<PAGE> 1
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended March 31, 2000
Commission file no. 0-27917
IPVoice.com, Inc.
(Name of small business issuer in its charter)
Nevada 65-0729900
(State or other Jurisdiction of Incorporation (I.R.S. Employer
or organization) Identification No.)
5050 N. 19th Avenue, Suite 416/417
Phoenix, Arizona 85015
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (602) 335-1231
Securities registered under Section 12(b) of the Exchange Act:
<TABLE>
<CAPTION>
Name of each exchange on
Title of each class which registered
------------------- ----------------
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None
</TABLE>
Securities registered under Section 12 (g) of the Exchange Act:
Common Stock, $.001 par value
-----------------------------
(Title of class)
Copies of Communication Sent to:
I. Douglas Dunipace
Jennings, Strouss & Salmon, P.L.C.
Two North Central Avenue, Suite 1600
Phoenix, Arizona 85004-2393
Tel: (602) 262-5911
Fax: (602) 253-3255
Indicate by 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
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was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of March 31, 2000, there are 17,183,758 shares of voting stock of the
registrant issued and outstanding.
PART I
Item 1. Financial Statements.
The Condensed Consolidated Financial Statements of IPVoice.com,
Inc. for the period ending March 31, 2000 are unaudited and are attached and
incorporated by this reference as Item 1.
Item 2. Management's Discussion and Analysis of Results of Operations and
Plan of Operations.
This analysis should be read in conjunction with the condensed
consolidated financial statements, the notes thereto, included in this Form
10Q-SB and the financial statements and notes thereto included in IPVoice.com,
Inc.'s December 31, 1999 Annual Report on Form 10-KSB.
All non-historical information contained in this Form 10-QSB is a
forward-looking statement. The forward looking statements contained herein are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those reflected in the forward-looking statements.
DISCUSSION AND ANALYSIS
IPVoice.com, Inc. ("IPVC"), as the parent company, and IPVoice
Communications, Inc. ("IPVCDE"), as a wholly-owned subsidiary, are collectively
referred to herein as "the Company". IPVCDE was incorporated in Delaware in
December of 1997. In March 1998, IPVCDE entered into a reorganization agreement
with Nova Enterprises, Inc., which was incorporated February 1997 in the State
of Nevada ("Nova"). Under the reorganization agreement, the shareholders of
IPVCDE exchanged all of the outstanding common shares of IPVCDE for 9,000,000
shares of Nova. IPVCDE became a wholly-owned subsidiary of Nova. Nova changed
its name to "IPVoice.com, Inc." in May 1999. The reorganization agreement was
accounted for as a reorganization of IPVCDE.
2
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In general terms a reverse acquisition is a transaction in which the
inactive public entity acquires an operating company and then changes its name
as the surviving parent corporation to the name of the subsidiary and allows the
subsidiary to appoint management in the surviving public entity. Thereafter, the
subsidiary may formally merge with the parent or may continue to operate as a
separate operating subsidiary. In this case, the subsidiary transferred all of
its assets to the parent.
The Company is quoted on the OTC Bulletin Board under the symbol
"IPVC". The Company conducted business from its headquarters in Denver, Colorado
until August 1999, when it relocated to Phoenix, Arizona.
Since inception the Company has been engaged in the business of
developing its MultiCom Business Management Software ("MultiCom") for use in
Internet Protocol 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. The Company's business was developed on the
premise that traditional telephone systems wasted precious resources by
assigning each call a "nailed down" circuit. The Company'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 Protocol telephony and related industries for development, distribution
or acquisition.
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. Current activities include software and hardware
development, raising additional equity, and negotiating with key personnel and
facilities.
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 Protocol telephony
market, there is no assurance that any benefit will result from such activities.
The Company's management expects to receive limited operating revenues and 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 for the three-month period ending March 31, 2000 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 further its planned operations.
The Company recently installed Gateways in New York, Los Angeles and
London and began receiving revenues from the Company's involvement in the sale
of prepaid calling cards.
3
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RESULTS OF OPERATIONS
COMPARISON OF THREE-MONTH PERIODS ENDED MARCH 31, 2000 AND 1999
REVENUES
Revenues for the three months ended March 31, 2000 and 1999 were
$97,628 and $0, respectively. The Company engaged in the sale of prepaid calling
cards which resulted in revenues for the three-months ended March 31, 2000. In
March 1999, the Company did not have any contracts for revenues and was still
engaging in research and development.
OPERATING EXPENSES
Operating expenses for the three-months ended March 31, 2000 were
$739,017 compared to $258,725 for the three-months ended March 31, 1999. Net
loss was $760,808 and $258,725 for the three-months ended March 31, 2000 and
1999, respectively. The increases in the operating expenses and net loss are
primarily related to consulting, general and administrative expenses. During the
three-months ended March 31, 2000, consulting fees of $22,500 were paid to James
K. Howson and $296,094 to International Investment Partners, Ltd. There was
$25,693 and $38,455 outstanding to two officers, James K. Howson and Barbara S.
Will, respectively, and $65,419 outstanding to a shareholder, International
Investment Partners, Ltd. in respect of fees and reimbursement of expenses as of
March 31, 2000.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had cash of $114,170 compared to
$98,592 at December 31, 1999.
The Company is seeking to reduce its outstanding debt obligations by
converting them to equity interests in the Company. In this respect, the Company
commenced a tender offer on April 20, 2000 to exchange outstanding investment
Units for shares of the Company's common stock. Each Unit consists of a $24,900
promissory note, 25 shares of the Company's Senior Convertible Preferred Stock
and a warrant to purchase 18,750 shares of the Company's common stock. In the
tender offer, the Company is offering 17,832 shares of its common stock in
exchange for each Unit. The tender offer is scheduled to expire at close of
business on May 19, 2000. More information about the tender offer is contained
in the Schedule TO and Offering Circular filed with the Securities and Exchange
Commission on April 20, 2000 and amended May 5, 2000.
In addition, the Company is seeking additional capital through
private sales of its equity securities. In this respect, it has entered into
agreements with Augustine Fund, L.P. and The Shaar Fund, Ltd., two private
investment funds, for the sale of 2,500 shares of Series B Convertible Preferred
Stock and Warrants to purchase 250,000 shares of the Company's common stock for
an aggregate cash investment of $2,500,000. The investment is scheduled to fund
on May 22, 2000 subject only to the condition that at least 23 of the 46
outstanding investment Units are tendered to and accepted by the Company by the
conclusion of the current tender offer. The Company cannot be assured that this
condition will be satisfied. The two investment funds also have the option to
invest up to an additional $2,500,000 in the Company's common stock. On May 5,
2000, one of the investment funds has agreed to advance $500,000 to the Company.
Repayment of the advance is due not later than May 27, 2000. Additional
information about this financing is set forth in the amendment to
4
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Schedule TO and Supplement No. 1 to the Offering Circular filed with the
Securities and Exchange Commission.
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 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
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 is has disclosed all required information
relative to Year 2000 issues relating to its business and operations.
FORWARD-LOOKING STATEMENTS
This Form 10-QSB 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-QSB which address activities, events or development 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 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 of developments will conform with the Company's 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; competition in the high technology area; 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-QSB 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.
5
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PLAN OF OPERATIONS
Management estimates that the cash flow from operations over the
next 12 months, as well as the proceeds from agreements with Augustine Fund,
L.P. and The Shaar Fund, Ltd. will be sufficient to continue the Company's
operations and to cover its operational expenses. Nevertheless, the Company
reserves the right to raise additional proceeds or incur debt or take such other
actions to expand or sustain its operations.
The Company does plan to continue to make material investments into
its products research and development. The Company does anticipate making
material purchases of facilities and equipment. The Company anticipates
increasing its number of employees over the next 12 months to include clerical
and other administrative services, sales and tech personnel.
The historical background and general description of business is
more particularly set out in the last filed 10-KSB/A Report for the Company,
which was filed on April 12, 2000 as of December 31, 1999. A copy of this filing
or other filings to date under the Securities Act of 1934 by the Company will be
made available by the Company to any shareholder requesting the same, or to
other interested parties. All filed documents of the Company may further be
retrieved "on line" through the Internet at the SEC homepage at:
http://www.sec.gov.
Until the Company achieves a sustained level of profitability, it
must be considered a start-up entity. The Company remains dependent on
continuing to obtain financing for cash flows to meet certain operating expenses
and no assurance of financial success or economic survival of the Company can be
assured during this period.
It should also be noted that as a start up entity, the Company has
and will necessarily continue to incur certain types of start up costs,
including costs related to the commencement of business, legal and accounting
fees, initial filing fees, and advertising and marketing fees which may not
constitute ongoing fees; or, if ongoing, may not be incurred at the same level
or percentage of revenues as experienced in the initial start-up period.
Management's general discussion of operations is limited by and
should be considered within the context of the actual Financial Statements and
Notes attached thereto and incorporated as part of Item 1 above.
PART II
Item 1. Legal Proceedings.
On December 9, 1999, the Company was advised that Peter Stazzone
intended to bring a lawsuit against the Company and certain of the Company's
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
6
<PAGE> 7
Action"). The complaint for the Stazzone Action alleges one count of 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"). Under the INS Action, INS is seeking actual
and punitive damages for the rescission of the merger transaction. 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 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. As of the date of this 10-QSB, the Company intended to file a
reply stating that the Amended Complaint fails to name all of the shareholders.
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. The Company
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, the Company 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 2. Changes in Securities and Use of Proceeds.
On January 18, February 15, March 15, and March 29, 2000, the
Company issued 50,000, 86,000, 50,000, and 200,000 shares of Common Stock,
respectively, upon the exercise of warrants at the exercise price of $1.00 per
share for gross proceeds of $386,000, which were allocated to the general
operating fund. The shares were not registered under the Securities Exchange Act
of 1934 and were issued in reliance upon an exemption under Rule 506 of the
Securities Act of 1933.
On January 25, 2000, the Company issued 75,000 shares of Common
Stock upon the exercise of warrants at the exercise price of $.9875 per share
for gross proceeds of $75,062.50, which were allocated to the general operating
fund. The shares were not registered under the Securities Exchange Act of 1934
and were issued in reliance upon an exemption under Rule 506 of the Securities
Act of 1933.
On February 25, the Company executed a Consultant/Employee Stock
Compensation Plan for the registration of 300,000 shares of Common Stock to be
issued as a payment to consultants listed on Form S-8, which was filed with the
Securities Exchange Commission on March 3, 2000 and incorporated by reference.
7
<PAGE> 8
On February 28, 2000, the Company approved the terms of a Tender
Offer to the holders of the outstanding investment Units. This commenced on
April 20, 2000 and was made in reliance upon an exemption under Rule 506 of the
Securities Exchange Act of 1933. Additionally, the Company approved changes to
the 2000 Stock Option Plan, which was attached as an exhibit to the 10KSB/A
filed on April 12, 2000 and is incorporated by reference.
On May 5, 2000, the Company created Series B Senior Convertible
Preferred Stock. The preferences, limitations and relative rights are described
in the attached Item 3.(i).6 and incorporated by this reference.
Item 5. Other Information.
On March 1, 2000, Julie J. Bahavar began serving as Controller
and Chief Accounting Officer. In April, J. Michael Scott began serving as
the Vice President of Sales & Marketing.
On March 15, 2000, the Company retained Jennings, Strouss & Salmon,
P.L.C., Phoenix, Arizona, as legal counsel.
On March 15, 2000, the Company issued a press release reporting the
results of its Valentine's Day Beta testing program. Investors as well as
potential customers and other interested persons participated in the testing of
the Company's gateways in several US and international locations. Participants
were asked to evaluate the calls. Of the responses received, 98% gave the
highest rating to the ease of use and quality of the Company's Internet Protocol
telephony system.
On March 27, 2000, the Company issued a press release reporting the
commissioning of six additional gateways, on-line registration and the growing
number of staff.
On March 30, 2000, Condor Worldwide, Ltd. waived its rights to any
shares of the Company's stock as described in the Amendment made July 29, 1998
to the Consulting Agreement made November 10, 1997 between the Company and
Condor Worldwide, Ltd., which is shown in Exhibit 10.20 in the 10SB filed
November 3, 1999 and incorporated by reference.
On May 5, 2000, Barbara S. Will, Anthony K. Welch and James K.
Howson, in their individual capacities, and IPVoice Communications, Inc. and
Condor Worldwide Ltd., assigned all of the intellectual property in Multicom
Business Management Software, a telecommunications software program, which uses
an Internet interface with the public telephone system and provides real time
billing, administration and control of the long distance telephone calls,
including any and all modifications and future improvements, to the IPVoice.com,
Inc. Barbara S. Will, Anthony K. Welch, and James K. Howson constitute all the
members of the board of IPVoice Communications, Inc. James K. Howson is the
Chairman and CEO of Condor Worldwide, Ltd.
Item 6. Exhibits.
(a) The exhibits required to be filed herewith by Item 601 of Regulation S-B, as
described in the following index of exhibits, are incorporated herein by
reference, as follows:
8
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<CAPTION>
Exhibit No. Description
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3.(i).5 * Certificate of Correction completing the description of the
Senior Convertible Preferred Shares listed in the Amendment to
the Articles of Incorporation filed on April 19, 1999.
