Report on Form 10-Q For the Quarter Ended March 31, 2008 INDEX Page ---- Part I. Financial Information Item 1. Financial Statements (unaudited)...................... 3 Balance Sheets.......................................3-4 Statements of Operations ............................5-6 Statement of Stockholders' Equity (Deficit)........... 7 Statements of Cash Flows.............................. 8 Notes to the Financial Statements ................. 9-10 Item 2. Management's Discussion and Analysis or Plan of Operation .............................. 11 Item 3. Controls and Procedures ............................. 12 Part II. Other Information Item 1. Legal Proceedings ................................... 13 Item 2. Changes in Securities ............................... 15 Item 3. Defaults Upon Senior Securities ..................... 15 Item 4. Submission of Matters to a Vote of Security Holders . 15 Item 5. Other Information ................................... 15 Item 6. Exhibits and Reports on Form 8-K .................... 15 Signatures........................................... 16 Certifications 2 PART I - FINANCIAL INFORMATION ALPHATRADE.COM Balance Sheets ASSETS ------ March 31, December 31, 2008 2007 ------------- -------------- (unaudited) CURRENT ASSETS Cash $ 35,281 $ 153,760 Accounts receivable 2,241,351 28,047 Marketable securities-avaliable for sale 482,713 658,858 Marketable securities-avaliable for sale related party 7,324 5,232 Prepaid expenses 14,900 750 ------------ ------------- Total Current Assets 2,781,569 846,647 ------------ ------------- PROPERTY AND EQUIPMENT, net 40,334 45,633 OTHER ASSETS Investments, at cost 300,000 300,000 TOTAL ASSETS $ 3,121,903 $ 1,192,280 ============ ============= The accompanying notes are an integral part of these financial statements. 3 ALPHATARADE.COM Balance Sheets LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ March 31, December 31, 2008 2007 ------------- ------------- (unaudited) CURRENT LIABILITIES Accounts payable and accrued expenses $ 2,159,821 $ 2,404,822 Bank overdraft 65,918 - Related party payables 2,435,650 2,190,414 Deferred revenues 251,696 244,578 ------------- ------------- Total Current Liabilities 4,913,085 4,839,814 ------------- ------------- TOTAL LIABILITIES 4,913,085 4,839,814 ------------- ------------- STOCKHOLDERS' EQUITY Preferred shares: $0.001 par value, 10,000,000 shares authorized: 2,000,000 Class A and 2,000,000 Class B shares issues and outstanding 4,000 4,000 Common shares: $0.001 par value, 100,000,000 shares authorized: 50,280,523 and 48,589,773 shares issues and outstanding,respectively 50,281 48,590 Stock subscription payable 45,080 28,500 Additional paid-in capital 33,072,117 32,719,057 Accumulated other comprehensive income (1,875,883) (1,647,531) Accumulated deficit (33,086,777) (34,800,150) ------------- ------------- Total Stockholders' Equity (1,791,182) (3,647,534) ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,121,903 $ 1,192,280 ============= ============== The accompanying notes are an integral part of these financial statements. 4 ALPHATRADE.COM Statements of Operations (unaudited) For the Three Months Ended March 31, -------------------------- 2008 2007 ------------ ------------ REVENUES Subscription revenue $ 771,928 $ 772,661 Advertising revenue 2,660,317 398,367 Other revenue 37,401 20,179 ------------ ------------ Total Revenues 3,469,646 1,191,207 ------------ ------------ COST OF SALES Financial content 483,403 452,294 Other cost of sales 1,100 1,486 ------------ ------------ Total Cost of Sales 484,503 453,780 ------------ ------------ GROSS PROFIT 2,985,143 737,427 ------------ ------------ OPERATING EXPENSES Management expense 120,000 120,000 Professional fees 438,492 457,825 Research and development 147,478 87,751 Marketing expense 134,697 891,497 General and administrative 256,885 180,797 ------------ ------------ Total Operating Expenses 1,097,552 1,737,870 ------------ ------------ INCOME (LOSS) FROM OPERATIONS 1,887,591 (1,000,443) ------------ ------------ OTHER INCOME (EXPENSE) Gain (Loss) on sale of assets (85,738) - Interest expense (88,480) - ------------ ------------ Total Other Income (Expense) (174,218) - ------------ ------------ NET LOSS BEFORE INCOME TAXES 1,713,373 (1,000,443) INCOME TAX EXPENSE - - ------------ ------------ The accompanying notes are a integral part of these financials statements. 