Registration of Securities of a Small-Business Issuer — Form 10-SB
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10SB12G Registration of Securities of a Small-Business 27 101K
Issuer
2: EX-3.(I) Certificate of Incorporation 1 6K
3: EX-3.(II) By-Laws 10± 40K
5: EX-10 Joint Venture Agreement 11 39K
6: EX-10 Joint Venture Agreement 13 42K
4: EX-10 Lease 1 7K
7: EX-27 Financial Data Schedule 1 7K
10SB12G — Registration of Securities of a Small-Business Issuer
Document Table of Contents
FORM 10-SB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the
Securities Exchange Act of 1934
INTERNET VIP, INC.
(Name of Small Business Issuer in its charter)
Delaware (I.R.S. Employer
(State or other jurisdiction of Identification No.)
incorporation or organization)
1155 University St., Suite 602, Montreal, Canada H3B 3A7
(Address of principal executive offices) (Zip Code)
Telephone Number (514) 876-9222 Fax Number (514) 876-1001
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0001 par value
(Title of Class)
PART I.
Item 1. Description of Business.
(a) Business Development
Internet VIP, Inc. (the "Company"), a Delaware corporation, was organized on
November 13, 1998. The Company has not been involved with any bankruptcy,
receivership or similar proceedings. The Company has not had any material
reclassification, merger, consolidation, or purchase or sale of a significant
amount of assets not in the ordinary course of business.
(b) Business of Issuer
THE COMPANY
The Company was formed to sell long distance international
telephone services using the new technology, Voice over Internet Protocol
("VIP"). From its strategically-located Switching Center in Montreal, Canada,
calls can be routed from anywhere in North America to anywhere in the world
using VIP technology. The first phase of operations will encompass calls from
Montreal to St. Petersburg and Moscow, and vice versa.
The Company will initially be servicing two different groups
of customers, and both groups will access the Company's technological platform
in a different manner.
The first customer group will be from the Russian Ministry of
Interior. The Ministry presently has its own telephone system. When a member of
the ministry calls North America through the Company's platform, he will dial a
code to access the Company's equipment that is located in the ministry. He will
then get a second dial tone and will be able to dial directly to North America.
The Company's equipment takes this call and sends it over a dedicated line to
the Company's calling center in Montreal using the VIP technology. In Montreal,
the Company's mirror image equipment receives the call, re-packages it for
normal phone transmission and then directs it through regular local phone lines
to the intended parties anywhere in North America.
The second type of subscriber will be individuals or
corporations that will have purchased prepaid calling cards or contracts. For
one of these customers to place a call from any telephone in Russia, he will
dial a local access number to reach the Company's equipment and then input his
card number and personal identification number ("PIN"). The Company's equipment
will validate the card number and PIN and then give the caller a second dial
tone allowing him to make the long distance call. The call is then processed in
the same manner as described above.
For both types of customers, the Company's technology and
equipment will process these steps in milliseconds and the customer will be
unable to detect the difference between a traditional long distance call between
Moscow and North America and a call utilizing the Company's system. The process
for a call to Moscow originating in North America over the Company's system
operates the same way with the customer calling an "800" number to access the
Company's North American platform in the same manner as if he were using a
conventional calling card.
All of the Company's technology is state of the art, but the
Company will not be dependent on any one vendor in particular. For the hardware
in the calling centers in Montreal and Moscow, the Company will be using a
configuration and equipment designed by Ericsson Inc. For the trans-atlantic
fiber optic E-1 lines, the Company has proposals from five telecommunication
companies for the lease of dedicated VIP circuits.
Initially, the Company will operate through a wholly owned Canadian
subsidiary corporation, V.I. Internet Telecommunications Inc. ("V.I. Internet").
V.I. Internet owns and operates the Canadian switching center, and it owns 80%
of two Russian joint-venture entities, established to manage the Company's
centers in St. Petersburg and Moscow. The remaining 20% of the Russian
joint-venture companies are owned indirectly by the Russian Ministry of
Interior, in the case of Moscow, and by the BaltUnexim Bank in the case of St.
Petersburg. The strategy of teaming with a prominent Russian government agency
should give V.I. Internet access to unlimited local lines in Russia and
contracts for usage from most if not all government and related agency traffic
from within the Russian Federation to North America.
Traditional telephone service is a circuit-switched
technology. When a long-distance call is placed, the system switches open a
direct connection between the sender, and then over a series of switching
facilities, to the receiving party. The connection remains open during the
duration of the telephone call. Since no one else can use the circuit while a
call is in progress, more circuits are required, which leads to inefficiency and
expense. This is one reason why local telephone companies, and the intermediate
switching companies, charge high prices for their services.
The Company believes that Internet Protocol (IP) telephony is
the wave of the future. IP is a packet-switched technology, which is the basis
of all Internet communication and is the technology used by the Company to
process their long distance telephone service. IP breaks up network data into
small chunks or packets, which are then sent out. These packets are routed, over
the Company's dedicated fiber optic lines, until they reach their destination.
