As filed with the Securities and Exchange Commission on October 13, 2000
Registration No. ___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
IVOICE.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 7373 52-1750786
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
750 Highway 34
Matawan, New Jersey 07747
(732) 441-7700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------------
JERome R. MAHONEY
750 Highway 34
Matawan, New Jersey 07747
(732) 441-7700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------------
COPIES TO:
LAWRENCE A. MUENZ, ESQ. SCOTT S. ROSENBLUM, ESQ.
Meritz & Muenz LLP Kramer Levin Naftalis & Frankel LLP
Three Hughes Place 919 Third Avenue
Dix Hills, New York 11746 New York, New York 10022
(631) 242-7384 (212) 715-9100
Approximate date of commencement of proposed sale to the public: At such
time or times as may be determined by the selling stockholders after this
registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Securities Act"), check the
following box. [X]
<PAGE>
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
-------------------------------------------------------------------------------------------
Proposed
Number of Maximum Proposed
Shares Offering Maximum Amount of
Title of Shares to be Price Aggregate Registration
to be Registered Registered Per Share Offering Price Fee
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A common stock, par value 35,100,100 (2) $20,000,000 $5,280.00
$.01 per share (1)
-------------------------------------------------------------------------------------------
Class A common stock, par value 4,200,000 $0.4375 (4) $ 1,837,500 $485.10
$.01 per share (3)
-------------------------------------------------------------------------------------------
Class A common stock, par value 9,000,000 $0.4375 (4) $ 3,937,500 $1,039.50
$.01 per share (5)
-------------------------------------------------------------------------------------------
Class A common stock, par value 500,000 $0.4375 (4) $218,750 $57.75
$.01 per share (6)
-------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the shares that, in good faith, we anticipate we would be
required to issue to Swartz Private Equity, LLC if we were to draw dawn
the $20,000,000 of financing available to us pursuant to an investment
agreement with Swartz.
(2) Pursuant to our investment agreement with Swartz, for each share of our
Class A common stock we issue to Swartz pursuant to a put right under the
investment agreement, Swartz will pay us the lesser of (1) the market
price for each share, minus $.075, and (2) 91% of the market price for
each share, except that Swartz must pay at least the designated minimum
per share price, if any, we specify in our notice. Market price is defined
as the lowest closing bid price for our Class A common stock during the 20
business day pricing period immediately following a put date.
(3) To be issued upon conversion of the outstanding principal amount of, and
other amounts due under, the $500,000 of 12% secured convertible
debentures due December 1, 2000.
(4) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act, based on the average of
the high and low sales prices for our common stock reported on the
Over-the-Counter Bulletin Board on October 9, 2000.
(5) Includes 5,490,000 shares of our Class A common stock issuable upon
exercise of a warrant issued to Swartz Private Equity, LLC as an initial
commitment fee under the investment agreement and 3,510,000 shares of our
Class A common stock issuable upon exercise of warrants that may be issued
to Swartz at the end of each pricing period in consideration for a put
right. The additional shares of Class A common stock being registered for
issuance upon exercise of the latter warrants is equal to 10% of the total
number shares of Class A common stock we may issue to Swartz pursuant to
the investment agreement, as set forth under note (2) above.
(6) Represents 500,000 shares of Class A common stock issued to Lawrence A.
Muenz (of which 50,000 shares were issued to Mr. Muenz in a custodial
capacity) in consideration for legal services rendered to us by Mr. Muenz.
-2-
<PAGE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until this Registration Statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
-3-
<PAGE>
PROSPECTUS
48,800,000 SHARES
COMMON STOCK
IVOICE.COM, INC.
The stockholders named on page 23 are offering to sell up to 48,800,000
shares of our common stock.
Our common stock is traded on the NASD Over-the-counter Bulletin Board
under the symbol "IVOC".
Investing in our common stock involves certain risks. See "Risk
Factors" beginning on page 2.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
The date of this prospectus is October __, 2000.
