U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
[X] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _______________ to ________________
Commission file no. 0-27917
IPVoice.com, Inc.
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(Name of small business issuer in its charter)
Nevada 65-0729900
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5050 No. 19th Avenue, Suite 416/417, Phoenix, Arizona 85015
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(Address of principal executive offices) (Zip Code)
Name of each exchange on
Title of each class which registered
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Copies of Communications Sent to:
Mercedes Travis, Esq.
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696:
Fax: (561) 659-5371
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $321,279.
Of the 16,422,758 shares of voting stock of the registrant issued and
outstanding as of December 31, 1999, 7,066,235 shares are held by
non-affiliates. The Company is quoted on the OTC under the symbol "IPVC". On
March 30, the closing price was $2.531. Accordingly, the aggregate market value
based on the non-affiliate shares and based upon this closing price as of March
30, 2000 was $17,884,641.
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TABLE OF CONTENTS
PART I PAGE NO.
Item 1. Description of Business 1
Item 2. Description of Property 38
Item 3. Legal Proceedings 39
Item 4. Submission of Matters to a Vote of Security Holders 40
PART II
Item 5. Market for Common Equity and Related Shareholder Matters 40
Item 6. Plan of Operation 41
Item 7. Financial Statements - Commencing on 47
Item 8. Changes and Disagreements with Accountants on Accounting 48
And Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; 48
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation 51
Item 11. Security Ownership of Certain Beneficial Owners and 55
Management
Item 12. Certain Relationships and Related Transactions 58
Item 13. Exhibits and Reports on Form 8K 65
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PART I
Item 1. Description of Business.
(a) Business Development
IPVoice.com, Inc. (the "Company" or "IPVC") is incorporated in the
State of Nevada. The Company was originally incorporated as Nova Enterprises,
Inc. on February 19, 1997 ("Nova"). In March 1998, Nova acquired 100% of IPVoice
Communications, Inc., a Delaware corporation formed in December 1997 ("IPVCDE").
The Company subsequently changed its name to IPVC in May 1999. The Company is
quoted on the OTC Bulletin Board under the symbol "IPVC". Its executive offices
are presently located at 5050 No. 19th Avenue Suite 416/417, Phoenix, Arizona
85015. Its telephone number is (602) 335-1231 and its facsimile number is (602)
335-1577.
The Company is filing this Form 10-KSB in compliance with the
effectiveness of its filing on Form 10-SB. The Company will file periodic
reports in the event its obligation to file such reports is suspended under the
Securities and Exchange Act of 1934 (the "Exchange Act".)
Since inception the Company has been engaged in the business of
developing its MultiCom Business Management Software ("MultiCom") for use in
Internet telephony applications (telephone, fax, data, images and video over the
Internet). MultiCom is the business management system behind the Company's
TrueConnect Gateway product ("Gateway"), for which trademark protection is being
sought. Gateway provides a mechanism for bridging the public telephone system
with the Internet. IPVC was founded on the premise that traditional telephone
systems wasted precious resources by assigning each call a "nailed down"
circuit. IPVC's Gateway allows a packet of information (voice, video, e-mail,
data, images, etc.) to cross multiple networks on its way to its final
destination. Thus, instead of having one dedicated circuit for a call, the
entire network is shared. The Company continues to research the availability of
additional innovative products in the Internet telephony and related industries
for development, distribution or acquisition. See Part I, Item 1. "Description
of the Business - (b) Business of Issuer - Patents, Copyrights and Trademarks."
It is the Company's intention to (i) continue to market its network
and Gateway product; (ii) to conduct research to further develop its Gateway
product and (iii) to develop further "add- ons" which will enhance and expand
the Gateway product. See Part I, Item 1. "Description of the Business - (b)
Business of Issuer."
In February 1997, prior to its acquisition of IPVCDE, the Company
sold 1,400,000 shares of its unrestricted Common Stock to sixty-nine (69)
individuals for $14,000. For such offering, the Company relied upon Section 3(b)
of the Securities Act of 1933, as amended (the "Act") and Rule 504 promulgated
under Regulation D of the Act ("Rule 504") and Section 517.061(11) of the
Florida Code, Section 4[5/4](G) of the Illinois Code, Section 90.530(11) of the
Nevada Code, Section 78 A-17(9) of the North Carolina Code, Section
48-2-103(b)(4) of the Tennessee Code
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and Section 5[581-5]I(c) of the Texas Code. No state exemption was necessary for
the sales made to Bahamian, Canadian or French investors. See Part III, Item 12.
"Certain Relationships and Related Transactions".
In November 1997, prior to its acquisition by the Company, IPVCDE
entered into a consulting agreement with Condor Worldwide, Ltd., a Bahamian
corporation ("Condor"), whereby Condor agreed to provide certain sales,
marketing and public relations services in exchange for 600,000 shares of
IPVCDE's unrestricted Common Stock to be issued upon listing of IPVCDE's stock
on the OTC Bulletin Board. Such shares were never issued and the agreement was
amended in July 1998 deleting the issuance of such shares. The consulting
agreement was modified in July 1998 to revoke all interest in the shares. The
term of the Agreement was for a period of six (6) years and is still in effect.
James K. Howson, the Company's Chairman and CEO, serves as the Chairman and CEO
of Condor and he is the beneficial owner of Condor. Effective September 1999,
Condor agreed to reduce its consulting fees to $90,000 per year. This agreed
reduction will shall continue until the Company is profitable and there are no
accruals of any unpaid amounts under the Condor contract. Further, none Condor
has no expectations regarding the amount foregone at any future date. See Part
I, Item 1. "Description of Business - (b) Business of Issuer - Employees and
Consultants"; Part III, Item 11 "Security Ownership of Certain Beneficial Owners
and Management"; and Part III, Item 12. "Certain Relationships and Related
Transactions".
In March 1998, the Company's predecessor, Nova, entered into a share
exchange agreement with IPVCDE and its shareholders whereby Nova issued
9,000,000 shares of its restricted Common Stock valued at $9,000 to IPVCDE's
shareholders for all of the outstanding capital stock of IPVCDE, which then
became a wholly-owned subsidiary of Nova. In connection with the agreement, the
Company entered into employment agreements with Barbara Will, its current
Director, Chief Operating Officer and President and with Anthony Welch, designer
of the Company's proprietary software, who currently serves as the Senior
Vice-President of Research and Development. As part of the exchange, Ms. Will,
Mr. Welch and Condor each received 3,000,000 shares of the Company's restricted
common stock. Mr. Howson, the Company's Chairman and Chief Executive Officer, is
the beneficial owner of Condor. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506, Section 11-51-308(1)(j) of the Colorado Code,
Section 7309(b)(9) of the Delaware Code and Section 90.530(17) of the Nevada
code. The Company relied on no state exemption for the issuance to Condor, which
is a Bahamian corporation. See Part I, Item 1. "Description of Business - (b)
Business of Issuer - Employees and Consultants"; Part III, Item 10. "Executive
Compensation - Employee Contracts and Agreements"; Part III, Item 11. "Security
Ownership of Certain Beneficial Owners and Management"; and Part III, Item 12.
"Certain Relationships and Related Transactions".
In April 1998, the Company sold 154,000 shares of its unrestricted
Common Stock to five (5) investors for $154,000. For such offering, the Company
relied upon Section 3(b) of the Act and Rule 504 and Section 517.061(11) of the
Florida Code and Section 359(f)(2)(d) of the New York Code. No state exemption
was necessary for the shares sold to a United Kingdom corporation. See Part III,
Item 12. "Certain Relationships and Related Transactions".
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In July 1998, the Company sold 53,333 shares of its unrestricted
Common Stock to one (1) investor for $40,000.75. For such offering, the Company
relied upon Section 3(b) of the Act and Rule 504 and Section 517.061(11) of the
Florida Code. See Part III, Item 12. "Certain Relationships and Related
Transactions".
In July 1998, the Company entered into a consulting agreement with
Calpe, Ltd., a Bahamian corporation ("Calpe"), to provide public relations
consulting services valued at $85,000 to the Company in exchange for 850,000
shares of the Company's unrestricted Common Stock, of which 200,000 shares were
given to The Investor Communications Group, Inc., a Georgia corporation ("ICG")
pursuant to its consulting contract (as more fully described herein) and 23,000
shares were given to Neil Rand d/b/a Corporate Imaging ("CI") pursuant to its
consulting contract (as more fully described herein). In consideration of its
627,000 shares, Calpe agreed to forego commissions equal to $62,700 from IPVC
product sales. The term of the Agreement was for a period of three (3) years and
is still in effect. For such offering, the Company relied upon Section 3(b) of
the Act and Rule 504. No state exemption was necessary for the Calpe shares, as
Calpe is a Bahamian corporation. However, the Company relied upon Section
10-5-9(13) of the Georgia Code for the ICG shares and Section 14-4-140 of the
Arizona Code for the CI shares. See Part I, Item 1. "Description of Business -
(b) Business of Issuer - Employees and Consultants"; and Part III, Item12.
"Certain Relationships and Related Transactions".
In July, 1998, the Company entered into a consulting agreement with
ICG to provide financial public relations and direct marketing advertising and
consulting services to the Company. For such services, the Company agreed to pay
ICG $75,000 over the term of the Agreement and to issue 200,000 shares of the
unrestricted Common Stock of the Company, and to grant warrants to purchase
100,000 shares of the restricted Common Stock of the Company exercisable for a
period of two (2) years at an exercise price of $2.00 per share. Such warrants
have piggy-back registration rights. Such issuance of shares were valued at
$20,000, while the warrants were valued at $0. IPVC has a right of first refusal
to buy back any shares proposed to be sold by ICG to any third party. Of the
850,000 shares of its unrestricted Common Stock issued to Calpe, 200,000 shares
were given to ICG pursuant to its contract. The contract term was for a period
of six (6) months and has since terminated. For such offering, the Company
relied upon Section 3(b) of the Act and Rule 504. The Company relied upon
Section 10-5-9(13) of the Georgia Code for the issuance of ICG shares. See Part
I, Item 1. "Description of Business - (b) Business of Issuer - Employees and
Consultants"; and Part III, Item 12. "Certain Relationships and Related
Transactions".
In July 1998, the Company entered into a consulting agreement with CI
to provide public and investor relations consulting services to the Company in
exchange for 23,000 shares of the Company's unrestricted Common Stock. The
Agreement was for a term of three (3) months and terminated automatically in
November 1998. Of the 850,000 shares of its unrestricted Common Stock issued to
Calpe, 23,000 shares were given to CI pursuant to its contract. The Company
relied upon Section 3(b) of the Act and Rule 504. The Company relied upon
Section 14-4-140 of the Arizona Code for the issuance of CI shares. See Part I,
Item 1. "Description of Business - (b) Business of Issuer - Employees and
Consultants"; and Part III, Item 12. "Certain Relationships
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and Related Transactions".
In July 1998, the Company entered into an agreement with The
Armstrong International Group, Inc. ("Armstrong") wherein the Company granted
Armstrong the non-exclusive right to market, advertise and sell the Company's
domestic and international calling services. As payment for these services, IPVC
issued Armstrong warrants to purchase 50,000 shares of the Company's Common
Stock exercisable at a price of $0.75 per share or, at the option of IPVC, for a
total sum of $37,500 as well as commissions on all sales of the Company's
products and services. The term of the agreement is for a period of three (3)
years. For such offering, the Company relied upon Section 4(2) of Act and Rule
506 and Section 517.061(11) of the Florida Code. See Part I, Item 1.
"Description of Business - Business of Issuer - Internet Telephony"; and Part
III, Item 12. "Certain Relationships and Related Transactions".
In September 1998, the Company entered into a consulting agreement
for a term of six (6) months with First Capital Partners, Inc. ("First
Capital"), to provide financial consulting services to the Company. In the event
that First Capital was successful in securing debt or equity financing for the
Company, First Capital would be granted warrants to purchase 125,000 shares of
the restricted Common Stock of the Company exercisable for a period of three (3)
years at an exercise price of $1.00 per share. Such warrants would have
piggy-back registration rights. See Part I, Item 1. "Description of Business -
(b) Business of Issuer - Employees and Consultants"; and Part III, Item 12.
"Certain Relationships and Related Transactions".
In September 1998, the Company sold 20,000 shares of its unrestricted
Common Stock to one (1) investor for $10,000. For such offering, the Company
relied upon Section 3(b) of the Act and Rule 504 and Section 517.061(11) of the
Florida Code. See Part III, Item 12. "Certain Relationships and Related
Transactions".
In September 1998, the Company sold 100,000 shares of its
unrestricted Common Stock to one (1) investor for $25,000. For such offering,
the Company relied upon Section 3(b) of the Act and Rule 504 and Section
49:3-50(b)(9) of the New Jersey Code. See Part III, Item 12. "Certain
Relationships and Related Transactions".
In September 1998, the Company sold 80,000 shares of its unrestricted
Common Stock to one (1) investor for $15,000. For such offering, the Company
relied upon Section 3(b) of the Act and Rule 504 and Section 517.061(11) of the
Florida Code. See Part III, Item 12. "Certain Relationships and Related
Transactions".
In September 1998, the Company issued 100,000 shares of its
unrestricted common stock in exchange for legal services valued at $10,000. For
such offering, the Company relied upon Section 3(b) of the Act, Rule 504 and
Section 517.061(11) of the Florida Code. See Part III, Item 12. "Certain
Relationships and Related Transactions".
In October 1998, the Company entered into a consulting agreement with
International Investment Partners, Ltd., an Irish corporation ("IIP"),
memorializing an oral agreement made in
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July 1998, to provide financial, consulting and advisory services valued at
$35,000 in exchange for the issuance of 350,000 shares, of which 243,760 are
unrestricted Common Stock of the Company and 106,240 are restricted Common Stock
of the Company, the grant of warrants to purchase an additional 1,600,000 shares
of the unrestricted Common Stock of the Company exercisable without time
limitation at an exercise price of $0.06 per share, the grant of warrants to
purchase an additional 350,000 shares of the restricted Common Stock of the
Company exercisable without time limitation at an exercise price of $3.90 per
share and in consideration of $100 the grant of warrants to purchase an 5% of
the restricted Common Stock of the Company on a fully-diluted basis at a price
of $1.00 per share. In January 1999, IIP received 93,760 shares of Common Stock
in lieu of payment for services which was due in the amount of $14,064. IIP
exercised its warrant to purchase 1,600,000 shares in April 1999 at an exercise
price of $96,000. As to the warrant that entitles IIP to purchase 5% of the
restricted Common Stock of the Company, in February 2000, IIP purchased 136,000
shares at an exercise price of $136,000 and in March 2000, IIP purchased 50,000
shares at an exercise price of $50,000. Such shares represent 1.22% of the 5%
interest that IIP is entitled to acquire, thereby entitling IIP to purchase
additional shares representing 3.88%. The Agreement is for a period of three (3)
years and is still in effect. The Company must also pay a monthly fee of $4,000
the first year, $6,000 the second year and $8,000 the third year. For the
unrestricted shares and warrants to purchase unrestricted shares, the Company
relied upon Section 3(b) of the Act and Rule 504. For the restricted shares and
warrants to purchase restricted shares, the Company relied upon Section 4(2) of
the Act and Rule 506. No state exemption was necessary, as IIP is an Irish
corporation. See Part I, Item 1. "Description of Business - (b) Business of
Issuer - Employees and Consultants"; and Part III, Item 12. "Certain
Relationships and Related Transactions".
In October, 1998, the Company entered into a consulting agreement
with Insidestock.com, Inc., a Florida corporation ("Inside.com") to provide
media relations services and consulting advice to the Company valued at $41,250
in exchange for the issuance of 275,000 shares of the unrestricted Common Stock
of the Company and the grant of warrants to purchase an additional 155,000
shares of the unrestricted Common Stock of the Company exercisable for a period
of one (1) year at a price of $0.645 per share. Inside.com exercised its warrant
to purchase 155,000 shares in April 1999 at an exercise price of $100,000. The
Agreement is for a term of one (1) year and is still in effect. For such
issuance, the Company relied upon Section 3(b) of the Act and Rule 504 and
Section 517.061(11) of the Florida Code. See Part I, Item 1. "Description of
Business - (b) Business of Issuer - Employees and Consultants"; and Part III,
Item 12. "Certain Relationships and Related Transactions".
From December 1998 through January 1999, the Company sold 896,665
shares of its unrestricted Common Stock to eight (8) investors for $134,500. For
such offering, the Company relied upon Section 3(b) of the Act and Rule 504 and
Section 11-51-308(1)(j) of the Colorado Code, Section 517.061(11) of the Florida
Code and Section 49:3-50(b)(9) of the New Jersey Code. No state exemption was
required for two (2) Bahamian investors. See Part III, Item 12. "Certain
Relationships and Related Transactions".
From February 1999 through May 1999, the Company sold forty-six (46)
units to twenty- four (24) investors for $1,150,000. Each unit consisted of: (i)
a note payable in two (2) years with an option for the Company to extend it for
an additional two (2) years in the principal amount of $24,900 bearing interest
at 9% per annum payable quarterly in cash or, at the option of the Company, in
unrestricted shares of the Company's Common Stock; (ii) a warrant to purchase
18,750 shares of the Company's restricted Common Stock exercisable during the
period in which the note is outstanding at an exercise price equal to 125% of
the average closing price of the stock for the thirty (30) trading days
immediately prior to February 1, 1999, which warrants contain piggy-back
registration rights; and (iii) twenty-five (25) of the Company's Senior
Convertible Preferred shares. In the event of a default in repayment of the
notes, all outstanding Senior Convertible Preferred shares shall be converted
into Common Stock of the Company in an amount which will equal 51% of the issued
and outstanding shares, warrants and options of the Company. For such offering,
the Company relied upon Section 4(2) of the Act and Rule 506 and Section
14-4-126(f) of the Arizona Code, Section 25102(f) of the California Code,
Section 517.061(11) of the Florida Code, Section 130.293 of the Illinois Code,
Section 191-50.14(502) of the Iowa Code, Section 451.803.7 of the Michigan Code,
Section 359(f)(2)(d) of the New York Code and Section 70P.S.1-211 of the
Pennsylvania Code. See Part III, Item 12. "Certain Relationships and Related
Transactions".
In March and April 1999, the Company sold 875,000 shares of its
unrestricted Common Stock to one (1) investor for $350,000. For such offering,
the Company relied upon Section 3(b) of the Act and Rule 504. No state exemption
was required, as the investor was a Bahamian corporation. See Part III, Item 12.
"Certain Relationships and Related Transactions".
In March 1999, the Company entered into a consulting agreement with
Buying Power Network ("BPN") to provide financial public relations consulting
services to the Company for which the Company agreed to pay $40,000 for the
first month, and $30,000 for the second and third months, with subsequent months
to be agreed upon, each of which is payable in unrestricted shares of the
Company's Common Stock the number of which is determined by dividing the monthly
payment by $1.00. The contract term was through September 1999 and has expired
without renewal. In exchange for services rendered by BPN, the Company issued
100,000 shares of its unrestricted Common Stock valued at $106,200 to Joyce
Research Group, of which BPN is a division. For the fourth, fifth and sixth
months of the contract, the Company granted Joyce Research Group options to
purchase 150,000 shares of the Company's restricted Common Stock at an exercise
price equal to 60%, 65% and 70% of the market price respectively. For such
offering, the Company relied upon Section 3(b) of the Act and Rule 504 and
Florida Code Section 517.061(11). See Part I, Item 1. "Description of Business -
(b) Business of Issuer - Employees and Consultants"; and Part III, Item 12.
"Certain Relationships and Related Transactions".
In April 1999, the Company entered into a share exchange agreement
with SATLINK 3000, Inc. d/b/a Independent Network Services, a Nevada corporation
formed in April, 1998, ("INS") whereby the Company exchanged 250,000 shares of
its Redeemable Convertible Preferred stock valued at $500,000 for all of the
outstanding capital stock of INS. Such Redeemable Convertible Preferred stock
contains 1 for 1 conversion rights after one (1) year and is redeemable at $2.00
per share. The President of INS, Peter M. Stazzone, remained with the
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Company as the President of the subsidiary. At the time of the exchange Mr.
Stazzone became Secretary, Treasurer and Chief Financial Officer of the Company
under an employment agreement. Also at the time of the exchange, Mr. Stazzone
received 50,000 shares of the Redeemable Convertible Preferred Stock of the
Company. Pursuant to the Employment Agreement, Mr. Stazzone received 200,000
shares of the Company's Restricted Common Stock, a stock bonus of 100,000 shares
of the Restricted Common Stock deemed earned on the date of the Share Exchange
Agreement, but to be delivered on the earlier of (i) the first anniversary date
or (ii) Mr. Stazzone's termination and options to purchase an additional 200,000
shares of the restricted Common Stock of the Company exercisable for a period of
three (3) years at an exercise price of $1.00 per share. It was represented that
INS had acquired certain assets, including the rights to INS' name, from the
Bankruptcy Court in the Chapter 11 filing on behalf of Telsave Corporation
("Telsave"). Mr. Stazzone was the Chief Financial Officer of Telsave at the time
the bankruptcy was filed and the Bankruptcy Court was provided with disclosure
of his involvement with INS prior to the Court's approval of the sale of certain
Telsave assets to INS. In June 1998, Mr. Stazzone was loaned $100,000 by INS,
which loan bears no interest and has no stated repayment terms. At the time of
the acquisition of INS, the Company believed that it was acquiring the rights to
the carrier identification code 10-10-460 ("CIC Code"). The purchase price was
based in part upon an appraisal of the value of the CIC Code which is loaded in
approximately 60% of the domestic market. However, during the course of the
audit, it was discovered that clear title may not have passed to INS and
subsequently the Company as the owner of INS. Therefore, the Board resolved
that, in the event clear title had not passed to the Company, it would be in the
best interest of the shareholders to unwind the transaction. The Company sought
a legal opinion on the status of such title and just prior to filing its Form
10SB discovered that there was no clear link between the ownership of the CIC
Code and INS. Therefore the Company voted to unwind the transaction ab initio,
to rescind the issuances made under the acquisition and the employment
agreements and to terminate Mr. Stazzone's employment. Mr. Stazzone and INS have
instituted suit against the Company. For such offering, the Company relied upon
Section 4(2) of the Act and Rule 506, Section 14-4-126(f) of the Arizona Code
and Section 90.530(11) of the Nevada Code. See Part I, Item 1. "Description of
Business - (b) Business of Issuer - Employees and Consultants"; Part I, Item 3.
Legal Proceedings"; Part I, Item 4. "Security Ownership of Certain Beneficial
Owners and Management"; Part I, Item 6. "Executive Compensation - Employee
Contracts and Agreements"; and Part III, Item 12. "Certain Relationships and
Related Transactions".
In April 1999, the Company entered into a marketing agreement with
Benae International, Inc., a Nevada Corporation ("Benae") to market the
Company's telephony services and to register a minimum of one hundred (100)
customers in the thirty (30) cities in which IPVC plans to offer telephony
services within twelve(12) months in exchange for 200,000 shares of the
unrestricted Common Stock of the Company valued at $206,200. The shares are to
be returned to the Company if the minimum is not met. For such offering, the
Company relied upon Section 3(b) of the Act and Rule 504 and Section 90.530(11)
of the Nevada Code. See Part I, Item 1. "Description of Business - Business of
Issuer - Internet Telephony"; Part I, Item 1. "Description of Business - (b)
Business of Issuer - Employees and Consultants"; and Part III, Item 127.
"Certain Relationships and Related Transactions".
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In April, 1999, the Company entered into a marketing and advertising
agreement with Netgenie.com, Inc., an Arizona corporation ("NG") to provide
marketing services to a minimum of 75,000 customers in thirty (30) cities
designated by IPVC within a twelve (12) month period in exchange for 100,000
shares of the restricted Common Stock of the Company valued at $103,100, which
shares must be returned if NG fails to deliver a minimum of eight (8) cities
with a total of 75,000 customers before December 31, 1999. In addition, NG may
earn performance bonuses of: 50,000 restricted shares if eight (8) cities are
delivered within ninety (90) days of execution; 50,000 restricted shares if
fifteen (15) cities are delivered within one hundred fifty (150) days; and
10,000 restricted shares for each additional city thereafter before December 31,
1999 up to 30 cities. Further, NG will be granted warrants to purchase 30,000
shares of the Company's restricted Common Stock exercisable for a period of two
(2) years at an exercise price of $2.50 per share for every block of 5,000
pre-registered customers up to 75,000 pre-registered customers in a twelve (12)
month period. For such offering, the Company relied upon Section 4(2) of the Act
and Rule 506 and Section 14-4-126(F) of the Arizona Code. See Part I, Item 1.
"Description of Business - Business of Issuer - Internet Telephony"; Part I,
Item 1. "Description of Business - (b) Business of Issuer - Employees and
Consultants"; and Part III, Item 12. "Certain Relationships and Related
Transactions".
In September 1999, the Company issued 10,000 shares of its
unrestricted Common Stock in exchange for legal services valued at $10,000. The
shares were issued pursuant to an obligation incurred in 1998. The Company
relied upon Section 3(b) of the Act, Rule 504 and Florida Code Section
517.061(11). See Part III, Item 12. "Certain Relationships and Related
Transactions".
On November 11, 1999, the Company executed a letter employment
agreement dated November 10, 1999 with Harry R. Bowman. Under the terms of the
agreement, Mr. Bowman is to serve as an Executive Vice President of the Company
for a term of two (2) years at a base salary of $78,000 per year. In addition,
Mr. Bowman, a resident of Pennsylvania, receives health insurance, a paid
vacation, travel twelve (12) times a year to his residence and living,
automobile and subsistence allowances. Mr. Bowman is required to spend at least
three (3) weeks a month at the Company's offices in Phoenix and one (1) week a
month at a location to be decided in Pennsylvania.. The agreement included a
sixty (60) day probationary period. Under the terms of the agreement, Mr. Bowman
was granted four (4) years options to purchase 50,000 shares of the Company's
Common Stock at an exercise price of $1.75 exercisable one half when the stock
trades for any ten (10) days out of thirty (30) consecutive days at or above
$7.00 per share and one half when the stock trades at or above $12.00 in the
same manner. Any shares acquired under the option must be held for the two-year
period in which Mr. Bowman has committed to work for the Company, and, in the
event the commitment is not met or Mr. Bowman is discharged due to poor
performance or cause, unexercised options expire and shares acquired are
forfeited. For such offering, the Company relied upon Section 4(2) of the Act
and Rule 506 and Section 201.[70 P.S. 1.201] of the Pennsylvania Code. See Part
I, Item 1. "Description of Business - (b) Business of Issuer - Employees and
Consultants"; Part III, Item 10. "Executive Compensation - Employee Contracts
and Agreements"; Part III, Item 11. "Security Ownership of Certain Beneficial
Owners and Management"; and Part III, Item 12. "Certain Relationships and
Related Transactions".
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At a meeting of the Board in November 1999, the Company granted to
Russell Watson, a Director of the Company, four (4) years options to purchase
20,000 shares of the Company's Common Stock at an exercise price of $1.75
exercisable one half when the stock trades for any ten (10) days out of thirty
(30) consecutive days at or above $7.00 per share and one half when the stock
trades at or above $12.00 in the same manner. For such offering, the Company
relied upon Section 4(2) of the Act and Rule 506 and Section 201.[70 P.S. 1.201]
of the Pennsylvania Code. See Part I, Item 4. "Security Ownership of Certain
Beneficial Owners and Management"; Part III, Item 12. "Certain Relationships and
Related Transactions".
On November 17, 1999, the Company executed a memorandum of
understanding with Telic.net whereby the parties entered a strategic alliance
under which Telic.net will provide enhanced services to the Company and the
Company will acquire from Telic.net gateways at Telic.net's cost for use by the
Company's customers. Although a non-binding agreement, the parties have
expressed the wish to maintain the alliance as long as it is beneficial to each
of them. The Company maintains the right to purchase hardware elsewhere. In
addition, the Company can license certain of Telic.net's software, acquire
certain source codes and Telic.net will modify the Company's gateways to
accommodate the Company's billing system and call flow. It is intended that
Telic.net will provide full network support for the Company thereby advancing
the Company's timetable for full integration of its network. See Part I, Item 1.
"Description of Business - Business of Issuer - Internet Telephony
Effective November 29, 1999, the Company executed an engagement
letter with McGinn, Smith & Co., Inc. ("McGinn") to act as a broker and
financial advisor to the Company in the private placement of up to $5 million of
the Company's securities. Under the agreement McGinn is to use its best efforts
with regard to such placement. The agreement is effective through March 24,
2000. From the date of the engagement letter through March 24, 2000, McGinn has
the exclusive right to offer the Company's securities. In the event McGinn is
successful, it will receive a fee equal to ten percent (10%) of the first $5
million and eight percent (8%) of any amount in excess of $5 million and will
receive three year warrants equal to 2% of the proceeds with a strike price of
125% of the bid price on the date of closing. Such warrants are to have
piggy-back registration rights. Upon execution of the engagement letter, the
Company was required to issue 10,000 shares of its restricted Common Stock as a
non-refundable Retainer/Investment Banking fee and the Company is obligated to
reimburse McGinn for pre- approved expenses. The Company has not accepted the
terms of any private placements under this Agreement. For such issuance, the
Company relied upon Section 4(2) of the Act and Rule 506 and Section
359(f)(2)(d) of the New York Code. See Part I, Item 1. "Description of Business
- - (b) Business of Issuer - Employees and Consultants"; and Part III, Item 12.
"Certain Relationships and Related Transactions".
On December 9, 1999, the shareholders adopted an executive incentive
stock award plan under which 1,000,000 are reserved for grants under the plan.
The plan takes effect on January 1, 2000 and terminates on December 31, 2005.
Under the plan, options can be granted to select employees, officers,
executives, directors and consultant and advisors to the Company. It is intended
that all options be granted at fair market value on a particular date determined
by the
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Compensation and Option Committee which is made up of James Howson, Director and
Chief Executive Officer and Russell Watson, Director; however, a lesser price
may be set by such Committee. The exercise period for the options is determined
by the Committee but cannot exceed six (6) years. Pursuant to the terms of the
approved plan, the Board of Directors is authorized to alter, amend or modify
the plan under certain conditions. The Board of Directors approved a modified
plan on February 28, 2000 that maintains the key features of the approved plan
as required. Part III, Item 10. "Executive Compensation - Employee and
Consultants Stock Option Plans"; and Part III, Item 12. "Certain Relationships
and Related Transactions".
Effective February 16, 2000, the Company executed an engagement
letter with Delano Group Securities LLP ("Delano") to act as a placement agent
and financial advisor to the Company in the private placement of up to $2.5
million of the Company's securities. Under the agreement Delano is to use its
best efforts with regard to such placement. Delano was listed with McGinn as a
broker with whom they were working prior to the McGinn engagement letter. In the
event Delano is successful, it will receive a fee equal to seven percent (7%) of
the proceeds, a non-accountable expense allowance equal to three percent (3%) of
the proceeds and five year warrants to purchase 100,000 shares of the Company's
Common Stock at a strike price equal to 120% of the lowest closing bid price
during the five (5) trading days prior to the closing. Such warrants are to have
piggy-back registration rights. The Company has not accepted the terms of any
private placements under this Agreement. See Part I, Item 1. "Description of
Business - (b) Business of Issuer - Employees and Consultants".
See (b) "Business of Issuer" immediately below for a description of
the Company's business.
(b) Business of Issuer.
Background of the Industry
The $88.6 billion U.S. long distance industry is dominated by the
nation's three largest long distance providers, AT&T, MCI/WorldCom and Sprint,
which together generated approximately 80.3% of the aggregate revenue of all U.S
long distance interexchange carriers in 1997. Other long distance companies,
some with national capabilities, accounted for the remainder of the market.
As published on the Federal Communications Commission ("FCC') Website
located at
www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/socc/97socc.pdf., toll
service revenues of U.S. long distance interexchange carriers have grown from
$38.8 billion in 1984 to $88.6 billion in 1997. While industry revenues have
grown at a compounded annual rate of 6.6% since 1984, the revenues of carriers
other than AT&T, MCI/WorldCom and Sprint have grown at a compounded rate of
33.7% during the same period. As a result, the aggregate market share of all
interexchange carriers other than AT&T, MCI/WorldCom and Sprint has grown from
2.6% in 1984 to 19.8% in 1997. During the same period, the market share of AT&T
declined from 90.1% to 44.5%.
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Prior to the Telecommunications Act (the "TC Act"), signed by
President Clinton on February 8, 1996, the long distance telecommunications
industry had been principally shaped by a court decree between AT&T and the
United States Department of Justice, known as the Modification of Final Judgment
(the "Consent Decree") that in 1984 required the divestiture by AT&T of its
twenty-two (22) Bell operating companies and divided the country into some two
hundred (200) Local Access and Transport Areas, or "LATAs." The twenty-two (22)
operating companies, which were combined into seven (7) Regional Bell Operating
Companies, or "RBOCs", were given the right to provide local telephone service,
local access service to long distance carriers and intraLATA toll service
(service within LATAs), but were prohibited from providing interLATA service
(service between LATAs). The right to provide interLATA service was maintained
by AT&T and the other carriers.
To encourage the development of competition in the long distance
market, the Consent Decree and the Federal Communications Commission ("FCC")
require most Local Exchange Carriers ("LECs") to provide all carriers with
access to local exchange services that is equal in type, quality and price to
that provided to AT&T and with the opportunity to be selected by customers as
their preferred long distance carrier. These so-called equal access and related
provisions are intended to prevent preferential treatment to AT&T.
On February 8, 1996, the President signed the TC Act, which is
intended to introduce more competition to the U.S. telecommunications markets.
In addition to codifying the provisions of the Consent Decree, the TC Act
codifies LECs equal access and non-discrimination obligations with respect to
the local services market by requiring LECs to permit interconnection to their
networks (i.e. customer's telephone or modem which connects to the service
provider's equipment) and establishing among other things, LECs obligations with
respect to access, resale, number portability (the capability of individuals,
businesses, and organizations to retain their existing telephone number(s) and
the same quality of service when switching to a new local service provider),
dialing parity (the duty to provide dialing parity to competing providers of
telephone exchange service and telephone toll service and the duty to permit all
such providers to have non-discriminatory access to telephone numbers, operator
services, directory assistance and directory listing, with no unreasonable
dialing delays), access to rights-of-way (the duty to afford access to the
poles, ducts, conduits and rights-of-way of a LECs to competing providers of
telecommunications services at the same rates and on the same terms afforded by
the LECs, and mutual compensation. In essence, the TC Act codifies the LECs duty
to provide to independent service providers (such as the Company) access to the
LECs network under the same terms and restrictions to which the LEC is subject.
The TC Act allows the Company to compete with previously established long
distance and local telephone providers under the same terms and conditions as
those to which the providers are subject.
Regulatory, judicial and technological factors have helped to create
the foundation for smaller companies to emerge as competitive alternatives to
AT&T, MCI/WorldCom and Sprint for long distance telecommunications services. The
FCC requires that AT&T not restrict the resale of its services, and the Consent
Decree and regulatory proceedings have ensured that access to LECs networks are
in most cases, available to all long distance carriers.
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General
The Company was formed in February 1997 and had little or no
operations until March 1998, when it acquired IPVCDE. At the time of the
acquisition, IPVCDE principally was involved in developing its MultiCom Business
Management Software. Such software was developed by Anthony Welch, the Senior
Vice President of the Company.
With the acquisition of INS in April 1999, the Company intended to
gain licenses to provide telecommunications services. INS currently is licensed
in thirty-one (31) states and the District of Columbia and is pending tariff
licensing in one other state. INS is a switchless reseller of long distance
telephone services. At the time of the acquisition of INS, the Company believed
that it was acquiring the CIC Code designated 10-10-460. As result of the audit,
there appeared to be a question of whether INS gained title to the CIC Code and,
in the event that it did not, the Company resolved to unwind the acquisition.
Just prior to filing its Form 10SB in November 1999, it was determined that
there was no clear link between the ownership of the CIC Code and INS. Therefore
the Company voted to unwind the transaction ab initio and to rescind the
issuances made under the acquisition and the employment agreements. While such
CIC Code is not operational at this time, if such title issue had been resolved
and if the Company elected to make such service operational, it would have
allowed the Company to diversify into distinct segments of the long distance
market not currently provided by the Company. INS has instituted suit against
the Company. See Part I, Item 1. "Description of the Business - (b) Business of
the Issuer - Government Regulation - State; and Part I, Item 3. "Legal
Proceedings."
Today, the Company focuses its attention on Internet telephony. In
the fast moving world of communications, especially Internet telephony, the
companies with systems in the market are currently establishing both open and
closed systems. IPVC has developed an open system which it believes will have an
edge on closed systems. In a closed system, the provider is limited to receiving
calls only. In an open system, the provider can both send and receive calls from
any other telephone carrier in the market.
With the meteoric rise of the Internet (which is predicted to
continue at a staggering rate), the Company believes that Internet telephony can
provide cost savings to the consumer when such telephony services are provided
by a small Internet telephone company providing this service. Smaller companies
are able to compete with large established telecommunications companies in this
market because it is easier for them to assimilate new technology and to adapt
and make changed as they are developed. The Company believes that its billing,
management network and marketing programs give it a competitive edge. AT&T and
MCI currently are not utilizing Internet telephony.
As the Internet telephony market continues to grow, which many
industry analysts predict it will, it is an area that the large traditional
telephone companies will certainly look to enter, probably through acquisitions.
The Company believes that with its ever-growing installed client base, a network
of customers, its developing international presence and the software which it
has developed, tested and implemented, IPVoice could be viewed as a potentially
attractive buyout candidate.
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Internet Telephony
Traditional telephone networks give every call a nailed-down circuit.
This means that a dedicated circuit must be utilized for the full time that the
call is connected. Such circuitry wastes expensive resources because only one
person can talk at a time and also because there are breaks in the conversation.
In a normal conversation, one person speaks while the other listens, using half
of the capacity of the dedicated circuit. At best, a traditional telephone
network uses 25% of capacity for each call. This significantly inflates the
costs of making telephone calls.
Internet Protocol ("IP") is the most significant of the communication
methods on which the Internet (and thus the World Wide Web) is based. It allows
a packet of information (voice, video, e-mail, data, images, etc.) to cross
multiple networks on its way to its final destination. Thus, instead of having
one dedicated circuit for a call, the entire network is shared. The
"conversation" (voice, data, images, video, etc.) is split into many small
packets and each packet is sent down whichever path is open at that time.
Packets are reassembled at the destination. Until recently, packet switching was
very slow. New technology can zip packets around networks at lightning speed.
Fast packet networks will make voice sound as good (and possibly better) than
the circuit-switched voice networks used currently.
Since its inception, the Company's MultiCom system has been installed
and run in a carrier- grade switching environment to interact with voice over
the Internet applications. It is marketed under the product name of TrueConnect
Gateways ("Gateway"). By introducing carrier-grade business management into the
marketplace, IPVoice is poised to take advantage of the explosive potential in
Internet telephony. IPVoice is in the final stages of developing products which
allow companies and individuals to route their phone calls, faxes, and other
data across the Internet at substantial cost savings with limited sacrifice of
voice transmission quality.
IPVoice has proprietary rights in state-of-the-art software and
hardware solutions which it believes will bridge the gap between the telephone
and the Internet. The Company's technology includes billing, management network
and marketing programs.
The hardware technology to route calls over the Internet (Internet
Telephony) has existed since August 1998. It avoids traditional telephone
networks, and is faster, more direct and efficient. These factors ultimately
result in cheaper call cost than traditional telephone networks.
Competition in the industry has been focused on the software
applications necessary to switch an Internet call.
The business of telephone companies is to sell minutes. Blocks of
minutes represent the commodity of the industry. The more minutes you can switch
through your network switches, the more money you make. Under traditional phone
networks, a call from a home to New York City will pass through switches
belonging to a local provider near the home, a regional provider, a
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national provider, a second regional provider and the local provider on the
other end. Each provider benefits from the "per minute charge".
Internet Telephony provides the ability to leapfrog the middle men,
thereby creating a huge dollar savings to the customer, as well as allowing
immediate monitoring of telephone services which were not available prior to the
new technology.
The deregulation of the telephone industry which resulted from the
Consent Decree and the TC Act allowed independent companies access to the
lucrative telephone market. The Company's technology can achieve savings of 30%
to 70% over circuit-switched voice for both domestic and international calls.
The potential market for Internet telephony appears to be without
limit. Industry analysts have speculated that revenues could grow as much as
sixteen-fold from 1995 to the turn of the century and International Data
Corporation ("IDC") predicted that the IP Telephony market could be worth $560
million in 1999 and have a cumulative annual growth rate of over 382%
Products
The Company's products are being designed at its facilities located
in Phoenix, Arizona and Denver, Colorado. Its products are made from
company-designed software and company- configured hardware, as well as materials
purchased from a few major suppliers. See Part I, Item 1. "Description of
Business - (b) Business of Issuer - Sources and Availability of Raw Materials."
