FORM 10-SB/A
AMENDMENT NO. 2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the
Securities Exchange Act of 1934
INTERNET VIP, INC.
(Name of Small Business Issuer in its charter)
Delaware (I.R.S. Employer
(State or other jurisdiction of Identification No.)
incorporation or organization)
1155 University St., Suite 602, Montreal, Canada H3B 3A7 (Address of principal
executive offices) (Zip Code)
Telephone Number (514) 876-9222 Fax Number (514) 876-1001
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0001 par value
(Title of Class)
<PAGE>
INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 28, 1999
TOGETHER WITH AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Internet VIP, Inc.:
We have audited the accompanying consolidated balance sheet of Internet VIP,
Inc. (a Delaware corporation) and subsidiary as of February 28, 1999, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the period from inception (November 13, 1998) to February 28,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Internet VIP, Inc. and
subsidiary as of February 28, 1999, and the results of their operations and
their cash flows for the period from inception (November 13, 1998) to February
28, 1999, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company is in the
development stage and its continued existence is dependent on obtaining
additional financing for its operations. The Company's plans in regards to these
matters are also described in Note 1. In addition, the Company faces risks as a
development stage company. The success of the Company's operations is influenced
by these risks as more fully described in Note 1. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
The accompanying financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
/s/ ARTHER ANDERSEN LLP
New York, New York
June 1, 1999
<PAGE>
INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED BALANCE SHEET
FEBRUARY 28, 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 223,624
Other current assets 801
------------
Total current assets 224,425
DEPOSIT ON ACCOUNT OF PROPERTY AND EQUIPMENT 25,000
------------
Total assets $ 249,425
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 68,258
---------------
Total current liabilities 68,258
---------------
STOCKHOLDERS' EQUITY:
Common Stocks, $0.0001 par value; 50,000,000 shares authorized; 20,874,800
shares issued and 2,087 outstanding
Additional paid-in capital 498,090
Deferred compensation (100,000)
Accumulated deficit
(219,010)
Total stockholders' equity 181,167
----------------
Total liabilities and stockholders' equity $ 249,425
================
The accompanying notes are an integral part of this
balance sheet.
<PAGE>
INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 13, 1998) TO
FEBRUARY 28, 1999
OPERATING EXPENSES:
General and administrative expenses $ 219,010
Total operating expenses 219,010
Net loss $ (219,010)
BASIC AND DILUTED NET LOSS PER SHARE $ (0.01)
==============
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - $=
BASIC AND DILUTED 20,143,332
==========
The accompanying notes are an integral part of this statement.
<PAGE>
INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (NOVEMBER 13, 1998) TO FEBRUARY 28, 1999
DO TABLES LATER
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Common Stock Additional Total
Number of Amount Paid-in Deferred Accumulated Stockholders'
Shares Capital Compensation Deficit Equity
BALANCE, November 13, 1998 $ - $ - $ - $ - $ - $ -
Issuance of Common Stocks to 18,772,600 1,877 - - - 1,877
founders
Issuance of Common Stocks in a
private placement ($0.05 per
share) 1,184,000 118 59,082 - - 59,200
Issuance of Common Stocks for
consulting services 200,000 20 99,980 (100,000) - -
Issuance of Common Stocks in a
private placement ($0.5 per
share), net of issuance costs of
$20,000 718,200 72 339,028 - - 339,100
Net loss - - - - (219,010) (219,010)
BALANCE, February 28, 1999 20,874,800 2,087 498,090 (100,000) (219,010) 181,167
========== ===== ======= ======== ======== =======
The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE>
INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 13, 1998) TO FEBRUARY 28, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(219,010)
Adjustments to reconcile net loss to net cash used in operating activities-
Changes in operating assets and liabilities-
Other current assets (801)
Accrued expenses 68,258
Net cash used in operating activities (151,553)
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit on account of property and equipment (25,000)
Net cash used in investing activities (25,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Stockholders' capital contribution, net 400,177
Net cash provided by financing activities 400,177
Net increase in cash and cash equivalents 223,624
CASH AND CASH EQUIVALENTS, beginning of period -
CASH AND CASH EQUIVALENTS, end of period $223,624
NONCASH FINANCING ACTIVITIES:
Common stock issued for consulting services $100,000
The accompanying notes are an integral part of this statement.