5 ALPHATRADE.COM Statements of Operations (unaudited) (Continued) For the Three Months Ended March 31, -------------------------- 2008 2007 ------------ ------------ NET LOSS $ 1,713,373 $ (1,000,443) ============ ============ OTHER COMPREHENSIVE INCOME (LOSS) $ (228,352) $ (9,482) TOTAL COMPREHENSIVE INCOME (LOSS) $ 1,485,021 $ (1,009,925) ============ ============ BASIC EARNINGS (LOSS) PER SHARE $ 0.03 $ (0.03) ============ ============ COMPREHENSIVE BASIC EARNINGS (LOSS) PER SHARE $ 0.03 $ (0.03) ============ ============ FULLY DILUTED INCOME (LOSS) PER SHARE $ 0.03 $ (0.03) ============ ============ COMPREHENSIVE FULLY DILUTED INCOME (LOSS) PER SHARE $ 0.03 $ (0.03) ============ ============ BASIC WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 49,601,306 37,502,527 ============ ============ FULLY DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 49,601,306 37,502,527 ============ ============ The accompanying notes are a integral part of these financials statements. 6 ALPHATRADE.COM Statements of Stockholders' Equity <TABLE> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Preferred Stock Common Stock Additional Stock Other Total ----------------- ------------------ Paid-In Subscription Comprehensive Accumulated Stockholders' Shares Amount Shares Amount Capital Payable Income Deficit Equity --------- ------ ---------- ------- ----------- ------------ ------------- ------------- ------------- Balance, December 31, 2006 4,000,000 $4,000 40,425,027 $40,425 $30,853,661 $ (30,000) $ (717,860) $(31,111,747) $ (961,521) Common stock issued for cash at $0.18 per share - - 2,287,500 2,288 454,212 28,500 - - 485,000 Common stock issued for services at $0.20 per share - - 5,877,246 5,877 1,052,066 - - - 1,057,943 Value of stock purchase warrants granted - - - - 207,728 - - - 207,728 Value of stock options issued under the 2007 stock option plan - - - - 131,540 - - - 131,540 Contributed capital - - - - 19,850 - - - 19,850 Amortization of prepaid expense - - - - - 30,000 - - 30,000 Net income for the year ended December 31, 2007 - - - - - - (929,671) (3,688,403) (4,618,074) --------- ------ ---------- ------- ----------- ----------- ------------- ------------ Balance, December 31, 2007 4,000,000 4,000 48,589,773 48,590 32,719,057 28,500 (1,647,531) (34,800,150) (3,647,534) Common stock issued for cash at $0.20 per share - - 725,000 725 144,275 16,580 - - 161,580 Common stock issued for services at $0.20 per share - - 965,750 966 194,552 - - - 195,518 Value of stock purchase warrants granted - - - - 14,233 - - - 14,233 Net loss for the three months ended March 31, 2008 - - - - - - (228,352) 1,713,373 1,485,021 Balance, March 31, 2008 (unaudited) 4,000,000 $4,000 50,280,523 $50,281 $33,072,117 $ 45,080 $ (1,875,883) $(33,086,777) $ (1,791,182) ========= ====== ========== ======= =========== =========== ============= ============ ============ </TABLE> The accompanying notes are a integral part of these financials statements. 7 ALPHATRADE.COM Statements of Cash Flows (unaudited) For the Three Months Ended March 31, -------------------------- CASH FLOWS FROM 2008 2007 OPERATING ACTIVITIES ------------ ------------ Net loss $ 1,713,373 $ (1,000,443) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation expense 5,299 3,336 Value of options granted 14,233 10,128 Loss on sale of assets 85,738 - Amortization of services prepaid by common stock - 13,125 Investments received as payment for accounts receivable (232,697) (146,250) Common stock issued for services 195,518 232,365 Changes in operating assets and liabilities: Proceeds from bank overdraft 65,918 - Changes in accounts receivable (2,194,256) 56,510 Changes in prepaid expenses (14,150) (10,241) Changes in deferred revenues 7,118 83,740 Changes in related party payables 245,236 422,494 Changes in accounts payable and accrued expenses (245,001) 209,182 ------------ ------------ Net Cash Provided by Operating Activities (353,671) (126,054) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Sale of securities 73,612 - Purchase of fixed assets - (1,023) ------------ ------------ Net Cash Used by Investing Activities 73,612 (1,023) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Stock subscriptions payable 16,580 - Common stock issued for cash 145,000 - Contributed capital - 19,850 ------------ ------------ Net Cash Provided by Financing Activities 161,580 19,850 ------------ ------------ NET DECREASE IN CASH (118,479) (107,227) CASH AT BEGINNING OF PERIOD 153,760 147,323 ------------ ------------ CASH AT END OF PERIOD $ 35,281 $ 40,096 ============ ============ SUPPLIMENTAL DISCLOSURES OF CASH FLOW INFORMATION CASH PAID FOR: Interest $ 24,286 $ - Income Taxes $ - $ - NON CASH FINANCING ACTIVITIES: Common stock issued for services and contributions $ 195,518 $ 232,365 Value of stock options granted $ 14,233 $ 10,128 The accompanying notes are an integral part of these financial statements. 