UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997.
[ ] TRANSACTION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transaction period from To
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Commission File Number 0-14213
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GLOBAL VENTURE FUNDING, INC.
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(Name of small business issuer in its charter)
Colorado 84-0990371
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identificaion No.)
6965 El Camino Real, #105-279, Carlsbad, CA 92009
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(Address of principal executive offices)
Issuer's telephone number (760) 436-5485
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Check whether the issuer (1) 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 issuer was
required to file such report), 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 issuers
classes of common equity, as of the latest practicable date.
Class Outstanding at August 14, 1997
- ----------------------------- --------------------------
Common Stock $.0001 par value 11,182,273
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PART I - Item 1
GLOBAL VENTURE FUNDING, INC.
BALANCE SHEETS
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<CAPTION>
<C> <C> <C>
June 30, September 30,
1997 1996
ASSETS (Unaudited) (Audited)
Current assets:
Cash $ 1,373 $ 49,800
Prepaid expenses 22,041 26,600
--------- ---------
Total current assets 23,414 76,400
Investment in and advances to
unconsolidated subsidiary -- --
Licensing rights 1,000
Leasehold improvements and equipment 18,107 --
Other assets - deposits (302) --
--------- ---------
Total assets $ 44,719 $ 77,400
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 62,508 $ 11,300
Current portion of long-term
debt - related parties -- --
Accounts payable and accrued
liabilities 107,994 47,800
Stock subscriptions payable -- --
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Total current liabilities 170,052 59,100
Long-term debt, related parties 263,360 298,700
Contingencies
Stockholders' deficit (Note ):
Convertible preferred stock,
$.10 par value; authorized
20,000,000 shares:
Series II; authorized 500,000
shares; issued and outstanding
453,574 and 475,000 shares
(aggregate liquidation preference
of $453,574 and $ 475,000) 45,357 47,500
Series B; authorized 500,000
shares; issued and outstanding
384,475 and 397,000 (aggregate
liquidation preference of
$384,475 and $397,000) 38,448 39,800
Series C; authorized 50,000
shares; issued and outstanding
5,300 and 1,050 shares (aggregate
liquidation preference of $530,000
and $105,000) 530 100
Series D; authorized 50,000 shares;
issued and outstanding 20,250 and
10,500 shares (no liquidation
preference) 2,025 1,100
Common stock $0001 par value;
authorized 150,000,000 shares;
issued and outstanding 4,173,898
and 3,282,513 417 300
Additional paid-in capital 858,834 569,400
Stock options -- 30,000
Accumulated deficit (1,334,304) (968,600)
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Total stockholders' deficit (388,693) (280,400)
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Total liabilities and
stockholders' deficit $ 44,719 $ 77,400
========= =========
2
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</TABLE>
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<CAPTION>
<C>
GLOBAL VENTURE FUNDING, INC.
STATEMENTS OF OPERATIONS
<C> <C> <C>
For the Six For the Three
Months Ended June 30 Months Ended June 30
-------------------- ---------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues $ 1,385 $ 142,643 $ 1,385 $ --
Cost of revenues $ 3,000 $ 36,315 $ 3,000 $ --
--------- --------- --------- ---------
Gross profit $ (1,615) $ 106,328 $ (1,615) $ --
-------- --------- -------- ---------
Selling, general,
and administrative
expenses 337,857 147,414 107,016 404
-------- -------- --------- --------
Loss from operations (339,472) (41,086) (108,631) (404)
Other expenses:
Interest expense,
related parties 25,906 818 818 --
Interest expense
Depreciation 302 440 440 --
------- ------- -------- -------
Net loss from continuing
operations before
taxes (365,680) (42,344) (109,889) (404)
Provision for income
taxes -- -- -- --
Net loss from
continuing operations (365,680) (42,344) (109,889) (404)
Discontinued operations -- -- -- --
------- ------- -------- --------
Net loss before
extraordinary item (365,680) (42,344) (109,889) (404)
Extraordinary item -- -- -- --
-------- ------- -------- ------
Net loss $ (365,680) (42,344) (109,889) (404)
=========== ======= ======== =======
Net loss per common share
Net loss $ (0.09) (0.02) (0.03) Nil
Weighted average common
shares outstanding 3,909,645 2,241,842 3,909,645 2,241,842
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3
GLOBAL VENTURE FUNDING, INC.