<PAGE>
TABLE OF CONTENTS
Prospectus Summary...........................................................2
Risk Factors.................................................................3
Use of Proceeds..............................................................7
Market for Common Equity.....................................................7
Management's Discussion and Analysis or Plan of Operation....................8
Description of Business......................................................9
Management and Executive Compensation.......................................14
Certain Relationship and Related Transactions...............................17
Description of Property.....................................................17
Principal Stockholders......................................................17
Description of Securities...................................................19
Investment Agreement........................................................21
Convertible Debentures......................................................22
Selling Stockholders........................................................23
Plan of Distribution........................................................24
Legal Proceeding............................................................25
Interests of Named Experts and Counsel......................................25
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities.................................................................25
Where You Can Find More Information.........................................26
Index to Financial Statements...............................................27
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PROSPECTUS SUMMARY
This summary highlights the information we present more fully in the rest
of this prospectus. We encourage you to read the entire prospectus carefully.
iVoice.com, Inc.
We are a communication company primarily engaged in developing,
manufacturing, and marketing voice and computer technology communication systems
for businesses and corporate departments with between two and 20,000 telephones.
This technology allows businesses to communicate more effectively by integrating
their traditional office telephone systems with voicemail, automated attendant,
and interactive voice response functions. These products allow information in PC
databases to be accessed from a standard touch-tone telephone.
Our offices are located at 750 Highway 34, Matawan, New Jersey 07747 and
our telephone number is (732) 441-7700.
The Offering
In accordance with our obligations under our investment agreement with
Swartz Private Equity, LLC, and our registration rights agreement with the
holders of our 12% secured convertible debentures due December 1, 2000, we are
registering the following 48,800,000 shares of our common stock. See "Selling
Stockholders" on page 23.
Common stock offered by the 38,610,000 shares of our common stock that we
selling stockholders may issue pursuant to an investment agreement
with Swartz Private Equity, LLC as well as
warrants that we may issued to Swartz
pursuant to the investment agreement.
5,490,000 shares of our common stock that we
may issue upon exercise of a warrant held by
Swartz as a commitment for entering into the
investment agreement.
4,200,000 shares of our common stock that we
may issue upon conversion of the outstanding
principal amount of, and interest and other
amounts due under, our 12% senior convertible
debentures due December 1, 2000, including
any shares issued in consideration of default
charges.
500,000 shares of our common stock issued to
Lawrence A. Muenz (of which 50,000 were
issued to Mr. Muenz in a custodial capacity)
in consideration for legal services rendered
to us by Mr. Muenz.
Use of Proceeds We will not receive any of the proceeds from
sale by the selling stockholders of shares of
our common stock. However, upon exercising a
put right under our investment agreement with
Swartz we will receive cash in consideration
for issuing our common stock. We intend to
use these proceeds to repay short-term debt
and for working capital and general corporate
purposes.
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<PAGE>
RISK FACTORS
Investing in our common stock involves a high degree of risk, and you
should be able to bear losing your entire investment. You should consider
carefully the following risks, in addition to the other information contained in
this prospectus.
Our Financial Condition and Need for Additional Funding
We may need additional financing sooner than anticipated.
Based on our potential rate of cash operating expenditures and our current
plans, the proceeds of our investment agreement with Swartz Private Equity, LLC
may constitute our principal source of financing. However, our ability to raise
funds under the investment agreement is subject to certain conditions. These
include the continuing effectiveness of a registration statement covering the
resale of the shares sold under the investment agreement and a limitation on the
number of shares we may issue based on the volume of trading in the common
stock. We may be unable to satisfy one or more of these conditions.
We have a history of losses, expect to encounter future losses and may not
achieve or sustain profitability.
To date, we have incurred significant losses. As of June 30, 2000, our
accumulated deficit was $7,422,830. For the six-month period ending June 30
2000, we incurred a net loss of $1,330,774, and for the previous fiscal year
ending December 31, 1999, we incurred a net loss of $6,054,364. We will incur
operating losses in the future until sales of our voice-recognition systems
exceeds our administrative and research-and-development costs. This may never
happen.
Our accountants have expressed substantial doubt about our ability to continue
as an operating concern.
