<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, 2000
/ / Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For 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 (IRS Employer
incorporation or organization) Identification Number)
3830 Del Amo Blvd., Torrance, CA 90503
(Address of principal executive offices)
Issuer's telephone number including area code: (310) 896-6370
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 90 Days: Yes /X/
No / /
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 17,939,096 shares outstanding at September 30,
2000.
Documents incorporated by reference: None
Total sequentially numbered pages in this document: 12
1
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INDEX
NOVA COMMUNICATIONS LTD.
PART I. FINANCIAL INFORMATION
ITEM 1 Financial Statements (unaudited) September 30, 2000 and December 31,
1999, (audited)
(a) Balance sheets, September 30, 2000 and December 31, 1999.
(b) Statements of operations, for the nine months ended September 30,
2000 and 1999.
(c) Statements of operations, for the three months ended September 30,
2000 and 1999.
(d) Statements of cash flow for the nine months ended September 30, 2000
and 1999.
(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
None
PART I. FINANCIAL INFORMATION
Item 1, Financial Statements
2
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NOVA COMMUNICATIONS LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
Unaudited Audited
September 30 December 31
2000 1999
------------ ------------
<S> <C> <C>
Assets
Current Assets
Cash $ 396 $ 3,513
Receivables 462,153 29,820
Notes Receivable 74,259 48,829
Deposits 3,177 3,177
Available-for-sale Investments 200,000 200,010
------------ ------------
Total current assets 739,985 285,349
Notes receivable 25,858 94,469
Equipment, net 25,999 28,473
------------ ------------
$ 791,842 $ 408,291
============ ============
Liabilities and Net Capital Deficiency
Current liabilities
Notes payable, net of deferred loan fees of $20,137 $ 595,385 $ 438,038
Accounts payable 317,576 336,541
Payable to related parties 627,825 511,509
Accrued Payroll and payroll related liabilities 47,077 46,379
Long-term obligations, due within one year 3,498 3,429
------------ ------------
Total Current Liabilities 1,591,361 1,335,896
Long-term obligations 766,998 321,216
------------ ------------
Total Liabilities $ 2,358,359 $ 1,657,112
------------ ------------
Net capital deficiency
Preferred stock; no par value; authorized 10,000,000
shares; common stock; $.001 par value, shares
authorized 500,000,000 shares; shares outstanding
13,496,182 at December 31, 1999 and June 30, 2000; 13,496 13,496
Additional paid in capital 9,760,954 9,760,955
Retained deficit (11,043,220) (10,725,525)
Unrealized holding loss from available-for-sale
Investments (297,747) (297,747)
------------ ------------
Net capital deficiency (1,566,517) (1,248,821)
------------ ------------
$ 791,842 $ 408,291
============ ============
</TABLE>
3
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NOVA COMMUNICATIONS LTD.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Nine Months Ended
-----------------------------------
SEPTEMBER 30 SEPTEMBER 30
2000 1999
-----------------------------------
<S> <C> <C>
Net investment income $ 36,898 $
Gain on investments 165,939
Interest and other 57,733
-------------- --------------
Total net revenues 36,898 223,672
-------------- --------------
General and administrative expenses 256,997 268,196
Loan fees 96,797 51,106
-------------- --------------
(353,794) (319,302)
-------------- --------------
Loss before provision for income taxes (316,896) (95,630)
Provision for income taxes (800) (800)
-------------- --------------
Net Loss $ (317,696) $ (96,430)
============== ==============
Net Loss per common share $ (0.0151) $ (0.0015)
============== ==============
</TABLE>
4
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NOVA COMMUNICATIONS LTD.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
------------------------------------
SEPTEMBER 30 SEPTEMBER 30
2000 1999
---------------- ---------------
<S> <C> <C>
Revenues: $ $
Management Fees 10,000
Interest 14,637 15,256
---------------- ---------------
Total net revenues 24,637 15,256
---------------- ---------------
General and administrative expenses 118,055 55,915
Loan Fees 20,197 35,829
---------------- ---------------
Loss from operations (138,252) (91,744)
Loss before provision for income taxes (113,615) 76,488
Provision for income taxes -- --
---------------- ---------------
Net Loss $ (113,615) $ 76,488
================ ===============
Net Loss per common share $ (0.0069) $ (0.0050)
================ ===============
</TABLE>
5
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NOVA COMMUNICATIONS LTD.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
-----------------------------------
SEPTEMBER 30 SEPTEMBER 30
2000 1999
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities $ $
Net loss (317,696) (19,944)
Adjustment to reconcile net loss to net cash used in
operating activities
Depreciation 3,750 1,575
Equipment sold (1,276) 4,268
Deposit (851)
Prepaid expenses (197,623)
Increase in accounts payable and
accrued liabilities 255,465 34,900
-------------- ---------------
Net cash (used) in operating activities (59,757) (177,675)
-------------- ---------------
Cash flows from investing activities
Sale of STS investment 81,000
Acquisition of Auckland note receivable (102,000)
Collection of notes receivable 43,181 13,620
Sale and disposal of Legal Club stock 88,461
Advances to Communications 2000, Inc. (432,323) (7,500)
-------------- ---------------
Net cash provided (used) in investing activities $ (389,142) $ 73,581
-------------- ---------------
Cash flows from financing activities
Freepoint Loan Proceeds $ 445,782 $
Common stock retired (300)
Repayment of related party debt (390,000)
Deferred loan fees
Borrowing 544,800
-------------- ---------------
Net cash provided (used) in financing activities 445,782 154,500
-------------- ---------------
Net increase (decrease) in cash (3,117) 50,406
Cash - Beginning 3,513 (3,493)
-------------- ---------------
Cash - End
$ 396 $ 46,913
============== ===============
</TABLE>
6
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NOVA COMMUNICATIONS 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, 2000 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,
1999.