3.(i).6 * Certificate of Amendment of the Articles of Incorporation
designating the preferences, limitations and relative rights
of Series B Preferred Stock.
10.36 [1] Agreement dated February 16, 2000 with Delano Group
Securities.
10.43 * Agreement dated March 30, 2000 with Condor Worldwide, Ltd.
10.44 * Promissory Note dated May 5, 2000, Stock Escrow Agreement, and
Pledge and Security Agreement.
10.45 * Agreement dated May 5, 2000 with Condor Worldwide, Ltd., James
K. Howson, Anthony Welch, Barbara Will and IPVoice.com.
27.1 * Financial Data Schedule
</TABLE>
[1] Previously filed with the Company's Form 10KSB/A for the period ending
December 31, 1999.
* Filed herewith.
(b) No Reports on Form 8-K were filed during the quarter ended March 31, 2000.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date May 12, 2000 IP Voice.Com, Inc. (Registrant)
/s/ Barbara S. Will
---------------------------------
Barbara S. Will
Director, President and Chief
Operating Officer
/s/ James Howson
---------------------------------
James Howson
Chairman, Chief Executive Officer
/s/ Julie Bahavar
---------------------------------
Julie Bahavar
Controller and Chief Accounting
Officer
[Form 10QSB - 3/31/00]
9
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IPVOICE.COM, INC.
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Balance Sheets (Unaudited) ............................... F-2
Consolidated Statements of Operations (Unaudited) ..................... F-3
Consolidated Statements of Stockholders' Deficiency (Unaudited) ....... F-4
Consolidated Statements of Cash Flows (Unaudited) ..................... F-5
Notes to Consolidated Financial Statements ............................ F-6
</TABLE>
F-1
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IPVOICE.COM, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
------------------------------------
ASSETS Unaudited
<S> <C> <C>
CURRENT ASSETS
Cash $ 114,170 $ 98,592
Certificate of deposit - restricted 25,514 25,205
Accounts receivable 48,100 108,100
Inventory 9,450 7,586
Prepaid expenses and deposits 475,566 16,865
-------------------------------
Total current assets 672,800 256,348
-------------------------------
FIXED ASSETS
Computer equipment 369,961 369,619
Office equipment 30,043 19,019
Furniture & fixtures 40,537 29,445
-------------------------------
Sub total property & equipment 440,541 418,083
Less accumulated depreciation (62,837) (40,528)
-------------------------------
Total property & equipment 377,704 377,555
-------------------------------
Total Assets $ 1,050,504 $ 633,903
===============================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts Payable
Trade $ 141,971 $ 326,524
Officer 64,148 17,403
Related party 65,419 40,896
Accrued payroll taxes 328 1,005
Accrued interest - stockholders 11,398 12,690
Deferred revenue 9,643 7,821
-------------------------------
Total current liabilities 292,907 406,339
-------------------------------
LONG-TERM LIABILITIES
Notes payable 1,145,400 1,145,400
-------------------------------
Total long-term liabilities 1,145,400 1,145,400
-------------------------------
Total liabilities 1,438,307 1,551,739
-------------------------------
STOCKHOLDERS' DEFICIENCY
Senior convertible preferred stock, $.001 par value, authorized 10,000,000 shares 1 1
1,150 and 0 issued and outstanding shares
Common stock, $.001 par value, authorized 50,000,000 outstanding; 17,183,758 17,184 16,423
and 16,422,758 issued and outstanding shares
Additional paid-in capital 2,860,320 1,570,240
Deficit accumulated in the development stage (3,265,308) (2,504,500)
-------------------------------
Total stockholders' deficiency (387,803) (917,836)
-------------------------------
Total Liabilities and Stockholders' Deficiency $ 1,050,504 $ 633,903
===============================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-2
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IPVOICE.COM, INC.
(A Development Stage Enterprise
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
February 19, 1997
Three Months Ended March 31, (Inception)
--------------------------------- through
2000 1999 March 31, 2000
--------------------------------- ---------------
Unaudited Unaudited Unaudited
<S> <C> <C> <C>
NET SALES $ 97,628 $ 0 $ 460,161
COST OF SALES 94,526 0 399,960
--------------------------------- ---------------
Gross Profit 3,102 0 60,201
--------------------------------- ---------------
OPERATING EXPENSES
Compensation
Officers 70,167 66,097 554,520
Other 40,620 14,320 153,476
Consulting 9,367 0 525,482
Consulting - related party 318,594 122,393 640,885
General and administrative 249,800 39,485 1,131,258
Research and development 28,160 0 125,563
Organizational expense - related party 0 14,000 14,000
Depreciation and amortization 22,309 2,430 62,837
--------------------------------- ---------------
Total operating expenses 739,017 258,725 3,208,021
--------------------------------- ---------------
Loss from operations (735,915) (258,725) (3,147,820)
--------------------------------- ---------------
OTHER INCOME (EXPENSE)
Interest expense (26,067) 0 (90,454)
Interest income 1,174 0 21,498
Write-off of receivable 0 0 (48,532)
--------------------------------- ---------------
Total other income (expense) (24,893) 0 (117,488)
--------------------------------- ---------------
Net Loss (760,808) (258,725) (3,265,308)
================================= ============
Loss per common share $ (0.05) $ (0.02)
Number of weighted average common
shares outstanding 16,646,417 12,950,742
=================================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
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IPVOICE.COM, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
Par Value
---------------------------- Additional
Number of Shares Preferred Common Paid-in
Preferred Common Stock Stock Capital
<S> <C> <C> <C> <C> <C>
BEGINNING BALANCE,
February 19, 1997 (Inception) 0 0 $ 0 $ 0 $ 0
2/97 - founder's serv. ($0.001/sh.) 0 9,000,000 0 9,000 0
3/97 - cash ($0.01/sh.) 0 1,400,000 0 1,400 12,600
Net loss 0 0 0 0 0
---------------------------------------------------------------------------
BALANCE, 12/31/97 0 10,400,000 0 10,400 12,600
3/19 - donated-rel. party $0.001/sh.) 0 (9,000,000) 0 (9,000) 9,000
3/19 - acquisition ($0.001) 0 9,000,000 0 9,000 (9,000)
3/20 - cash received 0 0 0 0 0
2nd qtr, - cash ($1.00/sh.) 0 144,000 0 144 143,856
3rd qtr. - cash ($1.00/sh.) 0 10,000 0 10 9,990
3rd qtr. - cash ($0.75/sh.) 0 53,333 0 53 39,947
3rd qtr. - cash ($0.50/sh.) 0 20,000 0 20 9,980
3rd qtr. - cash ($0.25/sh.) 0 100,000 0 100 24,900
3rd qtr. - cash $0.10/sh.) 0 627,000 0 627 62,073
3rd qtr. - services ($0.10/sh.) 0 473,000 0 473 46,827
4th qtr. - cash ($0.15/sh.) 0 396,666 0 397 56,103
4th qtr. - services ($0.15/sh.) 0 275,000 0 275 40,975
4th qtr. - cash ($0.19/sh.) 0 80,000 0 80 14,920
Net loss 0 0 0 0 0
---------------------------------------------------------------------------
BALANCE 12/31/98 0 12,578,999 0 12,579 465,171
1st qtr. - cash ($0.22/sh.) 0 687,499 0 687 149,313
1st qtr. - services ($0.87/sh.) 0 493,760 0 494 429,070
2nd qtr. - cash received 0 0 0 0 0
2nd qtr. - cash ($4.00/sh.) 1,150 0 1 0 4,599
2nd qtr. - cash ($0.15/sh.) 0 2,005,000 0 2,005 293,995
3rd qtr. - cash ($0.40/sh.) 0 437,500 0 438 174,562
3rd qtr. - cash received 0 0 0 0 0
3rd qtr. - services ($1.00) 0 10,000 0 10 9,990
4th qtr. - services ($0.21) 0 210,000 0 210 43,540
Net loss 0 0 0 0 0
---------------------------------------------------------------------------
BALANCE 12/31/99 1,150 16,422,758 1 16,423 1,570,240
1/1/2000. - cash ($1.00/sh.) 0 50,000 0 50 49,950
01/1/2000. - cash ($1.00/sh.) 0 86,000 0 86 85,914
02/01/2000. - cash ($.99/sh.) 0 75,000 0 75 73,988
03/15/2000. - services/deposits ($2.92/sh.) 0 250,000 0 250 730,528
03/15/2000. - services ($2.00/sh.) 0 25,000 0 25 49,975
03/15/2000. - services ($2.00/sh.) 0 25,000 0 25 49,975
03/29/2000. - cash ($1.00/sh.) 0 200,000 0 200 199,800
03/15/2000. - cash ($1.00/sh.) 0 50,000 0 50 49,950
Net loss 0 0 0 0 0
---------------------------------------------------------------------------
BALANCE, 3/31/2000, UNAUDITED 1,150 17,183,758 $ 1 $ 17,184 $ 2,860,320
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
Deficit
Accumulated
Stock During the Total
Subscription Development Stockholders'
Receivable Stage Deficiency
BEGINNING BALANCE,
<S> <C> <C> <C>
February 19, 1997 (Inception) $ 0 $ 0 $ 0
2/97 - founder's serv. ($0.001/sh.) 0 0 9,000
3/97 - cash ($0.01/sh.) (12,274) 0 1,726
Net loss 0 (22,981) (22,981)
-------------------------------------------------------
BALANCE, 12/31/97 (12,274) (22,981) (12,255)
3/19 - donated-rel. party $0.001/sh.) 0 0 0
3/19 - acquisition ($0.001) 0 0 0
3/20 - cash received 12,274 0 12,274
2nd qtr, - cash ($1.00/sh.) 0 0 144,000
3rd qtr. - cash ($1.00/sh.) 0 0 10,000
3rd qtr. - cash ($0.75/sh.) 0 0 40,000
3rd qtr. - cash ($0.50/sh.) 0 0 10,000
3rd qtr. - cash ($0.25/sh.) 0 0 25,000
3rd qtr. - cash $0.10/sh.) (62,700) 0 0
3rd qtr. - services ($0.10/sh.) 0 0 47,300
4th qtr. - cash ($0.15/sh.) 0 0 56,500
4th qtr. - services ($0.15/sh.) 0 0 41,250
4th qtr. - cash ($0.19/sh.) 0 0 15,000
Net loss 0 (507,685) (507,685)
-------------------------------------------------------
BALANCE 12/31/98 (62,700) (530,666) ($ 115,616)
1st qtr. - cash ($0.22/sh.) 0 0 150,000
1st qtr. - services ($0.87/sh.) 0 0 429,564
2nd qtr. - cash received 60,000 0 60,000
2nd qtr. - cash ($4.00/sh.) 0 0 4,600
2nd qtr. - cash ($0.15/sh.) 0 0 296,000
3rd qtr. - cash ($0.40/sh.) 0 0 175,000
3rd qtr. - cash received 2,700 0 2,700
3rd qtr. - services ($1.00) 0 0 10,000
4th qtr. - services ($0.21) 0 0 43,750
Net loss 0 (1,973,834) (1,973,834)
-------------------------------------------------------
BALANCE 12/31/99 0 (2,504,500) (917,836)
1/1/2000. - cash ($1.00/sh.) 0 0 50,000
01/1/2000. - cash ($1.00/sh.) 0 0 86,000
02/01/2000. - cash ($.99/sh.) 0 0 74,063
03/15/2000. - services/deposits ($2.92/sh.) 0 0 730,778
03/15/2000. - services ($2.00/sh.) 0 0 50,000
03/15/2000. - services ($2.00/sh.) 0 0 50,000
03/29/2000. - cash ($1.00/sh.) 0 0 200,000
03/15/2000. - cash ($1.00/sh.) 0 0 50,000
Net loss 0 (760,808) (760,808)
-------------------------------------------------------
BALANCE, 3/31/2000, UNAUDITED $ 0 ($3,265,308) ($ 387,803)
========================================================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE> 14
IPVOICE.COM, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
Three Months February 19, 1997
Ended March 31, (Inception)
------------------------- through
2000 1999 March 31, 2000
------------------------- --------------
Unaudited Unaudited Unaudited
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(760,808) $(258,725) $(3,265,308)
Adjustments to reconcile net loss to net cash used by
Operating activities:
Stock issued for services/deposits - related party 730,778 120,264 862,392
Stock issued for services - other 100,000 0 549,250
Depreciation 22,309 2,430 62,837
Interest credited to certificate of deposit (309) 0 (514)
Changes in operating assets and liabilities:
(Increase) decrease in inventory (1,864) 27,582 (9,450)
(Increase) decrease in accounts receivable 60,000 0 (48,100)
(Increase) decrease in prepaid expenses (458,701) 0 (475,566)
Increase (decrease) in accounts payable - trade (184,553) (28,628) 141,971
Increase (decrease) in accounts payable - officers 46,745 (6,845) 64,148
Increase (decrease) in accounts payable - related party 24,523 4,936 65,419
Increase (decrease) in deferred revenue 1,822 0 9,643
Increase (decrease) in accrued payroll taxes (677) 31,205 328
Increase (decrease) in accrued interest (1,292) 0 11,398
------------------------- -----------
Net cash used by operating activities (422,027) (107,781) (2,031,552)
------------------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase certificate of deposit 0 0 (25,000)
Purchase property and equipment (22,458) (16,360) (440,541)
------------------------- -----------
Net cash used by investing activities (22,458) (16,360) (465,541)
------------------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 0 0 1,145,400
Common stock issued for cash 460,063 150,000 1,386,289
Preferred stock issued for cash 0 0 4,600
Proceeds stock subscription receivable 0 0 74,974
------------------------- -----------
Net cash provided by financing activities 460,063 150,000 2,611,263
------------------------- -----------
Net increase (decrease) in cash and equivalent 15,578 25,859 114,170
CASH, beginning of period 98,592 908 0
------------------------- -----------
CASH, end of period $ 114,170 $ 26,767 $ 114,170
========================= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash $ 27,359 $ 0 $ 79,056
========================= ===========
NON-CASH FINANCING ACTIVITIES:
Stock subscription receivable $ 0 $(175,000) $ 0
========================= ===========
Donated capital - related party $ 0 $ 0 $ 9,000
========================= ===========
Inventory transferred to property and equipment $ 0 $ 0 $ 152,980
========================= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE> 15
IPVOICE.COM, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(information for the three-month period
ending March 31, 2000 and 1999 is unaudited)
(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 since, as provided by the service provider in reports
detailing usage by activated PIN codes. Since 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.
j) INTERIM FINANCIAL INFORMATION. The financial statements for the three
months ended March 31, 2000 and 1999 are unaudited and include all
adjustments, which in the opinion of management are necessary for fair
presentation, and such adjustments are of a normal and recurring nature.
