<PAGE>
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington. D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-25965
JFAX.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0371142
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
10960 Wilshire Boulevard
Suite 500
Los Angeles, California 90024
(Address of principal executive offices)
(310) 966-1800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares, $0.01 par value each, of the registrant's common
stock outstanding as of October 31, 1999: 32,855,374 shares.
- --------------------------------------------------------------------------------
<PAGE>
JFAX.COM, INC.
For the Quarter Ended September 30, 1999
INDEX
<TABLE>
<CAPTION>
Page
----
PART I. FINANCIAL INFORMATION
<C> <S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations................ 3
Condensed Consolidated Balance Sheets.......................... 4
Condensed Consolidated Statements of Cash Flows................ 5
Notes to Condensed Consolidated Financial Statements........... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk .... 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ............................................. 13
Item 2. Changes in Securities and Use of Proceeds ..................... 13
Item 3. Defaults Upon Senior Securities ............................... 14
Item 4. Submission of Matters to a Vote of Security Holders ........... 14
Item 5. Other Information ............................................. 14
Item 6. Exhibits and Reports on Form 8-K .............................. 14
</TABLE>
2
<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. Financial Statements
JFAX.COM, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 1,952 $ 975 $ 5,010 $ 2,250
Cost of revenue 1,167 916 3,400 2,225
----------- ----------- ----------- -----------
Gross profit 785 59 1,610 25
Operating expenses:
Sales and marketing 1,880 1,291 3,245 2,176
Research and development 401 329 1,298 878
General and administrative 1,670 1,242 5,199 3,267
----------- ----------- ----------- -----------
Total operating expenses 3,951 2,862 9,742 6,321
Operating Loss (3,166) (2,803) (8,132) (6,296)
Interest income (expense), net 418 (433) (465) (433)
Increase in market value of put warrants --- 1,863 --- 1,863
----------- ----------- ----------- -----------
Net loss before extraordinary item (2,748) (5,099) (8,597) (8,592)
Extraordinary item-Loss on
extinguishment of debt 4,428 --- 4,428 ---
----------- ----------- ----------- -----------
Net Loss (7,176) (5,099) (13,025) (8,592)
----------- ----------- ----------- -----------
Premiums on preferred stock (878) --- (878) ---
Dividends and accretion on preferred stock (169) (244) (694) (244)
----------- ----------- ----------- -----------
Net loss attributable to
common stockholders $ (8,223) $ (5,343) $ (14,597) $ (8,836)
=========== =========== =========== ===========
Basic and diluted net loss
per common share $ (0.26) $ (0.22) $ (0.55) $ (0.40)
=========== =========== =========== ===========
Weighted average shares outstanding 30,796,568 24,088,045 26,496,131 21,819,348
----------- ----------- ----------- -----------
</TABLE>
3
<PAGE>
JFAX.COM, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $25,019 $ 7,279
Investments in debt securities 19,358 ---
Accounts receivable 374 241
Prepaid expenses and other current assets 6,063 1,131
------- --------
Total current assets 50,814 8,651
Furniture, fixtures and equipment, net 2,668 1,778
Long-term investments in debt securities 9,337 ---
Other assets 481 84
------- --------
Total assets $63,300 10,513
======= ========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Accounts payable and accrued expenses $ 2,996 $ 1,101
Deferred revenue 281 329
Current portion of capital lease payable 172 90
Current portion of long-term debt 1,164 317
Customer deposits 85 79
------- --------
Total current liabilities 4,698 1,916
Capital lease obligations 231 142
Long-term debt 1,679 6,137
Put warrants --- 6,318
------- --------
Total liabilities 6,608 14,513
Redeemable common stock 7,475 5,246
Mandatory redeemable series A preferred stock --- 4,071
Total stockholders' equity (deficiency) 49,217 (13,317)
------- --------
Total liabilities and stockholders' equity (deficiency) $63,300 $ 10,513
======= ========
</TABLE>
4
<PAGE>
JFAX.COM, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30
----------------------
1999 1998
----------------------
<S> <C> <C>
Net cash used in operating activities (8,919) (7,388)
-------- -------
Cash flows from investing activities:
