<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission File No. 0-29025
NETVOICE TECHNOLOGIES CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Nevada 91-1986538
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
13747 Montfort Drive, Suite 250
Dallas, Texas 75240
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(Address of principal executive offices, including zip code)
(972) 788-2988
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(Registrants telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all repo
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
As of August 17, 2000, 15,478,944 shares of Common Stock were outstanding
and 254,500 shares were contingently issuable shares.
DOCUMENTS INCORPORATED BY REFERENCE
Exhibits to the following documents filed with the Securities and Exchange
Commission have been incorporated by reference in Part II of this Quarterly
Report on Form 10-Q:
1. Annual Report on Form 10-KSB, dated as of April 13, 2000
<PAGE>
NETVOICE TECHNOLOGIES CORPORATION
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 22
Item 3. Default Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of
Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 25
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
NETVOICE TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
ASSETS 2000 1999
(Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,930,450 $ 20,085
Restricted cash 141,226
Accounts receivable - trade, net of allowance for doubtful
accounts of $20,000 and $0, respectively 2,159,532 190,733
Federal tax receivable 55,800
Prepaid expenses 290,763 86,505
------------ -----------
Total current assets 6,577,771 297,323
PROPERTY AND EQUIPMENT, NET 7,782,670 860,534
GOODWILL, net of accumulated amortization of $88,936 9,775,429
OTHER ASSETS 519,343 300,787
------------ -----------
TOTAL $ 24,655,213 $ 1,458,644
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 5,914,115 $ 1,519,154
Accrued expenses 180,626 180,082
Notes payable and current portion of capital lease obligations 2,518,509 3,659,905
Unearned revenue 320,000 30,000
------------ -----------
Total current liabilities 8,933,250 5,389,141
LONG-TERM DEBT 4,273,984 223,056
------------ -----------
Total liabilities 13,207,234 5,612,197
COMMITMENTS AND CONTINGENCIES (See Notes)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock; 50,000,000 shares authorized at $0.001 par value,
3,578,349 and no shares issued and outstanding, respectively 3,578
Common stock, 100,000,000 shares authorized at $0.001 par value;
15,314,444 and 10,741,600 shares issued and outstanding,
respectively 15,315 10,742
Paid-in capital 24,267,209 2,940,739
Stock subscription receivable (1,494,123)
Unearned compensation (93,156) (366,814)
Accumulated deficit (11,250,844) (6,738,220)
------------ -----------
Total stockholders' equity (deficit) 11,447,979 (4,153,553)
------------ -----------
TOTAL $ 24,655,213 $ 1,458,644
============ ===========
See notes to consolidated unaudited financial statements.
</TABLE>
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<PAGE>
NETVOICE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Month Period Ended Six Month Period Ended
June 30, June 30,
2000 1999 2000 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 5,296,991 $ 135,760 $ 5,706,799 $ 259,960
EXPENSES:
Direct expenses 4,946,360 307,839 5,571,932 460,805
General and administrative expenses 2,664,997 543,849 4,132,515 1,081,931
------------ ----------- ------------ ------------
Total expenses 7,611,357 851,688 9,704,447 1,542,736
------------ ----------- ------------ ------------
OPERATING LOSS (2,314,366) (715,928) (3,997,648) (1,282,776)
OTHER INCOME (EXPENSE):
Interest income 2,071 2,785 12,885 3,377
Interest expense (212,443) (272,536) (527,861) (344,472)
------------ ----------- ------------ ------------
Total other expense (210,372) (269,751) (514,976) (341,095)
------------ ----------- ------------ ------------
NET LOSS $ (2,524,738) $ (985,679) $ (4,512,624) $ (1,623,871)
============ =========== ============ ============
BASIC AND DILUTED LOSS PER SHARE $ (0.19) $ (0.10) $ (0.35) $ (0.16)
============ =========== ============ ============
WEIGHTED AVERAGE BASIC AND DILUTED
SHARES OUTSTANDING 13,434,329 10,367,850 12,829,945 9,995,671
============ =========== ============ ============
See notes to consolidated unaudited financial statements.
</TABLE>
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<PAGE>
NETVOICE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
Six Months Ended June 30, 2000
<TABLE>
<CAPTION>
Preferred Stock Common Stock Stock
----------------- ------------------ Paid-In Subscription
Shares Amount Shares Amount Capital Receivable
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 2000 - $ - 10,741,600 $10,742 $ 2,940,739 $ -
Restricted shares granted
(44,000) to employees 163,000
Options exercised 1,512,500 1,513 4,738
Shares sold as part of private
placement memorandum at $4.25,
net of issuance costs 1,200,000 1,200 4,973,800
Amortization of unearned
compensation
Restricted shares issued to
officers, directors and
employees 1,100,000 1,100 (1,100)
Shares sold as part of private
placement memorandum at $7.00,
net of issuance costs 453,886 454 2,887,939 (1,494,123)
Shares issued in connection with
an acquisition at $9.50, net of
issuance cost 306,458 306 2,721,045
Shares sold as part of private
placement of equity at $3.25,
net of issuance costs 3,578,349 3,578 10,577,048
Net loss
--------- ------ ---------- ------- ----------- -----------
BALANCE, JUNE 30, 2000 (Unaudited) 3,578,349 $3,578 15,314,444 $15,315 $24,267,209 $(1,494,123)
========= ====== ========== ======= =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Unearned Accumulated
Compensation Deficit Total
<S> <C> <C> <C>
BALANCE, JANUARY 1, 2000 $(366,814) $(6,738,220) $(4,153,553)
Restricted shares granted
(44,000) to employees (163,000) -
Options exercised 6,251
Shares sold as part of private
placement memorandum at $4.25,
net of issuance costs 4,975,000
Amortization of unearned
compensation 436,658 436,658
Restricted shares issued to
officers, directors and
employees -
Shares sold as part of private
placement memorandum at $7.00,
net of issuance costs 1,394,270
Shares issued in connection with
an acquisition at $9.50, net of
issuance cost 2,721,351
Shares sold as part of private
placement of equity at $3.25,
net of issuance costs 10,580,626
Net loss
(4,512,624) (4,512,624)
--------- ------------ -----------
BALANCE, JUNE 30, 2000 (Unaudited) $ (93,156) $(11,250,844) $11,447,979
========= ============ ===========
</TABLE>
See notes to consolidated unaudited financial statementts.