8 ALPHATRADE.COM Notes to the Financial Statements NOTE 1 - CONDENSED FINANCIAL STATEMENTS The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2008 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2007 audited financial statements. The results of operations for the periods ended March 31, 2008 and 2007 are not necessarily indicative of the operating results for the full years. NOTE 2 - OUTSTANDING COMMON STOCK OPTIONS AND STOCK PURCHASE WARRANTS The Company uses the instruments identified as stock options and common stock warrants somewhat interchangeably. Both forms of equity instruments have been granted as compensation to the Company's officers and directors. Under FASB Statement 123R, the Company estimates the fair value of each stock award at the grant date by using the Black-Scholes option pricing model. The following weighted average assumptions used for grants in the periods ended December 31, 2007 and March 31, 2008: dividend yield of zero percent for all years; expected volatility of 55.50% and 62.01%; risk-free interest rates of 5.03% and 3.25% and expected lives of 1.0 and 1.0, respectively. The general terms of awards such as vesting requirements(usually 1 to 2 years), term of options granted (usually 10 years), and number of shares authorized for grants of options or other equity instruments are determined by the Board of Directors. A summary of the status of the Company's stock options and warrants as of December 31, 2007 and changes during the periods ended December 31, 2007and March 31, 2008 is presented below: Weighted Weighted Options Average Average and Exercise Grant Date Warrants Price Fair Value ---------- -------- ---------- Outstanding, December 31, 2006 39,822,997 $ 0.38 $ 0.38 Granted 13,618,000 0.25 0.25 Expired (1,130,000) 0.72 0.72 Exercised (740,650) 0.76 0.76 ---------- -------- --------- Outstanding, December 31, 2007 51,570,347 $ 0.36 $ 0.36 ========== ======== ========= Exercisable, December 31, 2007 35,925,350 $ 0.40 $ 0.40 ========== ======== ========= 9 ALPHATRADE.COM Notes to the Financial Statements NOTE 2 - OUTSTANDING COMMON STOCK OPTIONS AND STOCK PURCHASE WARRANTS (Continued) Weighted Weighted Options Average Average and Exercise Grant Date Warrants Price Fair Value ---------- -------- ---------- Outstanding, December 31, 2007 51,570,347 $ 0.36 $ 0.36 Granted 2,160,000 0.41 0.41 Expired (200,000) 0.15 0.15 Exercised (298,650) 0.25 0.25 ---------- -------- --------- Outstanding, March 31, 2008 53,231,697 $ 0.36 $ 0.40 ========== ======== ========= Exercisable, March 31, 2008 37,885,350 $ 0.40 $ 0.40 ========== ======== ========= 10 Item 2. Management's Discussion and Analysis of Financial Condition or Plan of Operations The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-Q. Forward-looking and Cautionary Statements This report contains certain forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks and uncertainties. These factors may cause our company's, or our industry's actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will" "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. These statements are only predictions. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Results of Operations. During the three months ended March 31, 2008, revenue increased significantly over the same period of 2007. Revenue for the first quarter in 2008 was $3,469,646, which is a 191% increase over first quarter 2007 revenue of $1,191,207. The largest increase in revenue is advertising. Advertising revenues in the first quarter grew from $398,367 in 2007 to $2,660,317 in 2008. Our advertising model is unique in the industry and we focus on long term clients that are seeking brand awareness in combination with building their shareholder base. We have built relationships with investor and public relations firms which are driving our growth. We are focused on driving more people to our website to create new prospects for our products and to generate continued exposure for our advertising clients. Our cost of sales for our financial products is directly related to the price of our financial feeds and content. Some