SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
Quarterly Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended Commission File Number
----------------- ----------------------
September 30, 2000 33-19196-A
INTERNET VENTURE GROUP, INC.
----------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2919648
------- ----------
(State of incorporation) (I.R.S. Employer
Identification No.)
9307 West Sam Houston Parkway South, Bldg. 100, Houston, Texas 77049
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 596-9308
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
43,941,519 common shares as of December 31, 2000
<PAGE>
<TABLE>
INTERNET VENTURE GROUP, INC.
Consolidated Balance Sheets
September 30, 2000 and December 31, 1999
<CAPTION>
ASSETS
------
Unaudited Unaudited
September 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 5,939,348 $ 6,006
Accounts receivable, net 27,060 14,145
Inventory 114,022 79,588
Notes receivable 115,000 -
------------- -------------
Total current assets 6,195,430 99,739
PROPERTY AND EQUIPMENT, net 53,245 59,546
OTHER ASSETS, net 310,857 289,322
------------- -------------
$ 6,559,532 $ 448,607
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 1,062,902 $ 206,057
Notes payable 2,810,496 329,656
Accrued liabilities 623,795 35,370
------------- -------------
Total current liabilities 4,497,193 571,083
MINORITY INTEREST 297,521 -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $0.0001, 300,000,000 shares
authorized, 42,369,519 and 30,537,402 issued and outstanding
at September 30, 2000 and December 31, 1999, respectively 4,237 3,054
Paid-in capital 20,443,681 1,969,035
Accumulated deficit (18,683,100) (2,094,565)
------------- -------------
Total stockholders' equity (deficit) 1,764,818 (122,476)
------------- -------------
$ 6,559,532 $ 448,607
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
INTERNET VENTURE GROUP, INC.
Consolidated Statements of Operations
(Unaudited)
Nine months Nine months
ended ended
September 30, September 30,
2000 1999
------------- -------------
REVENUES
Sales $ 260,416 $ 296,252
Other - 58,000
------------- -------------
Total revenues 260,416 354,252
COST OF GOODS SOLD, sales (156,820) (156,568)
------------- -------------
GROSS PROFIT 103,596 197,684
OPERATING EXPENSES,
administrative and overhead (1,083,183) (315,312)
PURCHASED IN-PROCESS TECHNOLOGY (15,601,792) 0
INTEREST EXPENSE (7,156) (44,912)
------------- -------------
NET LOSS $(16,588,535) $ (162,540)
============= =============
NET LOSS PER SHARE $ (.40) $ (.01)
============= =============
WEIGHTED AVERAGE COMMON SHARES 41,802,819 26,100,000
============= =============
See accompanying notes to consolidated financial statements.
2
<PAGE>
INTERNET VENTURE GROUP, INC.
Consolidated Statements of Operations
(Unaudited)
Three months Three months
ended ended
September 30, September 30,
2000 1999
------------- -------------
REVENUES
Sales $ 84,364 $ 52,697
Other - 29,000
------------- -------------
Total revenues 84,364 81,697
COST OF GOODS SOLD, sales (8,945) (15,191)
------------- -------------
GROSS PROFIT 75,419 66,506
OPERATING EXPENSES,
administrative and overhead (683,828) (101,741)
PURCHASED IN-PROCESS TECHNOLOGY (15,601,792) 0
INTEREST EXPENSE (2,746) (40,075)
------------- -------------
NET LOSS $ (16,212,947) $ (75,310)
============= =============
NET LOSS PER SHARE $ (0.39) $ (.01)
============= =============
WEIGHTED AVERAGE COMMON SHARES 41,802,819 26,100,000
============= =============
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
INTERNET VENTURE GROUP, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
------------- -------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $(16,588,535) $ (162,540) $(16,212,947) $ (75,310)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Minority interest in cons. subsidiary 297,521 297,521
Depreciation 18,837 10,470 8,766 2,470
Amortization 16,532 15,581 4,132 8,080
Purchased in-process technology 15,601,792 - 15,601,792 -
Stock based compensation 258,118 - 131,860 -
Changes in assets and liabilities