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 a 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
have sustained operating losses for several years and required substantial
amounts of working capital in their operations. At September 30, 2000,
liabilities exceed assets by $1,566,517. 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, 2000, 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
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.
7
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INVESTMENTS: The Company's investments in equity securities are carried at cost
less valuation reserves established in prior years. The Company determined that
one of these investments does 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. The Company's option to acquire 100% of the outstanding capital stock of
Communications 2000, Inc. was extended by mutual agreement to June 30, 2000, and
was exercised on July 31, 2000 when the Company acquired 80% of the
Communications 2000, Inc. outstanding capital stock. On July 17, 2000,
Communications 2000, Inc. with the company's consent, agreed to issue 4,678,355
shares of common stock to the shareholders of Freepoint Telecom, Inc. in
exchange for 100% of the issued and outstanding common and preferred shares of
Freepoint Telecom, Inc. pursuant to the Agreement and Plan of Merger between
Freepoint Telecom, Inc. and Communications 2000, Inc., the Company's ownership
in Communications 2000, Inc. will be 38.77%. The Company continues to be able to
elect three of the five board members on Communications 2000's Board of
Directors.
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 basis 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:
Investments included the following at December 31, 1999:
<TABLE>
December 31, September 30
1999 2000
---------------------------
<S> <C> <C>
Gulf Coast Hotels, Inc.
Common Stock (at cost) 1,875 shares $ 209,782 $ 209,782
Advances (at cost) 85,000 85,000
Valuation reserve (294,782) (294,782)
And Justice For All, Inc.
Common Stock (appraised value) 362,500 shares 497,757 362,500
Valuation reserve (297,747) (162,500)
</TABLE>
At December 31, 1999, the Company's remaining investments included the Gulf
Coast Hotels project, cash advances to Communications 2000, Inc., and the
investment in And Justice For All (the "Legal Club") common stock.
8
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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, that 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;
And Justice For All (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 became
"free trading" on April 19, 2000. Bid and ask prices for Legal Club common stock
are available. Accordingly, the Company valued its Legal Club investment based
upon management's appraisal. 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 25,000shares of Legal Club common stock as collateral
for a loan and legal fees. The loan agreement provides for an "orderly
liquidation" of the Legal Club shares held as collateral commencing December
1999 to repay the loan.
NOTE D - NOTES RECEIVABLE
Notes receivable included the following at September 30, 2000 and December 31,
1999.
<TABLE>
<CAPTION>
September December
2000 1999
-----------------------
<S> <C> <C>
RABO - Installment note dated1994 for the
original amount of $88,000; secured by assets
and personal guarantee; payable $2,000 monthly
including interest at 10% per annum $ 49,857 $ 59,683
Less: Valuation reserve (59,683)
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 50,259 91,756
Less: Current portion (74,259) (24,000)
--------- --------
Notes Receivable, non-current $ 25,857 $ 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.
9
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NOTE E - OFFICE EQUIPMENT -
Office equipment included the following at September 30, 2000, and December 31,
1999:
<TABLE>
<CAPTION>
September December
2000 1999
----------------------
<S> <C> <C>
Office equipment (at cost) $ 47,075 $ 21,205
Accumulated depreciation 21,076 (14,006)
-------- ----------
Office Equipment, net $ 25,999 $ 7,199
======== ==========
</TABLE>
NOTE F - PREPAID CONSULTING CONTRACT AND LOAN FEE
Prepaid consulting contract - The Company entered into a six-month consulting
contract at a total cost of $25,000 in connection with the loan acquired on June
7, 1999. The cost of this contract was recorded as a prepaid expense and was
being written off to expense ratably over the six-month term of the contract
from June through November 1999.