In the first quarter of 1999, the Company commenced operation of its first
Gateway in Hong Kong. Its Gateways now are installed in London, New York and Los
Angeles.
The launch of its Gateway product, follows three years of extensive
research and development, field-testing and trials of the MultiCom system, which
is the business management software behind the Gateway. The Gateway bridges the
public telephone system with the Internet and is able to conduct real-time, full
duplex, high quality two-way voice communications over the Internet. It is
anticipated that this method will produce substantial savings compared to
standard long distance services. The Company currently is completing the
development of its next generation of IP Telephony Gateways which it has called
SuperConnect. SuperConnect will provide the ability for fax and "softphone"
capabilities. "Softphone" is software within a computer that allows the
placement of calls without a telephone through the use of a microphone and
speaker.
To support its Gateway product, the Company has developed several
proprietary products that allow the Company and its distributors to offer a full
solution in Internet Telephony. These products include: (i) MultiCom, which
offers a complete order entry, billing, customer service, agent management and
switching network management system for telecommunication businesses worldwide;
and (ii) AuditRite, a software module add-on for the MultiCom system, which
allows MultiCom to read and interpret carrier-supplied data-tapes. The AuditRite
system provides a powerful tool for analyzing call patterns and finding possible
errors in a vendor's billing.
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The Company also has developed TrueWeb, a Web-browser interface to
MultiCom, which the Company believes will change the way businesses function,
when introduced to the world of IP Telephony. TrueWeb is a complete business
management system available over the Internet and is scheduled for release in
the first half of 2000. In addition, the Company plans to develop PCTruePhone, a
software package for softphoning and Click 'N Call, a software package that will
allow a business have visitors to its website connect immediately to the
business simply by clicking a display button via telephone or PC at no cost to
the visitor.
The Company has applied for trademark protection for several of its
product names. See Part I, Item 1. "Description of Business - (b) Business of
Issuer - Patents, Trademarks and Copyrights."
With the new technology, software applications control everything
from routing to billing. Many companies entering the industry have concentrated
on software which simply switches the minutes across the network, without any
concern as to how they will manage the network, conduct billing and implement
feature functionality. The Company's MultiCom, AuditRite, TrueConnect and
SuperConnect platforms were designed to handle the expansion of the
manageability, billing, design upgrades and service options as future technology
develops. The Company protects itself against pirating by randomly changing its
source code on its software, up to four times daily.
The company believes that it has a twelve (12) month advance on
competing companies. Lucent Technologies Inc. ("Lucent") has begun buying up
companies which it will use to develop Internet Telephony capabilities. Through
the efforts of its President, Barbara S. Will, a former MCI marketing executive,
the Company has established its network and has begun providing newer and better
services which it believes can compete even with major players such as Lucent in
the field.
IPVC software includes:
Real-Time Billing - Not currently offered by other telephone
companies, real-time billing provides a customer with the ability to secure
reports on the volume of calls, locations called, exact amount owed and it
provides a host of other features.
Full Feature Functionality - IPVC can add services to its software at
will, as a customer online or when requested. Traditional phone companies are
saddled with huge costs and implementation time, as they update each switch
individually across their network. IPVC can update its entire international
network from its home base.
Unrivaled Agent Control - A single agent can sit in front of a
Gateway terminal and control the entire operation. Moreover, IPVC can directly
control the entire network from its main office in the U.S. This has the
capability to add and service customers from its home base without the need of
onsite installation.
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IPVC's software can switch through multiple networks, both Internet
and traditional, giving it a universal application. To the best of the Company's
knowledge, no other stand-alone switch can do this. The Company's Gateways
employ an open system, which means that the Gateways can both send and receive
calls from any other telephone carrier in the market. Other telephone companies
are limited to receiving calls only.
IPVC's Gateway switches cost a partner from $55,000 for a domestic
installation and $65,000 for an international installation and up to $135,000
installed (with volume discounts for multiple units). In addition, cost to the
partner can be even less if it installs its unit or units itself. A single,
similar traditional switch, with all the attendant hardware and support for
services and billing functions, would cost anywhere from $500,000 to $5 million.
The MultiCom software allows for the use of prepaid debit card and
travel calling card functions which are already built into the system. The
software modules have been designed to work seamlessly and efficiently with each
other, to provide the most extensive and well thought out approach to the
business end of the technology.
Given its technology, IPVC's business plan is simple and flexible. It
can set up its own switches, or partner with a local switching business and take
a percentage of the minutes. Its Gateways can route calls over the Internet in
areas where its network is established, or use traditional phone lines when
desired or necessary and the Company can also procure bulk minutes at a lower
rate.
Contractual Relationships
In order to manufacture a Gateway, the Company currently relies upon
arrangements with Natural Microsystems Corporation ("NMS") and Telic.net.
The arrangement with NMS commenced in February 1998 and is on a
purchase order basis. For each shipment ordered under an invoice, the Company is
granted a sixty (60) day evaluation period from the date it receives from NMS
both hardware and the operating software for the Gateways. After such sixty (60)
day period, the Company may purchase the product, or ship it back to NMS with no
further obligation.
On November 17, 1999, the Company executed a memorandum of
understanding with Telic.net whereby the parties entered a strategic alliance
under which Telic.net will provide enhanced services to the Company and the
Company will acquire from Telic.net gateways at Telic.net's cost for use by the
Company's customers. Although a non-binding agreement, the parties have
expressed the wish to maintain the alliance as long as it is beneficial to each
of them. The Company maintains the right to purchase hardware elsewhere. In
addition, the Company can license certain of Telic.net's software, acquire
certain source codes and Telic.net will modify the Company's gateways to
accommodate the Company's billing system and call flow. It is intended that
Telic.net will provide full network support for the Company thereby advancing
the Company's timetable for full integration of its network.
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Each of the Company's Gateways operates as a transporter between the
incoming carrier (access) and the outgoing termination (egress). The Gateways
can be installed in customer locations or under co-location agreements. The
Company may construct some of its own locations in the future.
Access/Egress Carriers (Local Providers): Carriers provide IPVC the
ability to originate and terminate calls across their traditional telephone
networks. In addition, the Company purchases wholesale minutes from them. The
Company can acquire such services from a Local Bell Company or from an
independent.
In June 1999, the Company entered into an agreement with ICG Telecom
Group, Inc. ("ITG") for local exchange service. The term of the contract is a
period of three (3) years, although it is terminable by IPVC earlier in the
event that ITG raises its prices twenty (20%) above the amounts stated in the
contract. In addition, in the event IPVC wishes to purchase telecommunications
services from a third party in ITG's areas of service, IPVC must first offer to
purchase like services from ITG.
In July 1999, the Company entered into an agreement with RSL Com
U.S.A., Inc. ("RSL") for the purchase of wholesale long distance minutes for
domestic and international calls.. The term is for a period of twelve (12)
months and may be terminated by either party upon thirty (30) days written
notice. The Company is required to purchase a minimum of 100,000 minutes per
month.
In August 1999, the Company entered into an agreement with Star
Telecommunications, Inc. for telephone communications between its locations in
New York and Los Angeles and the outbound to termination points around the
world. The initial term is for six (6) months and it is automatically renewable
on a month to month basis .
In August 1999, the Company entered into an agreement with ILD
Communications, Inc. ("ILD") for switching services and long distance wholesale
minutes. The agreement is for a term of one (1) year and is automatically
renewable.
Internet (Bandwidth): Internet bandwidth provides the Company with
the ability to transmit and receive information utilizing IP technology.
In June 1999, the Company entered into an agreement with Level 3
Communications, LLC ("Level 3") for wholesale bandwidths. The contract is for no
defined period of time and the terms of each order are governed by both a
separate Customer Order Form which is filled out for each individual order as
well as by the original agreement signed in June 1999.
In August, 1999, the Company entered into an agreement with MCI
WorldCom Technologies, Inc. for use of its UUNET network for wholesale
bandwidths. The contract is for a term of three (3) years. In December 1999, the
Company entered into an agreement with UUNET to provide hosting for the
Company's website and e-mail facilities. The Company is billed
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monthly for these services and this arrangement replaces the one previously
established on behalf of the Company by INS.
Gateway Locations.
The Company has entered into a series of agreements for customer
locations of its Gateways.
In March 1999, the Company entered into a TruePartner Agreement with
Teleco Service International, Inc. ("Teleco"), wherein the Company granted
Teleco the exclusive to market, advertise and sell the Company's products and
services in China, Nicaragua, El Salvador, Guatemala, Honduras and Panama.
Teleco and IPVC will share all revenues resulting from the proceeds of sales in
the Teleco territory. The term of the agreement is for a period of two (2)
years. Due to non-performance, Teleco lost the rights to China and Panama.
In March 1999, the Company entered into a TruePartner Agreement with
Billion Telecommunication Services, Ltd. ("Billion"), wherein the Company
granted Billion the exclusive right to market, advertise and sell the Company's
products and services in Hong Kong and Taiwan. As payment for these services,
IPVC must pay Billion commissions on all sales of the Company's products and
services. The term of the agreement is for a period of three (3) years. Under
the agreement, Billion can acquire the rights to China as well. The first
Gateway was delivered to Billion and is in the demonstration stage.
In May 1999, the Company entered into an agreement with FirstNet
Telephony Ltd. ("FirstNet"), wherein the Company granted FirstNet the exclusive
right to market, advertise and sell the Company's products and services in
London and Manchester, with a right of first refusal in the remainder of the
United Kingdom. As consideration for these services by FirstNet to the Company,
FirstNet is entitled to purchase Company products and services at a wholesale
rate. The term of the agreement is for a period of two (2) years. The FirstNet
Gateway was delivered in October 1999 and this installation currently is
completed.
In July 1999, the Company entered into an agreement with MetroPlus
Communication Technology, Inc. ("MetroPlus"), wherein the Company granted
MetroPlus the exclusive right to market, advertise and sell the Company's
products and services in certain cities in Canada, Washington and Oregon. As
consideration for these services by MetroPlus to the Company, MetroPlus is
entitled to purchase Company products and service at a wholesale rate. The term
of the agreement is for a period of three (3) years. No date has been scheduled
for this installation.
IPVC is retaining the rights for New York and Los Angeles, where it
has installed two (2) Gateways in each city. These sites are to be used as
demonstration sites for sale of the Company's network. In January 2000, the
Company entered into a three (3) year equipment lease with IIP. IIP purchased
three (3) Gateways from Telic.net for installation in New York and Los Angeles.
The Company pays $3,342.26 per month under the lease. The Company has an option
to renew the lease for an addition term on similar terms and conditions and has
the option to
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purchase the equipment at the end of the initial term for $66,946.77 or at any
time during the lease for $66,946.77 plus all outstanding lease payments. IIP
provides financial and consulting services for the Company and has purchased a
number of the Company's shares under warrants granted as part of its consulting
agreement. The Company believes that the lease arrangement with IIP is at least
as favorable as it could have secured from an outside third party in an arms
length transaction.
The Company previously had entered one agreement for co-location of
its Gateways.
In February 1999, the Company entered into an agreement with
BluegrassNet ("Bluegrass"), wherein the Company located one of its Gateways. The
agreement was for a term of one (1) year. The Company paid $250 per month for
each server at the location. This site is no longer operational and was used for
research and development purposes.
The Company secures Gateway sales and sales of other products and
services, as well as assistance in the acquisition of wholesale minutes,
co-locations and carriers through a series of agency agreements.
In July 1998, the Company entered into an agreement with Armstrong
wherein the Company granted Armstrong the non-exclusive right to market,
advertise and sell the Company's domestic and international calling services. As
payment for these services, IPVC issued Armstrong warrants to purchase 50,000
shares of the Company's Common Stock exercisable at a price of $0.75 per share
or, at the option of IPVC, for a total sum of $37,500 as well as commissions on
sales of the Company's products and services. The term of the agreement is for a
period of three (3) years. See Part III, Item 12. "Certain Relationships and
Related Transactions".
In February 1999, the Company entered into an agreement with IIP
wherein the Company granted IIP the non-exclusive right to market, advertise and
sell the Company's domestic and international calling services. As payment for
these services, IPVC must pay IIP commissions on sales of the Company's products
and services. The term of the agreement is for a period of three (3) years.
In March 1999, the Company entered into an agreement with Kenneth M.
Brown ("Brown"), wherein the Company granted Brown the non-exclusive right to
market, advertise and sell the Company's domestic and international calling
services. As payment for these services, IPVC must pay Brown commissions on
sales of the Company's products and services. The term of the agreement is for a
period of three (3) years.
In April, 1999, the Company entered into a marketing and advertising
agreement with NG to provide marketing services to a minimum of 75,000 customers
in thirty (30) cities designated by IPVC within a twelve (12) month period in
exchange for 100,000 shares of the restricted Common Stock of the Company valued
at $103,100, which shares must be returned if NG fails to deliver a minimum of
eight (8) cities each for a total of 75,000 customers before December 31, 1999.
In addition, NG may earn performance bonuses of: 50,000 restricted shares if
eight (8)
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cities are delivered within ninety (90) days of execution; 50,000 restricted
shares if fifteen (15) cities are delivered within one hundred fifty (150) days;
and 10,000 restricted shares for each additional city thereafter before December
31, 1999 up to 30 cities. Further, NG will be granted warrants to purchase
30,000 shares of the Company's restricted Common Stock exercisable for a period
of two (2) years at an exercise price of $2.50 per share for every block of
5,000 pre- registered customers up to 75,000 pre-registered customers in a
twelve (12) month period. For such offering, the Company relied upon Section
4(2) of the Act and Rule 506 and Section 14-4- 126(F) of the Arizona Code. See
Part III, Item 12. "Certain Relationships and Related Transactions".
In April 1999, the Company entered into a marketing agreement with
Benae to market the Company's telephony services and to register a minimum of
one hundred (100) customers in the thirty (30) cities in which IPVC plans to
offer telephony services within twelve(12) months in exchange for 200,000 shares
of the unrestricted Common Stock of the Company valued at $206,200. The shares
are to be returned to the Company if the minimum is not met. For such offering,
the Company relied upon Section 3(b) of the Act and Rule 504 and Section
90.530(11) of the Nevada Code. See Part III, Item 12. "Certain Relationships and
Related Transactions".
Planned Additional Services
In addition to the sale of the Gateways and the licensing of its
software, the Company plans to derive its revenues from the sale of the
following pre-paid services:
- flat-rate calling plans
- wholesale long distance services for other international carriers
- prepaid long distance calling card services
- corporate long distance, fax and data networking services
- e-commerce communications services for businesses selling products and
services over the Internet
- other telecommunications applications and services
Flat-Rate Calling Plans
The Company is in the process of establishing a flat-rate calling
plan option to be marketed under the name Flat25 which will allow unlimited
calling between cities in which the Company's Gateways are installed for a
single rate per month of $25.
In addition, the Company has designed a pre-paid, flat-rate long
distance plan for calls originating from any of its Gateways to be marketed
under the name Flat5 which will allow calls from the Gateway to anywhere in the
mainland United States and Canada for $.05 per minute. The customer will receive
a number to access the nearest Company Gateway. There will be a one time
registration fee of $25 and the customer may elect from three monthly
pre-payment plans.
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Further, the Company has designed a pre-paid flat-rate long distance
plan for calls originating from any of its Gateways to be marketed under the
name 4+4 which will allow calls from the Gateway to anywhere in the mainland
United States and Canada for $.04 per minute plus calls to up to four (4)
international countries at a 10% discounted rate. The customer will receive a
number to access the nearest Company Gateway. There will be a one time
registration fee of $25 and the customer may elect from three monthly
pre-payment plans.
Wholesale Long Distance Services
The Company plans to market its Internet telephony services to other
international long distance carriers and wholesale customers which have a need
for large blocks of long distance telephone time between selected locations.
Although margins at the wholesale level are lower than retail margins, the sale
of blocks of long distance time to other carriers will enable the Company to
generate revenues with only a limited number of gateways installed. The Company
is in the process of pre-marketing its services and has identified several
potential wholesale sellers of block minutes.
Prepaid Calling Cards
The Company plans to market prepaid calling cards to persons
traveling to destinations such as Mexico, Central, and South America, Asia,
Europe and other countries where long distance telephone calls are substantially
more expensive than domestic long distance telephone calls. In September 1999,
the Company shipped cards for which it received $50,000 in revenue and has
received a total of $261,279 in revenues through December 31, 1999. Based upon
expressions of interest by the current buyer and others, the Company believes
that this market can produce between $10,000 and $50,000 per month in revenues.
A typical long distance telephone call from Mexico to Vancouver,
British Columbia, made from a public payphone in Mexico can cost more than $2.00
per minute, and frequently surcharges are levied by third party credit card call
processing companies located outside of Mexico. However, due to competition in
North America, rates for calls from North America to Central and South America
are significantly less expensive than calls made from this area to North
America.
The pre-paid calling cards will be sold through travel agents,
tourist agencies, airline ticketing offices, tourist agencies, tour companies,
car rental agencies and hotel personnel in denominations of $10, $20, $30 and
$50 and an automated voice response system is planned to enable card holders to
add time to their calling cards by charging their credit card while on the
phone.
The Company's calling card will provide instructions for the use of
the Company's system. To place a long distance call to North America, the
cardholder dials a local access number (or an 800 number if an originating
gateway does not exist in the local calling area) and is then prompted to dial
the destination number as well as the cardholder's calling card number. The call
is then
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routed to the nearest originating gateway. After reaching the originating
gateway the call is transmitted over the Company's network to a terminating
gateway or the least cost route to the destination number. Once the call reaches
the terminating gateway the call is then switched to the local telephone network
and is routed to the destination number.
Travelers making long distance calls from a local calling areas which
do not have originating gateways will nevertheless be able to use the Company's
calling cards. However, the Company's operating margin will be less since these
calls must be routed via an 800 number to a distant originating gateway.
By establishing gateways in North America and select foreign
countries, the Company believes it can service a large and identifiable market
of travelers with cost-effective prepaid calling cards to use in placing calls
to North America.
Corporate Services
The Company also plans to market its services on a selective basis to
small-to-mid sized corporate customers who need a cost-effective means of
combining long distance voice, fax and video communications between their
international offices. The Company plans to begin marketing its corporate
Internet Telephony services to medium sized US and Canadian corporations who
operate branch offices or subsidiaries in the foreign countries in which the
Company operates its Gateways.
E- Commerce Services
The Company's software also will support "web-to-phone" and "call-me"
services.
"Click 'N Call" connections enable the users of multimedia PCs to
establish a voice conversation with the owner of the website or their designated
customer service representative. The Company will introduce this new capability
to website owners and developers in those markets in which the Company has
gateways and demand for e-commerce services is increasing. The Company believes
that this service will contribute to the development of sales made through the
Internet. "Click 'N Call" provides new capabilities for customers to speak
directly with sales people and reservation agents while they are online and
reviewing the content of a particular website. "Click 'N Call" personalizes the
experience of shopping over the Internet and provides a new level of customer
service.
PCTruePhone is the Company's planned software for softphoning. This
software will allow users to place telephone calls to any telephone in the world
using their computer and a connection to the Internet.
In addition to developing and marketing these communications
applications, the Company will also evaluate investing in or acquiring companies
engaged in the development of innovative IP software and network applications.
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Business Strategy
The Company intends to attempt to corner the market with its products
since many are the first of their kind and competitors will be required to spend
years in research to develop similar products. IPVC's technology is capable of
transforming competitors into customers, as IPVC's billing and management
software can communicate with other platforms due to its own open platform
design. Current competitors lack a critical component to their solutions:
effective data- management and billing. IPVC is capable of providing the
following unique features:
1. IP Telephony solutions and a mature, real-time billing system for
ease of use, affordability and quality.
2. Real-time remote access and manageability of information.
3. IP telephony technology, Internet remote-access technology and a
comprehensive order-entry and invoicing system which can
instantly address and secure new marketplaces and opportunities.
The Company has targeted international markets and supports its sales
efforts by participating in trade shows targeting the telecommunication industry
and large businesses. The Company also utilizes professional articles,
peer-reviewed studies, direct calls and a comprehensive marketing campaign in
its sales.
The Company has already executed TruePartner agreements for Gateway
installations in the following locations:
Billion: Hong Kong and Taiwan (China was originally granted to Teleco,
but Billion now has the option to for it). The Billion Gateway is
operational and in the demonstration stage.
FirstNet: London and Manchester, England. This Gateway was shipped and
installed and is currently operational.
MetroPlus: certain major Canadian cities, Oregon and Washington. This
Gateway has not been scheduled for shipment.
IPVC is retaining the rights for New York and Los Angeles, where it
has installed two (2) Gateways in each city. These sites are to be used as
demonstration sites for sale of the Company's network.
In addition, the Company has entered into a series of agency
agreements for the sale of its Gateways and other products and for assistance in
the acquisition of wholesale minutes, co- locations and carriers. The Company
intends to seek associations with professional agents who will help promote
their products and services.
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Marketing and Distribution
Marketing
According to industry sources, the global telecommunications market
could generate revenues in excess of $250 billion annually. According to IDC,
international switched telecommunications traffic grew from 28 billion minutes
of use in 1989 to 81.8 billion minutes in 1997 and is projected to reach between
approximately 128.7 and 158.6 billion minutes by 2001. Also according to IDC, in
the United States, residential long distance calls represent a $67 billion
dollar market. In its infancy today, the IP telephony services market is
estimated to increase to $1.8 billion by the year 2001. Due to deregulation,
competition has reduced rates for both business and residential calls placed
within North America. However this is not the case for international calls to
certain countries where higher per minute rates are common. The international
telecommunications industry is growing rapidly due to:
- deregulation
- privatization
- expansion of telecommunications infrastructure
- technological improvements
- globalization of the world's economies; and
- free trade
In addition to the growth in the telecommunications industry,
significant improvements have occurred in the compression and transmission of
voice over the Internet over the last several years. The quality of service of
Internet Telephony is now capable of being equivalent to that of a digital
cellular phone or a quality analog cell phone connection. Internet Telephony
technology is evolving continuously and it is expected that further improvements
will allow it to rival conventional telephony networks. The Gateway equipment
being deployed by the Company utilizes the newest digital signal processing and
error correction technologies for improved voice sampling and compression and
reduced latency. Latency is the time spent waiting for a signal to travel from
one Gateway to another and it is affected network conditions between the
Gateways as well as the processing time required to create the signal for
transmission. These technologies enable the Company to provide high quality,
commercial voice services with carrier class reliability (99.999% availability
of service). Carrier class reliability is determined by how often the system is
operational. It is the Company's goal to have at least the same if not better
reliability as those systems commonly used by the large telecommunications
companies such as AT&T and MCI.
The Company plans to market its products and services using four
methods. The first of those methods is to rely upon its agreements for marketing
in the agent direct True Partner Master Distributorship program, such as the
agreements it has with NG, Armstrong, IIP and Brown. There can be no assurances
that the current agreements will continue, that the efforts of such parties will
be successful or that the Company will be able to develop additional agreements
in the future. The second method of marketing the Company's products and
services is through outside
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telemarketing agencies. These firms are paid on a commission only basis. The
Company has not engaged any such firm to date and there can be no assurance that
they will engage one, or that if engaged, that such firm would be successful.
The third method of marketing the Company's products and services utilizes its
own sales force. The Company's sales effort currently is headed by Ms. Will who
has extensive experience in the telecommunications business. There can be no
assurance that these endeavors will be successful. The fourth method of
marketing the Company's products and services utilizes the Internet. The Company
currently markets and distributes its products and services through the Internet
utilizing its IPVoice.com web page. There can be no assurances that such web
page will generate sufficient interest as a marketing tool.
The Company believes these four marketing methods will be adequate to
sustain the Company now and for the foreseeable future.
Distribution
The Company distributes its products through agreements for its
Gateway locations with Teleco, Billion, FirstNet and MetroPlus and through
agency agreements with Armstrong, IIP, Brown, NG and Benae. The Company also
believes that its strategic alliance with Tel.net will enhance the market
potential for its products. See Part I, Item 1. "Description of Business - (b)
Business of Issuer - Internet Telephony - Contractual Relationships."
The Company intends to seek other professional agents who wish to
promote its products.
Status of Publicly Announced New Products and Services
TrueConnect Gateways are the Company's in-house-produced telephony
gateways for the delivery of IP Telephony services. This system is based on
Natural MicroSystems hardware and is controlled by the Company's in-house
developed software that controls the hardware as well as interfaces to MultiCom.
TrueConnect Gateways are being deployed now. Enhancements are made on an "as
needed" basis. The Company is completely development of its next generation of
Gateway designated SuperConnect.
MultiCom is a complete telecommunications and network management
system addressing every aspect of operating and managing a telecommunications
network and operations which provides a complete "backoffice" solution. MultiCom
provides a low barrier of entry for partners and alliances of the Company as it
does not require special computers for access. The Company, as well as its
partners, can access MultiCom and manage their business operations from any
location at any time of day. The MultiCom Data Management platform is fully
functional and complete. Enhancements are made on an "as needed" basis.
AuditRite is a software module add-in for MultiCom that allows
MultiCom to read and interpret carrier-supplied data-tapes. AuditRite provides a
tool for analyzing call patterns and finding possible errors in a vendor's
billing. AuditRite system is fully active.
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TrueWeb is a soon-to-be-released web-browser interface to MultiCom.
Included within the functions of this interface is its ability to display and
interact with the user in his or her native language, including the native
alphabet. The Company believes the TrueWeb multi-lingual capability to be unique
to the Company. TrueWeb is currently in alpha-production. The Company expects to
release the initial version by the second quarter 2000.
PCTruePhone and Click 'N Call are in development. The Company expects
to release the initial versions in the third or fourth quarter of 2000.
Competition
Two significant barriers to entry in the traditional long distance
telephone market are size (minimum efficient scale of operations) and regulatory
constraints which preclude smaller companies from gaining significant market
share. Internet telephony effectively eliminates or reduces these barriers since
it is presently unregulated and enjoys economies of scope and scale by using the
Internet and private IP networks as a common voice video and data network.
Internet telephony will decrease barriers to entry and increase competition in
the long distance industry.
The Company believes that its ability to compete in the Internet
Telephony Industry successfully will depend upon a number of factors, including
the pricing policies of competitors and suppliers; the capacity, reliability,
availability and security of the Internet telephony infrastructure; marketing;
the timing of introductions of new products and services into the industry; the
Company's ability to support existing and emerging industry standards; the
Company's ability to balance network demand with the fixed expenses associated
with network capacity; and industry and general economic trends.
The market for telecommunications services is extremely competitive
and there are a growing number of competitors in the Internet Telephony
Industry. There are many companies that offer business communications services
and which will compete with the Company at some level. These include large
telecommunications companies and carriers such as AT&T, MCI, and Sprint;
smaller, regional resellers of telephone line access; and other existing
Internet telephony companies. These companies, as well as others, including
manufacturers of hardware and software used in the business communications
industry such as Lucent, could in the future develop products and services that
could compete with those of the Company on a direct basis. Many of these
entities have far greater financial and organizational resources than the
Company and control significant market share in their respective industry
segments. There is no assurance that the Company will be able to successfully
compete in the Internet telephony Industry.
Certain large public telephone companies are positioning themselves
to enter the Internet telephony market to protect their dominant domestic market
from competition. Many of these companies are testing existing Internet
telephony gateway technology which at the present time has limited call volume
capabilities. A number of companies are waiting for gateway manufacturers to
introduce advanced gateways that will be able to handle larger call volumes and
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provide better quality and service.
In North America considerable discounting has been experienced in
recent years as competition has increased. While in many countries outside of
North America local telephone companies have begun offering discounts to very
large business and government customers with high call volumes, there are few
discounts available for individuals or small and medium sized companies. It is
expected that competition in the United States will be led by carriers providing
low cost but high quality Internet telephony services at rates of $0.05 to $0.09
per minute. Smaller Internet service providers and new carriers are expected to
focus primarily on international or niche markets.
International markets are attractive to smaller carriers and new
entrants while large carriers are still evaluating the technology and
marketplace and contending with competition and deregulation in their domestic
markets. With international long distance rates in many countries costing well
in excess of $0.50 per minute, the Company believes that it can earn attractive
gross profit margins while offering service at substantial discounts to
currently available long distance rates.
Although the Company anticipates that its primary competitors will be
other Internet telephony companies which offer phone-to-phone services, none
have as of yet addressed the international market which the Company plans to
continue to pursue with Gateway installations and its pre-paid calling cards,
nor has any competitor introduced a full billing system or an integrated product
offering containing corporate and e-commerce communications services.
Sources and Availability of Raw Materials
IPVoice products are made from company-designed software and
company-configured hardware as well as materials purchased from a few major
suppliers. They include the following:
In February 1998, the Company entered into an agreement with NMS.
Under the terms of the contract, the Company acquires both hardware and software
for its Gateways. With regard to both hardware and software, the Company takes
advantage of free shipping and a no-risk sixty (60) day trial period, after
which the Company may purchase the product, or ship it back to NMS with no
further obligation.
On November 17, 1999, the Company executed a memorandum of
understanding with Telic.net whereby the parties entered a strategic alliance
under which Telic.net will provide enhanced services to the Company and the
Company will acquire from Telic.net gateways at Telic.net's cost for use by the
Company's customers. Although a non-binding agreement, the parties have
expressed the wish to maintain the alliance as long as it is beneficial to each
of them. The Company maintains the right to purchase hardware elsewhere. In
addition, the Company can license certain of Telic.net's software, acquire
certain source codes and Telic.net will modify the Company's gateways to
accommodate the Company's billing system and call flow. It is intended that
Telic.net will provide full network support for the Company thereby advancing
the Company's timetable for full integration of its network.
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Dependence on Major Customers
In March 1999, the Company entered into an agreement with Teleco for
installation of Gateways in China, Nicaragua, El Salvador, Guatemala, Honduras
and Panama. Teleco lost the rights to China and Panama due to non-performance.
In March 1999, the Company entered into an agreement with Billion for
the installation of a Gateway in Hong Kong. This unit is installed and in the
demonstration stage.
In May 1999, the Company entered into an agreement with FirstNet,
wherein the Company granted FirstNet the exclusive right to market, advertise
and sell the Company's products and services in London and Manchester, with a
right of first refusal in the remainder of the United Kingdom. This installation
was completed in October 1999 and currently is operational.
In July 1999, the Company entered into an agreement with MetroPlus ,
wherein the Company granted MetroPlus the exclusive right to market, advertise
and sell the Company's products and services in certain cities in Canada,
Washington and Oregon. The installation date has not been scheduled.
Patents, Trademarks and Copyrights
The Company neither holds nor has applied for any patents.
On August 18, 1998, the Company filed for service mark protection
with the United States Patent and Trademark Office ("USPTO") for IPVoice,
MultiCom, AuditRite, 4Com, ICB Connect, TrueConnect and IPJack Design.
In March 30, 1999, the USPTO issued Office Actions on MultiCom, 4Com
and TrueConnect, finding that MultiCom could be confused with an existing
trademark; finding that 4Com's identification of goods was unacceptable as
indefinite; and finding that TrueConnect could be confused with an existing
trademark. The Company's trademark attorney filed responses to each of these.
On April 7 and 8, 1999, the USPTO issued Office Actions on AuditRite,
TruePartner and ICB Connect finding that AuditRite's identification of goods was
unacceptable as indefinite finding that TruePartner could be confused with an
existing trademark; and finding that ICB Connect's identification of goods was
unacceptable as indefinite. The Company's trademark attorney has been authorized
to file responses to each of these. Responses for AuditRite and TruePartner were
filed October 7, 1999 and a response for ICB Connect was filed October 8, 1999.
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On April 23, 1999, the USPTO issued Office Actions on IPVOICE
stylized and design finding that IPVOICE design's recitation of services was
unacceptable as indefinite; and finding that IPVOICE stylized was an
inappropriate mark since it merely describes the applicant's services. The
response was due October 14, 1999. As to the response filed on the IPVOICE
stylized and design finding, on December 6, 1999, the USPTO notified the Company
that it did not find the response acceptable and required the Company to amend
its filing. A response is due by June 6, 2000. As to the response filed on the
IPVOICE stylized, the USPTO has advised the Company that it is maintaining its
position that the mark is inappropriate since it merely describes the
applicant's services.
On September 4, 1998, the Company filed for service mark protection
with the USPTO for IPJack. On June 7, 1999, the USPTO issued an Office Action on
IPJACK finding the drawing unacceptable because the mark is not typed entirely
in capital letters. The Company's trademark attorney filed a response on
December 7, 1999.
On October 16, 1998, the Company filed for service mark protection
with the USPTO for COMMUNICATIONS OUT OF THE BOX and COMMUNICATIONS OUT OF THE
BOX stylized. On April 30. 1999, the USPTO issued an Office Action finding the
mark unacceptable as indefinite. A response was filed on November 1, 1999.
The Company is in the process of filing for service mark protection
with the USPTO for IPVOICE.NET, IPVOICE.COM and FLAT25.
As to IPVOICE.NET, on November 8, 1999, the USPTO issued an Office
Action finding the proposed mark was merely a descriptive term combined with an
address. A response is due by May 8, 2000.
As to IPVOICE.COM, on November 8, 1999, the USPTO issued an Office
Action refused the filing stating that the specimen did not show the proposed
mark. A response is due by May 8, 2000.
As to FLAT25, on November 8, 1999, the USPTO issued an Office Action
stating that the Company must amend to specify the common commercial name or
indicate the nature of the service. A response is due by May 8, 2000.
Government Regulation
Federal
The Company has a current license with the FCC. The Company uses the
Internet for transmission of long distance telephone calls. Presently, the FCC
does not regulate companies that provide Internet Telephony services as common
carriers or telecommunications service providers. Notwithstanding the current
state of the rules, the FCC's potential jurisdiction over the Internet is broad
because the Internet relies on wire and radio communications facilities and
services over which these regulatory authorities have long-standing authority.
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In Canada, the Canadian Radio-Television and Telecommunication
Commission ("CRTC") determined in 1998 that Internet Telephony services
providers must pay local contribution charges for calls terminating on local
telephone networks, while those calls that originate and terminate on computers
are not subject to these charges. The possibility exists that regulatory
authorities may one day make a determination to apply international call
termination fees or otherwise tariff Internet telephony.
The Company also will be required to comply with the regulations
regarding the operation of its business in several foreign jurisdictions and
will be subject to compliance with the requirements of the authorities of these
locales regarding the establishment and operation of its business.
Access charges are assessed by local telephone companies to long
distance companies for the use of the local telephone network to originate and
terminate long distance calls generally on a per minute basis. Access charges
have long been a source of dispute; with long distance companies arguing that
the access rates are substantially in excess of cost and local telephone
companies arguing that access rates are needed to subsidize lower local rates
for end user and other purposes. The FCC currently is considering whether
subscriber calls to Internet service providers should be classified as "local"
or "interstate" calls. Although the FCC to date has determined that Internet
service providers should not be required to pay interstate access charges to
local telephone companies, this decision may be reconsidered in the future if
the FCC finds these calls to be "interstate." The Company's costs for doing
business would increase if the Company were required to pay interstate access
charges.
State
The Company is subject to varying levels of regulation in the states
in which it currently anticipates providing intrastate telecommunications
services. The vast majority of the states require the Company to apply for
certification to provide intrastate telecommunications services, or at least to
register or to be found exempt from regulation, before commencing intrastate
service. The vast majority of states also require the Company to file and
maintain detailed tariffs listing its rates for intrastate service.
Many states also impose various reporting requirements and/or require
prior approval for transfers of control of certified carriers, corporate
reorganizations, acquisitions of telecommunications operations, assignments of
carrier assets, including subscriber bases, carrier stock offerings and
incurrence by carriers of significant debt obligations. Certificates of
authority can generally be conditioned, modified, canceled, terminated or
revoked by state regulatory authorities for failure to comply with state law and
the rules, regulations and policies of the state regulatory authorities. Fines
and other penalties, including the return of all monies received for intrastate
traffic from residents of a state, may be imposed for such violations. In
certain states, prior regulatory approval may be required for acquisitions of
telecommunications operations.
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As the Company expands its efforts to resell long distance services,
the Company will have to remain attentive to relevant federal and state
regulations. FCC rules prohibit switching a customer from one long distance
carrier to another without the customer's consent and specify how that consent
can be obtained. Most states have consumer protection laws that further define
the framework within which the Company's marketing activities must be conducted.
The Company intends to comply fully with all laws and regulations, and the
constraints of federal and state restrictions could impact the success of direct
marketing efforts.
The Company is not currently subject to any State regulation with
respect to its Internet related services. However, there can be no assurances
that the Company will not be subject to such regulations in the future.
Additionally, the Company is not aware of any pending legislation that would
have a material adverse effect on the Company's operations.
Effect of Existing or Probable Governmental Regulation on the Business
As the Company's services are available over the Internet in multiple
states and foreign countries, these jurisdictions may claim that the Company is
required to qualify to do business as a foreign corporation in each such state
and foreign country. New legislation or the application of laws and regulations
from jurisdictions in this area could have a detrimental effect upon the
Company's business.
In a report to Congress, the FCC has stated its intention to consider
whether to regulate voice and fax telephony services provided over the Internet
as "telecommunications" even though Internet access itself would not be
regulated. The FCC is also considering whether such Internet-based telephone
service should be subject to universal service support obligations, or pay
carrier access charges on the same basis as traditional telecommunications
companies.
A governmental body could impose sales and other taxes on the
provision of the Company's services, which could increase the costs of doing
business. A number of state and local government officials have asserted the
right or indicated a willingness to impose taxes on Internet-related services
and commerce, including sales, use and access taxes; however, no such laws have
become effective to date. The Company cannot accurately predict whether the
imposition of any such taxes would materially increase its costs of doing
business or limit the services which it provides, since it may be possible to
pass on some of these costs to the consumer and continue to remain competitive.
If, as the law in this area develops, the Company becomes liable for
information carried on, stored on, or disseminated through its Gateways, it may
be necessary for the Company to take steps to reduce its exposure to this type
of liability through alterations in its equipment, insurance or other methods.
This may require the Company to spend significant amounts of money for new
equipment or premiums and may also require it to discontinue offering certain of
its products or services.
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Due to the increasing popularity and use of the Internet, it is
possible that additional laws and regulations may be adopted with respect to the
Internet, covering issues such as content, privacy, access to adult content by
minors, pricing, bulk e-mail (spam), encryption standards, consumer protection,
electronic commerce, taxation, copyright infringement and other intellectual
property issues. IPVC cannot predict the impact, if any, that future regulatory
changes or developments may have on the Company's business, financial condition,
or results of operation. Changes in the regulatory environment relating to the
Internet access industry, including regulatory changes that directly or
indirectly affect telecommunication costs or increase the likelihood or scope of
competition from regional telephone companies or others, could increase the
Company's operating costs, limit its ability to offer services and reduce the
demand for its services.
Local telephone companies assess access charges to long distance
companies for the use of the local telephone network to originate and terminate
long distance calls, generally on a per-minute basis. Access charges have been a
matter of continuing dispute, with long distance companies complaining that the
rates are substantially in excess of cost, and local telephone companies arguing
that access rates are justified to subsidize lower local rates for end users and
other purposes. Both local and long distance companies, however, contend that
Internet-based telephony should be subject to these charges. Since the Company
has current plans to install its Gateways and to offer telephony, it would be
directly affected by these developments. However, IPVC cannot predict whether
these debates will cause the FCC to reconsider its current policy of not
regulating Internet service providers.
Cost of Research and Development
All research and development was completed prior to the formation of
IPVCDE and its acquisition by the Company. However, the Company paid a third
party for additional testing in fiscal 1999 at a cost of $97,403.
At the current time, there are no costs associated with research and
development, and accordingly, none will be bourne directly or indirectly by the
customer; however there is no guarantee that such costs will not be bourne by
customers in the future and, at the current time, the Company does not know the
extent to which such costs will be bourne by the customer, if at all.
Cost and Effects of Compliance with Environmental Laws
The Company's business is not subject to regulation under the state
and Federal laws regarding environmental protection and hazardous substances
control, including the Occupational Safety and Health Act, the Environmental
Protection Act, and Toxic Substance Control Act. The Company is unaware of any
bills currently pending in Congress which could change the application of such
laws so that they would affect the Company.
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Employees and Consultants
At December 31, 1999, the Company employed seven (7) persons all of
whom are employed on a full-time basis. None of these employees are represented
by a labor union for purposes of collective bargaining. The Company considers
its relations with its employees to be excellent.