net of effects from purchase of
subsidiary:
Current assets 163,663 68,509 164,567 (22,718)
Current liabilities (133,913) (46,907) 130,985 28,073
------------- ------------- ------------- -------------
Net cash provided by (used in) operating
activities (365,985) (114,887) 126,676 (59,405)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property
and equipment (12,536) (20,682) (4,166) (29,784)
Increase in note receivable (115,000) - (115,000) -
Cash acquired through purchase of
subsidiary 5,404,338 - 5,404,338 -
------------- ------------- ------------- -------------
Net cash provided by (used in) 5,276,802 (20,682) 5,285,172 (29,784)
investing activities
CASH FLOWS FROM FINANCING
ACTIVITIES
Net increase (decrease) in
notes payable 588,425 (260,172) 319,299 (260,172)
Stock issue adjustments 398,832 - 333,914
Proceeds on issuance of stock 434,100 - - -
------------- ------------- ------------- -------------
Net cash provided by financing
activities 1,022,525 138,660 319,299 73,742
------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH 5,933,342 3,091 5,731,147 (15,447)
CASH AT BEGINNING OF PERIOD 6,006 8,026 208,201 26,564
------------- ------------- ------------- -------------
CASH AT END OF PERIOD $ 5,939,348 $ 11,117 $ 5,939,348 $ 11,117
============= ============= ============= =============
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES:
The Company purchased approximately 93% of the common stock of Swan Magnetics,
Inc. with common stock and warrants valued at $17,783,611. In conjunction with
the acquisition, the fair value of assets and liabilities assumed were as
follows:
Tangible assets acquired, including cash $ 5,653,417
Intangible assets acquired and subsequently written-off 15,601,792
Liabilities assumed (3,471,598)
-------------
Value of stock and warrants issued $ 17,783,611
=============
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
INTERNET VENTURE GROUP, INC.
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
(Unaudited)
December 31, 1998 through September 30, 2000
<CAPTION>
Common Stock
----------------------------- Additional
Number of Paid-in Accumulated
Shares Amount Capital Deficit Total
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE,
December 31, 1998 4,000,000 $ 400 $ 1,712,124 $ (1,802,734) $ (90,210)
ACQUISITION OF
SUBSIDIARY 26,537,402 2,654 256,911 - 259,565
NET LOSS - - - (291,831) (291,831)
------------- ------------- ------------- ------------- -------------
BALANCE,
December 31, 1999 30,537,402 3,054 1,969,035 (2,094,565) (122,476)
ADJUST SHARES IN
SHARES ISSUED FOR SERVICES 825,000 83 186,175 - 186,258
SHARES ISSUED FOR
CASH 213,450 21 434,079 - 434,100
ACQUISITION OF
SUBSIDIARY 10,793,667 1,079 17,782,532 - 17,783,611
WARRANTS ISSUED FOR
SERVICES - - 71,860 - 71,860
NET LOSS, for nine months - - - (16,588,535) (16,588,535)
------------- ------------- ------------- ------------- -------------
BALANCE,
September 30, 2000 42,369,519 $ 4,237 $ 20,443,681 $(18,683,100) $ 1,764,818
============= ============= ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
INTERNET VENTURE GROUP, INC.
Notes to Consolidated Financial Statements
NOTE 1 - ORGANIZATION AND PRESENTATION
Strategic Ventures, Inc. was incorporated in the state of Florida on
March 19, 1987. At a stockholders' meeting on October 18, 1999,
Strategic Ventures, Inc. completed its name change to Internet Venture
Group, Inc. (the Company).
Effective December 31, 1999, the Company acquired all issued and
outstanding shares of GeeWhiz.com, Inc. (a Texas Corporation) for
26,537,402 shares of the Company's stock by the purchase method. For
accounting purposes, the acquisition was treated as a reverse
acquisition, with GeeWhiz.com, Inc. as the acquirer and Strategic
Ventures, Inc. as the acquiree. The acquisition qualified as a reverse
acquisition because the officers and directors of GeeWhiz.com assumed
management control of the resulting entity and the value and ownership
interest received by current GeeWhiz.com, Inc. stockholders exceeded
that received by Strategic Ventures, Inc.
