<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT STATEMENT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest
event reported): January 26, 2000
JFAX.COM, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 0-25965 51-0371142
(State of (Commission (I.R.S. Employer
incorporation) Number) Identification No.)
6922 Hollywood Blvd.
Suite 900
Los Angeles, California 90028
(Address of principal executive offices)
(323) 860-9200
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets (As previously stated in Form 8-K
filed on February 10, 2000)
(a) On January 26, 2000, JFAX.COM, Inc. acquired the outstanding stock of
SureTalk.Com, Inc., a closely held Internet-based faxing, messaging and
communications company based in Carlsbad, California. The stock was
acquired directly from the shareholders of SureTalk.Com, Inc. in a stock-
for-stock purchase transaction valued at approximately $9.28 million. The
shareholders of SureTalk.Com, Inc. included Steven J. Hamerslag, Timothy
Johnson, and Lester Morales, as well as various other former employees of
SureTalk.Com, Inc. Concurrently with the closing, Mr. Hamerslag was named
President and Chief Executive Officer of JFAX.COM, Inc., Mr. Johnson was
named Vice President of Product Marketing and Business Development, and Mr.
Morales was named Vice President of Sales. Certain of the other former
employee-shareholders of SureTalk.Com, Inc. also joined JFAX.COM, Inc. as
employees.
The purchase price was paid in the form of 1,515,545 shares of common stock
of JFAX.COM, Inc. valued at the closing price for such common stock as
reported on the NASDAQ on the date preceding the closing (January 25,
2000), $6.125 per share. The approximately $9.28 million consideration
paid for SureTalk.Com, Inc. was determined by negotiation between
management for the two companies.
Item 7. Financial Statements and Pro Forma Financial Information
Page No.
(a) Financial Statements of SureTalk.Com, Inc.
Report of Independent Accountants 4
Balance Sheet as of December 31, 1999 5
Statement of Operations for the year ended December 31, 1999 6
Statement Shareholders Equity (Deficiency) as of December 31, 1999 7
Statement of Cash Flows for the year ended December 31, 1999 8
Notes to Financial Statements-December 31, 1999 9
2
<PAGE>
(b) Unaudited Pro Forma Financial Information
Basis of Presentation
Unaudited Pro forma Condensed Combining Balance Sheet as of
December 31, 1999
Unaudited Pro Forma Condensed Combining Statement of Operations
for the year ended December 31, 1999
Basis of Presentation for Unaudited Pro Forma Condensed
Combining Financial Statements
The accompanying unaudited pro forma condensed combining financial
statements of JFAX.COM, Inc. and SureTalk.com, Inc. give retroactive effect
to the acquisition which is being accounted for as a purchase and, as a
result, the unaudited pro forma condensed combining balance sheet is
presented as if the companies had combined as of December 31, 1999 and
unaudited pro forma combining statement of operations is presented as if
the combining companies had been combined for the year then ended. These
unaudited pro forma condensed combining financial statements may not be
indicative of the results that actually may be obtained in the future. The
unaudited pro forma condensed combining financial statements should be read
in conjunction with the historical consolidated financial statements of
JFAX.COM, Inc. and SureTalk.com, Inc.
