SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended November 30, 1998 Commission File No. 33-23430-D
VIRTUAL ENTERPRISES INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
84-1091271
(I.R.S. Employer Identification Number)
4695 MacArthur Ct., Suite 530, Newport Beach, California
(Address of principal executive offices)
92660
(Zip Code)
(949) 475-6755
(Registrant's telephone number, including area code)
(Former Address, if changed since last report)
(Former Zip Code, if changed since last report)
(Former telephone number, if changed since last report)
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 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 No X
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 30, 1998, there were 799,372 shares of the Registrant's
no par value common stock issued and outstanding. There were also outstanding
warrants to purchase up to 668,000 shares of the Registrant's common stock.
There has been no bid or asked prices of the Registrant's common stock quoted in
any market since September 6, 1990.
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VIRTUAL ENTERPRISES, INC.
INDEX
Page
PART I
Item 1. Financial Statements
Balance Sheets - November 30, 1998 ..............................1
Statements of Operations - Three and Six Months Ended
November 30, 1998 and 1997....................................2
Statements of Cash Flows - Six Months Ended
November 30, 1998 and 1997....................................3
Notes to Financial Statements....................................4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....................7
PART II
Item 1. Legal Proceedings................................................8
Item 2. Changes In Securities............................................8
Item 3. Defaults Upon Senior Securities..................................8
Item 4. Submission of Matters to a Vote of Security Holders..............8
Item 5. Other Information................................................8
Item 6. Exhibits and Reports on Form 8-K.................................8
I
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<TABLE>
<CAPTION>
VIRTUAL ENTERPRISES, INC.
Condensed Balance Sheet
As of November 30, 1998 (Unaudited)
November 30,
1998
(Unaudited)
-------------------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 10
Total Current Assets 10
TOTAL ASSETS $ 10
Current Liabilities:
Accounts payable and accrued expenses $ 44,242
Due to affiliates 476,922
Total Current Liabilities 521,164
Stockholders' Deficiency:
Common stock - $.01 par value; 50,000,000 shares authorized;
799,372 shares issued and outstanding 7,994
Additional paid-in capital 432,948
Accumulated deficit (937,251)
Treasury stock (98,795 Shares, at Cost) (24,845)
Total Stockholders' Deficiency (521,154)
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 10
</TABLE>
See accompanying notes to these financial statements
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<TABLE>
<CAPTION>
VIRTUAL ENTERPRISES, INC.
Condensed Statements of Operations
For the Three and Six Months Ended
November 30, 1998 and 1997(Unaudited)
For the Three Months Ended For the Six Months Ended,
November 30, November 30,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------------- ----------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Costs and expenses:
General and administrative $ 32,535 $ 31,261 $ 62,492 $ 79,381
Totals 32,535 31,261 62,492 79,381
Net loss $ (32,535)$ (31,261) $ (62,492)$ (79,381)
Net loss per common share $ (.04)$ (.04) $ (.08)$ (.10)
Weighted average common
shares outstanding 799,372 799,372 799,372 799,372
</TABLE>
See accompanying notes to these financial statements
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<TABLE>
<CAPTION>
VIRTUAL ENTERPRISES, INC.
Condensed Statements of Cash Flows
For the Six Months Ended November 30, 1998 and 1997 (Unaudited)
Six Months Ended November 30,
1998 1997
(Unaudited) (Unaudited)
------------------------ ---------------------
<S> <C> <C>
Operating activities:
Net income (loss) $ (62,492) $ (175,300)
Adjustments to reconcile net income (loss) to net
cash provided (used) in operating activities:
Increase (decrease) from changes in:
Accounts payable and accrued expenses 4,572 3,832
Due to affiliate 57,930 75,551
Net cash provided (used) in operating activities 10 2
Net increase (decrease) in cash and cash equivalents 10 2
Cash and cash equivalents, beginning of period - 12
Cash and cash equivalents, end of period $ 10 $ 14
Supplemental Disclosure:
Cash payments for income taxes $ - $ -
Cash payments for interest $ - $ -
</TABLE>
See accompanying notes to these financial statements
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VIRTUAL ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
November 30, 1998
Note 1. Summary of Significant Accounting Policies
Business and Organization
The Company was incorporated in June, 1989 as a Colorado corporation. The
Company was primarily engaged in the acquisition, maintenance and operation of
television stations in various states through 1992.
In August 1992, the Company sold its Sunbelt Media Group ("Sunbelt") division,
operating the television stations, to a majority stockholder of the Company.
Since August 1992 through the date of this report, the Company has had no
operations and management is seeking a merger and/or sale of controlling
interest in its stock.
In September 1994, the Company's shareholders voted to effect a 1 for 1000
reverse split of the Company's issued and outstanding common stock. The split
was implemented through a merger with a newly formed Nevada corporation. The
accompanying financial statements have been retroactively restated to reflect
the merger including the change from no par value common stock to $.01 par value
common stock. In connection with the merger and reverse split, the Company's
authorized number of shares was reduced from 785,000,000 to 50,000,000.