On September 28, 2000, the Company acquired ownership of approximately
93% of the issued and outstanding shares of Swan Magnetics, Inc. (a
California Corporation), for shares of the Company's stock. The
transaction was accounted for under the purchase method. See Note 10.
The primary purpose of the Company is to become an internet company
through the acquisition, development and operation of early-stage
companies involved in "business-to-business," "business-to-consumer"
and "click and mortar" business activities. The primary business of
GeeWhiz.com, which now operates as a division of the Company, is the
development, acquisition, marketing and distribution of proprietary
products as specialty products and items for the Worldwide gift,
novelty and souvenir industries. Swan Magentics, Inc., which operates
as a majority-owned subsidiary of the Company, is involved in the
development of a proprietary ultra-high capacity (UHC), flexible disk
drive technology and currently has no revenue generating operations.
The Company's fiscal year-end is December 31.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim financial statements have been prepared by management and
are unaudited.
These financial statements are presented on the accrual method of
accounting in accordance with generally accepted accounting principles.
Significant principles followed by the Company and the methods of
applying those principles, which materially affect the determination of
financial position and cash flows, are summarized below:
PRINCIPLES OF CONSOLIDATION
---------------------------
The Company's consolidated financial statements as of and for the
period ended September 30, 2000 reflect its operations on a
consolidated basis. All significant intercompany accounts and
transactions have been eliminated.
6
<PAGE>
CASH AND CASH EQUIVALENTS
-------------------------
The Company considers all highly-liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.
INVENTORIES
-----------
Inventories are stated at cost, determined using the first-in,
first-out (FIFO) method, which is not in excess of market. Finished
products comprise all of the Company's inventories.
PROPERTY AND EQUIPMENT
----------------------
Property and equipment is stated at cost. The cost of ordinary
maintenance and repairs is charged to operations while renewals and
replacements are capitalized. Depreciation is computed on the
straight-line method over the following estimated useful lives:
Manufacturing Equipment 5 years
Furniture and Equipment 5 years
PATENTS, TRADEMARKS, AND LICENSES
---------------------------------
The Company capitalizes certain legal costs and acquisition costs
related to patents, trademarks, and licenses. Accumulated costs are
amortized over the lesser of the legal lives or the estimated economic
lives of the proprietary rights, generally seven to ten years, using
the straight-line method and commencing at the time the patents are
issued, trademarks are registered or the license is acquired.
INTANGIBLE ASSETS
-----------------
The Company recorded intangible assets for the excess of cost over fair
value of net tangible assets acquired during the acquisition of Swan.
This asset represents goodwill and intellectual property acquired and
is being amortized over 10 years on a straight-line basis.
REVENUE RECOGNITION
-------------------
Product Sales are sales of on-line products and specialty items.
Revenue is recognized at the time products are shipped. Other revenue
and commission income is recognized when the earnings process has been
completed.
INCOME TAXES
------------
The Company accounts for income taxes under SFAS No. 109, which
requires the asset and liability approach to accounting for income
taxes. Under this method, deferred tax assets and liabilities are
measured based on differences between financial reporting and tax bases
of assets and liabilities using enacted tax rates and laws that are
expected to be in effect when the differences are expected to reverse.
NET EARNINGS (LOSS) PER SHARE
----------------------------
Basic and diluted net loss per share information is presented under the
requirements of SFAS No. 128, Earnings Per Share. Basic net loss per
share is computed by dividing net loss by the weighted average number
of shares of common stock outstanding for the period, less shares
subject to repurchase. Diluted net loss per share reflects the
potential dilution of securities by adding other common stock
equivalents, including stock options, shares subject to repurchase,
warrants and convertible preferred stock, in the weighted-average
number of common shares outstanding for a period, if dilutive. All
potentially dilutive securities have been excluded from the
computation, as their effect is anti-dilutive.