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<PAGE>
<TABLE>
<CAPTION>
NETVOICE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<S> Six Month Period Ended
June 30,
<C> <C>
2000 1999
(Unaudited)
OPERATING ACTIVITIES:
Net loss $(4,512,624) $(1,623,871)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 435,437 272,000
Amortization of unearned stock compensation 436,658
Bad debt expense 20,000
Changes in operating assets and liabilities:
Accounts receivable (1,969,673) 23,651
Prepaid expenses (204,472) (112,389)
Accounts payable 3,575,566 67,825
Accrued expenses 544 (6,752)
Unearned revenue 290,000
Other assets (217,878) (69,051)
----------- -----------
Net cash used in operating activities (2,146,442) (1,448,587)
----------- -----------
INVESTING ACTIVITIES:
Purchase of property and equipment (2,084,563) (202,682)
Cash outflows for acquisitions (5,997,379)
Increase in restricted cash and cash equivalents (141,226) (23,258)
----------- -----------
Net cash used in investing activities (8,223,168) (225,940)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from the sale of common stock, net of issuance costs 7,863,393 1,103,500
Proceeds from the sale of preferred stock, net of issuance costs 9,086,503
Proceeds from long-term debt 386,027 1,121,735
Proceeds from options exercised 6,250
Payments on long-term debt and capital leases (3,062,198) (474,909)
----------- -----------
Net cash provided by financial activities 14,279,975 1,750,326
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 3,910,365 75,799
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 20,085 7,990
----------- -----------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 3,930,450 $ 83,789
=========== ===========
SUPPLEMENTAL DISCLOSURES - Interest paid $ 519,608 $ 125,886
=========== ===========
NONCASH TRANSACTION:
Assets acquired through capital leases $ 764,230 $
=========== ===========
Issued 370,000 compensatory shares to officers, directors and employees $ $ 145,000
=========== ===========
Note payable issued in connection with acquisition $ 2,100,000 $
=========== ===========
See notes to consolidated unaudited financial statements.
</TABLE>
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<PAGE>
NETVOICE TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
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1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Consolidated Unaudited Interim financial statements - The accompanying
consolidated unaudited interim financial statements of NetVoice Technologies
Corporation and its subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and in a manner consistent with that used in the preparation of the
annual consolidated financial statements of the Company at December 31, 1999. In
the opinion of management, the accompanying consolidated unaudited interim
financial statements reflect all adjustments, consisting only of normal and
recurring adjustments, necessary for a fair presentation of the financial
position and results of operations and cash flows for the periods presented.
Operating results for the three months and six months ended June 30,
2000 and 1999 are not necessarily indicative of the results that may be expected
for a full year. In addition, the unaudited interim consolidated financial
statements do not include all information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles. These consolidated unaudited interim financial statements
should be read in conjunction with the financial statements and related notes
thereto which are included in the Company's 1999 consolidated financial
statements in its Form 10-KSB as filed with the Securities and Exchange
Commission on April 13, 2000.
Business Description -- The Company is a provider of voice
transmission using Internet Protocol ("IP"), which allows our customers to make
high quality, low-cost calls via traditional telephones using a technology known
as Voice over Internet Protocol ("VoIP").
Earnings per Share - Basic earnings per share are computed by dividing
income (loss) available to common stockholders by the weighted average number of
common shares outstanding during the period. Diluted earnings per share are
computed by including contingently issuable shares would have an antidilutive
effect upon earnings per share, no diluted earnings per share is presented.
Principles of Consolidation - The consolidated unaudited interim
financial statements included the accounts of the Company and its wholly owned
subsidiaries, NetVoice Technologies, Inc., NetLD.com, Inc., Synetric, Inc.,
NetVoice Encom GP and NetVoice Encom LP. All intercompany transactions and
balances between the Company and its subsidiaries have been eliminated in
consolidation.
Comprehensive Income - For the three and six months ended June 30,
2000 and 1999, the Company has no elements of other comprehensive income.
Goodwill - Goodwill represents the amount in excess of the purchase
price of an acquisition after allocating to the identifiable assets and
liabilities. Amortization of goodwill is provided on a straight-line basis over
the estimated useful life of ten years.
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
June 30, December 31,
2000 1999
(Unaudited)
Furniture and equipment $ 78,965 $ 10,033
Computer and telephone equipment 8,224,453 975,765
----------- ---------
Total cost 8,303,418 985,798
Less accumulated depreciation (520,748) (125,264)
---------- ---------
$ 7,782,670 $ 860,534
=========== =========
3. OTHER ASSETS
Other assets consisted of the following:
June 30, December 31,
2000 1999
(Unaudited)
Vendor security deposits $342,893 $300,587
Noncurrent portion of commitment fee 176,250
Other 200 200
-------- --------
$519,343 $300,787
======== ========
</TABLE>
In June 2000, the Company paid $225,000, representing a 1.5% commitment
fee, to Cisco Systems for $15.0 million of Tranche A. This amount will be
amortized over five years. The Company amortized $3,750 for the six months
ended June 30, 2000.
