financial statements.

- 3 -

AlphaPoint Technology, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)


	For the Nine Months Ended
	September 30,
	2016			2015

Cash Flows from Operating Activities:
Net loss	$	(738,674	)	$	(142,286	)
Adjustments to reconcile Net Loss to net cash used by operating activities:
Depreciation and amortization		274,909			10,000
Foreign currency exchange gain		(15,615	)		—
Gain on disposal of discontinued operations, net of cash		(503,193	)		—
Changes in assets and liabilities:
Employee advances		(25,559	)		—
Accounts receivable		211,732			4,847
Accounts payable and accrued expenses		365,573			48,760
Deferred revenue		280,044			(8,842	)
Prepaids and other current assets		21,867			—
Other non-current liabilities		22,245			—
Net Cash Used by Operating Activities		(106,671	)		(87,521	)

Cash Flows from Financing Activities:
Net proceeds from stockholder loans		—			89,910
Repayments of long-term debt		(11,494	)		—
Proceeds from note receivable		119,950			—
Net Cash Provided by Financing Activities		108,456			89,910

Effect of fluctuations in foreign currency exchange rates		(18,200	)		—

Net Change in Cash		(16,415	)		2,389

Cash at beginning of period		44,625			688

Cash at end of period	$	28,210		$	3,077

Supplemental disclosures of cash flow information:

Cash paid for interest	$	—		$	—
Cash paid for taxes		—			—

The accompanying notes are an integral part of these consolidated financial statements

- 4 -

AlphaPoint Technology, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

September 30, 2016

(Unaudited)

1. Nature of Operations and Significant Accounting Policies

Nature of Operations

AlphaPoint Technology, Inc. (“AlphaPoint”) was incorporated in the State of Delaware on November 13, 2008. On October 14, 2015, AlphaPoint executed a Share Exchange Agreement (“SEA”) for the acquisition of all the issued and outstanding shares of Strategy to Revenue, Ltd. (“STR Ltd.”), a United Kingdom (“UK”) company based in London (“the STR acquisition”). AlphaPoint’s legacy business has been helping companies manage their IT assets. However, following the acquisition of STR Ltd., AlphaPoint transitioned its focus to STR’s revenue acceleration business. After the STR acquisition on October 14, 2015, AlphaPoint formed Strategy to Revenue Inc. (“STR Inc.”, collectively with STR Ltd., “STR”), in the U.S.A. as a Florida Corporation to better serve the North American market.

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. Pursuant to the Unwind, all STR Shareholders surrendered all of their shares and rights in AlphaPoint and AlphaPoint conveyed to STR Shareholders all of its shares, rights and ownership interest in STR, subject to STR’s payment in full of a $130,000 promissory note. As a result of the Unwind, the Company has 58,163,265 fewer shares issued and outstanding. None of the STR Shareholders or their assignees owns any interest in AlphaPoint. In addition, the shareholders of STR agreed to forgive certain intercompany receivables due from AlphaPoint as well as the notes payable totaling $900,000 issued as part of the original consideration in the SEA.

On December 23, 2014, AlphaPoint closed a share exchange transaction for the acquisition of all the issued and outstanding shares of N’Compass Solutions, Inc. (“N’Compass”, “NSI”) a Minnesota corporation. Since that time, issues arose and, as a result, the parties agreed to unwind the transaction. The consolidation of management, operations, assets, and liabilities did not happen from the time of the equity swap to the unwind time. The Unwind Agreement became effective on April 14, 2015, which essentially unwound the Share Exchange Agreement dated December 19, 2014 and which was reported on a Form 8-K on December 23, 2014 and an Amended Form 8-K on February 9, 2015.

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.

Basis of Presentation

In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair presentation of (a) the consolidated financial position at September 30, 2016 and December 31, 2015 and (b) the consolidated statements of operations, and cash flows for the nine months ended September 30, 2016 and 2015 have been made.

The unaudited consolidated financial statements and notes are presented as permitted by Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) have been omitted. The accompanying statements and notes should be read in conjunction with the audited consolidated financial statements and notes of the Company for the year ended December 31, 2015.