7
<PAGE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The carrying amount of cash, accounts receivable, accounts payable and
accrued expenses are considered to be representative of their
respective fair values because of the short-term nature of these
financial instruments. The carrying amount of the notes payable are
reasonable estimates of fair value as the loans bear interest based on
market rates currently available for debt with similar terms.
USE 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 the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from these estimates.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
September 30, December 31,
2000 1999
------------ ------------
Manufacturing equipment $ 115,956 $ 105,513
Furniture and equipment 31,301 29,208
------------ ------------
147,257 134,721
Less accumulated depreciation 94,012 75,175
------------ ------------
$ 53,245 $ 59,546
============ ============
NOTE 4 - OTHER ASSETS
At September 30, 2000, other assets consisted of the following:
Historical Accumulated Book
Cost Amortization Value
------------ ------------ ------------
Security deposits $ 15,360 $ - $ 15,360
Licensing, patents, trademarks 362,754 117,257 245,497
Prepaid expenses 50,000 - 50,000
------------ ------------ ------------
$ 428,114 $ 117,257 $ 310,857
============ ============ ============
At December 31, 1999, other assets consisted of the following:
Historical Accumulated Book
Cost Amortization Value
------------ ------------ ------------
Security deposits $ 15,360 $ - $ 15,360
Licensing, patents, trademarks 364,496 90,534 273,962
------------ ------------ ------------
$ 379,856 $ 90,534 $ 289,322
============ ============ ============
8
<PAGE>
NOTE 5 - NOTES PAYABLE
Notes payable consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
-------------- ---------------
<S> <C> <C>
Borrowings against a $30,000 line-of-credit agreement with a
financial institution collateralized by a general security
agreement covering substantially all assets of the Company; the
note bears interest at two points above the bank's prime rate
(8.25% at December 31, 1999 and 11.5% at September 30, 2000); the
note is payable on demand; however if no demand is made it matures
February 2001 $ 19,785 $ 22,985
Note payable to a financial institution, payable on demand,
however, if no demand is made, payable in monthly installments of
$425, including interest at 9.75% through February 2001,
collateralized by certain equipment
and the personal guarantees of the Company officers - 5,628
Short-term notes payable to related parties, non-interest
bearing and payable on demand 64,600 -
Note payable to an individual stockholder, interest at
7.0%, payable in full March 2000 - 4,000
Note payable to an individual stockholder, interest at
8.0%, payable in full on demand 160,111 201,043
Note payable to an individual stockholder, interest at
10.5%, payable on demand 66,000 96,000
Note payable to a company, interest at 8%, payable
on demand 1,000,000 -
Note payable to a company, interest at 8%, due
July 2003 1,500,000 -
-------------- ---------------
$ 2,810,496 $ 329,656
============== ===============
</TABLE>
NOTE 6 - INCOME TAXES
There has been no provision for U.S. federal, state, or foreign income
taxes for any period because the Company has incurred losses in all
periods and for all jurisdictions.
Deferred income taxes reflect the net tax affects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of deferred tax assets are as follows:
September 30, December 31,
2000 1999
------------ ------------
Deferred tax assets
Net operating loss carryforwards $ 18,683,100 $ 2,094,565
Valuation allowance for deferred
tax assets (18,683,100) (2,094,565)
------------- -------------
Net deferred tax assets $ - $ -
============= =============
9
<PAGE>
Realization of deferred tax assets is dependent upon future earnings,
if any, the timing and amount of which are uncertain. Accordingly, the
net deferred tax assets have been fully offset by a valuation
allowance. The Company had net operating loss carryforwards for federal
income tax purposes of approximately $18,683,100 and $2,094,565 as of
September 30, 2000 and December 31, 1999, respectively. These
carryforwards, if not utilized to offset taxable income begin to expire
in 2003. Utilization of the net operating loss may be subject to
substantial annual limitation due to the ownership change limitations
provided by the Internal Revenue Code and similar state provisions. The
annual limitation could result in the expiration of the net operating
loss before utilization.