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<PAGE>
4. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
Notes payable and capital lease obligations consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
Notes payable $ 1,412,262 $ 3,651,932
Loans from stockholders, no interest rate, maturing from
October 2004 to December 2004 223,672 206,672
Convertible secured promissory note, LIBOR interest rate plus
2%, maturing June 30, 2005 2,100,000
Capital lease obligations, with interest rates of 13.47% to 22.5%,
maturing August 2003 3,056,559 24,357
----------- -----------
6,792,493 3,882,961
Less current portion of long-term debt (2,518,509) (3,659,905)
----------- -----------
$ 4,273,984 $ 223,056
=========== ===========
</TABLE>
Notes payable are secured by a security interest in revenues from
contracts, equipment and cash reserve equal to 10% of total notes payable. The
notes bear interest at a rate of 13.35% per annum, payable on the first day of
each quarter during the term. All principal and unpaid accrued interest is due
and payable nine months from issuance. The notes are due through November 2000.
The note holder has the right to extend the terms of the notes for an additional
nine months at the same terms.
Convertible Secured Promissory Note - On June 30, 2000, NetVoice Encom LP
entered into an convertible secured promissory note ("Note") with World Access
Telecommunications Group, Inc. ("World Access") for $2.1 million. The Note
bears interest at a rate equal to the London Interbank Offering Rate ("LIBOR")
plus a margin of 2%.
Interest only is payable on quarterly basis commencing on September 30,
2000 and continuing through December 31, 2001. On December 31, 2001, the
Company shall make a one time principal payment of $350,000. Thereafter, the
remaining outstanding principal amount shall be payable in equal consecutive
quarterly installments, including interest, beginning on March 31, 2002 and
continuing until the maturity date of June 30, 2005.
The holder of the Note, at any time prior to or on the maturity date, may
convert the then outstanding principal amount into shares of the Company's
common stock at the current market price or a price not less than $10.00 per
share. Substantially all of the assets of this subsidiary are pledged as
collateral for this Note. Additionally, the parent Company is fully and
unconditionally liable for the payment of the Note to World Access.
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<PAGE>
5. STOCKHOLDERS' EQUITY
Private Placement Memorandum - In February 2000, the Company effected a
private placement of 1,200,000 shares of its common stock for $5,100,000,
excluding issuance cost of approximately $125,000. Subscribers may not sell,
transfer or otherwise dispose of the shares unless it is in compliance with Rule
144 of the Securities Act of 1933.
In May 2000, the Company completed a private placement memorandum to
accredited investors in the amount of $2.9 million for 453,886 shares of our
common stock. On June 30, 2000, in connection with this private placement, the
Company had stock subscription receivable of approximately $1.5 million.
Subsequent to the June 30, 2000, these funds have been collected by the Company.
Subscribers may not sell, transfer or otherwise dispose of the shares unless it
is in compliance with Rule 144 of the Securities Act of 1933.
Stock split - In February 2000, the Company declared a 2-for-1 stock split
of all outstanding shares for all stockholders of record as of March 14, 2000.
Retroactive effect has been given to the stock split in stockholders' equity
accounts as of December 31, 1999, and in all share and per-share data in the
accompany consolidated unaudited interim financial statements.
Preferred Stock - On June 30, 2000, the Company issued 3,578,349 shares at
$3.25 share of a newly created series of Series A Preferred Stock ("Preferred
Stock") to certain purchasers for approximately $10.6 million in cash pursuant
to a Securities Purchase Agreement among the Company and the purchasers (the
"Securities Purchase Agreement"). Pursuant to the Securities Purchase
Agreement, the Company issued approximately 238,000 warrants, with an exercise
price of $.01 per share, that are exercisable for shares of Preferred Stock (or
Common Stock if the Preferred Stock has been converted) if certain financial
targets and/or approximately 201,000 shares, with an exercise price of $.01 per
share, NASDAQ listing requirements are not achieved. The warrants will expire
if not exercised before June 30, 2010. The purchasers were also granted certain
registration rights with respect to the shares issued under the Securities
Purchase Agreement pursuant to a Registration Rights Agreement.
The Preferred Stock holders have the right to convert at the option of each
holder, at any time after six months of closing, into shares of the Company's
common stock. The Company can convert the Preferred Stock into the Company's
common stock if the average of the closing price of the common stock for any
twenty-one (21) trading day period exceeds $27.50 per share and the shares of
common stock are registered and freely tradeable. Each share of Preferred Stock
can be converted into one share of common stock. The Series A Preferred Stock
ranks senior to all classes of common or preferred stock.
6. STOCK OPTIONS
During the second quarter of 2000, the Company granted certain executives
and employees approximately 494,000 options to acquire common stock at an
exercise price equal to the fair market value at the date of grant. As of June
30, 2000, the Company had approximately 1.3 million options outstanding to
acquire common stock.
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<PAGE>
On June 30, 2000, two former directors and one current director of the
Company entered into an agreement to exercised their options, issued in January
1999, to purchase 1.8 million shares of restricted common stock, with an
exercise price of $0.50 per share. Pursuant to the exercise of these options,
the three individuals exchanged 300,000 shares of restricted common stock to the
Company. Pursuant to the agreement, the individuals will not, directly or
indirectly, offer, sell, pledge, contract to sell the restricted common stock
for a period of eighteen (18) months. The fair market value of these shares was
valued at approximately $2.70 per share, which was obtained by an independent
valuation appraisal.
7. ACQUISITION
Effective May 19, 2000, the Company completed the acquisition of Synetric,
Inc. of Dallas, Texas ("Synetric") pursuant to a definitive Stock Purchase
Agreement ("Stock Agreement") whereby the Company acquired all of the issued and
outstanding shares of Synetric from eight (8) individuals, including officers
and directors of Synetric. Pursuant to the Stock Agreement, the Company issued
286,458 shares of its restricted common sock. The Stock Agreement provides that
of the 286,458 shares delivered at closing, 33,229 shares will be held in escrow
for a period of one (1) year following the closing to satisfy any future
indemnification claims. Additionally, the Company issued 20,000 shares of
restricted common stock to a consultant in connection with the acquisition of
Synetric. The Company recorded this transaction under the purchase method of
accounting.