3
<PAGE>
Independent Auditors' Report
The Board of Directors
SureTalk.com, Inc. (formerly known as Fax4Free.com, Inc.):
We have audited the accompanying balance sheet of SureTalk.com, Inc. (formerly
known as Fax4Free.com, Inc.) as of December 31, 1999 and the related statements
of operations, shareholders' equity (deficiency) and cash flows for the year
then ended. 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 SureTalk.com, Inc. as of
December 31, 1999 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Los Angeles, CA
March 15, 2000
4
<PAGE>
<TABLE>
<CAPTION>
SURETALK.COM (Formerly known as FAX4FREE.COM)
Balance Sheet
December 31, 1999
Assets
<S> <C>
Current assets:
Cash and cash equivalents $ 31,671
Other current assets 119,577
-----------
Total current assets 151,248
Capitalized software costs 2,750,000
Net property and equipment, at cost 302,173
-----------
$ 3,203,422
===========
Liabilities and Stockholders' Deficiency
Note payable to shareholder $ 1,700,000
Accounts payable 498,263
Accrued expenses 304,921
Notes payable to officers 335,428
-----------
Total current liabilities 2,838,613
Long term portion of note payable to shareholder 1,000,000
-----------
Shareholders' deficiency:
Series A preferred stock, $0.01 par value. Authorized 2,660,000 26,600
shares; issued and outstanding 2,660,000 shares (liquidation
preference of $505,400)
Series B preferred stock, $0.01 par value. Authorized 3,000,000 29,979
shares; issued and outstanding 2,997,876 shares (liquidation
preference of $1,468,959)
Common stock, $0.001 par value. Authorized 30,000,000 shares; 9,771
issued and outstanding 9,771,314 shares
Additional paid in capital 3,325,515
Note receivable from stockholder (92,100)
Accumulated deficit (3,934,956)
-----------
Net stockholders' deficiency (635,191)
-----------
$ 3,203,422
===========
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
<TABLE>
<CAPTION>
SURETALK.COM (Formerly known as FAX4FREE.COM)
Statement of Operations
Year ended December 31, 1999
<S> <C>
Revenues $ 158,603
Cost of revenue 214,035
-----------
Gross profit (loss) (55,432)
-----------
Operating expenses:
Selling, general and administrative 3,077,732
Research and development 458,482
-----------
Total operating expenses 3,536,214
-----------
Operating loss (3,591,646)
Interest expense, net 97,585
-----------
Loss before income taxes (3,689,231)
Income taxes 800
-----------
Net loss $(3,690,031)
===========
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
SURETALK.COM (Formerly known as FAX4FREE.COM)
Statement of Shareholders' Equity (deficiency)
Year ended December 31, 1999
<TABLE>
<CAPTION>
Series A Series B
preferred stock preferred stock Common stock
----------------------- ----------------------- ---------------------
Shares Amount Shares Amount Shares Amount
--------- ----------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 -- -- -- -- 8,962,000 8,962
Issuance of stock options below fair market value -- -- -- -- -- --
Issuance of common stock for services -- -- -- -- 253,000 253
Issuance of common stock for cash -- -- -- -- 471,314 471
Exercise of options -- -- -- -- 85,000 85
Issuance of Series A preferred stock for cash 2,660,000 26,600 -- -- -- --
Issuance of Series B preferred stock for services -- -- 99,214 992 -- --
Issuance of Series B preferred stock for cash -- -- 2,898,662 28,987 -- --
ProtoDyne net equity -- -- -- -- -- --
Note receivable for issuance of common stock -- -- -- -- -- --
Net loss -- -- -- -- -- --
--------- ----------- --------- ------------ --------- ---------
Balance, December 31, 1999 2,660,000 $ 26,600 2,997,876 $ 29,979 9,771,314 $ 9,771
========= =========== ========= ============ ========= =========
<CAPTION>
Net
Note receivable Accumulated shareholders'
from Stockholder APIC deficit equity (deficiency)
---------------- ---------- ---------- ------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1998 -- 595,788 (268,208) 336,542
Issuance of stock options below fair market value -- 640,566 -- 640,566
Issuance of common stock for services -- 57,897 -- 58,150
Issuance of common stock for cash -- 89,079 -- 89,550
Exercise of options -- 16,065 -- 16,150
Issuance of Series A preferred stock for cash -- 473,400 -- 500,000
Issuance of Series B preferred stock for services -- 90,347 -- 91,339
Issuance of Series B preferred stock for cash -- 1,362,373 -- 1,391,360
ProtoDyne net equity -- -- 23,283
Note receivable for issuance of common stock (92,000) -- -- (92,100)
Net loss -- -- (3,690,031) (3,690,031)
---------- ---------- ---------- ------------
Balance, December 31, 1999 (92,100) 3,325,515 (3,934,956) (635,191)
========== ========== ========== ============
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
SURETALK.COM (Formerly known as FAX4FREE.COM)
Statement of Cash Flows
Year ended December 31, 1999
<S> <C>
Cash flows from operating activities:
Net loss $(3,690,031)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 298,817
Stock based compensation expense 788,810
Changes in assets and liabilities:
Prepaid expenses and other current
assets (109,621)
Accounts payable and accrued expenses 1,046,929
-----------
Net cash used in operating activities (1,665,096)
-----------
Cash used in investing activities:
Purchase of technology (100,000)
Purchase of property and equipment (286,819)
-----------
Net cash used in investing activities (386,819)
-----------
Cash flows from financing activities:
Proceeds from issuance of common stock 105,700
Proceeds from issuance of preferred stock 1,891,360
Issuance of note to officer (92,100)
Payment on note payable (200,000)
-----------
Net cash provided by financing
activities 1,704,960
-----------
Net decrease in cash and cash
equivalents (346,955)
Cash and cash equivalents at beginning of period 378,626
-----------
Cash and cash equivalents at end of period $ 31,671
===========
Supplemental disclosure of cash flow information --
cash paid during the period for:
Income taxes $ 800
Interest --
===========
Supplemental disclosure of noncash investing and
financing activity:
During 1999, the Company acquired certain software
technologies totaling $3,000,000 in exchange for
a $2,900,000 note payable and cash of $100,000.