NOTE 7 - STOCK OPTIONS
The Company has granted options to purchase shares of common stock to
employees, directors, consultants, and investors at prices as
determined by the Board of Directors, at date of grant. A summary of
the Company's stock options granted is presented below:
Weighted-
Average
Exercise
Number of Price per
Shares Share
------------- --------------
Balance, December 31, 1999 1,164,150 $ .62
Granted through June 30, 2000 8,212,475 $ .23
Granted July 2000 75,000 $ .75
Exercised - $ -
Canceled - $ -
------------- --------------
Balance, September 30, 2000 9,451,625 $ .32
============= ==============
The fair value of each stock option was estimated on the date of grant
using the Black-Schoales option-pricing model with the following
weighted-average assumption on stock options issued on or before June
30, 2000: an expected life of four (4) years, expected volatility of
87%, and a dividend yield of 0% and on stock options issued in July
2000: an expected life of 18 months, expected volatility of 90%, and a
dividend yield of 0%.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company is in the third year of a five-year operating lease which
commenced December 1997 for office and warehouse space located in
Houston, Texas. Future minimum lease commitments for building lease
approximate the following for each of the years ending December 31:
2000- $75,943; 2001 - $78,386; 2002 - $73,907; and none thereafter.
Rent expense was $32,121 and $73,296 for the nine months ended
September 30, 2000 and the year ended December 31, 1999, respectively.
10
<PAGE>
NOTE 9 - GOING CONCERN
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. The Company has
incurred substantial operating losses. As shown in the financial
statements, the Company incurred net losses of $986,743, excluding
purchased in-process technology of $15,601,792,on gross sales of
$260,416 for the nine months ended September 30, 2000. These factors
indicate there is substantial doubt about the Company's ability to
continue as a going concern. The future success of the Company is
likely dependent on its ability to obtain additional capital to develop
its proposed products and ultimately, upon its ability to attain future
profitable operations. There can be no assurance that the Company will
be successful in obtaining such financing, or that it will attain
positive cash flow from operations.
Management believes that actions presently being taken to revise the
Company's operating and financial requirements provide the opportunity
for the Company to continue as a going concern. The Company has been
able to continue based upon the financial support of certain of its
stockholders, and the continued existence of the Company is dependent
upon this support and the Company's ability to acquire assets by the
issuance of stock. Management has recently been able to secure a
$1,000,000 loan from Swan Magnetics, Inc. and has pending the
acquisition of businesses that management believes can provide
additional cash for the Company's operations and be profitable in both
the short and long-term. Management also intends to attempt to raise
additional funds through private sales of the Company's common stock.
Although management believes that these efforts will enable the Company
to continue as a going concern, there can be no assurance that these
efforts will be successful.
NOTE 10 - ACQUISITION OF SUBSIDIARY
On September 28, 2000, the Company acquired ownership of approximately
93% of Swan Magnetics, Inc. Swan is a hardware development company
specializing in ultra high capacity floppy disk drives and media. As
part of a two step purchase transaction, the Company exchanged
20,000,000 shares of restricted common stock for approximately 93% of
the outstanding common shares of Swan. The Company then offered, to
those stockholders, an exchange of restricted common stock for warrants
to purchase common stock at an exercise price equal to the market value
on September 28, 2000. The Company has received verbal commitments from
stockholders to exchange 9,206,333 shares of its restricted common
stock for common stock warrants as of November 17, 2000. The fair value
of the common stock warrants was estimated on September 28, 2000 using
the Black-Schoales option-pricing model with the following
weighted-average assumption on stock warrants issued: an expected life
of 18 months, expected volatility of 90%, and a dividend yield of 0%.
This transaction adjusted the purchase price to approximately
$17,800,000. The acquisition was accounted for using the purchase
method. The assets and liabilities of Swan were recorded at fair market
value, which approximates net book value on the date of acquisition.
Upon consummation of the Swan acquisition, the Company expensed
approximately $15.6M representing purchased in-process technology that
had not reached technological feasibility and had no alternative future
use. The Company's statement of income excludes the income and expenses
of Swan for the nine months ended September 30, 2000, as the purchase
was accounted for as a single asset purchase because Swan currently has
no revenue generating operations.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
Company's financial statements and related notes contained in this Form 10-QSB.