The Company has employment agreements with Barbara Will, Anthony
Welch, and Harry Bowman, who respectively act as the President, Senior Vice
President, and Executive Vice President. Ms. Will and Mr. Welsh have agreed
effective September 1999 voluntarily to reduce each of the salaries to $90,000
per year. Both of these agreed reductions shall continue until the Company is
profitable and there are no accruals of any unpaid amounts under their
respective contracts. Further, neither of these parties has any expectations
regarding the amount foregone at any future date. The Company previously had an
employment agreement with Peter Stazzone when he was acting as the
Secretary/Treasurer of the Company. When the Board voted to unwind the INS
acquisition ab initio, it rescinded the issuances under the acquisition and
employment agreement and to terminated Mr. Stazzone's employment. Mr. Stazzone
has instituted suit against the Company. See Part I, Item 3. "Legal
Proceedings"; and Part III, Item 10. "Executive Compensation - Employee
Contracts and Agreements."
In November 1997, prior to its acquisition by the Company, IPVCDE
entered into a consulting agreement with Condor, whereby Condor agreed to
provide certain sales, marketing and public relations services in exchange for
600,000 shares of IPVCDE's unrestricted Common Stock to be issued upon listing
of IPVCDE's stock on the OTC Bulletin Board. Such shares were never issued and
the agreement was amended in July 1998 deleting the issuance of such shares. The
consulting agreement was modified in July 1998 to revoke all interest in the
shares. The term of the Agreement was for a period of six (6) years and is still
in effect. James K. Howson, the Company's Chairman and CEO, serves as the
Chairman and CEO of Condor and he is the beneficial owner of Condor. Effective
September 1999, Condor agreed to reduce its consulting fees to $90,000 per year.
This agreed reduction will shall continue until the Company is profitable and
there are no accruals of any unpaid amounts under the Condor contract. Further,
none Condor has no expectations regarding the amount foregone at any future
date. See Part III, Item 11. "Security Ownership of Certain Beneficial Owners
and Management"; and Part III, Item 12. "Certain Relationships and Related
Transactions".
In March 1998, the Company's predecessor, Nova, entered into a share
exchange agreement with IPVCDE and its shareholders whereby Nova issued
9,000,000 shares of its restricted Common Stock valued at $9,000 to IPVCDE's
shareholders for all of the outstanding capital stock of IPVCDE, which then
became a wholly-owned subsidiary of Nova. In connection with the agreement, the
Company entered into employment agreements with Barbara Will, its current
Director, Chief Operating Officer and President and with Anthony Welch, designer
of the Company's proprietary software, who currently serves as the Senior
Vice-President of Research and Development. As part of the exchange, Ms. Will,
Mr. Welch and Condor each received 3,000,000 shares of the Company's restricted
common stock. Mr. Howson, the Company's
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Chairman and Chief Executive Officer, is the beneficial owner of Condor. For
such offering, the Company relied upon Section 4(2) of the Act, Rule 506,
Section 11-51-308(1)(j) of the Colorado Code, Section 7309(b)(9) of the Delaware
Code and Section 90.530(17) of the Nevada code. The Company relied on no state
exemption for the issuance to Condor, which is a Bahamian corporation. See Part
III, Item 10. "Executive Compensation - Employee Contracts and Agreements"; Part
III, Item 11. "Security Ownership of Certain Beneficial Owners and Management";
and Part III, Item 12. "Certain Relationships and Related Transactions".
In July 1998, the Company entered into a consulting agreement with
Calpe, to provide public relations consulting services valued at $85,000 to the
Company in exchange for 850,000 shares of the Company's unrestricted Common
Stock, of which 200,000 shares were given to ICG pursuant to its consulting
contract (as more fully described herein) and 23,000 shares were given to CI
pursuant to its consulting contract (as more fully described herein). In
consideration of its 627,000 shares, Calpe agreed to forego commissions equal to
$62,700 from IPVC product sales. The term of the Agreement was for a period of
three (3) years and is still in effect. For such offering, the Company relied
upon Section 3(b) of the Act and Rule 504. No state exemption was necessary for
the Calpe shares, as Calpe is a Bahamian corporation. However, the Company
relied upon Section 10-5-9(13) of the Georgia Code for the ICG shares and
Section 14-4-140 of the Arizona Code for the CI shares. See Part III, Item 12.
"Certain Relationships and Related Transactions".
In July, 1998, the Company entered into a consulting agreement with
ICG to provide financial public relations and direct marketing advertising and
consulting services to the Company. For such services, the Company agreed to pay
ICG $75,000 over the term of the Agreement and to issue 200,000 shares of the
unrestricted Common Stock of the Company, and to grant warrants to purchase
100,000 shares of the restricted Common Stock of the Company exercisable for a
period of two (2) years at an exercise price of $2.00 per share. Such warrants
have piggy-back registration rights. Such issuance of shares were valued at
$20,000, while the warrants were valued at $0. IPVC has a right of first refusal
to buy back any shares proposed to be sold by ICG to any third party. Of the
850,000 shares of its unrestricted Common Stock issued to Calpe, 200,000 shares
were given to ICG pursuant to its contract. The contract term was for a period
of six (6) months and has since terminated. For such offering, the Company
relied upon Section 3(b) of the Act and Rule 504. The Company relied upon
Section 10-5-9(13) of the Georgia Code for the issuance of ICG shares. See Part
III, Item 12. "Certain Relationships and Related Transactions".
In July 1998, the Company entered into a consulting agreement with CI
to provide public and investor relations consulting services to the Company in
exchange for 23,000 shares of the Company's unrestricted Common Stock. The
Agreement was for a term of three (3) months and terminated automatically in
November 1998. Of the 850,000 shares of its unrestricted Common Stock issued to
Calpe, 23,000 shares were given to CI pursuant to its contract. The Company
relied upon Section 3(b) of the Act and Rule 504. The Company relied upon
Section 14-4-140 of the Arizona Code for the issuance of CI shares. See Part
III, Item 12. "Certain Relationships and Related Transactions".
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In September 1998, the Company entered into a consulting agreement
for a term of six (6) months with First Capital, to provide financial consulting
services to the Company. In the event that First Capital was successful in
securing debt or equity financing for the Company, First Capital would be
granted warrants to purchase 125,000 shares of the restricted Common Stock of
the Company exercisable for a period of three (3) years at an exercise price of
$1.00 per share. Such warrants would have piggy-back registration rights. See
Part III, Item 12. "Certain Relationships and Related Transactions".
In October 1998, the Company entered into a consulting agreement with
IIP, memorializing an oral agreement made in July 1998, to provide financial,
consulting and advisory services valued at $35,000 in exchange for the issuance
of 350,000 shares, of which 243,760 are unrestricted Common Stock of the Company
and 106,240 are restricted Common Stock of the Company, the grant of warrants to
purchase an additional 1,600,000 shares of the unrestricted Common Stock of the
Company exercisable without time limitation at an exercise price of $0.06 per
share, the grant of warrants to purchase an additional 350,000 shares of the
restricted Common Stock of the Company exercisable without time limitation at an
exercise price of $3.90 per share and in consideration of $100 the grant of
warrants to purchase an 5% of the restricted Common Stock of the Company on a
fully-diluted basis at a price of $1.00 per share. In January 1999, IIP received
93,760 shares of Common Stock in lieu of payment for services which was due in
the amount of $14,064. IIP exercised its warrant to purchase 1,600,000 shares in
April 1999 at an exercise price of $96,000. As to the warrant that entitles IIP
to purchase 5% of the restricted Common Stock of the Company, in February 2000,
IIP purchased 136,000 shares at an exercise price of $136,000 and in March 2000,
IIP purchased 50,000 shares at an exercise price of $50,000. Such shares
represent 1.22% of the 5% interest that IIP is entitled to acquire, thereby
entitling IIP to purchase additional shares representing 3.88%. The Agreement is
for a period of three (3) years and is still in effect. The Company must also
pay a monthly fee of $4,000 the first year, $6,000 the second year and $8,000
the third year. For the unrestricted shares and warrants to purchase
unrestricted shares, the Company relied upon Section 3(b) of the Act and Rule
504. For the restricted shares and warrants to purchase restricted shares, the
Company relied upon Section 4(2) of the Act and Rule 506. No state exemption was
necessary, as IIP is an Irish corporation. See Part III, Item 12. "Certain
Relationships and Related Transactions".
In October, 1998, the Company entered into a consulting agreement
with Inside.com to provide media relations services and consulting advice to the
Company valued at $41,250 in exchange for the issuance of 275,000 shares of the
unrestricted Common Stock of the Company and the grant of warrants to purchase
an additional 155,000 shares of the unrestricted Common Stock of the Company
exercisable for a period of one (1) year at a price of $0.645 per share.
Inside.com exercised its warrant to purchase 155,000 shares in April 1999 at an
exercise price of $100,000. The Agreement is for a term of one (1) year and is
still in effect. For such issuance, the Company relied upon Section 3(b) of the
Act and Rule 504 and Section 517.061(11) of the Florida Code. See Part III, Item
12. "Certain Relationships and Related Transactions".
In March 1999, the Company entered into a consulting agreement with
BPN to provide financial public relations consulting services to the Company for
which the Company agreed to
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pay $40,000 for the first month, and $30,000 for the second and third months,
with subsequent months to be agreed upon, each of which is payable in
unrestricted shares of the Company's Common Stock the number of which is
determined by dividing the monthly payment by $1.00. The contract term was
through September 1999 and has expired without renewal. In exchange for services
rendered by BPN, the Company issued 100,000 shares of its unrestricted Common
Stock valued at $106,200 to Joyce Research Group, of which BPN is a division.
For the fourth, fifth and sixth months of the contract, the Company granted
Joyce Research Group options to purchase 150,000 shares of the Company's
restricted Common Stock at an exercise price equal to 60%, 65% and 70% of the
market price respectively. For such offering, the Company relied upon Section
3(b) of the Act and Rule 504 and Florida Code Section 517.061(11). See Part III,
Item 12. "Certain Relationships and Related Transactions".
In April 1999, the Company entered into a share exchange agreement
with INS whereby the Company exchanged 250,000 shares of its Redeemable
Convertible Preferred stock valued at $500,000 for all of the outstanding
capital stock of INS. Such Redeemable Convertible Preferred stock contains 1 for
1 conversion rights after one (1) year and is redeemable at $2.00 per share. The
President of INS, Peter M. Stazzone, remained with the Company as the President
of the subsidiary. At the time of the exchange Mr. Stazzone became Secretary,
Treasurer and Chief Financial Officer of the Company under an employment
agreement. Also at the time of the exchange, Mr. Stazzone received 50,000 shares
of the Redeemable Convertible Preferred Stock of the Company. Pursuant to the
Employment Agreement, Mr. Stazzone received 200,000 shares of the Company's
Restricted Common Stock, a stock bonus of 100,000 shares of the Restricted
Common Stock deemed earned on the date of the Share Exchange Agreement, but to
be delivered on the earlier of (i) the first anniversary date or (ii) Mr.
Stazzone's termination and options to purchase an additional 200,000 shares of
the restricted Common Stock of the Company exercisable for a period of three (3)
years at an exercise price of $1.00 per share. It was represented that INS had
acquired certain assets, including the rights to INS' name, from the Bankruptcy
Court in the Chapter 11 filing of Telsave. Mr. Stazzone was the Chief Financial
Officer of Telsave at the time the bankruptcy was filed and the Bankruptcy Court
was provided with disclosure of his involvement with INS prior to the Court's
approval of the sale of certain Telsave assets to INS. In June 1998, Mr.
Stazzone was loaned $100,000 by INS, which loan bears no interest and has no
stated repayment terms. At the time of the acquisition of INS, the Company
believed that it was acquiring the rights to the CIC Code. The purchase price
was based in part upon an appraisal of the value of the CIC Code which is loaded
in approximately 60% of the domestic market. However, during the course of the
audit, it was discovered that clear title may not have passed to INS and
subsequently the Company. Therefore, the Board resolved that, in the event clear
title had not passed to the Company, it would be in the best interest of the
shareholders to unwind the transaction. The Company sought a legal opinion on
the status of such title and just prior to filing its Form 10SB in November 1999
discovered that there was no clear link between the ownership of the CIC Code
and INS. Therefore the Company voted to unwind the transaction ab initio, to
rescind the issuances made under the acquisition and the employment agreements
and to terminate Mr. Stazzone's employment. Mr. Stazzone and INS have instituted
suit against the Company. For such offering, the Company relied upon Section
4(2) of the Act and Rule 506, Section 14-4-126(f) of the Arizona Code and
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Section 90.530(11) of the Nevada Code. See Part I, Item 3. "Legal Proceedings";
Part III, Item 10. "Executive Compensation - Employee Contracts and Agreements";
Part III, Item 11. "Security Ownership of Certain Beneficial Owners and
Management"; and Part III, Item 12. "Certain Relationships and Related
Transactions".
In April 1999, the Company entered into a marketing agreement with
Benae to market the Company's telephony services and to register a minimum of
one hundred (100) customers in the thirty (30) cities in which IPVC plans to
offer telephony services within twelve(12) months in exchange for 200,000 shares
of the unrestricted Common Stock of the Company valued at $206,200. The shares
are to be returned to the Company if the minimum is not met. For such offering,
the Company relied upon Section 3(b) of the Act and Rule 504 and Section
90.530(11) of the Nevada Code. See Part III, Item 127. "Certain Relationships
and Related Transactions".
In April, 1999, the Company entered into a marketing and advertising
agreement with NG to provide marketing services to a minimum of 75,000 customers
in thirty (30) cities designated by IPVC within a twelve (12) month period in
exchange for 100,000 shares of the restricted Common Stock of the Company valued
at $103,100, which shares must be returned if NG fails to deliver a minimum of
eight (8) cities with a total of 75,000 customers before December 31, 1999. In
addition, NG may earn performance bonuses of: 50,000 restricted shares if eight
(8) cities are delivered within ninety (90) days of execution; 50,000 restricted
shares if fifteen (15) cities are delivered within one hundred fifty (150) days;
and 10,000 restricted shares for each additional city thereafter before December
31, 1999 up to 30 cities. Further, NG will be granted warrants to purchase
30,000 shares of the Company's restricted Common Stock exercisable for a period
of two (2) years at an exercise price of $2.50 per share for every block of
5,000 pre-registered customers up to 75,000 pre-registered customers in a twelve
(12) month period. For such offering, the Company relied upon Section 4(2) of
the Act and Rule 506 and Section 14-4-126(F) of the Arizona Code. See Part III,
Item 12. "Certain Relationships and Related Transactions".
On November 11, 1999, the Company executed a letter employment
agreement dated November 10, 1999 with Harry R. Bowman. Under the terms of the
agreement, Mr. Bowman is to serve as an Executive Vice President of the Company
for a term of two (2) years at a base salary of $78,000 per year. In addition,
Mr. Bowman, a resident of Pennsylvania, receives health insurance, a paid
vacation, travel twelve (12) times a year to his residence and living,
automobile and subsistence allowances. Mr. Bowman is required to spend at least
three (3) weeks a month at the Company's offices in Phoenix and one (1) week a
month at a location to be decided in Pennsylvania.. The agreement included a
sixty (60) day probationary period. Under the terms of the agreement, Mr. Bowman
was granted four (4) years options to purchase 50,000 shares of the Company's
Common Stock at an exercise price of $1.75 exercisable one half when the stock
trades for any ten (10) days out of thirty (30) consecutive days at or above
$7.00 per share and one half when the stock trades at or above $12.00 in the
same manner. Any shares acquired under the option must be held for the two-year
period in which Mr. Bowman has committed to work for the Company, and, in the
event the commitment is not met or Mr. Bowman is discharged due to poor
performance or cause, unexercised options expire and shares acquired are
forfeited. For such offering, the Company relied upon Section 4(2) of the Act
and Rule 506 and Section 201.[70 P.S.
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1.201] of the Pennsylvania Code. See Part III, Item 10. "Executive Compensation
- - Employee Contracts and Agreements"; Part III, Item 11. "Security Ownership of
Certain Beneficial Owners and Management"; and Part III, Item 12. "Certain
Relationships and Related Transactions".
Effective November 29, 1999, the Company executed an engagement
letter with McGinn, to act as a broker and financial advisor to the Company in
the private placement of up to $5 million of the Company's securities. Under the
agreement McGinn is to use its best efforts with regard to such placement. The
agreement is effective through March 24, 2000. From the date of the engagement
letter through March 24, 2000, McGinn has the exclusive right to offer the
Company's securities. In the event McGinn is successful, it will receive a fee
equal to ten percent (10%) of the first $5 million and eight percent (8%) of any
amount in excess of $5 million and will receive three year warrants equal to 2%
of the proceeds with a strike price of 125% of the bid price on the date of
closing. Such warrants are to have piggy-back registration rights. Upon
execution of the engagement letter, the Company was required to issue 10,000
shares of its restricted Common Stock as a non-refundable Retainer/Investment
Banking fee and the Company is obligated to reimburse McGinn for pre-approved
expenses. The Company has not accepted the terms of any private placements under
this Agreement. For such issuance, the Company relied upon Section 4(2) of the
Act and Rule 506 and Section 359(f)(2)(d) of the New York Code. See Part III,
Item 12. "Certain Relationships and Related Transactions".
Effective February 16, 2000, the Company executed an engagement
letter with Delano to act as a placement agent and financial advisor to the
Company in the private placement of up to $2.5 million of the Company's
securities. Under the agreement Delano is to use its best efforts with regard to
such placement. Delano was listed with McGinn as a broker with whom they were
working prior to the McGinn engagement letter. In the event Delano is
successful, it will receive a fee equal to seven percent (7%) of the proceeds, a
non-accountable expense allowance equal to three percent (3%) of the proceeds
and five year warrants to purchase 100,000 shares of the Company's Common Stock
at a strike price equal to 120% of the lowest closing bid price during the five
(5) trading days prior to the closing. Such warrants are to have piggy-back
registration rights. The Company has not accepted the terms of any private
placements under this Agreement.
Item 2. Description of Property
The Company maintains its executive offices at 5050 No. 19th Avenue,
Suite 416/417, Phoenix, Arizona 85015. Its telephone number is (602) 335-1231
and its facsimile number is (602) 335-1577.
The Company leases approximately three thousand five hundred
sixty-five (3,565) square feet of office space in Phoenix, Arizona which now
serve as its executive offices. This space was occupied by INS, and this lease
replaced INS' previous lease at the same location. The lease is for a term of
one (1) year commencing August 1, 1999 and ending July 31, 2000. The Company
pays monthly rent in the amount of $3,862.08 plus a ratable cost adjustment and
taxes.
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The Company leases a corporate apartment in Phoenix, AZ which is used
by Mr. Bowman when he is in Phoenix and by other corporate personnel when he is
not. The lease is for a term of one year commencing November 1, 1999 and
terminating October 31, 2000. The Company pays monthly rent in the amount of
$866.12 plus a ratable adjustment for taxes. The lease has an automatic month to
month renewal at the end of the term that extends until the landlord receives
30-day notice that the tenant intends to vacate.
The Company owns no real property and its personal property consists
of hardware, inventory, software, furniture, fixtures and equipment, prototype
molds and leasehold improvements with an original cost of $41,968 on December
31, 1998.
In December 1999, the Company executed an agreement effective January
2000 replaced the phone system equipment previously installed by INS with a new
system under a finance lease purchase arrangement. The arrangement is for a term
of four (4) years and the Company makes monthly payments in the amount of
$374.52.
The Company currently employs its capital reserves in a sweep
account. Activity is monitored on a daily basis.
Item 3. Legal Proceedings
On December 9, 1999, the Company was advised that Peter Stazzone
intended to bring a lawsuit against the Company and certain of its advisors
relative to his termination as an Officer and Director of the Company in which
he will allege breach of his employment contract, breach of fiduciary duty by
certain advisors, tortious interference by certain advisors, intentional
misrepresentation by the Company and negligent misrepresentation by the Company.
Although the suit had not been filed at that time, the Company's attorneys were
provided with a draft copy of the suit which they intended to file in Maricopa
County, Arizona. On December 22, 1999, Mr. Stazzone filed a suit against the
Company [Peter M. Stazzone v. IPVoice.com, Inc, a Nevada Corporation, Superior
Court of the State of Arizona, County of Maricopa, No. CV 99-22828] (the
"Stazzone Action"). The Stazzone Action contains a one count breach of contract
claim in which Mr. Stazzone seeks his salary, liquidated damages, the award of
stock and options, interest and attorneys fees. The Company intends vigorously
to defend such action and believes it has meritorious defenses. The Company
filed an answer on January 18, 2000.
Also on December 9, 1999, the Company was advised that INS [Satlink
3000, Inc.] intended to bring a lawsuit against the Company for breach of
contract as a result of the Company's decision to rescind the merger
transaction. Although the suit had not been filed at that time, the Company's
attorneys were provided with a draft copy of the suit which they intended to
file in Maricopa County, Arizona. On December 17, 1999, INS filed a suit against
the Company [Satlink 3000, Inc., a Nevada Corporation v. IPVoice.com, Inc, a
Nevada Corporation, Superior Court of the State of Arizona, County of Maricopa,
No. CV 99-22560] (the "INS Action"). The INS Action is seeking actual and
punitive damages as a result of the rescission. The Company intends vigorously
to defend such action and believes it has meritorious defenses and counterclaims
against INS. The Company made a Motion to Dismiss on the basis that the injury
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claimed was that of the INS shareholders and that the suit had to be in their
names, not the Company name. INS conceded this point and filed an Amended
Complaint in February 2000 listing all but one of its shareholders. The Company
intends to file a reply stating that all of the shareholders are not named.
Prior to the vote by the Shareholders and the Board of Directors of
the Company to rescind the transactions with INS and Mr. Stazzone, advice of
counsel was sought as to the appropriateness of such actions. It was determined
that affirmative legal action instigated by the Company was not the best use of
the Company's assets which would be better spent pursuing the Company's
business. However, it was determined that, in the event Mr. Stazzone and/or INS
took action, that the Company would defend and pursue all of its remedies at law
and in equity.
The Company knows of no other legal proceedings to which it is a
party or to which any of its property is the subject, which are pending,
threatened or contemplated or any unsatisfied judgments against the Company.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter 1999, the following matters were voted upon
by the Shareholders.
On October 29, 1999, Shareholders representing a majority of shares
entitled to vote, at an emergency meeting called in accordance with the
Company's Bylaws, by a vote of 11,253,666 shares to 0 voted to rescind the Share
Exchange Agreement dated April 7, 1999 with Satlink ab initio and to remove Mr.
Stazzone as a Director for cause. At a meeting of the Board called immediately
thereafter, by unanimous vote, Mr. Stazzone was removed as an Officer for Cause.
The Company held its annual meeting on December 9, 1999 in Phoenix,
Arizona at which time the shareholders, by a vote of 9,823,189 shares to 0 voted
(1) to have Barbara Will, Anthony Welch, James Howson and Russell Watson serve
on the Board of Directors for another one (1) year term, (2) ratified the
appointment of Durland & Company, CPAs, P.A. as its auditors for the year ending
December 31, 1999 and (3) adopted a stock award plan which allows for up to
1,000,000 shares to be reserved for grants under the plan.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Market Information.
The Common Stock of the Company currently is quoted on the OTC Bulletin Board
under the symbol "IPVC" and has been since July 1998. The high, low and average
bid information for each quarter since July 1998 to the present are as follows:
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Quarter High Bid Low Bid Average Bid
Third Quarter 1998 1.17 .55 .86
Fourth Quarter 1998 .56 .10 .24
First Quarter 1999 1.38 .19 .95
Second Quarter 1999 7.50 .75 3.13
Third Quarter 1999 3.06 1.50 2.17
Fourth Quarter 1999 4.06 1.44 2.01
The quotations may reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not reflect actual transactions.
(b) Holders.
As of December 31, 1999 the Company had 87 shareholders of record of
its 16,422,758 outstanding shares of Common Stock, 9,239,429 of which are
restricted Rule 144 shares and 7,183,349 of which are free-trading. As of the
date hereof, the Company has outstanding options to purchase 2,583,879 shares of
Common Stock. Of the Rule 144 shares, 5,856,523 shares have been held by
affiliates of the Company for more than one (1) year. The Company voted to
unwind the INS transaction ab initio, to rescind the issuances made under the
acquisition and the employment agreements and to terminate Mr. Stazzone's
employment. The 300,000 shares issued to Mr. Stazzone were rescinded and all of
the Redeemable Convertible Preferred Shares were canceled. The Company has 1,150
shares of Senior Convertible Preferred outstanding.
(c) Dividends.
The Company has never paid or declared any dividends on its Common
Stock and does not anticipate paying cash dividends in the foreseeable future.
Item 6. Plan of Operation
The following discussion contains certain forward-looking statements
that are subject to business and economic risks and uncertainties, and the
Company's actual results could differ materially from those forward-looking
statements. The following discussion regarding the financial statements of the
Company should be read in conjunction with the financial statements and notes
thereto.
Discussion and Analysis
The Company, IPVoice Communications, Inc. is a Nevada chartered
development stage corporation which conducted business from its headquarters in
Denver, Colorado until August 1999 when it relocated to Phoenix, Arizona. The
Company was incorporated on February 19,1997, as Nova Enterprises, Inc. and
changed its name to IPVoice Communications in March, 1998. On May 24, 1999 the
Company formally changed its name to IPVoice.com, Inc.
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The Company is principally involved in the Internet telephony
industry. Current activities include software and hardware development, raising
additional equity, and negotiating with key personnel and facilities.
Inventory consists mainly of computer parts to be used in the
assembly of units to be sold to customers, or utilized by the Company in its
operations. Once the assembly is complete, the respective computer part costs
are charged to operations or reclassified to property and equipment based on the
nature of the transaction. Inventory is valued at the lower of cost or market.
Cost is determined using the first-in, first-out (FIFO) method.
In March 1998, IPVoice Communications, Inc., a Nevada corporation,
acquired 100% of the issued and outstanding shares of the common stock of
IPVoice Communications, Inc., a Delaware corporation, in a reverse merger, which
was accounted for as a reorganization of the Delaware company.
The Company is in the development stage, it is acquiring the
necessary operating assets and it is beginning its proposed business. While the
Company is developing tools necessary to enter the Internet telephony market,
there is no assurance that any benefit will result from such activities. The
Company will receive limited operating revenues and will continue to incur
expenses during its development, possibly in excess of revenue.
The ability of the Company to continue as a going concern is
dependent upon increasing sales and obtaining additional capital and financing.
The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern. The Company is
currently seeking financing to allow it to begin its planned operations.
On April 7, 1999, the Company acquired all of the issued and
outstanding common stock of INS. The Company issued 250,000 shares of redeemable
convertible preferred shares, each convertible on or after one (1) year after
Closing into one share of the Company's common stock or, at the sellers' option,
redeemable by the Company at a redemption price of $2.00 per share. The Company
rescinded this transaction ab initio just prior to filing its Form 10SB in
November 1999 after finding that there was no clear link between the ownership
of the CIC Code and INS. INS has instituted suit against the Company.
The purchase was done to acquire FCC tariffs, corporate certification
in over 30 states in the United States, and the INS name. At the time of the
acquisition, the Company believed that it was acquiring the CIC. The Company
also obtained all cash, furniture and equipment, staff and office space in
Arizona. An independent business valuation solely of the intangible assets,
which are comprised of the CIC code and state certifications and tariffs,
concluded a fair market value at the date of acquisition of $460,000. During the
course of the audit, it was discovered that clear title may not have passed to
INS and subsequently the Company. The Company believed that the acquisition of
INS would provide the Company with an operational and marketing advantage in the
United States, by being tariffed and, provided clear title had passed to the
Company, by having the CIC.
41
<PAGE>
The acquisition was subject to IPVC entering into agreements with the
Company's President and Chief Executive Officer, including but not limited to,
an employment agreement, consulting agreement, compensation agreement, stock
option agreement, and stock grant agreement. The Employment/Compensation
Agreement provides compensation for services performed in the capacity of
Director and Chief Financial Officer of the Company. In addition, certain stock
incentives were provided. The Board voted to unwind the transaction ab initio,
to rescind the issuances made under the acquisition and employment agreements
and to terminate Mr. Stazzone's employment. Mr. Stazzone has instituted suit
against the Company.
During the second quarter of 1999, the Company raised $1,150,000
through the issuance of forty-six (46) investment units in the amount of
$25,000. Each unit consisted of a two-year note in the principal amount of
$24,900 including interest payable quarterly in cash at 9% per annum; a warrant
for the purchase of 18,750 shares of restricted stock of the Company; and twenty
five (25) Senior Convertible Preferred shares. Management anticipated that the
net proceeds, less initial expenses payable, would provide sufficient working
capital to meet the Company's capital needs through the first quarter of 2000
and anticipated that it would generate sufficient revenue and/or be required to
raise additional capital in order to meet its needs through calendar year 2000.
However, there can be no assurance that sufficient revenues will be generated or
that additional capital can be raised, if needed.
The Company recently installed Gateways in New York, Los Angeles and
London and began receiving revenues from the sale of prepaid calling cards.
Results of Operations - Full Fiscal Years - December 31, 1999 and December 31,
1998
Revenues
Revenues for the twelve month period ended December 31, 1999 was
$321,279 and for the twelve month period ended December 31, 1998 was $41,254.
The Company engaged in the sale of prepaid calling cards which resulted in
revenues for the twelve months ended December 31, 1999.
Operating Expenses
Operating Expenses for the twelve months of calendar year 1999 were
$1,897,084 versus $548,939 in the comparable period in calendar year 1998. Net
loss was $1,973,834 and $507,685for the twelve months ended December 31,1999 and
1998, respectively.
During 1999, consulting fees of $136,500 were paid to two officers
and $131,064 a shareholder. There was $40,896 outstanding in respect to fees to
shareholders as of December 31, 1999.
42
<PAGE>
Assets and Liabilities
Assets were $633,903 as of December 31, 1999, and $191,513 as of
December 31, 1998. As of December 31, 1998, assets consisted primarily of
inventory of $152,980 and equipment with a net book value of $37,625. As of
December 31, 1999, assets consisted primarily of cash of $98,592, accounts
receivable of $108,100 and property and equipment of $377,555 net of
depreciation. Liabilities were $1,551,739 and $307,129 as of December 31, 1999
and December 31, 1998 respectively. As of December 31, 1999, liabilities
consisted primarily of trade accounts payable of $326,524 and long-term notes
payable of $1,145,400.
At December 31, 1998 and 1999, the Company owed two of its officers
$34,268 and $17,403 respectively for reimbursement of expenses paid on behalf of
the Company.
At December 31, 1998 and 1999, the Company owed two of its
shareholders $20,564 and $40,896 respectively for consulting services performed
on behalf of the Company. Total consulting fees incurred to shareholders during
the year ended December 31, 1998 and 1999 amounted to $31,096 and $131,064
respectively. During the year ended December 31, 1999, total consulting fees of
$136,500 were paid to two officers of the Company, one of whom was paid $30,000
in consulting fees prior to his election as an officer.
During the year ended December 31, 1998, one of the Company's
shareholders advanced funds totaling $24,750 for payment of general operating
expenses. This amount was repaid in 1999.
During 1999, the Company purchased for cash approximately $14,000 of
furniture and fixtures from an officer of the Company at fair market value.
Stockholders' Equity
Stockholders' equity was ($917,836) as of December 31, 1999 and
($115,616) as of December 31, 1998. The Company had 16,422,758 and 12,578,999
shares of common stock issued and outstanding at December 31, 1999 and 1998,
respectively.
In February 1997, the Company issued 9,000,000 shares to its founders
for services rendered to the Company valued at par value, or $9,000. In March
1997, the Company completed a Regulation D Rule 504 Placement for 1,400,000
shares in exchange for $14,000 cash.
In March 1998, a majority shareholder donated 9,000,000 shares of
common stock to the Company. These shares were simultaneously issued for the
acquisition of IPVoice Communications, Inc., a Delaware corporation. During the
second quarter of 1998, the Company issued 144,000 shares of common stock for
$144,000 in cash. The Company issued 473,000 shares of common stock for services
rendered, valued at the current market rate of $47,300, during the third quarter
of 1998. Also during the third quarter, the Company issued 183,333 shares of
common stock for $85,000 in cash, and 627,000 shares of common stock for a
subscription receivable of $62,700. In the fourth quarter of 1998, the Company
issued 275,000
43
<PAGE>
shares of common stock for services rendered, valued at the current market rate
of $41,250. In the same quarter, 476,666 shares of common stock were issued for
$121,800 in cash.
In January 1999, the Company issued 93,760 shares of common stock in
exchange for services, valued at $14,064. In January and February 1999, the
Company issued 499,999 shares of common stock in exchange for $75,000 in cash.
In March 1999, the Company issued 187,500 shares of common stock for $75,000 in
cash. These issuances were to then current stockholders. In March 1999, the
Company issued 400,000 shares of common stock for services, valued at the
current market rate of $415,500, to three previously unrelated entities.
In April 1999, the Company issued 250,000 shares of common stock to
an existing stockholder for $100,000 cash. In April 1999, an existing
stockholder exercised a warrant for 155,000 shares of common stock by tendering
$100,000 cash. In April 1999, an existing stockholder exercised a warrant for
1,600,000 shares of common stock by tendering $96,000 in cash. In the second
quarter, the Company completed a Regulation D Rule 506 Private Placement for
units, which included the issuance of 1,150 shares of senior convertible
preferred stock in exchange for $4,600 in cash. These senior convertible
preferred shares, as a group, are convertible into common shares equaling 51% of
the issued and outstanding common shares after conversion, in the event of an
uncured default of the notes payable.
In July 1999, the Company discovered that it had failed to issue and
record 10,000 shares of common stock in exchange for legal services, valued at
$10,000 in 1997, as originally contracted. These shares were recorded in July
1999. In August 1999, the Company issued 437,500 shares of common stock for
$175,000 cash. All common stock shares issued in exchange for cash, except the
two warrant exercises, were subscribed for in January 1999. In November 1999,
the Company issued 10,000 shares of common stock in exchange for services valued
at $23,750. In December 1999, the Company discovered that it had failed to issue
and record 200,000 shares of common stock for services valued at $20,000, which
had been contracted for in October 1998, and were recorded in December 1999.
Financial Condition, Liquidity and Capital Resources
At December 31,1999 the Company had cash of $98,592 as compared to
$908 at December 31, 1998.
During the second quarter of 1999, the Company raised $1,150,000
through the issuance of forty-six (46) investment units in the amount of
$25,000. Each unit consisted of a two-year note in the principal amount of
$24,900 including interest payable quarterly in cash at 9% per annum; a warrant
for the purchase of 18,750 shares of restricted stock of the Company; and twenty
five (25) Senior Convertible Preferred shares. Management anticipates the net
proceeds, less initial expenses payable, will provide working capital for the
Company through the first quarter of 2000.
44
<PAGE>
The Company is seeking to raise additional capital through private
and/or public sales of securities in the future and has retained the services of
a registered broker/dealer. Under this engagement, the Company is negotiating
with an investment group introduced by the broker/dealer for an investment of up
to $5 million in two tranches of $2.5 million within the next twelve (12)
months. There can be no guarantee that the Company and the investment group will
come to agreeable terms.
Impact of the Year 2000 Issue
The Year 2000 Issue was the result of potential problems with
computer systems or any equipment with computer chips that use dates where the
date has been stored as just two digits (e.g. 98 for 1998). On January 1, 2000,
any clock or date recording mechanism including date sensitive software which
used only two digits to represent the year, might have recognized the date using
00 as the year 1900 rather than the year 2000. This could have resulted in a
system failure or miscalculations causing disruption of operations, including
among other things, a temporary inability to process transactions, send
invoices, or engage in similar activities.
The Company was aware of the issues associated with the programming
code in existing computer systems as the millennium (Year 2000) approached. All
software used for the Company's systems has been supplied by software vendors or
outside service providers. The Company had confirmed with such providers that
its present software was Year 2000 Compliant.
The Company believes, after investigation, that all software and
hardware products that it is currently in the process of developing (directly or
through vendors) are Year 2000 compliant. The Company believes, after
investigation, that its own software operating systems are Year 2000 compliant
and in fact, has experienced no Year 2000 problems since January 1, 2000.
Further the Company has experienced no difficulties or adverse effects due to
untimely conversion or failure to convert by any other company upon which it
relies.
The Company believes that it has disclosed all required information
relative to Year 2000 issues relating to its business and operations.
Forward-Looking Statements
This Form 10-KSB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included or incorporated by reference in
this Form 10-KSB which address activities, events or developments which the
Company expects or anticipates will or may occur in the future, including such
things as future capital expenditures (including the amount and nature thereof),
demand for the Company's products and services, expansion and growth of the
Company's business and operations, and other such matters are forward-looking
statements. These statements are based on certain assumptions and analyses made
by the Company in light of its experience and its perception of historical
trends, current conditions and expected future developments as well as other
factors it believes are appropriate in the circumstances. However, whether
actual results or developments will conform with the Company's
45
<PAGE>
expectations and predictions is subject to a number of risks and uncertainties,
general economic market and business conditions; the business opportunities (or
lack thereof) that may be presented to and pursued by the Company; changes in
laws or regulation; and other factors, most of which are beyond the control of
the Company. Consequently, all of the forward-looking statements made in this
Form 10-KSB are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequence to or effects on the Company or its business or operations.
46
<PAGE>
Item 7. Financial Statements
IPVoice.com, Inc.
(A Development Stage Enterprise)
Audited Financial Statements
For the Years Ended December 31,
1999 and 1998 and from February 19, 1997
(Inception) through December 31, 1999
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report................................................F-2
Consolidated Balance Sheets.................................................F-3
Consolidated Statements of Operations.......................................F-4
Consolidated Statements of Stockholders' Deficiency.........................F-5
Consolidated Statements of Cash Flows.......................................F-6
Notes to Consolidated Financial Statements..................................F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
IPVoice.com, Inc.
(A Development Stage Enterprise)
Phoenix, Arizona
We have audited the accompanying consolidated balance sheets of IPVoice.com,
Inc., a development stage enterprise, (the "Company") as of December 31, 1999
and 1998 and the related consolidated statements of operations, stockholders'
deficiency and cash flows for the years ended December 31, 1999 and 1998 and
from February 19, 1997 (Inception) through December 31, 1999. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1999 and 1998 and the results of their operations and their cash
flows for the years ended December 31, 1999 and 1998 and from February 19, 1997
(Inception) through December 31, 1999, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 4 to the
consolidated financial statements, the Company has experienced a net loss since
inception, and reflects negative working capital and stockholders' deficiency as
of December 31, 1999. The Company's financial position and operating results
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 4. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Durland & Company
Durland & Company, CPAs, P.A.