Concurrent with the execution of the Stock Agreement, the Company entered
into an employment agreement with a former employee for a period of two years.
The employment agreement provides for the former employee to continue to serve
as President of Synetric or in such other capacity as determined by the
Company's Board of Directors. The employment agreement contains certain
confidentially and noncompetition provisions.
On June 30, 2000, the Company completed an acquisition from World Access
Telecommunications Group, Inc. of a division doing business as Enhanced
Communications (the "Division") pursuant to an Asset Purchase Agreement ("Asset
Agreement"). As consideration for the acquisition, the Company paid to World
Access $6.0 million in cash, issued a convertible promissory note in the
principal amount of $2.1 million and assumed liabilities of approximately $3.3
million, including approximately $2.7 million of assumed capital lease
obligations. The effective date of this acquisition was June 1, 2000. The
Company recorded this transaction under the purchase method of accounting. The
acquisition was funded with the Preferred Stock offering on June 30, 2000.
8. RESTATEMENT
Subsequent to the issuance of the Company's consolidated financial
statements as of and for the year ended December 31, 1999, the Company's
management determined that the cost for the purchase of a customer list from a
company owned by a shareholder in June 1999 should have been accounted for as a
capital distribution, and the proceeds from the sale of such customer list and
the excess of the proceeds from the sale of another customer list over its
amortized carrying cost, both having been sold to another minority shareholder
in December 1999, should have been accounted for as capital contribution. As a
result, the 1999 financial
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<PAGE>
statements will be restated from amounts previously reported to appropriately
account for this transaction.
A summary of the significant effects of the restatement on the 1999 financial
statements is as follows:
<TABLE>
<CAPTION>
As Previously As
Reported Restated
<S> <C> <C>
Balance sheet
Paid-in Capital $ 2,881,479 $ 2,946,110
Accumulated Deficit (6,673,589) (6,738,220)
</TABLE>
9. SUBSEQUENT EVENTS
On July 28, 2000, the Company issued an additional 801,847 shares of the
Series A Preferred Stock to certain purchasers for approximately $2.6 million in
cash pursuant to the Amended and Restated Securities Purchase Agreement.
Pursuant to the Amended and Restated Securities Purchase Agreement, the Company
issued approximately an additional 46,000 warrants, with an exercise price of
$.01 per share, that are exercisable for shares of Preferred Stock (or Common
Stock if the Preferred Stock has been converted) if certain financial targets
and/or approximately an additional 39,000 shares, with an exercise price of $.01
per share, if NASDAQ listing requirements are not achieved by September 29,
2000. The warrants will expire if not exercised before June 30, 2010. The
purchasers were also granted certain registration rights with respect to the
shares issued under the Amended and Restated Securities Purchase Agreement
pursuant to the Amended and Restated Registration Rights Agreement.
******
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statements
This document includes statements that may constitute forward-looking
statements made pursuant to the Safe Harbor provisions of the Private Securities
Litigation Reform Act of 1995. The Company would like to caution readers
regarding certain forward-looking statements in this document and in all of its
communications to shareholders and others, press releases, securities filings,
and all other communications. Statements that are based on management's
projections, estimates and assumptions are forward-looking statements. The words
"believe," "expect," "anticipate," "intend," and similar expressions generally
identify forward-looking statements. While the Company believes in the veracity
of all statements made herein, forward-looking statements are necessarily based
upon a number of estimates and assumptions that, while considered reasonable by
the Company, are inherently subject to significant business, economic and
competitive uncertainties and contingencies and known and unknown risks. Many of
the uncertainties and contingencies can affect events and the Company's actual
results and could cause its actual results to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company. Some of the factors that could cause actual results or future events to
differ materially include the Company's inability to find suitable acquisition
candidates or financing on terms commercially reasonable to the Company,
inability to find suitable facilities or personnel to open or maintain new
branch locations, interruptions or cancellation of existing sources of supply,
the pricing of and demand for distributed products, the presence of competitors
with greater financial resources, economic and market factors, and other
factors. Please see the "Risk Factors" in the Company's filings with the
Securities and Exchange Commission for a description of some, but not all,
risks, uncertainties and contingencies.
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and related notes thereto which are
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999 filed with the Securities and Exchange Commission.
Overview
We are a provider of telephony services using traditional technologies and
Internet Protocol ("IP"), which allows our customers to converge their data,
Internet and voice networks via our managed IP network.
We began offering our long distance and Internet services during the past
year as part of our current business plan. We have aggressively been deploying
IP gateways in 29 markets located throughout the United States with leading
manufacturers such as Cisco Systems, Inc. ("Cisco"). Currently, Cisco supplies
us with much of the equipment involved in establishing our IP gateways and
building our network.
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<PAGE>
IP transmission uses a technology called "packet-switching" to break voice,
and other IP telephony services into discrete data packets, route them over our
managed network and reassemble them into their original form for delivery to the
end destination. Traditional long distance calls, in contrast, are made using a
technology called "circuit switching" which carries these calls over traditional
telephone networks. Circuit switching requires a dedicated connection between
the caller and the recipient that must remain open for the duration of the call.
In contrast, packet-switching technology allows data packets representing
multiple conversations to be carried over the same line. This greater efficiency
creates significant network cost savings that can be passed on to the consumer
in the form of lower long distance and other telephony products. Additionally,
IP allows various telephony products to utilize the same network, which results
in an increased flexibility for a robust product offering.
We have filed a patent application for a communications enabled browser and
have filed a trademark application for the mark "CAB" as applied to the browser
software. Both of these applications are currently pending approval.
Effective May 19, 2000, we completed the acquisition of Synetric pursuant
to a definitive Stock Agreement whereby we acquired all of the issued and
outstanding shares of Synetric from eight (8) individuals, including officers
and directors of Synetric. Pursuant to the Stock Agreement, we issued 286,458
shares of restricted common sock. The Stock Agreement provides that of the
286,458 shares delivered at closing, 33,229 shares will be held in escrow for a
period of one (1) year following the closing to satisfy any future
indemnification claims. Additionally, the Company issued 20,000 shares of
restricted common stock to a consultant in connection with the acquisition of
Synetric.