The results for the three months are not indicative of a full year result.
(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 17,183,758
and 16,422,758 shares of common stock issued and outstanding at March 31,
2000 and December 31, 1999, respectively. The Company has 1,150 and 0
shares of senior convertible preferred stock issued and outstanding at
March 31, 2000 and December 31, 1999, 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.
F-6
<PAGE> 16
IPVOICE.COM, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) STOCKHOLDERS' EQUITY (CONTINUED)
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.) 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.
In first quarter 2000, an existing shareholder exercised warrants for
386,0000 shares of common stock for $386,000 cash. In the first quarter
2000 an existing 506 investor exercised his warrants for 75,000 shares of
common stock by tendering $74,063 cash. In the first quarter the Company
issued 300,000 shares of common stock for services/deposits, valued at the
current market rate of $830,778, to two entities one related party
($730,778) and the other unrelated ($100,000).
(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 $3,265,308, 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 March 31,
2000, is $1,306,000, 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 $1,306,000, as the Company has no history of
profitable operations.
The significant components of the net deferred tax asset as March 31, 2000
are:
<TABLE>
<S> <C>
Net operating losses $ 1,306,000
-----------
Valuation allowance (1,306,000)
-----------
Net deferred tax asset $ 0
===========
</TABLE>
F-7
<PAGE> 17
IPVOICE.COM, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) GOING CONCERN As shown in the accompanying consolidated financial
statements, the Company has incurred a net loss of $3,265,308 since
inception. At March 31, 2000, the Company reflects working capital of
approximately $380,000 and stockholders' deficiency of approximately
$388,000. 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 March 31, 2000, the Company owed two of its officers
$64,148 for reimbursement of expenses paid on behalf of the Company. This
amount is represented in Accounts Payable - Officer. At March 31, 2000,
the Company owed a shareholder $65,419 for consulting services performed
on behalf of the Company. This amount is represented in Accounts payable -
related party. Total consulting fees incurred by a shareholder during this
quarter amounted to $318,594. Consulting fees in the amount of $22,500
were paid to an officer.
(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.
TENDER OFFER. In April 2000 a tender offer was made to Senior Preferred
Convertible Stockholders the option of converting each unit to: (1)
Converting all of the units into 17,832 shares of common stock, (2)
Converting a portion of the units to shares and amend the notes or (3)
retain the units and not accept either offer.
(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-8
<PAGE> 18
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. 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.
d) LAWSUITS In December 1999, SatLink filed a lawsuit alleging breach of
contract as a result of the rescission 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
rescission 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) 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.
(10) SUBSEQUENT EVENTS - GOING CONCERN The Company is seeking to reduce its
outstanding debt obligations by converting them to equity interests in the
Company. In this respect, the Company commenced a tender offer on April 20,
2000 to exchange outstanding investment Units for shares of the Company's
common stock. Each Unit consists of a $24,900 promissory note, 25 shares of the
Company's Senior Convertible Preferred Stock and a warrant to purchase 18,750
shares of the Company's common stock. In the tender offer, the Company is
offering 17,832 shares of its common stock in exchange for each Unit. The
tender offer is scheduled to expire at close of business on May 19, 2000. More
information about the tender offer is
F-9
<PAGE> 19
contained in the Schedule TO and Offering Circular filed with the Securities and
Exchange Commission on April 20, 2000 and amended May 5, 2000.
In addition, the Company is seeking additional capital through private sales of
its equity securities. In this respect, it has entered into agreements with
Augustine Fund, L.P. and The Shaar Fund, Ltd., two private investment funds, for
the sale of 2,500 shares of Series B Convertible Preferred Stock and Warrants
to purchase 250,000 shares of the Company's common stock for an aggregate cash
investment of $2,500,000. The investment is scheduled to fund on May 22, 2000
subject only to the condition that at least 23 of the 46 outstanding investment
Units are tendered to and accepted by the Company by the conclusion of the
current tender offer. The Company cannot be assured that this condition will be
satisfied. The two investment funds also have the option to invest up to an
additional $2,500,000 in the Company's common stock. On May 5, 2000, one of the
investment funds agreed to advance $500,000 to the Company. Repayment of the
advance is due not later than May 27, 2000. Additional information about this
financing is set forth in the amendment to Schedule TO and Supplement No. 1 to
the Offering Circular filed with the Securities and Exchange Commission.
F-10
<PAGE> 20
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C> <C>
3.(i).5 * Certificate of Correction completing the description of the
Senior Convertible Preferred Shares listed in the Amendment to
the Articles of Incorporation filed on April 19, 1999.
3.(i).6 * Certificate of Amendment of the Articles of Incorporation
designating the preferences, limitations and relative rights
of Series B Preferred Stock.
10.36 [1] Agreement dated February 16, 2000 with Delano Group
Securities.
10.42 [1] Amended 2000 Stock Option Plan.
10.43 * Agreement dated March 30, 2000 with Condor Worldwide, Ltd.
10.44 * Promissory Note dated May 5, 2000 and Pledge and Security
Agreement.
10.45 * Agreement dated May 5, 2000 with Condor Worldwide, Ltd., James
K. Howson, Anthony Welch, Barbara Will and IPVoice.com.
27.1 * Financial Data Schedule
[1] Previously filed with the Company's Form 10KSB/A for the period ending
December 31, 1999.
* Filed herewith.
</TABLE>
<PAGE> 1
EXHIBIT 3.(i).5
[NEVADA STATE SEAL]
DEAN HELLER
SECRETARY OF STATE
101 NORTH CARSON STREET, SUITE 3
CARSON CITY, NEVADA 89701-4786
(775) 684 5708
CERTIFICATE OF
CORRECTION
(PURSUANT TO NRS 78.0295 AND
80.007)
IMPORTANT: READ ATTACHED INSTRUCTIONS BEFORE COMPLETING FORM.
OFFICE USE ONLY
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MARCH 30, 2000
NO. C3312-97
/S/ DEAN HELLER
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF CORRECTION
(PURSUANT TO NRS 78.0295 AND 80.007)
- REMIT IN DUPLICATE -
1. The name of the corporation for which correction is being made:
IPVoice.com, Inc.
2. Description of the original document for which correction is being made:
Certificate of Amendment of Articles of Incorporation
3. Filing date of the original document: 4/19/99.
4. Description of the incorrect statement and the reason it is incorrect or
the manner in which the execution or other formal authentication was
defective.*
The reason for the incorrect statement is that mistakenly the statement set
forth on the attached Exhibit A was inadvertently incomplete in that it did
not contain the description of the Senior Convertible Preferred shares
which was adopted at the same time as the remainder of the amendment.
5. Correction of the incorrect statement or defective execution or
authentication:
The statement set forth on the attached Exhibit B corrects the previous
incomplete statement.
6. Signature:
/s/ Barbara S. Will President March 30, 2000
----------------------------- ---------------------- --------------
Signature of Corporate Officer Title of Officer Date
* A reason for the incorrect statement, execution or other authentication must
be provided.
IMPORTANT: Failure to include any of the above information and remit the proper
fees may cause this filing to be rejected.
<PAGE> 2
EXHIBIT A TO CERTIFICATE OF CORRECTION
The following is the statement to be corrected:
"Article 3 is hereby reaffirmed and re-ratified except as follows:
3. Shares (number of shares the corporation is authorized to issue)
The maximum number of shares of stock that this corporation is
authorized to have outstanding at any one time is 50,000,000 shares of common
stock having $.001 par value per share and 10,000,000 shares of preferred stock
having $.001 par value per share. The preferred shares may be divided into
series and will have the preferences, limitations and relative rights determined
by the Board of Directors."
<PAGE> 3
EXHIBIT B TO CERTIFICATE OF CORRECTION
The following is the corrected statement:
"Article 3 is hereby reaffirmed and re-ratified except as follows:
3. Shares: (number of shares the corporation is authorized to issue)
The maximum number of shares of stock that this corporation is
authorized to have outstanding at one time is 50,000,000 shares of common stock
having $.001 par value per share and 10,000,000 shares of preferred stock having
$.001 par value per share. The preferred shares may be divided into series and
will have the preferences, limitations and relative rights as set forth in these
articles or as determined by the Board of Directors and set forth in a
certificate of designations.
Senior Convertible Preferred Shares. Up to 10,000 shares of authorized
and unissued preferred shares $.001 par value of the corporation are hereby
designated as a series of "Senior Convertible Preferred Shares" with the
following rights, preferences, powers, privileges and restrictions,
qualifications and limitations:
(a) Voting Rights. The holders of Senior Convertible Preferred Shares
shall have no right to vote on any matters except as provided herein or upon
such matters as may be required by the provisions of the Nevada General
Corporation Law.
(b) Dividends. The holders of Senior Convertible Preferred Shares shall
not be paid any dividend in respect of such shares.
(c) Conversion. The shares of Senior Convertible Preferred Shares shall
be issued as part of units, each of which shall include up to 25 shares of
Senior Convertible Preferred Shares, the corporation's promissory note (a "Note"
and collectively, the "Notes") and such other securities as the corporation may
determine. In the event that the corporation shall default in the payment of any
amounts due under the Notes and shall not cure such default within a reasonable
time, all outstanding shares of Senior Convertible Preferred Shares shall
automatically be converted into shares of the corporation's common stock $.001
par value. At the time of such conversion, the aggregate number of shares of
common stock issuable upon conversion shall, upon issuance, equal 51% of sum of
(i) the then issued and outstanding shares of common stock, and (ii) the shares
of common stock which would have been issued and outstanding if all then
outstanding warrants and options to acquire common stock had then been
exercised. If less than all the originally issued Senior Convertible Preferred
Shares remain outstanding at the time of conversion, the percentage of shares of
common stock issuable upon conversion shall be reduced proportionately. In the
event of a conversion as provided herein, the corporation shall promptly call a
special meeting of the holders of common stock for the purpose of permitting the
former holders of Senior Convertible Preferred Shares to elect such number of
additional members of the Board of Directors of the corporation as shall
represent a majority of the Board of Directors (if all the originally issued
Senior Convertible Preferred Shares have been converted) or such lesser number
of additional directors as will reflect such holders percentage of
<PAGE> 4
ownership of common stock (if less than all the originally issued Senior
Convertible Preferred Shares were outstanding at the time of conversion).
(d) Redemption. The Senior Convertible Preferred Shares in a unit shall
be redeemable by the corporation, at no cost to the corporation, at the time the
Note in that unit is paid in full.
(e) Liquidation. Upon the liquidation, dissolution or winding up of the
corporation, whether voluntary or involuntary, prior to the conversion or
redemption of the Senior Convertible Preferred Shares, before any distribution
may be made with respect to the common stock, the holders of the Senior
Convertible Preferred Shares shall be entitled to payment of the Notes. Upon
full payment of the Notes, the shares of Senior Convertible Preferred Shares
shall be deemed to have been redeemed by the corporation. If there are not
sufficient assets available to pay the Notes in full, the unpaid balance of the
Notes shall be deemed to have been converted into shares of common stock on the
same basis as provided in (c) above.
(f) Amendments. The provisions of this Article 3, insofar as they
describe the Senior Convertible Preferred Shares, shall not be amended without
the approval by the holders of at least a majority of the then outstanding
shares of Senior Convertible Preferred Shares
(g) Ranking. The corporation is authorized, without the approval of the
holders of the Senior Convertible Preferred Shares, to issue other series of
preferred stock which rank on a parity with the Senior Convertible Preferred
Shares with respect to rights on liquidation, winding up and dissolution and
which rank senior to the Senior Convertible Preferred Shares with respect to
dividend rights."