Palm Beach, Florida
March 7, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Consolidated Balance Sheet
December 31,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 98,592 $ 908
Certificate of deposit - restricted 25,205 0
Accounts receivable 108,100 0
Inventory 7,586 152,980
Prepaid expenses 16,865 0
------------- -------------
Total current assets 256,348 153,888
------------- -------------
PROPERTY AND EQUIPMENT
Computer equipment 369,619 30,953
Office equipment 19,019 11,015
Furniture and fixtures 29,445 0
------------- -------------
Subtotal property and equipment 418,083 41,968
Less accumulated depreciation (40,528) (4,343)
------------- -------------
Total property and equipment 377,555 37,625
------------- -------------
Total Assets $ 633,903 $ 191,513
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses
Trade $ 326,524 $ 191,817
Officer 17,403 34,268
Related party 40,896 20,564
Accrued payroll taxes 1,005 35,730
Accrued interest - stockholders 12,690 0
Deferred revenue 7,821 0
Advances from stockholder 0 24,750
------------- -------------
Total current liabilities 406,339 307,129
------------- -------------
LONG-TERM LIABILITIES
Notes payable 1,145,400 0
------------- -------------
Total long-term liabilities 1,145,400 0
------------- -------------
Total Liabilities 1,551,739 307,129
------------- -------------
STOCKHOLDERS' DEFICIENCY
Senior Convertible Preferred stock, $0.001 par value,
authorized 10,000,000 shares 1 0
1,150 and 0 issued and outstanding shares
Common stock, $0.001 par value, authorized 50,000,000 shares;
16,422,758 and 12,578,999 issued and outstanding shares 16,423 12,579
Additional paid-in capital 1,570,240 465,171
Stock subscription receivable 0 (62,700)
Deficit accumulated during the development stage (2,504,500) (530,666)
------------- -------------
Total stockholders' deficiency (917,836) (115,616)
------------- -------------
Total Liabilities and Stockholders' Deficiency $ 633,903 $ 191,513
============= =============
</TABLE>
The accompanying notes are an integral part of
the financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Consolidated Statements of Operations
Period from
February 19, 1997
(Inception)
Year Ended December 31, through
-------------------------------------------
1999 1998 December 31, 1999
------------------------ -------------------- -----------------------
<S> <C> <C> <C>
NET SALES $ 321,279 $ 41,254 $ 362,533
COST OF SALES 305,434 0 305,434
------------------------ -------------------- -----------------------
Gross profit 15,845 41,254 57,099
------------------------ -------------------- -----------------------
OPERATING EXPENSES
Compensation
Officers 340,896 140,076 484,353
Other 78,522 37,715 112,856
Consulting 470,765 0 516,115
Consulting - related party 267,564 91,096 322,291
General and administrative 605,749 275,709 881,458
Research and development 97,403 0 97,403
Organization expense - related party 0 0 14,000
Depreciation and amortization 36,185 4,343 40,528
------------------------ -------------------- -----------------------
Total operating expenses 1,897,084 548,939 2,469,004
------------------------ -------------------- -----------------------
Loss from operations (1,881,239) (507,685) (2,411,905)
------------------------ -------------------- -----------------------
OTHER INCOME (EXPENSE)
Interest expense (64,387) 0 (64,387)
Interest income 20,324 0 20,324
Write-off of receivable (48,532) 0 (48,532)
------------------------ -------------------- -----------------------
Total other income (expense) (92,595) 0 (92,595)
------------------------ -------------------- -----------------------
Net loss $ (1,973,834)$ (507,685)$ (2,504,500)
======================== ==================== =======================
Loss common share $ (0.13) (0.04)
======================== ====================
Number of weighted average common shares
outstanding 15,413,751 11,620,451
======================== ====================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Deficiency
Deficit
Accumulated Total
Par Value Additional Stock During the Stockholders'
-------------------
Number of Shares Preferred Common Paid-in Subscription Development Equity
--------------------
Preferred Common Stock Stock Capital Receivable Stage (Deficiency)
-------- ---------- ------- --------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
February 19, 1997 (Inception) 0 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
2/97 - founder's serv. ($0.001/sh.) 0 9,000,000 0 9,000 0 0 0 9,000
3/97 - cash ($0.01/sh.) 0 1,400,000 0 1,400 12,600 (12,274) 0 1,726
Net loss 0 0 0 0 0 0 (22,981)
--------- ----------- -------- ---------- ------------ ---------- ------------- -------------
BALANCE,
December 31, 1997 0 10,400,000 $ 0 $ 10,400 $ 12,600 $ (12,274)$ (22,981) $ (12,255)
3/19 - donated-rel. party ($0.001/sh.) 0 (9,000,000) 0 (9,000) 9,000 0 0 0
3/19 - acquisition ($0.001) 0 9,000,000 0 9,000 (9,000) 0 0 0
3/20 - cash received 0 0 0 0 0 12,274 0 12,274
2nd qtr, - cash ($1.00/sh.) 0 144,000 0 144 143,856 0 0 144,000
3rd qtr. - cash ($1.00/sh.) 0 10,000 0 10 9,990 0 0 10,000
3rd qtr. - cash ($0.75/sh.) 0 53,333 0 53 39,947 0 0 40,000
3rd qtr. - cash ($0.50/sh.) 0 20,000 0 20 9,980 0 0 10,000
3rd qtr. - cash ($0.25/sh.) 0 100,000 0 100 24,900 0 0 25,000
3rd qtr. - cash $0.10/sh.) 0 627,000 0 627 62,073 (62,700) 0 0
3rd qtr. - services ($0.10/sh.) 0 473,000 0 473 46,827 0 0 47,300
4th qtr. - cash ($0.15/sh.) 0 396,666 0 397 56,103 0 0 56,500
4th qtr. - services ($0.15/sh.) 0 275,000 0 275 40,975 0 0 41,250
4th qtr. - cash ($0.19/sh.) 0 80,000 0 80 14,920 0 0 15,000
Net loss 0 0 0 0 0 0 (507,685) (507,685)
--------- ----------- -------- ---------- ------------ ---------- ------------- -------------
BALANCE,
December 31, 1998 0 12,578,999 0 12,579 465,171 (62,700) (530,666) (115,616)
1st qtr. - cash ($0.22/sh.) 0 687,499 0 687 149,313 0 0 150,000
1st qtr. - services ($0.87/sh.) 0 493,760 0 494 429,070 0 0 429,564
2nd qtr. - cash received 0 0 0 0 0 60,000 0 60,000
2nd qtr. - cash ($4.00/sh.) 1,150 0 1 0 4,599 0 0 4,600
2nd qtr. - cash ($0.15/sh.) 0 2,005,000 0 2,005 293,995 0 0 296,000
3rd qtr. - cash ($0.40/sh.) 0 437,500 0 438 174,562 0 0 175,000
3rd qtr. - cash received 0 0 0 0 0 2,700 0 2,700
3rd qtr. - services ($1.00) 0 10,000 0 10 9,990 0 0 10,000
4th qtr. - services ($0.21) 0 210,000 0 210 43,540 0 0 43,750
Net loss 0 0 0 0 0 0 (1,973,834) (1,973,834)
--------- ----------- -------- ---------- ------------ ---------- ------------- -------------
BALANCE,
December 31, 1999 1,150 16,422,758 $ 1 $ 16,423 $ 1,570,240 $ 0 $ (2,504,500) $ (917,836)
========= =========== ======== ========== ============ ========== ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
Period from
February 19, 1997
(Inception)
Year Ended December 31, through
-----------------------------------
1999 1998 December 31, 1999
----------------- ----------------- -----------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,973,834)$ (507,685)$ (2,504,500)
Adjustments to reconcile net loss to net cash used by
operating activities:
Stock issued for services - related party 34,064 88,550 131,614
Stock issued for services - other 449,250 0 449,250
Depreciation 36,185 4,343 40,528
Interest credited to certificate of deposit (205) 0 (205)
Changes in operating assets and liabilities
(Increase) decrease in inventory (7,586) (152,980) (7,586)
(Increase) decrease in accounts receivable (108,100) 0 (108,100)
(Increase) decrease in prepaid expenses (16,865) 0 (16,865)
Increase (decrease) in accounts payable - trade 134,707 191,817 326,524
Increase (decrease) in accounts payable - officer (16,865) 34,268 17,403
Increase (decrease) in accounts payable - related party 20,332 6,564 40,896
Increase (decrease) in deferred revenue 7,821 0 7,821
Increase (decrease) in accrued payroll taxes (34,725) 35,730 1,005
Increase (decrease) in accrued interest 12,690 0 12,690
----------------- ----------------- -----------------------
Net cash used by operating activities (1,463,131) (299,393) (1,609,525)
----------------- ----------------- -----------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase certificate of deposit (25,000) 0 (25,000)
Purchase of property and equipment (223,135) (41,968) (418,083)
----------------- ----------------- -----------------------
Net cash used by investing activities (248,135) (41,986) (443,083)
----------------- ----------------- -----------------------
CASH FLOW FROM FINANCING ACTIVITIES :
Increase (decrease) in advance from shareholder (24,750) 24,750 0
Proceeds from notes payable 1,145,400 0 1,145,400
Common stock issued for cash 621,000 303,500 926,226
Preferred stock issued for cash 4,600 0 4,600
Proceeds from stock subscription receivable 62,700 12,274 74,974
----------------- ----------------- -----------------------
Net cash provided by financing activities 1,808,950 340,524 2,151,200
----------------- ----------------- -----------------------
Net increase (decrease) in cash 97,684 (837) 98,592
CASH, beginning of period 908 1,745 0
----------------- ----------------- -----------------------
CASH, end of period $98,592 $ 908 $98,592
================= ================= =======================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash $ 51,697 $ 0 $ 51,697
================= ================= =======================
Non-Cash Financing Activities:
Stock subscription receivable $0 $ (62,700)$0
================= ================= =======================
Donated capital - related party $0 $ 9,000 $9,000
================= ================= =======================
Inventory transferred to property and equipment $ 152,980 $ 0 $ 152,980
================= ================= =======================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-6
<PAGE>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Principles
The Company IPVoice.com, Inc., (the "Company"), is a Nevada chartered
development stage corporation which conducts business from its
headquarters in Phoenix, Arizona. The Company was incorporated on
February 19, 1997 as Nova Enterprises, Inc., and changed its name to
IPVoice Communications, Inc. in March 1998, and to IPVoice.com, Inc.
in April 1999. The company is principally involved in the internet
telephone industry. The Company is in the development stage. Although
the Company has received revenue, it is not yet considered material to
its intended operations. Company has received limited operating
revenues and will continue to incur expenses during its development,
possibly in excess of revenue.
The following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Use of estimates The consolidated financial statements have been
prepared in conformity with generally accepted accounting principles.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the statements of
financial condition, and revenues and expenses for the year then
ended. Actual results may differ from those estimates.
b) Significant acquisition In March 1998, IPVoice.com, Inc., a Nevada
corporation, acquired 100% of the issued and outstanding shares of the
common stock of IPVoice Communications, Inc., a Delaware corporation,
in a reverse merger, which was accounted for as a reorganization of
the Delaware company.
c) Principles of consolidation The consolidated financial statements
include the accounts of IPVoice.com, Inc. and its wholly owned
subsidiary. All intercompany balances and transactions have been
eliminated.
d) Net loss per share Basic net loss per weighted average common share
is computed by dividing the net loss by the weighted average number of
common shares outstanding during the period.
e) Stock compensation for services rendered The Company issues shares
of common stock in exchange for services rendered. The costs of the
services are valued according to generally accepted accounting
principles and have been charged to operations.
f) Inventory Inventory consists of unused telephone time related to
the prepaid calling cards sold. The Company receives transaction
reports by activated PIN codes from the long distance provider.
g) Property and equipment All property and equipment is recorded at
cost and depreciated over their estimated useful lives, using the
straight-line method. Upon sale or retirement, the costs and related
accumulated depreciation are eliminated from their respective
accounts, and the resulting gain or loss is included in the results of
operations. Repairs and maintenance charges which do not increase the
useful lives of the assets are charged to operations as incurred.
h) Revenue recognition The Company currently has two revenue streams:
1) prepaid telephone calling cards and 2) the sale of its "Gateways".
The Company recognizes revenue on the prepaid telephone cards based
upon actual usage as provided by the service provider in reports
detailing usage by activated PIN codes. Since
F-7
<PAGE>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Principles (Continued)
h) Revenue recognition (continued) the Company requires payment in
full by the wholesaler upon PIN code activation, in blocks, the
amount received by the Company in excess of that reported by the
provider is classified as deferred revenue. Revenue from the sale of
the Company's "Gateways" is recognized upon acceptance of the
equipment by the purchaser. Although the accounting for the two
revenue streams is different, they are both part of the Company's
single line of business.
i) Research and development Research and development costs are
expensed in the period incurred.
(2) Stockholders' Equity The Company has authorized 50,000,000 shares of
$0.001 par value common stock and 10,000,000 shares of $0.001 par
value preferred stock. Rights and privileges of the preferred stock
are to be determined by the Board of Directors prior to issuance. The
Company had 16,422,758 and 12,578,999 shares of common stock issued
and outstanding at December 31, 1999 and 1998, respectively. The
Company has 1,150 and 0 shares of senior convertible preferred stock
issued and outstanding at December 31, 1999 and 1998, respectively.
In February 1997, the Company issued 9,000,000 shares to its founder
for services rendered to the Company valued at par value, or $9,000.
In March 1997, the Company completed a Regulation D Rule 504
Placement for 1,400,000 shares in exchange for $14,000 cash.
In March 1998, a majority shareholder donated 9,000,000 shares of
common stock to the Company. 9,000,000 shares were simultaneously
issued for the acquisition of IPVoice Communications, Inc., a
Delaware corporation (Note (1)(b). During the second quarter of 1998,
the Company issued 144,000 shares of common stock for $144,000 in
cash. The Company issued 473,000 shares of common stock for services
rendered, valued at the current market rate of $47,300, during the
third quarter of 1998. Also during the third quarter, the Company
issued 183,333 shares of common stock for $85,000 in cash, and
627,000 shares of common stock for a subscription receivable of
$62,700. In the fourth quarter of 1998, the Company issued 275,000
shares of common stock for services rendered, valued at the current
market rate of $41,250. In the same quarter, 476,666 shares of common
stock were issued for $121,800 in cash.
In January 1999, the Company issued 93,760 shares of common stock in
exchange for services, valued at $14,064. In January and February
1999, the Company issued 499,999 shares of common stock in exchange
for $75,000 in cash. In March 1999, the Company issued 187,500 shares
of common stock for $75,000 in cash. These issuances were to then
current stockholders. In March 1999, the Company issued 400,000
shares of common stock for services, valued at the current market
rate of $415,500, to three previously unrelated entities.
In April 1999, the Company issued 250,000 shares of common stock to
an existing stockholder for $100,000 cash. In April 1999, an existing
stockholder exercised a warrant for 155,000 shares of common stock by
tendering $100,000 cash. In April 1999, an existing stockholder
exercised a warrant for 1,600,000 shares of common stock by tendering
$96,000 in cash. In the second quarter, the Company completed a
Regulation D Rule 506 Private Placement for units, which included the
issuance of 1,150 shares of senior convertible preferred stock in
exchange for $4,600 in cash. These senior convertible preferred
shares, as a group, are convertible into common shares equaling 51%
of the issued and outstanding common shares after conversion, in the
event of an uncured default of the notes payable.
F-8
<PAGE>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(2) Stockholders' Equity (Continued) In July 1999, the Company discovered
that it had failed to issue and record 10,000 shares of common stock
in exchange for legal services, valued at $10,000 in 1997, as
originally contracted. These shares were recorded in July 1999. In
August 1999, the Company issued 437,500 shares of common stock for
$175,000 cash. All common stock shares issued in exchange for cash,
except the two warrant exercises, were subscribed for in January
1999. In November 1999, the Company issued 10,000 shares of common
stock in exchange for services valued at $23,750. In December 1999,
the Company discovered that it had failed to issue and record 200,000
shares of common stock for services valued at $20,000, which had been
contracted for in October 1998, and were recorded in December 1999.
(3) Income Taxes Deferred income taxes (benefits) are provided for
certain income and expenses which are recognized in different periods
for tax and financial reporting purposes. The Company had net
operating loss carry- forwards for income tax purposes of
approximately $2,504,500, which expire beginning December 31, 2117.
There may be certain limitations on the Company's ability to utilize
the loss carry-forwards in the event of a change of control resulting
from the conversion of the senior convertible preferred stock, should
that occur.
The amount recorded as a deferred tax asset, cumulative as of
December 31, 1999, is $1,002,000, which represents the amount of tax
benefits of the loss carry-forwards. The Company has established a
valuation allowance for this deferred tax asset of $1,002,000, as the
Company has no history of profitable operations.
The significant components of the net deferred tax asset as of
December 31, 1999 are:
Net operating losses $ 1,002,000
-----------------------
Valuation allowance (1,002,000)
-----------------------
Net deferred tax asset $ 0
=======================
(4) Going Concern As shown in the accompanying consolidated financial
statements, the Company has incurred a net loss of $2,504,500 since
inception. At December 31, 1999, the Company reflects negative
working capital of approximately $150,000 and stockholders'
deficiency of approximately $918,000. These conditions raise
substantial doubt as to the ability of the Company to continue as a
going concern. The ability of the Company to continue as a going
concern is dependent upon increasing sales and obtaining additional
capital and financing. The financial statements do not include any
adjustments that might be necessary if the Company is unable to
continue as a going concern. The Company has retained the services of
a registered broker/dealer and is in negotiations with an investment
group, introduced by the broker/dealer, for an investment of up to
$5,000,000 in the Company.
(5) Related Parties At December 31, 1999, the Company owed two of its
officers $17,403 for reimbursement of expenses paid on behalf of the
Company. This amount is represented in Accounts payable - officer. At
December 31, 1999, the Company owed two of its shareholders $40,896
for consulting services performed on behalf of the Company. This
amount is represented in Accounts payable - related party. Total
consulting fees incurred to a shareholder during the year amounted to
$131,064. Consulting fees in the amount of $136,500 were paid to two
officers, $30,000 of which was paid to one officer prior to his
election.
F-9
<PAGE>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(5) Related Parties (Continued) During the year ended December 31, 1998,
one of the Company's shareholders advanced funds totaling $24,750 for
payment of general operating expenses. This amount was repaid in
1999.
During 1999, the Company purchased for cash approximately $14,000 of
furniture and fixtures from an officer of the Company at the fair
market value.
(6) Significant Acquisition On April 7, 1999, the Company acquired all of
the issued and outstanding common stock of SatLink 3000, Inc., d/b/a
Independent Network Services, a Nevada Corporation (INS). The Company
issued 250,000 shares of redeemable convertible preferred shares.
Each share is convertible, on or after one year after Closing, into
one share of the Company's common stock or, at the shareholder's
option, redeemable by the Company at a price of $2 per share, giving
a total valuation of $500,000 to this transaction.
During the course of the audit of the SatLink 3000, Inc. 1998
financial statements, certain information was disclosed to the
Company. Based on this information, the Board of Directors elected,
on October 29, 1999, to rescind the acquisition transaction ab initio
and nullify the above-mentioned agreements with the President and
Chief Executive Officer of SatLink 3000, Inc. These transactions are
being treated as if they never occurred, except for the assumption of
an office space lease and the writeoff of a receivable of $48,532.
(7) Private Offering of Securities During the second quarter of 1999, the
Company raised $1,150,000 through the issuance of forty-six
investment units in the amount of $25,000. Each unit consisted of a
two-year note in the principal amount of $24,900, with a maturity of
June 3, 2001, with interest payable quarterly at 9% per annum; a
warrant for 18,750 shares of common stock of the Company; and
twenty-five senior convertible preferred shares. The preferred
shares, as a group, are convertible into common shares equaling 51%
of the issued and outstanding common shares after conversion, in the
event of an uncured default of the notes payable. The note payable
maturity can be extended for two additional years at the option of
the Company, with no consideration to the unit holders.
(8) Restricted Certificate of Deposit In October 1999, the Company
purchased a $25,000 one-year certificate of deposit, which bears
interest at the rate of 4.89%. The Company has pledged this CD as
collateral to a Letter of Credit in the amount of $25,000 issued in
favor of the supplier of prepaid telephone card services as a
guarantee of payment.
(9) Commitments and Contingencies
a) Consulting agreements - related parties In December 1997, the
Company entered into a consulting agreement with a previously
unrelated company controlled by the present Chairman of the Board of
Directors of the Company. This agreement, as amended, called for the
payment of $5,000 per month for six years. This agreement was
subsequently amended by verbal agreement, increasing the payment to
$12,500 per month and in September 1999, reduced to $7,500 per month
until the Company is profitable. At December 31, 1999, the Company is
obligated to pay a total of $90,000 in 2000, $90,000 in 2001 and
$82,500 in 2002.
F-10
<PAGE>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(9) Commitments and Contingencies (Continued)
a) Consulting agreements - related parties (continued) In October
1998, the Company entered into a consulting agreement with a
previously unrelated party. This agreement called for the issuance of
350,000 shares of common stock valued at $35,000, an option for
1,600,000 shares of common stock at an exercise price of $0.06 per
share, an option for 350,000 shares of common stock at an exercise
price of $3.90 per share, a five-year warrant for common stock shares
equal to five per cent of the then issued and outstanding common
stock at exercise with a strike price of $1.00 per share and
consulting fees for a 30 month period, beginning in September 1998,
in the amounts of : $4,000 per month for the first 6 months, $6,000
per month for the next 12 months, and $8,000 for the last 12 months.
At December 31, 1999, fifteen months remain under this agreement. The
Company is obligated for payments totaling $90,000 in 2000, and
$24,000 in 2001.
At the end of the first quarter of 1999, the Company entered into
three marketing agreements with three previously unrelated companies.
Those agreements called for the issuance of 100,000, 200,000 and
100,000 shares of common stock. One agreement also called for the
performance based issuance of up to 150,000 shares of common stock
and the performance based issuance of warrants for up to 450,000
shares of common stock, with an exercise price of $2.50 per share.
b) Consulting agreements - other In June 1999, the Company entered
into a one-year consulting agreement with an unrelated individual
which called for payment of $100,000. In 1999, the Company paid
$45,800 of this fee, and is obligated to pay the $54,200 balance
during 2000.
c) Leases The Company entered into a one-year lease for its office
space beginning in August 1999. The Company is obligated to rental
payments amounting to $27,000 in 2000. In 1999, the Company paid
$35,000 in office rent. In November 1999, the Company entered into a
one-year lease for an apartment for the Company's use. In 1999, the
Company paid $1,700 in rent, and is obligated to pay $8,700 in 2000.
d) Lawsuits In December 1999, SatLink filed a lawsuit alleging breach
of contract as a result of the recission of the acquisition in
October 1999, as discussed in Note 6 above. In December 1999, the
former CFO of the Company filed a lawsuit alleging breach of contract
as a result of the recission of the employment agreement in October
1999, as discussed in Note 6 above. The Company believes these suits
have no merit and intends to vigorously defend them.
e) Employment agreements In April 1998, the Company entered into
three-year employment agreements with the President and the Senior
Vice President. These agreements call for salaries in the amount of
$150,000 per year for each of those officers. In September 1999,
those officers agreed to reduce this compensation to $90,000 per year
until such time as the Company is profitable. The reduction
agreements do not call for an accrual and payment of the difference.
In November 1999, the Company entered into a two-year employment
agreement with its Executive Vice President, (EVP), which calls for a
salary of $78,000 per year and granted the EVP four-year options for
50,000 shares of common stock, with an exercise price of $1.75. These
options are not exercisable until the stock trades above $7.50 and
$12.00 per share for ten days out of thirty consecutive days,
one-half and one-half, respectively. The Company is obligated to pay
a total of $258,000 in 2000 and $110,000 in 2001, under these
employment agreements.
F-11
<PAGE>
IPVoice.com, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(10) Subsequent Events
a) Leases In January 2000, the Company entered into a financing lease
for a telephone system valued at $13,000, which calls for the Company
to make payments totaling $4,500 per year for four years.
In January 2000, the Company entered into a three-year operating
lease with a stockholder of the Company. This lease calls for a fair
market value purchase at lease end. The lease is for the Company's
"Gateway" equipment located in New York City and Los Angeles. The
Company is obligated to the following payments: $36,800 in 2000;
$40,000 in 2001; $40,000 in 2002 and $3,300 in 2003.
b) Stock option plan In December 1999, the stockholders approved for
the Board of Directors to adopt an employee stock option plan. This
plan reserves up to 1,000,000 shares to be issued upon the exercise
of such granted options. The plan, which was not finalized until
early 2000, allows for the grant of qualified and non- qualified
options, as defined by Section 422 of the Internal Revenue Code of
1986, as amended. To be eligible, a grantee must have been employed
by the Company for a minimum of 60 days, or be a Director of the
Company. The plan contains various exercise price calculation
formats. No options have been granted pursuant to this plan.
F-12
<PAGE>
Item 8. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
(a) Set forth below are the names, ages, positions, with the Company
and business experiences of the executive officers and directors of the Company.
Name Age Position(s) with Company
- --------- ---- --------------------------
Barbara S. Will 47 Director, President and Chief Operating
Officer
Anthony Welch 31 Director, Senior Vice President of Research
and Development
Harry R. Bowman 56 Executive Vice President
Julie J. Bahavar 54 Controller [Chief Accounting Officer]
James K. Howson 57 Chairman, Chief Executive Officer
Russell Watson 50 Director
All directors hold office until the next annual meeting of the
Company's shareholders and until their successors have been elected and qualify.
Officers serve at the pleasure of the Board of Directors. The officers and
directors will devote such time and effort to the business and affairs of the
Company as may be necessary to perform their responsibilities as executive
officers and/or directors of the Company.
Family Relationships
There are no family relationships between or among the executive
officers and directors of the Company.
47
<PAGE>
Business Experience
Barbara S. Will, age 47, currently serves as Director, President and
COO. She has served as a Director, President and COO since March 1998. She
previously served as Chairman between March 1998 to June 1999. Ms. Will has over
twenty (20) years of experience in all areas of telecommunications, both
domestic and international. Prior to joining IPVC, from 1984 to 1997, Ms. Will
was in a senior capacity with MCI and was responsible for signing some of the
largest contracts with a carrier/reseller in MCI's history. Her vast industry
experience includes international and international private line; International
800; data; DSO, DSI, DSC, OC3; dedicated in and outbound; One-Plus; calling and
debit cards; Operator Assistance; Internet; Enhanced Services; and Enhanced
Network. During her time at MCI, she received numerous awards for her
outstanding performance. Ms. Will attended Colorado State University for two
years.
Anthony K. Welch, age 31, current serves as a Director and the Senior
Vice-President. He has served as a Director and Senior Vice President since
March, 1998 and as Senior Vice President of Research and Development since
August 1999. Anthony Welch is the original designer of the MultiCom, AuditRite,
and TrueConnect platforms and has served as Special Consultant to various
telecommunications organizations. From 1997 to 1998, Mr. Welch was involved in
the formation of the Company and the development of the MultiCom Business
Management Software. From 1991 to 1997, Mr. Welch served as Special Consultant
and Project Design Leader for such organizations as Nation's Bank CS
Headquarters, Frito-Lay Worldwide Headquarters, NEC America Mobile
Radio/Cellular/Pager Division Headquarters, and Southwestern Bell Mobile
(Cellular/Pager) Systems Headquarters. Mr. Welch has received numerous awards
and recognition for his work in Artificial Intelligence - both in Military and
Academic circles - and has applied this experience to creating technology
solutions that are both intelligent and flexible. The technology behind the
MultiCom system has received recognition from several telecom trade magazines
("Computer Telephony" and "Telephony" magazines). Mr. Welch obtained first place
in the International Science competition for Artificial Intelligence at the age
of 17. Mr. Welch attended the University of Mississippi and was the first
freshman in the history of the college to be admitted into the artificial
intelligence Ph.D. Program.
Harry R. Bowman, age 56, currently serves as Executive Vice
President. He has served as Executive Vice President since November 1999. Mr.
Bowman is an experienced telecommunications operations professional who was
employed by AT&T from 1961 until 1995, when he retired. During his time with
AT&T, Mr. Bowman held various managerial positions, last serving as Manager for
Creative Software, where he was responsible for sales, contracts, personnel and
financials. Previously he had served as Manager of Technical Services, Date
Center Operations and in other management positions. After spending four years
in retirement, Mr. Bowman was provided with the opportunity to join the Company
has its Executive Vice President, which he accepted. Mr. Bowman holds a BS
Degree in Accounting from St. Joseph's University, Philadelphia, Pennsylvania.
48
<PAGE>
Julie J. Bahavar, age 54, currently serves as Controller [Chief
Accounting Officer]. She has served in this capacity since March 1, 2000.
During1999, Ms. Bahavar served as Chief Financial Officer/Controller for the
Arizona Industries for the blind, which is a manufacturing, distribution and
retail sales operation. During 1998, Ms. Bahavar was a Senior Financial Analyst
for Apollo Group Inc. From 1994 through 1997, Ms. Bahavar was an independent
consultant, representing such companies as Carboraudom Micro Electronics and
Wells Fargo Bank. From 1985 to 1994, Ms. Bahavar was employed as a Budget
Manager and Audit Manager with the State of Arizona. Ms. Bahavar received a BS
Degree in Accounting from the University of Denver in 1979 and an MBA from the
University of Denver in 1981. She is a Certified Public Accountant certified in
the States of Arizona and Colorado.
James K. Howson, age 57, currently serves as Chairman and Chief
Executive Officer. He has served as Chairman since June1999 and as Chief
Executive Officer since September 1999. Mr. Howson is an entrepreneur and has
been an investor for thirty (30) years in small businesses and start-up
companies in Europe, Latin American and the United States. From 1991 to 1996,
Mr. Howson was an investor in and consultant to Mid-America Venture Capital
Partners, Inc., a privately held company that provided seed capital to promising
young businesses. Mr. Howson was also an investor in Environmental Systems, Inc.
located in Lancaster, Pennsylvania. Mr. Howson attended Roan College in London
England in 1959.
Russell Watson, age 50, currently serves as a Director. He has served
as a Director since September, 1999. Currently, Mr. Watson is the Business
Manager for Behrwood Capital Service, Inc., an investment management company
which he joined in 1998. Also, he is the Vice President of Operations for
Venison America, Inc., a meat processor and distributor which he joined in 1998.
From 1994 to 1998, Mr. Watson was Operations Manager for Mid-Atlantic Snack,
Inc., a snack food distributor. Mr. Watson owned and operated a snack food
marketing business from 1993 to 1994. From 1974 to 1993, Mr. Watson was CFO and
Operations Manager for Weyerhauser Company, Hardwood Division. Mr. Watson
received a B.S. degree from Indiana University of Pennsylvania in 1971.
(b) Section 16(a) Beneficial Ownership Reporting Compliance
No Director, Officer, Beneficial Owner of more than ten percent (10%)
of any class of equity securities of the Company failed to file on a timely
basis reports required by Section 16(a) of the Exchange Act during the most
recent fiscal year or prior fiscal years.
49
<PAGE>
Item 10. Executive Compensation
<TABLE>
<CAPTION>
Name and Year Annual Annual Annual LT LT LTIP All
Post Comp Comp Comp Comp Comp Payouts Other
Salary Bonus Other Rest Options (1)
($) Stock
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Barbara 1997 $ -0- $ -0- $-0-
S. Will, 1998 $48,000 $ -0- $-0-
Director, 1999 $106,956 $ -0- $-0-
President and
COO
- -----------------------------------------------------------------------------------------------------
James K. 1997 $ -0- $-0-
Howson, 1998 $35,000 $-0-
Chairman and 1999 $ -0- $-0-
Chief (2)
Executive
Officer
- ------------------------------------------------------------------------------------------------------
Anthony 1997 $ -0- $ -0- $-0-
K. Welch, 1998 $48,000 $ -0- $-0-
Director and 1999 $51,996 $ -0- $-0-
Senior Vice-
President of
Research and
Development
- -----------------------------------------------------------------------------------------------------
Harry R. 1999 $10,734 $30,000 50,000 $-0-
Bowman, (4) (4)
Executive
Vice
President
- ------------------------------------------------------------------------------------------------------
Peter M. 1997 $ -0- $ -0- $-0-
Stazzone, 1998 $ -0- $ -0- $-0-
Director, 1999 $ 52,500 $ -0- $-0-
Secretary,
Treasurer and
Chief Financial
Officer and
President of INS (3)
- ------------------------------------------------------------------------------------------------------
Michael 1997 $ -0- $-0-
McKim, Vice 1998 $44,076 $-0-
President of 1999 $63,750 $-0-
Research and
Development
(3)
- ------------------------------------------------------------------------------------------------------
</TABLE>
50
<PAGE>
(2) All other compensation includes certain health and life insurance benefits
paid by the Company on behalf of its employee.
(3) Ms. Will and Mr. Welsh have agreed effective September 1999 voluntarily to
reduce each of the salaries to $90,000 per year and Condor has agreed
effective September 1999 to reduce its consulting fees to $90,000 per year.
Each of these agreed reductions shall continue until the Company is
profitable and there are no accruals of any unpaid amounts under their
respective contracts. Further, none of the parties has any expectations
regarding the amount foregone at any future date.
(4) Mr. Howson was a consultant to the Company prior to becoming the Chief
Executive Officer in June 1999 and continues to be paid under the
consulting agreement the Company has with Condor which had a six (6) year
term commencing November 1997.
(4) Mr. Bowman joined the Company in November, 1999 and the salary reflects
payments made from that date. Prior to joining the Company, Mr. Bowman
provided consulting services which are reflected as other compensation for
1999. In addition to health insurance, Mr. Bowman receives travel, living,
automobile and subsistence allowances and has use of the corporate
apartment when he is in Phoenix.
(5) Mr. Stazzone was terminated on October 29, 1999. Mr. McKim resigned in
September 1999.
51
<PAGE>
Year End Option Values for Executive Officers
Name (1) Exercised Value Realized No. of Value of
Unexercised Unexercised
Exercisable/ Exercisable/
Unexercisable Unexercisable
Barbara S. -0- -0- -0-/-0- -0-/-0-
Will
Anthony K. -0- -0- -0-/-0- -0-/-0-
Welch
Harry R. -0- -0- 50,000/-0- $-0-/-0- (2)
Bowman
James K. -0- -0- -0-/-0- -0-/-0-
Howson
(1) Neither Mr. Stazzone nor Mr. McKim were included in this table because they
were not executive officers at the year end 1999 and neither had any
unexercised exercisable/unexercised options.
(2) No value has been placed on their options because only one half may be
exercised when the Company's stock has traded for a designated period at $7
and the other half may be exercised when the Company's stock has traded for
a designated period at $12. At the time the options were granted, the
Company's Common Stock was trading at $1.75.
The Company has adopted an Employee Stock Option Plan and a
Consultant Stock Option Plan.
Employee Contracts and Agreement
The Company has entered into employment agreements with Ms. Will, Mr.
Welch and Mr. Bowman. In addition, the Company had an agreement with Mr.
Stazzone which was rescinded at the same time as the INS transaction was
rescinded ab initio.
In April 1998, the Company entered into an employment agreement with
Barbara S. Will, the Company's President and COO for a term of three (3) years
at a salary of $150,000 per year. Ms. Will received 3,000,000 shares of the
Company's Common Stock at the time of the share exchange agreement between the
Company and IPVCDE. Ms. Will has agreed effective September 1999 voluntarily to
reduce her salary to $90,000 per year. This agreed reduction will continue until
the Company is profitable and there are no accruals of any unpaid amounts under
her contract. Further, Ms. Will has no expectations regarding the amount
foregone at any future date.
52
<PAGE>
In April 1998, the Company entered into an employment agreement with
Anthony K. Welch, the Company's Senior Vice President of Research and
Development for a term of three (3) years at a salary of $150,000 per year. Mr.
Welch received 3,000,000 shares of the Company's Common Stock at the time of the
share exchange agreement between the Company and IPVCDE in consideration of all
of his rights, title and interest in the Company's proprietary software. Mr.
Welch has agreed effective September 1999 voluntarily to reduce his salary to
$90,000 per year. This agreed reduction will continue until the Company is
profitable and there are no accruals of any unpaid amounts under his contract.
Further, Mr. Welch no expectations regarding the amount foregone at any future
date.
On November 11, 1999, the Company executed a letter employment
agreement dated November 10, 1999 with Harry R. Bowman. Under the terms of the
agreement, Mr. Bowman is to serve as an Executive Vice President of the Company
for a term of two (2) years at a base salary of $78,000 per year. In addition,
Mr. Bowman, a resident of Pennsylvania, receives health insurance, a paid
vacation, travel twelve (12) times a year to his residence and living,
automobile and subsistence allowances. Mr. Bowman is required to spend at least
three (3) weeks a month at the Company's offices in Phoenix and one (1) week a
month at a location to be decided in Pennsylvania. Mr. Bowman has use of the
corporate apartment when he is in Phoenix. The agreement included a sixty (60)
day probationary period. Under the terms of the agreement, Mr. Bowman was
granted four (4) years options to purchase 50,000 shares of the Company's Common
Stock at an exercise price of $1.75 exercisable one half when the stock trades
for any ten (10) days out of thirty (30) consecutive days at or above $7.00 per
share and one half when the stock trades at or above $12.00 in the same manner.
Any shares acquired under the option must be held for the two-year period in
which Mr. Bowman has committed to work for the Company, and, in the event the
commitment is not met or Mr. Bowman is discharged due to poor performance or
cause, unexercised options expire and shares acquired are forfeited. For such
offering, the Company relied upon Section 4(2) of the Act and Rule 506 and
Section 201.[70 P.S. 1.201] of the Pennsylvania Code. See Part III, Item 12.
"Certain Relationships and Related Transactions".
In April 1999, the Company entered into an employment/compensation
agreement with Peter M. Stazzone, the President of INS and Chief Financial
Officer, Treasurer an Secretary of the Company for term of three (3) years at a
base annual salary of $140,000 commencing August 1999. Pursuant to the
Employment Agreement, Mr. Stazzone received 200,000 shares of the Company's
Restricted Common Stock, a stock bonus of 100,000 shares of the Restricted
Common Stock deemed earned on the date of the Share Exchange Agreement, but to
be delivered on the earlier of (i) the first anniversary date or (ii) Mr.
Stazzone's termination and options to purchase an additional 200,000 shares of
the restricted Common Stock of the Company exercisable for a period of three (3)
years at an exercise price of $1.00 per share. The Company voted to unwind the
INS transaction ab initio, to rescind the issuances made under the acquisition
and the employment agreements and to terminate Mr. Stazzone's employment. Mr.
Stazzone has instituted suit against the Company. See Part III, Item 12.
"Certain Relationships and Related Transactions".
53
<PAGE>
Key Man Life Insurance
The Company does not have nor does it intend to apply for Key Man
Life Insurance.
Employee and Consultants Stock Option Plans
On December 9, 1999, the shareholders adopted an executive incentive
stock award plan under which 1,000,000 are reserved for grants under the plan.
The plan takes effect on January 1, 2000 and terminates on December 31, 2005.
Under the plan, options can be granted to select employees, officers,
executives, directors and consultant and advisors to the Company. It is intended
that all options be granted at fair market value on a particular date determined
by the Compensation and Option Committee which is made up of James Howson,
Director and Chief Executive Officer and Russell Watson, Director; however, a
lesser price may be set by such Committee. The exercise period for the options
is determined by the Committee but cannot exceed six (6) years. Pursuant to the
terms of the approved plan, the Board of Directors is authorized to alter, amend
or modify the plan under certain conditions. The Board of Directors approved a
modified plan on February 28, 2000 that maintains the key features of the
approved plan as required. See Part III, Item 12. "Certain Relationships and
Related Transactions."
Compensation of Directors
The Company has no standard arrangements for compensating the
Directors of the Company for their attendance at meetings of the Board of
Directors.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of December 31, 1999,
regarding the ownership of the Company's Common Stock by each shareholder known
by the Company to be the beneficial owner of more than five percent (5%) of its
outstanding shares of Common Stock, each director and all executive officers and
directors as a group. Except as otherwise indicated, each of the shareholders
has sole voting and investment power with respect to the share of Common Stock
beneficially owned.
Name and Address of Title of Amount and Nature of Percent of
Beneficial Owner Class Beneficial Owner Class
- --------------------------------------------------------------------------------
James Howson (2)(3) Common 0 0.0%
7553 South Mount Zirkel
Littleton, CO 80127
Barbara S. Will(3) Common 3,000,000 18.267%
8027 East La Junta Road
Scottsdale, AZ 85255
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Anthony K. Welch(3) Common 2,856,523 17.394%
6554 South Olympian Road
Evergreen, CO 80439
Harry R. Bowman (4) Common 0 0.0%
181 Woodland Drive
York, PA 17403
Russell Watson Common 0 0.0%
105 Leader Heights Road
York, PA 17403 (5)
Condor Worldwide, Ltd. (2)(3)Common 3,000,000 18.237%
328 Bay Street
Nassau, The Bahamas
All Executive Officers and
Directors as a Group
(Five (5) persons) 8,856,523 53.928%
- ----------
(1) The percentages are based upon 16,422,758 shares of Common Stock
outstanding as of December 31, 1999. In addition to the shares owned by the
Executive Officers and Directors, said officers and directors own
(including those beneficially held) options to purchase 70,000 shares of
the Company's Common Stock. In the event all such options to purchase were
exercised, this group would own a total of 8,926,523 shares of the
Company's Common Stock which would represent 54.124% of the total shares of
Common Stock outstanding. None of these options may be exercised within
thirty (30) days, and then only in the event that the Company's stock
trades for any ten (10) days out of that thirty (30) consecutive days
period at or above $7.00.
(2) In November 1997, prior to its acquisition by the Company, IPVCDE entered
into a consulting agreement with Condor, whereby Condor agreed to provide
certain sales, marketing and public relations services in exchange for
600,000 shares of IPVCDE's unrestricted Common Stock to be issued upon
listing of IPVCDE's stock on the OTC Bulletin Board. Such shares were never
issued and the agreement was amended in July 1998 deleting the issuance of
such shares. The consulting agreement was modified in July 1998 to revoke
all interest in the shares. The term of the Agreement was for a period of
six (6) years and is still in effect. James K. Howson, the Company's
Chairman and CEO, serves as the Chairman and CEO of Condor and he is the
beneficial owner of Condor. Effective September 1999, Condor agreed to
reduce its consulting fees to $90,000 per year. This agreed reduction will
shall continue until the Company is profitable and there are no accruals of
any unpaid amounts under the Condor contract. Further, none Condor has no
expectations regarding the amount foregone at any future date. See Part
III, Item 12. "Certain Relationships and Related Transactions".