This process happens in microseconds. In 1996 the first IP telephony technology
was put into place. Millions of individuals, governments, and corporations are
using this technology every day to send data, voice conversations, and even
money.
The Company has commenced operations with the signing of two
joint venture agreements between V.I. Internet and its Russian partners covering
the cities of Moscow and St. Petersburg. As previously indicated, these joint
ventures should give the Company the availability of telephone lines needed to
provide service. Additionally, the Company's joint venture partners are
committed to market and promote the usage of the Company's centers in Russia to
customers from the industry and retail communities. The Company, through its
wholly owned subsidiary, V.I. Internet, has letters of intent with governmental
and industrial entities expressing an interest to purchase telephone service
from Russia to North America, provided the IP Network is completed. The Company
is in the process of completing and installing its IP Network and anticipates
converting the letters of intent to firm contracts by August 31, 1999. If the
Company is successful in converting the letters of intent to firm contracts, the
Company anticipates that by the end of the first year of long distance service
between Russia and North America the Company will be providing 1,500,000 minutes
per month. However, there can be no assurance that such usage and/or revenue
levels, if any, will be attained. The Company does not currently intend to
proceed with St. Petersburg until the Moscow facility is operational and can
fund development of the new facility.
COMPETITION
Internet Telephony in Russia has not been represented by big
companies yet. However, there are several small companies (Global M, Maxima,
Mos-Teleinternet) which serve several localities within Downtown Moscow. The
investigation launched into their activities by the Ministry of Communications
in November 1998 (the Report to Duma Communication committee on December 11,
1998) had established that all of these small companies work on a "call back"
principle which is illegal under Russian law. The main problem these companies
face is the necessity to get special licenses from the Ministry of
Communications. They do not currently have these licenses and we believe they
are unlikely to receive them in the near future as no law has been introduced in
that regard. Accordingly, competitors will not be able to legally operate
without great difficulty in the Russian market prior to approximately at least
the year 2002 when the Company believes the market may first start to become
officially deregulated. We, meanwhile, have the agreement with the Ministry of
Interior, which has its own telephone system independent of the Ministry of
Communications.
RUSSIAN MARKET TODAY
Three segments of the market are targeted by our project:
governmental, commercial (foreign and joint venture enterprises, Russian
companies and Russian branches of non-Russian companies) and private individuals
who will buy pre-paid cards. While there is no fully confirmed estimate of the
volume of Russian international communications market, the assumption made by
the Economic Research Institute of Russia (selection of research works
1994-1999) is that the market in Moscow and areas and regions using Moscow as
transmission points has an annual volume of about 210 million minutes. Over the
next 2 1/2 years we hope to capture 20-25% of our targeted markets in Moscow.
TERMS OF PAYMENT AND CURRENCY
Russian currency today is the ruble. On June 1, 1999 the
conversion rate was 24 rubles a dollar. Despite such a rate the ruble is more
stable than it was after the August 17, 1998 crisis and, according to published
reports by Smith Barney and Solomon Brothers should continue to exchange between
25 and 32 rubles a dollar for the foreseeable future. During July 1999, the
conversion rate was between 24-24.5 rubles a dollar.
The ruble is a convertible currency and can be freely
exchanged into any hard currency. Money may be transferred to foreign countries
as part of joint ventures without any obstacles.
All payments for our services will be based on the pre-payment
principle as exists today throughout the Soviet Federation. Payments will be
automatically transferred from the Central Bank in Moscow or BaltUnexim Bank in
St. Petersburg on a daily basis, as per instructions.
Our Moscow partner is the special technical and communication
services institute of the Ministry of Interior of Russia. The Russian Ministry
of the Interior is the strongest and most stable organization within the Russian
structure with its own telephone lines and communication services that include
governmental, presidential and other segments.
Our Moscow partner contributes the following:
*The premises where the equipment is housed with complete security;
*Proper distribution system through already existent channels with the
Ministry's telephone network covering the governmental segment;
*Unlimited fiber optic access to the Moscow telephone network: and
*A level of credibility that is very important for commercial success.
The leading executives of our Moscow JV partner are
Major-General V. Khimitchev, V. Martinov and R. Mananov, all of whom hold PhD
degrees and have done post graduate studies in the US and are specialists in
Russia in the field of communications.
The activities of our joint ventures have been negotiated
according to the Russian Law of Joint Ventures and Law of Investments. Acording
to the evaluation of IMF (statement of M. Comdecu, the president of IMF on
January 17 in the interview to the Interfax Agency) these laws are the most
liberal laws of that kind in Europe. However, problems with joint ventures do
exist. In our case however, the joint venture is with the Ministry of Interior
which is reputable and is much better organized than the average Russian partner
in a joint venture.
At present, there is a marketing plan for the Company's
Russian operations being developed in Moscow by a leading advertising and
marketing company. The plan is to capture Industrial usage of long distance
needs; and introduction of an economical pre-paid telephone card to the general
public.