<PAGE> 1
EXHIBIT 3.(i).6
[NEVADA STATE SEAL] DEAN HELLER
Secretary of State FILED #C3312-97
101 North Carson Street, Suite 3 MAY 5, 2000
Carson City, Nevada 89701-4786 IN THE OFFICE OF
(775) 684-5708 /s/ Dean Heller
DEAN HELLER
SECRETARY OF STATE
CERTIFICATE OF
AMENDMENT
(PURSUANT TO NRS 78.385 AND
78.390)
IMPORTANT: READ ATTACHED INSTRUCTIONS BEFORE COMPLETING FORM.
- --------------------------------------------------------------------------------
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
FOR NEVADA PROFIT CORPORATIONS
(PURSUANT TO NRS 78.385 AND 78.390 - AFTER ISSUANCE OF STOCK)
-REMIT IN DUPLICATE-
1. Name of corporation: IPVOICE.COM. INC., a Nevada corporation
2. The articles have been amended as follows (provide article numbers, if
available):
Attached hereto as Exhibit A is the text of a resolution of the Board of
Directors of the Corporation determining the preferences, limitation and
relative rights of Series W Preferred Stock, which was duly adopted by the Board
of Directors of the Corporation.
3. The vote by which the stockholders holding shares in the corporation
entitling them to exercise at least a majority of the voting power, or such
greater proportion of the voting power as may be required in the case of a vote
by classes or series, or as may be required by the provisions of the articles of
incorporation herein voted in favor of the amendments is: N/A.*
4. Signatures (Required):
/s/ Barbara S. Will /s/ [illegible]
- ---------------------------, ----------------------------
President or Vice President and Secretary or Asst. Secretary
* If any proposed amendment would alter or change any preference or any relative
or other right given to any class or series of outstanding shares, then the
amendment must be approved by the vote, in addition to the affirmative vote
otherwise required, of the holders of shares representing a majority of the
voting power of each class or series affected by the amendment regardless of
limitations or restrictions on the voting power thereof.
IMPORTANT: Failure to include any of the above information and remit the proper
fees may cause this filing to be rejected.
<PAGE> 2
CERTIFICATE OF DESIGNATION OF THE RELATIVE RIGHTS
AND PREFERENCES OF THE SERIES B
CONVERTIBLE PREFERRED STOCK
OF
IPVOICE.COM, INC.
It is certified that:
A. The name of the corporation is IPVoice.Com, Inc., a Nevada corporation
(hereinafter the "Company").
B. The certificate of incorporation of the Company, as amended, authorizes the
issuance of Ten Million (10,000,000) shares of Preferred Stock, $.001 par value
per share, and expressly vests in the Board of Directors of the Company the
authority provided therein to issue all of said shares in one or more series and
by resolution or resolutions to establish the designation and number and to fix
the relative rights and preferences of each series to be issued.
C. The Board of Directors of the Company, pursuant to the authority expressly
vested in it, has adopted the following resolutions creating a class of Series B
Preferred Stock:
RESOLVED, that a portion of the Ten Million (10,000,000) authorized
shares of Preferred Stock of the Company shall be designated as a separate
series possessing the rights and preferences set forth below:
1. Designation and Amount. The shares of such series shall have a par
value of $.001 per share and shall be designated as "Series B Preferred Stock"
(the "Series B Preferred Stock") and the number of shares constituting the
Series B Preferred Stock shall be up to 7,500. The Series B Preferred Stock
shall be offered for sale at a purchase price of $1,000 per share (the "Purchase
Price").
2. Dividends. The holders of the outstanding shares of Series B
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors, out of funds legally available therefor, dividends at an
annual rate of seven and one half percent of the Purchase Price. Such dividends
shall be deemed to accrue on the Series B Preferred Stock and be cumulative,
whether or not there are profits, surplus or other funds of the Company legally
available for the payment of dividends. All dividends declared upon the Series B
Preferred Stock shall be declared pro rata per share. If there shall not have
been a sum sufficient for the payment therefor set apart, the deficiency shall
first be paid before any dividend or other distribution shall be paid or
declared and set apart with respect to any other class of the Company's capital
stock, now or hereafter outstanding. All accrued cash dividends shall be
immediately due and payable on the date such shares of Series B Preferred Stock
are converted into shares of Common Stock, par value $.001 per share ("Common
Stock") in accordance with Section 5 hereof, or are redeemed in accordance with
Section 6 hereof. Dividends may be paid in cash or additional shares of Common
Stock of the Company, as may be determined, from time to time, in the sole
discretion of the Board of Directors. The Company shall not be required to pay
any dividends on the outstanding shares of the Series B
-1-
<PAGE> 3
Preferred Stock prior to the Conversion Date and/or Redemption Date (as defined
below) for such shares.
For purposes of this Certificate, unless the context otherwise
requires, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
shares of Common Stock or other equity securities of the Company, or the
purchase or redemption of shares of Common Stock or other equity securities of
the Company (other than redemptions set forth in Section 6 below or repurchases
of Common Stock or other equity securities held by employees or consultants of
the Company upon termination of their employment or services pursuant to
agreements providing for such repurchase) for cash or property payable other
than in shares of Common Stock or other equity securities of the Company.
3. Liquidation, Dissolution or Winding Up
(a) Treatment at Liquidation, Dissolution or Winding Up. In
the event of any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, before any distribution may be made with respect to
Common Stock or any other series of capital stock, holders of each share of
Series B Preferred Stock shall be entitled to be paid out of the assets of the
Company available for distribution to holders of the Company's capital stock of
all classes, whether such assets are capital, surplus, or capital earnings, such
amount equal to the Purchase Price plus all accrued cash dividends
(collectively, the "Liquidation Amount").
(b) If the assets of the Company available for distribution to
its shareholders shall be insufficient to pay the holders of shares of Series B
Preferred Stock the full amount of the Liquidation Amount to which they shall be
entitled, the holders of shares of Series B Preferred Stock shall share ratably
in any distribution of assets according to the amounts which would be payable
with respect to the shares of Series B Preferred Stock held by them upon such
distribution if all amounts payable on or which respect to said shares were paid
in full.
(c) In the event the holders cannot be located by the Company,
funds necessary for such payment shall be set aside by the Company in trust for
the account of holders of the Series B Preferred Stock so as to be available for
such payments. After payment of the Liquidation Amount shall have been made in
full (including funds held in trust pursuant to the preceding sentence), to the
holders of the Series B Preferred Stock, the holders of the Series B Preferred
Stock shall be entitled to no further participation in the distribution of the
assets of the Company, and the remaining assets of the Company legally available
for distribution to its shareholders shall be distributed among the holders of
other classes of securities of the Company in accordance with their respective
terms.
(d) The holders of Series B Preferred Stock shall have no
priority or preference with respect to distributions made by the Company in
connection with the repurchase of shares of Common Stock issued to or held by
employees, directors or consultants upon termination of their employment or
services pursuant to agreements providing for the right of said repurchase
between the Company and such persons.
-2-
<PAGE> 4
4. Voting Rights. Except as otherwise required by law, and except as
set forth in Section 8 of this Certificate, the holders of Series B Preferred
Stock shall not be entitled to vote upon any matter relating to the business or
affairs of the Company or for any other purpose.
5. Conversion Rights for the Series B Preferred Stock; Optional
Purchase of Additional Shares of Common Stock. The holders of Series B Preferred
Stock shall have conversion rights as follows ("Conversion Rights"):
(a) Right to Convert. No shares of Series B Preferred Stock
may be converted prior to the date (the "First Conversion Date") which is the
earlier of (i) the effective date of the registration statement covering the
resale of the shares of Common Stock issuable upon conversion of the Series B
Preferred Stock, and (ii) the one hundred eightieth day after the closing date
(the "Closing Date") of the issuance of the Series B Preferred Stock.
(b) Conversion Rate. Each share of Series B Preferred Stock
may be converted into the number of fully-paid and non-assessable shares of
Common Stock of the Company calculated in accordance with the following formula
("Conversion Rate"):
The number of shares issuable upon conversion of one share of Series B
Preferred Stock shall be determined by dividing the Purchase Price by the
Conversion Price, where:
(i) The Purchase Price is defined in Section 1
hereof; provided that, for purposes of this Section 5(b), in the event that the
Company elects to pay the dividends in additional shares of Common Stock which
have been registered under the Securities Act of 1933, as amended, the dividend
amount per share will be added to the Purchase Price for each such share of
Series B Preferred Stock;
(ii) the Conversion Price equals the lesser of (x)
one hundred ten percent (110%) of the lowest of the Closing Bid Prices (defined
below) for the Common Stock for the five (5) trading days prior to the date of
issuance of the Series B Preferred Stock being converted (the "Maximum Price"),
or (y) seventy five percent (75%) (the "Conversion Percentage") of the average
of the three (3) lowest Closing Bid Prices for the Common Stock for the thirty
(30) consecutive trading days immediately preceding the Conversion Date (as
herein defined), as reported on the National Association of Securities Dealers
OTC Bulletin Board Market (or on such other national securities exchange or
market as the Common Stock may trade at such time); notwithstanding anything in
this paragraph to the contrary, if the registration statement covering the
resale of the shares of Common Stock issuable upon conversion of the Series B
Preferred Stock has not been declared effective within 180 days (the "Due Date")
after the date of issuance of the Series B Preferred Stock, then the Conversion
Percentage shall decrease by two percent (2%) for each month (that is, each
thirty (30) day period beginning on the 30th day after the Due Date) or partial
month in which the said registration statement has not been declared, or does
not remain, effective; if such registration statement has not been declared and
does not remain effective on the date which is one (1) year after the date of
issuance of the Series B Preferred Stock, then the Conversion Percentage shall
be fifty percent (50%);
-3-
<PAGE> 5
(iii) for purposes hereof, the term "Closing Bid
Price" shall mean for any security as of any date, the last closing bid price
for such security on the OTC: Bulletin Board Market as reported by Bloomberg,
L.P., or, if the OTC: Bulletin Board Market is not the principal trading market
for such security, the last closing bid price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, L.P., or, if no last closing bid or trade price is
reported for such security by Bloomberg, L.P., the closing bid price shall be
determined by reference to the closing bid price as reported on the principal
trading market, and if not so reported shall be determined from the average of
the bid prices of any market makers for such security as reported in the "pink
sheets" published by the National Quotation Bureau, Inc. If the closing bid
price cannot be calculated for such security on such date on any of the
foregoing bases, the closing bid price of such security on such date shall be
the fair market value as mutually agreed by the Company and the holders of
two-thirds of the outstanding shares of Series B Preferred Stock.
(c) Forced Conversion. In the event the holders of the Series
B Preferred Stock have not exercised the Conversion Rights set forth herein
within two years after the date of issuance of the Series B Preferred Stock (the
"Final Date"), the Series B Preferred Stock shall automatically be converted as
if the holders had exercised their Conversion Rights on the Final Date. In
addition, in the event the Company closes on a public offering of its shares of
Common Stock at a price per share equal to or greater than two times the Maximum
Price, then at the election of the Company given by written notice, each share
of Series B Preferred Stock shall automatically be converted into shares of
Common Stock on the date ("Offering Conversion Date") which is seven business
days prior to the scheduled closing date of such public offering at the
applicable Conversion Rate above and the Offering Conversion Date shall be
deemed the Conversion Date with respect to such shares.
(d) Capital Reorganization or Reclassification. If the Common
Stock issuable upon the conversion of the Series B Preferred Stock shall be
changed into the same or different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification, stock split, stock
dividend, or similar event, then and in each such event, the holder of each
share of Series B Preferred Stock shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities and
property receivable upon such capital reorganization, reclassification or other
change which such holder would have received had its shares of Series B
Preferred Stock been converted immediately prior to such capital reorganization,
reclassification or other change.
(e) Capital Reorganization, Merger or Sale of Assets. If at
any time or from time to time there shall be a capital reorganization of the
Common Stock (other than a subdivision, combination, reclassification or
exchange of shares provided for in Section 5(d) above), or a merger or
consolidation of the Company with or into another corporation, or the sale of
all or substantially all of the Company's properties, stock and/or assets to any
other person or entity (any of which events is herein referred to as a
"Reorganization"), then as a part of such Reorganization, provision shall be
made so that the holders of the Series B Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series B Preferred Stock, the number
of shares of stock or other securities or property of the Company, or of the
successor corporation resulting from such Reorganization, to which such holder
would have been entitled if such holder had converted its shares of Series B
Preferred Stock immediately prior to such Reorganization. In any such case,
appropriate adjustment
-4-
<PAGE> 6
shall be made in the application of the provisions of this Section 5 with
respect to the rights of the holders of the Series B Preferred Stock after the
Reorganization, to the end that the provisions of this Section 5 (including
adjustment of the number of shares issuable upon conversion of the Series B
Preferred Stock) shall be applicable after that event in as nearly equivalent a
manner as may be practicable.