In connection with the report on our consolidated financial statements for
the year ending December 31, 1999, our independent certified public accountants
expressed substantial doubt about our ability to continue operating as a going
concern. Their doubt was based on our low levels of cash, our negative working
capital, and our failure to establish a source of revenues sufficient to cover
our operating costs. We may receive a similar opinion in connection with the
next audit of our financial statements.
Our Operations
We have a limited operating history.
We did not begin our voice-recognition business until December 1997.
Accordingly, we have a limited operating history on which to base your
evaluation of our business and prospects.
The voice-recognition business is in its infancy.
Our prospects are subject to the difficulties frequently encountered by
companies in the early stage of development in new and evolving markets. These
difficulties include the following:
o substantial delays and expenses related to testing and developing of
our new products;
o marketing and distribution problems encountered in connection with
our new and existing products and technologies;
o competition from larger and more established companies;
o delays in reaching our marketing goals;
o difficulty in recruiting qualified employees for management and
other positions;
o lack of sufficient customers, revenues and cash flow; and
o limited financial resources.
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<PAGE>
We may continue to face these and other difficulties in the future, some
of which may be beyond our control. If we are unable to successfully address
these problems, our business will suffer.
We cannot accurately forecast our future revenues and operating results, which
may fluctuate.
Our short operating history and the rapidly changing nature of the market
in which we compete make it difficult to accurately forecast our revenues and
operating results. Furthermore, we expect our revenues and operating results to
fluctuate in the future due to a number of factors, including the following:
o the timing of sales of our products and services, particularly given
that we depend on a relatively small number of large orders;
o the timing of product implementation, particularly large design
projects;
o unexpected delays in introducing new products and services;
o increased expenses, whether related to sales and marketing, product
development, or administration;
o deferral of revenue recognition in accordance with applicable
accounting principles, due to the time required to complete
projects;
o the mix of product license and services revenue; and
o costs related to possible acquisitions of technology or businesses.
We may fail to develop new products, or may incur unexpected expenses or delays.
Although we currently have available for sale fully developed products, we
are also developing various products and technologies and will rely on them to
remain competitive. Due to the risks inherent in developing new products and
technologies--limited financing, competition, obsolescence, loss of key
personnel, and other factors--we may fail to develop these technologies and
products, or may experience lengthy and costly delays in doing so. Although we
may be able to license some of our technologies in their current stage of
development, we cannot assure that we will be able to do so.
Our technologies and products could contain defects.
Voice-recognition products are not currently accurate in every instance,
and may never be. Furthermore, we could inadvertently release products and
technologies that contain defects. In addition, third-party technology that we
include in our products could contain defects. Clients who are not satisfied
with our products or services could bring claims against us for substantial
damages. Such claims could cause us to incur significant legal expenses and, if
successful, could result in the plaintiffs being awarded significant damages.
We face signficant competition.
The call-processing and voice-recognition industries are highly
competitive, and we believe that this competition will intensify. The segment of
the industry that supplies call-processing systems to businesses is also
extremely competitive. Many of our competitors have longer operating histories,
significantly greater financial, technical, product development, and marketing
resources, greater name recognition or larger client bases than we do. For
example, Nuance Communications, Inc., is recognized by industry analysts as the
market leader. Customers of Nuance include American Airlines, Bell Atlantic,
Charles Schwab, Sears and UPS. Nuance offers products through industry partners,
platform providers, and value-added resellers around the world. Corporate
investors in Nuance include Cisco Systems, Intel, Motorola, SAIC, Siebel
Systems, SRI International, Sun Microsystems, and Visa International.
We may be unable to protect our trademarks and proprietary rights.
To succeed, we will need to protect our intellectual property rights. We
have filed three patent applications and two trademark applications, but those
applications may not be approved. To maintain the confidentiality of our trade
secrets, we require our employees, consultants, and distributors to enter into
confidentiality agreements, but these
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<PAGE>
agreements afford us only limited protection and can be time-consuming and
expensive to obtain and maintain. Monitoring for unauthorized use of our
intellectual property is difficult, and we cannot be certain that the steps we
have taken will be effective to prevent unauthorized use. We may have to
litigate to enforce our trade secrets; such lawsuits, regardless of their
merits, would likely be time consuming and expensive and would divert
management's time and attention away from our business.