Purchases of investments in debt securities (28,695) ---
Purchases of furniture, fixtures and equipment (1,515) (304)
-------- -------
Net cash used in investing activities (30,210) (304)
-------- -------
Cash flows from financing activities:
Common stock issued, net of capitalized offering costs 73,823 3,000
Exercise of stock options 77 5
Proceeds from issuance of redeemable common stock --- 4,695
Proceeds from issuance of notes payable 91 783
Proceeds (repayments) of preferred stock (6,818) 4,653
Proceeds (repayments) of long-term debt (10,506) 4,612
Proceeds (repayments) of loan payable and capital lease obligations 202 (86)
-------- -------
Net cash provided by financing activities 56,869 17,662
-------- -------
Net increase in cash and cash equivalents 17,740 9,970
Cash and cash equivalents, beginning of year 7,279 23
-------- -------
Cash and cash equivalents, end of period $ 25,019 $ 9,993
-------- -------
</TABLE>
5
<PAGE>
JFAX. COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial information is unaudited but reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the consolidated financial
position and results of operations for the interim periods. The condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of operations, for
the fiscal year ended December 31, 1998 as presented in the Company's Form S-1
Registration Statement filed on July 23, 1999. The results of operations for the
three and nine months ended September 30, 1999 are not necessarily indicative of
the results to be expected for the entire fiscal year.
NOTE 2 - INITIAL PUBLIC OFFERING
On July 23, 1999, the Company completed its initial public offering of 8,500,000
shares of Common Stock and received proceeds of $73.8 million, net of offering
costs.
NOTE 3 - INVESTMENTS IN DEBT SECURITIES
At September 30, 1999 short and long term debt securities consisted of corporate
instruments. Short term maturities range from three months to one year and long
term maturities range from beyond one year up to 18 months. Such securities bear
interest at fixed rates ranging from 5% to 6.1% and are classified as held to
maturity as the Company has the ability and intent to do so. At September 30,
1999 cost approximates fair market value.
NOTE 4 - REPAYMENT OF SENIOR SUBORDINATED NOTES
On July 30, 1999 the Company redeemed all of its 10% Senior Subordinated Notes
due 2004. Such redemption aggregated $10,591,000 and included $85,000 in accrued
interest.
In connection with this redemption the Company recognized an extraordinary item
loss on early extinguishment of debt aggregating $4,428,000.
NOTE 5 - REDEMPTION OF PREFERRED STOCK
In August 1999 the Company redeemed all of its outstanding mandatorily
redeemable Series A preferred stock. Such amount aggregated $6,818,000 and
included premiums of $878,000 and accrued dividends of $940,000.
6
<PAGE>
NOTE 6 - PUT WARRANTS
Effective January 1, 1999, holders of a majority of the put warrants included in
the accompanying December 31, 1998 Balance Sheet agreed to eliminate a fair
market value put feature associated with these warrants for nominal
consideration. As a result of the elimination of the put feature, the Company
reclassified the put warrant liability of $6,318,000 to additional paid in
capital effective January 1999.
NOTE 7 - LOSS PER SHARE
The Company has adopted SFAS No. 128, "Earnings Per Share." Basic net loss per
share is computed using the weighted average number of common shares outstanding
during the period.
Dividends and accretion on Preferred Stock and premiums on Preferred Stock
redemption increased the net loss for determining basic and diluted net loss per
share attributable to Common Stock. Diluted net loss per share excludes the
effect of common stock equivalents, because their effect would be anti-dilutive.
NOTE 8 - LITIGATION
On October 28, 1999, AudioFAX IP LLC filed a lawsuit against the Company in the
United States District Court for the Northern District of Georgia asserting the
ownership of certain United States and Canadian patents and claiming that the
Company is infringing these patents as a result of the Company's sale of
enhanced facsimile products. The suit requests unspecified damages, treble
damages due to willful infringement, and preliminary and permanent injunctive
relief. We have reviewed the AudioFAX patents with our business and technical
personnel and outside patent counsel and have concluded that we do not infringe
these patents. As a result, we are confident of our position in this matter and
intend to defend the suit vigorously.
