Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 14 OR 15(D) OF THE EXCHANGE
ACT
IDT VENTURE GROUP, INC.
-----------------------
(Name of Registrant as specified in its charter)
N/A
---------------
(Former Name of Registrant)
Florida 0-30627 65-0984553
--------- ------------ -----------
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) No.) Identification No.)
399 South Federal Highway, Boca Raton, Florida 33432 (561)416-8338
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(Address and telephone number of principal executive offices)
515 South Federal Highway, Boca Raton, Florida (561)416-8338
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(Former Address and telephone number)
Check whether the issuer has (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months, (or such
shorter period that the Registrant was required to file such report(s), and (2)
has been subject to such filing requirements for the past 90 days.
Yes (X ) No ( )
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity , as of the latest practicable date: November 30, 2000
------------------
CLASS Outstanding at November 30, 2000
----------------------------------------- --------------------------------
Common stock $.001 Par Value 989,507
<PAGE>
IDT VENTURE GROUP, INC.
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
<S> <C>
Balance Sheets as of February 29, 2000 and
November 30, 2000 (Unaudited) 2
Comparative Statements of Operations for the Three and Nine
Months ended November 30, 2000 and Cumulative from February 10,
2000 (Inception) to May 31, 2000 (Unaudited) 3
Comparative Statement of Cash Flows for the Nine Months
Ended November 30, 2000 and Cumulative from February
10, 2000 (inception) to November 30, 2000 4
Notes to Financial Statements
(Unaudited) as of November 30, 2000 5
Item 2. Management Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risks N/A
PART II. OTHER INFORMATION
Item 1. Legal Proceedings N/A
Item 2. Changes in Securities and Use of Proceeds. 12
Item 3. Defaults Upon Senior Securities. N/A
Item 4. Submission of Matters to a Vote of Security Holders N/A
Item 5. Other Information N/A
Item 6. Exhibits, and Reports of Form S-K N/A
</TABLE>
<PAGE>
IDT VENTURE GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
November 30, 2000
(Unaudited) February 29, 2000
----------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 291,203 $ --
--------- ---------
Total Current Assets 291,203 --
INVESTMENTS
Investments in securities of unaffiliated issuers 250,000 --
Investments - other than securities 300,000 --
--------- ---------
Total Investments 550,000 --
TOTAL ASSETS $ 841,203 $ --
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Loan payable - related party $ 100,000 $ --
Accrued board fees 10,000 --
Accrued compensation - officers 56,250 --
--------- ---------
Total Current Liabilities 166,250 --
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value, 5,000,000 shares
authorized, none issued and outstanding -- --
Common stock, $0.001 par value, 25,000,000 shares
authorized, 989,507 and 751,700 shares issued
and outstanding, respectively 989 752
Additional paid-in capital 935,066 1,858
Deficit accumulated during development stage (261,102) (160)
--------- ---------
674,953 2,450
Less subscriptions receivable -- (2,450)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 674,953 --
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 841,203 $ --
========= =========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
IDT VENTURE GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative from
Three Months Nine Months February 10, 2000
Ended Ended (Inception) to
November 30, 2000 November 30, 2000 November 30, 2000
----------------- ----------------- -----------------
<S> <C> <C> <C>
OPERATING EXPENSES
Board of Directors fees $ 25,000 $ 25,000 $ 25,000
Compensation - officers 112,500 112,500 112,500
Consulting fees 28,848 67,796 67,796
Office and printing 4,980 5,365 5,365
Rent 6,300 6,300 6,300
Professional fees 42,853 42,853 42,853
General and administrative 300 1,128 1,288
--------- --------- ---------
Total Operating Expenses 220,781 260,942 261,102
--------- --------- ---------
NET LOSS $ 220,781 $ 260,942 $ 261,102
========= ========= =========
Net loss per share - basic and diluted $ (0.24) $ (0.32) $ (0.32)
========= ========= =========
Weighted average number of shares
outstanding during the period -
basic and diluted 924,584 817,847 813,347
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
IDT VENTURE GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative From
Nine Months February 10, 2000
Ended (Inception) to
November 30, 2000 November 30, 2000
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(260,942) $(261,102)
Adjustments to reconcile net loss to net cash
used in operating activities:
Expenses paid by promoters and affiliates 101,120 101,280
Changes in operating assets and liabilities:
Increase in:
Accrued board fees 10,000 10,000
Accrued compensation - officers 56,250 56,250
--------- ---------
Net cash used in operating activities (93,572) (93,572)
--------- ---------
Cash flows from investing activities:
Investments (450,000) (450,000)
--------- ---------
Net cash used in investing activities (450,000) (450,000)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock 834,775 834,775
--------- ---------
Net cash provided by financing activities 834,775 834,775
--------- ---------
NET INCREASE IN CASH $ 291,203 $ 291,203
========= =========
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD -- --
--------- ---------
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 291,203 $ 291,203
========= =========
Supplemental Disclosure of Non-Cash Financing Activities:
During the nine months ended November 30, 2000, the Company received in-kind
contributions valued at their fair market value of $101,280 in the form of
services, use of facilities, and payment of certain service providers of the
Company.