STATEMENTS OF CASH FLOWS
</TABLE>
<TABLE>
<CAPTION>
<C> <C> <C>
For the Six For the Three
Months Ended June 30 Months Ended June 30
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1997 1996 1997 1996
---- ---- ---- ----
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(365,680) $(42,344) $(109,889) $ (404)
Depreciation 302 440 302 --
Adjustments to
reconcile net (loss)
to net cash (used)
by operating activities:
(Increase) decrease in:
Inventory (7,874)
Stock options
exercised 30,000
Accounts receivable
& notes receivable(22,529)
Prepaids, deposits,
other assets 1,059 (35,512) 130
Intangible assets
Increase (decrease) in:
Accounts payable 62,996 24,606 32,712
Accrued expenses 6,492 7,572 8,059
Common stock
subscriptions payable -- --
------- ------- ------- -----
Net cash (used) by
operating activities (264,831) (75,641) (68,686) (404)
Cash flows from financing activities:
Issuance of common
stock in exchange
for services 25,390
Issuance of preferred
stock in exchange
for services 1,801
Proceeds from issuance
of common stock net of
placement fees 76,620
Proceeds from issuance
of long-term debt 50,758 160,000 56,944
Repayments of long-
term debt 86,098 (85,009)
Repayments of notes
payable (6,156) (63,123)
------- ------- ------- ------
Net cash provided
by financing
activities 234,511 160,000 78,830 --
Cash flows from investing activities
Purchase of
leasehold improvements
and equipment (18,107) (22,822) (18,107)
INCREASE (DECREASE)
IN CASH (48,427) 61,537 (7,963) (404)
CASH AT BEGINNING
OF PERIOD 49,800 367 9,336 62,308
--------- -------- ------ --------
CASH AT END OF PERIOD $ 1,373 $ 61,904 $ 1,373 $ 61,904
========= ========= ======= ========
Supplemental disclosure of cash flow information
Cash paid for income taxes
Schedule of non-cash
investing and financing
activities
Preferred stock issued
in exchange for services $ 1,801 -- $ 300 --
Common stock issued
for placement fees $ -- -- $25,380 --
4
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GLOBAL VENTURE FUNDING, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED JUNE 30, 1997 AND 1996
1. Basis of presentation and accounting policies:
Organization and basis of presentation:
Global Venture Funding, Inc. (the "Company") is a corporation
formed under the laws of the State of Colorado on December 7,
1984 under the name "Venture Funding Corporation". The Company
has been engaged in a variety of operations since inception, and
recently, through its wholly owned subsidiary, AllCell
Communications, Inc. ("AllCell"), a Georgia corporation formed on
April 29, 1996, has been engaged in the business of reselling
cellular time through a distribution network on a prepaid basis.
The subsidiary ceased operations during September, 1996 with no
immediate plans in the future to resume operations. To further
the Company's ability to capture market share and establish a
retail presence, the Company has located, signed a lease and is
in the process of opening a 4,600 sq. ft. retail location in
Houston, TX. This center will operate as the Hub for this market,
providing support to a Dealer Network as well a Company owned
Satellite centers. The Houston store subsequently opened on July
1, 1997.
The Company has experienced losses from discontinued operations
of $217,100 for the year ended September 30, 1996, and has
experienced losses from continuing operations of $ 109,889 and
$404 for the quarters ended June 30, 1997 and 1996, respectively,
and has a stockholders' deficit of $388,693 as of June 30, 1997.
The Company received proceeds of $45,00 from a private placement
during the quarter ended June 30, 1997, and is planning on
raising additional capital through the issuance of additional
stock in a private placement or public offering. The Company is
also currently seeking new business opportunities that may be
acquired or developed internally. Based upon the current status
of the Company, additional capital will be required in order for
the Company to complete any business acquisition or development,
or to maintain their ongoing operations.
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 asset carrying amounts or
the amount and classification of liabilities that might result
from the outcome of this uncertainty.
Unconsolidated subsidiary:
Because AllCell has experienced substantial financial losses and
the Company has abandoned any plans to fund the future operating
deficits of the subsidiary. Effective as of September 30, 1996,
the financial statements do not include the accounts of the
subsidiary on a consolidated basis. Rather, the investment in the
subsidiary is carried on the books of the Company using the cost
method. Prior to abandonment, the consolidated financial
statements included the accounts of the Company and AllCell. All
material intercompany transactions have been eliminated in
consolidation.
Income taxes:
The Company has implemented the provisions on SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires that income
tax accounts be computed using the liability method. Deferred
taxes are determined based upon the estimated future tax effects
of differences between the financial reporting and tax reporting
bases of assets and liabilities given the provisions of currently
enacted tax laws. The adoption of this provision by the Company
has not required any adjustment to the financial statements
presented.
Net loss per common share:
Net loss per common share is computed by dividing net loss by the
weighted average number of shares of common stock and dilutive
common stock equivalents outstanding during the year. Dilutive
common stock equivalents consist of shares issuable upon
conversion of convertible preferred shares and the exercise of
the Company's stock options (calculated using the treasury stock
method). During 1997 and 1996, common stock equivalents are
not considered in the calculation of the weighted average number
of common shares outstanding because they would be anti-dilutive,
thereby decreasing the net loss per common share.