Discontinued Operations

As a result of the STR Unwind transaction described above, AlphaPoint deconsolidated the assets, liabilities, income, and expenses of STR and recorded the results of operations of that entity as discontinued operations in the accompanying consolidated statements of operations. Furthermore, STR’s assets and liabilities as of December 31, 2015 are separately presented in the accompanying consolidated balance sheets. A gain on the disposal of STR was recognized as the excess of the consideration issued in the Unwind over the carrying amount of the net assets disposed.

- 5 -

Reclassifications

Certain reclassifications have been made to prior year financial statements to conform with the current year presentation. These reclassifications have no impact on net income and no material impact on any other financial statement captions.

Foreign Currency Translation

The assets and liabilities of the Company’s former foreign subsidiary for which the local currency is the functional currency 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. Prior to the Unwind, translation gains and losses were reported as components of accumulated other comprehensive income (“AOCI”), included within stockholders’ equity. AOCI at May 31, 2016 is included as part of the gain on disposal of discontinued operations. Gains and losses from foreign currency transactions are included in the Company’s consolidated statements of operations as part of the loss from discontinued operations.

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 accounting principles generally accepted in the United States of America. The application of U.S. 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, 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.

Fair Value Measurements

The Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 820, which defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements. The statement applies whenever other statements require or permit assets or liabilities to be measured at fair value.

At each balance sheet date, the Company performs an analysis of all instruments subject to fair value measurement. The Company applied ASC 820 for all non-financial assets and liabilities measured at fair value on a non-recurring basis. As of September 30, 2016 and December 31, 2015 the fair values of the Company’s financial instruments approximate their historical carrying amount.

Accounts Receivable

Accounts receivable consist of amounts due for the delivery of service offerings to customers. An allowance for doubtful accounts is established for any amounts that may not be recoverable, which is based on an analysis of the Company’s customer credit worthiness, and current economic trends. Receivables are determined to be past due, based on payment terms of original invoices. Charge-offs of accounts receivable are made once all collection efforts have been exhausted. The Company does not typically charge interest on past due receivables.

Property and Equipment

Property and equipment are stated at cost, and depreciated under the straight-line method over the estimated useful lives of the related assets. Expenditures for repairs and maintenance are expensed as incurred. Depreciable lives range from 3 to 7 years. Given that all property and equipment in the periods presented relate to STR, the balances are reflected in assets of discontinued operations in the accompanying consolidated balance sheets.

- 6 -

Business Combinations

The Company follows the acquisition method to account for business combinations. This method requires that when the Company (acquirer) takes control of another entity, the fair value of the underlying exchange transaction is used to establish a new accounting basis of the acquired entity. Furthermore, because obtaining control leaves the Company responsible and accountable for all the acquiree’s assets, liabilities and operations, the Company recognizes and measures the assets acquired and liabilities assumed at their full fair values as of the date control is obtained.

Identifiable Intangible Assets

Intangible assets consist of trademarks, domain names, revenue acceleration platforms, advertising and supply contracts, and customer relationships acquired in a business combination. The cost of these assets is amortized under the straight-line method over their respective useful lives. Trademarks and domain names are amortized over a useful life of 10 years, while the remaining intangible assets are amortized over 5 years. Given that all unamortized intangible assets in the periods presented relate to STR, the balances are reflected in assets of discontinued operations in the accompanying consolidated balance sheets. AlphaPoint’s intangible assets were fully amortized as of December 31, 2015.

Impairment of Long-lived assets and intangible property

Long-lived assets such as property, equipment and identifiable intangible assets 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.

Revenue recognition

Revenue is generally recognized when:


·	Evidence of an arrangement exists;

·	Delivery has occurred;

·	Fees are fixed or determinable; and

·	Collection is considered probable.

Most of the Company’s revenues are generated from software-as-a-service (“SaaS”) subscription offerings and related product support and maintenance; and consulting services billed on a time and materials basis. SaaS revenues stem mainly from annual subscriptions and are recorded evenly over the term of the subscription. Any customer payments received in advance are deferred until they are earned. Consulting and training revenues are recognized as work is performed.

For revenue stemming from project work, the Company recognizes revenue to the extent of costs incurred. All profit is recognized at the end of each project.