We may unintentionally infringe on the proprietary rights of others.
In the software industry currently, many lawsuits are being brought
alleging violation of intellectual property rights. In addition, a large number
of patents have been awarded in the voice-recognition area. Although we do not
believe that we are infringing any patent rights, patent holders may claim that
we are doing so. Any such claim would likely be time-consuming and expensive to
defend, particularly if we are unsuccessful, and could prevent us from selling
products or services. We may also be forced to enter into costly and burdensome
royalty and licensing agreements.
We may be unable to obtain component products from our vendors.
We purchase major components of our products from outside suppliers. At
any given time we may find ourselves unable to obtain those components, which
could prevent is from meeting customer demand.
We may be unable to attract and retain qualified employees, and we depend upon
key employees.
Our future success depends on our finding, hiring, training, motivating,
and retaining highly qualified technical, managerial, and other personnel, but
we may not be able to meet our needs in this regard, given the considerable
competition for qualified employees. If we lose the services of any of our
executive officers or other key employees, our business could suffer.
We may be unable to manage our significant growth.
We intend to continue to expand our business operations significantly.
Such growth would require us to expand our management, operational, financial,
and human resources systems and could strain the capacity of our current
management team.
Our Securities
We do not expect to pay dividends in the foreseeable future.
We intend to retain any future earnings to finance the growth and
development of our business. Therefore, we do not expect to pay any cash
dividends in the foreseeable future. Any future dividends will depend on our
earnings, if any, and our financial requirements.
Our stock price is volatile.
The market price of our common stock has been and is likely to continue to
be volatile and could be subject to wide fluctuations in response to quarterly
variations in operating results, announcements of technological innovations or
new products by us or our competitors, changes in financial estimates by
securities analysts, overall equity market conditions, or other events or
factors. Because our stock is more volatile than the market as a whole, our
stock is likely to be disproportionately harmed by factors that significantly
harm the market, such as economic turmoil or political uncertainty, even if
those factors do not relate to our business. In the past, securities class
action litigation has often been brought against companies following periods of
volatility in the market price of their securities. If securities class action
litigation is brought against us, such litigation could result in substantial
costs and would divert management's attention and resources.
5
<PAGE>
Trading in our common stock may be limited.
Our common stock is quoted on the OTC Bulletin Board. The OTC Bulletin
Board is not, however, an exchange, and trading in securities on the OTC
Bulletin Board is often more sporadic than trading in securities listed on an
exchange or NASDAQ. Consequently, you may have difficulty reselling any shares
that you purchase from the selling stockholders.
Because "penny stock" rules apply to trading in our common stock, you may find
it difficult to sell the shares you purchase in this offering.
Our common stock is a "penny stock," as it is not listed on an exchange
and trades at less than $5.00 a share. Broker-dealers who sell penny stocks must
provide purchasers of these stocks with a standardized risk-disclosure document
prepared by the SEC. This document provides information about penny stocks and
the nature and level of risks involved in investing in the penny-stock market. A
broker must also give a purchaser, orally or in writing, bid and offer
quotations and information regarding broker and salesperson compensation, make a
written determination that the penny stock is a suitable investment for the
purchaser, and obtain the purchaser's written agreement to the purchase.
Consequently, the penny stock rules may make it difficult for you to sell your
shares of our stock.
One of our officers and directors controls a significant percentage of our
common stock.
As of September 30, 2000, Jerome R. Mahoney, our President and Chief
Executive Officer, owned approximately 57.2% of our outstanding common stock on
a fully-diluted basis. Mr. Mahoney is able to significantly influence all
matters requiring stockholder approval, including election of directors and
approval of significant corporate transactions. This concentration of ownership,
which is not subject to any voting restrictions, could limit the price that
investors might be willing to pay for common stock. In addition, Mr. Mahoney is
in a position to impede transactions that may be desirable for other
stockholders. He could, for example, make it more difficult for anyone to take
control of us.