<PAGE>
INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1999
<PAGE>
ORGANIZATION
Internet VIP, Inc. was incorporated in the state of Delaware on November 13,
1998. Internet VIP, Inc. and its wholly owned subsidiary, V.I. Internet
Telecommunications, Inc., a Canadian corporation (together, the "Company") were
formed to sell long distance international telephone services using the new
technology, VIP-Voice over Internet Protocol. From its strategically located
switching center in Montreal, Canada, calls can be routed from anywhere in North
America to anywhere in the world. The first phase of operations will encompass
calls from Montreal to St. Petersburg and Moscow, and vice versa.
Initially Internet VIP Inc. will operate through its wholly owned
Canadian subsidiary corporation, V.I. Internet Telecommunications Inc. ("V.I.
Internet"). V.I. Internet will own and operate the Canadian switching centers.
Additionally, V.I. Internet will own 80% of two Russian joint-venture entities,
which were established to manage the Company's centers in St. Petersburg and
Moscow. The remaining 20% of the Russian joint-venture companies are owned by
the Division of the Russian Ministry of Interior, in the case of Moscow, and by
the BaltUnexim Bank in the case of St. Petersburg.
The Company is in the development stage. It is not currently generating any
revenues from operations and is therefore dependent on external sources for
financing its operations. The Company completed, subsequent to February 28,
1999, a private placement. Subsequent net proceeds from the issuance of the
equity were approximately $450,000. Management expects these proceeds together
with its estimated revenues in fiscal year 1999 to be sufficient to finance the
Company's operations through fiscal year 1999. However, there can be no
assurance that the Company will succeed in executing its plan and obtaining the
financing necessary for its operations.
The Company faces risks as a development stage company. These risks include,
among others, uncertainty of product acceptance, sales and distribution risk,
competition, risk of errors, and quality and price of its products compared to
alternative products and service. Additionally, other factors such as loss of
key personnel could impact the future results of operations or financial
condition of the Company.
All of the aforementioned matters raise substantial doubt about the Company's
ability to continue as a going concern.
<PAGE>
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Internet VIP, Inc.
and its wholly owned subsidiary, V.I. Internet and its Russian joint-ventures.
Material intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Foreign Currency
The Company accounts for foreign currency in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation,"
for operating subsidiaries. The functional currency of the Company's wholly
owned subsidiary is the U.S. dollar.
Per Share Data
SFAS No. 128, "Earnings per Share," establishes new standards for computing and
presenting earnings per share (EPS). The standard requires the presentation of
basic EPS and diluted EPS. Basic EPS is calculated by dividing income available
to common shareholders by the weighted average number of shares of common stock
outstanding during the period. Diluted EPS is calculated by dividing income
available to common shareholders by the weighted average number of common shares
outstanding adjusted to reflect potentially dilutive securities.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents approximates fair value.
Organizational and Development Costs
Organizational and development costs are expensed as incurred.
<PAGE>
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under the asset and liability method of SFAS No.
109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement and tax
bases of assets and liabilities. Deferred tax assets and liabilities are
measured using tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
SFAS No. 109, the effect of a change in tax rates on deferred tax assets and
liabilities is recognized in income in the period in which the tax rate change
takes place.
Recently Issued Accounting Standards
Additionally, in June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information." This statement establishes
standards for the way the public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. This statement is effective for
financial statements for periods beginning after December 15, 1997, and need not
be applied to interim periods in the initial year of application. Comparative
information for earlier years presented is to be restated. The Company currently
believes that it operates in one segment and that the adoption of this statement
will not have an impact on the Company's financial statement.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
No. 133 is effective for fiscal years beginning after June 15, 1999. The Company
currently does not use derivatives and, therefore, this new pronouncement is not
applicable.
