<PAGE>
UNITED STATES 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 September 30, 1999
------------------
( ) Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _____________ to ______________
Commission file number: 2-98014-D
NOVA COMMUNICATIONS, LTD.
(formerly First Colonial Ventures, Ltd.)
----------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 95-4756822
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
6033 West Century Boulevard, Suite 280, Los Angeles, California 90045
---------------------------------------------------------------------
(Address of principal executive offices)
Issuer's telephone number, including area code: (310) 642-0200
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 30 days.
Yes No X
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common stock: $.001 par value 15,216,264 shares outstanding at September 30,
1999
Transitional Small Business Disclosure Format: Yes No X
--- ---
Documents incorporated by reference: 1
Total sequentially numbered pages in this document: 16
1
<PAGE>
INDEX
NOVA COMMUNICATIONS, LTD.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
(a). Balance sheets, Nova Communications, Ltd., September
30, 1999 and December 31, 1998.
(b). Statements of operations, Nova Communications, Ltd.,
six months ended September 30, 1999 and 1998.
(c). Statements of operations, Nova Communications, Ltd.,
three months ended September 30, 1999 and 1998.
(d). Statements of cash flows, Nova Communications, Ltd.,
nine months ended September 30, 1999 and 1998
(e). Notes to financial statements
Item 2. Management's discussion and analysis of financial condition
and results of operations
PART II. OTHER INFORMATION
Item 5. Other Information
(a). Incorporation by reference of Schedule 14-C Information
Statement dated September, 1999.
(b). Resolutions adopted by shareholders in June 1999.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
2
<PAGE>
NOVA COMMUNICATIONS, LTD.
(formerly First Colonial Ventures, Ltd.)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30 December 31
1999 1998
------------ -----------
<S> <C> <C>
Assets
Current Assets:
Cash $ 2,571 $ --
Prepaid loan fees 140,543 --
Notes receivable, current portion 24,000 --
------------ ------------
Total Current Assets 167,114 --
------------ ------------
Office Equipment, net 7,199 13,742
------------ ------------
Investments and Other Assets:
Deposits 3,177 2,326
Notes receivable, non-current 67,756 --
Investments and advances 139,649 281,000
------------ ------------
Total Investments and Other Assets 210,582 283,326
------------ ------------
Total Assets $ 384,895 $ 297,068
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Outstanding checks in excess of cash in bank -- $ 3,493
Notes payable 850,106 699,453
Accounts payable and accrued liabilities 432,146 468,274
Management fees payable to officer 448,745 375,220
------------ ------------
Total Current Liabilities 1,730,997 1,546,440
------------ ------------
Stockholders' Deficit:
Common stock; $.001 par value; authorized
500,000,000 shares; outstanding 15,216,264
shares at 9/30/99 and 15,516,264 at 12/31/98 15,216 15,516
Preferred stock; no par value; authorized
10,000,000 shares; none outstanding -- --
Additional paid in capital 9,758,935 9,758,935
Convertible note payable -- --
Accumulated deficit (11,120,253) (11,023,823)
------------ ------------
Total Stockholders' Deficit (1,346,102) (1,249,372)
Total Liabilities and Stockholders' Deficit $ 384,895 $ 297,068
============ ============
</TABLE>
3
<PAGE>
NOVA COMMUNICATIONS, LTD.
(formerly First Colonial Ventures, Ltd.).
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Nine Months Ended
--------------------------------
September 30 September 30
1999 1998
--------- ---------
<S> <C> <C>
Revenues:
Management fees $ -- $ 90,000
Gain (loss) on investments 165,939 (292,953)
Interest and other 57,733 --
--------- ---------
Total revenues 223,672 (202,953)
--------- ---------
Expenses:
Salaries and management fee 162,734 292,757
Other general and administrative expenses 57,700 67,197
Legal and accounting fees 28,915 29,625
Loan fees 51,106 --
Depreciation expense 2,275 2,796
Interest expense 16,572 17,581
--------- ---------
Total Expenses 319,302 409,956
--------- ---------
Net loss before provision for income taxes (95,630) (612,909)
Provision for income taxes (800) (800)
--------- ---------
Net Loss $ (96,430) $ (613,709)
========= =========
Net loss per share $ (.01) $ (.04)
========= =========
</TABLE>
4
<PAGE>
NOVA COMMUNICATIONS, LTD.