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(3) In March 1998, the Company's predecessor, Nova, entered into a share
exchange agreement with IPVCDE and its shareholders whereby Nova issued
9,000,000 shares of its restricted Common Stock valued at $9,000 to
IPVCDE's shareholders for all of the outstanding capital stock of IPVCDE,
which then became a wholly-owned subsidiary of Nova. In connection with the
agreement, the Company entered into employment agreements with Barbara
Will, its current Director, Chief Operating Officer and President and with
Anthony Welch, designer of the Company's proprietary software, who
currently serves as the Senior Vice-President of Research and Development.
As part of the exchange, Ms. Will, Mr. Welch and Condor each received
3,000,000 shares of the Company's restricted common stock. Mr. Howson, the
Company's Chairman and Chief Executive Officer, is the beneficial owner of
Condor. For such offering, the Company relied upon Section 4(2) of the Act,
Rule 506, Section 11-51-308(1)(j) of the Colorado Code, Section 7309(b)(9)
of the Delaware Code and Section 90.530(17) of the Nevada code. The Company
relied on no state exemption for the issuance to Condor, which is a
Bahamian corporation. See Part III, Item 12. "Certain Relationships and
Related Transactions".
(4) On November 11, 1999, the Company executed a letter employment agreement
dated November 10, 1999 with Harry R. Bowman. Under the terms of the
agreement, Mr. Bowman is to serve as an Executive Vice President of the
Company for a term of two (2) years at a base salary of $78,000 per year.
In addition, Mr. Bowman, a resident of Pennsylvania, receives health
insurance, a paid vacation, travel twelve (12) times a year to his
residence and living, automobile and subsistence allowances. Mr. Bowman is
required to spend at least three (3) weeks a month at the Company's offices
in Phoenix and one (1) week a month at a location to be decided in
Pennsylvania. Mr. Bowman has the use of the Company apartment when he is in
Phoenix. The agreement included a sixty (60) day probationary period. Under
the terms of the agreement, Mr. Bowman was granted four (4) years options
to purchase 50,000 shares of the Company's Common Stock at an exercise
price of $1.75 exercisable one half when the stock trades for any ten (10)
days out of thirty (30) consecutive days at or above $7.00 per share and
one half when the stock trades at or above $12.00 in the same manner. Any
shares acquired under the option must be held for the two-year period in
which Mr. Bowman has committed to work for the Company, and, in the event
the commitment is not met or Mr. Bowman is discharged due to poor
performance or cause, unexercised options expire and shares acquired are
forfeited. For such offering, the Company relied upon Section 4(2) of the
Act and Rule 506 and Section 201.[70 P.S. 1.201] of the Pennsylvania Code.
See Part III, Item 12. "Certain Relationships and Related Transactions."
(5) At a meeting of the Board in November 1999, the Company granted to Russell
Watson, a Director of the Company, four (4) years options to purchase
20,000 shares of the Company's Common Stock at an exercise price of $1.75
exercisable one half when the stock trades for any ten (10) days out of
thirty (30) consecutive days at or above $7.00 per
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share and one half when the stock trades at or above $12.00 in the same
manner. For such offering, the Company relied upon Section 4(2) of the Act
and Rule 506 and Section 201.[70 P.S. 1.201] of the Pennsylvania Code. See
Part III, Item 12. "Certain Relationships and Related Transactions".
There are no arrangements which may result in the change of control
of the Company by such certain beneficial owners and management.
Item 12. Certain Relationships and Related Transactions
In February 1997, prior to its acquisition of IPVCDE, the Company
sold 1,400,000 shares of its unrestricted Common Stock to sixty-nine (69)
individuals for $14,000. For such offering, the Company relied upon Section 3(b)
of the Securities Act of 1933, as amended (the "Act") and Rule 504 promulgated
under Regulation D of the Act ("Rule 504") and Section 517.061(11) of the
Florida Code, Section 4[5/4](G) of the Illinois Code, Section 90.530(11) of the
Nevada Code, Section 78 A-17(9) of the North Carolina Code, Section
48-2-103(b)(4) of the Tennessee Code and Section 5[581-5]I(c) of the Texas Code.
No state exemption was necessary for the sales made to Bahamian, Canadian or
French investors.
In November 1997, prior to its acquisition by the Company, IPVCDE
entered into a consulting agreement with Condor, whereby Condor agreed to
provide certain sales, marketing and public relations services in exchange for
600,000 shares of IPVCDE's unrestricted Common Stock to be issued upon listing
of IPVCDE's stock on the OTC Bulletin Board. Such shares were never issued and
the agreement was amended in July 1998 deleting the issuance of such shares. The
consulting agreement was modified in July 1998 to revoke all interest in the
shares. The term of the Agreement was for a period of six (6) years and is still
in effect. James K. Howson, the Company's Chairman and CEO, serves as the
Chairman and CEO of Condor and he is the beneficial owner of Condor. Effective
September 1999, Condor agreed to reduce its consulting fees to $90,000 per year.
This agreed reduction will shall continue until the Company is profitable and
there are no accruals of any unpaid amounts under the Condor contract. Further,
none Condor has no expectations regarding the amount foregone at any future
date.
During 1997, the Company incurred certain organizational expenses
totaling $14,000 which were paid for by a company under common control. The
balance owed to this related party at December 31, 1997 was paid in full during
1998.
In March 1998, the Company's predecessor, Nova, entered into a share
exchange agreement with IPVCDE and its shareholders whereby Nova issued
9,000,000 shares of its restricted Common Stock valued at $9,000 to IPVCDE's
shareholders for all of the outstanding capital stock of IPVCDE, which then
became a wholly-owned subsidiary of Nova. In connection with the agreement, the
Company entered into employment agreements with Barbara Will, its current
Director, Chief Operating Officer and President and with Anthony Welch, designer
of the Company's proprietary software, who currently serves as the Senior
Vice-President of Research
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and Development. As part of the exchange, Ms. Will, Mr. Welch and Condor each
received 3,000,000 shares of the Company's restricted common stock. Mr. Howson,
the Company's Chairman and Chief Executive Officer, is the beneficial owner of
Condor. For such offering, the Company relied upon Section 4(2) of the Act, Rule
506, Section 11-51-308(1)(j) of the Colorado Code, Section 7309(b)(9) of the
Delaware Code and Section 90.530(17) of the Nevada code. The Company relied on
no state exemption for the issuance to Condor, which is a Bahamian corporation.
In April 1998, the Company sold 154,000 shares of its unrestricted
Common Stock to five (5) investors for $154,000. For such offering, the Company
relied upon Section 3(b) of the Act and Rule 504 and Section 517.061(11) of the
Florida Code and Section 359(f)(2)(d) of the New York Code. No state exemption
was necessary for the shares sold to a United Kingdom corporation.
In July 1998, the Company sold 53,333 shares of its unrestricted
Common Stock to one (1) investor for $40,000.75. For such offering, the Company
relied upon Section 3(b) of the Act and Rule 504 and Section 517.061(11) of the
Florida Code.
In July 1998, the Company entered into a consulting agreement with
Calpe, to provide public relations consulting services valued at $85,000 to the
Company in exchange for 850,000 shares of the Company's unrestricted Common
Stock, of which 200,000 shares were given to ICG pursuant to its consulting
contract (as more fully described herein) and 23,000 shares were given to CI
pursuant to its consulting contract (as more fully described herein). In
consideration of its 627,000 shares, Calpe agreed to forego commissions equal to
$62,700 from IPVC product sales. The term of the Agreement was for a period of
three (3) years and is still in effect. For such offering, the Company relied
upon Section 3(b) of the Act and Rule 504. No state exemption was necessary for
the Calpe shares, as Calpe is a Bahamian corporation. However, the Company
relied upon Section 10-5-9(13) of the Georgia Code for the ICG shares and
Section 14-4-140 of the Arizona Code for the CI shares.
In July, 1998, the Company entered into a consulting agreement with
ICG to provide financial public relations and direct marketing advertising and
consulting services to the Company. For such services, the Company agreed to pay
ICG $75,000 over the term of the Agreement and to issue 200,000 shares of the
unrestricted Common Stock of the Company, and to grant warrants to purchase
100,000 shares of the restricted Common Stock of the Company exercisable for a
period of two (2) years at an exercise price of $2.00 per share. Such warrants
have piggy-back registration rights. Such issuance of shares were valued at
$20,000, while the warrants were valued at $0. IPVC has a right of first refusal
to buy back any shares proposed to be sold by ICG to any third party. Of the
850,000 shares of its unrestricted Common Stock issued to Calpe, 200,000 shares
were given to ICG pursuant to its contract. The contract term was for a period
of six (6) months and has since terminated. For such offering, the Company
relied upon Section 3(b) of the Act and Rule 504. The Company relied upon
Section 10-5-9(13) of the Georgia Code for the issuance of ICG shares.
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In July 1998, the Company entered into a consulting agreement with CI
to provide public and investor relations consulting services to the Company in
exchange for 23,000 shares of the Company's unrestricted Common Stock. The
Agreement was for a term of three (3) months and terminated automatically in
November 1998. Of the 850,000 shares of its unrestricted Common Stock issued to
Calpe, 23,000 shares were given to CI pursuant to its contract. The Company
relied upon Section 3(b) of the Act and Rule 504. The Company relied upon
Section 14-4-140 of the Arizona Code for the issuance of CI shares.
In July 1998, the Company entered into an agreement with Armstrong
wherein the Company granted Armstrong the non-exclusive right to market,
advertise and sell the Company's domestic and international calling services. As
payment for these services, IPVC issued Armstrong warrants to purchase 50,000
shares of the Company's Common Stock exercisable at a price of $0.75 per share
or, at the option of IPVC, for a total sum of $37,500 as well as commissions on
sales of the Company's products and services. The term of the agreement is for a
period of three (3) years.
In September 1998, the Company entered into a consulting agreement
for a term of six (6) months with First Capital, to provide financial consulting
services to the Company. In the event that First Capital was successful in
securing debt or equity financing for the Company, First Capital would be
granted warrants to purchase 125,000 shares of the restricted Common Stock of
the Company exercisable for a period of three (3) years at an exercise price of
$1.00 per share. Such warrants would have piggy-back registration rights.
In September 1998, the Company sold 20,000 shares of its unrestricted
Common Stock to one (1) investor for $10,000. For such offering, the Company
relied upon Section 3(b) of the Act and Rule 504 and Section 517.061(11) of the
Florida Code.
In September 1998, the Company sold 100,000 shares of its
unrestricted Common Stock to one (1) investor for $25,000. For such offering,
the Company relied upon Section 3(b) of the Act and Rule 504 and Section
49:3-50(b)(9) of the New Jersey Code.
In September 1998, the Company sold 80,000 shares of its unrestricted
Common Stock to one (1) investor for $15,000. For such offering, the Company
relied upon Section 3(b) of the Act and Rule 504 and Section 517.061(11) of the
Florida Code.
In September 1998, the Company issued 100,000 shares of its
unrestricted common stock in exchange for legal services valued at $10,000. For
such offering, the Company relied upon Section 3(b) of the Act, Rule 504 and
Section 517.061(11) of the Florida Code.
In October 1998, the Company entered into a consulting agreement with
IIP, memorializing an oral agreement made in July 1998, to provide financial,
consulting and advisory services valued at $35,000 in exchange for the issuance
of 350,000 shares, of which 243,760 are unrestricted Common Stock of the Company
and 106,240 are restricted Common Stock of the Company, the grant of warrants to
purchase an additional 1,600,000 shares of the unrestricted
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Common Stock of the Company exercisable without time limitation at an exercise
price of $0.06 per share, the grant of warrants to purchase an additional
350,000 shares of the restricted Common Stock of the Company exercisable without
time limitation at an exercise price of $3.90 per share and in consideration of
$100 the grant of warrants to purchase an 5% of the restricted Common Stock of
the Company on a fully-diluted basis at a price of $1.00 per share. In January
1999, IIP received 93,760 shares of Common Stock in lieu of payment for services
which was due in the amount of $14,064. IIP exercised its warrant to purchase
1,600,000 shares in April 1999 at an exercise price of $96,000. As to the
warrant that entitles IIP to purchase 5% of the restricted Common Stock of the
Company, in February 2000, IIP purchased 136,000 shares at an exercise price of
$136,000 and in March 2000, IIP purchased 50,000 shares at an exercise price of
$50,000. Such shares represent 1.22% of the 5% interest that IIP is entitled to
acquire, thereby entitling IIP to purchase additional shares representing 3.88%.
The Agreement is for a period of three (3) years and is still in effect. The
Company must also pay a monthly fee of $4,000 the first year, $6,000 the second
year and $8,000 the third year. For the unrestricted shares and warrants to
purchase unrestricted shares, the Company relied upon Section 3(b) of the Act
and Rule 504. For the restricted shares and warrants to purchase restricted
shares, the Company relied upon Section 4(2) of the Act and Rule 506. No state
exemption was necessary, as IIP is an Irish corporation.
In October, 1998, the Company entered into a consulting agreement
with Inside.com to provide media relations services and consulting advice to the
Company valued at $41,250 in exchange for the issuance of 275,000 shares of the
unrestricted Common Stock of the Company and the grant of warrants to purchase
an additional 155,000 shares of the unrestricted Common Stock of the Company
exercisable for a period of one (1) year at a price of $0.645 per share.
Inside.com exercised its warrant to purchase 155,000 shares in April 1999 at an
exercise price of $100,000. The Agreement is for a term of one (1) year and is
still in effect. For such issuance, the Company relied upon Section 3(b) of the
Act and Rule 504 and Section 517.061(11) of the Florida Code.
At December 31, 1998, the Company owed Ms. Will $34,268 for
reimbursement of expenses paid on behalf of the Company. During the year ended
December 31, 1998, the Company owed two of its shareholders, Condor and IIP,
$20,564 for consulting services performed on behalf of the Company. Total
consulting fees incurred to these shareholders during the year ended December
31, 1998 amounted to $31,096. During 1998, additional consulting fees of $35,000
were paid to Mr. Howson and $25,000 in professional fees were paid to ICG, a
shareholder in the Company. There were no outstanding amounts owed respective to
these fees as of December 31, 1998. During the year ended December 31, 1998, IIP
advanced funds totally $24,750 for payment of general operating expenses which
was repaid in fiscal 1999.
During the period ended December 31, 1998, one of the shareholder's
who received a portion of the Company's Redeemable Convertible Preferred Stock
at the acquisition of INS paid consulting fees in the amount of $5,000 on behalf
of INS. This amount was outstanding at December 31, 1998 and was paid in March
1999.
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From December 1998 through January 1999, the Company sold 896,665
shares of its unrestricted Common Stock to eight (8) investors for $134,500. For
such offering, the Company relied upon Section 3(b) of the Act and Rule 504 and
Section 11-51-308(1)(j) of the Colorado Code, Section 517.061(11) of the Florida
Code and Section 49:3-50(b)(9) of the New Jersey Code. No state exemption was
required for two (2) Bahamian investors.
From February 1999 through May 1999, the Company sold forty-six (46)
units to twenty- four (24) investors for $1,150,000. Each unit consisted of: (i)
a note payable in two (2) years with an option for the Company to extend it for
an additional two (2) years in the principal amount of $24,900 bearing interest
at 9% per annum payable quarterly in cash or, at the option of the Company, in
unrestricted shares of the Company's Common Stock; (ii) a warrant to purchase
18,750 shares of the Company's restricted Common Stock exercisable during the
period in which the note is outstanding at an exercise price equal to 125% of
the average closing price of the stock for the thirty (30) trading days
immediately prior to February 1, 1999, which warrants contain piggy-back
registration rights; and (iii) twenty-five (25) of the Company's Senior
Convertible Preferred shares. In the event of a default in repayment of the
notes, all outstanding Senior Convertible Preferred shares shall be converted
into Common Stock of the Company in an amount which will equal 51% of the issued
and outstanding shares, warrants and options of the Company. For such offering,
the Company relied upon Section 4(2) of the Act and Rule 506 and Section
14-4-126(f) of the Arizona Code, Section 25102(f) of the California Code,
Section 517.061(11) of the Florida Code, Section 130.293 of the Illinois Code,
Section 191-50.14(502) of the Iowa Code, Section 451.803.7 of the Michigan Code,
Section 359(f)(2)(d) of the New York Code and Section 70P.S.1-211 of the
Pennsylvania Code.
In March and April 1999, the Company sold 875,000 shares of its
unrestricted Common Stock to one (1) investor for $350,000. For such offering,
the Company relied upon Section 3(b) of the Act and Rule 504. No state exemption
was required, as the investor was a Bahamian corporation.
In March 1999, the Company entered into a consulting agreement with
BPN to provide financial public relations consulting services to the Company for
which the Company agreed to pay $40,000 for the first month, and $30,000 for the
second and third months, with subsequent months to be agreed upon, each of which
is payable in unrestricted shares of the Company's Common Stock the number of
which is determined by dividing the monthly payment by $1.00. The contract term
was through September 1999 and has expired without renewal. In exchange for
services rendered by BPN, the Company issued 100,000 shares of its unrestricted
Common Stock valued at $106,200 to Joyce Research Group, of which BPN is a
division. For the fourth, fifth and sixth months of the contract, the Company
granted Joyce Research Group options to purchase 150,000 shares of the Company's
restricted Common Stock at an exercise price equal to 60%, 65% and 70% of the
market price respectively. For such offering, the Company relied upon Section
3(b) of the Act and Rule 504 and Florida Code Section 517.061(11).
In April 1999, the Company entered into a share exchange agreement
with INS whereby the Company exchanged 250,000 shares of its Redeemable
Convertible Preferred stock valued at
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$500,000 for all of the outstanding capital stock of INS. Such Redeemable
Convertible Preferred stock contains 1 for 1 conversion rights after one (1)
year and is redeemable at $2.00 per share. The President of INS, Peter M.
Stazzone, remained with the Company as the President of the subsidiary. At the
time of the exchange Mr. Stazzone became Secretary, Treasurer and Chief
Financial Officer of the Company under an employment agreement. Also at the time
of the exchange, Mr. Stazzone received 50,000 shares of the Redeemable
Convertible Preferred Stock of the Company. Pursuant to the Employment
Agreement, Mr. Stazzone received 200,000 shares of the Company's Restricted
Common Stock, a stock bonus of 100,000 shares of the Restricted Common Stock
deemed earned on the date of the Share Exchange Agreement, but to be delivered
on the earlier of (i) the first anniversary date or (ii) Mr. Stazzone's
termination and options to purchase an additional 200,000 shares of the
restricted Common Stock of the Company exercisable for a period of three (3)
years at an exercise price of $1.00 per share. It was represented that INS had
acquired certain assets, including the rights to INS' name, from the Bankruptcy
Court in the Chapter 11 filing of Telsave. Mr. Stazzone was the Chief Financial
Officer of Telsave at the time the bankruptcy was filed and the Bankruptcy Court
was provided with disclosure of his involvement with INS prior to the Court's
approval of the sale of certain Telsave assets to INS. In June 1998, Mr.
Stazzone was loaned $100,000 by INS, which loan bears no interest and has no
stated repayment terms. At the time of the acquisition of INS, the Company
believed that it was acquiring the rights to the CIC Code. The purchase price
was based in part upon an appraisal of the value of the CIC Code which is loaded
in approximately 60% of the domestic market. However, during the course of the
audit, it was discovered that clear title may not have passed to INS and
subsequently the Company. Therefore, the Board resolved that, in the event clear
title had not passed to the Company, it would be in the best interest of the
shareholders to unwind the transaction. The Company sought a legal opinion on
the status of such title and just prior to filing its Form 10SB in November 1999
discovered that there was no clear link between the ownership of the CIC Code
and INS. Therefore the Company voted to unwind the transaction ab initio, to
rescind the issuances made under the acquisition and the employment agreements
and to terminate Mr. Stazzone's employment. Mr. Stazzone and INS have instituted
suit against the Company. For such offering, the Company relied upon Section
4(2) of the Act and Rule 506, Section 14-4-126(f) of the Arizona Code and
Section 90.530(11) of the Nevada Code.
In April 1999, the Company entered into a marketing agreement with
Benae to market the Company's telephony services and to register a minimum of
one hundred (100) customers in the thirty (30) cities in which IPVC plans to
offer telephony services within twelve(12) months in exchange for 200,000 shares
of the unrestricted Common Stock of the Company valued at $206,200. The shares
are to be returned to the Company if the minimum is not met. For such offering,
the Company relied upon Section 3(b) of the Act and Rule 504 and Section
90.530(11) of the Nevada Code.
In April, 1999, the Company entered into a marketing and advertising
agreement with NG to provide marketing services to a minimum of 75,000 customers
in thirty (30) cities designated by IPVC within a twelve (12) month period in
exchange for 100,000 shares of the restricted Common Stock of the Company valued
at $103,100, which shares must be returned if NG fails to
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deliver a minimum of eight (8) cities for a total of 75,000 customers before
December 31, 1999. In addition, NG may earn performance bonuses of: 50,000
restricted shares if eight (8) cities are delivered within ninety (90) days of
execution; 50,000 restricted shares if fifteen (15) cities are delivered within
one hundred fifty (150) days; and 10,000 restricted shares for each additional
city thereafter before December 31, 1999 up to 30 cities. Further, NG will be
granted warrants to purchase 30,000 shares of the Company's restricted Common
Stock exercisable for a period of two (2) years at an exercise price of $2.50
per share for every block of 5,000 pre-registered customers up to 75,000
pre-registered customers in a twelve (12) month period. For such offering, the
Company relied upon Section 4(2) of the Act and Rule 506 and Section 14-4-126(F)
of the Arizona Code.
In September 1999, the Company issued 10,000 shares of its
unrestricted Common Stock in exchange for legal services valued at $10,000. The
shares were issued pursuant to an obligation incurred in 1998. The Company
relied upon Section 3(b) of the Act, Rule 504 and Florida Code Section
517.061(11).
On November 11, 1999, the Company executed a letter employment
agreement dated November 10, 1999 with Harry R. Bowman. Under the terms of the
agreement, Mr. Bowman is to serve as an Executive Vice President of the Company
for a term of two (2) years at a base salary of $78,000 per year. In addition,
Mr. Bowman, a resident of Pennsylvania, receives health insurance, a paid
vacation, travel twelve (12) times a year to his residence and living,
automobile and subsistence allowances. Mr. Bowman is required to spend at least
three (3) weeks a month at the Company's offices in Phoenix and one (1) week a
month at a location to be decided in Pennsylvania.. Mr. Bowman has the use of
the corporate apartment when he is in Phoenix. The agreement included a sixty
(60) day probationary period. Under the terms of the agreement, Mr. Bowman was
granted four (4) years options to purchase 50,000 shares of the Company's Common
Stock at an exercise price of $1.75 exercisable one half when the stock trades
for any ten (10) days out of thirty (30) consecutive days at or above $7.00 per
share and one half when the stock trades at or above $12.00 in the same manner.
Any shares acquired under the option must be held for the two-year period in
which Mr. Bowman has committed to work for the Company, and, in the event the
commitment is not met or Mr. Bowman is discharged due to poor performance or
cause, unexercised options expire and shares acquired are forfeited. For such
offering, the Company relied upon Section 4(2) of the Act and Rule 506 and
Section 201.[70 P.S. 1.201] of the Pennsylvania Code.
At a meeting of the Board in November 1999, the Company granted to
Russell Watson, a Director of the Company, four (4) years options to purchase
20,000 shares of the Company's Common Stock at an exercise price of $1.75
exercisable one half when the stock trades for any ten (10) days out of thirty
(30) consecutive days at or above $7.00 per share and one half when the stock
trades at or above $12.00 in the same manner. For such offering, the Company
relied upon Section 4(2) of the Act and Rule 506 and Section 201.[70 P.S. 1.201]
of the Pennsylvania Code.
Effective November 29, 1999, the Company executed an engagement
letter with McGinn, to act as a broker and financial advisor to the Company in
the private placement of up to $5
63
<PAGE>
million of the Company's securities. Under the agreement McGinn is to use its
best efforts with regard to such placement. The agreement is effective through
March 24, 2000. From the date of the engagement letter through March 24, 2000,
McGinn has the exclusive right to offer the Company's securities. In the event
McGinn is successful, it will receive a fee equal to ten percent (10%) of the
first $5 million and eight percent (8%) of any amount in excess of $5 million
and will receive three year warrants equal to 2% of the proceeds with a strike
price of 125% of the bid price on the date of closing. Such warrants are to have
piggy-back registration rights. Upon execution of the engagement letter, the
Company was required to issue 10,000 shares of its restricted Common Stock as a
non-refundable Retainer/Investment Banking fee and the Company is obligated to
reimburse McGinn for pre-approved expenses. The Company has not accepted the
terms of any private placements under this Agreement. For such issuance, the
Company relied upon Section 4(2) of the Act and Rule 506 and Section
359(f)(2)(d) of the New York Code.
On December 9, 1999, the shareholders adopted an executive incentive
stock award plan under which 1,000,000 are reserved for grants under the plan.
The plan takes effect on January 1, 2000 and terminates on December 31, 2005.
Under the plan, options can be granted to select employees, officers,
executives, directors and consultant and advisors to the Company. It is intended
that all options be granted at fair market value on a particular date determined
by the Compensation and Option Committee which is made up of James Howson,
Director and Chief Executive Officer and Russell Watson, Director; however, a
lesser price may be set by such Committee. The exercise period for the options
is determined by the Committee but cannot exceed six (6) years. Pursuant to the
terms of the approved plan, the Board of Directors is authorized to alter, amend
or modify the plan under certain conditions. The Board of Directors approved a
modified plan on February 28, 2000 that maintains the key features of the
approved plan as required.
At December 31, 1999, the Company owed Mr. Howson and Ms. Will
$17,363 and $40 respectively. During the year ended December 31, 1999, the
Company owed IIP and Behrwood Capital $40,000 and $896 respectively. Total
consulting fees paid to IIP during the year amounted to $131,0644. Total
consulting fees paid to Condor and Mr. Bowman were $106,500 and $30,000
respectively. Mr. Bowman received consulting fees prior to becoming an officer
of the Company. During 1999, the Company purchased for cash approximately
$14,000 of furniture and fixtures from Ms. Will at the fair market value.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<S> <C> <C>
Item No. Description
3.(i).1 [1] Articles of Incorporation of Nova Enterprises, Inc. filed February 19, 1997.
3.(i).2 [1] Certificate of Amendment of Articles of Incorporation changing name to IPVoice
Communications, Inc. filed March 24, 1998.
</TABLE>
64
<PAGE>
<TABLE>
<S> <C> <C>
3.(i).3 [1] Certificate of Amendment of Articles of Incorporation changing name to
IPVC.com, Inc.
3.(i).4 [1] Certificate of Amendment of Articles of Incorporation changing name to
IPVoice.com, Inc.
3.(ii).1 [1] Bylaws of Nova Enterprises, Inc.
4.1 [1] Form of Private Placement Offering of 1,600,000 common shares at $0.01 per
share.
4.2 [1] Form of Private Placement Offering of 992,500 common shares at $1.00 per share.
4.3 [1] Form of Private Placement Offering of 100,000 common shares at $0.50 per share.
4.4 [1] Form of Private Placement Offering of 1,000,000 common shares at $0.15 per
share.
4.5 [1] Form of Private Placement Offering of 1,250,000 common shares at $0.40 per
share.
4.6 [1] Form of Private Placement Offering of 104 Units at $25,000.00 per unit.
4.7 [1] Form of Promissory Note for Private Placement Offering of 104 Units at $25,000
per unit.
4.8 [1] Form of Warrant for Private Placement Offering of 104 Units at $25,000 per unit.
10.1 [1] Agreement dated March 1998 with Nova Enterprises, Inc.
10.2 [1] Agreement dated April 1999 with Independent Network Services.
10.3 [1] Agreement dated February 1998 with Natural MicroSystems Corporation.
10.4 [1] Agreement dated June 1999 with ICG Telecom Group, Inc.
10.5 [1] Agreement dated August 1999 with RSL Com U.S.A., Inc.
10.6 [1] Agreement dated July 1999 with Star Telecommunications, Inc.
10.7 [1] Agreement dated August 1999 with ILD Communications, Inc.
10.8 [1] Agreement dated June 1999 with Level 3 Communications LLC.
</TABLE>
65
<PAGE>
<TABLE>
<S> <C> <C>
10.9 [1] Agreement dated August, 1999 with Worldcom Technologies, Inc.
10.10 [1] Agreement dated March 1999 with Teleco Service International, Inc.
10.11 [1] Agreement dated March 1999 with Billion Telecommunication Services, Ltd.
10.12 [1] Agreement dated May 1999 with Firstnet Telephany Ltd.
10.13 [1] Agreement dated July 1999 with MetroPlus Communication Technology, Inc.
10.14 [1] Agreement dated February 1999 with BlueGrass Net.
10.15 [1] Agreement dated July 1998 with The Armstrong International Group, Inc.
10.16 [1] Agreement dated February 1999 with International Investment Partners, Ltd.
10.17 [1] Agreement dated March 1999 with Kenneth M. Brown
10.18 [1] Agreement dated April 1999 with Netgenie.com LLC
10.19 [1] Agreement dated April 1999 with Benae International Inc.
10.20 [1] Consulting Agreement dated November 1997 with Condor Worldwide, Ltd.
10.21 [1] Consulting Agreement dated July 1998 with Calpe, Ltd.
10.22 [1] Consulting Agreement dated July 1998 with The Investor Communications Group,
Inc.
10.23 [1] Consulting Agreement dated July 1998 with Corporate Imaging.
10.24 [1] Consulting Agreement dated September 1998 with First Capital Partners, Inc.
10.25 [1] Consulting Agreement dated October 1998 with International Investment Partners,
Ltd.
10.26 [1] Consulting Agreement dated October 1998 with Insidestock.com, Inc.
10.27 [1] Consulting Agreement dated March 1999 with Buying Power Network.
10.28 [1] Employment Agreement dated April 1998 with Barbara S. Will.
10.29 [1] Employment Agreement dated April 1998 with Anthony K. Welch.
</TABLE>
66
<PAGE>
<TABLE>
<S> <C> <C>
10.30 [1] Employment Agreement dated April 1999 with Peter M. Stazzone.
10.31 [1] Lease effective August 1, 1999 for Phoenix offices
10.32 [2] Employment Agreement dated November 10, 1999 with Harry R. Bowman
10.33 [2] Memorandum of Understanding between the Company and Telic.net dated
November 17, 1999
10.34 [2] Executive Incentive Stock Awards Plan adopted by Shareholders on December 9,
1999
10.35 * Engagement Letter dated November 24, 1999 with McGinn, Smith & Co., Inc.
10.36 * Engagement Letter dated February 16, 2000 with Delano Group Securities
10.37 * UUNET Agreement dated December 15, 1999
10.38 * Equipment Lease dated January 20, 2000 with International Investment Partners
10.39 * Professional Service Agreement dated October 8, 1999 with Natural Microsystems
Corp.
10.40 * Apartment Rental Agreement effective November 1, 1999
10.41 * Telephone Equipment Lease/Purchase Agreements dated December 10, 1999
10.42 * Amended 2000 Stock Plan
27.1 * Financial Data Sheet.
</TABLE>
- ----------------
[1] Previously filed with the Company's Form 10SB filed November November 3,
1999
[2] Previously filed with the Company's Form 10QSB for the Quarter ended
September 30, 1999
(* Filed herewith)
(b) Reports on Form 8K
There were no reports of Form 8K for the last quarter covered by this
report.
67
<PAGE>
SIGNATURE
In accordance with Section 13 and 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
IPVoice.com, Inc.
(Registrant)
Date: March 31, 2000 By:/s/ Barbara S. Will
-------------------
Barbara S. Will, Director, President
and Chief Operating Officer
By:/s/ James Howson
James Howson, Chairman, Chief
Executive Officer
By:/s/ Julie Bahavar
Julie Bahavar, Controller and
Chief Accounting Officer
Pursuant to the requirements of the Exchange Act, this report has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
/s/James K. Howson Chairman of the Board March 31, 2000
- - --------------------------- and Chief Executive Officer
James K. Howson
/s/Barbara S. Will . President and Chief Operating March 31, 2000
- - --------------------------- Officer and Director
Barbara S. Will
/s/Anthony K. Welch Senior Vice President of Research March 31, 2000
- - --------------------------- and Development and Director
Anthony K. Welch
/s/Russell Watson Director March 31, 2000
- - ---------------------------
Russell Watson
</TABLE>
68
EXHIBIT 10.35
MCGINN, SMITH & CO., INC.
INVESTMENT BANKERS * INVESTMENT BROKERS
ONE CAPITAL CENTER
90 Pine Street Albany, New York 12207
(518) 449-5131 FAX: (518) 449-6054
November 24, 1999
James K. Howson
Chairman
IPVoice -Com, Inc.
Via Facsimile# 480-513-0181
Dear Mr. Howsen:
This letter will confirm our understanding with you, with respect to our
services as broker and financial advisor in connection with your interest in
seeking non-bank financing for IPVoice.Com, Inc. (the "Company").
During the period from the date hereof through March 24,2000, McGinn, Smith &
Co., Inc. shall have the right to offer for sale an interest in the Company,
including but not limited to, common stock, preferred stock, convertible
preferred stock, debentures, convertible debentures of the Company (the
"Securities") or any assets of the Company (the "Assets"). McGinn, Smith& Co.
will use its best efforts to obtain acceptable purchasers of the securities
offered in an amount up to $5 million.
In connection therewith, McGinn Smith & Co. will:
a) Assist IPVoice.Com, Inc in preparing financial documents and
offering documents (the "Offering Documents");
b) Advise and assist IPVoice.Com, Inc. in recapitalizing the company's
financial structure, and
c) Advise and assist in negotiating the transaction.
It is agreed that McGinn, Smith & Co. shall have earned and be entitled to a fee
as set forth below if during the term of this Agreement:
a) We procure a party ready, willing and able to purchase any
Securities of the Company at a price and on the terms that are satisfactory
to you as evidenced by an executed Agreement; or
b) The Company sells Securities and/or Assets of the Company to a
party or through a party, either procured by us, or referred by us.
The fee earned hereunder shall be equal to ten percent (10%) of the first
S5,000.000.00, and eight percent (8%) of the balance of consideration in excess
of S5,000,000.00; It is further agreed that McGinn, Smith and Co., Inc. shall
<PAGE>
receive it's fee payable in cash prior to funds being released to the company.
McGinn, Smith and Co., Inc. shall also receive three year term warrants
representing two percent (2%) of the proceeds raised, with a strike price 125%
of the bid price on the date of closing. Such warrants shall have piggy-back
registration rights.
It is further agreed that McGinn, Smith & Co. shall be entitled to a
non-refundable Retainer/Investment Banking fee of 10,000 shares of restricted
common stock of IPVoice.Com, Inc. payable at the time that this agreement is
signed (with piggyback registration rights).
In addition to the above-mentioned fees, it is hereby agreed that McGinn, Smith
& Co. will be reimbursed for expenses incurred, when pre-approved by the
Company.
During the time of this Agreement, November 24, 1999 through March 24,2000
McGinn, Smith and Co., Inc. shall have the exclusive right to offer the
securities for IPVoice.Com, Inc. and you shall refer all inquiries regarding the
possible sale of any of the Company's Securities and/or Assets to us.
If within one year after March 24, 2000 the Company sells or transfers any or
all of its Assets, or Securities of the Company are sold or transferred to a
party with whom McGinn, Smith & Co. introduced to lPVoice.Com, Inc. the Company
shall pay McGinn, Smith & Co., the fee set forth herein above.
You shall indemnify and hold us harmless against any and all loss, claim,
damage, expense or liability, joint or several (including but not limited to any
and all expenses incurred in investigating, preparing or defending against all
litigation, commenced or threatened, or any claim whatsoever) to which we may
become subject under any statute or at common law or under the laws of foreign
countries, arising out of or based upon any untrue statement or alleged untrue
statement of material fact contained in any statement signed by you concerning
the Company.
You shall agree to hold the names of our investors strictly confidential for a
period of twenty-four months from the closing of the offering except as required
by law. Furthermore, you agree not to solicit future investments from our
investors without our express written permission, and at such time that any
investment by such investors is consummated, shall entitle us to a placement fee
of six (6) percent.
Representations and Warranties
The Company represents, warrants and agrees with you for the benefit that:
a) On the date hereof the Company is, and at all times to and including the time
the Securities and/or Assets are sold by the Company (the "Closing Time") will
be, duly incorporated, validly existing and in good standing as a corporation
under the laws of the State of Delaware with full power and authority to conduct
its business as now being conducted and to own its properties and to perform its
obligations under this Agreement.
b) All action required to be taken by the Company as a condition to the sale of
the Securities and/or Assets to qualified purchasers has been, or prior to
Closing Time will have been, taken and upon payment and delivery therefore the
Securities will be binding obligations of the Company enforceable in accordance
with their terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization and other laws or equitable principles now or
hereafter enacted relating to or affecting the enforcement of creditor's rights
generally.
<PAGE>
c) From the commencement of the Offering Period through Closing Time, the
Offering Documents will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in this paragraph
shall not apply to statements contained in or omitted from the Offering
Documents made in reliance upon or in conformity with information furnished to
the Company by you or on your behalf or omissions from the Offering Documents
relating to you or your activities With respect to the Company and/or the
Securities.
d) There is no litigation or governmental proceeding pending, or the knowledge
of the Company threatened, against, or involving the property or business of the
Company which would materially and adversely affect the financial condition of
the Company.
e) The balance sheet and income statement of the Company, present fairly the
financial position of the Company as of the dates thereof, and there has been no
material adverse change of the financial condition of the Company since the date
of the most recent of such financial statements.
f) The forecasts of operating expenses, estimated cash flow, taxable income,
depreciation and the assumptions on which they are based which are expected by
the Company to be included in the Offering Documents, are believed by management
of the Company to be reasonable.
It is further agreed that reference to all fees, and amounts raised shall be in
US dollars.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us a counterpart hereof whereupon this Letter
Agreement together with all counterparts hereof shall become an effective Letter
Agreement, binding between the Company and McGinn, Smith & Co., Inc.
Agreed to as of the date first written above.
ACCEPTED AND AGREED TO:
IPVoice.com, Inc. McGinn, Smith & Co., Inc.
By /s/ James K. Howson By /s/ Mark C. Casolo
- ----------------------------- --------------------------
James K. Howson Mark C. Casolo
Chairman Senior Vice President
Corporate Finance
Date: 29th November 1999 Date: 11/30/99
<PAGE>
MCGINN, SMITH & CO., INC.
INVESTMENT BANKERS * INVESTMENT BROKERS
ONE CAPITAL CENTER
90 Pine Street Albany, New York 12207
(518) 449-5131 FAX: (518) 449-6054
TERM SHEET
IPVOICE.Com, Inc.
Stock Price $2.00
Market Capitalization $______million (approx.)
Average DailyVolume_______
- - Offering amount: $2,500,000.00
- - Use of proceeds: Recruitment of senior management, and purchase and
installation of additional gateways.
- - Security: Series A Cumulative Convertible Preferred
- - Issue Price: $100.00-
- - Term: 3 years
- - Accretion rate: 8% in cash or stock accreted, and paid at the time of
conversion
- - Conversion terms: 25% discount to five-day average bid prior to conversion
- - Ceiling: 130% of the bid at the time of closing
- - Call Feature: Callable for cash on 30 days notice for accrued dividends,
plus 20% compounded annually if the average bid price for the 30 days
preceding such call date is below $1.50 per share. I - Automatic conversion
at maturity: Each share of Series A Preferred Stock-outstanding on the date
which is three years from the closing date, shall at the option of the
company either (1) be converted into common stock on such date equal in
value to 110% of the stated value of the outstanding Series A Preferred
Stock where the common stock is valued at 100% of the closing bid price, or
(2) redeemed by the company for cash in an amount equal to 110% of the
stated value of the Series A Preferred Stock being redeemed.
Series A shall rank:
1. Junior to any security specifically ranking by it's terms senior to
the Series A Preferred Stock.
2. Prior to the company's common stock
3. Prior to any class or series of capital stock hereafter created not
specifically ranking by its term's senior to or on parity with any
Series A Preferred Stock.
<PAGE>
- - Voting rights: The holders of the Series A Preferred Stock shall have no
voting rights
- - Warrants: 10,000 per $100,000.00 at an exercise price 125% over the bid
price on the date of closing. The warrants shall have a three-year term,
and shall have piggyback registration rights, and if not registered within
180 days, a demand registration will be offered.
- - Registration: Filed in thirty days, effective in 120 days.
EXHIBIT 10.36
DELANO GROUP
S E C U R 1 T1 I E S
DAVID R. ASPLUND
President
DELANO GROUP SECURITIES
141 W. Jackson Boulevard
Suite 2176
Chicago, Illinois 60604
888.499.1950
312.588.1950
Fax 312.588.1949
2/16/00
TO: James Howson, Chairman & CEO
Barbara Will, President
IPVoice.com, Inc.
Re: Private Placement of Securities of IPVoice.Com, Inc.
