FORM 8-K/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported): May 5, 1999
VIRTUAL ENTERPRISES INC.
(Exact name of registrant as specified in its charter.)
Nevada
(State of incorporation or organization)
33-23430-D
(Commission File Number)
84-1091271
(I.R.S. Employee Identification No.)
4695 MacArthur Court, Suite 530, Newport Beach, California
(Address of principal executive offices)
92660
(Zip Code)
Registrant's telephone number, including area code: (714) 475-6755
2 Park Plaza, Suite 470, Irvine, California 92614
(Former name or former address, if changed since last report)
[VEI\8K:52199amend]
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Item 1. Changes in Control of Registrant
N/A
Item 2. Acquisition or Disposition of Assets
On May 5, 1999, the Registrant entered into an Asset Purchase Agreement
and Plan Of Reorganization (the ?Agreement@) with Metroplex Web Inc., a Texas
corporation (AMetroplex@) whereby the Registrant acquired certain assets,
property, business interests and intellectual rights owned by Metroplex for
securities consisting of Ten Million (10,000,000) shares of the Registrant=s
$.01 par value common stock, causing Metroplex to have voting control and become
the principal stockholder of the Registrant.
Item 3. Bankruptcy or Receivership
N/A
Item 4. Changes in Registrant's Certifying Accountant
On May 15, 1999, the auditing practice of Kang, Yu & Jun, CPA's,
resigned as the Registrant's independent accountant. Kang, Yu & Jun previously
issued an unqualified report dated September 25, 1998, assuming the Company will
continue as going concern, which did not contain any adverse opinion or
disclaimer of opinion, or any qualification as to uncertainty, audit scope of
accounting principles. There were no disagreements with Kang, Yu & Jun on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure during the period from March 31, 1995 to the date of
their resignation.
Item 5. Other Events
N/A
Item 6. Change in Registrant's Directors
N/A
Item 7. Financial Statements and Exhibits
(a) Financial Statements
Set forth on pages 5 through 8 is pro forma financial
information required to be set forth in the Registrant's
Current Report.
- Pro Forma Consolidated Balance Sheet (Unaudited) - February
28, 1999.
- Pro Forma Consolidated Statement of Operations (Unaudited)
for the nine months ended February 28, 1999.
- Notes to Pro Forma Consolidated Financial Statements
(Unaudited).
(b) Exhibit 16(a) Letter re change in certifying accountant
- Letter dated May 15, 1999 from Kang, Yu & Jun, An
Accountancy Corporation, resigning as certifying
accountant for Virtual Enterprises, Inc.
[VEI\8K:52199amend]
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(b) Continued
Exhibit 16(b) Consent of Independent Accountant
- Letter dated June 28, 1999 from Kang, Yu & Jun, An
Accountancy Corporation, Noting agreement with the
disclosure in Item 4 of this Form 8-K
Item 8. Change in Registrant's Fiscal Year
N/A
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Virtual Enterprises, Inc.