Research and Development

The Company expenses research and development costs when incurred. Research and development costs include engineering, programmer costs and testing of product and outputs. Indirect costs related to research and development are allocated based on percentage usage to the research and development. The Company incurred $13,251 and $0 in research and development costs for the three months ended September 30, 2016 and 2015, respectively, and $14,488 and $0 for the nine months ended September 30, 2016 and 2015, respectively. Given that all research and development expenses were incurred by STR, these amounts are reflected in discontinued operations in the accompanying consolidated statements of operations.

- 7 -

Income taxes

The Company accounts for income taxes under the liability method. Deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purpose, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized. A valuation allowance may be applied against the net deferred tax due to the uncertainty of its ultimate realization.

Deferred tax assets have been fully offset by a valuation allowance, because at this time the Company believes that it is more likely than not that the future tax benefit will not be realized as the Company has a history of net operating losses.

Earnings (loss) per share

Basic earnings (loss) per share calculations are determined by dividing net income (loss) by the weighted average number of shares outstanding during the year. Diluted earnings (loss) per share calculations are determined by dividing net income (loss) by the weighted average number of shares plus any potentially dilutive shares. The Company does not have any potentially dilutive instruments and, thus, anti-dilution issues are not applicable.

Risks and concentrations

Financial instruments that potentially subject the Company to concentrations of credit risk include cash in banks in excess of federally insured amounts. The Company manages this risk by maintaining all deposits in high quality financial institutions.

2. Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has a history of losses resulting in an accumulated deficit. The Company has been dependent on financing from its majority shareholder and related parties to meet its operating obligations. In view of these matters, there is doubt regarding the Company’s ability to continue as a going concern, which is dependent upon the Company’s ability to identify revenue sources and to achieve a level of profitability. The Company intends on financing its future development activities, marketing plan and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes until such time that funds provided by operations are sufficient to fund working capital requirements.

The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

3. Recent Accounting Pronouncements

We have reviewed the FASB issued Accounting Standards Updates (“ASU”) and interpretations thereof that have effectiveness dates during the periods reported and in future periods.

In August 2016, The FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”, which provides guidance on specific cash flow issues with the objective of reducing diversity in practice in how certain cash receipts and cash payments are presented in the statement of cash flows. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those fiscal years with early adoption permitted. The Company elected to early adopt this ASU in the quarter ended September 30, 2016. There have been no changes in our reported statements of cash flows as a result of the adoption of ASU 2016-15.

In April 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The updated guidance simplifies several aspects of the accounting for share-based payment award transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendment to the standard is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any interim or annual period. The Company is currently assessing the impact of the new standard in order to determine the impact on its consolidated financial statements.

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In February 2016, the FASB issued ASU No. 2016-02, “Leases”. This standard requires the lessee to recognize virtually all of their leases on the balance sheet, by recording a right-of-use asset and lease liability. Public business entities will be required to adopt this standard for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted upon issuance of this standard. The new leasing standard requires modified retrospective transition, which requires application of the new guidance at the beginning of the earliest comparative period presented in the year of adoption. The Company is currently assessing the impact of the new standard in order to determine the impact on the consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The amendment to the standard is effective for the Company beginning on June 1, 2018. While the Company is currently assessing the impact of the new standard, it does not expect this new guidance to have a material impact on its consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17 “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” which simplifies the presentation of deferred income taxes. Under the new accounting standard, deferred tax assets and liabilities are required to be classified as noncurrent, eliminating the prior requirement to separate deferred tax assets and liabilities into current and noncurrent. The new guidance is effective for the Company beginning on January 1, 2017, with early adoption permitted. The standard may be adopted prospectively or retrospectively to all periods presented. The Company is currently assessing the timing of adoption of the new guidance, but does not expect it will have a material impact on the Company’s consolidated financial statements.