7
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations for the Three Months Ended September 30, 1999 and
September 30, 1998
Revenue. Revenue was $2.0 million and $975,000 for the three months ended
September 30, 1999 and 1998. The increase in revenue was primarily due to an
increased number of subscriptions. Our paid subscribers numbered 45,968 and
22,383 as of September 30, 1999 and 1998.
In April 1999, we introduced free fax services principally as a promotional
tool to attract customers we can target for selling our paid services. In June
1999, we introduced our free voice services for the same purpose. On September
14, we introduced our Free Fax Plus product which combines free fax and voice.
As of September 30, 1999, we had 233,145 subscribers for our free services.
Cost of Revenue. Cost of revenue is primarily comprised of data and voice
network costs, customer service, online processing fees and equipment
depreciation. Cost of revenue was $1.2 million or 60% of revenue and $916,000 or
94% of revenue for the three months ended September 30, 1999 and 1998. The
increase in cost of revenue reflects the cost of building and expanding our
server and networking infrastructure and customer service to accommodate growth
of our subscriber base. Cost of revenue as a percentage of revenue decreased as
a result of the increases in revenue over the same period last year.
Operating Expenses
Sales and Marketing. Our sales and marketing costs consist primarily of
payments with respect to strategic alliances, advertising, personnel related
expenses, public relations, and promotions. Sales and marketing expenses were
$1.9 million or 96% of revenue and $1.3 million or 132% of revenue for the three
months ended September 30, 1999 and 1998. The increases in sales and marketing
expenses from period to period primarily reflect an increase in advertising
costs associated with the launch of our $20 million advertising campaign and an
increase in personnel related expenses. Sales and marketing as a percentage of
revenue decreased as a result of the increases in revenue over the same period
last year.
Research and Development. Our research and development costs consist
primarily of personnel related expenses. Research and development costs were
$401,000 or 21% of revenue and $329,000 or 34% of revenue for the three months
ended September 30, 1999 and 1998. The increase in research and development
costs from period to period primarily reflects increases in personnel related
expenses. Research and development as a percentage of revenue decreased as a
result of increases in revenue over the same period last year.
General and Administrative. Our general and administrative costs consist
primarily of personnel related expenses, professional fees, and occupancy costs.
General and administrative costs were $1.7 million or 86% of revenue and $1.2
million or 127% or revenue for the quarters ended September 30, 1999 and 1998.
The increases in general and administrative costs from period to period were
primarily due to increases in personnel, as well as increased professional
8
<PAGE>
fees. General and administrative costs as a percentage of revenue decreased as a
result of increases in revenue over the same period last year.
Interest Income (Expense), Net. Our interest income (expense), net is
primarily related to interest expense on capital lease obligations and long-term
debt. Interest income (expense), net was $418,000 and $(433,000) for the three
months ended September 30, 1999 and 1998. The change in interest expense
(income), net primarily resulted from interest income earned on our investments
in marketable securities and a decrease in interest expense due to the repayment
of $10.5 million of long-term debt in July 1999.
Results of Operations for the Nine Months Ended September 30, 1999 and September
30, 1998
Revenue. Revenue was $5.0 million and $2.3 million for the nine months
ended September 30, 1999 and 1998. The increases in revenue were primarily due
to increases in the number of subscriptions. Our paid subscribers numbered
45,968 and 22,383 as of September 30, 1999 and 1998.
Cost of revenue. Cost of revenue is primarily comprised of data and voice
network costs, customer service, online processing fees and equipment
depreciation. Cost of revenue was $3.4 million or 68% of revenue and $2.2
million or 99% of revenue for the nine months ended September 30, 1999 and 1998.
The increases in cost of revenue reflect the cost of building and expanding our
server and networking infrastructure and customer services to accommodate the
growth of our subscriber base. Cost of revenue as a percentage of revenue
decreased from period to period as a result of the increases in revenue over the
same periods.
Operating Expenses
Sales and Marketing. Our sales and marketing costs consist primarily of
payments with respect to strategic alliances, personnel related expenses,
advertising, public relations, promotions, and trade shows. Sales and marketing
expenses were $3.2 million or 65% of revenue and $2.2 million or 97% of revenue
in the nine months ended September 30, 1999 and 1998. The increases in sales and
marketing expenses primarily reflect an increase in payments with respect to
strategic alliances and increased advertising spending as we launched our $20
million advertising campaign in September 1999.