Our joint venture partners will contribute in promoting and
selling the pre-paid card to all government agencies, through billboards,
television media and print media.
An extremely important feature of the Company's anticipated
revenue stream is that all sales will be prepaid by the customers on a monthly
basis and customers will be required to sign Usage Commitment Contracts.
The Company is in the process of analyzing the long distance
traffic between Russia and Europe. However, there can be no assurance that any
business will develop in this market.
On the North American side, the Company has entered into a
Maintenance and Operating Agreement with Bridgepoint Enterprises Inc., a
Montreal, Quebec corporation. Pursuant to the Agreement, after the Company
purchases the necessary equipment to establish a switching center, Bridgeport
will build and install the Company's center in its facility and once
operational, will continue to operate and maintain the center for a monthly fee
of $8,000. In April 1999, Bridgeport completed the installation of the Company's
equipment and the center became operational.
In June 1999, the Company entered into a one year renewable
contract with Metrocom, a closed joint stock company, to provide a
Trans-Atlantic Fiber Optic E-1 Line for dedicated circuits at an annual cost of
$515,520. The contract provides for the fee to be reduced if international
tariffs for Trans-Atlantic Lines decline. The Company currently anticipates that
rates will decline in the Fall of 1999.
The founders and principals of the Company believe that they
have put together a team having the experience and the extensive network of
contacts to build and operate a premier long distance service between the former
Soviet Union countries, North America and Europe. Their proven entrepreneurial
record and motivated energy will hopefully establish the Company as a prominent
telecommunications company, especially in the former Soviet Union countries,
resulting in a commercially successful enterprise.
The Company currently has three full time employees and eight
part time employees. The Company anticipates hiring up to an additional five
employees once its facilities become fully operational. The Company does not
expect to incur any material costs in complying with environmental laws.
Item 2. Plan of Operation.
Management's Discussion and Analysis
As noted in Item 1 above, the Company is currently installing its equipment and
building its network centers. Until its facilities are operational, the Company
cannot begin to generate any revenues. Our facilities are currently operational
on a limited basis and we expect them to be fully operational in August.
The Company recently completed a private offering in which it netted
approximately $800,000. The bulk of the proceeds are being used to purchase and
install equipment for our facilities in Moscow and Canada. We believe we have
sufficient funds to make our facilities operational and that any future funding
can be supplied by income from operations.
The Company does not expect to conduct any product research and development and
we have purchased all the equipment we need to install in our current
facilities. The Company intends to retain marketing and public relations
consultants as necessary, and to hire additional staff if warranted by its sales
volume on an as needed basis.
As discussed above, the Company intends to expand its operations into St.
Petersburg once the Moscow facility is operational using cash flows generated by
the Moscow facility. We have issued a purchase order for the necessary equipment
and anticipate installation to commence in the end of August or beginning of
September. While the Company will not have to pay for the equipment for six
months and believes it will be able to pay for the equipment out of then
existing cash flows, the Company anticipates requiring approximately $125,000 to
finance startup costs for the new facility. The Company has no specific plans at
this time for obtaining the necessary funds and is currently reviewing its
options, which includes an additional private financing. Total costs for each
new facility including equipment, installation, marketing and office personnel
is currently estimated at $300,000.
The Company's business plan currently calls for expansion into other markets,
such as Israel and Korea, if and when opportunities present themselves and as
funding permits. During the next twelve months, the Company intends to use the
same formula for financing any expansions, i.e., external funding for startup
costs and internal financing for operations. Other than as described, the
Company does not currently anticipate funding its growth with additional public
financings, except in the event an unexpected and unusual opportunity is
presented.
Year 2000 Disclosure
The Company only has a limited number of computers that it uses for mostly word
processing, bookkeeping and general administrative purposes. We do not believe
that we will be significantly effected by the "Year 2000 problem." In any event,
we have the ability to save all of our internal data on discs which will
preserve the date in the event problems occur with our system.
The Company's business is the sale of international telephone service. This
requires our total dependence on the integrity of equipment used by the
telecommunications industry. Specifically, we are dependent on equipment
used/made by Cisco Systems, RAD Data Communications Products, Teleglobe
(Metrocom), AT&T Canada and Ericsson. Based upon publicity available information
provided by these companies, we believe they are all "Year 2000 compliant" and
the Company's operations should not be adversely effected by the Year 2000
problem. We are also dependent upon the ability of the local Moscow telephone
exchange to address these issues. We have been advised by our agent that the
Moscow telephone system uses an analog technology that should not be effected by
the Year 2000 problem and that our business should not be jeopardized.
As with all commercial enterprises, we can be adversely impacted in the event
the local utility companies serving the areas in which we operate are not Year
2000 Compliant as well as the international banking system. In these regards the
Company expects that it is as susceptible as other businesses its size in its
locations and does not expect to be adversely impacted to any greater degree.
Item 3. Description of Property.
