Aly Energy Services, Inc. - Quarter Report: 2013 March (Form 10-Q)

prfv_10q.htm

United States

Securities and Exchange Commission

Washington, D. C. 20549

Form 10-Q

x Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

for the Period Ended March 31, 2013.

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 33-92894

ALY ENERGY SERVICES, INC.

Delaware		75-2440201
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3 Riverway, Suite 920 Houston, TX		77056
(Address of Principal Executive Offices)		(Zip Code)

(713) 333-4000

(Registrant’s Telephone Number, including area code.)

Preferred Voice, Inc.

3112 Purdue

Dallas, TX 75225

(Former name, Former Address and Former Fiscal year, if changed since last report.)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 the filing requirements for at least the past 90 days. Yes x 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o 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 definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x
(Do not check if a smaller reporting company)

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

Applicable Only to Corporate Issuers

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.

Common Stock, $ 0.001 Par Value – 6,130,184 shares as of April 30, 2013.

INDEX

Preferred Voice, Inc.

Part I.	Financial Information

Item 1.	Condensed Financial Statements

	Condensed Balance Sheets-March 31, 2013 and December 31, 2012.	3

	Condensed Statements of Operations- Three-Months Ended March 31, 2013 and 2012	4

	Condensed Statements of Cash Flows-Three-Months Ended March 31, 2013 and 2012.	5

	Notes to Condensed Financial Statements – March 31, 2013.	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12

Item 4T.	Controls and Procedures	12

Part II.	Other Information

Item 1.	Legal Proceedings	13

Item 1A.	Risk Factors	13

Item 2.	Unregistered Sales of Securities and Use of Proceeds	13

Item 3.	Defaults upon Senior Securities	13

Item 4.	Mine Safety Disclosures	13

Item 5.	Other Information	13

Item 6.	Exhibits and Reports on Form 8-K	14

Signatures		15

PREFERRED VOICE, INC.

CONDENSED BALANCE SHEETS

	March 31,			December 31,
	2013			2012
	(unaudited)
Assets

Current assets:
Cash and cash equivalents	$	293,513		$	318,032
Accounts receivable, net of allowance for doubtful
accounts		-			6,035

Total current assets	$	293,513		$	324,067

Other assets:
Deposits	$	-		$	4,485

Total other assets	$	-		$	4,485

Total assets	$	293,513		$	328,552

Liabilities and stockholders' equity

Current liabilities:
Accounts payable	$	515		$	1,465
Payroll taxes payable		-			2,365

Total current liabilities	$	515		$	3,830

Commitments and contingencies (Note E)

Stockholders' equity:
Common stock, $.001 par value;
100,000,000 shares authorized; 6,130,184
shares issued	$	6,130		$	6,130
Additional paid-in capital		20,482,085			20,482,085
Accumulated deficit		(20,193,711	)		(20,161,987	)
Treasury stock 4,500 shares at cost		(1,506	)		(1,506	)

Total stockholders' equity	$	292,998		$	324,722

Total liabilities and stockholders' equity	$	293,513		$	328,552

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

PREFERRED VOICE, INC.

CONDENSED STATEMENTS OF OPERATIONS

	Three-months ended March 31,
	2013			2012
	(unaudited)			(unaudited)

Net sales	$	-		$	-

Cost of sales		-			-

Gross profit	$	-		$	-

General and administrative expenses	$	31,724		$	32,534

Loss from continuing operations
before income taxes	$	(31,724	)	$	(32,534	)

Provision for income taxes		-			-

Loss from continuing operations	$	(31,724	)	$	(32,534	)

Income from discontinued operations	$	-		$	737

Net loss	$	(31,724	)	$	(31,797	)

Per share amounts:
Net loss from continuing operations
per common share	$	(0.005	)	$	(0.005	)

Net income from discontinued operations
per common share	$	-		$	-

Net loss per common share	$	(0.005	)	$	(0.005	)

Weighted average common shares outstanding		6,130,184			6,130,184

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

PREFERRED VOICE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

	Three-months ended March 31,
	2013			2012
	(unaudited)			(unaudited)

Cash flows from operating activities:
Net loss	$	(31,724	)	$	(31,797	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	$	-		$	108
Changes in operating assets and liabilities:
Decrease in accounts receivable		6,035			1,121
Decrease in other assets		4,485			-
Increase (decrease) in accounts payable and accrued expenses		(3,315	)		6,591
Total adjustments	$	7,205		$	7,820

Net cash used in operating activities	$	(24,519	)	$	(23,977	)

Cash flows from investing activities:
Net cash provided by investing activities	$	-		$	-

Cash flows from financing activities:
Net cash provided by financing activities	$	-		$	-

Net decrease in cash and cash equivalents	$	(24,519	)	$	(23,977	)

Cash and cash equivalents:
Beginning of period		318,032			415,151

End of period	$	293,513		$	391,174

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

PREFERRED VOICE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Note A - General organization and management’s plans:

Preferred Voice, Inc. (the "Company") is a Delaware corporation incorporated in 1992, commenced business on May 13, 1994, and was in the development stage until August 1, 1995. On February 25, 1997, the Company’s stockholders approved changing the name of the Company to better reflect the nature of the Company’s business. The Company currently has no operations but continues to maintain its principal offices in Dallas, Texas.