Research and Development. Our research and development costs consist
primarily of personnel related expenses. Research and development costs were
$1.3 million or 26% of revenue and $878,000 or 39% of revenue for the nine
months ended September 30, 1999 and 1998. The increase in research and
development costs from 1998 to 1999 primarily reflects increases in personnel
related expenses. Research and development costs as a percentage of revenue
decreased from 1998 to 1999 as a result of increases in revenue over the same
period.
General and Administrative. Our general and administrative costs consist
primarily of personnel related expenses, professional fees, and occupancy costs.
General and administrative costs were $5.2 million or 104% of revenue and $3.3
million or 145% of revenue for the nine months ended September 30, 1999 and
1998. The increases in general and administrative costs from period to period
were primarily due to increases in personnel, as well as increased professional
fees. General and administrative costs as a percentage of revenue decreased as a
result of increases in revenue over the same period last year.
9
<PAGE>
Interest Income (Expense), Net. Interest income (expense), net is primarily
related to interest expense on capital lease obligations, long-term debt, and
interest income earned on investments in marketable securities. Interest income
(expense), net was $(465,000) and $(433,000) for the nine months ended September
30, 1999 and 1998.
Liquidity and Capital Resources
Prior to our initial public offering, we financed our operations through
the private placement of common stock, preferred stock, long-term debt, and
equipment lease financing. On July 23, 1999 we completed our initial public
offering, in which we sold 8,500,000 shares of common stock at a price of $9.50
per share. Proceeds from the offering, before offering expenses, were
$80,750,000. As of September 30, 1999, we had approximately $25.0 million in
cash and cash equivalents and $19.3 and $9.3 million in short term and long term
debt securities, respectively. At September 30, 1999 short and long term debt
securities consisted of corporate instruments. Short term maturities range from
three months to one year and long term maturities range from beyond one year up
to 18 months.
Net cash used in operating activities increased to $9.0 million for the
nine months ended September 30, 1999 from $7.4 million for the same period in
1998. The increase in net cash used in operating activities was primarily due to
an increase in net losses of $4.4 million, an increase in prepaid marketing
costs of $1.3 million and the absence of a market value put warrant charge of
$1.9 million. These increases were reduced by an extraordinary loss of $4.4
million related to the debt extinguishment and an increase in accounts payable
of $1.5 million.
Net cash used in investing activities increased from $304,000 for the nine
months ended September 30, 1998 to $30.2 million for the nine months ended
September 30, 1999 primarily due to investments in debt securities and the
build-out of our network and purchases of office equipment.
Net cash provided by financing activities increased to $56.9 million for
the nine months ended September 30, 1999 from $17.7 million for the same period
in 1998. The increase in net cash provided by financing activities was primarily
due to proceeds from the initial public offering of $73.8 million, of which
$10.5 million was used to repay long-term debt and $6.8 million was used to
redeem preferred stock.
Our capital requirements depend on numerous factors, including market
acceptance of our services, the amount of resources we devote to investments in
our network and services development, the resources we devote to the sales and
marketing of our services and our brand promotions and other factors. We have
experienced a substantial increase in our capital expenditures and operating
lease arrangements since our inception consistent with the growth in our
operations and staffing, and anticipate that this will continue for the
foreseeable future. Additionally, we expect to make additional investments in
technologies and our network, and plan to expand our sales and marketing
programs and conduct more aggressive brand promotions.
We currently anticipate that the net proceeds of our initial public
offering, after repayment of indebtedness and redemption of preferred stock,
will be sufficient to meet our anticipated needs for working capital and capital
expenditures for at least the next 12 months. Although operating activities may
provide cash in certain periods, to the extent we experience growth in the
future, we anticipate that our operating and investing activities may use cash.
Consequently, any such
10
<PAGE>
future growth may require us to obtain additional equity or debt financing,
which may not be available on attractive terms, or at all, or may be dilutive.