Effective October 8, 1996, the Company's Articles of Incorporation were amended
to change the name of the Company from The Toen Group Inc. to Virtual
Enterprises Inc.
Basis Of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all normal adjustments,
consisting of normal recurring accruals, considered necessary for a fair
presentation have been included. The financial statements include the balance
sheet and statements of operations and cash flows of the Company as of November
30, 1998 and for the six months then ended. It is suggested that these unaudited
condensed financial statements be read in conjunction with the audited financial
statements and notes thereto included in the Company's Form 10KSB for the year
ended May 31, 1998. The results of operations for the periods ended November 30,
1998 and 1997 are not necessarily indicative of the operating results for the
full year.
Reclassification of Prior Year Amounts
To enhance comparability, the fiscal 1998 financial statements have been
reclassified, where appropriate, to conform with the financial statements
presentation used in fiscal 1999.
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Note 2. Going Concern
The Company has experienced recurring net losses, has limited liquid resources
and negative working capital. Management's intent is to keep searching for
additional sources of capital and new operating opportunities. In the interim,
the Company will keep operating with minimal overhead and key administrative
functions will be primarily provided by NuVen Advisors, Inc., an affiliate
("NuVen"). It is estimated that NuVen will have to contribute future financial
support for the Company to exist for the next fiscal year. Accordingly, the
accompanying consolidated financial statements have been presented under the
assumption the Company would continue as a going concern.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Going Concern
The Company has experienced recurring net losses, has limited liquid
resources, and negative working capital. Management's intent is to
continue searching for additional sources of capital and the Company
intends to continue operating with minimal overhead and key
administrative functions provided by advisors and consultants who are
compensated in the form of the Company's common stock. It is estimated,
based upon its historical operating expenses and current obligations,
that the Company may need to utilize its common stock for future
financial support to finance its needs during fiscal 1999. Accordingly,
the accompanying consolidated financial statements have been presented
under the assumption the Company will continue as a going concern.
Results of Operations
Quarter Ended November 30, 1998 Compared to Quarter Ended November 30,
1997
There were no operations during the quarter ended November 30, 1998 and
as such, there were no revenues or cost of revenues recorded during the
current quarter.
General and administrative expenses were $32,535 in the current quarter
compared to $31,261 in the comparable period last year. The change is
attributable to continued services provided by professional consultants
and advisors.
Six Months Ended November 30, 1998 Compared to Six Months Ended
November 30, 1997
There were no operations during the period ended November 30, 1998 and
as such, there were no revenues or cost of revenues recorded during the
current six month period.
General and administrative expenses was $62,492 in the current six
month period compared to $79,381 in the comparable period last year.
The change is attributable to continued services provided by
professional consultants and other advisors.
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Liquidity and Capital Resources
As of November 30, 1998 the Company had a working capital deficit of
$521,154, an increase of $62,492 from May 31, 1997. The change was
attributable to the accrual of professional, consulting and advisory
fees during the quarter that were incurred but not paid.
The Company had cash balances of approximately $10 and $14 at November
30, 1998 and 1997, respectively. The limited cash balances are a direct
result of the Company having no operations during the periods.
The Company's plan is to keep searching for additional sources of
capital and new operating opportunities. In the interim, the Company's
existence is dependent on continuing financial support from NuVen for
the next fiscal year. Furthermore, the Company may have to utilize its
common stock for future financial support to finance its needs. Such
conditions raise substantial doubt about the Company's ability to
continue as a going concern. As such, the Company's independent
accountants have modified their report for the Company's latest fiscal
year ended May 31, 1998 to include an explanatory paragraph with
respect to the uncertainty.
The Company has no commitments for capital expenditures or additional
equity or debt financing and no assurances can be made that its working
capital needs can be met.
Additionally, as of November 30, 1998, the Company had no operations or
employees other than its President.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
The Company knows of no significant changes in the status of
the pending litigation or claims against the Company as
described in Form 10-KSB for the Company's fiscal year ended
May 31, 1998.
Item 2. Changes In Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission Of Matters To A Vote Of Security Holders
None
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Item 5. Other Information
None
Item 6. Exhibits And Reports On Form 8-K
(a) Exhibits:
Exhibit Number Description of Exhibit
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
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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.
VIRTUAL ENTERPRISES INC.
(Formerly, The Toen Group Inc.)
(Registrant)
Date: December 7, 1998 By: /s/ Fred G. Luke
----------------------------------
Fred G. Luke,
Chairman of the Board
and President
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> NOV-30-1998
<CASH> 10
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10
<CURRENT-LIABILITIES> 521,164
<BONDS> 0
0
0
<COMMON> 7,994
<OTHER-SE> (529,148)
<TOTAL-LIABILITY-AND-EQUITY> 10
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 32,535
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (32,535)
<INCOME-TAX> 0
<INCOME-CONTINUING> (32,535)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,535)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