The Company maintains its corporate offices at 1155 University Street, Suite
602, Montreal, Canada where we have approximately 1,550 square feet at an annual
rental of $48,600. The property is subleased from an entity controlled by one of
our directors by a five year lease expiring January 31, 2004. The sublet may be
terminated by the Company at the end of any year without penalty. Our Moscow
facility is comprised of approximately 160 square yards and is located at 19-7
Starovagankovski Perealok, Moscow, Russia where we pay $4,354 per month under a
three year lease. The Moscow property is leased from an entity controlled by Dr.
Gerol and Mr. Makarov, directors of the Company, at a rate the Company believes
is the going rate for similar space.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information regarding the
beneficial ownership of the Company's Common Stock, $.0001 par value, as of the
date hereof and after the Offering by (i) each person known by the Company to
own beneficially more than five percent of the Company's outstanding shares of
Common Stock, (ii) each director and executive officer of the Company who owns
shares and (iii) all directors and executive officers of the Company as a group.
Unless otherwise indicated, all shares of Common Stock are owned by the
individual named as sole record and beneficial owner with exclusive power to
vote and dispose of such shares. None of the people listed below owns any other
securities of the Company. There are no arrangements which may result in a
change in control of the Company.
[Enlarge/Download Table]
-------------------------------------- --------------------------------- ---------------------------------
Shares Owned Beneficially Percentage
-------------------------------------- --------------------------------- ---------------------------------
Ilya Gerol (1) 2,700,000 12.38%
-------------------------------------- --------------------------------- ---------------------------------
Viatscheslav Makarov (1) 2,700,000 12.38%
-------------------------------------- --------------------------------- ---------------------------------
Derek Labell (1) 2,500,000 11.46%
-------------------------------------- --------------------------------- ---------------------------------
Michael MacInnis (1) 1,258,000 5.77%
-------------------------------------- --------------------------------- ---------------------------------
Natalia Maloshina (1) 2,000,000 9.17%
-------------------------------------- --------------------------------- ---------------------------------
Nais Corp. 1,386,300 6.35%
94 Washington Ave.
Lawrence, NY 11559
-------------------------------------- --------------------------------- ---------------------------------
Howard Salamon 1,386,300 6.35%
20 Margaret Ave.
Lawrence, NY 11559
-------------------------------------- --------------------------------- ---------------------------------
All Executive Officers and Directors 9,158,000 41.97%
as a Group
-------------------------------------- --------------------------------- ---------------------------------
1 Uses Company's address.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
(a) Directors and Executive Officers.
Name Age Position
Dr. Ilya Gerol 59 Chairman & Chief Executive Officer
Derek LaBell 39 President, Director of
Sales and Marketing
(North America) & Director
Michael MacInnis 51 Chief Financial Officer &
Director
Viatcheslav Makarov 44 VP-Sales and Marketing
(Russia) & Director
Dr. Ilya Gerol: Chairman and Chief Executive Officer
Dr. Ilya Gerol is an expert in communications with over 28 years of
experience. A Canadian of Russian descent, Dr. Gerol is Chairman of the Board of
Directors and Chief Executive Officer. He has consulted to the Economic Council
of Canada, and has researched and analyzed international information and
economic trends, specializing in energy, communications, and the world economy.
From 1965 through 1973, Dr. Gerol was an Editor, a Senior Editor, and then
Editor-in-Chief of Radio Broadcasting Atlantica International in Riga, Latvia
(former Soviet Union). From 1973 to 1979 he was an Editor of SM Newspaper in
Riga. From 1980 through 1981, he was an associate teaching assistant at the
University of British Columbia. From 1981 through 1984 he was a syndicated
columnist at The Province Vancouver and an associate Editor at the International
Business Magazine. From 1984 through 1990 he was a Foreign Editor and Syndicated
Columnist on international affairs and international business at the Ottawa
Citizen. From 1988 through 1991 he was a visiting professor of Political Science
at the State University of Winnipeg. From 1991 to 1994 he was a consultant on
Eastern Europe and Commonwealth of Independent States to Economic Counsel of
Canada for Amberoute International Group. From 1994 to 1997 Dr. Gerol was vice
president international, newsletter D.A. & G. Information and Analysis and
Editor-in-Chief. Dr. Gerol has been on staff and/or visiting professor for over
14 universities throughout the world including State University of Winnipeg,
University of British Columbia, Moscow State University, Hebrew University, and
others.