(Registrant)
Dated: July 8, 1999 By: /s/ Fred G. Luke
------------------------------
Fred G. Luke,
Chairman of the Board
and President
[VEI\8K:52199amend]
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<PAGE>
<TABLE>
<CAPTION>
VIRTUAL ENTERPRISES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
As of February 28, 1999
(Unaudited)
Virtual Pro Forma Pro Forma
Enterprises, Inc. MetroplexWeb, Inc. Adjustments Totals
--------------------- --------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1 $ 10,971 $ 0 $ 10,972
Total Current Assets 1 10,971 0 10,972
---------------------- ---------------------- ----------------- -----------------
Property and Equipment, at Cost:
Computer Systems 0 245,965 0 245,965
Other equipment 0 29,798 0 29,798
---------------------- ---------------------- ----------------- -----------------
0 275,763 0 275,763
Accumulated Depreciation
& Amortization 0 (45,833) 0 (45,833)
---------------------- ---------------------- ----------------- -----------------
Total Property &
Equipment 0 229,930 0 229,930
---------------------- --------------------- ---------------- -----------------
Other Assets
Goodwill 0 787,627 0 787,627
Client Lists 0 215,050 0 215,050
---------------------- ---------------------- ----------------- -----------------
TOTAL ASSETS $ 1 $ 1,243,578 $ 0 $ 1,243,579
====================== ====================== ================= =================
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current:
Accounts payable - trade $ 45,382 $ 35,694 $ (45,382) (1) $ 35,694
Due to affiliates 25,821 0 (25,821) (1) 0
Accrued expenses 0 4,523 0 4,523
Notes Payable Current 0 285,000 0 285,000
---------------------- ---------------------- ----------------- -----------------
Total Current Liabilities 71,203 325,217 (71,203) 325,217
--------------------- --------------------- ----------------- -----------------
Notes Payable - Long Term 0 1,200,000 (1,200,000) (1) 0
---------------------- ---------------------- ----------------- -----------------
Total Liabilities 71,203 1,525,217 (1,271,203) 325,217
---------------------- ---------------------- ----------------- -----------------
Stockholders' Equity:
Capital Stock and
additional paid-in capital 917,864 745,186 282,137 (1)(2) 1,945,187
Accumulated deficit (964,221) (1,026,825) 964,221 (2) (1,026,825)
Treasury Stock (24,845) 0 24,845 (2) 0
Total Stockholders' (71,202) (281,639) 1,271,203 918,362
---------------------- ---------------------- ----------------- -----------------
Equity
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 1 $ 1,243,578 $ 0 $ 1,243,579
====================== ====================== ================= =================
</TABLE>
(1) Existing liabilities totaling $1,271,203 were settled through
issuance of shares of Virtual Enterprises, Inc. Common stock at $1.00
a share.
(2) Elimination of Virtual Enterprises, Inc.'s Accumulated deficit and
Treasury Stock by reclassifying balances to additional paid in
capital.
See accompanying notes to pro forma consolidated financial statements.
[VEI\8K:52199amend]
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<PAGE>
<TABLE>
<CAPTION>
VIRTUAL ENTERPRISES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended February 28, 1999
(Unaudited)
Virtual
Enterprises, MetroplexWeb, Pro Forma Pro Forma
Inc. Inc. Adjustments Totals
---------------------- -------------------- -------------------- -------------------------
<S> <C> <C> <C> <C>
Sales $ 0 $ 328,262 $ 0 $ 328,262
Operating Expenses
General & Administrative $ 89,463 $ 581,204 $ 0 $ 670,667
Amortization of Goodwill 94,515 0 94,515
Amortization of client
lists 37,950 0 37,950
Depreciation 45,833 0 45,833
---------------------- --------------------- --------------------- -------------------------
Total Operating
Expenses $ 89,463 $ 759,502 $ 0 $ 848,965
---------------------- --------------------- --------------------- -------------------------
Loss from
operations $ (89,463) $ (431,240) $ 0 $ (520,703)
====================== ===================== ===================== ==========================
Pro forma loss per share $ (.02) $ N/A $ N/A $ (.03)
====================== ===================== ===================== ==========================
Pro forma weighted
average common shares
outstanding 5,069,372 N/A 11,271,203 16,340,575
====================== ===================== ===================== ==========================
</TABLE>
See Accompanying Notes to Pro Forma Consolidated Financial Statements.
[VEI\8K:52199amend]
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VIRTUAL ENTERPRISES, INC.
Notes to Pro Forma Financial Statements
(Unaudited)
Note 1. Basis of Presentation
On May 5, 1999, Virtual Enterprises, Inc. ("VEI") acquired the assets of
MetroplexWeb, Inc., a Texas corporation ("MWI"). The unaudited pro forma
consolidated balance sheet as of February 28, 1999 of VEI reflects the
acquisition of MWI on a pro forma basis assuming the acquisition occurred
February 28, 1999.
The unaudited pro forma consolidated statement of operations for the nine
months ended February 28, 1999 of VEI reflects the operations of VEI, on a pro
forma basis assuming the acquisition occurred June 1, 1998.
The accompanying unaudited historical statements of MWI includes the operations
of InteleSell, Inc. ("II") acquired in June 1998. MWI acquired the issued and
outstanding common stock of II for $1,200,000 in notes payable and 176 common
shares of MWI to the former shareholders of II. The purchase price of $1,335,142
was allocated $200,000 to certain property and equipment based on their
estimated fair value,.$253,000 to customer lists and $882,142 to Goodwill.