(formerly First Colonial Ventures, Ltd.)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three Months Ended
--------------------------------
September 30 September 30
1999 1998
--------- ---------
<S> <C> <C>
Revenues:
Management fees $ -- $ --
Gain on investments -- --
Interest and other 15,256 --
--------- ---------
Total revenues 15,256 --
--------- ---------
Expenses:
Salaries, consulting, and management fee 40,082 97,165
Other general and administrative expenses 24,010 23,454
Legal and accounting fees (19,477) 10,875
Loan fees 35,829 --
Depreciation expense 700 932
Interest expense 10,600 3,248
--------- ---------
Total Expenses 91,744 135,674
--------- ---------
Net loss before provision for income taxes (76,488) (135,674)
Provision for income taxes -- --
--------- ---------
Net Loss $ (76,488) $ (135,674)
========= =========
Net loss per share $ (.01) $ (.02)
========= =========
</TABLE>
5
<PAGE>
NOVA COMMUNICATIONS, LTD.
(formerly First Colonial Ventures, Ltd.).
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Nine Months Ended
--------------------------------
September 30 September 30
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (96,430) $(613,709)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation 2,275 2,796
Loss on equipment sold 4,268 --
Deposit (851) (2,326)
Prepaid loan fee (140,543) --
Increase in accounts payable
and accrued liabilities 37,397 334,177
--------- ---------
Net cash (used) in operating activities (193,884) (279,062)
--------- ---------
Cash flows from investing activities:
Sale of STS investment 81,000 --
Receipt of Auckland note receivable (102,000) --
Collection of Auckland note 10,234 --
Sale and disposal of Legal Club stock 88,461 --
Advances to Communications 2000 (28,100) --
Advances to STS -- (96,000)
Purchase of equipment -- (4,793)
--------- ---------
Net cash provided (used) in investing activities 49,595 (100,793)
--------- ---------
Cash flows from financing activities:
Paid in capital -- 265,381
Common stock issued (retired) (300) 3,870
Borrowing 544,800 12,025
Repayment of bank debt (394,147) --
Borrowing -- related party -- 98,192
--------- ---------
Net cash provided in financing activities 150,353 379,468
--------- ---------
Net increase (decrease) in cash 6,064 (387)
Cash -- Beginning of period (3,493) 689
--------- ---------
Cash -- End of period $ 2,571 $ 302
========= =========
</TABLE>
6
<PAGE>
NOVA COMMUNICATIONS, LTD.
(formerly First Colonial Ventures, Ltd.).
STATEMENTS OF CASH FLOWS (Continued)
(UNAUDITED)
<TABLE>
<CAPTION>
For The Nine Months Ended
--------------------------------------
September 30 September 30
1999 1998
---------------- ----------------
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information -
Cash paid during the period:
Interest $ 200 $ --
================ ===============
Income taxes $ -- $ --
================ ===============
</TABLE>
7
<PAGE>
NOVA COMMUNICATIONS, LTD.
(formerly First Colonial Ventures, Ltd.)
NOTES TO FINANCIAL STATEMENTS
NOTE A -- UNAUDITED FINANCIAL STATEMENTS
The unaudited financial statements have been prepared in conformity with
generally accepted accounting principles and include all adjustments which are,
in the opinion of management, necessary for a fair presentation of the results
for the interim periods presented. All such adjustments are, in the opinion of
management, of a normal recurring nature. Results of operations for the
nine-month period ended September 30, 1999 are not necessarily indicative of the
operating results to be expected for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the financial statements and notes thereto included
in the Company's annual report on Form 10-KSB for the year ended December 31,
1997 and, when filed, December 31, 1998.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
DESCRIPTION OF THE COMPANY: Nova Communications, Ltd. (the "Company" or
"NOVA"),was formerly known as First Colonial Ventures, Ltd. Stockholders of the
Company met in June 1999 and voted to change the name of the Company, change its
state of incorporation from Utah to Nevada, and to terminate its status under
the Investment Company Act of 1940 as Business Development Company. The Company
acquires ownership interests in business opportunities.