On June 30, 2000, we completed an acquisition from World Access
Telecommunications Group, Inc. of a division doing business as Enhanced
Communications (the "Division") pursuant to an Asset Purchase Agreement ("Asset
Agreement"). As consideration for the acquisition, we paid to World Access $6.0
million in cash, issued a convertible promissory note in the principal amount of
$2.1 million and assumed liabilities in an approximate amount of $3.3 million,
including approximately $2.7 million of assumed capital lease obligations. The
effective date of the acquisition was June 1, 2000.
Revenue From Operations
Currently, 99% of our revenues are derived from long distance services and
Internet services. One of the Company's initial strategies is to continue to
acquire existing customer bases concentrated in specific geographical areas
which complement our current markets and convert them to our IP network. We also
anticipate deriving revenues through direct sales by our existing employees,
independent agents, and by leveraging our relationship with Cisco. In the
future, in order to diversify, we plan to introduce a variety of value added
services utilizing our VoIP network including:
. Unified messaging;
. IP video conferencing;
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. IP video; and
. Wireless local loop.
Revenues from operations for the six months ended June 30, 2000 were
derived primarily from sales to wholesale voice customers. For the first time,
for the three months ended June 30, 2000, margins from revenue exceeded our
direct costs to offer those services. These cost include leased bandwidth,
connection to the Internet, local lines within a local calling area, and minutes
terminated on other carrier networks.
We will continue to expand our network to handle projected volume, which
will result in better efficiency. This coupled with converging various products
(voice, video, data and Internet) over the same network are the key ingredients
to approach profitability. The Company, as it continues to grow and build
network, is not expected to be profitable in the foreseeable future.
There are little or no seasonal changes in the revenue stream of the
Company's business.
Cost Structure
--------------
Our costs and expenses include:
. network costs;
. selling and marketing;
. general and administrative; and
. interest and depreciation.
Network costs primarily consist of costs associated with the routing and
termination of our customers' traffic. The costs include:
. leased bandwidth and connection to the Internet;
. local lines used to carry calls to and from our network locations;
. our network facilities; and
. calls terminated over other carrier networks.
We expect these costs to increase into the future as we further expand our
network in the United States and throughout the world. The Company will
continue to incur network costs in order to continue to grow revenue. The
network will have to be expanded to handle additional volume.
Sales and marketing expenses include the expenses anticipated to be
associated with acquiring customers, establishing brand recognition, commissions
paid to our sales
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personnel, advertising costs and customer referral fees. We expect sales and
marketing expenses to increase over time as we aggressively market our products
and services.
During the second quarter of 2000, sales and marketing expenses increased
as a result of new personnel and the start of various marketing campaigns.
Sales and marketing expenses are expected to increase both in terms of absolute
dollars and as a percentage of revenue as our revenue grows. We expect to spend
significant capital to build brand recognition to the extent possible due to our
relatively small size. Much of our sales and marketing expenses are anticipated
to be expanded to obtain strategic relationships with a variety of agents,
publications, portals, content providers and other key customer destinations on
the Web.
General and administrative expenses consist of the salaries of our
employees and associated benefits, and the cost of travel, business
entertainment, rent and utilities. A large portion of our general and
administrative expenses is allocated to operations and customer support.
Customer support expenses include the costs associated with customer service and
technical support, and consist primarily of the salaries and employment costs of
the employees responsible for those efforts. We expect operations and customer
support expenses to increase over time to support new and existing customers.
We expect general and administrative costs to increase to support our growth,
particularly as we establish a larger organization to implement our business
plan. We plan to incur additional costs for research and development, though
they are not expected to increase as a percentage of revenue. Over time, we
expect these relatively fixed general and administrative expenses to decrease as
a percentage of revenue, primarily as a consequence of increased revenues.
Interest expense includes the cost incurred for commissions (recognized
over the life of the notes) on the issuance of the short-term notes and interest
on the notes, interest expense on our capital lease obligations and interest on
our Cisco debt facility. As of June 30, there were no borrowings under the
Cisco facility. The notes have a term of nine-months with an interest rate of
13.35%. During the six months ended June 30, 2000, we had net interest expense
in the aggregate amount of $514,976.
Depreciation primarily relates to our telecommunications equipment. We
depreciate this equipment over its estimated useful life of five to seven years
using the straight-line method. In addition, we will be adding more originating
and terminating IP Gateways as traffic volumes justify. We expect depreciation
to increase in absolute terms as we grow our networks to support new and
acquired customers, but to decrease as a percentage of total revenue.
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<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the three months and six months
ended June 30, 2000 and 1999, respectively, the results of operations of the
Company.
<TABLE>
<CAPTION>
Three Month Period Six Month Period
Ended Ended
June 30, June 30,
2000 1999 2000 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 5,296,991 $ 135,760 $ 5,706,799 $ 259,960
EXPENSES:
Direct expenses 4,946,360 307,839 5,571,932 460,805
General and admin. expenses 2,664,997 543,849 4,132,515 1,081,931
----------- --------- ----------- -----------
Total expenses 7,611,357 851,688 9,704,447 1,542,736
----------- --------- ----------- -----------
OPERATING LOSS (2,314,366) (715,928) (3,997,648) (1,282,776)
OTHER INCOME (EXPENSE):
Interest income 2,071 2,785 12,885 3,377
Interest expense (212,443) (272,536) (527,861) (344,472)
----------- --------- ----------- -----------
Total other expense (210,372) (269,751) (514,976) (341,095)
----------- --------- ----------- -----------
NET LOSS $(2,524,738) $(985,679) $(4,512,624) $(1,623,871)
=========== ========= =========== ===========
</TABLE>
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30,
1999
Revenue increased to $5,296,991 for the three months ended June 30, 2000
from $135,760 for the three months ended June 30, 1999. The increase is a
result of our business moving from the start-up phase into an operational
entity, the acquisition of Enhanced Communications and Synetric. Of revenue
generated for the three months ended June 30, 2000, revenue from wholesale voice
sales accounted for approximately 97%. The remainder was the result of
wholesale Internet and equipment sales. We expect our wholesale revenue to
continue to grow, as we continue to expand our network into additional
locations. We have expanded our points of presence ("POPs") in major markets to
handle DS-3 traffic. The focus on the wholesale revenue gives us the ability to
grow our network and offer more on-net locations to the enterprise market. The
enterprise market will primarily consist of large corporate customers interested
in converged IP telephony products.