PLAN OF OPERATION
-----------------
The Company merged with GeeWhiz.com effective December 31, 1999.
GeeWhiz operates a vertical business portal e-commerce web site designed to
access and service the promotional products, gifts, and souvenir markets,
functioning within the Company as a separate division. To date, GeeWhiz has
principally been engaged in the sale of its proprietary Starglas line of fiber
optic illuminated drinking containers. Although GeeWhiz is currently a division
of the Company, management intends to form a new, wholly-owned subsidiary to
operate the GeeWhiz business sometime in 2001.
On September 28, 2000, the Company acquired ownership of approximately
93% of Swan Magnetics, Inc. As part of a two step purchase transaction, the
Company exchanged 20,000,000 shares of restricted common stock for approximately
93% of the outstanding common shares of Swan. The Company then offered, to those
stockholders, an exchange of restricted common stock for warrants to purchase
common stock at an exercise price equal to the market value on September 28,
2000. The Company has received verbal commitments from stockholders to exchange
9,206,333 shares of its restricted common stock for common stock warrants as of
December 31, 2000. The acquisition was accounted for using the purchase method.
Swan is the developer of a proprietary ultra-high capacity ("UHC"),
flexible disk drive technology, and is based in Santa Clara, California. Swan's
President is Eden Kim, Chairman of the Board and Secretary of the Company. Swan
currently has a small demonstration lab in Santa Clara displaying working UHC
drives, media and pilot production equipment and is under discussion with
potential partners for commercial exploitation of the products.
The Company's plan of operation for the remainder of the year 2000 will
consist of activities aimed at:
o Investigating and, if appropriate, pursuing definitive
agreements for acquisitions believed by the Board to be
consistent with the Company's plan to become an internet
company through the acquisition, development and operation of
early stage companies engaged in "business-to-business,"
"business-to-consumer" and "click and mortar" business
activities;
o Establishing strategic partnerships and alliances with
e-commerce enabling companies, such as front-end web design
firms, back-end transaction support firms, and enablers for
horizontal electronic business communities;
o Continuing the development of the GeeWhiz web site and forming
a new, wholly-owned subsidiary to operate the GeeWhiz
business;
o Continuing the efforts to commercialize Swan's proprietary
technology and thereby creating a cash-flow positive revenue
generating subsidiary of the Company; and
o Seeking additional equity financing for the Company.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
FINANCIAL CONDITION
At September 30, 2000, the Company had current assets of approximately
$6,195,430 and total assets of approximately $6,559,532. Current liabilities at
September 30, 2000 were approximately $4,497,193 and the Company had no
long-term liabilities. The Company's stockholders equity at September 30, 2000
was $1,764,818.
RESULTS OF OPERATIONS
Comparison of the Three Months Ended September 30, 2000 to September 30, 1999.
------------------------------------------------------------------------------
REVENUES. Revenues increased slightly from $81,697 to $84,364 for the three
month periods ended September 30, 1999 and 2000, respectively. This increase was
attributable principally to increased product sales.
COSTS AND EXPENSES. Costs of goods sold during the three months ended September
30, 2000 decreased to $8,945 from $15,191 for the same period in 1999. This
decrease was primarily the result of decreases in the price of materials. Other
expenses, consisting of selling, general and administrative expenses, and sales
and marketing expenses, increased $582,087 to $683,828 for the three months
ended September 30, 2000 from $101,741 for the three months ended September 30,
1999. The increase was principally due to increased travel, legal, accounting
and other expenses related to completing the Company's acquisition of Swan
Magnetics, Inc. as well as evaluating potential future acquisition candidates.
NET LOSS. The Company's net loss for the three months ended September 30, 2000
increased to $16,212,947 from a net loss of $75,310 during the three months
ended September 30, 1999. This increase of $16,137,637 is primarily due to an
increase in general and administrative expenses for the Company's third quarter
as well as the expense of $15,601,792 for purchased-in-process technology
related to the acquisition of Swan. Accordingly, the Company's net loss per
share increased from $0.02 per share for the three months ended September 30,
1999 to $0.39 per share for the same period in 2000.