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
ShareTalk.com, Inc. (formerly known as Fax4Free.com, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(1) Summary of Significant Accounting Policies
(a) Organization
SureTalk.com, Inc. (the Company) was incorporated on August 14, 1998
under the laws of the state of Colorado. In April 1999, the Company was
reincorporated under the laws of the state of Delaware. In December
1999, the Company name was changed from Fax4Free.com, Inc. to
SureTalk.com, Inc. The Company offers a variety of free and fee-based
communications services including Internet-based fax sending and
receiving, and voice mail to consumers, businesses and qualifying non-
profit organizations.
(b) Depreciation and Amortization
Depreciation and amortization of property and equipment is provided
using the straight-line method based on the estimated useful lives,
generally ranging from to one to three years.
(c) Capitalized Software Costs
All research and development costs are expensed as incurred. Purchased
technology is capitalized at cost and amortized over the estimated
economic life of the asset, which is five years.
(d) Revenue Recognition
Revenue is recognized at the time services are rendered or otherwise
earned.
(e) Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income
Taxes." Under the asset and liability method of Statement 109, deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered
or settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
9
<PAGE>
SURETALK.COM, INC. (FORMERLY KNOWN AS FAX4FREE.COM, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(f) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company accounts for long-lived assets (intangible assets and
property and equipment) under the provisions of Statement of Financial
Accounting Standards No. 121 (SFAS No. 121), "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
Of." The statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value, less costs
to sell.
(g) Stock-Based Compensation
The Company has adopted Statement of Financial Accounting Standards No.
123 (SFAS No. 123), "Accounting for Stock-Based Compensation," which
permits entities to recognize as expense over the vesting period the
fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to apply the
provisions of APB Opinion No. 25 and provide pro forma net income
disclosures for employee stock option grants made in future years as if
the fair-value-based method defined in SFAS No. 123 had been applied.
The Company has elected to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosure provisions of SFAS No. 123
(note 6).
(h) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities to
prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
(i) Comprehensive Income
Statement of Financial Accounting Standards ("SFAS") NO. 130,
"Reporting Comprehensive Income" is effective for fiscal years
beginning after December 15, 1997. SFAS 130 establishes standards for
the reporting and display of comprehensive income and its components
(revenue, expenses, gains and losses) in a full set of general-purpose
financial statements. SFAS 130 requires all items that are required to
be recognized under accounting standards as components of comprehensive
income be reported in a financial statement display with the same
prominence as other financial statements. SFAS 130 is effective for
fiscal years beginning after December 15, 1997. The Company adopted
SFAS No. 130 for the financial statements for the fiscal year ended
December 31, 1999.
10
<PAGE>
SURETALK.COM, INC. (FORMERLY KNOWN AS FAX4FREE.COM, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(2) Property and Equipment
Property and equipment is stated at cost and is summarized as follows:
<TABLE>
<S> <C>
Computers and equipment $ 332,508
Office furniture 13,041
Leasehold Improvements 5,441
----------
350,990
Less accumulated depreciation and
amortization (48,817)
----------
$ 302,173
==========
</TABLE>
(3) Capitalized Software Costs
Capitalized software costs relate to an acquisition of software from
ProtoDyne, Inc. (a related party) completed in July 1999. Mark Schwartz, a
co-founder and principal shareholder of the Company, was the sole
shareholder of ProtoDyne and the recipient of the purchase proceeds. The
purchase price was $3,000,000 delivered to Mark Schwartz with a down payment
of $100,000 and a promissory note of $2,900,000 (see note 9). The note is
secured by a stock pledge agreement and guarantee. Software costs are stated
at cost and are summarized as follows:
<TABLE>
<S> <C>
Capitalized software costs $3,000,000
Less accumulated amortization (250,000)
----------
$2,750,000
==========
</TABLE>
11
<PAGE>
SURETALK.COM, INC. (FORMERLY KNOWN AS FAX4FREE.COM, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(4) Income Taxes
Income taxes consist of franchise taxes for the state of California. At
December 31, 1999, the Company had available net operating loss
carryforwards totaling approximately $3,500,000, for Federal and state
income tax purposes expiring beginning in the year 2005. Due to the
uncertainty surrounding the realization of the benefits of its tax
attributes, including net operating loss carryforwards in future tax
returns, the Company has fully reserved its deferred tax assets as of
December 31, 1999. In assessing the potential realization of deferred tax
assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will be realized. The ultimate
realization of deferred tax assets is dependent upon the Company attaining
future taxable income during the periods in which those temporary
differences become deductible. In addition, the utilization of net operating
loss carryforwards may be limited due to restrictions imposed under
applicable Federal and state tax laws due to a change in ownership that
occurred subsequent to December 31, 1999 (Note 9).