Future sales of our common stock could cause our stock price to decline.
The sale of a large number of our shares, or the perception that such a
sale may occur, could lower our stock price. Such sales could make it more
difficult for us to sell equity securities in the future at a time and price
that we consider appropriate. As of September 30, 2000, 61,812,138 shares of our
common stock could be considered "restricted securities" and saleable only upon
registration under the Securities Act of 1933, upon compliance with Rule 144 of
the Securities Act, or pursuant to another exemption from registration. Many of
these shares will be eligible for sale in the public market by the end of 2000
or in early 2001.
Issuance of our reserved shares of common stock may significantly dilute the
equity interest of existing stockholders.
We have reserved for issuance shares of our common stock upon exercise or
conversion of stock options, warrants, or other convertible securities that are
presently outstanding or that may be granted in the future (including those that
we grant to Swartz Private Equity, LLC). Issuance of these shares will have the
effect of diluting the equity interest of our existing stockholders and could
have an adverse effect on the market price for our common stock. As of September
30, 2000, we had 44,100,000 shares of common stock reserved for possible future
issuance.
Under our investment agreement, the number of shares of common stock
issued to Swartz is based on a formula tied to the market price of our common
stock prior to a put notice. The lower the average trading price of our common
stock at the time of a draw down, the greater the number of shares of our common
stock that will be issued. Accordingly, this causes a greater risk of dilution.
The perceived risk of dilution may cause Swartz, as well as other stockholders,
to sell their shares, which could have a depressive effect on the price of our
common stock.
We issued 12% senior convertible debentures on terms that may dilute
significantly your ownership interest.
During the fourth quarter of 1999 and the first quarter of 2000, we issued
an aggregate principal amount of $500,000 of 12% senior convertible debentures.
These debentures are convertible into shares of our common stock at any time, in
whole or in part, at the election of the holder, at a conversion price equal to
50% of the average of the bid price during the 20 trading days immediately
preceding a conversion date, which period may be extended upon the occurrence of
certain events. As a result, the lower the stock price at the time the holder
converts, the more common shares the holder
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<PAGE>
will receive upon conversion. If the selling stockholders were to fully convert
the 12% senior convertible debentures plus unpaid interest into common stock on
September 30, 2000, approximately 2,686,890 additional shares of common stock
would be issued.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale by selling
stockholders of the shares offering under this prospectus. We will, however,
receive the sale price of any common stock we sell to Swartz Private Equity, LLC
under our investment agreement with Swartz. We expect to sell to Swartz, subject
to effective registration and applicable volume and other limitations,
$20,000,000 of common stock; this may increase to $40,000,000, subject to
certain listing and pricing requirements described in the investment agreement.
Additional amounts may be received if the warrants to purchase common stock are
exercised. We intend to use the net proceeds received from Swartz in the
following order of priority:
Expenses of financing (registration, $50,000
issuance, and distribution)
Sales and marketing $8,000,000
Research and development $7,300,000
Working capital and general corporate
purposes (includes salaries not included above,
cost of additional personnel, support and
management systems, legal and professional costs,
occupancy costs and capital costs for
computers and related equipment) $4,650,000
----------
Total Proceeds $20,000,000
===========
The amount and timing of actual expenditures will depend on numerous
factors, including;
o market acceptance of our call-processing and voice-recognition
products and services;
o the amount of cash generated by our operations; and
o products and services introduced by our competitors.
We may also use a portion of the net proceeds to acquire or invest in
businesses or technologies that are complimentary to our business.
Market For Common Equity
The following table shows the high and low closing prices for the periods
indicated.
High Low
---- ---
1999
First Quarter (1) -- --
Second Quarter (1) $0.6875 $0.32
Third Quarter $0.33 $0.125
Fourth Quarter $0.34 $0.125
2000
First Quarter $5.9375 $0.29
Second Quarter $2.2812 $0.3438
Third Quarter $0.7031 $0.3281
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(1) Trading prices are only available for the period commencing May 28,
1999.