Comparison of the Nine Months Ended September 30, 2000 to September 30, 1999.
-----------------------------------------------------------------------------
REVENUES. Revenues decreased $93,836 from $354,252 to $260,416 for the nine
month periods ended September 30, 1999 and 2000, respectively. This decrease was
attributable principally to reduced product sales for the nine months ended
September 30, 2000.
COSTS AND EXPENSES. Costs of goods sold remained relatively constant for the
nine month periods ended September 30, 1999 and 2000 while general and
administrative expenses increased for the same period. Costs of goods sold for
the nine months ended September 30, 1999 was $156,568, compared to $156,820 for
the same period in 2000. Other expenses, consisting of selling, general and
administrative expenses, and sales and marketing expenses, increased $767,871
to $1,083,183 for the nine months ended September 30, 2000 from $315,312 for the
nine months ended September 30, 1999. The increase was principally due to
increased travel, legal, accounting and other expenses related to completing the
Company's acquisitions of GeeWhiz.com and Swan Magnetics, Inc., as well as the
Company's resuming its SEC reporting, commencing the trading of its stock on the
over the counter bulletin board, and evaluating potential future acquisition
candidates.
NET LOSS. The Company's net loss for the nine months ended September 30, 2000
was approximately $16,588,535, compared to a net loss of $162,540 during the
nine months ended September 30, 1999. Net loss per common share increased $0.39
from $0.01 per share for the nine months ended September 30, 1999 to $0.40 per
share for the nine months ended September 30, 2000.
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LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities was approximately $365,985 for the nine
months ended September 30, 2000, compared to $114,887 for the nine months ended
September 30, 1999. The Company had cash and cash equivalents of $5,939,348 at
September 30, 2000, an increase of $5,933,342 which is primarily attributable to
the Company's acquisition of approximately 93% of the capital stock of Swan
Magnetics, Inc.
The Company financed its operations for the nine months ended September 30, 1999
and 2000 principally through the issuance of common stock in private
transactions, and borrowings from its management and stockholders.
The Company secured a $1,000,000 loan from Swan Magnetics, Inc. prior to the
Company's September 2000 acquisition of a majority of the capital stock of Swan,
an acquisition which resulted in a significant increase in the Company's cash
and cash equivalents. The Company also has pending the acquisition of businesses
that management believes can provide additional cash for the Company's
operations and be profitable in both the short and long-term. Management also
intends to attempt to raise additional funds through private sales of the
Company's capital stock. Although management believes that these efforts will
enable the Company to meet its liquidity needs in the future, there can be no
assurance that these efforts will be successful.
GOING CONCERN CONSIDERATION
The Company has continued losses from operations and negative cash flow. These
conditions 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 of reported assets or liabilities
should the Company be unable to continue as a going concern. Management believes
that the Company's recent business acquisitions can provide additional cash for
the Company's operations and that the Company can be profitable in both the
short and long-term. Management also intends to attempt to raise additional
funds through private sales of the Company's capital stock. Although management
believes that these efforts will enable the Company to continue as a going
concern, there can be no assurance that these efforts will be successful.
SUBSEQUENT EVENTS - PENDING ACQUISITIONS
To date, the Company has entered into definitive agreements to acquire 100% of
SES-Corp., Inc ("SES"), certain of the assets of Cheyenne Management Company,
Inc. ("Cheyenne"), and a minority interest in CyberCoupons.com, Inc.
("CyberCoupons"). Each transaction is subject to a number of conditions to
closing, and there can be no assurance as to when or wheterh any of these
transactions will be completed.