PRIVATE PLACEMENT
In January 1999, the Company offered to sell, in a private placement, up to
1,900,000 shares of its Common Stock, $0.0001 par value, at a price of $.50 per
share, of which 718,200 shares were sold by February 28, 1999. Proceeds from the
offering are held in an unrestricted escrow account and transferable to the
Company upon demand. At February 28, 1999 $115,000 held in escrow are included
in cash and cash equivalents. Subsequent to February 28, 1999, the Company
issued an additional 925,400 shares in connection with this offering.
INCOME TAXES
At February 28, 1999, the Company has net operating losses available to offset
future income for book and tax purposes of approximately $200,000.
<PAGE>
The loss carryforwards expire in February 2019. The annual utilization of these
loss carryforwards will be substantially limited if there are changes in the
Company's ownership.
The Company has provided a valuation allowance for the full amount of the tax
benefit associated with the loss carryforwards due to the uncertainty
surrounding their realization.
COMMITMENTS AND CONTINGENCIES
<PAGE>
Lease Commitment
The Company leases office space from a related party, for the period ending
January 2001, under an operating lease. Future minimum annual lease payments are
as follows:
For the year ending February 28:
2000 $ 48,600
2001 44,550
---------------
$ 93,150
Rent expense for the period from inception (November 13, 1998) to February 28,
1999 was $4,050.
Consulting Agreements
In December 1998, the Company entered into a four-year consulting agreement with
Nais Corp., a related party, according to which Nais Corp. will provide the
Company with financial and business public relations consulting services. Future
minimum annual fees are as follows:
For the year ending February 28:
2000 $ 72,000
2001 72,000
2002 72,000
2003 60,000
---------------
$ 276,000
In February 1999, the Company entered into a one-year consulting agreement with
Global Asset Management Group, Inc. ("Global Asset"), a Florida Corporation.
According to the contract, Global Asset will provide the Company with financial
consulting services in consideration to 200,000 shares of the Company's Common
Stock, the fair market value of which was $100,000 at the date of the contract.
The Company recorded the consulting fees as deferred compensation, which will be
amortized over the contract period (one year).
<PAGE>
Equipment Purchase Agreement
The Company purchased revenue generating equipment in the amount of $280,000, of
which $25,000 was paid in advance by February 28, 1999. The equipment was
received and installed by the Company subsequent to February 28, 1999.
Facilities Management Agreement
In February 1999, the Company entered into a five-year agreement with
Bridgepoint Enterprises ("Bridgepoint"), according to which Bridgepoint will
provide the Company with facilities for its equipment as well as maintenance and
technical support for such equipment for variable monthly consideration. Future
estimated minimum annual fees are as follows:
For the year ending February 28:
2000 $ 96,000
2001 96,000
2002 96,000
2003 96,000
2004 96,000
---------------
$ 480,000
Telecommunication Service Agreement
In June 1999, the Company entered into a one-year service agreement with
Metrocom, a Russian company, according to which Metrocom will provide
telecommunication services to the Company for a monthly charge of approximately
$40,000.
6. RELATED PARTIES
The Company received consulting services from related parties. Fees
paid for such services were approximately $14,000 in the period from inception
(November 13, 1998) to February 28, 1999.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTERNET VIP, INC.
Date: October 1, 1999 /s/
Dr. Ilya Gerol, Chairman and CEO
(Chief Executive Officer)
Date: October 1, 1999 /s/
Michael MacInnis, CFO and Director
(Chief Financial Officer)
Date: October 1, 1999 /s/
Derek LaBell, President and Director
Date: October 1, 1999 /s/
Viatcheslav Makarov, V P and Director