The Company continued its digital signage operations through January 31, 2012 at which time it discontinued operations due to a decline in business. The operations of the Company’s digital sign products are reflected in the financial statements as discontinued operations.

The Company intends to explore strategic alternatives including merger with another entity. The Company believes that it will be able to meet its cash requirements throughout 2013.

Note B - Summary of significant accounting policies:

Fiscal year-end

The Company has changed its year end from March 31 to December 31. All references in these condensed financial statements refer to the December 31 year end, unless otherwise specified.

Basis of presentation

The accounting policies followed by Preferred Voice, Inc. are set forth in the Company’s financial statements that are a part of its December 31, 2012, Form 10-K and should be read in conjunction with the unaudited condensed financial statements for the three-months ended March 31, 2013, contained herein.

The unaudited interim condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), and reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods on a basis consistent with the annual audited financial statements. All such adjustments are of a normal recurring nature. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the financial statements and the summary of significant accounting policies and notes included in the Company’s Transition Report on Form 10-K for the period ended December 31, 2012 and the Company’s Annual Report on Form 10-K for the year ended March 31, 2012.

Cash and cash equivalents

For purposes of reporting cash flows, cash and cash equivalents include all amounts due from banks with original maturities of three months or less.

Concentration of business, market and credit risks

In the normal course of business, the Company extends unsecured credit to its customers with payment terms generally 30 days. Because of the credit risk involved, management provides an allowance for doubtful accounts which reflects its opinion of amounts which will eventually become uncollectible. In the event of complete nonperformance by the Company’s customers, the maximum exposure to the Company is the outstanding accounts receivable balance at the date of nonperformance.

PREFERRED VOICE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Note B - Summary of significant accounting policies (continued):

Accounts receivable are stated at the amount billed to the customer. Customer account balances with invoices dated over 90 days are considered delinquent.

Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoice.

The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management’s best estimate of amounts that will not be collected. Management individually reviews all accounts receivable balances that exceed 90 days from the invoice date and, based on an assessment of current creditworthiness, estimates that portion, if any, of the balance that will not be collected. Accounts receivable past 90 days due are $-0- and $-0- as of March 31, 2013 and December 31, 2012, respectively.

Fair value of financial instruments

The Company defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. Financial instruments included in the Company’s financial statements include cash and cash equivalents, trade accounts receivable, other receivables, other assets, notes payable and long-term debt. Unless otherwise disclosed in the notes to the financial statements, the carrying value of financial instruments is considered to approximate fair value due to the short maturity and characteristics of those instruments. The carrying value of long-term debt approximates fair value as terms approximate those currently available for similar debt instruments.

Revenue recognition

For recognizing revenue, the Company applies the rules defined by the Revenue Recognition Topic of the Financial Accounting Standards Board Accounting Standards Codification. In most cases, the services being performed do not require significant production, modification or customization of the Company’s software or services; therefore, revenues are recognized when evidence of a completed transaction exists, generally when services have been rendered. In situations where the Company receives an initial payment for future services, the Company defers recognition of revenue, and recognizes the revenue over the life of the respective contract.

There were no revenues in the three-months ended March 31, 2013. During the three-months ended March 31, 2012, the Company’s revenue consisted of services that have been discontinued.

Loss per share

The Company adopted the provisions of the Earnings Per Share Topic of the FASB Accounting Standards Codification. This standard replaces primary and fully-diluted earnings per share (EPS) with basic and diluted EPS. Basic EPS is calculated by dividing net income or loss (available to common stockholders) by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For 2013, 200,000 warrant shares had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share. For 2012, there were no securities excluded from EPS.

Income per share for the three-months ended March 31, 2013 and 2012, respectively, is based on the weighted average number of shares outstanding of 6,130,184 for both periods.

PREFERRED VOICE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Note B - Summary of significant accounting policies (continued):

Income taxes

For income taxes, the Company applies the rules defined by the Income Taxes Topic of the FASB Accounting Standards Codification. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates that will apply in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company has available at March 31, 2013, a net operating loss carry-forward of approximately $15.8 million, which can be used to offset future taxable income through the year 2032. Utilization of net operating loss carry-forwards in the future may be limited if changes in the Company’s stock ownership create a change of control as provided in Section 382 of the Internal Revenue Code.