SES-CORP, INC. / CHEYENNE MANAGEMENT COMPANY, INC. On December 29, 2000, the
Company entered into an Asset Purchase Agreement and Agreement and Plan of
Merger by and among SES Acquisition 2001, Inc., Cheyenne Management Company,
Inc., SES-Corp., Inc.("SES"), Dennis Lambka, and Ronald Bray (the "Acquisition
Agreement"). The Acquisition Agreement provides for both the Company's purchase
of certain of the assets of Cheyenne Management Company, Inc. and the merger of
SES Acquisition 2001, Inc., a wholly owned subsidiary of the Company, with and
into SES, with SES to be the surviving corporation.
In consideration of the merger, the former shareholders of SES will receive a
number of restricted shares of the Company's common stock equal to 25% of its
issued and outstanding common stock immediately prior to the merger. An
additional number of restricted shares of the Company's common stock equal to up
to 8% of the Company's issued and outstanding stock prior to the merger may be
issued in 2002 based upon SES's 2001 pre-tax net income. The Company will also
acquire certain of the assets of Cheyenne Management Company, Inc. in exchange
for shares of the Company's common stock determined by dividing the fair market
value of the acquired assets as stated on Cheyenne's audited balance sheet as of
December 31, 2000 by $1.50.
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SES is the nation's largest privately held, full-service Professional Employer
Organization and headquarters in Auburn Hills, Michigan. SES currently has 10
offices in 9 states, with operations in 42 states. Founded in 1989, SES provides
its services to over 3,000 client employers and more than 40,000 work site
employees throughout the United States. Cheyenne is a Michigan corporation
currently owned by the shareholders of SES. The assets of Cheyenne that the
Company will be purchasing will be used to support the business and operations
of SES after the consummation of the merger transaction with SES Acquisition
2001, Inc.
CYBERCOUPONS. On January 9, 2001, the Company executed a Reorganization
Agreement and Plan of Exchange pursuant to which the Company will exchange up to
2,372,625 shares of its common stock for approximately 35% of the issued and
outstanding common stock of CyberCoupons.com,Inc., a Houston, Texas-based
company. CyberCoupons was formed to be an Internet source for consumers to
obtain on-line-printable manufacturer coupons for grocery, household and beauty
products. Advertiser expenditures on coupons amounted to over $6.2 billion in
1997. Much of this consisted of the printing, distribution and logistics
associated with coupon-based marketing activities. CyberCoupons believes that
the disintermediation of coupon distribution and redemption can result in a
significant savings to the billions of dollars spent by manufacturers to print,
distribute and redeem paper coupons. CyberCoupons allows shoppers to select
specific grocery coupons from its web site at a steep discount for use at local
grocery outlets. For example, $50 of coupons can be purchased for as little as
$9.95, with the user enjoying the benefit of being able to choose specific
product coupons.
CyberCoupons believes that it is positioned to capitalize on the
disintermediation of coupon distribution and redemption by offering on-line
download of specific coupons and point-of-sale redemption of coupon face value.
CyberCoupons has established a web site for the purchase of specific grocery
coupons (www.grocerycoupons.com) and is currently involved in key test markets
with regional grocery stores for point-of-sale redemption of electronically
downloaded coupons.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 9, 2000 Tommy Tipton filed suit against the Company in the
155th Judicial District Court in Fayette County, Texas. Mr. Tipton is a co-owner
of patents relating to the "Starglas" line of products sold by the Company's
GeeWhiz.com division. Mr. Tipton alleges the Company failed to pay royalties on
sales of the Starglas products under a license agreement between Mr. Tipton and
GeeWhiz.com. As of the date of this report, the parties have reached an
agreement to settle the suit. Under the terms of the settlement, the Company
would pay Mr. Tipton $122,000.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Amended and Restated Agreement and Plan of Exchange by and
among Internet Venture Group, Inc., Swan Magnetics, Inc., and
certain shareholders of Swan Magnetics, Inc., effective as of
June 28, 2000, previously filed as Exibit 10.2 of the
Company's Form 8-K filed on October 13, 2000.
(b) A report on Form 8-K was filed on July 21, and a report on Form 8-K/A
was filed on July 18, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: January 12, 2001
INTERNET VENTURE GROUP
/s/ Elorian Landers
--------------------------
Elorian Landers, President