Pervasiveness of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Fair value of financial instruments:
Based on the borrowing rates currently available to the Company,
the carrying value of long-term debt, related parties
approximates fair value.
2. Restatement of prior period financial statements:
Subsequent to the issuance of the September 30, 1995 financial
statements, the Company determined that the financial statements
contained errors related to the following matters:
Preferred stock Accumulated
and additional deficit
paid-in capital
Overstatement of advances from
affiliates and notes payable-
related party due to failure to
relieve liabilities assumed as a
result of the sale of a wholly
owned subsidiary, American West
Foods, Inc. on June 8, 1994 $ -- $ 27,300
Overstatement of compensation payable
due to failure to reduce salary accruals
payable to former officer to
contractual amount -- 80,800
Understatement of preferred stock and
additional paid-in capital due to
omission of stock issued for in-kind
services and cash 113,800 (63,700)
Net change as of September 30, 1994 $ 113,800 $ 44,400
The previously reported financial results for the quarter ended
December 31, 1995 have been restated to reflect the above and
other changes. Net loss and net loss per common share for the
year ended September 30, 1995 have been restated as follows:
1995
Net income, as previously reported $100,700
Adjustment for advances and notes
payable to related parties (27,300)
Adjustment for accrued compensation (80,800)
Adjustment for trade accounts payable (13,000)
Net loss, as restated $(20,400)
Net income per common share, as previously reported $0.06
Net loss per common share, as restated $(0.01)
3. Business acquisition and discontinued operations:
On May 8, 1996, the Company completed the acquisition of AllCell
in a transaction accounted for in a manner similar to a purchase.
In accordance with accounting principles associated with a
transaction where the acquired company has been acquired by a
development stage company, and the acquired company is considered
a promoter in the founding and organizing of the business, the
acquired business assets were recorded at the historical cost
basis of the predecessor. AllCell became a wholly owned
subsidiary of the Company through the exchange of 5,500 Series C
preferred shares for all of the outstanding stock of AllCell.
5,000 of the shares were escrowed, to be released to the former
stockholder of AllCell based upon the achievement of certain
performance criteria as the President of AllCell. AllCell was
formed on April 29, 1996 and had no significant operations prior
to its acquisition by the Company.
During September, 1996, the Company abandoned its
telecommunications operation through its subsidiary AllCell.
AllCell suffered substantial financial losses and was unable to
sustain operations without continued financial support from the
Company. Investments and advances to AllCell as of September
30, 1996, totaled $217,100, which has been charged to the current
period as a loss from discontinued operations. There was no tax
benefit recognized as a result of this loss. For the period from
acquisition, May 8, 1996, until September 30, 1996, AllCell had
revenues totaling $120,600. As of September 30, 1996, AllCell's
net liabilities exceeded net assets by $491,900. In addition, a
substantial creditor of AllCell has threatened litigation against
AllCell and the Company in order to collect amounts owed by
AllCell, which include significant contractual default penalties,
totaling approximately $200,000. Management of the Company
believes that it has no obligation in regards to these or any
other liabilities or commitments of AllCell and has no plans to
satisfy them in the future.
4. Stockholders' deficit:
Preferred stock:
The Company's preferred stock may be divided into such series as
may be established by the Board of Directors. The Board of
Doirectors may fix and determine the relative rights and
preferences of the shares of any series established. All
convertible preferred shares are noncumulative, nonparticipating
and do not carry any voting privileges.
In October, 1991, the Board of Directors authorized the issuance
of 500,000 shares of Series II Convertible Preferred Stock. Each
share of Series II preferred stock is entitled to preference upon
liquidation of $1.00 per share for any unconverted shares. Each
Series II preferred share may be converted to common stock after
a specified holding period as follows: after one year, two shares
of common stock; after two years, five shares of common stock;
after three years, ten shares of common stock.
In March, 1992, the Board of Directors authorized the issuance of
500,000 shares of Series B Convertible Preferred Stock. Each
share of Series B preferred stock is entitled to preference upon
liquidation of $1.00 per share for any unconverted shares. Each
Series B preferred share may be converted to common stock after a
specified holding period as follows: after one year, two shares
of common stock; after two years, five shares of common stock.
In June, 1992, the Board of Directors authorized the issuance of
50,000 shares of Series C Convertible Preferred Stock. Each
share of Series C preferred stock is entitled to preference upon
liquidation of $100 per share for any unconverted shares, and the
liquidation preference is junior only to that of all previously
issued preferred shares. Each Series C preferred share may be
converted to 100 shares of common stock after a specified
holding period of one year. In February, 1996, 12,000 shares of
Series C preferred stock was converted to 1,200,000 shares of
common stock.
In June, 1992, the Board of Directors authorized the issuance of
50,000 shares of Series D Convertible Preferred Stock. The
Series D preferred stock carry no liquidation preferences and is
subject to forfeiture prior to conversion. Each Series D
preferred share may be converted to 100 shares of common stock
after a specified holding period of one year.