BASIS OF PRESENTATION: The accompanying financial statements have been prepared
in conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. The Company and its investees
sustained operating losses for several years and require substantial amounts of
working capital in their operations. At September 30, 1999, liabilities exceed
assets by $1,346,000. The Company does not have an investee with current
operations. The Company continues to have difficulty in meeting its obligations
as they become due. The Company's cash flow for the quarter ended September 30,
1999, was not sufficient to meet current operating requirements and the Company
continues to have difficulty making satisfactory progress toward liquidating its
past due obligations. Creditors have recorded judgments against the Company. The
ability of the Company to acquire profitable operations and generate sufficient
positive cash flow is dependent upon obtaining additional capital and/or sale of
remaining investments. The Company's financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of
8
<PAGE>
liabilities that may result from the possible inability of the Company to
continue as a going concern.
CASH: Cash includes only cash in unrestricted bank accounts.
INVESTMENTS: The Company's investments in equity securities are carried at cost
less valuation reserves established in prior years. The Company determined that
these investments do not currently have a readily determinable fair value and,
accordingly, cannot be classified as "Trading" or "Available for Sale" pursuant
to the provisions of Statement of Financial Accounting Standards 115.
INCOME TAXES: Income taxes are accounted for using an asset and liabilities
approach. Under this method, deferred income tax assets and liabilities are
computed for differences between the financial statement carrying amounts and
their tax bases that will result in taxable or deductible amounts in the future
using enacted tax rates in effect in the years in which the differences are
expected to reverse. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable or refundable for the period plus or minus the change
in deferred tax assets and liabilities.
NET LOSS PER SHARE: Net loss per share is computed by dividing net loss by the
weighted average number of common shares outstanding during the period.
Preferred stock is not considered to be a common stock equivalent.
SIGNIFICANT RISKS AND UNCERTAINTIES: The process of preparing financial
statements in conformity with generally accepted accounting principles requires
the use of estimates and assumptions relating to the reporting of assets and
liabilities and the reported amounts for revenues and expenses. Such estimates
and assumptions primarily relate to unsettled transactions and events as of the
date of the financial statements. Accordingly, upon settlement, actual results
may differ from estimated amounts.
NOTE C -- INVESTMENTS AND ADVANCES
<TABLE>
<CAPTION>
Investments included the following at September 30, 1999 and December 31, 1998:
1999 1998
--------- ---------
<S> <C> <C>
Gulf Coast Hotels, Inc. -
Common stock (at cost) $ 209,782 $ 209,782
Advances (at cost) 85,000 85,000
Valuation reserve (294,782) (294,782)
And In Justice For All, Inc. -
Common stock (at cost) 209,940 376,426
Valuation reserve (98,391) (176,426)
STS Communications -
Advances (at cost) -- 81,000
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C>
Communications 2000, Inc. -
Advances (at cost) 28,100 --
--------- ---------
Total Investments $ 139,649 $ 281,000
========= =========
</TABLE>
During 1998 the Company closed its operating investees due to continuing losses.
Closed were Acclaim Studios, Acclaim Productions, and Contemporary Resources.
Also during 1998 the Company abandoned various other investments due to lack of
working capital. For the most part, these other investments had already been
written off. Accordingly, the 1998 losses consisted of writing off the 1998
advances made by the Company to these investees.
At December 31, 1998, the Company's remaining investments included the Gulf
Coast Hotels project, cash advances to STS Communications, and the investment in
And In Justice For All (the "Legal Club") common stock.
Gulf Coast Hotels -- In 1994 Gulf Coast Hotels (a non-public Mississippi
corporation) acquired the rights to approximately 1.4 acres in Biloxi,
Mississippi, for the purpose of developing a high-rise condominium on the site.
Negotiations began approximately two years ago for the transfer of these rights
to a development group in exchange for cash plus a minority interest in the
group. Although tentative agreement has been reached several times, there have
been various obstacles including water rights, sewer limitations, and
undisclosed liens against the property, which have prevented closing the deal.
Due to the uncertainties involved, the investment was fully reserved in 1997 by
a charge to unrealized losses. Management believes that eventually the project
will go forward and continues to support resolution of the obstacles.
STS Communications -- During 1998, the Company made cash advances totaling
$96,000 to STS Communications (a non-public California corporation) in an
agreement whereby the Company would eventually acquire as much as 50% of STS.