Impact of Year 2000 Issue
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any computer programs
or hardware that have date-sensitive software or embedded chips may recognize a
date using ''00'' as the year 1900 rather than the year 2000. This could result
in system failures or miscalculations causing disruptions of operations for any
company using computer programs or hardware, including, among other things, a
temporary inability to process transactions, send invoices or engage in normal
business activities. As a result, many companies' computer systems may need to
be upgraded or replaced in order to avoid Year 2000 issues.
We are a comparatively new company, and, accordingly, the software and
hardware we use to operate our business have all been purchased or developed in
the last three and one half years. While this does not protect us against Year
2000 exposure, we believe we gain some mitigation from the fact that the
information technology we use to operate our business is of recent origin. All
of the software code we have internally developed to operate our business is
written with four digits to define the applicable year.
We are in the process of testing our internal information technology and
non-information technology systems. We have completed the majority of testing of
our internally developed systems, and are in the process of evaluating and
compiling test results and determining what remaining issues need to be
addressed. All of the testing we have completed has been performed by our own
personnel. To date, we have not retained any outside service or consultants to
test or review our systems for Year 2000 compliance. Based on the testing we
have performed, we believe that such software is Year 2000 compliant. However,
we intend to retest such software prior to year end.
In addition to our internally developed software, we utilize software and
hardware developed by third parties both for our network as well as our internal
information systems. We have tested this third-party software and hardware to
determine Year 2000 compliance. In addition, we have obtained certifications
from our key suppliers of hardware and networking equipment for our data
centers, as well as from the providers of our Internet access and of our
dedicated data transmission media, that our hardware and networking equipment
are Year 2000 compliant. Additionally, we have received assurances from the
providers of key software applications for our internal operations that their
software is Year 2000 compliant. Based upon an initial evaluation of our broader
list of software and hardware providers, we are aware that all of these
providers are in the process of reviewing and implementing their own Year 2000
compliance programs, and we will work with these providers to address the Year
2000 issue and continue to seek assurances from them that their products are
Year 2000 compliant.
We have not incurred any significant expenses to date, and we do not
anticipate that any future costs associated with our Year 2000 remediation
efforts will be material. We estimate that the costs associated with
implementing our year 2000 compliance plan to be approximately $110,000. During
the 3rd quarter of 1999, the expenses incurred for testing were approximately
$5,000, bringing the total expenses incurred to date to $100,000. The costs
incurred to date represent in the aggregate less than 5% of the amounts that we
have budgeted for research and development and network operations. However, if
we, our customers, our providers of hardware
11
<PAGE>
and software or other third parties with whom we do business fail to remedy any
Year 2000 issues, our services could be interrupted and we could experience a
material loss of revenues that could have a material adverse effect on our
business, prospects, results of operations and financial condition. We consider
such an interruption to be the most reasonably likely unfavorable result of any
failure by us, or failure by the third parties upon whom we rely, to achieve
Year 2000 compliance. Presently, we are unable to reasonably estimate the
duration and extent of any interruption, or quantify the effect it may have on
our future revenues. We have yet to develop a comprehensive contingency plan to
address the issues which could result from such an event. We are prepared to
develop a plan if our ongoing assessment leads us to conclude we have
significant exposure based upon the likelihood of such an event.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
We had indebtedness outstanding that accrued interest at fixed rates over
the term of that indebtedness, and therefore we did not have interest rate risk
on that debt. As of July 30, 1999 we redeemed all of our 10% senior subordinated
notes due 2004 which represented a substantial portion of our long-term debt
obligations.
At September 30, 1999 short and long term debt securities consisted of corporate
instruments. Short term maturities range from three months to one year and long
term maturities range from beyond one year up to 18 months. Such securities bear
interest at fixed rates ranging from 5% to 6.1% and are classified as held to
maturity as the company has the ability and intent to do so. At September 30,
1999 cost approximates fair market value and we believe we have no significant
market rate risk.
12
<PAGE>
PART II.