(f) Certificate as to Adjustments; Notice by Company. Upon the
occurrence of each adjustment or readjustment of the Conversion Price of the
Series B Preferred Stock, the Company, at its expense, shall promptly compute
such adjustment or readjustment in accordance with the terms hereof and prepare
and furnish to each holder of such Series B Preferred Stock a certificate
executed by the president and chief financial officer (or in the absence of a
person designated as the chief financial officer, by the treasurer) setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment are based. The Company shall, upon written
request at any time of any holder of Series B Preferred Stock, furnish or cause
to be furnished to such holder a certificate setting forth (A) the Conversion
Price at the time in effect, and (B) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of a share of Series B Preferred Stock.
(g) Exercise of Conversion Rights. Holders of Series B
Preferred Stock may exercise their right to convert the Series B Preferred Stock
by telecopying an executed and completed notice to the Company and delivering
the original notice in the form annexed hereto as Exhibit A ("Notice of
Conversion") and the certificate representing the Series B Preferred Stock (once
fully converted, unless specifically requested otherwise by the Company) by
express courier. Each business date on which a Notice of Conversion is
telecopied to and received by the Company in accordance with the provisions
hereof shall be deemed a "Conversion Date." Such holders of Series B Preferred
Stock which have sent a Notice of Conversion to the Company shall, if requested
by the Company, deliver the originally executed Series B Preferred Stock
certificates to the Company within three business days from the Conversion Date.
The Company will transmit, or instruct its transfer agent to transmit, the
certificates representing shares of Common Stock issuable upon conversion of any
share of Series B Preferred Stock (together with the certificates representing
the Series B Preferred Stock not so converted, if the prior certificate was
delivered to the Company) to the holder thereof via express courier, by
electronic transfer or otherwise, within three business days after the Company
has received the facsimile Notice of Conversion. In addition to any other
remedies which may be available to the holders of shares of Series B Preferred
Stock, except as otherwise stated in the Purchase Agreement, in the event that
the Company fails to deliver, or has failed to contact its transfer agent within
two business days to deliver, such shares of Common Stock within such three
business day period, the holder will be entitled to revoke the relevant Notice
of Conversion by delivering a notice to such effect to the Company whereupon the
Company and the holder shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion. The Notice of
Conversion and Series B Preferred Stock certificates representing the portion of
the Series B Preferred Stock converted shall be delivered as follows:
: IPVoice.Com, Inc.
5050 North 19th Avenue
-5-
<PAGE> 7
Suite 416
Phoenix, Arizona 85015
Telephone: 602.335.1231
Facsimile: 602.335.1577
Attention: Ms. Barbara Will, President
(h) Optional Purchase of Additional Common Stock. On any
Conversion Date relating to a conversion of Series B Preferred Stock by a
holder, the converting holder shall have the option (the "Option") to purchase
one (1) additional share of Common Stock for each share of Common Stock issuable
as a result of such conversion at an exercise price per share equal to the
applicable Conversion Price (such additional shares of Common Stock referred to
herein as "Option Shares"). The holder shall (i) indicate on the Notice of
Conversion in respect of such Conversion Date that it is exercising its Option
with respect to such conversion and shall specify the number of shares of Common
Stock with respect to which the Option is being so exercised, and (ii) shall pay
to the Company in immediately available funds within two (2) business days after
such Conversion Date, the aggregate purchase price for the Option Shares then
being purchased. Without limitation, the provisions of this Section 5 above
shall apply to any exercise by the holder of its Option.
(i) Lost or Stolen Certificates. Upon receipt by the Company
of evidence of the loss, theft, destruction or mutilation of any Series B
Preferred Stock certificate(s), and (in the case of loss, theft or destruction)
of indemnity or security reasonably satisfactory to the Company, and upon the
cancellation of the Series B Preferred Stock certificate(s), if mutilated, the
Company shall execute and deliver new certificates for Series B Preferred Stock
of like tenure and date. However, the Company shall not be obligated to reissue
such lost or stolen certificates for shares of Series B Preferred Stock if the
holder contemporaneously requests the Company to convert such Series B Preferred
Stock into Common Stock.
(j) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of shares of Series B Preferred Stock. In lieu
of any fractional share to which the holder would be entitled for this
paragraph, the number of shares of Common Stock to be received shall be rounded
to the nearest whole share.
(k) Partial Conversion. In the event some but not all of the
shares of Series B Preferred Stock represented by a certificate or certificates
are converted, the Company may require the holder to surrender the said
certificate(s) to the Company within three (3) business days after such a
conversion; if so, the Company shall execute and deliver to or to the order of
the holder, at the expense of the Company, a new certificate representing the
number of shares of Series B Preferred Stock which were not converted.
(l) Reservation of Common Stock. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series B Preferred Stock (including also exercise of the Option), such
number of its shares of Common Stock as shall from time to time be sufficient or
as may be available to effect the conversion of all outstanding shares of the
Series B Preferred Stock,
-6-
<PAGE> 8
including also full exercise of the Option, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all the then outstanding shares of the Series B Preferred
Stock, including also full exercise of the Option, the Company shall use its
best efforts to take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
6. Redemption.
(a) The Company may redeem any or all of the outstanding
shares of the Series B Preferred Stock on any date (the "Redemption Date") set
by the Board of Directors of the Company for such redemption at any time at the
Redemption Price, as that term is defined below, for each share of Series B
Preferred Stock, to be paid in cash on the Redemption Date, provided, that
(except as hereinafter provided) the Company shall not send a Redemption Notice,
as that term is defined below, to any of the holders of Series B Preferred
Stock, unless it has good and clear funds, for payment of the Redemption Price
for the shares of Series B Preferred Stock it intends to redeem, in a bank
account controlled by the Company, and provided further, however, that in the
event the redemption is to be made simultaneously with the closing of a public
offering of the Company, then the Company may send a Redemption Notice even if
it does not have such good and clear funds, but not earlier than on the day
prior to the date the public offering is priced.
(b) The Redemption Price shall be an amount equal to 127.5% of
the Purchase Price, plus an amount equal to all accrued but unpaid dividends,
whether or not declared, to but excluding the Redemption Date;
(c) The Redemption Price shall be payable in cash. If fewer
than all of the outstanding shares of Series B Preferred Stock are to be
redeemed, the redemption shall be pro rata among the holders of the Series B
Preferred Stock based upon the number of shares held by such holders and subject
to such other provisions as may be determined by the Board of Directors of the
Company.
(d) Except as otherwise provided in Section 6(a), not less
than five days prior to the Redemption Date, the Company shall send, by
facsimile transmission and by first class mail, postage prepaid, a notice (the
"Redemption Notice") to each holder of Series B Preferred Stock, which notice
shall contain all instructions and materials necessary to enable such holders to
tender Series B Preferred Stock pursuant to the redemption. Such notice shall
(i) state that a redemption is being effected, (ii) specify the Redemption Date,
(iii) state that holders will be required to surrender the certificate or
certificates representing such shares, properly endorsed, in the manner and at
the place specified in the notice prior to the close of business on the business
day prior to the Redemption Date, (iv) state that holders may convert all or any
portion their shares of Series B Preferred Stock into shares of Common Stock,
provided that the Company receives the Notice of Conversion within twenty-four
hours from the time the Redemption Notice was received by such holder and that
all other shares shall be deemed to have been redeemed by the Company on the
Redemption Date at the Redemption Price plus all accrued but unpaid cash
dividends whether or not declared. The Company may not redeem any portion of the
Series B Preferred Stock that has been converted on or prior to the date of the
Redemption Notice. In the event the Company fails to deliver the Redemption
Price plus accrued and unpaid cash dividends on or before (i) one day after the
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<PAGE> 9
Redemption Date or (ii) in the event the redemption is made simultaneously with
the closing of a public offering of the Company, six days after the closing date
of such public offering, the Redemption Notice shall be null and void and the
Company will relinquish its redemption rights provided by this section.
(e) On the Redemption Date, unless the Company defaults in the
payment for the shares of Series B Preferred Stock tendered pursuant to the
redemption, dividends will cease to accrue with respect to the shares of Series
B Preferred Stock tendered. All rights of holders of such tendered shares will
terminate, except for the right to receive payment therefor, on the Redemption
Date.
(f) The Company may, at its option, at any time after the
mailing of the Redemption Notice pursuant to Section 6 (d) above, deposit the
aggregate amount payable upon redemption of the Series B Preferred Stock with a
bank or trust company (the "Depositary") having its principal office in New
York, New York, and having a combined capital and surplus (as shown by its then
most recently published financial statement) of at least $200,000,000,
designated by the Board of Directors of the Company, to be held in trust by the
Depositary for payment to the holders of the shares to be redeemed. Upon such
deposit, the Company shall be released and discharged from any obligation to pay
the Redemption Price of the shares to be redeemed, and the holders of the shares
instead shall have the right to receive from the Depositary only, and not from
the Company, the amount payable upon redemption of the shares on surrender to
the Depositary of the certificates representing the shares. Any money so
deposited with the Depositary that is not claimed after one year from the
Redemption Date shall be repaid to the Company by the Depositary on demand, and
the holder of any of the shares shall thereafter look only to the Company for
any payment to which the holder may be entitled. Any interest which accrues on
money deposited with the Depositary shall belong to the Company and shall be
paid to the Company from time to time by the Depositary.
7. No Reissuance of Series B Preferred Stock. Any share or shares of
Series B Preferred Stock acquired by the Company by reason of redemption,
purchase, conversion or otherwise shall be canceled, shall return to the status
of authorized but unissued preferred stock of no designated series, and shall
not be reissuable or re-sellable by the Company as Series B Preferred Stock.
8. Restrictions and Limitations
(a) Amendments to Charter. The Company shall not amend its
certificate of incorporation without the approval by the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock if such
amendment would:
(i) change the relative seniority rights of the
holders of Series B Preferred Stock as to the payment of dividends in relation
to the holders of any other capital stock of the Company, or create any other
class or series of capital stock entitled to seniority as to the payment of
dividends in relation to the holders of Series B Preferred Stock;
-8-
<PAGE> 10
(ii) reduce the amount payable to the holders of
Series B Preferred Stock upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company, or change the relative seniority of
the liquidation preferences of the holders of Series B Preferred Stock to the
rights upon liquidation of the holders of other capital stock of the Company, or
change the dividend rights of the holders of Series B Preferred Stock;
(iii) cancel or modify the conversion rights of the
holders of Series B Preferred Stock provided for in Section 5 herein; or
(iv) cancel or modify the rights of the holders of
the Series B Preferred Stock provided for in this Section 8.
9. Notices of Record Date. In the event of:
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger of the Company, or any transfer of all or substantially all of the assets
of the Company to any other corporation, or any other entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding up of the Company, then and in each such event the Company shall mail or
cause to be mailed to each holder of Series B Preferred Stock a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and a description of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, merger, dissolution, liquidation
or winding up is expected to become effective and (iii) the time, if any, that
is to be fixed, as to when the holders of record of Common Stock (or other
securities) shall be entitled to exchange their shares of Common Stock (or other
securities) for securities or other property deliverable upon such
reorganization, reclassification, recapitalization, transfer, merger,
dissolution, liquidation or winding up. Such notice shall be mailed at least ten
days prior to the date specified in such notice on which such action is to be
taken.
10. Certificate of Incorporation. The statements contained in the
foregoing, creating and designating the said Series B issue of Preferred Stock
and fixing the number, powers, preferences and relative, optional,
participating, and other special rights and the qualifications, limitations and
restrictions shall, upon the effective date of said series, be deemed to be
included in and be a part of the Certificate of Incorporation of the Company
pursuant to the relevant provisions of the General Corporation Law of the State
of Nevada.
11. Limitation on Number of Conversion Shares. (a) Notwithstanding any
other provision herein, the Company shall not be obligated to issue any shares
of Common Stock upon conversion of the Series B Preferred Stock if the issuance
of such shares of Common Stock
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<PAGE> 11
would exceed that number of shares of Common Stock which the Company may issue
upon conversion of the Series B Preferred Stock (the "Exchange Cap") without
breaching the Company's obligations under the rules and regulations of The
Nasdaq Stock Market, Inc., except that such limitation shall not apply in the
event that the Company (a) obtains the approval of its stockholders as required
by applicable rules of The Nasdaq Stock Market, Inc., for issuances of Common
Stock in excess of such amount or (b) obtains a written opinion from outside
counsel to the Company that such approval is not required, which opinion shall
be reasonably satisfactory to the holders of a majority of the shares of Series
B Preferred Stock then outstanding; provided, however, that notwithstanding
anything herein to the contrary, the Company will issue such number of shares of
Common Stock issuable upon conversion of the Series B Preferred Stock at the
then current Conversion Price up to the Exchange Cap. Until such approval or
written opinion is obtained, no holder of Series B Preferred Stock pursuant to
the Securities Purchase Agreement ("Purchase Agreement") shall be issued, upon
conversion of Series B Preferred Stock, shares of Common Stock in an amount
greater than the product of (i) the Exchange Cap amount multiplied by (ii) a
fraction, the numerator of which is the number of shares of Series B Preferred
Stock issued to such holder pursuant to the Purchase Agreement and the
denominator of which is the aggregate amount of all the shares of Series B
Preferred Stock issued to all holders pursuant to the Purchase Agreement (the
"Cap Allocation Amount"). In the event that any holder of Series B Preferred
Stock shall convert all of such holder's shares of Series B Preferred Stock into
a number of shares of Common Stock which, in the aggregate, is less than such
holder's Cap Allocation Amount, then the difference between such holder's Cap
Allocation Amount and the number of shares of Common Stock actually issued to
such holder shall be allocated to the respective Cap Allocation Amounts of the
remaining holders of Series B Preferred Stock on a pro rata basis in proportion
to the number of shares of Series Preferred Stock then held by each such holder.