(5) Related Party Transactions
In July 1999, the Company purchased all of the outstanding shares of
ProtoDyne, Inc. for $3.0 million. The purchase price was paid as $100,000 in
cash plus the issuance of a promissory note for $2.9 million payable in
installments over 29 months. During 1999, payments of $200,000 were made
toward this note, leaving a balance of $2.7 million as of December 31, 1999.
Mark Schwartz, a co-founder and principal shareholder of the Company, was
the sole shareholder of ProtoDyne and the recipient of the purchase
proceeds.
As of December 31, 1999 the Company had notes receivable in the amount of
$92,100 and notes payable in the amount of $335,000 from officers of the
Company. All such notes bear market interest rates and were established in
the ordinary course of business
Certain payments for the services of Barry Shore (Co-founder, Director) were
made to Dynamic Marketing Group, a corporation for which Mr. Shore is the
sole shareholder.
(6) Stock Options
The Company accounts for its stock option plan in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. As such,
compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price.
On December 31, 1999, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation," which permits entities to recognize as expense
over the vesting period the fair value of all stock-based awards on the date
of grant. Alternatively, SFAS No. 123 also allows entities to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro
forma earnings per share disclosures for employee stock option grants made
in 1995 and future years as if the fair-value-based method defined in SFAS
No. 123 had been applied. The Company has elected to apply the provisions of
APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS
No. 123.
12
<PAGE>
SURETALK.COM, INC. (FORMERLY KNOWN AS FAX4FREE.COM, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Summary stock option activity from inception to December 31, 1999 is as
follows:
<TABLE>
<CAPTION>
Weighted average
Number of options exercise price
------------------- -------------------
<S> <C> <C>
Balance at inception August 1998 -- $ --
Granted 1,150,000 0.299
Exercised -- --
Canceled (400,000) 0.813
------------------- -------------------
Balance at December 31, 1998 750,000 $ 0.025
Granted 3,273,289 0.181
Exercised (85,000) 0.190
Canceled (60,000) 0.240
------------------- -------------------
Balance at December 31, 1999 3,878,289 $ 0.150
=================== ===================
</TABLE>
There were 1,000,000 options vested at December 31, 1999. All options are
exercisable immediately, even if not vested; however, early exercised shares
are subject to repurchase by the Company at the original exercise price if
service terminates prior to vesting. Additionally, at December 31, 1999
there were 2,878,289 shares outstanding originally issued under stock option
agreements, subject to repurchase by the Company.
In connection with the granting of stock options in 1999 below fair market
value, the Company recorded compensation expense of $649,566 during the year
ended December 31, 1999.
If the Company had elected to recognize compensation cost based on the fair
value at the date of grant, consistent with the method as prescribed by SFAS
No. 123, net loss would have changed to the pro forma amounts indicated
below:
<TABLE>
<S> <C>
Net loss:
As reported $ 3,690,031
Pro forma 3,936,138
===================
</TABLE>
The fair value of options granted during 1999 was determined using a minimum
value pricing model with the following assumptions: risk-free interest rate
of 6.00% and an expected life of 10 years.