In March, April and May, 1996, the Company issued 93,350 shares
of Series B preferred stock to certain creditors in exchange for
trade accounts payable debts owed by the Company in the amount of
$92,200. All exchanges were valued at approximately $1.00 per
share.
In February and September, 1996, certain stockholders exercised
their preferred stock conversion rights and the Company issued
1,700,000 shares of common stock in exchange for the cancellation
of 25,000 shares of Series II preferred stock, 50,000 shares of
Series B preferred stock and 12,000 shares of Series C preferred
stock.
In November of 1996, the Company issued 2,250 shares of Series C
and 250 shares of Series D preferred stock in exchange for
services received.
In April of 1997, the Company issued 2,500 shares of Series C
preferred stock to Roger K. Knight President (2000 shares) and
Silas Phillips Vice President/Secretary (500 shares) in exchange
for services to the Company.
The Company has reserved 17,500,000 shares of its $.0001 par
value common stock for conversion of preferred stock issuance's.
Stock options:
On July 26, 1996, the Company issued options to purchase 300,000
common shares to an individual in exchange for a management
consulting agreement scheduled to terminate on May 26, 1997. The
option agreement provides for an exercise price of $.10 per share
commencing July 26, 1996 until July 26, 1998 or 24 months after
the filing and acceptance of this issuance with the Securities
and Exchange Commission, whichever date is later. The number of
shares issuable under the agreement are subject to adjustment to
take into account reorganizations, recapitalization, mergers or
other similar corporate events. In addition, the Company has
agreed to reserve 300,000 shares of its $.0001 par value common
stock for the exercise of this option. This agreement was valued
at $30,000 and is being amortized over the life of the consulting
agreement. This option was exercised on December 16, 1996.
On April 28, 1997, the Company granted Pat Stephenson an option
to purchase 100,000 common shares at $1.00 per the Incentive
Stock Option Plan of Global. The option may be exercised after
4/28/98 and continues for five Years.
On July 18, 1997, the Board of Directors granted Robert C. Brehm
an option to purchase 2,500,000 shares of restricted common stock
at an option price of $.05 per share or an aggregate price for
all shares of $125,000 for a period of five years.
5. Income taxes:
The benefit for income taxes from continuing operations is
different than the amount computed by applying the statutory
federal income tax rate to net loss before taxes. A
reconciliation of income tax benefit follows:
Year ended September 30,
1996 1995
Computed tax benefit at federal
statutory rate $ 40,500 $ 6,900
Change in valuation allowance (40,500) (6,900)
$ -- $ --
The provision for federal and state income taxes consisted of the
following:
Current $ -- $ --
Deferred -- --
$ -- $ --
The deferred tax asset consisted of the following:
Net operating loss carryforwards $ 613,600 $489,000
Valuation allowance (613,600) (489,000)
Net deferred tax asset $ -- $ --
The Company has net operating loss carryforwards ("NOLs") for
federal income tax reporting purposes of approximately
$1,595,000. The NOLs expire at various times through 2011.
Included in the above NOLs are net operating loss carryforwards
which may be subject to substantial limitations in accordance
with various provisions of the Internal Revenue Code. The Company
has not yet determined the amount and nature of these
limitations.
6. Related party transactions:
Licensing agreements:
During the quarter ended June 30, 1996, the Company entered into
an agreement with Cellular 99, a Nevada corporation under the
control of the president of the Company, whereby it obtained an
exclusive license to rent cellular phones in the State of
Illinois, using the proprietary marketing technology of Cellular
99. The Company exchanged 10,000 shares of Series D Convertible
Preferred Stock for these licensing rights. These rights were
valued at $1,000 or $.10 per share. In November of 1996, the
Company entered into a similar agreement with Cellular-99 for an
exclusive license to rent cellular phones in the State of Texas.
The Company exchanged 10,000 shares of Series D Convertible
Preferred Stock for these licensing rights. These rights were
valued a $1,000 or $.10 per share.
Office space and administrative support:
The Company is provided office space and other administrative
support services at no cost to the Company by various
corporations under the control of the president of the Company, a
principal stockholder.
Notes payable to related party:
Notes payable to related party consisted of various notes payable
to a Director of the Company, and a corporation under the control
of that Director. The notes are unsecured, due in 18 months from
the date of issuance, and bear interest at 10%. The maturities
range from November, 1997 to March, 1998.
Legal fees:
Certain stockholders of the Company are affiliated with firms who
currently provide or have provided legal services to the Company
in prior years. During the years ended September 30, 1996 and
1995, fees and other expenses charged by these firms totaled
approximately $31,700 and $4,800, respectively. As of June 30,
1997, amounts due these firms totaled $31,261.