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
IDT VENTURE GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF NOVEMBER 30, 2000
NOTE 1 ORGANIZATION AND ACCOUNTING POLICIES
------ ------------------------------------
(A) Organization
The Company is a corporation, formed under the laws of
Florida, with the objective of investing venture capital in
companies ("Investees") for growth and/or income and providing
incubator and management advisory services to those Investees.
Revenues are expected to consist of dividend, interest and
other investment income, fees from incubator and management
advisory services and realized and unrealized gains from the
sale of investments. Income may take the form of additional
capital stock or options of the Investees or cash
distributions and fees.
Activities during the development stage include formation of
the corporate infrastructure, raising of capital and initial
investments in Investees.
(B) Investments
Investments in securities of unaffiliated issuers represent
holdings of less than 5% of the issuer's voting common stock.
Investments in and advances to affiliates are presented as (i)
controlled companies if the holdings, directly or indirectly,
represent over 25% of the issuer's voting common stock and
(ii) other affiliates if the holdings, directly or indirectly,
represent 5% to 25% of the issuer's voting common stock.
Investments - other than securities represent all investments
other than in securities of the issuer.
Investments in securities or other than securities of
privately held entities are initially recorded at their
original cost as of the date the Company obtained an
enforceable right to demand the securities or other investment
purchased and incurred an enforceable obligation to pay the
investment price.
For financial statement purposes, investments are recorded at
their fair value. Through November 30, 2000 the Company has
invested in rights and securities of only privately held
entities for which readily determinable fair values do not
exist. The fair value of these investments is determined in
good faith by the Company's Board of Directors. Due to the
inherent uncertainty of these valuations, these estimates may
differ significantly from the values that would have been used
had a ready market for the investments existed.
Realized gains (losses) from the sale of investments and
unrealized gains (losses) from the valuation of investments
are reflected in operations during the period incurred.
5
<PAGE>
IDT VENTURE GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF NOVEMBER 30, 2000
(C) Fair Value of Financial Instruments
Carrying amounts of certain of the Company's financial
instruments, including cash, loan payable, accrued
compensation, and other accrued liabilities, approximate fair
value because of their short maturities. The fair value of
investments are determined in good faith by the Board of
Directors and recorded at fair value.
NOTE 2 BASIS OF PRESENTATION
------ ---------------------
The accompanying unaudited financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America and the rules and
regulations of the Securities and Exchange Commission for
interim financial information. Accordingly, they do not
include all the information necessary for a comprehensive
presentation of financial position and results of operations.
It is management's opinion, however that all material
adjustments (consisting of normal recurring adjustments) have
been made which are necessary for a fair financial statements
presentation. The results for the interim period are not
necessarily indicative of the results to be expected for the
year.
For further information, refer to the financial statements and
footnotes included in the Company's Form 10-SB for the year
ended February 29, 2000.