Derek LaBell: President and Director of Sales and Marketing (North America)
Mr. Derek LaBell is the Company's President and Director of
Sales and Marketing (North America) and comes to the Company with over 20 years
experience in sales, marketing and management. Mr. LaBell has an in-depth
knowledge of the North American telecommunications long distance telephone card
market, including card marketing, applications, production, distribution,
franchising and card application platforms. In 1994, Mr. LaBell participated in
the initial groundwork to bring prepaid phone cards to Canada by conducting a
comprehensive study on behalf of a company which eventually became Canada's
number one prepaid phone card company. From 1986 to 1990 Mr. LaBell was
Director-Property Management of The Marine Group's real estate division,
Montreal, Quebec, managing the real estate portfolio in Montreal, Windsor,
Ontario and Fort Lauderdale, Florida. From 1991 to 1993 he established a Limited
Partnership, operating foreign currency exchange offices in Montreal, Quebec for
which he negotiated the North American rights to sell and distribute the leading
European automated foreign currency exchange vending machine. During the same
period he was instrumental in concluding the acquisition of AVF, a carriage
trade asset management firm in Frankfurt, Germany. During 1994 he represented
Pascals Realties Ltd. leasing and managing their corporate office property in
Old Montreal. From 1995 to 1997 Mr. LaBell provided consulting services to Monit
International Inc. (a privately held Montreal Real Estate company owning and
managing more than sixty properties throughout Eastern Canada and United States)
on leasing and tenant improvement construction issues. From 1997 to present he
has been director of leasing for Tidan, a privately held Montreal Real Estate
company owning and managing more than fifty properties throughout Eastern Canada
and in the United States.
Michael MacInnis: Chief Financial Officer
Mr. Michael MacInnis is the Chief Financial Officer. Mr.
MacInnis received his Chartered Accountant designation in 1972 and started his
own firm in 1974 where he specialized in corporate finance, income taxation and
reorganizations. In addition, he has operated and consulted to many corporations
throughout Canada and has successfully raised funding in excess of an aggregate
of $200 million for various commercial projects. Also, he specializes in Public
Corporations listed on the NASD Bulletin Board. During the last five years Mr.
MacInnis has focused his efforts on developing a franchised consulting concept
and providing consulting services to various companies seeking financing.
Viatcheslav Makarov: Vice President - Sales and Marketing (Russia)
Mr. Viatcheslav is the Company's vice-president - sales and
marketing. Mr. Makarov was trained as an engineer and his initial career was as
an avionics scientist in the former Soviet Union. From 1989 through 1995 he
became the chief representative of Volvo (automotive) in Russian and, as well,
worked as a member of Renault bureau in Moscow. Since 1996, Mr. Makarov moved to
Canada where he established and currently operates, the Interservice Group, a
group of companies that consult to U.S., Canadian and European business circles
on financial and industrial development within Eastern European and C.I.S.
countries utilizing the many contacts and connections that he has cultivated in
the last ten years in both the Russian government and industry.
(b) Significant Employees
None
(c) Family Relationships
There are no family relationships among directors or executive officers of the
Company.
(d) Involvement in Certain Legal Proceedings.
None.
Item 6. Executive Compensation.
(a) General
Commencing January 1, 1999, the Company has agreed to pay Dr. Gerol and Messrs.
MacInnis and Makarov an annual salary of $24,000. Mr. LaBell receives the same
salary commencing May 1, 1999. None of the Company's executive officers provides
services on a full-time basis. No executive officer or employee of the Company
is paid more than $100,000 per year in salary and benefits. The Company does not
currently provide any benefits to its executive officers.
(b) Summary Compensation Table
[Download Table]
SUMMARY COMPENSATION TABLE
Name and Other Long-term
Principal Position Year(1) SalaryBonus Compensation Compensation: Options
Dr. Ilya Gerol 1999 $4,000 0 0 0
Chairman & Chief
Executive Officer
Michael McInnis 1999 $4,000 0 0 0
Chief
Financial Officer
& Director
Viatcheslav Makarov 1999 $4,000 0 0 0
VP-Sales and
Marketing (Russia)
& Director
Derek LaBell 1999 0 0 0 0
President, Directors
of Sales and
Marketing
(North America)
& Director
(1) Covers the period from inception (November 13, 1998) to the fiscal
year end on February 28, 1999.
(c) Options/SAR Grants Table
None.
(d) Aggregated Option/SAR Exercises and Fiscal Year End Option/SAR Value Table
None
(e) Long Term Incentive Plan ("LTIP") Awards Table
None
(f) Compensation of Directors
None
(g) Employment Contracts and Termination of Employment, and Change-in-Control
Arrangements The Company has no employment contracts with any of its executive
officers. There are no provisions for compensation to be paid to any executive
officer or director of the Company upon the termination of their services by
either party or by the actions of a third party.
(h) Report on Repricings of Options/SARs
None.
Item 7. Certain Relationships and Related Transactions.
None.
Item 8. Description of Securities.
(a) Common or Preferred Stock
The Company is authorized to issue 50,000,000 shares of Common Stock,
$0.0001 par value, of which 21,817,900 shares were issued and outstanding as of
the date hereof. Each outstanding share of Common Stock is entitled to one (1)
vote, either in person or by proxy, on all matters that may be voted upon the
owners thereof at meetings of the stockholders.
The holders of Common Stock (i) have equal ratable rights to dividends
from funds legally available therefor, when and if declared by the Board of
Directors of the Company; (ii) are entitled to share ratably in all of the
assets of the Company available for distribution to holders of Common Stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription or conversion rights, or redemption or sinking
fund provisions applicable thereto; and (iv) are entitled to one non-cumulative
vote per share on all matters on which stockholders may vote at all meetings of
stockholders.