7. Extraordinary item:
In September, 1996, the Company exchanged on terms favorable to
the Company a trade accounts payable debt for an agreed upon
installment obligation totaling $12,900 over the next 13 months.
The installment obligation is unsecured, and bears no interest.
A gain of $16,800, net of tax, has been recognized on this debt
restructuring transaction. As part of this transaction, the
Company issued post-dated checks to a collection agency. These
post-dated checks, are included in the cash balance.
8. Leasehold Improvements and equipment
During the quarter ended March 31, 1997 leasehold improvements
and equipment were purchased in preparation for the opening of
the Houston retail store in April. No depreciation has been
provided for these assets as they have not been put into
operation as of June 30, 1997.
PART I - Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
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Since October of 1993, GVF has allocated its efforts towards
seeking a viable business venture to acquire and/or develop
internally. Based upon the status of the Company, its lack of
operating cash and its stockholder's deficit, additional funding
will be required in order for the Company to complete any
business ventures whether through an acquisition merger, or
developed internally.
The Company has continued in its efforts to identify a company in
the telecommunications industry and/or to establish its own
activity in the telecommunications industry. Toward this end, on
May 29, 1996, the Company entered into a License Agreement with
Cellular 99, Inc. whereby Cellular 99, Inc. granted a ten year
license for the exclusive right to engage in the merchandising,
marketing, distribution, promotion and renting of cellular
telephones in the State of Illinois and the right to use the
trade name Cell Phone 99. In November 1996, the Company entered
into a similar agreement with Cellular 99, Inc. to obtain the
exclusive licensing rights to the State of Texas. The stock was
valued at $.10 per share with a total value of $1,000. The
company expects to secure additional licenses for other states.
The cellular phone services would be sold through retail outlets
and it is estimated that they would rent for 99 cents per day.
On May 8, 1996, GVF acquired 100% of the common stock of AllCell
Communications, Inc., (AllCell) a Georgia corporation, in
exchange for 5,500 shares of the Company's Series C Preferred
Stock, of which 5,000 shares were placed in escrow pending
achievement by AllCell of certain earnings levels as specified in
the purchase agreement. AllCell was acquired to test market the
Company's prepaid cellular products prior to a regional and
national roll out of retail stores offering cellular and related
products. The Company canceled the shares and the losses have
been accounted for as discontinued operations.
On July 18, 1997, Robert C. Brehm became President and Treasurer
and subsequently was elected Chairman of the Board of Directors.
He moved the company's administrative offices from Las Vegas to
6965 El Camino Real, Suite 105-279, Carlsbad, CA 92009. The new
phone number is 760-436-5485. Mr. Brehm intends to reorganize
and restructure the company so as to include Energy,
Communications and Internet components.
Results of Operations
- ----------------------
Quarter Ended June 30, 1997 compared to the Quarter Ended June
30, 1996.
During the quarter ended June 30, 1997, the Company had sales of
$1,385 and it continued laying the ground work for the opening of
its first retail store in Houston, Texas in July 1997.
Selling, general and administrative expenses for the second
quarter were $107,016. Selling, general and administrative
expenses are comprised mainly of legal and accounting expenses
arising from the preparation of SEC reporting forms for public
disclosure, consulting fees, filing fees and general office
expenses incurred in starting up an on-going operation which has
been dormant for several years.
Interest expense for related parties was $818 during the third
quarter of fiscal 1997. The interest is related to notes payable
to related parties. These notes, due in 18 months from the date
of issuance, bear interest at the rate of 10% per annum.
Depreciation for the quarter totaled $440.
Primarily, as a result of the above mentioned expenses, Net
Losses from Operations increased $109,889 in the quarter ended
June 30, 1997. This compares to a net loss of $404 for the
quarter ended June 30, 1996.
There was no provision for income taxes in either 1995 or 1996
due to the existence of net operating loss carry forwards from
prior years, and the likelihood of the Company being able to
utilize these net operating losses in the future.
There was a loss from discontinued operations in 1996 totaling
$217,100 representing investments and advances to AllCell. On
May 8, 1996, the Company completed the acquisition of AllCell in
a transaction accounted for in a manner similar to a purchase.
In accordance with accounting principals associated with a
transaction where the acquired company has been acquired by a
development stage company and the acquired company is
considered a promoter in the funding and organizing of the
business, the acquired business assets were recorded at
the historical cost basis of the predecessor. AllCell became a
wholly owned subsidiary of the Company through the exchange of
5,500 series C preferred shares for all the outstanding stock of
AllCell. 5,000 of the shares were placed in escrow to be released
to the former stockholder of AllCell based upon the achievement
of certain performance criteria as the President of AllCell.
AllCell was formed on April 29, 1996 and had no significant
operations prior to its acquisition by the Company.