Use of estimates

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The operating results for the interim periods are not necessarily indicative of the results to be expected for the full year.

Stock-based compensation

For stock-based compensation, the Company applies the rules defined by the Compensation - Stock Compensation Topic of the FASB Accounting Standards Codification. This statement requires the Company to recognize compensation costs related to stock-based payment transactions (i.e. granting of stock options and warrants to employees) in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be re-measured each reporting period. Compensation cost will be recognized over the period that an employee provides services in exchange for the award. Compensation expense recognized during the three-months ended March 31, 2013 and 2012 was $-0- for both periods.

Note C - Discontinued operations:

In accordance with FASB Accounting Standards Codification, Presentation of Financial Statements – Discontinued Operations – Other Presentation Matters Topic, the Company has presented the results of the Company’s digital sign product business as discontinued operations in the accompanying statement of operations and statement of cash flows. Income from discontinued operations in the period presented was as follows:

	Three months
	ended
	March 31, 2012

Net sales	$	978
Cost of sales		115
Gross profit	$	863

General and administrative expenses	$	126
Income from discontinued operations	$	737

PREFERRED VOICE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Note D - Common stock:

At March 31, 2013, the Company had outstanding warrants to purchase 200,000 shares of the Company's common stock at $0.10 per share. The warrants are exercisable at any time and expire November 15, 2013. At December 31, 2012, 200,000 shares of common stock were reserved for that purpose.

Note E – Commitments and Contingencies:

The Company leased its office facilities and office equipment under operating leases originally expiring on December 31, 2012. The Company and the lessor amended the lease to terminate effective October 31, 2012.

The Company subleased 92% of its office space to a third party under a month-to-month sublease that expired with termination of the Company’s lease October 31, 2012. Payments received from the sub-lessor reduce rent expense. Total rent expense charged to operations was $-0- and $262 for the three-months ended March 31, 2013 and 2012, respectively.

The Company is subject, from time to time, to certain legal proceedings and claims in the ordinary course of conducting its business. It records a liability related to its legal proceedings and claims when it has determined that it is probable that it will be obligated to pay and the related amount can be reasonably estimated. The Company currently believes that there are no pending legal proceedings in which it is currently involved which, if adversely determined, would have a material adverse effect on its financial position, results of operations or cash flows.

Note F – Subsequent Events:

On May 14, 2013, Preferred Voice, Inc. (“Preferred Voice”), Aly Energy Services, Inc. (“Aly Energy”) and the common stockholders of Aly Energy entered into a Share Exchange Agreement (the “Exchange Agreement”), pursuant to which the holders of common stock of Aly Energy surrendered all of their shares in exchange for approximately 68 million newly issued shares of common stock of Preferred Voice (the “Share Exchange”), representing approximately 92% of the outstanding common stock of Preferred Voice after giving effect to the Share Exchange. Shares were exchanged at the ratio of 19.91 shares of Preferred Voice common stock for each one share of Aly Energy common stock. Following the Share Exchange, Aly Energy became a wholly-owned subsidiary of Preferred Voice and the name was changed to Aly Energy Services, Inc. Aly Energy is engaged in oilfield manufacturing, distribution and services.

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

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results, including those set forth herein under “Management’s Discussion and Analysis of Financial Condition and Results of Operations" and those set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the Form 10-K for the fiscal year ended March 31, 2012. Notwithstanding the foregoing, the Company is not entitled to rely on the safe harbor for forward looking statements under 27A of the Securities Act or 21E of the Exchange Act as long as the Company’s stock is classified as a penny stock within the meaning of Rule 3a51-1 of the Exchange Act. A penny stock is generally defined to be any equity security that has a market price (as defined in Rule 3a51-1) of less than $5.00 per share, subject to certain exceptions.

Overview

We began operations in May 1994 as a traditional 1+ long-distance reseller. Recognizing the declines in telecommunications service prices and the decreasing margins being experienced in long distance sales, we decided to sell our long distance customer base and assets in early 1997. From 1997 until early 2005, we focused on the development of voice activated telecommunications services that would allow any consumer the ability to “dial” their calls using their voice. In the last five years we have focused our efforts on service applications that relate to the delivery of content to end users.

Our initial introduction to mobile entertainment led us to research the viability of personalized entertainment services that could be delivered through our network. On October 22, 2004 we announced the first commercial launch of a ringback service in the United States with the launch of our Rockin’ Ringback service. At May 31, 2010 we had eight carrier customers providing My Phone Services Suite service in their marketplace.

Approximately 65% of the Company’s revenue came from one customer. In early May 2010, this customer gave notice that it would be canceling its contract and did effective August 31, 2010. The Company’s revenues from its remaining customers were insufficient to continue operational requirements.