Total direct costs increased to $4,946,360 for the three months ended June
30, 2000 from $307,839 for the three months ended June 30, 1999. The increase
of costs in the three months ended June 30, 2000 over the three months ended
June 30, 1999 is a result of our increased revenue. As we expand our network to
DS-3 level service in each of our major
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markets, we expect network cost to continue to increase. We have continued to
purchase additional equipment to expand our IP network therefore direct costs
have increased. As we continue to implement several of the new wholesale
contracts, in the second quarter of fiscal year 2000, direct costs as a
percentage of revenue are expected to decrease for a period of time and then
track as a percentage of revenue.
General and Administrative costs increased to $2,190,132 for the three
months ended June 30, 2000 from $299,646 for the three months ended June 30,
1999. As we continue to build our network, expand our product offering and
execute our business plan, we expect these expenses to continue to increase.
The primary reason for this increase relates to expanded marketing efforts and
hiring of additional personnel. These costs are expected to increase as a
percentage of revenue for a period, until all necessary personnel and systems
are in place to handle future revenue and support future products. Thereafter,
we anticipate that general and administrative costs will increase but not as a
percentage of revenues.
Depreciation and Amortization costs increased to $474,865 for the three
months ended June 30, 2000 from $244,203 for the three months ended June 30,
1999. Depreciation consists primarily of the depreciation of our IP gateways and
other telecom equipment. We depreciate this network equipment over five to seven
years on a straight-line basis. It can be expected that depreciation will
continue to increase as we continue to expand our network. Amortization expense
consists of the amortization of goodwill from the acquisitions of Enhanced
Communications (effective June 1, 2000) and Synetric (effective May 18, 2000).
Net Interest expense decreased to $210,372 for the three months ended June
30, 2000 from $269,751 for the three months ended June 30, 1999. This decrease
is the result of the repayment of short-term notes during the second quarter
2000. We expect interest to increase throughout the rest of fiscal year 2000, as
a result of the acquisition of Enhanced Communications and the use of the Cisco
credit facility to purchase equipment.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
Revenue increased to $5,706,799 for the six months ended June 30, 2000 from
$259,960 for the six months ended June 30, 1999. The increase is a result of our
business moving from the start-up phase into an operational entity, the
acquisition of Enhanced Communications and the acquisition of Synetric. Of
revenue generated in for the six months ended June 30, 2000, revenue from
wholesale voice sales accounted for approximately 97%. The remainder was the
result of wholesale Internet and equipment sales. We expect our wholesale
revenue to continue to grow, as we continue to expand our network into
additional locations. We have expanded our POPs in major markets to handle DS-3
traffic. The focus on the wholesale revenue gives us the ability to grow our
network and offer more on-net locations to the enterprise market. The enterprise
market will primarily consist of large corporate customers interested in
converged IP telephony products.
Total direct costs increased to $5,571,932 for the six months ended June
30, 2000 from $460,805 for the six months ended June 30, 1999. The increase of
costs is a direct
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<PAGE>
result of the increase in revenue. As we expand our network to DS-3 level
service in each of our major markets, we expect network cost to continue to
increase. We have continued to purchase additional equipment to expand our IP
network therefore direct costs have increased. As we continue to implement
several of the new wholesale contracts, in the second quarter of fiscal year
2000, direct costs as a percentage of revenue are expected to decrease for a
period of time and then track as a percentage of revenue.
General and Administrative costs increased to $3,260,400 for the six months
ended June 30, 2000 from $809,931 for the six months ended June 30, 1999. As we
continue to build our network, expand our product offering and execute our
business plan, we expect these expenses to continue to increase. The primary
reason for this increase relates to expanded marketing efforts and hiring of
additional personnel. These costs are expected to increase as a percentage of
revenue for a period, until all necessary personnel and systems are in place to
handle future revenue and support future products. Thereafter, we anticipate
that general and administrative costs will increase but not as a percentage of
revenues.
Depreciation and Amortization costs increased to $872,115 for the six
months ended June 30, 2000 from $272,000 for the six months ended June 30, 1999.
Depreciation consists primarily of the depreciation of our IP gateways and other
telecom equipment. We depreciate this network equipment over five to seven years
on a straight-line basis. It can be expected that depreciation will continue to
increase as we continue to expand our network. Amortization expense consists of
the amortization of goodwill from the acquisitions of Enhanced Communications
(effective June 1, 2000) and Synetric (effective May 18, 2000).
Net Interest expense increased to $514,976 for the six months ended June
30, 2000 from $341,095 for the six months ended June 30, 1999. This increase is
the result of the increase in the issuance of short-term notes and the
commissions paid to broker-dealers for the sale of these notes throughout 1999
and through February 2000. In February 2000, we began to repay these notes. The
current principal balance is $1.4 million. Additionally, we incur interest
expense for the financing of our capital equipment.