Later during 1998, STS was acquired by Auckland Entertainment, LLC, a non-public
California limited liability company. In March 1999, a Settlement Agreement was
reached between the Company and Auckland whereby Auckland would pay to the
Company a total of $130,000, in the form of a note payable, as complete payment
for the Company's interests in STS Communications. Also see Note D.
Legal Club -- During 1996 and 1997, the Company acquired 650,000 shares of
common stock of the Legal Club, a nationwide membership organization
providing access to attorney services at discounted rates. During 1998 the
Legal Club became a public company trading over-the-counter. The Legal Club
shares owned by the Company were issued pursuant to Rule 144 and do not
become "free trading" until December 1999. Although bid and ask prices for
Legal Club common stock are available, financial statements for the Legal
Club are not available. On June 7, 1999, the Company paid out 250,000 shares
of its Legal Club common stock as a loan fee, and assigned 337,500 shares and
pledged an additional 25,000 shares of Legal Club common stock as collateral
for a loan and legal fees. The loan agreement provides for an "orderly
liquidation" of the
10
<PAGE>
Legal Club shares held as collateral commencing December 1999 to repay the loan
(also see Note F under Foothill Bank).
NOTE D -- NOTES RECEIVABLE
<TABLE>
<CAPTION>
Notes receivable included the following at September 30, 1999 and December 31,
1998:
1999 1998
-------- --------
<S> <C> <C>
RABO -- Installment note dated 1994
for the original amount of $88,000;
secured by assets and personal guarantee;
payable $2,000 monthly
including interest at 10% per annum $ 59,683 $ 60,000
Less: valuation reserve (59,683) (60,000)
AUCKLAND -- Installment note dated 3/16/99
in the original amount of $130,000; secured
by equipment; payable monthly per schedule;
plus interest at 10% per annum 91,756 --
Less: Current portion (24,000) --
-------- --------
Notes Receivable, non-current $ 67,756 $ --
======== ========
</TABLE>
Payments made by Rabo or Auckland and received by the Company after June 7,
1999, are to be split 65% to the Company and 35% to a law firm. This Company
agreed to split payments received as part of the terms of the loan negotiated on
June 7, 1999, discussed in greater detail under "Foothill Bank" in Note G.
NOTE E -- OFFICE EQUIPMENT
<TABLE>
<CAPTION>
Office equipment included the following at September 30, 1999 and December 31,
1998:
1999 1998
-------- --------
<S> <C> <C>
Office equipment, at cost $ 21,205 $ 25,998
Accumulated depreciation (14,006) (12,256)
-------- --------
Office Equipment, net $ 7,199 $ 13,742
======== ========
</TABLE>
NOTE F -- PREPAID LOAN FEE
The Company paid as a loan fee 250,000 shares of its Legal Club common stock to
obtain the loan acquired on June 7, 1999, discussed in greater detail in Note G
under
11
<PAGE>
Foothill Bank. The Company determined that these shares had a fair value of
$191,650 and recorded this amount as a prepaid loan fee. The loan fee is being
written off to expense ratably over the fifteen-month term of the loan from June
1999 through August 2000.
NOTE G -- NOTES PAYABLE
<TABLE>
<CAPTION>
Notes payable included the following at September 30, 1999 and December 31,
1998:
1999 1998
-------- --------
<S> <C> <C>
Private Investor -- demand note dated
4/29/94 plus interest at 2% over Bank
of America prime rate $309,453 $309,453
Investment Group -- note dated 6/07/99
due 8/31/00 plus interest at 10% per
annum secured by assets of the Company 525,000 --
Installment Note -- secured by equipment
dated 4/11/99 payable $461 monthly
including interest due March 2004 15,653 --
Foothill Bank -- guarantee of loan
to Contemporary Resources -- 390,000
-------- --------
Notes payable $850,106 $699,453
======== ========
</TABLE>
Private Investor Demand Note -- In December 1997, the Company issued 150,000
shares of its common stock to the private investor under an agreement whereby
the Company would payoff the note with shares of its stock. The Company
guaranteed the private investor that proceeds received from future sale of the
investor's NOVA stock would be sufficient to payoff the note in full. The
private investor accepted the shares of NOVA common stock but did not sign the
agreement.