of these costs are fixed monthly fees and others are based on the number of users or subscribers. As our subscribers increase, our ability to charge more for our advertising products increases. For the first quarter of 2008 our cost of sales was 14% of revenues compared to 38% in 2007. As our advertising revenues increase, this percentage may become more and more favorable in terms of profitable operations. We incurred a net income of $1,713,373 for the three months ended March 31, 2008 compared to a loss of $1,000,443 for the three months ended March 31, 2007. This is an increase of $2,713,816 and directly related to our established relationships with the marketing and public relations firms. During 2008 we terminated most of our sports partnerships because the cost was excessive for the results we achieved from a financial perspective; however, they did achieve the result of driving a lot of new traffic to our website. In 2007 we paid $891,497 to a variety of major league baseball teams, automobile racing teams, and the PBR, and other marketing consultants. In combinations with what we spent 11 in 2007 and to date this year, these expenses have translated into a substantial increase in Alphatrade's brand awareness which enabled us to capitalize on that awareness to build our advertising growth. During 2008 we paid only $134,697 in marketing fees. Included in professional fees for 2008 are shares of common stock to investor relations consultants valued at $195,518 compared to $232,365 in 2007 and stock options to our consultants and employees valued at $14,233 compared to $10,128 in 2007. The investor relations consultants have been instrumental in bringing new advertising business to the company. We realized related party compensation expense of $120,000 for both 2008 and 2007. Our operating expenses decreased from $1,737,870 in 2007 to $1,097,552 for 2008 because we did not renew most of our sports partnerships. Historically, many of our expenses are paid in shares of our common stock. The expenses are recorded at the fair value of the shares issued. Excluding these non cash expenses the income (loss) for the three months ended March 31, 2008 and 2007 would have been $1,923,124 and ($757,959), respectively. The loss in 2007 is almost entirely due to the payments to our sports partnerships which are providing some residual benefits from the greater exposure we received and from the contacts we made with these associations. Liquidity and Capital Resources. We have consistently been financed through loans from related parties and from raising capital through private equity offerings. We used $353,671 and $126,054 of cash in our operating activities in the first three months of 2008 and 2007, respectively. For the three months ended March 31, 2008 and 2007 we received cash totaling $161,580 and $19,850 from the issuance of our common stock and contributed capital. We expect that in the next twelve months the cash generated by our operations will be adequate to cover our operating expenses. Given the right circumstances, we would entertain a secondary financing if it would ensure our growth could be greatly fast-tracked otherwise we will focus on building our business via revenue growth. Currently, we do not have any definitive plans for a secondary financing. We currently have no material commitments for major capital expenditures. Dependence on Key Personnel We are dependent on the services of Penny Perfect, the Chief Executive Officer of the Company. The loss of Ms. Perfect or Gordon Muir, our CTO or other key executives and personnel, or the inability to attract and retain the additional highly skilled employees required for the expansion of our activities, may have a material adverse effect on our business or our future operations. Item 3. Controls and Procedures As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities 12 Exchange Act of 1934. Based upon that evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures are effective to cause the material information required to be disclosed by us in the reports that we file or submit under the Exchange Act to be recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. There have been no significant changes in our internal controls or in other factors which could significantly affect internal controls subsequent to the date we carried out our evaluation. 