In August 2015, the FASB issued ASU No. 2015-15 “Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements”, which requires debt issuance costs to be presented in the balance sheet as a deduction from the carrying value of the associated debt liability. The FASB further clarified that for line-of-credit arrangements an entity can continue to defer and present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The new guidance should be applied on a retrospective basis. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” that will supersede most current revenue recognition guidance, including industry-specific guidance. The core principle of the new guidance is that an entity will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. Additionally, the guidance requires disaggregated disclosures related to the nature, amount, timing, and uncertainty of revenue that is recognized. The amendments are required to be adopted by the Company on January 1, 2017. The FASB has implemented a one-year delay in the effective date of Topic 606. Transition to the new guidance may be done using either a full or modified retrospective method. The Company is currently evaluating the full effect that the adoption of this standard will have on the Company’s consolidated financial statements.

4. Discontinued Operations

As a result of the Unwind described in Note 1, AlphaPoint deconsolidated the assets, liabilities, income, and expenses of STR and recorded the results of operations of that entity as discontinued operations in the accompanying consolidated statements of operations. Furthermore, STR’s assets and liabilities as of December 31, 2015 are separately presented in the accompanying consolidated balance sheets. A gain on the disposal of STR was recognized as the excess of the consideration issued in the Unwind over the carrying amount of the net assets disposed. The Company followed the guidance in ASC 205-20, Discontinued Operations; ASC 810-10-40, Consolidation – Derecognition; ASC 845, Nonmonetary Transactions; as well as the SEC’s interpretive guidance on discontinued operations, spin-offs, and divestitures.

As a result of this transaction, the Company wrote off the net assets of STR, which had a carrying value on the effective date of the Unwind of $2,494,211 and accumulated other comprehensive income related to cumulative translation adjustments of $191,864. Consideration received in the Unwind consisted of: (a) $130,000 note receivable, (b) $410,660 intercompany payables to STR forgiven, (c) $900,000 notes payable forgiven, (d) $1,744,898 fair value of the shares reacquired by AlphaPoint; for a total consideration received of $3,185,558. The resulting gain on disposal was $499,485, which is reflected in discontinued operations in the accompanying consolidated statements of operations. The fair value of the shares reacquired was approximately $0.03 per share, which was the closing price of the stock on May 31, 2016.

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Below is a reconciliation of the carrying amounts of major classes of assets and liabilities of the discontinued operation:


	December 31, 2015

Carrying amounts of major classes of assets included as part of discontinued operations:
Cash	$	692
Accounts receivable, net		714,456
Prepaid and other current assets		23,195
Total current assets		738,343

Intangible assets, net		3,244,198
Goodwill		169,160
Property and equipment, net		76,912
Total noncurrent assets		3,490,270
Total assets	$	4,228,613

Carrying amounts of major classes of liabilities included as part of discontinued operations:
Notes payable, current	$	450,000
Notes payable to bank		103,513
Accounts payable		324,151
Accrued expenses		310,373
Deferred revenue and customer deposits		425,239
Total current liabilities		1,613,276

Notes payable, net of current portion		450,000
Other non current liabilities		8,072
Total noncurrent liabilities		458,072
Total liabilities	$	2,071,348

Below is a reconciliation of the carrying amounts of major classes of net loss from discontinued operations:


	Three months ended September 30, 2016		Nine months ended September 30, 2016

Revenues	$	—	$	1,278,820
Cost of Revenues		—		382,588
Gross Profit		—		896,232

Operating expenses:
Compensation		—		807,158
Research and Development		—		14,488
Professional Fees		—		147,386
General and Administrative		—		357,959
Foreign Currency Translation (Gain) Loss		—		(35,259	)
Depreciation and Amortization		—		274,909
Total Operating Expenses		—		1,566,641

Interest expense		—		(4,217	)
Net loss from discontinued operations	$	—	$	(674,626	)

- 10 -

The following table provides the total operating and financing cash flows of the discontinued operations included in the accompanying consolidated statement of cash flows:


	Nine months ended September 30, 2016
Cash flows from discontinued operating activities:
Net loss from discontinued operations	$	(674,626	)
Adjustments to reconcile Net Loss to net cash used by operating activities:
Depreciation and amortization		274,909
Foreign currency exchange gain		(15,615	)
Changes in assets and liabilities:
Employee advances		(25,958	)
Accounts receivable		211,732
Accounts payable and accrued expenses		144,153
Deferred revenue		282,280
Prepaid and other current assets		24,932
Other non-current liabilities		22,245
Net Cash Used by Operating Activities	$	244,052

Cash flows from financing activities:
Repayments of long-term debt	$	(11,494	)
Net Cash Used by Financing Activities	$	(11,494	)

5. Contingencies

Some of the officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities that become available. They may face a conflict in selecting between the Company and other business interests. The Company has not formulated a policy for the resolution of such conflicts.