We anticipate that by October 31, 2000, our common stock will be quoted on
the OTC Bulletin Board under the symbol "IVOC." As of September 30, 2000, the
number of record holders of our common shares was approximately 327. All of the
issued and outstanding shares of our common stock were issued in accordance with
the exemption form registration afforded by Section 4(2) of the Securities Act
of 1933, as amended.
We have no plans to pay any dividends in the near future. We intend to
retain all earnings, if any, for the foreseeable future, for use in our business
operations.
Management's Discussion and Analysis or Plan of Operation
This discussion and analysis of our financial condition and results of
operations includes "forward-looking" statements that reflect our current views
with respect to future events and financial performance. We use words such as we
"expect," "anticipate," "believe," and "intend" and similar expressions to
identify forward-looking statements. You should be aware that actual results may
differ materially from our expressed expectations because of risks and
uncertainties inherent in future events, particularly those risks identified in
the "Risk Factors" section of this prospectus, and you should not rely unduly on
these forward looking statements. We will not necessarily update the information
in this discussion if any forward-looking statement later turns out to be
inaccurate.
This discussion and analysis of financial condition and results of
operations should be read in conjunction with our Financial Statements included
in the prospectus.
Recent Developments
In August 2000 we filed three patent applications and one trademark
application with the U.S. Patent and Trademark Office, and in September 2000 we
filed a further trademark application. The titles of the patents are "Voice
Activated Voice Operated Copier," "Voice Activated Voice Operational Universal
Remote Control" and "Voice Activated Voice Responsive Hear I Am Voice Locator."
The trademark applications register the taglines "Our technology speaks for
itself" and "Hear I am."
June 30, 2000 Compared to June 30, 1999
Our revenues are derived primarily from the sale of voice and computer
technology communication systems for businesses and corporate departments with
between two and 20,000 telephones. Total revenues for the three and six months
ended June 30, 2000 were $104,371 and $501,719, respectively, as compared to
$110,706 and $210,321 for the three and six months ended June 30, 1999, a
decrease of ($6,335) and an increase of $291,398 or (5.7%) and 138.5%,
respectively. The decrease in the three-month period ending June 30, 2000 was
primarily the result of our focus on matters other than sales, such as additions
to our technical personnel and our compliance with the OTC Bulletin Board
"eligibility rule" and subsequent delisting from the OTC Bulletin Board. The
decrease in revenues from the first quarter of 2000 was due to the completion of
previously incomplete customer installations and subsequent revenue recognition
on those installations in the quarter ending March 31, 2000, while there was no
comparable revenue recognition in the current quarter.
Unless special arrangements are made, we receive as a down payment on any
product purchased 50% of the total contract amount, with the balance due upon
completion of the installation. We recognize revenue using the "percentage of
completion" method. We determine the expected costs on a particular installation
by estimating the hardware costs and anticipated labor hours to configure and
install a system. Revenues are then recognized in proportion to the amount of
costs incurred as of the reporting date over the total estimated costs
anticipated. As of June 30, 2000, in addition to several smaller installation
projects, we had four contracts for the installation of our products, each with
a total contract price in excess of $99,000. Progress towards completion of
these contracts ranges from 10% to 50%. We expect these contracts to be fully
completed by the end of the fourth quarter 2000. We accept company checks or
Visa/Mastercard.
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Gross margin for the three and six months ended June 30, 2000 was $44,246
and $339,917 or 42.4% and 67.8%, respectively, as compared to $48,222 and
$89,522 or 43.6% and 42.6% for the three and six months ended June 30, 1999. The
gross margin is dependent, in part, on product mix, which fluctuates from time
to time; complexity of a communication system installation which determines
necessary hardware requirements and may not have a proportionate relationship
with the system selling price; and the ability of our technology personnel to
efficiently configure and install our communications products. While in the
current quarter ending June 30, 2000, the change in gross margin was slightly
less due to product mix, the $250,395 increase in gross margin for the six
months ended June 30, 2000 from the six months ending June 30, 1999 was
primarily due to the recognition of revenues on projects that were not hardware
intensive and improved installation and configuration efficiencies.