As of September 30, 1996, the Company abandoned its
telecommunications test market operations through its subsidiary,
AllCell, which suffered substantial financial losses and was
unable to sustain operations without continued financial support
from the Company. Investment and advances to AllCell as of
September 30, 1996, totaled $217,100 which has been charged
to the current period as a loss from discontinued operations.
For the period from acquisition, May 8, 1996, until September 30,
1996, the date of abandonment, AllCell had revenues totaling
$120,600. As of September 30, 1996, AllCell's net liabilities
exceeded net assets by $491,900. In addition, a substantial
creditor of AllCell has threatened litigation against AllCell and
the Company in order to collect amounts allegedly owed by AllCell
which include significant contractual default penalties, totaling
approximately $200,000. Management of the Company believes that
it has no obligation in regards to these or any other liabilities
or commitments of AllCell and has no plans to satisfy them in the
future.
Because AllCell experienced substantial financial losses and the
Company has abandoned any plans to fund the future operating
deficits of the subsidiary, as of September 30, 1996, the
financial statements do not include the accounts of the
subsidiary on a consolidated basis. Rather the investment in the
subsidiary is carried on the books of the Company using the
cost method. Prior to the abandonment, the consolidated
financial statements included the accounts of the Company and
AllCell. All material intercompany transactions have been
eliminated in consolidation in 1996.
In September 1996, the Company exchanged, on terms favorable to
the Company, a trade accounts payable debt for an agreed upon
installment obligation totaling $12,900 over the next 13 months.
The installment obligation is unsecured and bears no interest. A
gain of $16,800, net of tax, has been recognized on this debt
restructuring transaction. As part of this transaction, the
Company issued post-dated checks to a collection agency. These
post-dated checks are included in the cash balance on the Balance
Sheet for June 30, 1997.
The Company has experienced losses from discontinued operations
of $217,100 for the year ended September 30, 1996, and has
experienced losses from continuing operations of $150,376 and
$169 for the quarters ended June 30, 1997 and 1996
respectively, and has a stockholder's deficit of $399,405 as of
June 30, 1997. The Company is planning on raising additional
capital through the issuance of additional stock in a private
placement or public offering. The Company is also seeking new
business opportunities that may be acquired or developed
internally. Based on the current status of the Company,
additional capital will be required in order for the Company to
complete any business acquisitions or development, or to
maintain their ongoing operations.
Liquidity and Capital Resources
- --------------------------------
Cash and equivalents totaled $1,373 and $61,904 at June 30, 1997
and 1996 respectively. During the quarter ending June 30, 1997,
net cash used by operating activities totaled $68,686, which
includes payments for accounting, legal fees and professional
services.
Net Working Capital (Current Assets less Current Liabilities)
was ($146,638) as of June 30, 1997. As of June 30, 1996,
net working capital was $63,347.
Non-cash investing and financing activities
- -------------------------------------------
In March and April 1996, the Company issued 93,350 shares of
Series B preferred stock to certain creditors in exchange for
trade accounts payable debts owed by the Company in the amount of
$92,200. All exchanges were valued at approximately $1.00 per
share. In February and September 1996, certain stockholders
exercised their preferred stock conversion rights and the Company
issued 1,700,000 shares of common stock in exchange for the
cancellation of 25,000 shares of Series II preferred stock,
50,000 shares of Series B preferred stock and 12,000 shares of
Series C preferred stock for a combined value of $8,700.
In May 1996, 5,500 shares of Series C Preferred stock was issued
in exchange for the acquisition of AllCell for a total value of
$28,300. An additional 550 shares was paid to a related party
stockholder as a finder's fee. In September 1996, the Company
canceled 5,000 shares of Series C Preferred stock due to the
discontinuation of AllCell's operations.
During the quarter ended June 30, 1996, the Company entered into
an agreement with Cellular 99, a Nevada corporation under the
control of the president of the Company, whereby it obtained an
exclusive license to rent cellular phones in the State of
Illinois, using the proprietary marketing technology of Cellular
99. The Company exchanged 10,000 shares of Series D Convertible
Preferred stock for these licensing rights. These rights were
valued at $1,000 or $.10 per share. In November of 1996, the
Company entered into a similar agreement with Cellular 99, Inc.
for the State of Texas. The Company issued 10,000 shares of
Series D Preferred Stock to Cellular 99, Inc. to obtain the
exclusive licensing rights to the State of Texas. The stock was
valued at $.10 per share with a total value of $1,000.00.
On July 26, 1996, the Company issued options to purchase 300,000
common shares to Robert Brehm Consulting, in exchange for a
management consulting agreement scheduled to terminate May 26,
1997. The option agreement provides for an exercise price of
$.10 per share commencing July 26, 1996 until July 26, 1998 or
24 months after the filing and acceptance of the issuance with
the Securities and Exchange Commission, whichever date is
later. The number of shares issuable under the agreement are
subject to adjustment to take into account reorganization,
recapitalization, mergers or other corporate events. In
addition, the Company has agreed to reserve 300,000 shares of its
$.0001 par value common stock for the exercise of this option.