Holders of Shares of Common Stock of the Company do not have cumulative
voting rights, which means that the individuals holding Common Stock with voting
rights to more than 50% of eligible votes, voting for the election of directors,
can elect all directors of the Company if they so choose and, in such event, the
holders of the remaining shares will not be able to elect any of the Company's
directors.
(b) Debt Securities.
The Company has not issued any debt securities to date.
(c) Other securities to be Registered
None.
PART II
Item 1. Market Price for Common Equity and Related Stockholder Matters.
(a) Market Information
There is no public trading market for the Company's securities. The Company has
no outstanding securities convertible into its Common Stock. No stockholder has
any registration rights. Of the 21,817,900 shares of common stock outstanding,
20,156,600 are currently subject to the resale restrictions and limitations of
Rule 144.
(b) Holders
There are 94 holders of the Company's common stock.
(c) Dividends
The Company has had no earnings to date, nor has the Company declared any
dividends to date. The payment by the Company of dividends, if any, in the
future, rests within the discretion of its Board of Directors and will depend,
among other things, upon the Company's earnings, its capital requirements and
its financial condition, as well as other relevant factors. The Company has not
declared any cash dividends since inception, and has no present intention of
paying any cash dividends on its Common Stock in the foreseeable future, as it
intends to use earnings, if any, to generate growth.
Item 2. Legal Proceedings
None
Item 3. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
Item 4. Recent Sales of Unregistered Securities.
In November 1998, the Company sold 1,184,000 shares at a price of $.05 per
share. All of such shares were sold pursuant to the exemption contained in
Regulation S.
During the first part of 1999, the Company sold 1,661,300 shares at a price of
$.50 per share. All of such shares were sold pursuant to the exemption contained
in Rule 504.
In February 1999, the Company agreed to issue 200,000 shares of restricted stock
to Global Asset Management Fund as payment for consulting services. These shares
were issued pursuant to the exemption from registration contained in Section
4(2) of the Act.
No commissions or discounts were paid or given to any person or entity in any of
the Company's sales of securities. There were no underwriters or securities
brokers or securities dealers involved in the offering in any way; the shares
were sold by management on a best efforts basis.
Item 5. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law, as amended, authorizes the
Company to Indemnify any director or officer under certain prescribed
circumstances and subject to certain limitations against certain costs and
expenses, including attorney's fees actually and reasonably incurred in
connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which a person is a party by reason of being
a director or officer of the Company if it is determined that such person acted
in accordance with the applicable standard of conduct set forth in such
statutory provisions. The Company's Certificate of Incorporation contains
provisions relating to the indemnification of director and officers and the
Company's By-Laws extends such indemnities to the full extent permitted by
Delaware law.
The Company may also purchase and maintain insurance for the benefit of any
director or officer which may cover claims for which the Company could not
indemnify such persons.
PART F/S
The financial statements are included at the end of this Registration Statement,
prior to the signature page.
PART III
Item 1. Index to Exhibits.
EXHIBIT
2.1 Certificate of Incorporation
2.2 By-Laws
6.1 Lease for Montreal space
6.2 Joint Venture Agreement between V.I. Internet Telecommunications Inc.
and Specialized Technic and Communications of The Ministry of
Interior of Russian Federation
6.3 Joint Venture Agreement between V.I. Internet Telecommunications Inc.
and Telecom XXI Development, Ltd.
27 Financial Data Schedule
INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 28, 1999
TOGETHER WITH AUDITORS' REPORT
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Internet VIP, Inc.:
We have audited the accompanying consolidated balance sheet of Internet VIP,
Inc. (a Delaware corporation) and subsidiary as of February 28, 1999, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the period from inception (November 13, 1998) to February 28,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Internet VIP, Inc. and
subsidiary as of February 28, 1999, and the results of their operations and
their cash flows for the period from inception (November 13, 1998) to February
28, 1999, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company is in the
development stage and its continued existence is dependent on obtaining
additional financing for its operations. The Company's plans in regards to these
matters are also described in Note 1. In addition, the Company faces risks as a
development stage company. The success of the Company's operations is influenced
by these risks as more fully described in Note 1. 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 recorded asset amounts or the amounts
and classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
/s/
New York, New York
June 1, 1999
INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED BALANCE SHEET
FEBRUARY 28, 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 223,624
Other current assets 801
------------
Total current assets 224,425
DEPOSIT ON ACCOUNT OF PROPERTY AND EQUIPMENT 25,000
------------
Total assets $ 249,425
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 68,258
---------------
Total current liabilities 68,258
---------------
STOCKHOLDERS' EQUITY:
Common Stocks, $0.0001 par value; 50,000,000 shares authorized; 20,874,800
shares issued and 2,087 outstanding
Additional paid-in capital 498,090
Deferred compensation (100,000)
Accumulated deficit
(219,010)
Total stockholders' equity 181,167
----------------
Total liabilities and stockholders' equity $ 249,425
================
The accompanying notes are an integral part of this
balance sheet.
INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 13, 1998) TO
FEBRUARY 28, 1999
OPERATING EXPENSES:
General and administrative expenses $ 219,010
Total operating expenses 219,010
Net loss $ (219,010)
BASIC AND DILUTED NET LOSS PER SHARE $ (0.01)
==============
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - $=
BASIC AND DILUTED 20,143,332
==========
The accompanying notes are an integral part of this statement.
INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (NOVEMBER 13, 1998) TO FEBRUARY 28, 1999
DO TABLES LATER
[Enlarge/Download Table]
Common Stock Additional Total
Number of Amount Paid-in Deferred Accumulated Stockholders'
Shares Capital Compensation Deficit Equity
BALANCE, November 13, 1998 $ - $ - $ - $ - $ - $ -
Issuance of Common Stocks to 18,772,600 1,877 - - - 1,877
founders
Issuance of Common Stocks in a
private placement ($0.05 per
share) 1,184,000 118 59,082 - - 59,200
Issuance of Common Stocks for
consulting services 200,000 20 99,980 (100,000) - -
Issuance of Common Stocks in a
private placement ($0.5 per
share), net of issuance costs of
$20,000 718,200 72 339,028 - - 339,100
Net loss - - - - (219,010) (219,010)
BALANCE, February 28, 1999 20,874,800 2,087 498,090 (100,000) (219,010) 181,167
========== ===== ======= ======== ======== =======
The accompanying notes are an integral part of this statement.
INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 13, 1998) TO FEBRUARY 28, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(219,010)
Adjustments to reconcile net loss to net cash used in operating activities-
Changes in operating assets and liabilities-
Other current assets (801)
Accrued expenses 68,258
Net cash used in operating activities (151,553)
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit on account of property and equipment (25,000)
Net cash used in investing activities (25,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Stockholders' capital contribution, net 400,177
Net cash provided by financing activities 400,177
Net increase in cash and cash equivalents 223,624
CASH AND CASH EQUIVALENTS, beginning of period -
CASH AND CASH EQUIVALENTS, end of period $223,624
NONCASH FINANCING ACTIVITIES:
Common stock issued for consulting services $100,000
The accompanying notes are an integral part of this statement.
INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1999
ORGANIZATION
Internet VIP, Inc. was incorporated in the state of Delaware on November 13,
1998. Internet VIP, Inc. and its wholly owned subsidiary, V.I. Internet
Telecommunications, Inc., a Canadian corporation (together, the "Company") were
formed to sell long distance international telephone services using the new
technology, VIP-Voice over Internet Protocol. From its strategically located
switching center in Montreal, Canada, calls can be routed from anywhere in North
America to anywhere in the world. The first phase of operations will encompass
calls from Montreal to St. Petersburg and Moscow, and vice versa.
Initially Internet VIP Inc. will operate through its wholly owned
Canadian subsidiary corporation, V.I. Internet Telecommunications Inc. ("V.I.
Internet"). V.I. Internet will own and operate the Canadian switching centers.
Additionally, V.I. Internet will own 80% of two Russian joint-venture entities,
which were established to manage the Company's centers in St. Petersburg and
Moscow. The remaining 20% of the Russian joint-venture companies are owned by
the Division of the Russian Ministry of Interior, in the case of Moscow, and by
the BaltUnexim Bank in the case of St. Petersburg.
The Company is in the development stage. It is not currently generating any
revenues from operations and is therefore dependent on external sources for
financing its operations. The Company completed, subsequent to February 28,
1999, a private placement. Subsequent net proceeds from the issuance of the
equity were approximately $450,000. Management expects these proceeds together
with its estimated revenues in fiscal year 1999 to be sufficient to finance the
Company's operations through fiscal year 1999. However, there can be no
assurance that the Company will succeed in executing its plan and obtaining the
financing necessary for its operations.
The Company faces risks as a development stage company. These risks include,
among others, uncertainty of product acceptance, sales and distribution risk,
competition, risk of errors, and quality and price of its products compared to
alternative products and service. Additionally, other factors such as loss of
key personnel could impact the future results of operations or financial
condition of the Company.
All of the aforementioned matters raise substantial doubt about the Company's
ability to continue as a going concern.
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Internet VIP, Inc.
and its wholly owned subsidiary, V.I. Internet and its Russian joint-ventures.
Material intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make 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.
Foreign Currency
The Company accounts for foreign currency in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation,"
for operating subsidiaries. The functional currency of the Company's wholly
owned subsidiary is the U.S. dollar.
Per Share Data
SFAS No. 128, "Earnings per Share," establishes new standards for computing and
presenting earnings per share (EPS). The standard requires the presentation of
basic EPS and diluted EPS. Basic EPS is calculated by dividing income available
to common shareholders by the weighted average number of shares of common stock
outstanding during the period. Diluted EPS is calculated by dividing income
available to common shareholders by the weighted average number of common shares
outstanding adjusted to reflect potentially dilutive securities.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents approximates fair value.