On September 9, 2010, the Company entered into an Asset Purchase Agreement between the Company, as seller, and ClearSky Mobile Media, Inc., (“CMM”) and ClearSky RBT, LLC, (“CRBT”). Pursuant to the Purchase Agreement, the Company sold all of the rights and assets utilized by the Company in its ringback tone and content delivery business to CMM and CRBT. CRBT is a wholly owned subsidiary of CMM. The Purchase Agreement was effective for accounting purposes as of September 1, 2010.

Under the Purchase Agreement, the Company transferred (i) to CMM, all of the Company’s business contracts executed in connection with the ringback tone and content delivery business, intellectual property rights (including patents and trademarks) relating to the ringback tone and content delivery business, key employee services, equipment, website content and telephone numbers, and (ii) to CRBT, all software, hardware and software development rights used in connection with the ringback tone and content delivery business at a purchase price of $225,000 in cash at the closing.

The Company retained its digital signage support business until January of 2012 when it determined that it was no longer a viable business at which time it discontinued the service.

On January 15, 2013, our Board of Directors approved a change of our fiscal year end from March 31, to December 31 effective immediately. The change was made to align our fiscal periods with those of potential third party merger candidates.

Results of Operations

The operations of the Company’s digital sign business have been classified as discontinued in the Condensed Statements of Operations contained in the Company’s Condensed Financial Statements. The results of continuing operations include only the Company’s general overhead allocated to the continuing business enterprise.

We recorded a net loss from continuing operations of $31,724 or $.005 per share, for the three-months ended March 31, 2013, compared to a net loss from continuing operations of $32,534 or $.005 per share, for the three-months ended March 31, 2012.

Selling, General and Administrative

Selling, general and administrative expenses for the three-months ended March 31, 2013 were $31,724 compared to $32,534 for the three-months ended March 31, 2012. General and administrative expenses will continue to drop as the overall overhead of the Company is reduced.

Income Taxes

As of March 31, 2013, we had cumulative federal net operating losses of approximately $15.8 million, which can be used to offset future income subject to federal income tax through the fiscal year 2032. Net operating loss limitations may be imposed if changes in stock ownership of the company create a change of control as provided in Section 382 of the Internal Revenue Code of 1986.

Discontinued Operations

As discussed above, the Company’s discontinued operations included the operations of the Company’s digital sign business. The income from discontinued operations in the three-months ended March 31, 2012 was composed of the following:

	Three months
	ended
	March 31, 2012

Net sales	$	978
Cost of sales		115
Gross profit	$	863

General and administrative expenses	$	126
Income from discontinued operations	$	737

Liquidity and Capital Resources

Our cash and cash equivalents at March 31, 2013 were $293,513, a decrease of $24,519 from $318,032 at December 31, 2012.

The Company will explore strategic alternatives including merger with another entity. The Company currently has sufficient capital resources to continue its diminished operations and continue to evaluate viable opportunities.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Future Obligations

Management projects working capital needs to be approximately $90,000 over the next twelve months for corporate overhead to continue to maintain its current level of operation and continue as a reporting company. Management believes that current cash and cash equivalents are sufficient to meet this requirement.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required by smaller reporting companies.

Item 4T. Controls and Procedures

Evaluation of disclosure controls and procedures. The Chief Executive Officer, who also acts as our Chief Financial Officer, of the Company has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the quarter covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer of the Company has concluded that the Company’s disclosure controls and procedures as of the end of the quarter covered by this Quarterly Report on Form 10-Q are effective as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act.

Due to the limited number of Company employees engaged in the authorization, recording, processing and reporting of transactions, there is inherently a lack of segregation of duties. The Company periodically assesses the cost versus benefit of adding the resources that would remedy or mitigate this situation and currently, does not consider the benefits to merit the cost of these resources.

Changes in internal controls. There were no changes in our internal controls over financial reporting identified in connection with our evaluation that occurred during our last fiscal quarter ended March 31, 2013 that materially affected, or was reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 1A. Risk Factors.

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 2. Unregistered Sales of Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures

None

Item 5. Other Information.

None

Item 6. Exhibits

Exhibit
Number		Exhibit Description

31.1		Certification of Chief Executive Officer and Chief Financial Officer

32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS **		XBRL Instance Document

101.SCH **		XBRL Taxonomy Extension Schema Document

101.CAL **		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF **		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB **		XBRL Taxonomy Extension Label Linkbase Document

101.PRE **		XBRL Taxonomy Extension Presentation Linkbase Document

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PREFERRED VOICE, INC.

Date: May 15, 2013	/s/ Mary G. Merritt
	Mary G. Merritt
	Chairman and Chief Executive Officer
	(Principal Executive Officer )