13 PART II - OTHER INFORMATION. Item 1. Legal Proceedings. AlphaTrade.com is the Defendant in litigation pending in the Supreme Court of British Columbia, Canada. This action was filed on December 23, 2003 and is between Zacks Investment Services, Inc. as Plaintiff and AlphaTrade.com as Defendant. The case number is 5036907. The Plaintiff alleges that it is owed the sum of $279,664 pursuant to a licensing Agreement executed by the Plaintiff and the Defendant in 1999. Alphatrade is agressively defending itself against this claim. During the year ending December 31, 2002, a company filed an action against AlphaTrade in the Supreme Court of British Columbia, Canada claiming unspecified damages. AlphaTrade filed a Statement of Defence in August, 2002. There has been no further developments in this action. AlphaTrade plans to vigorously defend itself. Arena Media Networks LLC v. AlphaTrade.com Supreme Court of the State of New York, County of New York, Index No. 603406/06 ------------------------------------------------------------------------------- Plaintiff Arena Media Networks LLC ("Arena") commenced this action on or about October 15, 2007 by the filing of a Summons and Complaint. In the Complaint, Arena asserts causes of action for breach of contract, account stated and unjust enrichment against the Company arising from the Company's alleged failure to pay sums purportedly due Arena pursuant to an agreement in which Arena agreed to place advertising for the Company. The Company answered the Complaint on February 1, 2008. In its Answer, the Company denies the material allegations of the Complaint and asserts numerous affirmative defenses. This action is presently in the discovery stage. The Company intends to vigorously defend this action. Professional Bull Riders, Inc. v. AlphaTrade.com, United Stated District Court, District of Colorado, Case No. 08-cv-01017 (MSK) Plaintiff Professional Bull Riders, Inc. ("PBR") commenced this action against the Company on or about April 15, 2008 in the District Court of Pueblo County, Colorado, Case No. 2008CV527. The Company removed this action to the United States District Court for the District of Colorado on May 15, 2008. In its Complaint, PBR alleges two causes of action arising from the alleged breach of a Sponsorship Agreement, as amended, and the alleged breach of a settlement agreement, and seeks damages of over $1,500,000. The Company is required to answer or move with respect to the Complaint on or before May 22, 2008. The Company denies the material allegations of the Complaint and intends to vigorously defend this action. We are subject to potential liability under contractual and other matters and various claims and legal actions which may be asserted. These matters arise in the ordinary course and conduct of our business. While the outcome of the potential claims and legal actions against us cannot be forecast with certainty, we believe that such matters should not result in any liability which would have a material adverse effect on our business. 14 Item 2. Changes in Securities. The following unregistered securities have been issued since January 1st, 2008: Valued Date No. of Shares Title At Reason Jan./2008 400,000 Common $0.20 For cash Jan./2008 440,750 Common $0.20 For services Feb./2008 300,000 Common $0.20 For cash Feb./2008 480,000 Common $0.20 For services March/2008 45,000 Common $0.20 For services March/2008 25,000 Common $0.20 For cash The above noted shares were issued in private, isolated transactions without registration under the Securities Act. The shares were issued in reliance on the exemption provided by Rule 506 and/or Section 4(2) of the Securities Act as a transaction by an issuer not involving a public offering to Consultants or to companies owned or controlled by Consultants or Officers of AlphaTrade. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit 31.1 Certification of C.E.O. Pursuant to Section 302 of the Sarbanses-Oxley Act of 2002. Exhibit 31.2 Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanses-Oxley Act of 2002. Exhibit 32.1 Certification of C.E.O. Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Exhibit 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 (b) Report on Form 8-K None 15 SIGNATURES In accordance with the requirements of the Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ALPHATRADE.COM Date: 19/05/2008 / s / Penny Perfect ---------------------------- President / Director Date: 19/05/2008 / s / Katharine Johnston ---------------------------- Principal Accounting Officer 16 </TEXT> </DOCUMENT>