Organizational and Development Costs
Organizational and development costs are expensed as incurred.
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under the asset and liability method of SFAS No.
109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement and tax
bases of assets and liabilities. Deferred tax assets and liabilities are
measured using tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
SFAS No. 109, the effect of a change in tax rates on deferred tax assets and
liabilities is recognized in income in the period in which the tax rate change
takes place.
Recently Issued Accounting Standards
Additionally, in June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information." This statement establishes
standards for the way the public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. This statement is effective for
financial statements for periods beginning after December 15, 1997, and need not
be applied to interim periods in the initial year of application. Comparative
information for earlier years presented is to be restated. The Company currently
believes that it operates in one segment and that the adoption of this statement
will not have an impact on the Company's financial statement.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
No. 133 is effective for fiscal years beginning after June 15, 1999. The Company
currently does not use derivatives and, therefore, this new pronouncement is not
applicable.
PRIVATE PLACEMENT
In January 1999, the Company offered to sell, in a private placement, up to
1,900,000 shares of its Common Stock, $0.0001 par value, at a price of $.50 per
share, of which 718,200 shares were sold by February 28, 1999. Proceeds from the
offering are held in an unrestricted escrow account and transferable to the
Company upon demand. At February 28, 1999 $115,000 held in escrow are included
in cash and cash equivalents. Subsequent to February 28, 1999, the Company
issued an additional 925,400 shares in connection with this offering.
INCOME TAXES
At February 28, 1999, the Company has net operating losses available to offset
future income for book and tax purposes of approximately $200,000.
The loss carryforwards expire in February 2019. The annual utilization of these
loss carryforwards will be substantially limited if there are changes in the
Company's ownership.
The Company has provided a valuation allowance for the full amount of the tax
benefit associated with the loss carryforwards due to the uncertainty
surrounding their realization.
COMMITMENTS AND CONTINGENCIES
Lease Commitment
The Company leases office space from a related party, for the period ending
January 2001, under an operating lease. Future minimum annual lease payments are
as follows:
For the year ending February 28:
2000 $ 48,600
2001 44,550
---------------
$ 93,150
Rent expense for the period from inception (November 13, 1998) to February 28,
1999 was $4,050.
Consulting Agreements
In December 1998, the Company entered into a four-year consulting agreement with
Nais Corp., a related party, according to which Nais Corp. will provide the
Company with financial and business public relations consulting services. Future
minimum annual fees are as follows:
For the year ending February 28:
2000 $ 72,000
2001 72,000
2002 72,000
2003 60,000
---------------
$ 276,000
In February 1999, the Company entered into a one-year consulting agreement with
Global Asset Management Group, Inc. ("Global Asset"), a Florida Corporation.
According to the contract, Global Asset will provide the Company with financial
consulting services in consideration to 200,000 shares of the Company's Common
Stock, the fair market value of which was $100,000 at the date of the contract.
The Company recorded the consulting fees as deferred compensation, which will be
amortized over the contract period (one year).
Equipment Purchase Agreement
The Company purchased revenue generating equipment in the amount of $280,000, of
which $25,000 was paid in advance by February 28, 1999. The equipment was
received and installed by the Company subsequent to February 28, 1999.
Facilities Management Agreement
In February 1999, the Company entered into a five-year agreement with
Bridgepoint Enterprises ("Bridgepoint"), according to which Bridgepoint will
provide the Company with facilities for its equipment as well as maintenance and
technical support for such equipment for variable monthly consideration. Future
estimated minimum annual fees are as follows:
For the year ending February 28:
2000 $ 96,000
2001 96,000
2002 96,000
2003 96,000
2004 96,000
---------------
$ 480,000
Telecommunication Service Agreement
In June 1999, the Company entered into a one-year service agreement with
Metrocom, a Russian company, according to which Metrocom will provide
telecommunication services to the Company for a monthly charge of approximately
$40,000.
6. RELATED PARTIES
The Company received consulting services from related parties. Fees
paid for such services were approximately $14,000 in the period from inception
(November 13, 1998) to February 28, 1999.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTERNET VIP, INC.
Date: August 2, 1999 /s/
Dr. Ilya Gerol, Chairman and CEO
(Chief Executive Officer)
Date: August 3, 1999 /s/
Michael MacInnis, CFO and Director
(Chief Financial Officer)
Date: August 2, 1999 /s/
Derek LaBell, President and Director
Date: August 2, 1999 /s/
Viatcheslav Makarov, V P and Director
Description of Exhibits.
2.1 Certificate of Incorporation
2.2 By-Laws
6.1 Lease for Montreal space
6.2 Lease for Moscow space
6.3 Joint Venture Agreement between V.I. Internet Telecommunications Inc.
and Specialized Technic and Communications of The Ministry of
Interior of Russian Federation
6.4 Joint Venture Agreement between V.I. Internet Telecommunications Inc.
and Telecom XXI Development, Ltd.
27 Financial Data Schedule
Dates Referenced Herein and Documents Incorporated by Reference
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