NOTE 3 INVESTMENTS
------ -----------
(A) Investments - Other Than Securities
The Company executed an agreement in September 2000 for an
investment of capital in a United States privately held marine
air conditioning business (the "Investee"). Under the
agreement, the Company purchased a 50% non-dilutive interest
in all profits of the internet and catalogue sales of the
Investee and 50% of the profit from any sale of the internet
and catalogue sales division of the Investee. The purchase
compensation payments as defined in the agreement are a
$300,000 payment upon signing of agreement, and two optional
subsequent payments of $350,000 based on the Investee meeting
and stipulated milestones.
The Company is not obligated to make all of three the payments
under this agreement and to the extent that any monies
received are below the amounts specified in this agreement,
the returns specified in this agreement shall accordingly be
reduced.
6
<PAGE>
IDT VENTURE GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF NOVEMBER 30, 2000
The Company made a payment of $200,000 in September 2000 and
another $100,000 was paid by a related party on behalf of the
Company resulting in a loan payable to a related party (see
Note 4). At November 30, 2000, the Company, in compliance with
the agreement, owns a 50% interest in the venture as discussed
above. This investment represents approximately 45% of the net
assets of the Company at November 30, 2000.
(B) Investment in Securities of Unaffiliated Issuers
On October 18, 2000, pursuant to a Preferred Stock Investment
Agreement (the "Agreement") the Company invested $250,000 in a
United States privately owned marketing and advertising
business (the "Investee") in exchange for 10,129 shares of the
Investee's non-voting Series A 10% Cumulative Convertible
Preferred Stock (the "Series A Shares"). This investment
represents approximately 37% of the net assets of the Company
at November 30, 2000. The cumulative dividend feature
commences January 1, 2002 and is payable on December 31 of
each year. Accrual of dividends will cease upon the earlier of
(i) the closing of a qualified public offering as defined in
the agreement, (ii) the closing of a change in control
transaction, (iii) the conversion of the Series A Preferred
Shares, (iv) the recoupment date as defined in the Agreement
or (v) ten years from the original issuance date of the Series
A Shares. The Series A Shares have dividend and liquidation
preference.
The Series A Shares are convertible at the holders' option, to
Class A Common Stock of the Investee at a rate determined by
dividing the liquidation preference (average price paid plus
declared but unpaid cumulative dividends, less all dividends
and Additional Payments paid (see below)) by the conversion
price then in effect. Conversion will occur automatically
immediately before the earlier of (i) the closing of a
qualified public offering as defined in the agreement, (ii)
the closing of a change in control transaction, (iii) the
recoupment date as defined in the Agreement or (iv) ten years
from the original issuance date of the Series A Shares.
The Investee will also pay (the `Additional Payments") to the
holders of the Series A Shares, on a pro rata basis, on each
February 15 commencing on February 15, 2003, an amount of cash
equal to the lesser of (i) the product of the Investee's free
cash flow for the last completed calendar year, as defined in
the Agreement, and the entitlement ratio, or (ii) the
recoupment amount as defined in the Agreement, minus the
aggregate of all prior Additional Payments and all dividends
paid with regard to the Series A Shares.
On January 8, 2001 the Company invested an additional $750,000
in exchange for 34,204 additional Series A Shares and
committed to purchase additional Series A Shares in two equal
blocks of 29,166 shares at $500,000 each upon the Investee
meeting two stipulated revenue milestones.
7
<PAGE>
IDT VENTURE GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF NOVEMBER 30, 2000
Since the actual conversion rate and resulting common stock
holdings upon conversion cannot be determined until the
conversion date, this investment is reflected as an investment
in an unaffiliated issuer. Upon conversion, this investment
may be reclassified to investments in and advances to
affiliates based on the percentage ownership in the Investee
(see Note 1(B)).