OTHER INFORMATION
ITEM 1. Legal Proceedings
On October 28, 1999, AudioFAX IP LLC filed a lawsuit against the Company in the
United States District Court for the Northern District of Georgia asserting the
ownership of certain United States and Canadian patents and claiming that the
Company is infringing these patents as a result of the Company's sale of
enhanced facsimile products. The suit requests unspecified damages, treble
damages due to willful infringement, and preliminary and permanent injunctive
relief. We have reviewed the AudioFAX patents with our business and technical
personnel and outside patent counsel and have concluded that we do not infringe
these patents. As a result, we are confident of our position in this matter and
intend to defend the suit vigorously.
ITEM 2. Changes in Securities and use of Proceeds
A. Not applicable
B. Not applicable
C. Sales of Unregistered Securities
In the three months ended September 30, 1999 we (1) issued a total of
33,044 shares of our common stock to various employees who exercised employee
options to purchase such stock at prices between $.80 and $1.65 per share for a
total purchase price of $ 29,135 (2) issued 5,470 shares of our common stock to
an employee in consideration for services to be performed under a consulting
agreement.
D. Sales of Registered Securities and Use of Proceeds During July 1999, the
Company completed its initial public offering ("the Offering") of 8,500,000
shares of its common stock. The offering date was July 23, 1999. JFAX.COM's
stock is publicly traded on the NASDAQ National Market under the symbol "JFAX."
The lead underwriters in the offering were Donaldson, Lukfin & Jenrette;
BancBoston Robertson Stephens; CIBC World Markets; and DLJdirect Inc. The shares
of common stock sold in the Offering were registered under the Securities Act of
1933, as amended, on a Registration Statement on Form S-1 (the "Registration
Statement") (File No. 333-76477) which was declared effective by the SEC on July
22, 1999.
A total of 8,500,000 shares of common stock were registered for sale by the
Company under the Registration Statement for an aggregate amount of $80,750,000
(based upon the offering price of $9.50 per share). 8,500,000 shares were sold
by the Company for an aggregate amount of $80,750,000 (before deduction of
underwriting discounts, commissions and other expenses). Additionally, the
underwriters had an option to purchase an additional 473,000 shares from the
Company and 802,000 shares from certain selling stockholders to cover
overallotments. None of these shares were sold in the Offering. If these shares
had been sold, the aggregate amount
13
<PAGE>
received for the optional shares on the same basis as above would have been $4.5
million for the Company and $7.6 million for the selling stockholders.
After deducting underwriting discounts and commissions of $5,652,500 and
expenses of $1,274,000 in connection with the Offering, the Company received net
proceeds from the Offering of $73.8 million.
Through September 30, 1999, we have used $20.9 million of proceeds from the
offering for the following purposes: (i) $17.3 million for repayment of long-
term debt in the amount of $10.5 million and redemption of preferred stock in
the amount of $6.8 million, (ii) $1.0 million for expansion of our worldwide
network, (iii) $1.5 million for funding advertising and marketing activities,
and (iv) $1.1 million for funding general corporate expenses.
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable
ITEM 5. Other Information
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibits 3.1 through 10.19 are incorporated herein by reference to the
exhibit with the corresponding number filed as part of the Company's
registration statement on Form S-1 filed on April 16, 1999 and all
amendments thereto (File No. 333-76477).
<TABLE>
<CAPTION>
Exhibit
Number Description
- ---------- -----------
<C> <S>
3.1 Certificate of Incorporation, as amended and restated.
3.2 By-laws, as amended and restated.
4.1 Specimen of common stock certificate.
9.1 Securityholders' Agreement, dated as of June 30, 1998, with the
investors in The June and July 1998 private placements.
10.1 JFAX.COM Incentive Compensation Bonus Plan.
10.2 JFAX Communications, Inc. (JFAX.COM) 1997 Stock Option Plan.
10.3 Employment Agreement for Gary H. Hickox, dated September 2, 1998.
10.3.1 Promissory Note issued by Gary H. Hickox to JFAX Communications,
Inc. On October 7, 1998, due October 7, 2001.
10.4 Employment Agreement for Dr. Anand Narasimhan, dated March 17, 1997.
10.4.1 Amended and Restated Interest Only Note issued by Anand Narasimhan to
JFAX Communications, Inc. on September 17, 1997, due September 17, 1998.