This agreement was valued at $30,000 and is being amortized over
the life of the consulting agreement. These options were
exercised in full in December of 1996.
In November of 1996 the Company issued 10,000 shares of Series D
Preferred stock to Cellular-99 to obtain the exclusive licensing
rights to the State of Texas. The stock was valued a $.10 per
share with a total value of $1,000.00
During the quarter ended June 30, 1997, 3,876 shares of Series II
preferred stock and 4,825 shares of Series B preferred stock were
converted into 62,885 shares of common stock.
On July 18, 1997, the Company issued options to purchase
2,500,000 restricted common shares to Robert C. Brehm. The option
agreement provides for an exercise price of $.05 per share
commencing September 1, 1997 and continuing for five years.
In August 1997, certain stockholders exercised their preferred
stock conversion rights and the Company issued 2,000,000 shares
of common stock in exchange for the cancellation of 20,000 shares
of Series D preferred stock.
To date the Company has financed its operations principally
through borrowings and private placements of equity securities
and debt. During the third quarter of 1997, the Company raised
$45,000 in a private placement for which stock was issued for
45,000 shares. The stock was sold at $1.00 per share. Net
proceeds to the company after placement fee's was $39,600. The
Company will need additional capital to continue its existence
and will endeavor to raise sufficient funds through the sale of
shares, or other means.
Future Funding Requirements
- ----------------------------
The Company's working capital and other capital requirements
during the next year or more will vary based on a number of
factors, including the rate at which retail stores are opened and
generate profits, the level of sales and marketing activities for
prepaid cellular services, and the level of effort needed to
develop additional retail outlets in Texas and elsewhere to the
point of commercial viability. The Company has closed out the
Reg. D, 506 offering as of June 30, 1997 and plans to make an
additional offering after the reverse stock split takes affect on
August 20, 1997.
The Company's failure either to ramp up sales sufficiently in
Illinois and Texas or elsewhere and receive additional funds from
its Private Placement Offering, could adversely affect the
Company's cash flows. In addition, the Company's business plans
may change or unforeseen events may occur which require the
Company to raise additional funds. There can be no guarantees
that the Company can raise the required capital necessary to
continue with its plans for growth and expansion.
Continuation Of Business
- ------------------------
In order for the Company to be successful, additional funding
will be required. The Company had no significant revenues and
has borrowed over $410,000 during the year. The failure of the
company to successfully obtain additional funds may jeopardize
its existence. The company intends to raise additional
working capital by the sale of common stock, borrowings and/or
possible licensing of its developed business arrangements (See
further discussion under "Management Discussion and Analysis
Of Financial Condition And Results Of Operations" section).
Employees
- ---------
As of June 30, 1997, the Company had 3 full-time employees. By
December 31, 1997, the Company expects to significantly increase
the number of employees, principally in retail operations, sales
and marketing and through acquired operating subsidiaries. The
Company's employees are not represented by a labor union and the
Company believes its employee relations are good.
On February 28, 1997. Robert C. Brehm resigned as Treasurer of
the Company. On March 18, 1997, Robert M. Dolan resigned as
President and CEO. The Board of Directors of the Company named
Roger K. Knight as President and CEO. Mr. Knight has previously
served in this capacity for the Company. On April 23, 1997, the
Company appointed Conrad B. Nagel to assume the position of
Chief Financial Officer and Treasurer. He is a CPA and has
substantial experience in the financial and accounting areas.
Factors Affecting Future Performance
- ------------------------------------
From time to time, in reports filed with the Securities and
Exchange Commission, in press releases, and in other
communications to shareholders or the investing public, the
Company may comment on anticipated future financial Performance.
Such forward looking statements are subject to risks and
uncertainties, including but not limited to, the impact of
competitive products and services, technological changes in the
Company's industry, the ability of the Company to develop and
successfully deploy it's Dealer Network, the Company's ability to
attract and retain customers, product demand and market
acceptance risks, reliance on key strategic alliances,
fluctuations in operating results, delays in development of
highly complex products and services and other risks detailed
from time to time in GVF's filing with the Securities and
Exchange Commission. These risks could cause the company's
actual results for 1997 and beyond to differ materially from
those expressed in any forward looking statements made
by, or on behalf of, GVF.
Although the cellular market, and in particular, the prepaid
cellular market segment, has experienced rapid growth in the
recent year, there can be no assurance that similar growth will
continue at similar rates, or at all, or that cellular customers
will be attracted to the Company's services through its sales
and marketing efforts. In addition, the prepaid cellular market
will have significant competition from the emerging Personal
Communication Service (PCS) carriers who are offering prepaid
services. These services will include wireless communication for
voice, fax, paging, and Internet connection. The prepaid
market is in its initial stage of development, and if these
markets do not grow as expected or if the customers in these
markets do not use the Company's services, the Company's
business, financial condition and results of operations
could be materially and adversely affected.