NOTE 4 LOAN PAYABLE - RELATED PARTY
------ ----------------------------
On September 21, 2000 (the "Agreement Date") a related party
advanced $100,000 to an Investee. The loan, as evidenced by a
loan agreement, allows advances up to $1,100,000, bears
interest at prime plus 1% and is due at the earlier of demand
or two years from the Agreement Date. The loan is
collateralized by all banking accounts, brokerage accounts and
capital stock holdings of the Company. (See Note 3(A))
NOTE 5 COMMITMENTS
------ -----------
(A) Employment Arrangements
The Company has unwritten employment arrangements with three
officers who are principal stockholders. Each shall be
compensated at $75,000 per year and receive 5% of the net
income for each investment made by the Company and 5% of the
equity received by the Company for investments made. At
November 30, 2000, $56,250 was due to those officers. (See
Note 8.)
(B) Board of Directors Compensation
At November 30, 2000 there were nine members of the Board of
Directors (the "Board") of which three were members of
management. Board members serve one-year terms, which may be
renewed. The six independent members of the Board shall each
receive an annual payment of $12,500 per year, paid quarterly,
as well as 3% of the net income from each investment that
shall be divided equally among the six Board members. In
addition, 3% of the equity received by the Company for any
investments shall also be divided equally among the six Board
members. The 3% distributions shall be paid once, annually. In
addition, pre-approved reasonable expenses will be reimbursed
to Board members. As of November 30, 2000, $10,000 was due to
Board members under this arrangement.
(C) Commitment to Invest
The Company has committed to invest up to $1,000,000 based on
stipulated Investee revenue milestones (See Note 3(B).
8
<PAGE>
IDT VENTURE GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF NOVEMBER 30, 2000
NOTE 6 STOCKHOLDERS' EQUITY
------ --------------------
(A) Preferred Stock
The Company is authorized to issue 5,000,000 shares of
preferred stock at $0.001 par value per share with such rights
and preferences as determined by the Board of Directors. As of
November 30, 2000, no shares are issued and outstanding.
(B) Common Stock
The Company is authorized to issue 25,000,000 shares of common
stock at $.001 par value. In February 2000, the Company issued
751,700 shares of its common stock that was subscribed for to
its founders and to various stockholders pursuant to Section
4(2) of the Securities Act of 1933, as amended, for an
aggregate consideration of $2,610 plus contributed services
valued at $160. From March 2000 through November 30, 2000 the
Company issued 237,807 shares for aggregate cash of $832,325
pursuant to Regulation D, Private Placement. In December 2000
and January 2001 the Company issued an additional 179,000
shares for $626,500 under the private placement.
NOTE 7 INCOME TAXES
------ ------------
There was no income tax expense due to the Company's operating
losses at November 30, 2000. There was approximately $260,000
in net operating loss carryforwards available to offset future
income through 2021. The resulting deferred tax asset of
approximately $88,000 was fully offset by a valuation
allowance.
NOTE 8 RELATED PARTIES
------ ---------------
A related party of the Company provides office space and
equipment usage at no charge. The fair market value of such
items is allocated to the Company and recorded as an expense
and contributed capital. The Company determines the allocation
based on square footage used by the Company to total leased by
the related party. Management believes that this allocation
method is reasonable.
Certain officers contributed services before accrual of their
agreed upon compensation. This amount totaling $56,250 has
been reflected as compensation expense and contributed capital
in addition to $56,250 of accrued amounts. (See Note 5(A)).
A related party contributed $38,270 in legal and professional
fees, which was recorded as professional fees and contributed
capital.
9
<PAGE>
IDT VENTURE GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF NOVEMBER 30, 2000
NOTE 9 CONCENTRATION OF CREDIT RISK
------ ----------------------------
Financial instruments, which potentially expose the Company to
concentrations of credit risk, consist primarily of cash and
investments.
At November 30, 2000, the Company had $191,203 of cash in
excess of Federal insurance limits. In assessing its risk, the
Company has policies whereby it banks only with reputable
financial institutions.
The Company with its investments in two privately held
entities with no public market is more susceptible to factors
adversely affecting these investments than a company whose
investments are more diversified and liquid.