Liquidity And Capital Resources
-------------------------------
Since January of 1998 NVT, Inc. has privately issued a series of promissory
notes. These funds were used primarily to continue the build-out of our IP
network, which includes equipment purchases, and for working capital. The terms
of these notes are nine-months with an interest rate of 13.35%. The notes are
secured by revenues from contracts, equipment and a 10% cash reserve. The
Company received a waiver from the paymaster of the Trustee to waive this
requirement as of December 31, 1999, and as of February 23, 2000, the Company
has complied with the debt covenant requirement. Since February 2000, the
Company has not issued any of these promissory notes and has begun to repay the
amount of short-term debt.
At June 30, 2000, we had approximately $1.4 million outstanding in such
notes. All of the Notes will be immature on or before November 2000. At this
time, we intend to repay the Notes with existing cash.
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<PAGE>
In February 2000, we sold to all accredited investors 1,200,000 shares of
our Common Stock through a Private Placement Memorandum for $5.1 million. The
cost of the offering was $125,000 for finder's fees. The net proceeds were
primarily used for marketing, network expansion, working capital and the
repayment of short-term debt.
On May 31, 2000, we completed a credit facility with Cisco that provides
$25.0 million in funding. The funding will be used primarily to fund equipment
purchases in order to expand our network. The funding, in the form of a loan, is
to be used for equipment purchases from Cisco and soft costs to install that
equipment. The Company will receive the funding from Cisco over a period of 5
years and will be required to repay the principal plus interest at a rate of
approximately 5.5% over LIBOR. There are no principal payments due until
September 30, 2001. As of June 30, 2000, we have no balance outstanding on this
facility.
On May 18, 2000, we completed the acquisition of 100% of the outstanding
shares of Synetric for 286,458 shares of the Company's restricted common stock.
The stock purchase agreement provides that of the 286,458 shares delivered at
closing, 33,229 shares will be held in escrow for a period of one (1) year
following the closing to satisfy any future indemnification claims. As part of
the acquisition approximately $2.7 million of goodwill has been recorded and is
being amortized over 10 years. Additionally, the Company issued 20,000 shares of
restricted common stock to a consultant in connection with the acquisition of
Synetric.
On June 30 and July 28, 2000, we completed the issuance of 4,398,658 shares
of the Series A Preferred Stock for approximately $13.2 million to certain
investors in a private equity offering. Pursuant to the Securities Purchase
Agreement, we issued approximately 284,000 warrants, with an exercise price of
$.01 per share, that are exercisable for shares of Preferred Stock (or Common
Stock if the Preferred Stock has been converted) if certain financial targets
and/or approximately 240,000 shares, with an exercise price of $.01 per share,
NASDAQ listing requirements are not achieved by September 29, 2000. The warrants
will expire if not exercised before June 30, 2010. The investors were also
granted certain registration rights with respect to the shares issued under the
Securities Purchase Agreement pursuant to a Registration Rights Agreement.
The Preferred Stock holders have the right to convert at the option of each
holder, at any time after six months of closing, into shares of the Company's
common stock. The Company can convert the Preferred Stock into the Company's
common stock if the average of the closing price of the common stock for any
twenty-one (21) trading day period exceeds $27.50 per share and the shares of
common stock are registered and freely tradeable. Each share of Preferred Stock
can be converted into one share of common stock. The Preferred Stock ranks
senior to all classes of common or preferred stock.
On June 30, 2000, we completed an acquisition of certain assets and
liabilities of Enhanced Communications, a division of World Access
Telecommunications Group, Inc. for $6.0 million in cash, $2.1 million in a
convertible secured note and assumed liabilities of approximately $3.3 million,
including approximately $2.7 million of assumed capital lease
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<PAGE>
obligations. The debt is payable to World Access over a period of four years at
a rate of 2% over LIBOR. There are no principal payments due until December 31,
2001. The holder of the convertible secured note, at any time prior to or on the
maturity date, may convert the then outstanding principal amount into shares of
the Company's common stock at the current market price or a price not less than
$10.00 per share. Substantially all of the assets of this subsidiary are pledged
as collateral for this Note. Additionally, the parent Company is fully and
unconditionally liable for the payment of the Note to World Access. As part of
the acquisition approximately $7.1 million of goodwill has been recorded and is
being amortized over 10 years.
As of June 30, 2000, we had approximately $3.9 million in cash and cash
equivalents. Our operating activities used cash of approximately $2.1 million
for the six months ended June 30, 2000, compared to approximately $1.4 million
for the six months ended June 30, 1999. Our cash used in operating activities
was principally for the result of the Company losses. Cash used in investing
activities for the six months ended June 30, 2000 was approximately $8.2 million
and $0.2 million for the six months ended June 30, 1999. Our cash used in
operating and investing activities was principally for the acquisition of
Enhanced Communications, the purchase of telecommunications and Internet
equipment. Our financing activities provided cash of approximately $14.3 million
and $1.8 million for the six months ended June 30, 2000 and 1999, respectively.
The principal sources of the cash provided were additional funding from the sale
of the preferred stock and common stock offerings in February and May 2000.
Our future capital requirements will depend on numerous factors, including:
. market acceptance of our services;
. brand promotions;
. the amount of resources we devote to the development of our
current and future products; and
. the expansion of our in-house sales force and marketing our
services.
We may experience a substantial increase in our capital expenditures and
lease arrangements consistent with the growth in our operations and adding
additional personnel. Our current cash flow from operations is not sufficient to
meet our working capital and capital expenditure needs for at least the next
twelve (12) months and accordingly, we have obtained and will continue to seek
additional financing. Accordingly, there can be no assurance that we will have
sufficient capital to finance potential acquisitions or other growth oriented
activities, and may issue additional equity securities, incur debt or obtain
other financing. We have no other material capital commitments.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not currently a party to any legal proceedings, nor are we aware of
pending or threatened litigation.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
In February 2000, the Company sold 1,200,000 shares of its Common Stock at
$4.25 to 79 investors for a total of $5,100,000. Finders fee of $125,000 were
paid in connection with the sales. The shares of Common Stock issued by the
Company in connection with this offering are deemed "restricted securities"
within the meaning of that term as defined in Rule 144 of the Securities Act of
1933, as amended ("Act") and were issued pursuant to certain "private placement"
exemptions under Section 4(2) and rule 506 of Regulation D of the Act, as
promulgated by the Securities and Exchange Commission. The sales of the Common
Stock were to "accredited" investors, as that term is defined in rule 501 of
Regulation D of the Act, and were transactions by the Company not involving any
public offering. Although not required, all such accredited investors had access
to information on the Company necessary to make an informed investment decision.