The provisions of this paragraph will apply only in the event the Company
becomes listed for trading on the NASDAQ stock market (either Small Cap or
National Market).
(b) Conversion Restrictions. Notwithstanding anything to the
contrary set forth herein or in the Certificate of Designations, in no event
shall any holder of the Series B Preferred Stock be entitled to convert Series B
Preferred Stock (or exercise the Option to receive Option Shares) in excess of
such portion of the principal of the Series B Preferred Stock that, upon giving
effect to such conversion, would cause the aggregate number of shares of Common
Stock beneficially owned by such converting holder and its affiliates to exceed
4.99% of the outstanding shares of the Common Stock following such conversion.
For purposes of the foregoing proviso, the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliates shall include the
number of shares of Common Stock issuable upon conversion of the Series B
Preferred Stock with respect to which the determination of such proviso is being
made. Except as set forth in the preceding sentence, for purposes of this
Section, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. The limitations
imposed by this Section on conversion of Series B Preferred Stock shall no
longer apply, and the holder of the Series B Preferred Stock may convert all or
any portion of the Series B Preferred Stock, irrespective of the resulting
beneficial ownership of the Company's Common Stock, should any of the following
events occur: (I) The Company shall either: (i) become insolvent; (ii) admit in
writing its inability to pay its debts generally or as they become due; (iii)
make an assignment for the benefit of creditors or commence proceedings for its
dissolution; or (iv) apply for, or consent to the appointment of, a trustee,
liquidator, or receiver for its or for a substantial part of its property or
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<PAGE> 12
business; or (II) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without the
Company's consent and such appointment is not discharged within sixty (60) days
after such appointment; or (III) Any governmental agency or any court of
competent jurisdiction at the instance of any governmental agency shall assume
custody or control of the whole or any substantial portion of the properties or
assets of the Company and shall not be dismissed within sixty (60) days
thereafter; or (IV) Any money judgment, writ or Note of attachment, or similar
process in excess of Five Hundred Thousand United States Dollars (US$500,000.00)
in the aggregate shall be entered or filed against the Company or any of its
properties or assets and shall remain unpaid, unvacated, unbonded or unstayed
for a period of fifteen (15) days or in any event later than five (5) days prior
to the date of any proposed sale thereunder; or (V) Bankruptcy, reorganization,
insolvency or liquidation proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall be instituted by or
against the Company and, if instituted against the Company, shall not be
dismissed within sixty days after such institution or the Company shall by any
action or answer approve of, consent to, or acquiesce in any such proceedings or
admit the material allegations of, or default in answering a petition filed in,
any such proceeding.
12. Ranking.
The Series B Preferred Stock shall, with respect to dividend
rights and rights on liquidation, winding up and dissolution, rank senior to any
of the (i) Common Stock and rank senior to or on parity with any preferred stock
issued after the date hereof and any other class or series of stock of the
Company.
Signed and attested to on May __, 2000.
IPVOICE.COM, INC.
By: /s/ Barbara Will
___________________________________
Ms. Barbara Will, President
Attest:
/s/ Russell Watson
_____________________________
______Secretary
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<PAGE> 13
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order
to Convert the Series B Preferred Stock)
The undersigned hereby irrevocably elects to convert ___ shares of Series B
Preferred Stock, Certificate No. ___ (the "Preferred Stock") into shares of
Common Stock of IPVoice.Com, Inc. (the "Company"), according to the conditions
hereof, as of the date written below.
The undersigned hereby irrevocably elects to purchase ____ Option Shares, at an
exercise price per share equal to the Conversion Price, or $_______ per share.
The undersigned shall pay the purchase price for such Option Shares to the
Company within two (2) business days after the date of delivery of this Notice
of Conversion.
The undersigned represents and warrants that
(i) All offers and sales by the undersigned of the shares of
Common Stock issuable to the undersigned upon conversion of
the Series B Preferred Stock (and exercise of the Option as
stated above) shall be made in compliance with Regulation D,
pursuant to an exemption from registration under the
Securities Act of 1933, as amended (the "Securities Act"), or
pursuant to registration of the Common Stock under the Act,
subject to any restrictions on sale or transfer set forth in
the purchase agreement between the Company and the original
holder of the Certificate submitted herewith for conversion.
(ii) Upon conversion (and exercise of the Option, if applicable)
pursuant to this Notice of Conversion, the undersigned will
not own of record (within the meaning of the Securities
Exchange Act of 1934, as amended) 4.99% or more of the then
issued and outstanding shares of the Company.
_______________________________ ___________________________
Date of Conversion Applicable Conversion Price
________________________________ ___________________________
Number of shares of Common Stock $ Amount of Conversion
issuable upon Conversion
Legal Name of Converting Holder: ______________________________________
_______________________________________________________________________
Signature/Title of Authorized Representative of
Converting Holder
Address for Delivery of Shares: ________________________________
________________________________
________________________________
<PAGE> 1
Exhibit 10.43
AMENDMENT
THIS AMENDMENT dated the 30th day of March, 2000, by and between
IPVoice.com, INC., a Nevada corporation with offices at 5050 N. 19th Avenue,
Suite 417/416, Phoenix, Arizona 85015 ("Client") and Condor Worldwide, Ltd.,
with offices located at 328 Bay Street, Nassau, Bahamas ("Consultant"),
stipulates the following:
Consultant agrees to waive its rights to any restricted shares of Client's
common stock as described in THE AMENDMENT made the 29th day of July, 1998, to
THE CONSULTING AGREEMENT made the 10th day of November, 1997.
CONDOR WORLDWIDE, LTD. IPVOICE.COM, INC.
BY: /s/ James K. Howson By: /s/ Barbara S. Will
------------------------------- -------------------------------
James K. Howson Barbara S. Will
President
<PAGE> 1
Exhibit 10.44
PROMISSORY NOTE
Chicago, Illinois U.S.A.
U.S.$500,000.00
May 5, 2000
AMOUNT; INTEREST RATE
FOR VALUE RECEIVED, the undersigned, IPVoice.Com, Inc., a
corporation organized under the laws of the State of Nevada,
U.S.A., with headquarters located at 5050 North 19th Avenue,
Suite 416, Phoenix, Arizona 85015, promises to pay to the
order of Augustine Fund, L.P., an Illinois Limited
Partnership with offices at 141 West Jackson Street, Suite
2182, Chicago, Illinois 60604 ("Augustine"), the principal
sum of Five Hundred Thousand and no/100 United States
dollars (U.S.$500,000.00). Interest shall not accrue on the
said principal sum except as stated below.
PAYMENT SCHEDULE
The principal amount of this note shall by payable on or
before May 27, 2000 (the "Due Date").
Except as otherwise stated herein, from and after the date
hereof, until the principal amount of this note is paid in
full, interest shall be paid in cash in the amount of eight
percent (8%) per annum. All accrued interest (if any) under
this note shall be payable with the first repayment of
principal.
DEFAULT
If any of the following events shall occur, the outstanding
principal balance of this note together with accrued
interest thereon shall, on demand by the holder of this
note, be due and payable: any amount owing under this note
is not paid when due; a default under any other provision of
this note or under any guarantee or other agreement
providing security for the payment of this note; a breach of
any representation or warranty under this note or under any
such guarantee or other agreement; the liquidation,
dissolution, death or incompetency of the undersigned or any
individual, corporation, partnership or other entity
guaranteeing or providing security for the payment of this
note; the sale of a material portion of the business and
assets of the undersigned or any corporation, partnership or
other entity guaranteeing or providing security for the
payment of this note; the filing of a petition under any
bankruptcy, insolvency or similar law by the undersigned or
by any individual, corporation, partnership or other entity
guaranteeing or providing security for the payment of this
note; the making of any assignment for the benefit of
creditors by the undersigned or by any individual,
corporation, partnership or other entity guaranteeing or
providing security for the payment of this note; the filing
of a petition under any bankruptcy, insolvency or similar
law against the
<PAGE> 2
undersigned or against any individual, corporation, partnership or
other entity guaranteeing or providing security for the payment of
this note and such petition not being dismissed within a period of
thirty (30) days of the filing.
DEFAULT INTEREST
Except as otherwise stated herein, the outstanding balance of any
amount owing under this note which is not paid when due shall bear
interest at the lesser of (x) eighteen percent (18%) per annum, or (y)
the maximum rate permitted by law.
USURY CLAUSE
Notwithstanding any other provision of this note, interest under this
note shall not exceed the maximum rate permitted by law; and if any
amount is paid under this note as interest in excess of such maximum
rate, then the amount so paid will not constitute interest but will
constitute a prepayment on account of the principal amount of this
note. If at any time the interest rate under this note would, but for
the provision of the preceding sentence, exceed the maximum rate
permitted by law, then the outstanding principal balance of this note
shall, on demand by the holder of this note, become and be due and
payable. The parties acknowledge that this is a commercial loan, made
for bona fide business purposes.
WHERE TO MAKE PAYMENTS
All payments of principal and interest shall be made in lawful
currency of the United States of America in immediately available
funds before 5:00 p.m. Chicago time on the due date thereof at the
offices of Augustine as stated in the first paragraph of this
instrument, or in such other manner or at such other place as the
holder of this note designates in writing.
TAX GROSS UP
All payments under this note shall be made without defense, set-off or
counterclaim, free and clear of and without deduction for any taxes of
any nature now or hereafter imposed. Should any such payment be
subject to any tax, the undersigned shall pay to the holder of this
note such additional amounts as may be necessary to enable the holder
to receive a net amount equal to the full amount payable hereunder. As
used in this paragraph, the term "tax" means any tax, levy, impost,
duty, charge, fee, deduction, withholding, turnover tax, stamp tax and
any restriction or condition resulting in a charge imposed in any
jurisdiction upon the payment or receipt of any amount under this note
other than taxes on the overall net income of the holder under the
laws of Illinois and of the United States of America.
2
<PAGE> 3
EXPENSES
The undersigned agrees to pay on demand (i) all expenses (including,
without limitation, legal fees and disbursements) incurred in
connection with the negotiation and preparation of this note and any
documents in connection with this note, and (ii) all expenses of
collecting and enforcing this note and any guarantee or collateral
securing this note, including, without limitation, expenses and fees
of legal counsel, court costs and the cost of appellate proceedings.
GOVERNING LAW; AGENT FOR SERVICE OF PROCESS
This note and the obligations of the undersigned shall be governed by
and construed in accordance with the law of the State of Illinois,
U.S.A. For purposes of any proceeding involving this note or any of
the obligations of the undersigned, the undersigned hereby submits to
the non-exclusive jurisdiction of the courts of the State of Illinois
and of the United States having jurisdiction in the County of Cook,
State of Illinois, and agrees not to raise and waives any objection to
or defense based upon the venue of any such court or based upon lack
of or improper jurisdiction, or upon forum non conveniens. The
undersigned agrees not to bring any action or other proceeding with
respect to this note or with respect to any of its obligations in any
other court unless such courts of the State of Illinois and of the
United States determine that they do not have jurisdiction in the
matter. For purposes of any proceeding involving this note or any of
the obligations of the undersigned, the undersigned hereby irrevocably
appoints H. Glenn Bagwell, Jr., Esq., with offices at 3005 Anderson
Drive, Suite 204, Raleigh, NC 27609 (the "Escrow Agent"), its agent to
receive service of process for it and on its behalf.
WAIVER OF PRESENTMENT, ETC.
The undersigned waives presentment for payment, demand, protest and
notice of protest and of non-payment.
DELAY; WAIVER
The failure or delay by the holder of this note in exercising any of
its rights hereunder in any instance shall not constitute a waiver
thereof in that or any other instance. The holder of this note may not
waive any of its rights except by an instrument in writing signed by
the holder.
PREPAYMENT
The undersigned may prepay all or any portion of the principal of this
note at
3
<PAGE> 4
any time and from time to time without premium or penalty. Any such
prepayment shall be applied against the installments of principal due
under this note in the inverse order of their maturity and shall be
accompanied by payment of accrued but unpaid interest on the amount
prepaid to the date of prepayment.
AMENDMENT
This note may not be amended without the written approval of the
holder.
AGREEMENT; GUARANTEE
As additional security for the undertakings of the parties hereto, the
Company has caused itself and certain additional third parties to have
executed of even date herewith the Stock Escrow Agreement attached
hereto as Exhibit A (the "Escrow Agreement"), and the Pledge and
Security Agreement attached hereto as Exhibit B. Such documents are
incorporated herein by reference.