These unaudited pro forma consolidated financial statements do not purport to be
indicative of the results that actually would have been obtained if the
companies and their operations had actually been combined at February 28, 1999
for balance sheet presentation or June 1, 1998 for operating purposes, and this
presentation is not intended to be a projection of future results or trends.
Note 2. Background and Overview of the Transaction
Prior to the acquisition, VEI was an effectively inactive publicly traded
Company with limited assets and accumulated operating losses. The market
capitalization of VEI was approximately $1,000,000 based upon the average of the
bid and ask price for a period of approximately 90 days prior to the
acquisition.
MWI is a Internet Web Page designer and servicer with a client base of over
6,000 companies. MWI also has a proprietary product called "City Malls" where
internet users can search out sources for products and services in there local
geographic areas. Currently MWI has six City Malls operating with another two
opening within 30 days.
VEI purchased MWI through the issuance of 10,000,000 shares of common stock with
a value estimated to be $3,000,000. Such value was based upon the current
average of the bid and ask of approximately $0.20 and an assumption that such
average would increase approximately 50% upon consummation of the transaction.
However, since the sellers of MWI would be acquiring a controlling interest in
VEI, generally accepted accounting principles ("GAAP") require that the
transaction be accounted for as a recapitalization of MWI. Accordingly, the
historical balance sheet of MWI will be consolidated with the balance sheet of
VEI, after reflecting the recapitalization of MWI. If VEI were the acquiring
entity, the basis in the client lists and the City Malls would be presented at
their fair value of approximately $4.2 million with no goodwill.
[VEI\8K:52199amend]
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Note 3. Adjustments to Proforma Financial Statements
Statement of Operations
As MWI had limited operations prior to May 31, 1998, the attached pro forma
Consolidated Statement of Operations for the nine months ended February 28, 1999
has been presented in order to provide more meaningful disclosure to the reader.
Management intends to amend this Form 8-K as soon as practical after the Form
10-KSB for the year ended May 31, 1999 is filed with the Securities and Exchange
Commission.
Depreciation and Amortization
Fixed assets, client lists and goodwill are being amortized on the straight line
basis over the estimated useful lives of 3 years for fixed assets, 5 years for
client lists and 7 years for goodwill.
Loss Per Share
Pro forma loss per share is completed using the weighted average number of
shares of the Company's common stock issued and outstanding, assuming that the
shares issued in the transaction were outstanding for the entire period. Common
stock equivalents were not considered in the loss per share calculation as the
effect would have been anti-dilutive.
[VEI\8K:52199amend]
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EXHIBIT 16(a)
Kang, Yu &Jun
An Accountancy Corporation,
Member Firm of AICPA, SECPS, PCPS and CSCPA
18000 Studebaker Road, Suite 295
Cerritos, California. 90703
(562) 865-2727
May 15, 1999
Mr. Fred G. Luke
Chairman of the Board
VIRTUAL ENTERPRISES, INC.
4695 MacArthur Court, Suite 530
Newport Beach, CA 92660
Re: Resignation
Dear Mr. Luke:
This is to confirm that the client-auditor relationship between VIRTUAL
ENTERPRISES, INC. (Commission file Number 33-23430-D) and Kang, Yu & Jun has
ceased.
Very truly yours,
/s/ KY&J CPA'S
-------------------
Kang, Yu &Jun
cc: Office of the Chief Accountant
SECPA Letter File
Securities & Exchange Commission
Mail Stop 9-5
450 Fifth Street, NW
Washington, DC 20549
[VEI\8K:52199amend]
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EXHIBIT 16(b)
Kang, Yu &Jun
An Accountancy Corporation,
Member Firm of AICPA, SECPS, PCPS and CSCPA
18000 Studebaker Road, Suite 295
Cerritos, California. 90703
(562) 865-2727
June 28, 1999
We have read the disclosure made in this Form 8-K/A regarding our resignation as
Registrants Certifying Accountant as disclosed in Item 4 and are in agreement
with the disclosures.
/s/ Kang, Yu & Jun
-------------------
Kang, Yu & Jun
[VEI\8K:52199amend]
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