Dear James and Barbara,
Per our conversation, IPVoice.Com, Inc. (together with any present
and future subsidiaries, successors and affiliates of IPVoice.Com, Inc. "the
Company") hereby retains Delano Group Securities, LLC ("De1ano") to serve as
financial advisor to and placement agent for the Company with respect to the
private placement ("P1acement") of securities of the Company pursuant to the
offering exemption afforded by the Securities of 1933, as amended (the "1933
Act") arid Section 4(2) and/or Regulation D promulgated under the 1933 Act
("Regulation D"). A schedule of agreed upon terms and conditions of the
Placement shall be substantially as shown in Exhibit A attached hereto and
incorporated herein by reference (the "Term Sheet").
Delano is being retained to provide the services described herein
solely to the Company, and it is agreed that the engagement of Delano is not,
and shall not be deemed to be, on behalf of, and is not intended to confer
rights or benefits upon any shareholder or creditor of the Company or upon any
other person or entity other than the Company. No one other the Company shall be
permitted to rely upon this engagement letter or the agreements made herein (the
"Agreement") or any of the advice, statements or actions of Delano. The
Agreement may not be assigned by the Company without prior written consent of
Delano.
Company will furnish Delano with all information and material
concerning the Company that Delano requests in connections with the performance
of its obligations hereunder. The Company represents and warrants that all
information provided or made available to Delano by the Company at all times
during the period of the Agreement is and shall be complete and true in all
material respects and will not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statement
thereof not misleading in light of the circumstances under which such statements
are made. The Company represents and warrants that any projections provided to
Delano will have been prepared in good faith and will be based upon assumptions
that, in light of the circumstances under which they are made, are reasonable.
The Company acknowledges and agrees that in rendering its services hereunder
Delano will be using and relying on, without independent investigation or
<PAGE>
verification, all information furnished to Delano or to be furnished to Delano
by or on the Company's behalf as well as publicly available information. The
Company understands that in rendering its services hereunder, Delano will also
rely upon the advice of counsel to the Company and other advisors to the Company
as to legal, tax and other matters relating to any transaction or proposed
transaction contemplated by this Agreement.
For the services rendered pursuant to this Agreement, the Company
shall pay to Delano the amounts (whether in cash, in kind, or with respect to
the issuance of warrants or options) specified in Exhibit A. Such amounts shall
be paid at the closing of the Placement out of escrow from the gross proceeds of
the Placement and out of escrow front the gross proceeds resulting from the
exercise of investment options upon conversion. The Company represents and
warrants there are no brokers, placement agents, finders or other persons that
have an interest in any compensation due to Delano from any transaction
contemplated herein.
Before the Company releases any information referring to Delano's
role as the Company's financial advisor and placement agent with respect to the
Placement or uses of Delano's name in a manner which may result in public
dissemination thereof, the Company shall furnish drafts of all documents or
prepared oral statements to Delano for comment, and shall not release any
information relating thereto without the prior written consent of Delano.
Nothing herein shall prevent the Company from releasing any information to the
extent that such release is required by law.
The Company agrees that, following the consummation of the
Placement, Delano shall have the right to place advertisements in financial and
other newspapers and journals at its own expense, describing its services to the
Company hereunder, provided that Delano will submit a copy of any such
advertisements to the Company for its prior approval, which approval shall no be
unreasonably withheld.
The Company agrees to indemnify and hold harmless Delano, its
affiliates and their respective officers, directors, members, partners,
employees, agents and affiliates and control persons of any of the above (each
an 'Indemnified Person") from and against all claims, liabilities, loses or
damages (or actions in respect thereof) or other expenses that (a) are related
to or arise out of (i) actions taken or omitted to be taken (including any
untrue statements made or any statements omitted to be made) by the Company, or
(ii) actions taken or omitted to be taken by an Indemnified Person with the
consent of or in conformity with the actions or omissions of the Company or (b)
are otherwise related to arise out of Delano's duly authorized activities on
behalf of the Company. The Company shall not be responsible, however, for any
losses, claims damages. liabilities or expenses pursuant to clause (b) of the
preceding sentence that are finally judicially determined to have resulted
solely from Delano's or such other Indemnified Person's reckless or wrongful
conduct. The Company agrees to reimburse each Indemnified Person for all out of
pocket expenses (including fees and expenses of counsel for such Indemnified
Person) 'for such Indemnified Person in connection with investigating,
preparing, conducting or defending any such action or- claim, whether or not to
connection with litigation in which any Indemnified Person is a named party, or
in connection with enforcing the rights of an Indemnified Person under the
Agreement. To the extent the foregoing indemnification clause is unavailable in
full to an Indemnified Person or insufficient to hold an Indemnified Person
harmless, then the Company shall contribute to the amount paid or payable by
such Indemnified Person as a result of such claim, liability, loss, damage or
expense in such proportion as is appropriate to reflect not only the relative
benefits received by the Company on the one hand and Delano on the other, but,
also the relative fault of the Company and such Indemnified Person, as well as
any relevant equitable considerations, subject to the limitation that in any
event the aggregate contribution of all Indemnified Pet-sons to all losses,
claims, liabilities, damages or expenses shall not exceed the amount of fees
actually received by Delano pursuant to this Agreement. It is hereby further
<PAGE>
agreed that the relative benefits to the Company on the one hand and Delano on
the other with respect to any transaction or proposed transactions contemplated
by this Agreement shall be deemed to be in same proportion as (a) the total
value of transaction or proposed transaction bears to (b) the fees paid to
Delano with respect to such transaction.
The Company represents and warrants that this Agreement has been
duly authorized and represents the legal, valid, binding and enforceable
obligation of the Company and that neither this Agreement nor the consummation
of the transaction contemplated hereby requires the approval or consent of any
governmental or regulatory agency or violates any law, regulation. Contract or
order binding the Company.
The terms, provisions and conditions of this Agreement are solely
for the benefit of the Company and Delano and the other Indemnified Persons and
their respective heirs, successors and permitted assigns and no other person or
entity shall acquire or have a right by virtue of this Agreement. This Agreement
(including all exhibits and any addenda or schedules attached hereto) contains
the entire understanding and agreement between the parties hereto with respect
to Delano's engagement hereunder, and all prior discussions are hereby merged
into this Agreement.
This Agreement shall be governed and construed under the laws of the
State of Illinois without regard to such state's conflicts of law principles and
may be amended, modified or supplemented only by written instrument executed by
parties hereto. The parties hereto each hereby submits to the jurisdiction and
venue of the federal courts located in the County of Cook, sitting in Chicago,
Illinois in connection with any dispute related to this Agreement, the Placement
or any other matter contemplated hereby.
If the foregoing correctly sets forth the entire understanding and
agreement between the Company and Delano, please so indicate by executing this
Agreement as indicated below and return an executed copy to Delano, whereupon
this Agreement shall constitute a binding agreement as of the date first above
written.
Very truly yours,
DELANO GROUP SECURITIES, LLC.
By: /s/ David R. Asplund, President
- ------------------------------------------
David R. Asplund, President
ACKNOWLEDGED AND AGREED THIS THE DAY OF FEBRUARY, 2000.
IPVOICE.COM, INC.
By: /s/ James Howson
- ------------------------------------
James Howson, Chairman and CEO
By: /s/ Barbara Will
- -----------------------------
Barbara Will, President
EXHIBIT 10.37
UUNET Customer Information Form Page 1
An MCI WorldCom Company
The following information is needed by UUNET to set up your hosting account.
Please FAX this completed form along with your hosting Service Agreement to your
UUNET Account Representative.
Billing Contact Information
- -------------------------------------
Choose one of the following three options:
X Bill to an existing UUNFT Account. If checked please provide Account Number
X________________ _ Bill to contact listed on Service Agreement _ Bill to a
different contact than that Iistcd on Scniicc Agreement: _Bill to a different
contact than listed on Service Agreement:
Billing Contact: Lillian Vader
Street Address/City/State/zip: 5050 N. 19th Ave. #416
Phoenix AZ 85015
Phone# 602-335-1231 CellPhone# 303-596-5423
Fax# 602-335-1577 Email Address: [email protected]
Primary Technical Contact Information
Please list the person whom our installation engineer and install coordinator
should contact regarding installation and configuration issues. Standard
installation periods begin when the UUNET Web Hosting Install Coordinator has
all necessary configuration information and contractual paperwork has been
processed by UUNET Accounts Processing.
A technical contact e-mail address is required so that we can email the
technical contact in case of service maintenance announcements. It is important
that this information is up-to-date, and that these addresses are valid at all
times.
CompanyName: IPVOICE.COM, INC.
Technical Contact: BUD BOWMAN / ANTHONY WELCH
Street Address/City/State/Zip: 5050 No. 19th Ave #416
Phoenix AZ 85015
Phone# 602-335-1231 CellPhone#
Fax# 602-335-1577
Primary Technical Contact Email address (required): [email protected]
[email protected]
Primary Sales Contact Information
We will contact this person if we are unable to reach the primary technical
contact.
Primary Contact: Barbara Will
Street Address/City/State/Zip: 5050 No. 19th Ave #416
Phoenix AZ 85015
Phone# 602-335-1231 CellPhone#
Fax# 602-335-1577 E-mail Address: [email protected]
UUNET Technologies, Inc. - Hosting and E-Commerce
3060 Williams Drive Fairfax. Virginia 22031-4648
VOICE: (703) 758 7700
<PAGE>
UUNET UUNET Technologies, Inc. +1 800 258-4039 (voice)
An MCI WorldCom Company 3060 Williams Drive +1 703 206-5629 (voice)
Fairfax, VA 22031 +1 703 645-4588 (fax)
http://www.uu.net [email protected]
----------------- ----------------
UUNET is a registered trademark, the UUNET logo design is a
trademark and The Internet at Work is a service mark of
UUNET Technologies, Inc.
_ Install Expedite Fee: $750(for install requests with less than 3 business
days notice from date of request)(1)
Service Type (choose one)
_ Basic
The $500 Monthly Fee applies on a prorated basis for the first partial
month of service. During any month or partial month in which the total monthly
data transfer is in excess of 1,000 MB, the applicable Monthly Fee for each
additional 1,000MB (or fraction thereof) of data transfer is as follows:
Monthly Fee per
MB per Month Additional 1,000 MB
-------------- --------------------
1,001 - 10,000 $ 100
10,001 + $ 80
500 MB of storage included. No additional storage is available with this service
(2)
<TABLE>
<S> <C> <C>
BASIC SERVICE OPTIONS MONTHLY FEE START-UP CHARGE
Secure (SSL) Server Option(3) each URL-Number of Options ___ $ 0 $ 500
CyberCash(TM)Capability $ 0 $ 100
Netshow(TM)Capability $ 50 $ 125
Anonymous FTP capability (4) $ 50 $ 0
Enhance Reporting $ 100 $ 0
POP Mailboxes (each) - Number of Mailboxes___ (each) $ 10 $ 0
PREMIUM MONTHLY FEE START-UP CHARGE
$ 750 $ 750
</TABLE>
The $750 Monthly Fee applies on a prorated basis for the first partial month of
service. During any month or partial month in which the total monthly data
transfer is in excess of 2,000 MB, the applicable Monthly Fee for each
additional 1,000 MB (or fraction thereof) of data transfer is as follows:
MB per Month Monthly Fee per
Additional 1,000 MB
---------------- ---------------------
2,001 - 10,000 $ 100
10,001 - 50,000 $ 80
50,001 + $ 70
1,200 MB of storage included. No additional storage is available with this
service (2)
<TABLE>
<S> <C> <C>
PREMIUM SERVICE OPTIONS MONTHLY FEE START-UP CHARGE
Secure (SSL) Server Option(3) each URL-Number of Options ___ $ 0 $ 500
CyberCash(TM)Capability $ 0 $ 100
Netshow(TM)Capability $ 50 $ 125
Anonymous FTP capability (4) $ 50 $ 0
Enhance Reporting $ 100 $ 0
POP Mailboxes (each) - Number of Mailboxes___ (each) $ 10 $ 0
</TABLE>
<PAGE>
UUNET Shared Windows NT-Based Web Hosting Includes:
- -Compaq Server with minimum of two 200Mhz -Data backups - DNS service for one
domain name(6) Pentium Pro processors, 256 MB RAM -RAID disk storage -Database
hosting (SQL Server or Access(6) -Daily/Weekly/Monthly server traffic reports
- -custom CGI capabilities -24x7 Network Operations Center
TERM COMMITMENT: 1-year term(5% discount) 2-year Term(10% discount)
PAYMENT: If purchase order is required, return the PO with this form and provide
PO#
BILLING PREFERENCE: Bill my exisitng UUNET account number__________ Bill to new
account number____
Please sign this Agreement on the reverse.
- ------------------------------
(1) Expedited install cannot be guaranteed. If UUNET fails to provide the
Customer password and login information within 3 business days of Customer's
request, Customer's sole and exclusive remedy shallbe to receive a full refund
of the install Expedite Fee.
(2) Storage refers to disk space allocated on server for Customer's content. It
does not include storage space used for system software or logging.
(3) A Digital ID isrequired for Secure Server hosting. Start-up Charge includes
inital registration of the Digital ID with Versign(TM) for the first year of
use. Yearly renewals thereafter will be billed at Versign(TM) list price
(currently $250 per year). A separate SecureServer option is needed for each
URL, even if multiple URLs point to the same IP address.
(4) Each Anonymous FTP and Netshow instance will require an additional IP
address.
(5) Domain name registration requires a separate fee that will be billed
directly to customer by Network Solutions. All domain name applications that use
UUNET nameservers must be authorized by UUNET or the application may be denied
or delayed. UUNET will not, under any circumstances, send payment to Network
Solutions on behalf of Customer.
(6) Only available with Premium Service Option.
(7) Discount applicable only to Monthly Fees. At the conclusion of the Term
Commitment, this Agreement shall continue in effect on a month-to-month basis
without term discount for the service.
THE INTERNET AT WORK
<PAGE>
1 GENERAL TERMS AND CONDITIONS
1. UUNET Technologies Inc. (UUNET) exercises no control over, and accepts no
responsibility for, the content of the information passing through UUNET's host
computers, network hubs and points of presence (the UUNET Network). EXCEPT AS
EXPRESSLY SET FORTH IN SECTION 8 BELOW, UUNET (a) MAKES NO WARRANTIES OF ANY
KIND. WHETHER EXPRESS OR IMPLIED, FOR THE SERVICES AND EQUIPMENT IT IS PROVIDING
AND (b) DISCLAIMS ANY WARRANTY OF TITLE, MERCHANTABILITY NON- INFRINGEMENT OR
FITNESS FOR A PARTICULAR PURPOSE. Use of any information obtained via the UUNET
Network is at Customer's own risk. UUNET specifically denies any responsibility
for the accuracy or quality of information obtained through its server UUNET
shall not be liable For any delay or failure in performance due to Force
Majeure, which shall include without limitation acts of God, earthquake,
disputes, changes in law, regulation, or 4 government policy, riots, war, fire,
epidemics, acts or omissions of vendors or suppliers, equipment failures,
transportation difficulties, or other occurrences which are beyond UUNET's
reasonable control.
2. All use of the UUNET Network and the service must comply with the
then-current version of the UUNET Acceptable Use Policy ("Policy') which is made
a part of this Agreement and is available at the following URL:
www.uu.net/useplicy . UUNET reserves the right to amend the Policy from time to
time, effective upon posting of the revised Policy at the URL or other notice to
Customer. UUNET reserves the right to suspend the service or terminate this
Agreement effective upon notice for a violation of the Policy. Customer agrees
to indemnify and hold harmless UUNET from any losses, damages, costs or expenses
resulting from third party claim or allegation ("Claim") arising out of or
relating to use of the service, including any Claim which, if true, would
constitute a vioIation of the Policy.
3. UUNET assumes no responsibility for any encrypted data that is sent to
.storage on, or retrieved off of a UUNET server. The technology used to encrypt
data being transmitted to or from UUNET's servers is licensed by UUNET from a
third party and UUNET makes no claims or warranties regarding the viability,
integrety or robustness of the encryption on used. Further UUNET is not
responsible for the success or failure of the Secure Server to properly encrypt
data. By using Secure Server Customer assumes the risk (Fiat the encryption
algorithm may be broken so that the data being transmitted is visible to others.
UUNET assumes no responsibility for any commercial transactions attempted or
completed involving any UUNET service or the third party software and other
products services designed to enable such transactions used by Customer.
Customer's rights and obligations with respect thereto are subject solely to any
agreement between Customer and such third party.
4. NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE
OR CONSEQUENTIAL DAMAGES THAT RESULT FROM CUSTOMERS OR CUSTOMERS USERS' USE OF
THE UUNET NETWORK AND THE SERVICE INCLUDING, WITHOUT LIMITATION. ANY SUCH
DAMAGES FOR LOSS OF DATA RESULTING PROM DELAYS, NON-DELIVERIES MISDELIVERIE5 OR
SERVICE INTERRUPTIONS. Notwithstanding anything to the contrary stated in this
Agreement, Customer's sole remedies for any claims relating to this service or
the UUNET Network are set forth in Section 8 below.
5. Networks assigned from a UUNET net-block are non-portable. Network space
allocated by UUNET must be retumed toUUNET in the event Customer discontinues
service.
6. Payment is due 30 days after date of invoice. Accounts are in default if
payment is not received within 30 days after date of invoice. If payment is
returned to UUNET unpaid Customer is immediately in default and subject to a
returned check charge of $25 from UUNET. Accounts unpaid 60 days after date of
invoice may have service interrupted or terminated. Such interruption does not
relieve Customer of the obligation to pay the Monthly Fee. Only a written
request to terminate Customer's service relieves Customer of the obligation to
pay the Monthly Fee Accounts in default are subject to an interest charge art
the outstanding balance of the lesser of 1.5% per monlh or the maximum rate
permitted by law. Customer agrees to pay UUNET its reasonable expenses,
including attorney collection agency fees, incurred in enforcing its rights
under these Terms and Conditions. Prices are exclusive of any taxes which may be
levied or assessed upon the Equipment or services provided hereunder. Any such
taxes shall be paid by Customer. If Customer is exempt from otherwise applicable
tax Customer must submit its tax identification number and exemption certificate
atthe same time it submits this Agreement.
7. UUNET will invoice the Start-up Charge upon acceptance of this Agreement.
Billing of the Monthly Fee will commence when UUNET is prepared to provide
Customer password and login information, enabling installation of Customer's
data files on the UUNET server. The services will be invoiced monthly in and
UUNET reserves the right to change the rates for this service by notifying
Customer 30 days in advance of the effective date of the chance. Service may be
<PAGE>
canceled only upon 30 days' advance written notice. In the event of early
cancellation of a Term Commitment, Customer will be required to pay 75% of
UUNET's Monthly Pee for each month remaining in the Term Commitment.
8. If Customer notifies UUNET Customer Support immediately upon failure to
access Customer's Server and UUNET determines in its reasonable commercial
judgment that the Server is unavailable due to a Server outage caused solely by
the items of the service managed exclusively by UUNET, the following will apply
if UUNET so determines that the Server was unavailable for one or more (but
fewer then four) consecutive hours during such calendar month, UUNET. upon
Customer's request, will credit Customers account for such month the pro-rated
charges for one day's service. Or if UUNET so determines that the Server was
unavailable for four (4) or more consecutive hours during any calendar month,
UUNET, upon Customer's request, will credit Customer's account for such month
for the pro-rated charges for one week's service. A Server shall be deemed to be
unavailable if the server is not responding to HTTP requests issued by UUNET
monitoring software. Scheduled maintenance shall not be deemed to be Server
unavailability. This Section sets forth Customer's exclusive remedies for
unavailability of Customer's Server. The remedies set forth in this Section
shall not apply if unavailability of Customer's Server is due, to Customer's
informal content or application programming, acts of Customer or its agents,
network unavailability outside of the UUNET Network or events of force majeure.
Credits will not apply to traffic charges or to charges for services other than
the Monthly Fee. Customers with multiple Servers will not receive credits
pursuant to this Section for Servers which are unaffected by the outage.
Customer's account shall not be credited more than once per month pursuant to
this Section.
9. MCI WORLDCOM, Inc. or its affiliates or subcontractors may perform some or
all of UUNET duties and/or obligations hereunder.
10. Neither party may use the other party's name, trademarks, tradenames or
other proprietary identifying symbols without the prior written approval of the
other party. Neither party may assign or transfer any of its rights or
obligations under this Agreement without the express, prior written consent of
the other party provided, that either party may assign or transfer this
Agreement to any affiliate of such party upon advance written notice to the
other party failure on the part of either party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof nor
shall any single or partial exercise any right or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right or remedy
granted hereby or by law. This Agreement supersedes all previous
representations, understandings or agreements and shall prevail notwithstanding
any variance with terms and conditions any order submitted. Acceptance of this
Agreement by UUNET may be subject in UUNET's absolute discretion, to
satisfactory completion of a credit check Activation of service shall indicate
UUNET's acceptance of this Agreement. Use of the UUNET Web Hosting Services
provided hereunder constitutes acceptance of this Agreement.
AGREED AND ACCEPTED
Signature: /s/ Barbara S. Will Company Name: IPVoice.com, Inc.
Printed Name: Barbara S. Will Address: 5050 N 19th Ave #416
Title: President Phoenix, AZ 85015
Date: 12-15-99 Telephone: 602-335-1231
Fax: 602-335-1577
THE INTERNET AT WORK
EXHIBIT 10.38
EQUIPMENT LEASE
This Equipment Lease (this "Lease") is made effective as of January 20, 2000
between international Investment Partners, Ltd (the "Lessor"), 615 Centerville
Road, Lancaster, PA 17601, and IPVoice.com,Inc. (the "Lessee"), 5050 North 19th
Avenue, Suite 416, Phoenix,, AZ 850 15, and states the agreement of the parties
as follows:
EQUIPMENT SUBJECT TO LEASE. The Lessor shall lease the equipment listed on the
attached Exhibit "A".
PAYMENT TERMS. The Lessee shall make 36 payments of $3,342.26 each, for a total
amount of $120,321.36. Payments shall be due on the 28th day of each month, with
the first payment due on February 28, 2000. The lease payments shall be due
whether or not the Lessee has received notice of a payment due.
SERVICE CHARGE. If any Lease installment is not paid within 15 day(s) after the
due date, the Lessee shall pay to the Lessor a service charge of $50.00.
NON-SUFFICIENT FUNDS. The Lessee shall be charged $25.00 for each check that is
returned to the Lessor for lack of sufficient -funds.
SECURITY DEPOSIT. The Lessee shall pay a security deposit of $6,000.00 at the
time that this Lease is signed. This deposit will be returned to the Lessee at
the termination of this Lease, subject to the option of the Lessor to apply it
against Lease charges and damages or exercise of the option to purchase
contained herein.. Any amounts refundable to the Lessee shall be paid at the
time this Lease is terminated. The security deposit shall not bear interest.
LEASE TERM. This Lease shall begin on the above effective date and shall
terminate on January 28, 2003, unless otherwise terminated in a manner
consistent with the terms of this Lease.
LOCATION OF EQUIPMENT. The equipment shall be located at the Lessees location
sites in New York and Los Angeles, during the lease term, and shall not be
removed from those locations without the Lessor's prior written consent.
CARE AND OPERATION OF EQUIPMENT. The equipment may only be used and operated in
a careful and proper manner. Its use must comply with all laws, ordinances, and
regulations relating to the possession, use, or maintenance of the equipment,
including registration and/or licensing requirements, if any.
ALTERATIONS. Lessee shall be permitted to mare alterations to the equipment, if
the alterations do not reduce the value of the equipment or significantly alter
the purposes for which the equipment is designed. All alterations shall be the
property of the Lessor and subject to the terms of this Lease.
MAINTENANCE AND REPAIR. The Lessee shall maintain at the Lessee's cost, the
equipment in good repair and Operating condition, allowing for reasonable wear
and tear. Such costs shall include labor, material, parts, and similar items.
<PAGE>
LESSOR'S RIGHT OF INSPECTION. The Lessor shall have the right to inspect the
equipment during Lessee's normal business hours.
RETURN OF EQUIPMENT. At the end of the Lease term, the Lessee shall be obligated
to return the equipment to the Lessor at the Lessee's expense.
OPTION TO RENEW. If the Lessee is not in default upon the expiration of this
lease, the Lessee shall have the option to renew this Lease for a similar term
on such terms as the parties may agree at the time of such renewal.
OPTION TO PURCHASE. If the Lessee is not in default under this Lease, the Lessee
shall have the option to purchase, in entirety, all items of equipment on any
scheduled lease payment date, or at the end of the lease term, at the prices
specified for such items of equipment in the attached Equipment Schedule. (If
purchase is at the end of the lease term, the exercise price shall be
$66,946.77.) Any such payment shall be in addition to the scheduled lease
payment then due. If the Lessee chooses to exercise this option during the final
90 days of the originally scheduled lease term, prior written notice to the
Lessor of such intent must be provided.
ACCEPTANCE OF EQUIPMENT. The Lessee shall inspect each item of equipment
delivered pursuant to this Lease. The Lessee shall immediately notify the Lessor
of any discrepancies between such item of equipment and the description of the
equipment in the Equipment Schedule. If the Lessee fails to provide such notice
before accepting delivery of the equipment, the Lessee will be conclusively
presumed to have accepted the equipment as specified in the Equipment Schedule.
OWNERSHIP AND STATUS OF EQUIPMENT. The equipment will be deemed to be personal
property, regardless of the manner in which it may be attached to any other
property. The Lessor shall be deemed to have retained title to the equipment at
alt times, unless the Lessor transfers the title by sale. The Lessee shall
immediately advise the Lessor regarding any notice of any claim, te'~y, lien, or
legal process issued against the equipment.
WARRANTY. The Lessor makes no warranties, e~press or implied, as to the
equipment leased. The Lessee assumes the responsibility for the condition of the
equipment.
RISK OF LOSS OR DAMAGE. The Lessee assumes all risks of loss or damage to the
equipment from any cause, and agrees to return it to the Lessor in the condition
received from the Lessor, with the exception of normal wear and tear, unless
otherwise provided in this Lease.
INDEMNITY OF LESSOR FOR LOSS OR DAMAGES. Unless otherwise provided in this
Lease, if the equipment is damaged or lost, the Lessor shall have the option of
requiring the Lessee to repair the equipment to a state of good working order,
or replace the equipment with like equipment in good repair, which equipment
shall become the property of the Lessor and subject to this Lease.
LIABILITY AND INDEMNITY. Liability for injury, disability, and death of workers
and other persons caused by operating, handling, or transporting the equipment
during the term of this Lease is the obligation of the Lessee, and the Lessee
shall indemnify and hold the Lessor harmless from and against all such
liability. Lessee shall maintain liability insurance of at least $2,000,000.00.
CASUALTY INSURANCE. The Lessee shall insure the equipment in an amount
sufficient to cover the replacement cost of the equipment.
<PAGE>
TAXES AND FEES. During the term of this Lease, the Lessee shall pay all
applicable taxes, assessments, and license and registration fees on the
equipment.
DEFAULT. The occurrence of any of the following shall constitute a default under
this Lease:
A. The failure to make a required payment under this Lease when due.
B. The violation of any other provision or requirement that is not
corrected within 20 days day(s) after written notice of the violation
is given.
C. The insolvency or bankruptcy of the Lessee.
D. The subjection of any of Lessee's property to any levy, seizure,
assignment, application or sale for or by any creditor or government
agency.
RIGHTS ON DEFAULT. In addition to any other rights afforded the Lessor by law,
if the Lessee is in default under this Lease, without notice to or demand on the
Lessee, the Lessor may take possession of the equipment as provided by law,
deduct the costs of recovery (including attorney fees and legal costs), repair,
and related costs, and hold the Lessee responsible tor any deficiency. The
rights and remedies of the Lessor provided by law and this Agreement shall be
cumulative in nature. The Lessor shall be obligated to re-lease the equipment,
or otherwise mitigate the damages from the default, only as required by law.
NOTICE. All notices required or permitted under this Lease shall be deemed
delivered when delivered in .person or by mail, postage prepaid, addressed to
the appropriate party at the address shown for that party at the beginning of
this Lease.
ASSIGNMENT. The Lessee shall not assign or sublet any interest in this Lease or
the equipment or permit the equipment to be used by anyone other than the Lessee
or Lessee's employees, without Lessor's prior written consent.
ENTIRE AGREEMENT AND MODIFICATION. This Lease constitutes the entire agreement
between the parties. No modification or amendment of this Lease shall be
effective unless in writing and signed by both parties. This Lease replaces any
and all prior agreements between the parties.
GOVERNING LAW. This Lease shall be construed in accordance with the laws of the
State of Pennsylvania
SEVERABILITY. If any portion of this Lease shall be held to be invalid or
unenforceable for any reason, the remaining provisions shall continue to be
valid and enforceable. If a court finds that any provision of this Lease is
invalid or unenforceable, but that by limiting such provision, it would become
valid and enforceable, then such provision shall be deemed to be written,
construed, and enforced as so limited.
WAIVER. The failure of either party to enforce any provision of this Lease shall
not be construed as a waiver or limitation of that party's right to subsequently
enforce and compel strict compliance with every provision of this Lease.
CERTIFICATION. Lessee certifies that the application, statements, trade
references, and financial reports submitted to Lessor are true and correct and
any material misrepresentation will constitute a default under this Lease.
<PAGE>
ARBITRATION. Any controversy or claim relating to this Lease, including the
construction or application of this Lease, will be settled by binding
arbitration under the rules of the American Arbitration Association, and any
judgment granted by the arbitrator(s) may be enforced in any court of proper
jurisdiction.
Lessor:
International Investment Partners, Ltd
By:/s/ Jeremy P Feakins
- -----------------------------------------
Jeremy P. Feakins
Managing Partner
Lessee:
IPVoice.com,Inc.
By:/s/ Barbara S Will
- ---------------------------
Barbara S. Will
President
<PAGE>
EXHIBIT A
Equipment Schedule
Equipment Description: As contained in attached quotes from Telic.net and
Technology's Edge
Lease End Purchase Price: $66,946.77
If Lessee chooses to exercise the Option to Purchase on any payment date prior
to lease end, the purchase price shall be the monthly lease payment then due
plus the balance shown on the attached amortization schedule.
<PAGE>
telic.net
QUOTE
Number IPPF000117
BILL TO:
IPVO1CE
5050 North 19th Avenue
Suite 416
Phoenix, AZ 85015
Fax: 602-335-1577
Attn: Mr. Bud Bowman
Sales Purchase Ship Date Quote
Person Order Via Shipped Date
- ------- ------- ----- ------- --------
House 1/17/99
<TABLE>
<S> <C> <C> <C> <C> <C>
Part Unit Extended
Number Description Quanitiy Price Price
--------- ---------------------- -------- ----------- --------------
1 Nuvo 299 chasis, AC 3 6,648.00 19,944.00
2 4T1 Kit (3 Cards) 3 26,568.00 79,704.00
3 Channels (24 per T1) 88 50.00 14,400.00
4 Digi Port Server 8 w/Rack 2 1,400.00 2,800.00
- -------- --------- ---------------------------- --------- ------------- --------------
$ 116,848.00
5 Sales Tax @ 8.14% 9,639.96
6 Installation 2 800.00 1,600.00
7 Airfare (for LA only) 300.00 300.00
Total $ 128,387.96
Shipping 700.00
Total Amount Due $ 129,087.96
</TABLE>
<PAGE>
Technology*s Edge
From Martin-Williams, Inc.
Proposal for CALL PLUS Page 1
Proposal No. 6773 09/10/99
Requested by Bret Deemer
Prepared by Marty Troup
<TABLE>
<S> <C> <C> <C>
Qty Unit Price Ext Price
12 PORT SWITCH
3com 3300 10/100 12 port switch 1.0 1235.00 1235.00
Total for 12 PORT SWITCH 1235.00
RPS UPGRADE
3com RPS chassis 1.0 590.00 590.00
3com RPS module 100w 2.0 220.00 440.00
3com Y cable 1.0 84.00 84.00
Total for RPS UPGRADE 1114.00
PROPOSAL SUBTOTAL 2349.00
TOTAL SALES TAX 182.04
*GRAND TOTAL* 2531.04
</TABLE>
<PAGE>
payment calculator
- ----------------------------------------------------
For the given values:
Principal = $ 131619
Interest Rate = 18.00%
Amortization Period = 5 years
Starting month = Feb
Starting year = 2000
Monthly Pre-payment = $ 0
Annual Pre-payment = $ 0.00
- ----------------------------------------------------
Your monthly payment will be $ 3342.26
The following mortgage would result for 2000:
<TABLE>
<S> <C> <C> <C>
Month Prin Int Balance
Feb 1367.97 1974.28 130251.03
Mar 1388.49 1953.77 128862.54
Apr 1409.32 1932.94 127453.22
May 1430.46 1911.80 126022.76
Jun 1451.92 1890.34 124570.84
Jul 1473.69 1868.56 123097.15
Aug 1495.80 1846.46 121601.35
Sep 1518.24 1824.02 120083.11
Oct 1541.01 1801.25 118542.10
Nov 1564.13 1778.13 116977.97
Dec 1587.59 1754.67 115390.38
</TABLE>
FOR 2000 : Int=$ 20536.22 Prin=$ 16228.62 Bal=$ 115390.38
<PAGE>
For Calender Year 2001 (Year 2, 4 left)
<TABLE>
<S> <C> <C> <C>
Month Prin Int Balance
Jan 1611.40 1730.86 113778.98
Feb 1635.57 1706.68 112143.41
Mar 1660.11 1682.15 110483.30
Apr 1685.01 1657.25 108798.29
May 1710.28 1631.97 107088.01
Jun 1735.94 1606.32 105352.07
Jul 1761.98 1580.25 103590.10
Aug 1788.41 1553.85 101801.69
Sep 1815.23 1527.03 99986.46
Oct 1842.46 1499.80 98144.00
Nov 1870.10 1472.16 96273.90
Dec 1898.15 1444.11 94376.75
</TABLE>
FOR 2001: Int=$ 19092.46 Prin=$ 21014.63 Bal=$ 94375.75
- -------------------------------------------------------------------------------
For Calender Year 2002(Year 3, 3 left)
<TABLE>
<S> <C> <C> <C>
Month Prin Int Balance
Jan 1926.62 1415.64 92449.13
Feb 1955.52 1386.74 90493.61
Mar 1984.85 1357.40 88508.76
Apr 2014.63 1327.63 86494.13
May 2044.85 1294.41 84449.28
Jun 2075.52 1266.74 82373.77
Jul 2106.65 1235.61 80267.12
Aug 2138.25 1204.01 78128.86
Sep 2170.32 1171.93 75958.54
Oct 2202.88 1139.38 73755.66
Nov 2235.92 1106.33 71519.74
Dec 2269.46 1072.80 69250.28
</TABLE>
FOR 2002: Int=$ 14981.62 Prin=$ 25125.48 Bal=$ 69250.28
<PAGE>
For Calender Year 2003 (Year 4, 2 left)
<TABLE>
<S> <C> <C> <C>
Month Prin Int Balance
Jan 2303.50 1038.75 66946.77
Feb 2338.06 1004.20 64608.72
Mar 2373.13 969.13 62235.59
Apr 2408.72 933.53 59826.87
May 2444.85 897.40 57382.01
Jun 2481.53 860.73 54900.48
Jul 2518.75 823.51 52381.73
Aug 2556.53 785.73 49825.20
Sep 2594.88 747.38 47230.32
Oct 2633.80 708.45 44596.52
Nov 2673.31 688.95 41923.21
Dec 2713.41 628.85 39209.80
</TABLE>
FOR 2003 Int=$ 10066.62 Prin=$ 300400.47 Bal=$ 39209.80
- -------------------------------------------------------------------------------
For Calender Year 2004 (Year 5, 1 left)
<TABLE>
<S> <C> <C> <C>
Month Prin Int Balance
Jan 2754.11 588.15 36455.69
Feb 2795.42 546.84 33660.27
Mar 2837.35 504.90 30822.92
Apr 2879.91 462.34 27943.00
May 2923.11 419.15 25019.89
Jun 2966.96 375.30 22052.93
Jul 3011.46 330.79 19041.47
Aug 3056.64 285.62 15984.83
Sep 3102.49 239.77 12882.35
Oct 3149.02 193.24 9733.32
Nov 3244.20 98.06 3292.86
Dec 3244.20 98.06 3292.86
</TABLE>
FOR 2004 Int=$ 4190.15 Prin=$ 35916.94 Bal=$ 3292.86
<PAGE>
For Calender Year 2005 (Year 6, 0 left)
Month Prin Int Balance
Jan 3292.86 49.39 0.00
- -------------------------------------------------------------------------------
Where the final summary is:
o Monthly Payment: $ 3342.26
o Total lnt:$ 68916.45(No pre-payment)
o Total Int:$ 68916.45 (As given)
o SAVINGS: $ 0.00 Total Interest Saved, 0.00 Years shorter loan
o 2000 Int $20536.22
o 2001 Int $ 19092.46
o End Bal Dec 2001: $ 94375.75
o Avg Int each Month: $ 1148.61
For more information call 1-800-732-1999 or email [email protected], Copyright (C)
1999 Express Financial Corp. All rights reserved.
EXHIBIT 10.39
PROFESSIONAL SERVICES AGREEMENT
This Agreement is made this 8TH day of October, 1999 between Natural
MicroSystems Corporation a Delaware corporation of 100 Crossing Boulevard,
Framingham, MA USA 01702 ("NMS") and IP Voice.com. Inc., a Nevada Corporation,
of 5050 N. l9th Avenue, Suite 416, Phoenix, Arizona 85015, (the "Customer").
(h) SCOPE
NMS agrees to perform the services (the "Services") set forth in the in the
attached Statement of Work (the "Statement of Work"'). subject to the terms and
conditions in this Agreement. Beginning on the Services Starr Date as defined in
the Statement of Work, NMS shall provide the Services during NMS' normal
business hours unless otherwise expressly stated in the Statement of Work. Each
party shall appoint a Project Manager who shall be the point of contact for day
to day work.
(i) TERM OF AGREEMENT
This Agreement shall become effective upon signature by both parties, and shall
continue in force until expiration on the Services End Date as defined in the
Statement of Work or termination in accordance with Section 8, whichever comes
sooner.
3. PRICES & PAYMENT
NMS shall perform the Services at the rates/prices and any payment schedule(s)
set forth in Statement of Work. Customer shall pay each invoice in full within
thirty (30) days from the date of such invoice. Customer will nor set-off any
amounts due under any invoice, Customer also agrees to reimburse NMS for all
travel, airfare, meals, living, incidental and out of pocket expenses incurred
in the performance of this Agreement unless otherwise expressly stated in the
Statement of Work.
['he rates are exclusive of any taxes or duties. Consequently, Customer shall
pay. or reimburse NMS for, the gross amount of any taxes however levied
(excluding taxes imposed exclusively on NMS' earnings generally), including, but
not limited to, taxes on the Services or present or future sales, use,
licensing, delivery, excise. value added or other taxes or duties on any
services or deliverables provided hereunder.
Any estimated costs, dates and numbers of hours in the Statement of Work are
non-binding estimates. Actual expenses may exceed any estimates. NMS makes no
representations that the actual amount of Services performed or the actual
number of hours charged will be equal to, or will approximate, any estimate.
A late fee will be assessed on past due amounts at one and one-half percent
(1.5%) or the maximum amount then permissible by law, whichever is greater.
Customer will also pay any reasonable collection and attorney's fees NMS incurs
in the collection of any unpaid balance, including any late fees.
4. OWNERSHIP
(a) Customer shall retain title to all of Customer's pre-existing patents,
copyrights, trade secrets and other intellectual property rights ("Customer's
Pre-existing Technology") whether or not such Customer Pre-existing Technology
is used to produce, or embodied in the Services or any work or data hereunder.
NMS shall retain title to all of NMS' pre-existing patents, copyrights, trade
<PAGE>
secrets and other intellectual property rights ("NMS Pre-existing Technology")
whether or not such NMS Pre-existing Technology is used to produce. or embodied
in the Services or any work or data hereunder.
(b) Provided that Customer has made all payments to NMS due under this
Agreement, the work product to be made and delivered under this Agreement by NMS
("Work Product") shall be the exclusive property of Customer, excluding NMS
Pre-existing technology.
(c) In no event shall this Agreement be construed as an assignment or transfer
of any NMS Pre- existing Technology or other rights Prom NMS to Customer.
5. NONSOLICITATION
Customer agrees that it shall riot during, and for one year after any expiration
or termination of this Agreement, directly or indirectly, solicit, hire or
other-wise retain as an employee, independent contractor or consultant (except
through NMS) any employee of NMS who was directly involved in the performance or
this Agreement.