Foothill Bank/Investment Group -- The Company guaranteed the asset based line of
credit extended by Foothill Independent Bank to Contemporary Resources. Since
the closure of Contemporary, the bank required the Company to honor its
guarantee and payoff the line of credit. On June 7, 1999, the Company arranged
for a loan in the amount of $525,000 and used the proceeds to payoff the
Foothill Bank line of credit, to pay certain legal and consulting fees, and for
working capital. Terms of the new loan included a loan fee of 250,000 shares of
Legal Club common stock that was tendered to the lender. Also, the Company
assigned 337,500 shares and pledged an additional 25,000 shares of Legal Club
common stock as collateral for the loan and legal fees. The loan plus interest
at 10% per annum is due August 31, 2000. Notwithstanding the loan due date, the
loan agreement
12
<PAGE>
provides for an "orderly liquidation" of the Legal Club shares commencing
December 1999 to repay the loan.
NOTE H -- MANAGEMENT FEE PAYABLE TO OFFICER
The Company pays a monthly management fee of $13,750 to its president pursuant
to a month-to-month management agreement. For the past several years, the
Company has been unable to pay the fee in full. Accordingly, this accrued
liability represents amounts earned, but not yet paid to the Company's
president.
NOTE I -- COMMON STOCK
On January 1, 1999, the Company entered into an agreement to acquire 100% of the
outstanding shares of Communications 2000, a non-public California corporation
that sells and installs telephone and other communication equipment and systems.
The Company will exchange a note convertible into 2,000,000 shares of NOVA
common stock for all of the outstanding shares of Communications 2000. The note
is convertible on or after March 31, 2000. The Company may rescinded the
agreement if Communications 2000 does not meet certain financial goals, and
Communications 2000 may rescind the agreement if the Company's common stock is
not trading at or above one dollar by March 31, 2000.
The Company cancelled 300,000 shares of common stock during the first quarter of
1999. These shares had been issued to TND Medical in connection with the
Company's acquisition of TND, and were cancelled due to the termination of the
Company's investment in TND.
NOTE J -- INCOME TAXES
<TABLE>
<CAPTION>
Deferred income taxes consisted of the following at September 30, 1999 and
December 31, 1998:
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryovers $ 2,395,000 $ 2,385,000
Valuation allowance (2,395,000) (2,385,000)
----------- -----------
Net deferred income taxes $ -- $ --
=========== ===========
</TABLE>
The Company had net operating loss carryovers as of December 31, 1998 of
approximately $ 6,800,000 available to offset future taxable income, if any. In
the event of ownership changes aggregating 50% or more in any three-year period,
the amount of loss carryovers that become available for utilization in any year
may be limited. If not utilized against future taxable income, the tax loss
carryovers will expire in the years 1999 through 2010. The consolidated tax
returns of the Company are filed in the name of
13
<PAGE>
Contemporary Resources as a result of the original reverse purchase of the
assets of the Company in 1987 by Contemporary Resources.
NOTE K -- LEGAL MATTERS
The president of the Company, along with several other individuals, has been
indicted by the United States District Court, Southern District of New York,
alleging conspiracy, securities fraud, and wire fraud. The president denies the
allegations and is vigorously defending the matter.
In addition during 1997, the United States Securities and Exchange Commission
began a private investigation of the Company in connection with its financial
reporting practices. The investigation has not yet been completed and no formal
allegations have been charged. The Company does not believe it has violated any
securities rules and regulations.
Item 2. Management's discussion and analysis of financial condition and results
of operations.
GENERAL
The Company was formed for the purpose of acquiring ownership interests in
business opportunities. During 1998, the Company closed its operating investees,
Acclaim Studios, Acclaim Productions, and Contemporary Resources, and currently
owns only passive investments.
The following discussion is based on the unaudited financial statements
contained elsewhere in this report. The unaudited financial statements have been
prepared in conformity with generally accepted accounting principles, which
contemplate continuation of the Company as a going concern. The financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classifications of the liabilities that may result from the possible inability
of the Company to continue as a going concern. See Note B of Notes to the
Financial Statements.
RESULTS OF OPERATIONS
REVENUES --
Management fees -- The Company received revenues in the form of
management fees charged to its operating investees for whom the company provided
management, clerical, and accounting services. The Company charged such
management fees to investees during the first and second quarters of 1998.