NOTE 10 SUBSEQUENT EVENTS
------- -----------------
Additional equity capital was raised (see Note 6(B)) and an
additional investment was made (see Note 3(B)).
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE RESULTS OF OUR OPERATIONS AND FINANCIAL
CONDITION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE
NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT. EXCEPT FOR THE HISTORICAL
INFORMATION CONTAINED HEREIN, THE DISCUSSION CONTAINED IN THIS REPORT CONTAINS
"FORWARD-LOOKING STATEMENTS" THAT INVOLVE RISK AND UNCERTAINTIES. THESE
STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS
"BELIEVES," "EXPECTS," "MAY," "WILL," "SHOULD" OR "ANTICIPATES" OR THE NEGATIVE
THEREOF OR SIMILAR EXPRESSIONS OR BY DISCUSSIONS OF STRATEGY. THE CAUTIONARY
STATEMENTS MADE IN THIS REPORT SHOULD BE READ AS BEING APPLICABLE TO ALL RELATED
FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR IN THIS REPORT. OUR ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THIS REPORT.
Results of Operations
Since inception IDT Venture Group, Inc. ("IDT" or "we") has not generated any
revenues. Management has however made two investments in privately held
companies. In September 2000, we entered into an agreement with Ocean Marine,
Inc. and invested $300,000 which gives us a 50% non-dilutive interest in all
profits of the Internet and catalogue sales of the Internet and catalogue
division together with 50% of the profit from any sale of the Internet and
catalogue sales division. In addition, IDT at our option may invest two
additional amounts of $350,000 each based on stipulated milestones of Ocean
Marine Inc. If we do not make the additional investments, our 50% interest may
be diluted proportionately. In October 2000, we invested $250,000 in Brandaid
Communications Corporation, a marketing and advertising business, in exchange
for 10,129 shares of Brandaid Communications non-voting Series A 10% Cumulative
Convertible Stock. Subsequent to November 30, 2000, on January 8, 2001 we
invested an additional $750,000 for 34,204 additional Series A 10% preferred
shares. Management believes that these two investments will provide a source of
revenues and potential capital gains in the future. During the last three
months, we incurred a net loss of $220,781 and have incurred losses since
inception totaling $261,102. Several of the expense items listed including
compensation to officers, professional fees and rent partially represent
accruals or non-cash expenses representing contributed capital from officers,
principal shareholders and affiliates. There can be no assurance that we will be
able to reverse these losses that we have incurred to date.
Liquidity and Capital Resources
We have a total of $291,203 in cash, investments recorded at $550,000 and
current liabilities totaling $166,250. We raised approximately $933,000 through
November 30, 2000 and an additional $626,500 through the date of this report
from the sale of our common stock to accredited investors. The securities have
been sold pursuant to IDT's offering of its common stock in a private placement
exempt from registration under Rule 506 of the Securities Act of 1933.
11
<PAGE>
PART II. OTHER INFORMATION AND SIGNATURES
Item 2. Changes in Securities and Use of Proceeds
During our last fiscal quarter, we raised a total of $368,850 from the
sale of 105,386 shares of our common stock. The sale of these shares was exempt
from registration pursuant to Rule 506 of the Securities Act of 1933, as
amended. Sales were made only to accredited investors who have previously had a
business relationship either with us or one of our principals. The shares were
sold at a price of $3.50 per share. We intend to sell additional shares of our
common stock at prices ranging from $3.50 to $6.00 per share.
We expended $200,000 of the proceeds raised from the sale of its common
stock to fund the agreement with Ocean Marine, Inc. The remaining $100,000 was
funded with a loan from a related party. An additional $250,000 was invested in
the non-voting Series A 10% Cumulative Convertible Preferred Stock of Brandaid
Communications Corporation. The balance of the funds have been used for general
working capital requirements.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IDT VENTURE GROUP, INC.
BY: /s/ Darren Silverman
----------------------------
Darren Silverman, President
Dated: This 12th day of January 2001.