6. WARRANTY & LIMITATION OF LIABILITY
NMS DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO,
THE IMPLIED WARRANTIES OF MERCHANTABILITY NONINFRINGEMENT AND FITNESS FOR A
PARTICULAR PURPOSE. IN. NO EVENT SHALL NMS BE LIABLE FOR ANY INCIDENTAL,
CONSEQUENTIAL, SPECIAL, PUNITIVE AND/OR INDIRECT DAMAGES, INCLUDING, BUT NOT
LIMITED TO, THOSE RESULTING FROM LOSS OF USE, DATA PROFIT, BUSINESS, PROSPECTIVE
PROFITS OR ANTICIPATED SALES, OR ON ACCOUNT OF EXPENDITURES, INVESTMENTS, LEASES
OR COMMITMENTS IN CONNECTION WITH THE 8US1NESS OR GOODWILL, WHETHER ARISING IN
AN ACTION OF CONTRACT, TORT OR OTHER LEGAL THEORY, EVEN IF ADVISED OF THE
POSSIBILITY OF SUCH. NMS' TOTAL LIABILITY AND CUSTOMER'S SOLE AND EXCLUSIVE
REMEDY FOR ANY CLAIM CONCERNING NMS PERFORMANCE, NMS' NONPERFORMANCE ANY WORK
PRODUCT AND/OR ANY SERVICES, OR FOR DAMAGES FOR ANY CAUSES WHATSOEVER AND
REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT' OR ANY OTHER LEGAL
THEORY, SHALL NOT EXCEED THE AMOUNT RECEIVED BY NMS IN RESPONSE TO THE RELATED
INVOICE.
7. PERSONNEL
Customer acknowledges that the NMS personnel providing Services may perform
similar services from time to time for third parties. Nothing In this Agreement
shall restrict NMS' providing similar services to other customers or NMS'
discretion to transfer or assign its personnel to any other project.
8. TERMINATION:
This Agreement, and any purchase order issued hereunder. may he terminated for
causes follows:
i) by either party if the other party fails to perform any material provisions
of this Agreement and fails to cure within thirty (30) days after receipt of
written notice; or
(ii) by either party immediately upon written notice if the other party becomes
insolvent or makes an assignment for the benefit of creditors, or a receiver or
similar office: is appointed to take charge of all or part of such party's
assets; or
<PAGE>
(iii) by NMS immediately upon written notice if Customer enters into an
Agreement with, or is acquired by or merged into, any other party which in NMS'
sole opinion is a competitor of NMS or is adverse to NMS' business interest.
9. NOTICE
Any notice given under this Agreement shall be written or telegraphic. Written
notice shall be sent by registered or certified mail, postage prepaid, return
receipt requested. Any telegraphic notice must be followed within three (3) days
by written notice. All notices shall be effective when first received at the
following addresses:
Natural MicroSystems Corporation IPVoice.com. Inc.
100 Crossing Boulevard 5050 North 1 9th Avenue
Framingham, MA 01702 Suite4l6
Attn: CFO Phoenix, AZ 85015
Attn: Bud Bowman
10. CONFIDENTIAL INFORMATION
Each party agrees to treat a!] information received from the other party which
is labeled or identified as proprietary or confidential, as confidential and
trade secret proprietary information of the disclosing party ("Confidential
information"). The receiving party shall not sell, copy. transfer, publish,
disclose, display, or otherwise make available any Confidential Information to
any person or third party (including any of the receiving party's subsidiaries),
except those with a need to know such Confidential information in order to
accomplish the purposes of this Agreement. The receiving party shall secure and
protect the Confidential information in a manner consistent with its treatment
of its own confidential information of like significance, but no less than
reasonable. The receiving party shall take appropriate action by instruction
and/or agreement with its employees and agents who are permitted access to such
Confidential Information, to satisfy its obligations hereunder. Confidential
information does riot include information that: (i) is or becomes part of the
public domain through no fault of the receiving party. (ii) is rightfully known
to the receiving party without obligations of confidentiality or restrictions on
use prior to its first receipt from the disclosing party, or (iii) is, as
evidenced by written records, independently developed by the receiving party, or
(iv) is rightfully received from a third party (without obligations of
confidentiality or restrictions on use) who is not subject to any non-disclosure
obligation.
Neither this Agreement nor receipt of Confidential Information hereunder shall
limit either party's independent development and marketing of products or
systems. nor will this Agreement or receipt of Confidential Information
hereunder prevent cither party from undertaking similar efforts or discussions
with third parties, including competitors of each party. Nothing in this
Agreement shall restrict either party's discretion to transfer or assign its
personnel or prevent employees who had access to Confidential information from
using that information mentally retained as part of their general skill,
knowledge, talent and expertise.
11. INDEPENDENT CONTRACTOR
In furnishing services pursuant to the Agreement. NMS will be acting as an
Independent Contractor. Neither party is an agent, representative, employee,
partner or joint venturer of the other party, and neither party is authorized to
act on behalf of the other party. As such, neither NMS nor its employees will be
an employee of Customer, and neither NMS nor its employees will by reason of the
Agreement or the Services hereunder be entitled to participate in, or to receive
any benefit or right under any of Customer's employee benefit or welfare plans.
<PAGE>
12. GENERAL
A. This Agreement constitutes and fully expresses the final, complete, exclusive
and entire Agreement between the parties with respect to the subject matter
hereof. This Agreement supersedes all prior agreements and understandings
between the parties and may not be modified, waived or extended unless mutually
agreed upon in writing by both parties.
B. In the event any provision of this Agreement is found to be legally
unenforceable, such provision shall be stricken to the extent unenforceable and
the remainder of this Agreement. shall remain in full force and effect.
C. This Agreement shall be construed, interpreted and applied in accordance with
the Laws of the Commonwealth of Massachusetts, excluding its choice of laws
principles. Customer agrees to the exclusive jurisdiction of a competent court
in the Commonwealth of Massachusetts.
D. This Agreement may only be modified or amended by a writing signed by the
parties.
E. Neither party may assign this Agreement without the prior written consent of
the other party, and any attempt by either party to assign this Agreement
without such consent shalt be void.
F. The obligations under the following Sections shall survive any expiration or
termination of this Agreement: 4, 5, 6, 10 and 12(c).
IN WITNESS WHEREOF, the authorized representatives behalf of the parties hereto
have executed this Agreement on behalf of the parties.
Natural MicroSystems Corporation IPVoice.com, Inc.
By:/s/ Tim Greer By: /s/ Barbara S. Will
- -------------------------- ------------------------------
Name: Tim Greer Name: Barbara S. Will
Title: VP American Sales Title: President and COO
Date: Oct 22, 1999 Date: October 8, 1999
<PAGE>
STATEMENT OF WORK
to
PROFESSIONAL SERVICES AGREEMENT
Dated: 8th day of October 1999
Customer: IPVOICE.COM. Inc.
Services Start Date: October 15, 1999
DESCRIPTION OF SERVICES
NMS shall perform the following Services:
IPVoice.com desires the ability to add multiple AGT1/RT2 and / or multiple
AGEl/RT2 VOIP platforms to us current single AGTI/RT2 and single AGE l/RT2 VOIP
platforms. IPVoice.com has requested that Natural microsystems (NMS) extend
their present gateway population from 1 up to 4 AGT1/RT2 or AGE l/RT2 per TX3000
Data Engine utilizing appropriate NMS Software Development Tools.
Features and Requirements:
- Communication will be established between two gateways configured as
IPVoice.com gateways.
- Each configuration will comprise one TX3000 Data Engine and up to four
AGT1/RT2 Fusion cards.
- G.723.1 will be the realtime vocoder.
- Fusion 2.2 is the current Revision being used by IPVoice.com.
- NMS will require adequate software representing IPVoice.com.'s
proprietary software,
- NMS will require the operating CI ACCESS/FUSION program ~a it. exists
today.
- Direct phone communication between the respective Project Managers
will be required.
Limitations
This development is planned to fully populate ISA hackplane systems per the
"Description Of Service" above using Standard NMS Software Tools and IPVoice.com
proprietary applications.
The IPVoice.com. gateways will be fully tested such that configurations
containing at least 1 TX3000 will be scalable and will be configured with from 1
to 4 AGT1/RT2. AGE/RT2 components. The Current IPVoice.com. application which
runs on the single component platform will run on the scalable platforms.
NMS will provide a 30 day software warranty for the work performed. This
warranty will begin upon completion and acceptance of the proposed work
contained herein.
<PAGE>
2. PROJECT MANAGERS
NMS Project Manager: Gerard Boyer
Customer Project Manager: Anthony Welch
3. TERM
Services Start Date:
On or about October 11th, 1999
Services End Date: October 29, 1999
4. RATES/PRICES/PAYMENT SCHEDULE (to be included below by NMS):
$l6O/hour. The estimate is 117--120 hours for completion
Customer will reimburse NMS for all travel, airfare, meals, living,
incidental and out of pocket expenses unless otherwise expressly
stated above.
Any estimated costs, dates or numbers of hours are non-binding.
Actual expenses may exceed any estimates. NMS makes no
representations that the actual amount of Services performed or the
actual number of hours charged will be equal to, or will
approximate, any estimate presented to Customer.
IN WITNESS WHEREOF, the authorized representatives of the panics hereto have
executed this Statement of Work on behalf of the parties,
Natural Microsystems Corporation (Customer)
By: /s/ Tim Geer By:/s/ Barbara S. Will
- ------------------------------- --------------------------------
Name: Tim Geer Name: Barbara s. Will
Title:VP Sales America Title: President and COO
Date:Oct 22, 1999 Date: October 8, 1999
<PAGE>
IPVoice..com, Inc. Purchase Order No. 99-01202
5050 N. 19thAve.~ Ste. 417/416
Phoenix, AZ 85015
602-3354231 fax 602-335-1577
- ----------------------------------------------------------PURCHASE ORDER--------
Vendor: Ship To:
Name Natural MicroSystems Name: IPVC
Address 100 Crossing Blvd. Address
City Framingham St MA ZIP 01702 City St ZIP
Phone Phone
Qty Units Description Unit Price Total
1 Professional Services Agreement $ 19,200 $ 19,200.00
Dated October 8, 1999
Sub Total $ 19,200.00
Shipping & Handling
Taxes/State
Total $ 19,200.00
Payment Details
_Check
_Cash
_Account No.:
_CreditCard
Name:
CC#
Exp Date:
Shipping Date:
Approval Date 12/2/99
Order No 10/8/99
Sales Rep
Ship Via
Notes/Remarks
EXHIBIT 10.40
20TH &CAMPBELL APARTMENT HOMES
APARTMENT RENTAL AGREEMENT
Associated Estates Realty' Corporation as manager and Agent (hereinafter called
"Managemex7U' for the Owner), rents --Apartment No.6-149 20th & Campbell
Apartments located at 2025 E Campbell Ave Phoenix AZ 85016, to be used solely
for the purpose of a personal residence by:
I P Voice, com
Tenant - Bud Bowman
For a term of 12 months beginning November 8, 1999 and ending October 31, 2000
for this Agreement will be month - to -month commencing on November 1. 2000 for
an unfurnished apartment and Residents will pay rent, tax, charges, and deposits
set forth below. Occupancy is limited to those persons named above.
MONTHLY RENTAL CHARGES: OTHER CHARGES & DEPOSITS:
- ---------------------------------------- -----------------------------------
Monthly Rent: $ 855.00 Security Deposit: $ 00.00
Pet Rent: $ 00.00 Pet Deposit: $ 00.00
Other: $ 00.00 Preparation Fee: $ 00.00
--------------
Non Refundable Pet Fees $ 00.00
(Concession) ($ 00.00)
Subtotal: $ 855.00
City Sales Tax: $ 11.12 Utilities
(subject to change) Natural Gas paid by owner
Electric Paid by Resident
MONTHLY TOTAL: $ 866.12 Water Paid by Owner
A. Other terms and conditions are: $40.00 late fee assessed on the 4th, and
$20.00 fee for service of a 5 day notice. Any and all discounts or concessions
must be paid back to Management/Owner if lease is broken prior to expiration
date. Concession: 50% off($427,50) December 1999 rent for signing a 12 month
lease.
B. The rent (including applicable tax) shall be payable in advance on or before
the 1st day of each month at the onsite managers office, which is payable with a
personal check, cashiers check, or money order in the exact amount due. No
second party checks will be accepted. Resident will pay as additional rent no
later than the next rental payment date: $10.00 a day after the 3rd that any
portion of the rent is delinquent; $20.00 for each NSF fund check returned by
the Residents bank and thereafter all future rent charges shall be paid only in
the form of a cashiers check or money order; charges for clogged drains or
damage done due to resident activity' or negligence will be charged case by
case, based on the time and cost to repair the premises, with a $50.00 minimum
base fee. Residents will be responsible for the conduct of family and guests on
the property.
C. Tax adjustment during lease term: Management shall have the right, upon 30
day written notice, to increase the total rent reasonably related to the cost of
an increase in city sales tax.
D. PARKING POLICIES: Resident that only those vehicles identified below may park
on the property without separate written consent from the Management:
Make Model and Year: Color Lisc#
- --------------------------------------------------------------------------------
1.
2.
<PAGE>
Management may assign parking spaces or areas for residents and guests.
Management may also designate (1) parking areas; (2) whether trailers, boats, or
campers may park and where inoperable, abandoned, or unauthorized vehicles will
be towed at the vehicle owners expense after a 24 hour notice is posted on the
vehicle. The 24 hour notice does not apply to vehicles parked in another
residents assigned parking space, parked in a marked tow-away zone, or parked to
impede traffic or trash collection easements. Vehicles parked in this manner
will be towed away immediately at the vehicle owners expense. If Management pays
the vehicle owners towing expense, costs incurred will be deemed as additional
rent owed and be immediately due and payable. Guests and Residents must only be
parked in parking lots, and never on sidewalks, in landscape areas or apartments
(including patios) and must not damage asphalt etc.. Vehicles leaking oil or
other fluids will be repaired in a timely manner, or be subject to towing.
Residents will not use the parking lot for non-emergency repairs. Vehicles
parked on the property will be parked "head-in" only and show current
registration. Management may elect to charge $50.00 as additional rent for
repeat offenders.
E. ACCESS: Except in cases of emergency or if it is impractical to give notice,
Management not enter Residents apartment without prior written notice. Resident
further agrees that notification to Management of a service or maintenance
request grants Management authority to enter the apartment at all reasonable
times for the purpose of that request, and Management must have advanced written
permission to open Residents apartment for others (i.e. delivery personnel,
service personnel, friends, etc.) Resident is aware that under these
circumstances Management is not responsible for lost or stolen articles, damage
or doors left unlocked.
F. FAIR hOUSING ACCOMMODATIONS: This community is dedicated to honoring Federal
and Arizona Far Housing laws. Accommodations v~ill be made/allowed as reasonably
necessary to the policies and regulations of the community in order to enable
residents with disabilities to utilize the premises. The Community reserves the
right to require reasonable medical evidence of the disability, and that the
requested accommodation is necessary. The resident may be required to restore
the premises to the prior condition if failure to do so would interfere with the
Owner's, or next tenant's use and enjoyment of the premises.
G. RESIDENT POLICIES: (I) Resident shall no decorate or alter the apartment,
patio or balcony area, change or add door locks, have a waterbed or sublet the
apartment, without written permission of the management (2) Resident further
agrees to comply with city or state statutes and ordinances which are applicable
to the premises. (3) Resident shall show due consideration for neighbors and not
interfere with other residents quiet enjoyment, and Management will be the sole
judge of acceptable conduct. (4) Resident has inspected the premises and finds
them to be in clean, rentable, undamaged condition except which may be noted on
move in inventory sheet. Resident agrees to exercise reasonable care in the use
of the premises and maintain and redeliver the same in a clean, safe and
undamaged condition. (5) Resident is responsible for the conduct of all
occupants, family and guests.
H. ABANDONMENT: Abandonment means either (1) The Residents absence from the
premises for at least 7 (seven) consecutive days, rent being at least 10 (ten)
days past due; and the lack of reasonable evidence that the resident is
occupying the premises; or (2) Residents absence from the premises for at least
(5) five days rent being at least five (5) days past due, and the absence of the
Residents personal property from the dwelling unit. Such abandonment shall not
constitute a "surrender" without the consent of Management and in the event of
abandonment, Management shall be entitled to all remedies at law or in equity,
which provides that if personal property is abandoned by the Resident and
determined to by Management to be of less value than the cost of moving,
storing, and conducting a sale of such property, Management may destroy or
otherwise dispose of any or all of the abandoned property.
I. COMMUNITY POLICIES: The community policies are for the mutual benefit of all
residents and are deemed part hereof of this Rental Agreement, and violations or
breeches of any community policy shall constitute a default under the Rental
Agreement. Notice of modifications to community policies will be given to
residents at least 30 days prior to their effective date.
J. OPTION TO RENEW/INCREASE: At expiration of this lease, this lease will
automatically renew on a month- to-month basis under the same terms and
conditions unless resident gives Management a written 30 day notice to vacate or
Management, at its sole discretion, chooses not to renew the lease and in such
cases, resident agrees to vacate at the expiration date of the lease. The rent
may be increased upon the expiration of the lease with 30 day prior written
notice of such an intent being provided to the Resident. A specific lease term
of no less than one month and no greater than one year may be required for
continued occupancy.
K. INDEMNIFICATION Management shall not be liable for any damage or injury to
the resident(s) or any other person, or to any property, occurring on the
premises, or any part thereof, or in the common areas thereof, unless such
damage is the result of negligence or unlawful acts of Management, its agents or
employees. Management is only liable for those claims for damages and injuries
for which it is legally responsible. Resident shall be responsible for obtaining
fire, extended coverage, and liability coverage with respect to the contents of
the apartment and with respect to any motor vehicles on the premises. Resident
understands that Management's insurance does not cover residents belongings from
<PAGE>
losses not caused by Management's negligence and Management encourages Resident
to obtain an all-risk policy in addition to marking all valuables for
"'operation identification".
L. WAIVER: Failure of Management to insist upon strict compliance with the terms
of this rental agreement shall not constitute a waiver of Management's rights to
act on any violation.
M. ATTORNEYS FEES: In the event of legal action to enforce compliance with this
Rental Agreement, the prevailing party may be awarded court costs and reasonable
attorneys fees.
N. SEVER4BWITY If any provision of this Rental Agreement is invalid under
applicable law, such provision shall be ineffective to the extent of such
invalidity' only, without invalidating he remainder of this document.
0. REMEDIES CUMULATIVE: All remedies under this Rental Agreement or by law or
equity shall be cumulative
EXHIBIT 10.41
Data Speak Systems, Inc.
SALES AGREEMENT
This Agreement for the Sale of Goods and Services ("Agreement') made arid
effective this 10th day of December, 1999 by end between DataSpeak Systems,
Inc., ('Seller') and IPVoice (Buyer).
Seller desires to sell to Buyer, arid Buyer desires to purchase from Seller,
certain tangible products end services.
NOW, THEREFORE, in consideration of the mutual promises herein contained, the
parties hereto agree as follows:
1. SALE.
Seller agrees to sell, transfer arid convey to Buyer, arid Buyer agrees to
purchase the products and services ('Goods') included In Schedule A of this
Agreement, and made a part hereof.
2. PRICE.
Buyer shall pay Seller for the Goods the sum of $11,915. Payment for equipment
shall be made within 5 days of first installation according to the terms of
Crown Dank Leasing of 794t1 East Acoma Drive suite 209 Scottsdale, AZ 85260 or
their appointed agents/operators. This agreement is subject to an approval
letter from the leasing agent.
In the event that the purchase price is not timely paid, in addition to its
other remedies, Seller may impose, and Buyer shall pay, a late payment charge
equal to one percent (1%) of the overdue amount each month.
3. SCOPE OF WORK
The scope of work to be performed under this Agreement is specified In Schedule
A.
4. SOFTWARE LICENSE
Goods may include proprietary software that are listed in Schedule A. In the
event that proprietary software is included in Schedule A, Schedule B of the
Agreement, end made a part hereof, shall apply.
5. LIMITED WARRANTY.
Products sold hereunder are warranted to be free from defects in material and
workmanship for a period of twelve (12) months from the date of delivery and
acceptance. If the Products do not conform to this Limited Warranty during the
warranty period (as herein above specified). Buyer shall notify Seller in
writing of the claimed defects and demonstrate to Seller's satisfaction that
said defects are covered by this Limited Warranty. If the detects are properly
reported to Seller within the warranty period, and the defects are of such type
and nature as to be covered by this warranty~ Seller shall~ at its own expense.
repair or replace defective Products. shipping arid Installation of the repaired
or replacement Products shall be at Seller's expense.
THE FOREGOING IS IN LIEU OF ALL OTHER WARRANTIES EXPRESS OR IMPLIED, INCL1JOING
BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. Seller does not warrant against damages or defects arising
out of improper or abnormal use of handling of the Products; against defects or
damages arising from Improper installation (where Installation is by persons
other than Seller), against defects in products or components not supplied by
Seller, or against damages resulting from such non-Seller supplied products or
components. This warranty also does not apply to Products upon which repairs
have been effected or attempted by persons other than pursuant to written
authorization by Seller.
The sole and exclusive obligation of Seller shall be to repair or replace the
defective Products in the manner and for the period provided above. Seller shall
not have any other obligation with respect to the Products or any part thereof,
whether based on contract, tort, strict liability or otherwise. Under no
circumstances, whether based on this Limited Warranty or otherwise, shall
Manufacturer be liable for incidental, special, or consequential damages.
Seller's employees or representatives' ORAL OR OTHER WRITTEN STATEMENTS DO NOT
CONSTITUTE WARRANTIES, shall not be relied upon by Buyer arid are not a part of
the contract for sale or this limited warranty.
<PAGE>
This Limited Warranty states the entire obligation of Seller with respect to the
Products. If any part of this Limited Warranty is determined to be void or
illegal, the remainder shall remain in full force and effect.
6. TRANSFER OF TITLE.
Title to and ownership of the goods shall not pass from Seller to Buyer until
Buyer has paid in purchase price to Seller.
7. LIMITATION OF LIABILITY.
In no event shall Seller be liable for any special, indirect, incidental or
consequential damages arising out of or connected with this Agreement or the
Goods, regardless of whether a claim is based on contract, tort. Strict
liability or otherwise, nor shall 8uyer's damages exceed the amount of the
purchase price of the Goods.
8. TAXES.
Buyer shall pay reimburse Seller as appropriate for any sales, use, excise or
other tax imposed or levied with respect to the payment of the purchase price
for the Goods or the conveyance of title in the Goods to Buyer. In no event
shall Buyer be responsible for any tax imposed upon Seller based upon Seller's
income or for the privilege of doing business.
9. NOTICES.
Any notice required by this Agreement or given in connection with it, shall be
in writing and shall be given to the appropriate party by personal delivery or
by certified mail, postage prepaid, or recognized overnight delivery services.
If to Buyer:
IPVoice
5050 North 19th Ave. #416
Phoenix, AZ 85015
Bud Bowman
602-335-1231
If to Seller:
DateSpeak Systems, Inc.
7360 East Acoma, #3
Scottsdale, AZ 85260
10. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with the laws of
the state of Arizona.
11. FINAL AGREEMENT.
This Agreement terminates and supersedes all prior understandings or agreements
on the subject matter hereof. This Agreement may be modified only by a further
writing that Is duly executed by both parties.
12. SEVERABILITY.
If any term of this Agreement is held by a court of competent jurisdiction to be
Invalid or unenforceable, then this Agreement, including all of the remaining
terms, will remain in full force and effect as If such invalid or unenforceable
term had never been Included.
13. HEADINGS.
Headings used in this Agreement are provided for convenience only and shall not
be used to construe meaning or intent.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
Buyer: IPVoice
Its: /s/ Barbara S. Will
--------------------------------
Seller: /s/ Kimm Welty
-------------------------------
Kimm Welty
Its: DataSpeak Systems. inc.
<PAGE>
Schedule A
Equipment List and Scope of Work
EQUIPMENT: Vodavi Infinite DVX Plus II Telephone System
CONFIGURATION: Capacity 108 Ports
Carded 12 Lines and 24 Stations
Working 8 Lines and 12 Stations
Qty Description Part #
1 Vodavi DVX Plus II KSU Basic Cabinet IN 9000-00
2 Vodavi DVX Plus II 6 Line CO Boards IN 8031-00
1 Vodavi DVX Plus II 24 Station Board IN 8032-40
1 Vodavi DVX Power Supply IN 8071-20
11 Vodavi 24 Button Executive Display Speaker Phone IN 9013-71
1 Vodavi 8 Button Speaker Phone IN 9015-71
1 Vodavi DSS Operator's Console IN 9010-71
1 Vodavi TaIkPath 4 port Voice Mail System IN 303-04
1 Battery Back-up Unit VC6I 101
1 Musicon Hold Unit -
12 Cabling and Jacks-Phone -
1 Cabling and Jacks-Fax -
1 One Free Programming Change within 30 Days -
1 Installation and Programming -
1 12 Month Labor and Equipment Warranty -
1 On Site Training and Users Guides -
System Investment: $ 11,915.00
The price is subject to Sales Tax
Install Address: 5O5O North l9th Ave.#416
Phoenix. Az 85015
Other Services:
/s/ Barbara S Will 12/10/99
- --------------------------- --------------
Customer signature on Schedule A
<PAGE>
Telephone System Proposal
LOCATION: IPVoice
5050 North 19th Ave #416
Phoenix, AZ
CONTACT: Bud
602.335.1231
EQUIPMENT: Vodavi Infinite DVX Plus II Telephone System
CONFIGURATION: Capacity 108 Ports
Carded 12 Lines and 24 Stations
Working 8 Lines and 12 Stations
Qty Description Part #
1 Vodavi DVX Plus II KSU Basic Cabinet IN 9000-00
2 Vodavi DVX Plus II 6 Line CO Boards IN 8031-00
1 Vodavi DVX Plus II 24 Station Board IN 8032-40
1 Vodavi DVX Power Supply IN 8071-20
11 Vodavi 24 Button Executive Display Speaker Phone IN 9013-71
1 Vodavi 8 Button Speaker Phone IN 9015-71
1 Vodavi DSS Operator's Console IN 9010-71
1 Vodavi TaIkPath 4 port Voice Mail System IN 303-04
1 Battery Back-up Unit VC6I 101
1 Musicon Hold Unit -
12 Cabling and Jacks-Phone -
1 Cabling and Jacks-Fax -
1 One Free Programming Change within 30 Days -
1 Installation and Programming -
1 12 Month Labor and Equipment Warranty -
1 On Site Training and Users Guides -
System Investment: $ 11,915.00
The price is subject to Sales Tax
<PAGE>
EQUIPMENT LEASE AGREEMENT
Lessee Supplier
- ----------------- ---------------------
Name IPVoice.com, Inc. Name Savings Communications, Inc.
Address 5050 N. 19th Ave. #416/417 Address 7360 E. Acoma, Suite 3
City Phoenix County Maricopa City Scottsdale County
State AZ Zip 85015 State Zip 85260
Phone (602) 335--1231 Phone (480) 443-8191
Quantity, Full Description of Equipment including Make, Model, and Serial Number
Price
Telephone Equipment more fully described in Schedule "A" attached hereto and
made a part hereof. $ 13,000.00
Term (In Months) 48
Frequency of Payments [x] Monthly [ ] Quarterly [ ] Annually [ ] Other
Amount of Rent Payment (plus applicable sales or use tax) $374.52
Initial Payment (check for this amount must accompany lease) $ 877.22
[x] Doc. Fee $75.00 [x] First $401.11 [x] Last $ 401.11
[ ] Deposit $ [ ] Other $
Sales Tax (Only if included in Total Cost) $
Design, Freight and Installation $ 13,000.00
Total Cost
Additional Terms:
Expiration %_____
Casualty
Value
- ------------------
TERMS AND CONDITIONS
Lessor will lease to Lessee and Lessee will lease from Lessor the above
described personal property (collectively the "Equipment' and individually an
'Item") under the terms of this equipment lease agreement ("lease").
1. LESSEE'S OBLIGATIONS. Lessee's obligations under this lease as to an Item
(other than the obligation to pay rent which commences as set forth in paragraph
2) commence at such time as Lessor has any interest in or obligation as to the
Item and end when the Item is returned to Lessor in accordance with paragraph
12, except as otherwise provided in this tease.
2. PAYMENTS. The rent shown above is based on the Total Cost" which is an
estimate of the cost to Lessor of the Equipment. Actual rent will be calculated
in the proportion that the actual cost paid by Lessor for the Equipment bears to
the Total Cost. Sales and use taxes applicable to the rent will be added to the
rent. As indicated above, the projected initial rent payment is to be furnished
on lease execution. If the contemplated leasing transaction is not consummated,
the initial rent payment may be retained by Lessor as partial compensation for
Lessor's costs and expenses incurred in preparation for the transaction. If the
amount received is less or greater than the rent payment as finally determined,
the deficiency or excess will be payable with or credited to the second rent
payment. The second rent payment will be due 30 days after Lessee's execution of
the Certificate-of Acceptance for the Equipment or on such later date as Lessor
chooses. Subsequent rent will be due on the same day of each month, or other
period set forth above, thereafter until paid, whether or not an invoice is
rendered or received. Other amounts due Lessor from Lessee hereunder are payable
upon the earlier of Lessee's knowledge thereof or Lessee's receipt of an invoice
therefore. Lessee will pay Lessor amounts due under this lease at Lessor's
address shown below or to such other person and/or at such other place as Lessor
may notify Lessee. Amounts to be applied to the last rent payment or payments
will be applied to the final and preceding rent payment or payments-until
exhausted provided there has been no default under the lease. In the event of a
default, payments made under the tease may be applied to Lessee's obligations to
Lessor in any order Lessor chooses.
3. LESSOR TERM1NATION. If the Certificate of Acceptance for the Equipment has
not previously been - executed and delivered to Lessor. Lessor may terminate its
obligations hereunder and tender to Lessee all obligations and duties with
respect to the Equipment by giving Lessee notice of such termination (a)
subsequent to sixty (60) days from the date of this lease, (b) upon a material
adverse change in Lessee's financial condition or probable ability to perform
its obligations under this lease, (c) if the actual cost of the Equipment would
exceed the Total Cost or (d) if the lease is in default.
<PAGE>
4. DELIVER; ACCEPTANCE. Lessee will either (a) execute and deliver the
Certificate of Acceptance for-the Equipment thereby accepting the Equipment for
all purposes of this lease or (b) give Lessor notice specifying any proper
objection to any Item within fourteen (14)-days of completion of the delivery of
the Equipment. If Lessee has not furnished Lessor with the Certificate of
Acceptance within this period, Lessee will, upon Lessor's request, assume all of
Lessor's rights and obligations as purchaser of the Equipment, and Lessor's
obligations hereunder and related hereto will terminate. Lessee further
acknowledges that upon direction by Lessor Lessee will pay directly to the
appropriate parties the excess of design, freight and installation costs related
to an Item over fifteen percent (15%) of its actual cost and will pay directly
to the appropriate party any invoice applicable to an Item which may be
furnished Lessor subsequent to the acceptance of the Equipment. - -
5. NET LEASE; NO OFFSET. THIS IS A NET LEASE TERMINABLE ONLY AS EXPRESSLY
PROVIDED HEREIN. LESSEE MAY NOT TERMINATE ITS OBLIGATION HEREUNDER FOR ANY
REASON WHATSOEVER INCLUD1NG, WITHOUT LIMITATION, THE FAILURE OF THE EQUIPMENT TO
OPERATE PROPERLY. LESSEE'S OBLIGATION TO MAKE ALL PAYMENTS UNDER THIS LEASE IS
ABSOLUTE AND UNCONDITIONAL AND WILL NOT BE SUBJECT TO ANY ABATEMENT,
COUNTERCLAIM, RECOUPMENT OFFSET OR DEFENSE LESSEE'S OBLIGATIONS UNDER THIS
LEASE, INCLUDING, WITHOUT LIMITATION, THOSE SET FORTH IN PARAGRAPH 17, SURVIVE
THE EXPIRATION OR EARLIER TERMINATION OF THE LEASE.
6. NO AGENCY. LESSEE ACKNOWLEDGES THAT NEITHER THE SUPPLIER NOR ANY FINANCIAL
INTERMEDIARY NOR ANY AGENT OF EITHER IS AN AGENT OF LESSOR AND FURTHER THAT NONE
OF SUCH PARTIES IS AUTHORIZED TO WAIVE OR ALTER ANY TERM OR CONDITION OF THIS
LEASE. NO REPRESENTATION AS TO THIS EQUIPMENT OR ANY OTHER MATTER BY ANY SUCH
PARTY IS BINDING UPON LESSOR OR WILL EFFECT LESSEES DUTY TO PAY THE RENT AND
PERFORM THE OTHER OBLIGATIONS UNDER THIS LEASE.
7. DISCLAIMER OF WARRANTIES. LESSEE ACKNOWLEDGES THAT THE EQUIPMENT AND THE
ABOVE SUPPLIER HAVE BEEN SELECTED BY LESSEE, THAT LESSEE' LEASES THE EQUIPMENT
"AS IS" AND ACCORDINGLY THAT LESSOR MAKES NO EXPRESS WARRANTY AND SPECIFICALLY
DISCLAIMS ANY IMPLIED WARRANTY AS TI THE EQUIPMENT INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
IF AN ITEM DOES NOT FUNCTION PROPERLY, LESSEE WILL MAKE ANY RESULTANT CLAIMS
AGAINST THE SUPPLIER OR MANUFACTURER PROVIDED NO EVENT OF DEFAULT HAS OCCURRED
AND IS CONTINUING, LESSOR ASSIGNS TO LESSEE DURING THE TERM HEREOF ANY THIRD
PARTY WARRANTY APPLICABLE TO THE EQUIPMENT. ANY PROCEEDS THEREOF WILL BE APPLIED
BY LESSEE TO PLACE THE EQUIPMENT IN WARRANTY CONDITION. CONSISTENT WITH LESSEE'S
ASSUMPTION OF ALL RISKS RESPECTING THE EQUIPMENT, LESSEE HEREBY WAIVES ANY
RIGHTS, DEFENSES AND CLAIMS AGAINST LESSOR RELATED TO THE EQUIPMENT ARISING
UNDER DIVISION 10 OF THE CALIFORNIA UNIFORM COMMERCIAL CODE OR SIMILAR
APPLICABLE LAW TO THE EXTENT PERMITTED BY LAW.
LESSEE'S INITIALS HERE /S/BW
SEE REVERSE SIDE FOR ADDITIONAL TERMS AND CONDITIONS WHICH ARE PART OF THIS
LEASE
By execution hereof Lessee requests Lessor to order the Equipment form the
Supplier and lease the Equipment to Lessee hereunder. Execution hereof by a duly
authorized officer of lessor at lessor's address shown above indicates lessor's
acceptance of such offer. Lessee authorizes Lessor to insert identification data
as to the Equipment above. Lessee warrants that Lessee will use the Equipment
solely for commercial or business purposes. LESSEE UNDERSTANDS THAT THIS LEASE
IS A "FINANCIAL LEASE" AND THUS UNDER LAW LESSEE WILL HAVE THE RIGHTS LESSOR
RECEIVES UNDER THE CONTRACT OR CONTRACTS EVIDENCING LESSOR'S PURCHASES OF THE
EQUIPMENT, INCLUDING ANY MANUFACTURER OR OTHER THIRD PARTY WARRANTIES. LESSOR
ADVISES LESSEE TO CONTACT THE SUPPLIER FOR A DESCRIPTION OF THOSE RIGHTS,
INCLUDING ANY RELATED LIMITATIONS OR DISCLAIMERS.
Lessor and Lessee have executed this lease as of 12/29/99
BJ LEASING COMPANY IPVoice.com, Inc.
(Lessor) ---------------------------
By: /s/ Cathy Dirth Printed legal name of Lessee Above
- -------------------------
By: Barbara S. Will
--------------------
Barbara Will, President
<PAGE>
SCHEDULE A
Lease #: 991230
LESSOR: BJ Leasing Company
2355 Griffin Avenue
Suite G
Enumclaw, WA 98022
VENDOR: Savings Communications, Inc.
7360 E. Acoma
Suite 3
Scottsdale, AZ, 85260
EQUIPMENT DESCRIPTION:
One(1) Vodavi DVX Plus II Phone System including:
Eleven (11) 24 Button Executive Display
Phones, sin's SBL9297 17, SBL929720,
SBL929772, SBL929738, SBL9303 11, SBL930252,
SBL930020, SBL930262, SBL930033, SBL9303 12,
SBL929725.
One(1) Basic Key Service Unit, s/n SBAO 10025
One(1) Power Supply, s/n SBA010256
One(1) Digital Interface Service Board-- 24, s/n SBA050132
Two(2) Loop Start CO Card-- 6, s/n's SBAO5O1S6 & SBA050736
One(1) Master Processing Board, sin SBAO 50226
One(1) Miscellaneous Service Board, sin SBA050167
One(1) 8 Button Basic Speaker Phone, sin SBK9 18484
One(1) DSS Operator Console, s/n SBK912792
One(1) TalkPath Voice Mail-- 4 Port, s/n POY9I-10544
One(1) Modem Unit, s/n SBG95 1530
One(1) Music On Hold Unit
One(1) Battery Backup Supply
13CAT 3Cable Runs
I4CAT SCable Runs
24 Port Patch Panel
LESSEE: IPVOICE.COM, INC.
By: /s/ Barbara Will Title: President
- ---------------------
Barbara Will
DATE: 12/29/99
<PAGE>
BJ Leasing Company
2355 Griffin Avenue
Suite G
Enumclaw, WA 98022
CERTIFICATE OF ACCEPTANCE
INSTRUCTIONS
THE EQUIPMENT LISTED HAS BEEN DELIVERED AND IS ACCEPTABLE FOR ALL PURPOSES OF
THE LEASE REFERENCED ABOVE.
2. DO NOT SIGN UNLESS ALL ITEMS ARE ACCEPTABLE.
3. IF ANY ITEMS ARE UNACCEPTABLE, PROMPTLY NOTIFY LESSOR AT SUCH ADDRESS OF THE
SPECIFICS.
Quantity, Full Description of Equipment including Make, Model, and Serial Number
Price
Telephone Equipment more fully described in Schedule "A" attached hereto and
made a part hereof. $ 13,000.00
Term (In Months) 48
Frequency of Payments [x] Monthly [ ] Quarterly [ ] Annually [ ] Other
Amount of Rent Payment (plus applicable sales or use tax) $374.52
Initial Payment (check for this amount must accompany lease) $ 877.22
[x] Doc. Fee $75.00 [x] First $401.11 [x] Last $ 401.11
[ ] Deposit $ [ ] Other $
Sales Tax (Only if included in Total Cost) $
Design, Freight and Installation $ 13,000.00
Total Cost
Additional Terms:
Expiration %_____
Casualty
Value
- ------------------
Lessee acknowledges receipt of all the above equipment and accepts this
equipment for all purposes of the Equipment Lease Agreement referenced above.
Lessee further acknowledges that the rent for the equipment will be based on the
actual cost to Lessor.
LESSEE UNDERSTANDS THAT UPON LESSOR'S RECEIPT OF THIS CERTIFICATE OF ACCEPTANCE
AND IN RELIANCE THEREON LESSOR WILL PAY FOR THE EQUIPMENT AND FURTHER THAT
LESSEE'S ACCEPTANCE OF THE EQUIPMENT WILL COMMENCE LESSEE'S NONTERMINABLE RENTAL
OBLIGATION UNDER THE LEASE AS TO THE EQUIPMENT. LESSEE REAFFIRMS THAT LESSOR HAS
MADE NO EXPRESS WARRANTIES AND HAS D1SCLAtMED ANY 1MPLIED WARRANTIES AS TO THE
EQUIPMENT AND THAT LESSEE'S OBLIGATION TO PAY THE RENT AND OTHER AMOUNTS DUE
UNDER THE LEASE WILL NOT BE AFFECTED BY ANY PROBLEMS ASSOCIATED WITH THE
EQUIPMENT OR ANY SIMILAR OR DISSIMILAR OCCURRENCE AS MORE FULLY SET FORTH IN THE
LEASE.
IPVOICE.COM, INC.