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. 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 was written off to expense ratably
over the fifteen-month term of the loan from June 1999 through August 2000.
NOTE G - NOTES PAYABLE
Notes payable consisted of the following at September 30, 2000 and December 31,
1999;
<TABLE>
<CAPTION>
September December
2000 1999
---------------------
<S> <C> <C>
Private Investor - demand note dated 4/24/94 $ $
plus interest at 2% over Bank of America prime
rate 309,453 309,453
Investment Group - note dated 6/07/99 due on
8/31/00 plus interest at 10% per annum secured
by assets of the Company 595,385 553,505
Freepoint Telecom, Inc. - Note dated 8/15/00
repayable by conversion into 147,201 shares
of Nova common stock when the closing bid
price of Nova stock reaches $3.50. Interest at
7% per annum included, or to be paid in cash
if on the second anniversary of the Note, the
stock has not attained a closing bid price of $3.50. 450,000
Note secured by equipment dated 4/11/99 payable
$461 monthly including interest due March 2004 11,044 15,191
---------- --------
Notes payable $1,365,882 $878,229
========== ========
</TABLE>
10
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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 has looked to 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 was due August 31, 2000. Because of the present value of Legal
Club stock the investment group is not pressing the company for repayment and is
seeking an alternative repayment schedule.
NOTE H - MANAGEMENT FEE PAYABLE TO OFFICER
The Company accrues 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 June 13, 2000, the Company signed a letter of intent in substitution of the
previous 100% of the outstanding shares of Communications 2000, Inc., a non-
public California corporation that sells and installs telephone and other
communication equipment and systems. The Company will exchange 3,000,000 shares
of restricted Nova common stock for 80% of the outstanding shares of
Communications 2000, Inc.
NOTE J - INCOME TAXES
Deferred income taxes consisted of the following at September 30, 2000 and
December 31, 1999:
<TABLE>
<CAPTION>
September December
2000 1999
--------------------------
<S> <C> <C>
Deferred tax assets
Net operating loss carryovers $ 2,395,000 $ 2,395,000
Valuation allowance (2,395,000) (2,395,000)
Net deferred income taxes $ -- $ --
=========== ===========
</TABLE>
11
<PAGE>
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Company in the capacities and on the dates
indicated:
November 14, 2000
/s/ Kenneth D. Owen
------------------------
Kenneth D. Owen President and Director
November 14, 2000
/s/ Leslie I. Handler
------------------------
Leslie I. Handler Secretary and Director
12
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NOVA COMMUNICATIONS LTD.
AMENDED BALANCE SHEETS
----------------------
(UNAUDITED)
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
------------ ------------
<S> <C> <C>
Assets
------
Current assets:
Cash $ $ 3,513
Receivables 27,638 29,820
Notes Receivable 67,000 48,829
Deposits 3,177 3,177
Available-for-sale investments 200,000 200,010
------------ ------------
Total current assets 297,815 285,349
Notes receivable 62,681 94,469
Equipment, net 27,223 28,473
------------ ------------
$ 387,719 $ 408,291
============ ============
Liabilities and Net Capital Deficiency
--------------------------------------
Current liabilities:
Outstanding checks in excess of cash in bank $ 5 $ --
Notes payable, net of deferred loan fees of
$67,842: 499,543 438,038
Accounts payable 329,300 317,880
Payable to related parties 535,305 511,509
Accrued Payroll and payroll related liabilities 46,379 46,379
Other accrued liabilities 10,710 18,661
Long-term obligations, due within one year 4,881 3,429
------------ ------------
Total Liabilities 1,426,123 1,335,896
Long-term obligations 318,382 321,216
Net capital deficiency
Preferred stock; no par value; authorized
10,000,000 shares; common stock; $.001 par
value; shares authorized 500,000,000 shares;
shares outstanding 13,496,182 at December 31,
1999 and March 31, 2000: 13,496 13,496
Additional paid in capital 9,760,654 9,760,955
Retained deficit (10,833,189) (10,725,525)
Unrealized holding loss from available-for-sale
investments: (297,747) (297,747)
------------ ------------
Net capital deficiency (1,356,786) (1,248,821)
------------ ------------
$ 387,719 $ 408,291
============ ============
</TABLE>
13