13
<PAGE>
SURETALK.COM, INC. (FORMERLY KNOWN AS FAX4FREE.COM, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
The following table summarizes information regarding options outstanding and
options exercisable at December 31, 1999:
<TABLE>
<CAPTION>
Options outstanding
-----------------------------------------------------------
Options exercisable
Weighted -----------------------------------------
Range of exercise Outstanding at average remaining Weighted average Exercisable at Weighted average
prices December 31, 1999 contractual life exercise price December 31, 1999 exercise price
--------------------------------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.025 950,000 5.7 $ 0.025 950,000 0.025
0.190 2,928,289 9.6 0.190 50,000 0.190
--------------------------------------------------------------- -----------------------------------------------------------
$ 0.025 - 0.190 3,878,289 8.7 $ 0.150 1,000,000 0.033
=============================================================== ===========================================================
</TABLE>
(7) Commitments
Lease Commitments
The Company entered into various operating leases for office space and
equipment which expire through the year 2000 and total $79,840. The lease
expense included in the accompanying statement of operations for the year
ended December 31, 1999 was $39,920.
Employment Agreements
The Company has entered into employment agreements with three of its
officers, Steve Hamerslag, Barry Shore and Mark Schwartz. These agreements
provide for employment terms ranging from 1 year to 30 months and for
continuation of salary, bonuses and vesting of options in the event of early
termination. As of December 31, 1999, $100,000 of severance expense had been
recognized in accordance with these contracts.
(8) Stockholders' Equity (Deficiency)
(a) Capital Stock
The Company's Amended and Restated Articles of Incorporation (Articles)
authorize the issuance of two classes of shares, designated common
stock and preferred stock. The numbers of shares of common stock and
preferred stock authorized totaled 30,000,000 and 5,660,000, shares
respectively.
(b) Common Stock
Holders of shares of common stock are entitled, subject to the senior
rights of holders of preferred stock described below, to receive
dividends when and as declared by the Board of Directors, to share
ratably in the proceeds of any dissolution or winding up of the Company
and to vote on certain matters as provided in the Articles. Shares of
common stock are subject to transfer restrictions and certain rights of
first refusal relating to the securities laws, the bylaws of the
Company and, in certain cases, specific agreements with the Company and
holders of preferred stock.
(c) Preferred Stock
Of the preferred stock, 2,660,000 shares have been designated Series A
and 3,000,000 shares have been designated Series B. In July 1999, the
Company issued and sold 2,660,000 of such shares to a single investor
for total cash consideration of $500,000. Warrants to purchase
1,330,000 shares of common stock were also issued in conjunction with
the sale of Series A stock. In July through September 1999, the Company
issued and sold 2,997,876 shares of Series B stock to accredited
investors for total cash consideration of $1,482,699.
14
<PAGE>
SURETALK.COM, INC. (FORMERLY KNOWN AS FAX4FREE.COM, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(d) Conversion Rights
Each share of preferred stock outstanding is convertible, at the option
of the holder, into common stock at the rate of one share of common
stock for each share of preferred stock, adjustable for certain
dilutive events. Such conversion will occur automatically upon the
closing of a registered public offering of the Company's common stock
or upon the vote in favor of such conversion by a majority of the
holders of Series A or Series B preferred stock then outstanding.
(e) Dividend Rights
Holders of Series A preferred stock and Series B preferred stock are
entitled to receive dividends, when and as declared by the Company's
Board of Directors. Such dividends are payable in preference and
priority to any dividends on common stock.
(f) Liquidation Preference
In the event of a liquidation, dissolution or winding up of the
Company, the holders of Series A and Series B preferred stock are
entitled, sharing pro rata, to receive a liquidation preference of
$0.19 and $0.49 per share, respectively, plus any accrued but unpaid
dividends. The liquidation preferences terminate upon conversion of the
preferred stock to common stock.
(g) Voting Rights
Holders of preferred stock are generally entitled to vote together with
holders of common stock on matters presented for shareholder action as
if such shares were converted to common stock.
(9) Subsequent Events
In November 1999, the Company entered into a letter of intent to be acquired
by JFAX.COM, Inc. (JFAX). Under the terms of the purchase agreement, all
equity in the Company was to be exchanged for 1,515,545 shares of restricted
common stock of JFAX valued at $6.125. This purchase transaction was
completed in January 2000. Immediately prior to the closing, the balance of
the $2.7 million promissory note to Mark Schwartz, along with certain
additional obligations, were converted to equity. In addition, the vesting
of all outstanding stock options was accelerated in accordance with the
terms of the Stock Option Plan. Finally, in conjunction with the purchase
transaction, Steven J. Hamerslag, the Company's CEO, entered into an
employment agreement to become the CEO of JFAX.
15
<PAGE>
JFAX.COM INC.