- ---------------------------------
PRINT LEGAL NAME OF LESSEE ABOVE
BY /s/ Barbara S. Will
- ---------------------------------
Date: 12/29/99
<PAGE>
CONTINUING GUARANTY
The undersigned, jointly and severally, request that BJ LEASING COMPANY
hereinafter referred to as "Lessor", enter into a lease or leases of personal
property, to extend credit, or otherwise to do business WITH: IPVOICE.COM, INC.
hereinafter called "Lessee". The undersigned, jointly and severally,
unconditionally guaranty to Lessor, the full and prompt performance by Lessee of
all obligations which Lessee presently or hereafter have to Lessor, and payment
when due of all sums presently or hereafter owing by Lessee arising by lease,
note, or otherwise, and agree to indemnify Lessor, against any wrongful act of
Lessee including any breaches of any contract now existing between Lessee and
Lessor, or which may arise in the future. The undersigned may terminate its
obligations hereunder as to then future transactions between Lessor, and Lessee
only by written notice sent by the terminating guarantor by registered mail
notice to Lessor at the address above-stated, providing, however, that such
termination shalt not affect any liability with respect to any obligation of
Lessee incurred to Lessor prior to receipt of such notice by Lessor, or the
continuing liability of such others of the undersigned as have not given such
notice.
The undersigneds' obligations hereunder are joint and several, and independent
of the obligations of Lessee, and a separate action may be maintained against
the undersigned, whether action is brought against Lessee or whether Lessee be
joined in such action. Undersigneds waive any right to require Lessor, to
proceed against Lessee, or to proceed against or exhaust any security, and waive
any rights of subrogation and any right to participate in any benefit of any
ownership or other interest now or hereafter held by Lessor.
This shall be a continuing guaranty and indemnity. Irrespective of any lack of
notice to or consent of undersigneds, undersigneds' obligations hereunder shall
not be impaired in any manner whatsoever by any: (a) new agreements or
obligations or obligations of Lessee with respect to Lessor, amendments,
extensions, modifications, renewals, or waivers of default as to any existing or
future agreements or obligations of Lessee or third parties with respect to
Lessor, or extensions u credit by Lessor to Lessee; (b) adjustments, compromises
or releases of any obligations of Lessee, any guarantor, or other parties, or
exchanges, releases, or sales of any interests of Lessee, any guarantor or other
party; (c) fictitiousness, incorrectness, invalidity or unenforceability, for
any reason, of any instrument or writing, or acts or omissions by any guarantor
or Lessee; (d) compromises, extensions, moratoria, or other relief granted to
Lessee; or (e) interuption in the buisiness relations between Lessor and Lessee.
Notice of your acceptance hereof, of default or non-payment by Lessee or any
other party, or presentment, protest and demand, and of all other matters of
which undersigned otherwise might entitled, is waived. Lessor is not required to
inform guarantor of matters affecting the financial condition of Lessee.
The obligations hereunder of each guarantor shall be binding upon their
respective heirs and personal representatives. The failure of any person to sign
this guaranty and indemnity shall not affect the liability hereunder of any
signer thereof.
Guarantors shall reimburse Lessor, on demand, for all expenses, including
without limitation, attorney's fees incurred by Lessor in the enforcement or
attempted enforcement of any of Lessor's rights against any guarantor or any
other person or entity. This guaranty shall bind the respective heirs,
administrators, personal representatives, successors and assigns of the
guarantor, and shall inure to the benefit of any of Lessor's successors or
assigns. All rights of Lessor hereunder are accumulative and not alternative.
ARBITRATION: Any controversy or claim arising out of or relating to this
contract, or the breach thereof, shall be settled b arbitration in accordance
with the rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Jurisdiction is hereby agreed to be in the Superior Courts
of the State of Washington, and venues are hereby agreed to be King County,
Washington. Arbitration shall he held the City of Seattle, State of Washington,
and any questions of law shall be decided in accordance with the laws of the
State Washington.
DATED: 12/29, 1999.
INDIVIDUAL GUARANTOR: WITNESSED:
By: /s/ Barbara S. Will By: /s/ James Borcher
- ------------------------ ---------------------
Barbara Will James Borcher
- ---------------------------- ---------------------
Print Name Print name of Witness
8027 East La Junta Rd
- -----------------------------
Home Address of Guarantor
Scottsdale Az 85255
- ----------------------------
City State Zip
480-502-3701
- ---------------------------
Home Telephone
<PAGE>
BJ LEASING COMPANY dba
ODYSSEY BUSINESS CREDIT
You have entered into an Equipment Lease Agreement with us dated 12/29/99 (the
"Lease") which covers certain property more fully described in the Lease (the
"Equipment"). You and we hereby agree that you will purchase AS-IS- WHERE-IS our
interest in all, but not less than all, of the Equipment leased or otherwise
included under the Lease at the expiration of the term thereof for $ 1.00 (to be
pro rated based on cost if the Lease is terminated early as to any equipment
because, for example, of a casualty, it being understood that there is no
voluntary right of early termination under the Lease in whole or in part). As
contemplated under the Lease, the term Equipment includes any software as to
which we have advanced funds pursuant to the Lease, whether we purchased the
software or advanced the purchase price on you behalf of or for your license of
the software. As indicated above, our transfer is without representation or
warranty. Accordingly, you will be obligated to pay us the purchase price for
any relevant software even though we will not necessarily be transferring
anything to you and even though any license you or we have for such software may
have expired. You also agree to pay us said purchase price together with all
taxes on or measured by such purchase price prior to expiration of the term of
the Lease.
By our respective execution hereof in the space provided below you and we
acknowledge the terms and conditions hereof.
Yours very truly,
BY: /s/Cathy Dirth
--------------------------
Cathy Dirth, Sec/Treas.
Acknowledged and Agreed to this
29 day of 12 , 1999
IPVOICE.COM, INC.
BY: /s/ Barbara S. Will
- ------------------------------
Barbara Will, President
BY:
<PAGE>
approved by The Secretary of State of Arizona. Rev. IO/90
FORM UCC-I .Space below used by filing office
<TABLE>
<S> <C>
Return copy or recorded original to: ARIZONA UNIFORM COMMERCIAL CODE
BJ LEASING COMPANY FINANCING STATEMENT Form UCC-1
2355 Griffin Ave., Suite G This FINANCING STATEMENT is presented for filing
Enumclaw, WA. 98022 (recording) pursuant to the Arizona Uniform
Commercial Code.
1. Debtor(s) (last name first and address): 2. Secured Party(ies) and address:
IPVOICE.COM, INC. BJ LEASING COMPANY
5050 N. 19th Ave. #416/417 2355 Griffin Ave., Suite G
Phoenix, AZ. 85015 Enumclaw, WA. 98022
3. Name and Address of Assignee of Secured 4. [x] If checked, products of collateral are also covered.
Party(ies):
6. If the collateral is crops, the crops 5. This Financing Statement covers the following types
are growing or to be grown on the (or items) of property:
followingdescribed real estate: Telephone Equipment more fully described in
Schedule "A' attached hereto and made
a part hereof.
</TABLE>
7. If the collateral is (a) goods which are or are to become fixtures: (b)
timber to be cut: or (C) minerals or the like (including oil and gas), or
accounts resulting from the sale thereof at the wellhead or minehead to which
the security interest attaches upon extraction, the legal description of the
real estate concerned is:
And, this Financing Statement is to be recorded in the office where a mortgage
on such real estate would be recorded. If the Debtor does not have an interest
of record, the name of a record owner is:
8. This Financing Statement is signed by the Secured Party instead of the debtor
to perfect or continue perfection of a security interest in:
[ ] collateral already subject to a security interest in jurisdiction when it
was brought into this state.
[ ] proceeds of collateral because of a change in type or use.
[ ] collateral as to which the filihg has lapsed or will lapse.
[ ] collateral acquired after a change of name, identity or corporate structure
of the Debtor.
IPVOICE.COM, INC. DATED: 12/30/99
/s/ Barbara S. Will BJ LEASING COMPANY
- ----------------------- /s/ Cathy Dirth
Barbara Will, President -----------------
SIGNATURES OF DEBTOR/ASSIGNOR SIGNATURE OF SECURED PARTY OR ASSIGNEE
Lessor: BJ Leasing Company Lease# 991230
2355 Griffin Ave. Suite G
Enumclaw, WA. 98022
<PAGE>
INSURANCE AUTHORIZATION
To: Harold Chuhlantseff
DiBuduo & Defebdis Insurance Group
7030 North Fruit Avenue Fresno, CA 93711
Phone: (559)432--0222 Fax: (5591 431--6712
Contact: Harold Chuhlantseff
We have entered into an equipment lease agreement for the equipment shown on the
attached Schedule of Equipment located at 5050 N. 19th Ave. #416/417. Phoenix AZ
85015
This is a net lease and we are responsible for the fully equipment cost in the
amount of $13,000.00
Please see that we immediately have ALL RISK coverage for liability and full
replacement cost of the equipment and that BJ Leasing Company is shown as LOSS
PAYEE and ADDITIONAL INSURED on the policy. Please forward a Certificate of
Insurance and Loss Payee and Additional Insured clause to:
BJ Leasing Company
2355 Griffin Ave. Suite G
Enumclaw, WA. 98022
(360) 825--7845 Voice
(360) 802--0496 Fax
Concurrent Certificates of Insurance, thirty (30) days notice in the event of
cancellation or alteration, and general correspondence should be sent to the
above addressee as well.
Very Truly Yours,
Lessee: IPVOICE.COM, INC.
By: Barbara S. Will
- -----------------------------
Barbara Will, President
Date executed by Lessee 12/29/99
EXHIBIT 10.42
IPVOICE.COM, INC.
2000 STOCK OPTION PLAN
1. GRANT OF OPTIONS; GENERALLY. In accordance with the provisions hereinafter
set forth in this stock option plan, the name of which is the IPVOICE.COM 2000
STOCK OPTION PLAN (the "Plan"), the Board of Directors (the "Board") or, a
committee designated by the Board as the stock compensation committee (the
"Stock Compensation Committee") of IPVoice.com, Inc. (the "Corporation") is
hereby authorized to issue from time to time on the Corporation's behalf to any
one or more Eligible Persons, as hereinafter defined, options to acquire shares
of the Corporation's $.001 par value per share common stock (the "Stock").
2. TYPE OF OPTIONS AND AWARDS. The Board or the Stock Compensation Committee is
authorized to issue non-qualified awards ("Award" or "Awards")and options which
meet the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), which options are hereinafter referred to collectively as
ISO's, or singularly as an ISO. The Board or the Stock Compensation Committee is
also, in its discretion, authorized to issue options and Awards which are not
ISO's, which options and Awards are hereinafter referred to collectively as
NSO's, or singularly as an NSO. The Board or the Stock Compensation Committee is
also authorized to issue "Reload Options" in accordance with Paragraph 10
herein, which options are hereinafter referred to collectively as Reload
Options, or singularly as a Reload Option. Except where the context indicates to
the contrary, the term "Option" or "Options" means ISO's, NSO's and Reload
Options.
3. AMOUNT OF STOCK. The aggregate number of shares of Stock which may be
purchased pursuant to the exercise of Options or awarded hereunder shall be One
Million (1,000,000) shares. Of this amount, the Board or the Stock Compensation
Committee shall have the power and authority to designate whether any Options so
issued shall be ISO's or NSO's, subject to the restrictions on ISO's contained
elsewhere herein. If an Option ceases to be exercisable, in whole or in part,
the shares of Stock underlying such Option shall continue to be available under
this Plan. Further, if shares of Stock are delivered to the Corporation as
payment for shares of Stock purchased by the exercise of an Option granted under
this Plan, such shares of Stock shall also be available under this Plan. If
there is any change in the number of shares of Stock on account of the
declaration of stock dividends, recapitalization resulting in stock split-ups,
or combinations or exchanges of shares of Stock, or otherwise, the number of
shares of Stock available for Awards or purchase upon the exercise of Options,
the shares of Stock subject to any Award or Option and the exercise price of any
outstanding Option shall be appropriately adjusted by the Board or the Stock
Compensation Committee. The Board or the Stock Compensation Committee shall give
notice of any adjustments to each Eligible Person granted an Option or Award
under this Plan, and such adjustments shall be effective and binding on all
Eligible Persons. If because of one or more recapitalizations, reorganizations
or other corporate events, the holders of outstanding Stock receive something
other than shares of Stock then, upon exercise of an Option or surrender of the
awarded Stock, the Eligible Person will receive what the holder would have owned
if the holder had surrendered awarded Stock or exercised the Option immediately
before the first such corporate event and not disposed of anything the holder
received as a result of the corporate event.
4. ELIGIBLE PERSONS.
(A) With respect to ISO's, an Eligible Person means any individual
who has been employed by the Corporation or by any subsidiary of the
Corporation, for a continuous period of at least sixty (60) days.
<PAGE>
(B) With respect to NSO's, an Eligible Person means (i) any
individual who has been employed by the Corporation or by any subsidiary of the
Corporation, for a continuous period of at least sixty (60) days, (ii) any
director of the Corporation or any subsidiary of the Corporation or (iii) any
consultant or advisor of the Corporation or any subsidiary of the Corporation.
(C) With respect to Awards, an Eligible Person means any director of
the Corporation or any subsidiary of the Corporation.
5. GRANT OF OPTIONS AND AWARDS.
(A) The Board or the Stock Compensation Committee has the right to
issue the Options and Awards established by this Plan to Eligible Persons. The
Board or the Stock Compensation Committee shall follow the procedures prescribed
for it elsewhere in this Plan. A grant of Options or Awards shall be set forth
in a writing signed on behalf of the Corporation or by a majority of the members
of the Stock Compensation Committee. In the case of an Option, the writing shall
identify whether the Option being granted is an ISO or an NSO and shall set
forth the terms which govern the Option. The terms shall be determined by the
Board or the Stock Compensation Committee, and may include, among other terms,
the number of shares of Stock that may be acquired pursuant to the exercise of
the Options, when the Options may be exercised, the period for which the Option
is granted and including the expiration date, the effect on the Options if the
Eligible Person terminates employment, whether the Eligible Person may deliver
shares of Stock to pay for the shares of Stock to be purchased by the exercise
of the Option and any vesting provisions applicable to the options. However, no
term shall be set forth in the writing which is inconsistent with any of the
terms of this Plan. The terms of an Award or Option granted to an Eligible
Person may differ from the terms of an Award or Option granted to another
Eligible Person, and may differ from the terms of an earlier Award or Option
granted to the same Eligible Person, including terms relative to change of
control.
(B) To the extent any Option terminates, expires or lapses under the
terms of any applicable vesting provision, any shares of Stock subject to the
Option will be available for the grant of any other Award or Option under this
Plan.
(C) In order to assure the viability of Awards or Options granted
under this Plan to Eligible Persons who are employees of the Corporation located
in foreign countries, the Board or Stock Compensation Committee may provide such
special terms as it may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom.
6. AWARD AND OPTION PRICES. An Award or Option price per share shall be
determined by the Board or the Stock Compensation Committee at the time any
Award or Option is granted, and shall be not less than
(A) except in the case of an ISO granted to a ten percent or greater
shareholder, the fair market value,
(B) in the case of an ISO granted to a ten percent or greater stock-
holder, 110% of the fair market value,
(C) in the case of an NSO, not less than 75% of the fair market
value (but in no event less than the par value) of one share of Stock on the
date the Option is granted, as determined by the Board or the Stock Compensation
Committee.
(D) In the case of an Award, not less than 75% of the fair market
value (but in no event less than the par value) of one share of Stock on the
date the Award is granted, as determined by the Board or the Stock Compensation
Committee.
<PAGE>
(E) Fair market value as used herein shall be not less than:
(i) If shares of Stock shall be traded on an exchange
or over-the-counter market, the mean between the high and low sales prices of
Stock on such exchange or over-the-counter market on which such shares shall be
traded on that date, or if such exchange or over-the-counter market is closed or
if no shares shall have traded on such date, on the last preceding date on which
such shares shall have traded.
(ii) If shares of Stock shall not be traded on an
exchange or over-the-counter market, the value as determined by a recognized
appraiser as selected by the Board or the Stock Compensation Committee.
7. PURCHASE OF SHARES ON EXERCISE OF OPTIONS AND AWARD OBLIGATIONS.
An Option shall be exercised by the tender to the Corporation of the
full purchase price of the Stock with respect to which the Option is exercised
and written notice of the exercise. The purchase price of the Stock shall be in
United States dollars, payable in cash or by check, or in property or
Corporation stock, if so permitted by the Board or the Stock Compensation
Committee in accordance with the discretion granted in Paragraph 5 hereof,
having a value equal to such purchase price. The Corporation shall not be
required to issue or deliver any certificates for shares of Stock awarded or
purchased upon the exercise of an Option prior to
(A) if requested by the Corporation, the filing with the Corporation
by the Eligible Person of a representation in writing that it is the Eligible
Person's then present intention to acquire the Stock being purchased for
investment and not for resale, and/or
(B) the completion of any registration or other qualification of
such shares under any government regulatory body, which the Corporation shall
determine to be necessary or advisable.
8. GRANT OF AWARDS.
(A) The Board may grant each employee or non-employee Director, upon
first being appointed or elected to the Board of Directors, ___________
(________) shares of Stock and/or Options to purchase _______________
(____________) shares of Stock (or such higher number of shares and/or Options
to purchase shares as determined by the Board or Stock Compensation Committee
for recruitment purposes), which Options to purchase shares shall be NSO's
regardless of the employment status of the Director of the Company.
(B) Following the annual meeting of the Stockholders each year, the
Board may grant each employee or non-employee Director, upon first being
appointed or elected to the Board of Directors, ___________ (________) shares of
Stock and/or Options to purchase _______________ (____________) shares of Stock
(or such higher number of shares and/or Options to purchase shares as determined
by the Board or Stock Compensation Committee for recruitment purposes), which
Options to purchase shares shall be NSO's regardless of the employment status of
the Director of the Company.
9. $100,000 PER YEAR LIMITATION.
(A) In general. To the extent that the aggregate fair market value
of Stock with respect to which ISO's (determined without regard to this
subsection) are exercisable for the first time by any individual during any
calendar year (under all plans of the Corporation and its parent and subsidiary
corporations) exceeds $100,000, such options shall be treated as options which
are not ISO's.
<PAGE>
(B) Ordering Rule. Subparagraph (A) of this section shall be applied
by taking options into account in the order in which they were granted.
(C) Determination of fair market value. For purposes of subparagraph
(A) of this section, the fair market value of any Stock shall be determined as
of the time the option with respect to such Stock is granted.
10. GRANT OF RELOAD OPTIONS. In granting an Option under this Plan, the Board or
the Stock Compensation Committee may include a Reload Option provision therein,
subject to the provisions set forth in Paragraphs 22 and 23 herein. A Reload
Option provision provides that if the Eligible Person pays the exercise price of
shares of Stock to be purchased by the exercise of an ISO, NSO or another Reload
Option (the "Original Option") by delivering to the Corporation shares of Stock
already owned by the Eligible Person (the "Tendered Shares"), the Eligible
Person shall receive a Reload Option which shall be a new Option to purchase
shares of Stock equal in number to the tendered shares. The terms of any Reload
Option shall be determined by the Board or the Stock Compensation Committee
consistent with the provisions of this Plan.
11. STOCK COMPENSATION COMMITTEE. The Stock Compensation Committee may be
appointed from time to time by the Corporation's Board of Directors. The Board
may from time to time remove members from or add members to the Stock
Compensation Committee. The Stock Compensation Committee shall be constituted so
as to permit the Plan to comply in all respects with the provisions set forth in
Paragraph 21 herein. The members of the Stock Compensation Committee may elect
one of its members as its chairman. The Stock Compensation Committee shall hold
its meetings at such times and places as its chairman shall determine. A
majority of the Stock Compensation Committee's members present in person shall
constitute a quorum for the transaction of business. All determinations of the
Stock Compensation Committee will be made by the majority vote of the members
constituting the quorum. The members may participate in a meeting of the Stock
Compensation Committee by conference telephone or similar communications
equipment by means of which all members participating in the meeting can hear
each other. Participation in a meeting in that manner will constitute presence
in person at the meeting. Any decision or determination reduced to writing and
signed by all members of the Stock Compensation Committee will be effective as
if it had been made by a majority vote of all members of the Stock Compensation
Committee at a meeting which is duly called and held.
12. ADMINISTRATION OF PLAN. In addition to granting Awards and Options and to
exercising the authority granted to it elsewhere in this Plan, the Board or the
Stock Compensation Committee is granted the full right and authority to
interpret and construe the provisions of this Plan, promulgate, amend and
rescind rules and procedures relating to the implementation of the Plan and to
make all other determinations necessary or advisable for the administration of
the Plan, consistent, however, with the intent of the Corporation that Options
granted or Stock awarded pursuant to the Plan comply with the provisions of
Paragraph 22 and 23 herein. All determinations made by the Board or the Stock
Compensation Committee shall be final, binding and conclusive on all persons
including the Eligible Person, the Corporation and its stockholders, employees,
officers and directors and consultants. No member of the Board or the Stock
Compensation Committee will be liable for any act or omission in connection with
the administration of this Plan unless it is attributable to that member's
willful misconduct.
13. PROVISIONS APPLICABLE TO ISO's. The following provisions shall apply to all
ISO's granted by the Board or the Stock Compensation Committee and are
incorporated by reference into any writing granting an ISO:
(A) An ISO may only be granted on or before December 31, 2005.
<PAGE>
(B) An ISO may not be exercised after the expiration of six (6)
years from the date the ISO is granted.
(C) The Option price may not be less than the fair market value of
the Stock at the time the ISO is granted.
(D) An ISO is not transferrable by the Eligible Person to whom it is
granted except by will, or the laws of descent and distribution, and is
exercisable during his or her lifetime only by the Eligible Person.
(E) If the Eligible Person receiving the ISO owns at the time of the
grant stock possessing more than 10% of the total combined voting power of all
classes of stock of the employer corporation or of its parent or subsidiary
corporation (as those terms are defined in the Code), then the Option price
shall be at least 110% of the fair market value of the Stock, and the ISO shall
not be exercisable after the expiration of five (5) years from the date the ISO
is granted.
(F) Even if the shares of Stock which are issued upon exercise of an
ISO are sold within one (1) year following the exercise of such ISO so that the
sale constitutes a disqualifying disposition for ISO treatment under the Code,
no provision of this Plan shall be construed as prohibiting such a sale.
(G) The Plan was adopted by the Corporation on December 9, 1999, by
virtue of its approval by the Corporation's Board of Directors. Approval by the
stockholders of the Corporation is to occur prior to December 8, 2000.
14. DETERMINATION OF FAIR MARKET VALUE. In granting ISO's, NSO's or Awards under
this Plan, the Board or the Stock Compensation Committee shall make a good faith
determination as to the fair market value of the Stock at the time of granting
the ISO, NSO or Award.
15. RESTRICTIONS ON ISSUANCE OF STOCK. The Corporation shall not be obligated to
sell or issue any shares of Stock pursuant to an Award or the exercise of an
Option unless the Stock with respect to which the Option is being exercised is
at that time effectively registered or exempt from registration under the
Securities Act of 1933, as amended, and any other applicable laws, rules and
regulations. The Corporation may condition issuance of Stock pursuant to an
Award or the exercise of an Option granted in accordance herewith upon receipt
from the Eligible Person, or any other purchaser thereof, of a written
representation that at the time of such Award or exercise it is his or her then
present intention to acquire the shares of Stock for investment and not with a
view to, or for sale in connection with, any distribution thereof; except that,
in the case of a legal representative of an Eligible Person,"distribution" shall
be defined to exclude distribution by will or under the laws of descent and
distribution. Prior to issuing any shares of Stock pursuant to an Award or the
exercise of an Option, the Corporation shall take such steps as it deems
necessary to satisfy any withholding tax obligations imposed upon it by any
level of government.
16. EXERCISE IN THE EVENT OF DEATH OF TERMINATION OF EMPLOYMENT, DIRECTORSHIP
OR CONSULTANCY.
(A) If an optionee shall die (i) while an employee, Director or
acting as a consultant of the Corporation or a Subsidiary or (ii) within three
(3) months after termination of his employment, directorship or consultancy with
the Corporation or a Subsidiary because of his disability, or retirement or
otherwise, his Options may be exercised, to the extent that the optionee shall
have been entitled to do so on the date of his death or such termination of
employment, directorship or consultancy, by the person or persons to whom the
optionee's right under the Option pass by will or applicable law, or if no such
person has such right, by his executors or administrators, at any time, or from
time to time. In the event of termination of employment, directorship or
<PAGE>
consultancy because of his death while an employee, director or consultant under
this subsection, his Options may be exercised not later than the expiration date
specified in Paragraph 5 or one (1) year after the optionee's death, whichever
date is earlier.
(B) If an optionee's employment by the Corporation or a Subsidiary,
his directorship or consultancy shall terminate because of his disability and
such optionee has not died within the following three (3) months, he may
exercise his Options, to the extent that he shall have been entitled to do so at
the date of the termination of his employment, directorship or consultancy, at
any time, or from time to time, but not later than the expiration date specified
in Paragraph 5 hereof or one (1) year after termination of employment,
directorship or consultancy, whichever date is earlier.
(C) If an optionee's employment, directorship or consultancy shall
terminate by reason of his retirement in accordance with the terms of the
Corporation's tax-qualified retirement plans or with the consent of the Board or
the Stock Compensation Committee or involuntarily other than by termination for
cause, and such optionee has not died within the following three (3) months, he
may exercise his Option to the extent he shall have been entitled to do so at
the date of the termination of his employment, directorship or consultancy at
any time and from time to time, but not later than the expiration date specified
in Paragraph 5 hereof or ninety (90) days after termination of employment,
directorship or consultancy, whichever date is earlier.
(D) If an optionee's employment, directorship or consultancy shall
terminate for any reason other than death, disability, retirement, or for cause,
the optionee may exercise his Option to the extent he shall have been entitled
to do so at the date of the termination of his employment, directorship or
consultancy at any time and from time to time, but not later than the expiration
date specified in Paragraph 5 hereof or thirty (30) days after termination of
employment, directorship or consultancy, whichever is earlier.
(E) If the optionee's employment, directorship or consultancy shall
terminate for cause, all rights to exercise his Option shall terminate at the
date of such termination of employment, directorship or consultancy.
(F) For purposes of this Paragraph 16, termination for cause shall
mean termination of employment, directorship or consultancy by reason of the
optionee's commission of a felony, fraud or willful misconduct which has
resulted, or is likely to result, in substantial and material damage to the
Corporation or a Subsidiary, all as the Board or the Stock Compensation
Committee in its sole discretion may determine, and in the case of a Director,
any other definition of cause contained within the Corporation's Articles or
Bylaws then in effect.
17. CORPORATE EVENTS.
(A) Upon a "change in control" of the Corporation as defined herein,
the Corporation will pay to the Eligible Person in cash, an amount equal to the
number of shares exercisable under an Opinion or Options granted to Eligible
Persons up to the date the change in the control of the Corporation occurs,
whether such Options are vested, not vested or exercised, multiplied by the
highest closing sale price of a share of the Corporation's Stock quoted during
the 30-day period immediately preceding the date the change in control occurs on
the composite tape for shares listed on the New York Stock Exchange; or if such
shares are not quoted on the composite tape of the New York Stock Exchange, the
highest closing sale price quoted during such period on the principal United
States Securities Exchange registered under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), on which such shares are listed; or if such
shares are not listed on any such exchange, the highest closing bid quotation
with respect to a share during the 30-day period preceding the date the change
of control occurs on the National Association of Securities Dealers, Inc.,
automated quotation system or any similar system thin in general use; or if no
such quotations are available, the fair market value of a share on the date the
<PAGE>
by a majority of disinterested directors, such amount being hereafter referred
to as "Termination Option Payment". The Termination Option Payment will be paid
to the Eligible Person within sixty (60) days after the change in control occurs
and also will include an additional amount equal to:
(i) any excise tax imposed on the Eligible Person under
the Internal Revenue Code by reason of Eligible Person's receipt of the
Termination Options Payment above; plus
(ii) a gross-up payment to reflect any federal, state or
local income tax or other taxes imposed on the Eligible Person by reason of the
Eligible Person's receipt of the above Termination Option Payment.
(B) For purposes of this Plan; "change of control" means any of the
following:
(i) any merger of the Corporation in which the
Corporation or a wholly owned subsidiary of the Corporation is not the
continuing or surviving entity, or pursuant to which Stock would be converted to
cash, securities or other property, other than a merger of the Corporation in
which holders of the Corporation's Stock immediately prior to the merger have
the same proportionate ownership of beneficial interest of Stock or other voting
securities of the surviving entity immediately after the merger;
(ii) any sale, lease, exchange or other transfer (in one
(1) transaction or a series of related transactions) of assets or earning power
aggregating more than 40% of the assets or earning power of the Corporation and
its subsidiaries (taken as a whole), other than pursuant to sale- leaseback,
structured finance or other form of financing transaction;
(iii)any plan or proposal for liquidation of dissolution
of the Corporation that the Shareholders shall approve;
(iv) any person (as such term is defined in Section 13
(d) and 14(d) of the Exchange Act), other than any current Shareholder of the
Corporation or affiliate thereof or any employee benefit plan of the Corporation
or nay subsidiary of the Corporation or any entity holding shares of capital
stock of the Corporation for or pursuant to the terms of any such employee
benefit plan in its role as an agent or trustee for such plan, shall become the
beneficial owner (within the meaning of Rule 13(d)(3) under the Exchange Act) of
20% or more of the Corporation's outstanding Stock; or
(v) during any period of two (2) consecutive years,
individuals who at the beginning of such period shall fail to constitute a
majority thereof, unless the election, or the nomination for election by the
Corporation's Shareholders, of each new Director was approved by a vote of at
least two-thirds (2/3) of the Directors then still in office who were Directors
at the beginning of the period.
(C) Adjustments. The number of shares awarded or exercisable under
an Option shall be subject to adjustment in accordance with the provisions of
this Subsection (C).
(i) Adjustments for Stock Splits and Combinations. If
the Corporation shall at any time from time to time after the date of an Award
or Option is granted, effect a stock split of the outstanding Stock, the
applicable number of shares in effect immediately prior to the combination shall
be proportionately increased. Any adjustment under this Subsection (C)(i) shall
be effective at the close of business on the date the stock split or combination
occurs.
(ii) Adjustments for Certain Dividends and Distributions
If the Corporation shall at any time or from time after the date an Award or
Option is granted, make or issue or set a record date for the determination of
holders of Stock entitled to receive a dividend or other distribution payable in
<PAGE>
shares of Stock, then, and in each event, the applicable number of shares in
effect immediately prior to such event shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of the
close of business on such record date, by multiplying as applicable, the
applicable number of shares then in effect by a fraction;
(a) the numerator of which shall be the
total number of shares of Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date; and
(b) the denominator of which shall be the
total number of shares of Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Stock issuable in payment of such dividend or distribution.
(iii) Adjustment for Other Dividends and Distributions.
If the Corporation shall at time or from time to time after the date an Award or
Options is granted, make or issue or set a record date for the determination of
holders of Stock entitled to receive a dividend or other distribution payable in
other than shares of Stock, then, and in each event, an appropriate revision to
the number of shares shall be made and provision shall be made (by adjustments
of the number of shares or otherwise) so that the Eligible Person shall receive,
in addition to the number of shares of Stock, the number of shares of additional
Stock which they would have received as any other holder and, in the case of
Options, the number of additional shares of Stock which they would have received
if the Option had been exercised prior to such event, giving application to all
adjustments called for during such period under this Subsection (C)(iii) with
respect to the rights of the Eligible Person under this Plan.
(iv) Adjustment for Reclassification, Exchange or Sub-
stitution. If the Common Stock at any time or form time to time after the date
an Award or Option is granted shall be changed into the same or different number
of shares of any class or classes of stock, whether by reclassification,
exchanged, substitution or otherwise (other than by way of a stock split or
combination of shares or stock dividends provided for in Subsections (C)(i),
(ii) and (iii), or a reorganization, merger, consolidation, or sale of assets
provided for in Subsection (C)(v)), then and in each event, an appropriate
revision to the numbers of shares shall be made and provisions shall be made (by
adjustments of the number of shares of otherwise) so that the Eligible Person
shall have the right thereafter to convert their shares or options into the kind
and amount of shares of stock and other securities receivable upon
reclassification, exchange, substitution or other change, by the Eligible Person
of the number of shares of Stock into which such shares or Options, if such
Options had been exercised prior to such event, might have been converted
immediately prior to such reclassification, exchange, substitution or other
change, all subject to further adjustment as provided herein.
(v) Adjustment for Reorganization, Merger, Consolidation
or Sales of Assets. If at any time or from time to time after the date an Award
or Option is granted there shall be a capital reorganization of the Corporation
(other than by way of a stock split or combination of shares or stock dividends
or distributions provided for in Subsection (C)(i), (ii) and (iii), or
reclassification, exchange or substitution of shares provided for in Subsection
(C)(iv)), or a merger or consolidation of the Corporation with or into another
corporation, or the sale of all substantially all of the Corporation's
properties or assets to any other person, then as a part of such reorganization,
merger, consolidation, or sale, an appropriate revision to the number of shares
shall be made and provision shall be made (by adjustments of the number of
shares or otherwise) so that the Eligible Person shall have the right thereafter
to convert their shares or Options into the kind and amount of shares of stock
and other securities or property of the Corporation or any successor corporation
resulting from such reorganization, merger, consolidation, or sale, to which a
holder of Stock deliverable upon conversion of such shares would have been
entitled upon such reorganization, merger, consolidation, or sale. In any such
<PAGE>
case, appropriate adjustment shall be made in the application of the provisions
of this Subsection(C)(v) with respect to the rights of the Eligible Person after
the reorganization, merger, consolidation, or sale to the end that the
provisions of this Subsection (C)(v) (including any adjustment in the applicable
number of share then in effect and the number of shares of Stock or other
securities deliverable upon exercise of ht Option) shall be applied after that
event in as nearly an equivalent manner as may be practicable.
(D) Further, in the event of an adjustment pursuant to subsection
(C) of this Clause 17, the Corporation shall not be obligated to issue any
fractional shares and the Board or Stock Compensation Committee shall determine,
in its sole discretion, whether cash shall be given in lieu of fractional shares
or whether such fractional shares shall be eliminated by rounding up or down as
appropriate.
18. NO GUARANTEE OF EMPLOYMENT. Nothing in this Plan or in writing granting an
Award or Option will confer upon any Eligible Person the right to continue in
the employ of the Eligible Person's employer, or will interfere with or restrict
in any way the right of the Eligible Person's employer to discharge such
Eligible Person at any time for any reason whatsoever, with or without cause.
19. NONTRANSFERABILITY. No Option granted under the Plan shall be transferable
other than by will or by the laws of descent and distribution. During the
lifetime of the optionee, an Option shall be exercisable only by him.
20. NO RIGHTS AS STOCKHOLDER. No optionee shall have any rights as a stockholder
with respect to any shares subject to his Option prior to the date of issuance
to him of a certificate or certificates for such shares.
21. AMENDMENT AND DISCONTINUANCE OF PLAN. The Corporation's Board of Directors
may amend, suspend or discontinue this Plan at any time. However, no such action
may prejudice the rights of any Eligible Person who has prior thereto been
granted Awards or Options under this Plan. Further, no amendment to this Plan
which has the effect of (a) increasing the aggregate number of shares of Stock
subject to this Plan (except for adjustments pursuant to Paragraph 17(C)
herein), or (b) changing the definition of Eligible Person under this Plan, may
be effective unless and until approval of the stockholders of the Corporation is
obtained in the same manner as approval of this Plan is required. The
Corporation's Board of Directors is authorized to seek the approval of the
Corporation's stockholders for any other changes it proposes to make to this
Plan which require such approval, however, the Board of Directors may modify the
Plan, as necessary, to effectuate the intent of the Plan as a result of any
changes in the tax, accounting or securities laws treatment of Eligible Persons
and the Plan, subject to the provisions set forth in this Paragraph 21, and
Paragraphs 22 and 23.
22. COMPLIANCE WITH RULE 16b-3. This Plan is intended to comply in all respects
with Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), with respect to participants who are subject to Section 16 of the
Exchange Act, and any provision(s) herein that is/are contrary to Rule 16b-3
shall be deemed null and void to the extent appropriate by either the Stock
Compensation Committee or the Corporation's Board of Directors.
23. COMPLIANCE WITH CODE. The aspects of this Plan on ISO's is intended to
comply in every respect with Section ss.422 of the Code and the regulations
promulgated thereunder. In the event any future statute or regulation shall
modify the existing statute, the aspects of this Plan on ISO's shall be deemed
to incorporate by reference such modification. Any stock option agreement
relating to any Option granted pursuant to this Plan outstanding and unexercised
at the time any modifying statute or regulation becomes effective shall also be
<PAGE>
deemed to incorporate by reference such modification and no notice of such
modification need be given to optionee. If any provision of the aspects of this
Plan on ISO's is determined to disqualify the shares purchasable pursuant to the
Options granted under this Plan from the special tax treatment provided by Code
Section ss.422, such provision shall be deemed null and void and to incorporate
by reference the modification required to qualify the shares for said tax
treatment.
24. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the grant of Awards,
the grant and exercise of Options, and the obligation of the Corporation to sell
and deliver Stock under such Awards and Options, shall be subject to all
applicable federal and state laws, rules and regulations and to such approvals
by any government or regulatory agency as may be required. The Corporation shall
not be required to issue or deliver any certificates for shares of Stock prior
to
(A) the listing of such shares on any stock exchange or over-the-
counter market on which the Stock may then be listed and
(B) the completion of any registration or qualification of such
shares under any federal or state law, or any ruling or regulation of any
government body which the Corporation shall, in its sole discretion, determine
to be necessary or advisable. Moreover, no Option may be exercised if its
exercise or the receipt of Stock pursuant thereto would be contrary to
applicable laws.
(C) Until registered under the Securities Act of 1933, as amended
(the "Act"), all Stock granted as an Award, any Option granted or any Stock
issued upon exercise of an Option, shall be a "restricted" security as defined
in Rule 144 promulgated under the Act and shall bear the following legend:
(i) As to Shares:
"The shares represented by this certificate
have not been registered under the
Securities Act of 1933. The shares have been
acquired for investment and may not be
offered, sold or otherwise transferred in
the absence of an effective registration
statement for the shares under the
Securities Act of 1933, or a prior opinion
of counsel satisfactory to the issuer, that
registration is not required under the Act."
(ii) As to Options:
"This Option and the securities issuable
upon the exercise of this Option have not
been registered under the Securities Act of
1933, as amended (the "Act") or applicable
state law and may not be sold, transferred
or otherwise disposed of unless registered
under the Act and any applicable state act
or unless the issuer receives an opinion
from counsel for the holder and is satisfied
that this Option and the underlying
securities may be transferred without
registration under the Act"
25. DISPOSITION OF SHARES. In the event any share of Stock acquired by an Award
or an exercise of an Option granted under the Plan shall be transferable other
than by will or by the laws of descent and distribution within one (1) year of
the date such Option or Award was granted or within one (1) year after the
transfer of such Stock pursuant to such exercise, the optionee shall give prompt
written notice thereof to the Corporation or the Stock Compensation Committee.
26. NAME. The Plan shall be known as the "IPVoice.com 2000 Stock Option Plan."
<PAGE>
27. NOTICES. Any notice hereunder shall be in writing and sent by certified
mail, return receipt requested or by facsimile transmission (with electronic or
written confirmation of receipt) and when addressed to the Corporation shall be
sent to it at its office, 5050 North 19th Avenue, Suite 416, Phoenix, AZ 85015
and when addressed to the Committee shall be sent to it at the above address
subject to the right of either party to designate at any time hereafter in
writing some other address, facsimile number or person to whose attention such
notice shall be sent.
28. HEADINGS. The headings preceding the text of Sections and subparagraphs
hereof are inserted solely for convenience of reference, and shall not
constitute a part of this Plan nor shall they affect its meaning, construction
or effect.
29. EFFECTIVE DATE. This Plan was adopted by the Board of Directors of the
Corporation on December 8, 2000, approved by the shareholders on December 8,
2000 and shall be effective on January 1, 2000.
Dated as of ___________________.
By: /s/ James Howson
---------------------
James Howson,
Chairman of the Board
By:/s/ Anthony Welsh
----------------------
Anthony Welsh,
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001092083
<NAME> IPVoice.com, Inc.
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<CURRENCY> U.S. Currency
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<EXCHANGE-RATE> 1
<CASH> 98,592
<SECURITIES> 0
<RECEIVABLES> 108,100
<ALLOWANCES> 0
<INVENTORY> 7,586
<CURRENT-ASSETS> 256,348
<PP&E> 418,083
<DEPRECIATION> (40,528)
<TOTAL-ASSETS> 633,903
<CURRENT-LIABILITIES> 1,551,739
<BONDS> 0
0
1
<COMMON> 16,423
<OTHER-SE> (917,836)
<TOTAL-LIABILITY-AND-EQUITY> 633,903
<SALES> 321,279
<TOTAL-REVENUES> 15,845
<CGS> 0
<TOTAL-COSTS> 305,434
<OTHER-EXPENSES> 1,897,084
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (64,387)
<INCOME-PRETAX> (1,973,834)
<INCOME-TAX> 0
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</TABLE>
