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 AUGUST 31, 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 COURT, STE. 530, NEWPORT BEACH, CALIFORNIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
92660
(ZIP CODE)
(949) 475-6755
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
2 PARK PLAZA, SUITE 470, IRVINE, CALIFORNIA
(FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
92614
(FORMER ZIP CODE, IF CHANGED SINCE LAST REPORT)
(714) 833-2091
(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 SEPTEMBER 1, 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.
[VEI\10Q\83198.QSB]-7
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VIRTUAL ENTERPRISES INC.
(FORMERLY, THE TOEN GROUP INC.)
INDEX
PAGE
PART I
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEET - AUGUST 31, 1998 (UNAUDITED) .....................1
STATEMENTS OF OPERATIONS - THREE MONTHS ENDED
AUGUST 31, 1998 AND 1997 (UNAUDITED)..........................2
STATEMENTS OF CASH FLOWS - THREE MONTHS ENDED AUGUST 31, 1998
(UNAUDITED) AND AUGUST 31, 1997 (UNAUDITED)...................3
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)........................4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................6
PART II
ITEM 1. LEGAL PROCEEDINGS................................................7
ITEM 2. CHANGES IN SECURITIES............................................7
ITEM 3. DEFAULTS UPON SENIOR SECURITIES..................................7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............7
ITEM 5. OTHER INFORMATION................................................7
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................7
I
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<CAPTION>
VIRTUAL ENTERPRISES INC.
(FORMERLY, THE TOEN GROUP INC.)
BALANCE SHEET
AS OF AUGUST 31, 1998 (UNAUDITED)
August 31,
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 $ 39,172
DUE TO AFFILIATES 449,457
--------------------------
TOTAL CURRENT LIABILITIES 488,629
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 (904,716)
TREASURY STOCK (24,845)
---------------------------
TOTAL STOCKHOLDERS' DEFICIENCY (488,619)
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 10
==========================
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS
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<CAPTION>
VIRTUAL ENTERPRISES INC.
(FORMERLY, THE TOEN GROUP INC.)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
AUGUST 31, 1998 AND 1997(UNAUDITED)
FOR THE THREE MONTHS ENDED,
AUGUST 31,
------------------------------------------------
1998 1997
----------------------- ------------------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
COSTS AND EXPENSES:
GENERAL AND ADMINISTRATIVE $ 29,957 $ 48,120
----------------------- ------------------------
TOTALS 29,957 48,120
----------------------- ------------------------
NET LOSS $ (29,957)$ (48,120)
======================= ========================
NET LOSS PER COMMON SHARE $ (.04)$ (.06)
======================= ========================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 799,372 799,372
======================= ========================
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS
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<TABLE>
<CAPTION>
VIRTUAL ENTERPRISES INC.
(FORMERLY, THE TOEN GROUP INC.)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
AUGUST 31, 1998 AND 1997 (UNAUDITED)
THREE MONTHS ENDED AUGUST 31,
1998 1997
------------------------ --------------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (29,957) $ (48,120)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
CASH PROVIDED (USED) IN OPERATING ACTIVITIES:
INCREASE (DECREASE) FROM CHANGES IN:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 2,492 1,926
DUE TO AFFILIATE 30,465 46,265
------------------------ --------------------
NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES 3,000 71
------------------------ --------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,000 71
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD (2,990) 12
------------------------ --------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10 $ 83
======================== ====================
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.
(FORMERLY, THE TOEN GROUP INC.)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 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. THERE
ARE PRESENTLY OUTSTANDING WARRANTS TO PURCHASE 668,000 SHARES OF COMMON STOCK.
THE WARRANTS ARE EXERCISABLE AT $5.00 PER SHARE.
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
consolidated 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 unaudited condensed financial
statements include the condensed balance sheet as of August 31, 1998, and the
related condensed statements of operations and cash flows of the Company for the
three months ended August 31, 1998 and 1997. These unaudited condensed financial
statements should be read in conjunction with the audited financial statements
included in the Company's Form 10-KSB for its fiscal year ended May 31, 1998
("Fiscal 98"). The results of operations for the three months ended August 31,
1998 are not necessarily indicative of the operating results for the full year.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
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Income Taxes
The Company accounts for income taxes using the liability method. Income taxes
are provided on all revenue and expense items, regardless of the period in which
such items are recognized for tax purposes, except for those items representing
a permanent difference between pre-tax income and taxable income. A valuation
allowance is recorded when it is more likely than not that benefits resulting
from deferred tax assets will not be realized.
Earnings (Loss) Per Common Share
Net income (loss) per common share is calculated by dividing net income (loss)
by the weighted average number of shares outstanding during each year. All per
share amounts are reported as adjusted after the merger and resulting reverse
stock split. Common stock equivalents were not considered in the loss per share
calculations as the effect would have been anti dilutive.
Reclassification of Prior Year Amounts
To enhance comparability, the fiscal 1997 financial statements have been
reclassified, where appropriate, to conform with the financial statements
presentation used in fiscal 1998.
Note 2. Going Concern
The Company has experienced recurring net losses, has limited liquid resources,
negative working capital and its primary operating subsidiary was liquidated
during fiscal year 1993. 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 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 financial
statements have been presented under the assumption the Company would continue
as a going Concern.
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5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Going Concern
The Company has incurred recurring net losses, a working capital
deficiency and has limited liquid resources. Management's intent is to
continue searching for additional sources of capital and new operating
opportunities. In the interim, the Company will to continue operating
with minimal overhead and key administrative functions will be provided
by NuVen Advisors Inc., an affiliate ("NuVen"). It is estimated that
NuVen will have to contribute financial support in order for the
Company to exist for the next fiscal year. Accordingly, the
accompanying financial statements have been presented under the
assumption that the Company will continue as a going concern.
Results of Operations
Quarter Ended August 31, 1998 Compared to Quarter Ended August 31,1997
There were no operations during the quarter ended August 31, 1998 and,
consequently, no revenues or cost of revenues were recorded during the
current quarter.
General and administrative aggregated expenses were $29,957 in the
current quarter compared to $48,120 in the comparable period last year.
The decrease is primarily attributable to a decrease in services
provided by professional consultants and other advisors.
Liquidity and Capital Resources
As of August 31, 1998 the Company had a working capital deficit of
$488,619, an increase of $30,257 from May 31, 1998. The increase in
working capital deficiency was primarily 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 $83 at August
31, 1998 and 1997, respectively. The limited cash balances are a direct
result of the Company having no operations during the respective
quarters.
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 August 31, 1998, the Company had no operations or
employees other than its President.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings
The Company knows of no significant changes in the status of
any legal proceedings 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
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: October 2, 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> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> AUG-31-1998
<CASH> 10
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10
<CURRENT-LIABILITIES> 488,629
<BONDS> 0
0
7,994
<COMMON> 432,948
<OTHER-SE> (929,561)
<TOTAL-LIABILITY-AND-EQUITY> 10
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 29,957
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (29,957)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (29,957)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