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Historical
-------------------------------
Proforma Pro Forma
JFAX.COM Suretalk.COM Adjustments Combined
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $12,256,487 31,671 12,288,158
Short term Investments 23,510,623 23,510,623
Accounts receivable 275,046 275,046
Due from related parties 95,151 95,151
Interest receivable 600,569 600,569
Prepaid marketing costs 2,725,234 2,725,234
Other current assets 784,760 119,578 904,338
------------------------------------------------------------------
40,247,870 151,249 40,399,119
Furniture, fixtures and equipment, net 3,344,075 302,173 3,646,248
Capitalized Software Costs 2,750,000 2,750,000
Long term Investments 13,558,615 13,558,615
Investment in Joint venture 417,773 417,773
Goodwill and other intangibles acquired (A)9,917,904 9,917,904
Other long-term assets 1,057,000 1,057,000
------------------------------------------------------------------
$58,625,333 3,203,422 13,223,872 71,746,659
==================================================================
Liabilities, Redeemable Securities
and Stockholders' Equity (Deficiency)
Current liabilities:
Accounts payable and accrued expenses $ 1,781,088 1,138,613 2,919,701
Deferred revenue 438,722 438,722
Current portion of capital lease obligations 176,089 176,089
Current portion of long-term debt 1,239,650 1,239,650
Current portion of Note payable to shareholder 1,700,000 (B)(1,700,000) -
Customer deposits 57,267 57,267
------------------------------------------------------------------
3,692,816 2,838,613 4,831,429
Capital lease obligations 185,762 185,762
Long-term debt 1,537,357 1,537,357
Note payable to shareholder 1,000,000 (B)(1,000,000) -
Redeemable common stock 7,064,633 7,064,633
Common stock subject to put option 997,500 997,500
Total stockholders' equity (deficiency) 45,147,265 (635,191) (A)9,917,904 57,129,978
(B)2,700,000
------------------------------------------------------------------
$58,625,333 3,203,422 9,917,904 71,746,659
==================================================================
<CAPTION>
Notes
(A) Purchase price of 1,515,545 shares at $6.125 (January 25,
2000) is $9,282,713 in total consideration
Total Consideration 9,282,713
Add Suretalk deficiency (635,191)
-----------
Total Goodwill and other intangibles acquired 9,917,904
===========
(B) To record conversion of notes payable to shareholder to
common stock in connection with purchase transaction.
</TABLE>
16
<PAGE>
JFAX.COM, INC.
UNAUDITED PRO FORMA CONDENSED COMBINING
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Historical
------------------------------ Pro Forma Pro Forma
JFAX.COM SureTalk.COM Adjustments Combined
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 7,643,442 158,603 7,802,045
Costs and expenses 20,800,284 3,750,249 (A)(B) 3,680,968 28,231,501
------------ ----------- ---------------- -----------
Operating loss (13,156,842) (3,591,646) 3,680,968 (20,429,456)
---------------- -----------
Other income (expense) 146,113 (98,385) (C) 98,385 146,113
------------ ----------- ---------------- -----------
Loss before extraordinary item (13,010,729) (3,690,031) (3,582,583) (20,283,343)
Extraordinary Item-Loss on extinguishment of debt (4,428,374) (4,428,374)
------------ ----------- ---------------- -----------
Net Loss $(17,439,103) (3,690,031) (3,582,583) (24,711,717)
============ =========== ================ ===========
Net loss attributable to common shareholders $(19,010,974) (26,288,588)
============ ===========
Net loss per common share:
Basic $ (0.68) (0.89)
Diluted (0.68) (0.89)
Weighted average common shares used in
determining loss per share:
Basic and diluted 28,098,994 (D)29,614,539
</TABLE>
Notes
To adjust for goodwill and technology amortization as if the two companies had
been combined as of January 1, 1999:
<TABLE>
<S> <C>
(A) Total goodwill as reported in the combining condensed balance sheet $9,917,904
Pro forma amortization period 3 years
Pro forma goodwill amortization for 1999 3,305,968
(B) Pro forma adjustment for accelerated amortization period for capitalized software costs 375,000
Total pro forma amortization for 1999 $3,680,968
(C) Elimination of interest expense for shareholder notes converted to common stock
(D) Includes additional 1,515,545 shares of common stock issued to acquire SureTalk.com
</TABLE>
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: April 7, 2000
JFAX.COM, Inc.
(Registrant)
By: /s/ Nehemia Zuceer
----------------------------
Nehemia Zuceer
Chief Financial and Accounting
Officer (Principal Financial
and Accounting Officer)
18