All of the aforesaid purchasers were fully informed and advised concerning the
Company, its business, financial and other matters by way of a Private Placement
Memorandum. All of the aforesaid securities have been appropriately marked with
a restricted legend and are "restricted securities," as defined in Rule 144 of
the rules and regulations of the Securities and Exchange Commission. The
Company's transfer agent has been instructed to mark "stop transfer" on its
ledgers to assure that these securities will not be transferred absent
registration or until the availability of an exemption therefrom is determined.
The proceeds of this offering were used for working capital, marketing efforts
and payment of short-term debt.
In February 2000, the Company declared a 2-for-1 stock split of all
outstanding shares for all stockholders of record as of March 14, 2000.
Retroactive effect has been given to the stock split in stockholders' equity
accounts as of December 31, 1999, and in all share and per-share data in the
accompany consolidated unaudited interim financial statements.
On June 30, 2000, the Company issued 3,578,349 shares at $3.25 share of a
the Series A Preferred Stock ("Preferred Stock") to certain purchasers for
approximately $10.6 million in cash pursuant to a Securities Purchase Agreement
among the Company and the purchasers (the "Securities Purchase Agreement").
Pursuant to the Securities Purchase Agreement, the Company issued approximately
238,000 warrants, with an exercise price of $.01 per share, that are exercisable
for shares of Preferred Stock (or Common Stock if the Preferred Stock has been
converted) if certain financial targets and/or approximately 201,000 shares,
with an exercise price of $.01 per share, NASDAQ listing requirements are not
achieved by September 29, 2000. The warrants will expire if not exercised before
June
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<PAGE>
30, 2010. The purchasers were also granted certain registration rights with
respect to the shares issued under the Securities Purchase Agreement pursuant to
a Registration Rights Agreement. The proceeds of this offering were used fund
the acquisition of a division doing business as Enhanced Communications from
World Access Telecommunications Group, Inc.
On July 28, 2000, the Company issued an additional 801,847 shares of the
Series A Preferred Stock to certain purchasers for approximately $2.6 million in
cash pursuant to the Amended and Restated Securities Purchase Agreement.
Pursuant to the Amended and Restated Securities Purchase Agreement, the Company
issued approximately an additional 46,000 warrants, with an exercise price of
$.01 per share, that are exercisable for shares of Preferred Stock (or Common
Stock if the Preferred Stock has been converted) if certain financial targets
and/or approximately an additional 39,000 shares, with an exercise price of $.01
per share, if NASDAQ listing requirements are not achieved by September 29,
2000. The warrants will expire if not exercised before June 30, 2010. The
purchasers were also granted certain registration rights with respect to the
shares issued under the Amended and Restated Securities Purchase Agreement
pursuant to the Amended and Restated Registration Rights Agreement. The proceeds
of this offering were used for working capital, marketing efforts and payment of
short-term debt.
ITEM 3. DEFAULT UPON SENIOR SECURITIES.
There was no default upon our senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
None.
(b) Reports on Form 8-K
(1) On May 19, 2000, we filed a Form 8-K (pursuant to Item 2 and 7) in
connection with the acquisition of Synetric, Inc. pursuant to a
definitive Stock Purchase Agreement ("Agreement") whereby we acquired
all of the issued and outstanding shares of Synetric from eight (8)
individuals, including officers and directors of Synetric. Pursuant to
the Agreement, we issued 286,458
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<PAGE>
shares of the Company's restricted common stock. The Agreement provides
that of the 286,458 shares delivered at closing, 33,229 shares will be held
in escrow for a period of one (1) year following the closing to satisfy any
future indemnification claims.
(2) On June 23, 2000, we filed a Form 8-K (pursuant to Item 5) in connection to
a Credit Agreement with Cisco Systems Capital Corporation. The Credit
Agreement permits the Company to borrow up to $15,000,000 for a twelve-
month period and an additional $10,000,000 for a twelve-month period after
year one. We must utilize the proceeds of the Credit Agreement of up to
$20,000,000 for the financing of the purchase of Cisco Systems networking
hardware and up to $5,000,000 for the costs of integration and installation
of Cisco Systems solutions.
(3) On June 30, 2000, we filed a Form 8-K (pursuant to Item 2, 5 and 7) in
connection with the acquisition of certain assets and liabilities of
Enhanced Communications, a division of World Access Telecommunications
Group, Inc. for $6.0 million in cash, $2.1 million in a convertible secured
note and assumed liabilities of approximately $3.3 million and the issuance
of 3,578,349 shares of newly created series of Series A Preferred Stock to
certain purchasers for approximately $10.6 million in cash.
(4) On August 17, 2000, we filed a Form 8-K (pursuant to Item 5) in connection
with the issuance of an additional 818,309 shares of a newly created series
of Series A Preferred Stock to certain purchasers for approximately $2.6
million in cash pursuant to the Amended and Restated Securities Purchase
Agreement among the Company and the purchasers.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NETVOICE TECHNOLOGIES CORPORATION
Date: August 21, 2000 By: /s/ JEFFREY ROTHELL
-------------------------------------
Jeffrey Rothell, President, Chief
Executive Officer
Date: August 21, 2000 By: /s/ GARTH COOK
-------------------------------------
Garth Cook, Treasurer, Chief Financial
Officer and Chief Accounting Officer
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