Maker:
IPVOICE.COM, INC.
By: /s/ Barbara S. Will
-------------------------------------
(Duly Authorized Officer or Director)
Accepted by: Augustine Fund, L.P.
By: Augustine Capital Management, L.L.C.,
General Partner
By:
--------------------------------------
(Duly Authorized Representative)
4
<PAGE> 5
EXHIBIT A
STOCK ESCROW AGREEMENT
THIS STOCK ESCROW AGREEMENT (this "Agreement") is dated as of May 5, 2000,
by and between Condor Worldwide, Ltd. (the "Shareholder"), Augustine Fund, L.P.
(the "Lender"), and H. GLENN BAGWELL, JR., a duly licensed attorney who
practices law in the State of North Carolina, U.S.A., as Escrow Agent (the
"Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Lender and IPVoice.Com, Inc., a Nevada corporation (the
"Company") have entered into a Promissory Note dated as the date of this
Agreement (the "Loan Agreement"), pursuant to which the Lender has agreed to
lend to the Company, in accordance with the terms hereof and of the Security
Agreement (defined below) and of the Loan Agreement, an amount of money in
United States dollars as stated in the Loan Agreement (the "Loan Amount"),
which Loan Amount is to be secured by a number of shares of registered common
stock ("Common Stock") of IPVoice.Com, Inc., owned by the Shareholder;
(capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to them in the Loan Agreement and in the accompanying
Security Agreement); and
WHEREAS, the Lender has requested certain additional security as partial
consideration for Lender's undertakings as described in the Loan Agreement,
which the Shareholder has agreed to provide in accordance with the terms of the
Security Agreement; and
WHEREAS, it is a condition of the Lender's and the Company's respective
obligations to execute the Loan Agreement, that this Agreement be executed and
delivered by all of the parties named above, and that the undertakings
described herein be performed; and
WHEREAS, the Escrow Agent is willing to act hereunder on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth below, the parties hereto hereby agree as follows:
1. ESCROW ACCOUNT.
1.1 Account; Deposit. The transaction(s) described in the Loan Agreement
shall be entered into and commenced at a closing ("the Closing"). On or before
the date hereof, the Shareholder shall place 300,000 shares of Common Stock
(the "Shares") in escrow with the Escrow Agent. Upon receipt by the Escrow
Agent of the Shares, the Escrow Agent shall inform the Lender of such fact and
the Lender shall release the Loan Amount to or at the direction of the Company.
<PAGE> 6
2. DISBURSEMENT OF COMMON STOCK.
2.1 Disbursement. None of the Shares shall be disbursed other than in
accordance with the terms hereof, or in accordance with the written instructions
of at least two (2) of the three (3) parties hereto (i.e., any two (2) of the
Lender, the Shareholder and the Escrow Agent) delivered to the Escrow Agent.
Except as herein stated or as required by the Loan Agreement or the Security
Agreement, in no event shall the Escrow Agent release or transfer any Shares to
any party other than to the Shareholder in accordance with this Agreement,
absent express written instructions from the Shareholder to transfer Shares to a
third party. The Escrow Agent shall hold the Shares in escrow and shall release
the Shares to a party other than the Shareholder only upon the following
conditions.
(a) If (x) the Loan Amount is not repaid in full in a timely manner as
described in the Loan Agreement, or if (y) the Lender informs the Escrow Agent
and the Shareholder in writing with reasonable specificity of a Default (as
defined in the Loan Agreement) other than non-timely repayment of the Loan
Amount, the Shareholder or the Company shall have five (5) business days to cure
the Default; if the Default is cured, the Lender shall, inform the Escrow Agent
in writing, and no further action will be taken; but if the Escrow Agent is not
so informed in writing by the Lender that the Default has been cured within such
five (5) day period, then IN EITHER CASE, the Lender shall have the right to
direct the sale, in its sole discretion as to timing and price, of Shares until
such time as the Lender has received sale proceeds equal to the principal
amount and all accrued but unpaid interest, all as stated in the Loan Agreement,
net of transaction costs. The Escrow Agent shall deliver the Shares to the
Lender to effect the purposes of this Security Agreement; however, the Escrow
Agent shall release to the Lender only so much of the Shares as is reasonably
necessary for the Lender to receive sale proceeds as specified in this Section
2.1(a).
(b) Once the amounts stated in and owed to the Lender pursuant to the Loan
Agreement have been paid in full, the Escrow Agent shall be notified of such
fact by the Lender, and the Escrow Agent shall immediately release the
remaining Shares held by the Escrow Agent to the Shareholder. The Shareholder
shall give written notice providing instructions with respect to the return of
all remaining Shares held in the Escrow Account (if any) to the Shareholder.
Any Shares then in the possession of the Lender shall immediately be returned
to the Escrow Agent for delivery to the Shareholder.
2.2 Controversies. If any controversy arises between two or more of
the parties hereto, or between any of the parties hereto and any person not a
party hereto, as to whether or not or to whom the Escrow Agent shall deliver
the Shares or any portion thereof or as to any other matter arising out of or
relating to this Escrow Agreement, the Escrow Agent shall not be required to
determine the same and need not make any delivery of the Escrow concerned or
any portion thereof but may retain the same until the rights of the parties to
the dispute shall have been finally determined by agreement or by final
judgment of a court of competent jurisdiction after all appeals have been
finally determined (or the time for further appeals has expired without an
appeal having been made) (notwithstanding the above, the provisions of the
paragraph next above this one shall apply in all events without exception). The
Escrow Agent shall deliver that portion of the Escrow concerned covered by such
agreement or final order, if any is then held by
2
<PAGE> 7
the Escrow Agent, within five (5) days after the Escrow Agent receives a copy
thereof. The Escrow Agent shall assume that no such controversy has arisen
unless and until it receives written notice from the Lender and/or the
Shareholder that such controversy has arisen, which refers specifically to this
Agreement and identifies the adverse claimants to the controversy.
2.3 No Other Disbursements. No portion of the Shares shall be disbursed
or otherwise transferred except in accordance with this Section 2, Section 4 or
Section 5.1(b).
2.4 Title and Ownership of the Shares. The parties hereto acknowledge and
agree that ownership of and legal title to the Escrow Account and the contents
thereof shall be in the Shareholder, until and unless a Default occurs, in
which case the terms of the Loan Agreement and of the Security Agreement with
respect thereto shall control.
3. ESCROW AGENT. The acceptance by the Escrow Agent of his duties
hereunder is subject to the following terms and conditions, which the parties
to this Agreement hereby agree shall govern and control with respect to the
rights, duties, liabilities and immunities of the Escrow Agent:
3.1 The Escrow Agent shall not be responsible or liable in any manner
whatever for the sufficiency, correctness, genuineness or validity of any cash,
Common Stock, certificates, investments or other amounts deposited with or held
by him.
3.2 The Escrow Agent shall be protected in acting upon any written
notice, certificate, instruction, request or other paper or document believed
by him to be genuine and to have been signed or presented by the proper party
or parties.
3.3 The Escrow Agent shall not be liable for any act done hereunder
except in the case of his reckless or willful misconduct or actions taken in
bad faith.
3.4 The Escrow Agent shall not be obligated or permitted to investigate
the correctness or accuracy of any document or to determine whether or not the
signatures contained in said documents are genuine or to require documentation
or evidence substantiating any such document or signature.
3.5 The Escrow Agent shall have no duties as Escrow Agent except those
which are expressly set forth herein, and in any modification or amendment
hereof; provided, however, that no such modification or amendment hereof shall
affect his duties unless he shall have given his written consent thereto. The
Escrow Agent shall not be prohibited from owning an equity interest in the
Company, the Shareholder, the Lender, another Lender, any of their respective
subsidiaries or any third party that is in any way affiliated with or conducts
business with either the Company, the Shareholder, the Lender or another Lender.
3.6 The Shareholder and the Lender specifically acknowledge that the
Escrow Agent is a practicing attorney, and may have worked with the
Shareholder, the Lender, the Company, or affiliates of either of them on other
unrelated transactions, and that they and each of them has
3
<PAGE> 8
specifically requested that the Escrow Agent draft some or all of the documents
for the said transactions and act as Escrow Agent with respect to the said
transactions. Each party represents that it has retained legal and other
counsel of its choosing with respect to the transactions contemplated herein
and in the Loan Agreement, and is satisfied in its sole discretion with the
form and content of the documentation drafted by the Escrow Agent. The Escrow
Agent may purchase an equity interest in the Company and/or may become an
equity owner of the Lender or another lender, and may increase or sell any such
interest, so long as in accordance with any and all applicable law. The said
parties hereby waive any objection to the Escrow Agent so acting based upon
conflict of interest or lack of impartiality. The Escrow Agent agrees to act
impartially and in accordance with the terms of this Agreement and with the
parties' respective instructions, so long as they are not in conflict with the
terms of this Agreement.
4. TERMINATION. This Agreement shall terminate on the earlier of (a)
the date on which all of the Common Stock and any other escrowed documents and
things described herein shall have been fully disbursed in accordance with the
terms and conditions of this Agreement, or (b) any other date agreed to jointly
by the Lender and the Shareholder.
5. MISCELLANEOUS.
5.1 Indemnification of Escrow Agent.
(a) The Shareholder and Lender each agree, jointly and severally, to
indemnify the Escrow Agent for, and to hold him harmless against, any loss
incurred without willful misconduct or bad faith on the Escrow Agent's part,
arising out of or in connection with the administration of this Agreement,
including the costs and expenses of defending himself against any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder. This indemnification shall not apply to a party with
respect to a direct claim against the Escrow Agent by such party alleging in
good faith a willful breach of this Agreement or act of bad faith by the Escrow
Agent, which claim results in a final non-appealable judgment against the
Escrow Agent with respect to such claim.
(b) In the event of any dispute as to the nature of the rights or
obligations of the Lender, the Shareholder or the Escrow Agent hereunder, the
Escrow Agent may at any time or from time to time interplead, deposit and/or
pay all or any part of the Shares with or to a court of competent jurisdiction
sitting in Wake County, North Carolina or in any appropriate federal court, in
accordance with the procedural rules thereof. The Escrow Agent shall give
notice of such action to the Shareholder and the Lender. Upon such
interpleader, deposit or payment, the Escrow Agent shall immediately and
automatically be relieved and discharged from all further obligations and
responsibilities hereunder, including the decision to interplead, deposit or
pay such funds.
5.2 Amendments. This Agreement may be modified or amended only by a
written instrument executed by each of the parties hereto.
4
<PAGE> 9
5.3 Notices. All communications required or permitted to be given under
this Agreement to any party hereto shall be sent by first class mail or
facsimile to such party at the address, of such party set forth on the signature
page of this Agreement.
5.5 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Escrow Agent shall not assign its duties under this
Agreement.
5.6 Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of North Carolina.
5.7 Counterparts. This Agreement may be executed in three or more
counterparts, each of which shall be an original, and all of which together
shall constitute one and the same agreement.
5.8 Facsimile. This Agreement may be accepted via facsimile, and a
facsimile transmission of the executed signature page hereof shall make this
Agreement legally binding upon the party so executing and faxing such signature
page to the Escrow Agent.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
[SIGNATURE PAGE FOLLOWS]
5
<PAGE> 10
[SIGNATURE PAGE TO ESCROW AGREEMENT DATED MAY 5, 2000]
THE SHAREHOLDER:
CONDOR WORLDWIDE, LTD.
By: /s/ [ILLEGIBLE]
-----------------------------------------
Duly Authorized Corporate
Representative
THE LENDER:
AUGUSTINE FUND, L.P.
By: Augustine Capital Management, L.L.C., its
general partner
By:
-----------------------------------------
(Duly Authorized Representative)
ESCROW AGENT:
---------------------------------------------
H. GLENN BAGWELL, JR., ESQ.
Address: 3005 Anderson Drive, Suite 204
Raleigh, North Carolina USA 27609
Telephone 919.785.3113
Telecopier 919.785.3116
6
<PAGE> 11
EXHIBIT B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEDGE AND SECURITY AGREEMENT
by and between Condor Worldwide, Ltd.
and
AUGUSTINE FUND, L.P.
as Secured Party
Dated as of May 5, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-1-
<PAGE> 12
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") dated as of May 5,
2000, is entered into by and between Condor Worldwide, Ltd. (the "Obligor"),
and AUGUSTINE FUND, L.P. (the "Secured Party").
W I T N E S S E T H:
WHEREAS, IPVoice.Com, Inc., a Nevada corporation (the "Company") and the
Secured Party are parties to that certain Promissory Note dated as of the date
hereof (including also all Exhibits and Addenda executed by the parties, the
"Note");
WHEREAS, it is a condition precedent to Secured Party's willingness to
execute the Note and to lend the sum of $500,000.00 to the Company (the
"Obligations") be secured by certain common stock (the "Common Stock") of
IPVoice.Com, Inc. ("IPVC") owned or to be purchased by the Obligor, resales of
which Common Stock are as of the date of this Agreement restricted under
applicable securities law.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties executing this Agreement, the parties hereto agree
as follows:
SECTION 1. GRANT OF SECURITY INTEREST. The Obligor hereby conveys,
transfers, grants, assigns and pledges to the Secured Party a security interest
in the security title to (together with a right of setoff) the Obligor's right,
title and interest in 300,000 shares of Common Stock of IPVC owned by the
Obligor (the "Collateral").