Litigation

From time to time the Company may become a party to litigation matters involving claims against the Company. Current regulations and reporting requirements require the Company to disclose any legal proceedings that are ongoing and could have a material impact on the consolidated financial statements for the period ended September 30, 2016.

On July 13, 2016, AlphaPoint entered into a Mediation Settlement Agreement with Ladenburg Thalmann & Co. (“Ladenburg”) regarding the lawsuit arising from the Investment Banking Agreement and associated counter-claim by the Company (11th Judicial Circuit Court, Miami-Dade County, Florida (Case No. 15004012 CA 01)) (“Lawsuit”). Under the Settlement Agreement, the parties agreed to dismiss the Lawsuit upon the settlement payment, which totaled $33,800, inclusive of mediation fees. All matters previously disclosed and subject to the Settlement Agreement are described in further detail in the Company’s 2015 and 2016 Quarterly and 2014 and 2015 Annual Reports filed with the SEC.

6. Subsequent Events

Management has evaluated subsequent events that occurred through the date of this filing for matters that would have a material impact on our consolidated financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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. However, following the recent acquisition of Strategy to Revenue, Ltd. (“STR Ltd.” or “STR”), a United Kingdom (“UK”) based company, AlphaPoint transitioned its focus to STR’s revenue acceleration business.

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. As a global sales effectiveness company, STR Ltd.’s existing clients are industry leading, Fortune 500 companies keen to realize efficient revenue growth. STR Ltd.’s customers include high-profile organizations such as Thomson Reuters, Vodafone, Hewlett Packard, Motorola, SAP, Zebra Technologies, Comcast and DHL, among others. STR Ltd. helps marketing and sales teams become motivated, better equipped and mobilized on core business initiatives, and improve engagement with customers.

AlphaPoint management are 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 .

RESULTS OF OPERATIONS

Three months ended September 30, 2016 and 2015

Our revenues from continuing operations were $325 and $4,284 for the three months ended September 30, 2016 and 2015, respectively. The decrease in revenues is the Company’s abandonment of the legacy business in contemplation of incremental revenues from STR.

Operating expenses from continuing operations were $128,301 and $37,913 for the three months ended September, 2016 and 2015, respectively. The increase year over year expenses mainly relates to work on finding opportunities to implement the company’s strategy following the Unwind, and associated adjustments to internal resources and advisory costs.

The Company had net losses of $161,776 and $38,761 for the three months ended September 30, 2016 and 2015, respectively.

Nine months ended September 30, 2016 and 2015

Our revenues from continuing operations were $2,236 and $20,925 for the nine months ended September 30, 2016 and 2015, respectively. The decrease in revenues is due to the Company’s abandonment of the legacy business in contemplation of incremental revenues from STR. STR revenues of $1,278,820 for the five months ended May 31, 2016 are reflected in net loss from operations of discontinued operations of $674,626, as the operations of STR were unwound on that date.

Operating expenses from continuing operations were $531,969 and $149,585 for the nine months ended September 30, 2016 and 2015, respectively. The increase year over year expenses mainly relates to work on finding opportunities to implement the company’s strategy following the Unwind, and associated adjustments to internal resources and advisory costs. STR operating expenses of $1,566,641 for the five months ended May 31, 2016 are reflected in net loss from operations of discontinued operations of $674,626, as the operations of STR were unwound on that date.

The Company had net losses of $738,674 and $142,286 for the nine months ended September 30, 2016 and 2015, respectively. The year over year increase in net losses reflects higher operating expenses for AlphaPoint and STR.

LIQUIDITY AND CAPITAL RESOURCES

As reflected in the unaudited consolidated financial statements, at September 30, 2016, we had a deficit in working capital, an accumulated deficit, a net loss and a comprehensive loss.