Restatement of prior period financial statements
- ------------------------------------------------
Subsequent to the issuance of the September 30, 1995 financial
statements, the Company determined that the financial statements
contained errors relating to the following matters :
Preferred Stock
and additional Accumulated
Paid in Capital Deficit
Overstatement of advances
from affiliates and notes
payable-related party due
to failure to relieve
liabilities assumed as a
result of the sale of a
wholly owned subsidiary,
American West Foods, Inc.
in June 1994. $ -- $ 27,300
Overstatement of compensation
payable due to failure to
reduce salary accruals
payable to former officer to
contractual amount. $ -- $ 80,800
Understatement of preferred
stock and additional paid-in-
capital due to omission of
stock issued for in-kind
services and cash. $ 113,800 $(63,700)
Net Change as of September
30, 1994 $ 113,800 $ 44,400
The previously reported financial results for the year ended
September 30, 1995 have been restated to reflect the above and
other changes, net loss and net loss per common share for the
year ended September 30, 1995 has been restated as follows:
1995
Net Income (loss) as previously reported $100,700
Adjustments for advances and notes payable
to related parties (27,300)
Adjustments for accrued compensation (80,800)
Adjustments for trade accounts payable (13,000)
Net Loss, as restated $(20,400)
Net income (loss) per common share,
as previously reported $ 0.06
Net loss per common share, as restated $ (0.01)
PART II
Item 1 - Legal Proceedings
- --------------------------
There are no known legal proceedings to which the Company is a
party as of March 31, 1997
Item 2 - Changes In Securities
- ------------------------------
On July 21, 1997, The Board of Directors voted to reverse split
all classes of stock on a one for twenty basis with an effective
date of August 20, 1997. As a result of the reverse split, the
Company will reacquire shares of common stock and all classes of
preferred stock. Such shares shall be cancelled and restored to
the status of authorized but unissued shares. Each class will
have 1/20 of the shares outstanding prior to the split.
Item 3 - Defaults Upon Senior Securities
- ----------------------------------------
None
Item 4 - Submission of Matters To A Vote Of Security Holders
- ------------------------------------------------------------
None
Item 5 - Other Information - subsequent events
- ----------------------------------------------
On July 18, 1997 The Board of Directors elected Robert C. Brehm
as President and Treasurer of Global with the task of turning the
company around from its then current situation. At the time of
his election, Global had a poor financial outlook including a
negative net worth, significant accounts payable, long term debt,
few current assets and a stock bid price of $0.047 per share as
quoted on the Over The Counter Bulletin Board. The company was
considering bankruptcy alternatives. Mr. Brehm had been
associated with the Company previously as Treasurer, Director and
a management consultant. He was responsible for getting the
company trading on the Over The Counter Bulletin Board in 1996.
The Board of Directors, after careful consideration of several
alternative turn around offers, and after a review of Mr. Brehm's
background which includes two engineering degrees, a Master's in
Business Administration and significant business experience
decided that hiring him as president was the best alternative for
a successful company turn around. Mr. Brehm had been working
with Mr. Knight and many of the investors on an informal basis
since his consulting contract expired in May 1997. Since he
had not been compensated for his time and the Board wanted to
hire him as President, the Board voted to hire Mr. Brehm and
compensate him for past services by issuing five million shares
of restricted common stock valued at $.01 per share. As an
additional incentive for Mr. Brehm, Global granted Mr. Brehm an
option to purchase 2,500,000 shares of restricted common stock at
an option price of $.05 per share or an aggregate price for all
shares of $125,000 for a period of five years.
Item 6 - Exhibits And Reports On Form 8-K
- -----------------------------------------
(a) None
(b) Reports on Form 8-K
On October 17, 1996, the Company filed a Form
8-K/A for the purpose of filing the Gilbert & Company
accountant's letters.
On October 21, 1996, the Company filed a Form
8-K Item 5 disclosing that Roger K. Knight has resigned as
President of the Company and that Robert M. Dolan was
elected as President effective October 1, 1996.
On April 25, 1997, the Company filed a Form 8-K
disclosing that Robert M. Dolan resigned as President of the
Company and that Roger K. Knight was elected as President
effective March 18, 1997.
On August 15, 1997, the Company filed form 8-K,
disclosing that Roger K. Knight resigned as President of the
Company and that Robert C. Brehm was elected President, Treasurer
and Chairman of the Board. Effective July 18, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Global Venture Funding, Inc.
Date: 08/15/97 By: /s/ Robert C. Brehm
------------------------------------
Robert C. Brehm, President
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