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures the performance
of the obligations of the Company under the Note (the "Company's Obligations"),
whether now or hereafter existing. Without limiting the generality of the
foregoing, this Agreement secures the performance of the Company's Obligations
and all amounts which would be owed by the Obligor to the Secured Party but for
the fact that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Obligor.
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Obligor represents and
warrants as follows:
(a) This Agreement creates a valid security interest in the
Collateral, securing the performance of the Company's Obligations.
(b) The Collateral is not subject to any lien, security interest or
encumbrance senior to that created by this Agreement.
(c) The Collateral is as of the date of this Agreement restricted
from transfer under applicable securities law.
-2-
<PAGE> 13
SECTION 4. FURTHER ASSURANCES; LEGAL OPINION. The Obligor agrees that
from time to time it will promptly execute and deliver all further instruments
and documents and take all further action that may be necessary or that the
Secured Party may reasonably request in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to the Collateral. The Obligor shall, upon execution of this Agreement,
cause to be provided to the Company, its transfer agent and to the Secured Party
an opinion of legal counsel to the effect that, should the Company be in default
with respect to its repayment obligations under the Note, the Secured Party
shall have the right to immediately sell all or such portion of the Collateral
as is necessary to recoup any amounts then due and payable under the Note,
including without limitation any interest due.
SECTION 5. TRANSFERS OF COLLATERAL. Except as stated herein, the
Obligor shall not sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, the Collateral. The Obligor
shall upon request of the Secured Party provide trade confirmations with respect
to any Common Stock sold.
SECTION 6. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. The Obligor hereby
irrevocably appoints the Secured Party its attorney-in-fact, with full authority
in the place and stead of the Obligor and in the name of the Obligor or
otherwise, at such time as any default has occurred in the Company's Obligations
(a "Default"), to take any action and to execute any instrument which the
Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation:
(a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or
in connection with the Collateral;
(b) to receive, endorse and collect any instruments or documents in
connection therewith; and
(c) to file any claims or take any action or institute any
proceedings which the Secured Party may deem necessary or desirable for the
collection of the Collateral or otherwise to enforce the rights of the
Secured Party with respect to the Collateral.
SECTION 7. SECURED PARTY MAY PERFORM. If the Obligor fails to perform
any agreement contained herein, the Secured Party may itself perform or cause
the performance of such agreement, and the expenses of the Secured Party
incurred in connection therewith shall be payable by the Obligor.
SECTION 8. SECURED PARTY'S DUTIES. The powers conferred on the Secured
Party hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers.
SECTION 9. REMEDIES. If any Default shall have occurred and until such
Default is waived in writing in accordance with the Note:
-3-
<PAGE> 14
(a) The Secured Party may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party under the
Uniform Commercial Code in effect in the State of Illinois at that time or
any other applicable jurisdiction, and also may (i) without notice, except
as specified below, sell the Collateral or any part thereof at public or
private sale, at any of the Secured Party's offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as are
commercially reasonable. The Obligor agrees that, to the extent notice of
sale shall be required by law, at least ten (10) calendar days' notice to
the Obligor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Secured Party shall not be obligated to make any sale of
Collateral, regardless of notice of sale having been given. The Secured
Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) All cash proceeds received by the Secured Party in respect of any
sale of, collection from or other realization upon all or any part of the
Collateral may, in the discretion of the Secured Party, be held by the
Secured Party as collateral for, and/or then or at any time thereafter be
applied in whole or in part by the Secured Party against, all or any part
of the Company's Obligations. Any surplus of such cash or cash proceeds
held by the Secured Party and remaining after satisfaction in full of all
the Company's Obligations shall be paid over to the Obligor or to
whomsoever may be lawfully entitled to receive such surplus.
SECTION 10. REMEDIES CUMULATIVE. Each right, power and remedy of the
Secured Party as provided for in this Agreement or now or hereafter existing at
law or in equity or by statute or otherwise shall be cumulative and concurrent
and shall be in addition to every other right, power or remedy provided for in
this Agreement or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by the Secured Party of
any one or more of such rights, powers, or remedies shall not preclude the
simultaneous or later exercise by the Secured Party of any or all such other
rights, powers, or remedies.
SECTION 11. EXPENSES. The Obligor will upon demand pay to the Secured Party
the amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel which the Secured Party may incur in connection with the
exercise or enforcement of any of the rights of the Secured Party hereunder or
the failure by the Obligor to perform or observe any of the provisions hereof.
Within five (5) business days after the date of this Agreement, the Obligor or
the Company shall pay to the Escrow Agent (as defined in the Note) legal/escrow
fees in the amount of $2,000.00.
SECTION 12. POSSESSION UNTIL DEFAULT. Until a Default shall occur the
Collateral shall be held in escrow by the Escrow Agent (as defined in the Note),
subject to and upon the terms hereof, the Note and its related escrow agreement.
The Obligor shall deliver the Collateral to the Escrow Agent at or prior to the
closing of the transactions contemplated in the Note. The Escrow Agent shall
hold the Collateral in escrow and shall release the Collateral to a party other
than the Obligor only upon the following conditions: (I) if the Note is not
repaid in
-4-
<PAGE> 15
full in a timely manner as described in the Note, or (II) if the Secured Party
informs the Escrow Agent and the Obligor in writing with reasonable specificity
of a Default, the Obligor or the Company shall have five (5) business days to
cure the Default; if the Default is cured, the Secured Party shall inform the
Escrow Agent in writing, and no further action will be taken. If the Escrow
Agent is not informed in writing by the Secured Party that the Default has been
cured within such five (5) day period, the Escrow Agent shall deliver the
Collateral to the Secured Party to effect the purposes of this Security
Agreement.
SECTION 13. AMENDMENTS; ETC. No waiver of any provision of this
Agreement shall in any event be effective unless the same shall be in writing
and signed by the Secured Party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No amendment of any provision of this Agreement shall be effective
unless the same shall be in writing and signed by the Secured Party and the
Obligor.
SECTION 14. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be given in the form and manner and delivered (a)
to the Secured Party at 141 West Jackson Street, Suite 2182, Chicago, Illinois
60604, or (b) to the Obligor at the address set forth on the signature page
hereof or, (c) as to either party, at such other address as shall be designated
by such party in a written notice to the other party.
SECTION 15. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER NOTE. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the performance in full of the
Company's Obligations, (b) be binding upon the Obligor and its successors and
assigns, and (c) inure to the benefit of and be enforceable by the Secured
Party and its successors, transferees and assigns. Upon the performance in full
of the Company's Obligations and all other amounts payable under this
Agreement, the security interest granted hereby shall terminate and all rights
to the Collateral shall revert to the Obligor. The Secured Party shall not, by
any act, delay, omission or otherwise, be deemed to have waived any of its
rights or remedies hereunder unless such waiver is in writing and signed by the
Secured Party and then only to the extent therein set forth. A waiver by the
Secured Party of any right or remedy on any occasion shall not be construed as
a bar to the exercise of any such right or remedy that the Secured Party has or
would otherwise have had on any other occasion.
SECTION 16. GOVERNING LAW; TERMS. This Agreement shall be governed by
and construed in accordance with the laws of the State of Illinois without
reference to the conflict or choice of law principles thereof, except to the
extent that the validity or perfection of the security interest hereunder, or
the remedies hereunder, in respect of any particular Collateral are governed by
the laws of a jurisdiction other than the State of Illinois. Any terms used
herein which are used in the Uniform Commercial Code of the State of Illinois
shall have the same meanings herein as such terms have in said Uniform
Commercial Code. Each of the parties hereby submits to the nonexclusive
jurisdiction of the state and federal courts located in the county of Cook,
state of Illinois, and hereby waives any legal objection to such jurisdiction.
SECTION 17. MISCELLANEOUS.
(a) This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all such separate counterparts shall
together
-5-
<PAGE> 16
constitute but one and the same instrument. A facsimile of the signature page
hereof faxed to the Escrow Agent shall be deemed acceptance of this Agreement
for all purposes, and the other party hereto may rely upon such facsimile as if
this Agreement were executed in the presence of the party so relying.
(b) Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall be ineffective to the extent of such prohibition or
unenforceability in such jurisdiction without invalidating the remaining
provisions hereof in such jurisdiction or affecting the validity or
enforceability of such provision in any other jurisdiction.
IN WITNESS WHEREOF, the Obligor and the Secured Party have caused this
Agreement to be duly executed and delivered as of the date first above written.
OBLIGOR
CONDOR WORLDWIDE, LTD.
/s/ [illegible]
- ----------------------------------
Dully Authorized Corporate Officer
Address:
Post Office Box N-8325
Nassau, Bahamas
Tel: 242.325.7355
Contact: Ron Adkinson
SECURED PARTY
AUGUSTINE FUND, L.P.
By: Augustine Capital Management, L.L.C., its General Partner
By:
-----------------------------------
(Duly Authorized Representative)
-6-
<PAGE> 1
Exhibit 10.45
ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS
ASSIGNMENT AGREEMENT by and among Barbara S. Will, of Scottsdale, Arizona,
Anthony K. Welch, of Evergreen, Colorado, and James K. Howson, of Phoenix,
Arizona, in their individual capacities and as principals of IPVoice
Communications, Inc., a Delaware Corporation and, as the case may be, of Condor
Worldwide Ltd. (IPVoice Communications, Inc., Condor Worldwide, Ltd., Ms. Will,
Mr. Welch, and Mr. Howson hereinafter jointly and severally referred to as
"Assignors") and IPVoice.Com, Inc., a Nevada corporation (hereinafter referred
to as "Assignee"), effective this 5th day of May, 2000 ("Effective Date").
RECITALS
The Assignors desire that all of the intellectual property inhering in
certain software called Multicom Business Management Software, a
telecommunications software program which uses an internet interface with the
public telephone system and provides real time billing, administration and
control of the long distance telephone calls, including any and all
modifications and future improvements which the Assignors or any of them may
create (the "Software") be assigned to Assignee.
Previous agreements have been executed which together were intended to
transfer some or all of the intellectual property rights to the Assignee. These
consist of (a) an Assignment from IPVoice Communications, Inc. to Assignee of
all right, title, and interest in and to the Software executed on March 17,
2000; (b) an Assignment from James K. Howson to Condor Worldwide Ltd. of all of
Howson's right, title and interest in and to the Software executed on March 10,
1998; (c) and Agreement between Barbara S. Will, Anthony K. Welch, Condor
Worldwide Ltd., and James Howson by which Anthony K. Welch exchanged all of his
right, title and interest in and to the Software for a certain number of shares
of stock in Assignee, executed March 17, 2000; and (d) Minutes of a Meeting of
the Board of Directors of Assignee, held on March 16, 2000, by which IPVoice
Communications, Inc. offered to sell all of its right, title and interest in and
to the Software to Assignee for $1.00, which offer was accepted.
ASSIGNMENT OF ALL INTELLECTUAL PROPERTY RIGHTS
For $1.00 and other good and valuable consideration, receipt of which is
hereby acknowledged, Assignors jointly and severally assign to Assignee all
right, title and interest that they or any of them have in the Software, and in
all copyright, trade secret, and any other intellectual property rights
inherent in the Software. Assignors further assign to Assignee all causes of
action which may have heretofore accrued due to the infringement of any
intellectual property right in the Software by a third party.
<PAGE> 2
IN WITNESS WHEREOF, Assignors and Assignee have executed or caused the
execution of this agreement on the date first above written.
/s/ Barbara S. Will
-------------------------------
Barbara S. Will
/s/ Anthony K. Welch
-------------------------------
Anthony K. Welch
CONDOR WORLDWIDE, LTD.
By /s/ Dennis J. Sutton
-------------------------------
Dennis J. Sutton
Managing Director
/s/ James K. Howson
-------------------------------
James K. Howson
IPVOICE COMMUNICATIONS, INC.
By: /s/ Barbara S. Will
-------------------------------
Barbara S. Will
President
IPVOICE.COM, INC.
By: /s/ Barbara S. Will
-------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001092083
<NAME> IPVOICE.COM, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. CURRENCY
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 114,170
<SECURITIES> 25,514
<RECEIVABLES> 48,100
<ALLOWANCES> 0
<INVENTORY> 9,450
<CURRENT-ASSETS> 672,800
<PP&E> 440,541
<DEPRECIATION> 62,837
<TOTAL-ASSETS> 1,050,504
<CURRENT-LIABILITIES> 292,907
<BONDS> 1,145,400
0
1
<COMMON> 17,184
<OTHER-SE> 2,860,320
<TOTAL-LIABILITY-AND-EQUITY> 1,050,504
<SALES> 97,628
<TOTAL-REVENUES> 97,628
<CGS> 94,526
<TOTAL-COSTS> 94,526
<OTHER-EXPENSES> 739,017
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,893
<INCOME-PRETAX> (760,808)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (760,808)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