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At September 30, 2016, the Company had current assets of $41,325 including cash of $28,210 and the balance on the note receivable from STR of $10,050. Current liabilities total $295,792, and resulting in a working capital deficit of $254,467.

The Company will continue to seek strategic merger opportunities in order to generate revenues and operating cash flows. We will require working capital to meet our current shortfall in working capital and to market our product and achieve our operating plan in 2017. In the event we are not successful in reaching our revenue targets, additional funds may be required for the development and marketing of our core services. Should this occur, we would likely seek additional financing to support the continued operation of our business. 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 keep costs from being more than these estimated amounts or that the Company will be able to raise such funds.

Completion of our plan of operation is subject to attaining adequate revenue. We cannot assure investors that adequate revenues will be generated. Without adequate revenues, we may be unable to proceed with our plan of operations.

In the event we are not successful in reaching our revenue targets, additional funds may be required, and we would then not be able to proceed with our business plan for the development and marketing of our core services. Should this occur, we would likely seek additional financing to support the continued operation of our business. We anticipate that depending on market conditions and our plan of operations, we would incur operating losses in the foreseeable future. We base this expectation, in part, on the fact that we may not be able to generate enough gross profit from our services to cover our operating expenses. Consequently, there is doubt about the Company’s ability to continue to operate as a going concern. As reflected in the consolidated financial statements we have an accumulated deficit from inception of approximately $3.7 million and have a net loss from continuing operations of approximately $564 thousand for nine months ended September 30, 2016. This may raise doubt about the Company’s ability to continue as a going concern. 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 consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

However, the Company may not be able to obtain additional capital or generate sufficient revenues to fund our operations. 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 six (6) individuals who advise our chief executive officer and chief financial 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 to the consolidated financial statements for a discussion of recent accounting guidance.

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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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

When we prepare our consolidated financial statements and accompanying notes in conformity with U.S. GAAP, we must make estimates and assumptions about future events that affect the amounts we report. Certain of these estimates result from judgments that can be subjective and complex. As a result of that subjectivity and complexity, and because we continuously evaluate these estimates and assumptions based on a variety of factors, actual results could materially differ from our estimates and assumptions if changes in one or more factors require us to make accounting adjustments. During the nine months ended September 30, 2016, we reassessed our critical accounting policies and estimates as disclosed in our 2015 Form 10-K; however, we have made no material changes or additions with regard to those policies and estimates.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not applicable to a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on their most recent review, as of the end of the period covered by this report, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures were not effective, and that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and are ineffective to ensure that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

As previously disclosed in the Company’s 10-K filed April 13, 2016, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures and internal controls over financial reporting were not effective, due to a material weakness surrounding the Company’s identification and application of the appropriate accounting treatment for certain revenue transactions. Management has undertaken steps to design and implement more effective internal controls, including the implementation of a review process of certain revenue transactions and has engaged qualified consultants to assist the Company with the application of the appropriate accounting treatment of such transactions when necessary.

As previously disclosed in the Company’s 10-K filed April 13, 2016, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures and internal controls over financial reporting were not effective, due to a material weakness related to the lack of an audit committee. Management intends to adopt a more rigorous corporate governance structure, including the possible formation of an audit committee. Additional steps will be taken when the activity level of the Company justifies additional controls.

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Changes in Internal Control Over Financial Reporting

The changes in the Company’s internal control over financial reporting described in the previous paragraphs were implemented during the quarter ended March 31, 2016, and continue to be remediated.

There were no other changes in the Company’s internal controls over financial reporting during the nine months ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

Not applicable to a smaller reporting company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(b) Exhibits:


31.1	Rule 13a-14(a) Certification of Principal Executive Officer

31.2	Rule 13a-14(a) Certification of Principal Financial Officer

32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of Principal Accounting Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101*	Interactive Data Files of Financial Statements and Notes.

* In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed”.

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SIGNATURE

In accordance with the requirements of the Exchange Act, the Issuer caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	ALPHAPOINT TECHNOLOGY, INC.


	By	/s/ Gary Macleod
		Gary Macleod
		Principal Executive Officer

		DATED: November 9, 2016

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LevelBlox, Inc. - FORM 10-Q - November 10, 2016

Attached files

LevelBlox, Inc. Reports