10.5 Employment Agreement for Nehemia Zucker, dated March 21, 1997.
</TABLE>
14
<PAGE>
<TABLE>
<C> <S>
10.5.1 Promissory Note issued by Nehemia Zucker to JFAX Communications, Inc.
On April 11, 1997, due March 31, 2001.
10.6 Consulting Agreement for Boardrush Media LLC, dated as of March 17,
1997.
10.7 Put Rights, for the benefit of the investors in the June and July 1998 private
Placements
10.8 Registration Rights Agreement, dated as of June 30, 1998, with the investors
In the June and July 1998 private placements.
10.9 Registration Rights Agreement, dated as of March 17, 1997, with
Orchard/JFax Investors, LLC, Boardrush LLC (Boardrush Media LLC),
Jaye Muller, John F. Rieley, Nehemia Zucker and Anand Narasimhan.
10.9.1 Letter, dated as of June 30, 1998, to Boardrush LLC, Jens Muller, John F.
Rieley, Anand Narasimhan, and Nehemia Zucker from Richard S. Ressler
Regarding the Registration Rights Agreement, dated as of March 17, 1997,
Among JFAX Communications, Inc., Boardrush LLC, Jens Muller, John F.
Rieley, Anand Narasimhan, and Nehemia Zucker.
10.10 Stock Option Agreement, dated as of January 24, 1997, by and among
JFAX Communications, Inc. and Michael P. Schulhof.
10.11 Letter, dated as of June 30, 1998, to Michael P. Schulhof from Richard S.
Ressler regarding the Stock Option Agreement, dated as of January 24, 1997,
Between JFAX Communications, Inc. and Michael P. Schulhof.
10.12 Purchase Agreement, dated as of July 2, 1998, relating to $5 million of
Preferred stock and warrants.
10.13 Consent to Amendment of Purchase Agreement, dated as of April 16, 1999.
10.14 Form of warrant pursuant to such Purchase Agreement.
10.15 Master Loan and Security Agreement, dated as of March 10, 1998, by
JFAX Communications, Inc. in favor of Transamerica Business Credit
Corporation.
10.16 Promissory Note issued by JFAX Communications, Inc. to Transamerica
Business Credit Corporation on April 21, 1998 due May 1, 2001.
10.17 Promissory Note issued by JFAX Communications, Inc. to Transamerica
Business Credit Corporation on December 22, 1998 due January 1, 2002.
10.18 Investment Agreement among JFAX Communications, Inc., Jens Muller,
John F. Rieley and Boardrush LLC and Orchard/JFax Investors, L.L.C. and
Richard S. Ressler, dated as of March 14, 1997 and effective as of March 17,
1997.
10.19 Promissory Note issued by Boardrush LLC to JFAX Communications, Inc.
Dated March 17, 1997 due March 17, 2004.
27.1 Financial Data Schedule.
</TABLE>
B. Reports on Form 8-K
No reports on Form 8-K have been filed by the Company during the period
covered by this report.
15
<PAGE>
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 thereunto duly authorized.
JFAX.COM, INC.
(Registrant)
By: /s/ Nehemia Zucker
----------------------------------
Nehemia Zucker
Chief Financial Officer and Duly
Authorized Officer of the Registrant
November 12, 1999
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE PERIOD ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 25,019
<SECURITIES> 19,358
<RECEIVABLES> 374
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 50,814
<PP&E> 4,184
<DEPRECIATION> 1,516
<TOTAL-ASSETS> 63,300
<CURRENT-LIABILITIES> 4,698
<BONDS> 0
0
0
<COMMON> 306
<OTHER-SE> 48,911
<TOTAL-LIABILITY-AND-EQUITY> 63,300
<SALES> 5,010
<TOTAL-REVENUES> 5,010
<CGS> 3,400
<TOTAL-COSTS> 3,400
<OTHER-EXPENSES> 9,742
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,283
<INCOME-PRETAX> (8,597)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,597)
<DISCONTINUED> 0
<EXTRAORDINARY> 4,428
<CHANGES> 0
<NET-INCOME> (13,025)
<EPS-BASIC> (0.55)
<EPS-DILUTED> (0.55)
</TABLE>