However, during the third quarter 1998 the Company discontinued charging its
management fees as it became apparent operations at the subject investees would
cease. No management fees have been changed in 1999.
14
<PAGE>
Gain on investments -- Gain on investments totaled $165,939 for the
nine months ended September 30, 1999. The gain was $34,000 from settlement of
the STS investment, $17,212 from the sale of 25,000 shares of the Legal Club
common stock, plus $114,727 gain on the 250,000 shares of Legal Club common
stock exchanged as a loan fee (see Note G under Foothill Bank). As also
discussed in Note F, the Company determined the Legal Club shares tendered as
a loan fee had a fair value of $191,650. These shares had a book value of
$76,923. The Company recorded the difference as a gain on the investment and
recorded the loan fee of $191,650 to prepaid expenses subject to write off to
expense over the fifteen-month term of the loan.
Interest and other -- Recoveries of advances to Contemporary Resources
and Acclaim in the amount of $40,294 plus interest of $17,439 were recorded as
revenues for the nine months ended September 30, 1999.
LOSS ON INVESTMENTS -- For 1998 this loss represents the write-off of advances
made principally to Acclaim and Contemporary Resources. Since the operating
investees were closed by December 31, 1998, no additional advances were made
during 1999, thus no additional loss occurred.
OTHER GENERAL AND ADMINISTRATIVE EXPENSES -- Other administrative expenses
declined for the quarter and six months ended September 30, 1999 compared with
the prior periods. Expenses declined because employees were discharged and
expenses cut back in conjunction with closure of the Company's operating
investees.
LEGAL AND ACCOUNTING FEES -- For the quarter ended September 30, 1999, legal
fees were a negative as a result of adjusting accruals made in the two prior
quarters. The Company incurred lower than expected legal fees in connection with
the stockholders' meeting and in connection with documentation of the new loan
and payoff of Foothill Bank.
LIQUIDITY AND CAPITAL RESOURCES -- Currently, the Company's principle sources of
liquidity are from collection on the Rabo and Auckland notes receivable, and
from collection of old trade receivables from Acclaim and Contemporary
Resources. The Company's long-term strategy is to seek acquisitions in the
communications and internet industries that will provide cash flow and a capital
base. Beginning December 1999, the Company also expects to begin selling shares
of the Legal Club.
CENTURY DATE CHANGE COMPLIANCE
The century date change (CDC) issue results from computer programs that cannot
differentiate between the year 1900 and the year 2000 because they were written
using two digits rather than four to define the applicable year; accordingly
computer systems that have time-sensitive calculations may not properly
recognize the year 2000. The Company has conducted an initial review of its
computer systems to identify whether the system is CDC compliant. The computer
equipment and software currently used by the
15
<PAGE>
Company is an older generation and will be affected by the CDC problem. The
Company purchased a current generation system and new software, and will replace
the existing system before December 31, 1999.
PART II. OTHER INFORMATION
Item 5. Other Information.
(a) Information statement pursuant to 14(c) of the Securities Exchange Act
of 1934 was filed September 1999 and is hereby incorporated by reference.
(b) Stockholders of the Company met in June 1999 and adopted all resolutions
proposed by the board of directors as set forth in the Information Statement.
Pursuant to this meeting of stockholders, the Company changed its name to Nova
Communications, Ltd., changed its state of incorporation to Nevada, changed its
federal identification number to 95-4756822, and terminated its Business
Development Company status.
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,571
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 167,114
<PP&E> 21,205
<DEPRECIATION> 14,006
<TOTAL-ASSETS> 384,895
<CURRENT-LIABILITIES> 1,730,997
<BONDS> 0
0
0
<COMMON> 15,216
<OTHER-SE> (1,361,318)
<TOTAL-LIABILITY-AND-EQUITY> 384,895
<SALES> 0
<TOTAL-REVENUES> 223,672
<CGS> 0
<TOTAL-COSTS> 302,730
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,572
<INCOME-PRETAX> (95,630)
<INCOME-TAX> 800
<INCOME-CONTINUING> (96,430)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (96,430)
<EPS-BASIC> (.01)
<EPS-DILUTED> 0
</TABLE>