Operating expenses increased from $159,926 and $235,006 for the three and
six months ended June 30, 1999, to $762,835 and $1,349,472 for the three and six
months ended June 30, 2000, or an increase of $602,909 and $1,114,466 or 377.0%
and 474.2%, respectively. The increases are primarily due to an increase in
personnel costs, followed by professional fees. Operating expenses for the three
and six months ended June 30, 2000, include expenses of $98,989 and $108,609,
respectively, for research and development costs incurred to develop new
products and enhance existing products. These costs were not incurred in the
same periods for the prior year. Also included in operating expenses were
depreciation and amortization charges of $35,211 and $66,114 for the three and
six-month periods ending June 30, 2000, versus $797 and $1,595 for the same
three and six-month periods of 1999. As of June 30, 2000, we had 19 full-time
employees, two part-time employees, and two full-time consulting developers for
a total of 23 individuals.
The loss from operations for the three and six months ended June 30, 2000,
was $718,589 and $1,009,555 compared to $111,704 and $145,484 for the three and
six months ended June 30, 1999, an increase of $606,885 and $864,071,
respectively.
Interest expense of $176,969 and $321,219 was incurred for the three and
six month period ending June 30, 2000 related to the amortization of debt issue
costs and capital lease transactions entered into in the current period.
Interest expense was not incurred in the same periods of the prior year.
Net loss for the three and six-month period ending June 30, 2000, was
$895,558 and $1,330,774 as compared to $111,704 and $145,484 for the three and
six months of 1999. The increase in net loss of $783,854 and $1,185,290 was a
result of the factors discussed above.
Liquidity and Capital Resources
We are funding our current operations principally from loans from our
principal stockholder that in the aggregate, amount to $417,798. We are
operating on a negative cash flow basis and anticipate that we will require
additional financing during the final quarter of 2000. To achieve our growth
potential we will require additional amounts of capital. There is no assurance
that we can obtain any such financing on terms that will enable us to implement
our long-term growth strategy. Accordingly, our viability for the foreseeable
future is questionable if additional funding is not obtained. We will attempt to
obtain such funds through venture capital, or other private or public financing.
We have started to reduce spending in order to cover day to day operations as
best as possible with the current cash flow. However, there can be no assurance
that such funds will be available, or if available, the cost of such funds to
us.
Description of Business
Background
Our current corporate configuration is the result of a number of separate
transactions over the past three years.
On February 26, 1996, Select Resources, Inc., a publicly held Delaware
company, and three of its principal stockholders entered into a stock exchange
agreement with Visual Telephone of New Jersey, Inc., a privately held New Jersey
corporation, and its two stockholders pursuant to which Select Resources
acquired all of the outstanding shares of Visual Telephone and spun-off Select
Housing Associates, Inc., its wholly owned subsidiary The aim of this agreement
was to provide for a more profitable business direction for Select Resources.
Pursuant to the agreement, Select Resources agreed to issue 5,611,000 shares of
its capital stock to one of the two stockholders of Visual Telephone and to
transfer one-
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half of the shares of Select Housing Associates to the other stockholder of
Visual Telephone, namely Joel Beagelman, in return for all of the outstanding
shares of Visual Telephone. In addition, Select Resources transferred the other
half of the shares of Select Housing Associates to Gary W. Pomeroy and Brad W.
Pomeroy, two of Select Resources' three principal stockholders, in return for
the cancellation of 1,111,000 shares of common stock of Select Resources owned
by them. At the time of the stock exchange agreement, Mr. Beagelman, Gary W.
Pomeroy and Brad W. Pomeroy were directors of Select Resources. On February 26,
1996, the stock exchange agreement was approved by the consent of stockholders a
majority of the outstanding shares of common stock of Select Resources. Visual
Telephone then merged into Select Resources, which changed its name to that of
the subsidiary.
In July 1996, Visual Telephone acquired 100% of the outstanding common
shares of Communications Research Inc., or "CRI," for $50,000 in cash, $150,000
in notes and 1,000,000 shares of Visual Telephone. CRI designs, develops, sells,
and supports PC-based communication systems that transmit data, voice and
full-motion video.
On May 21, 1999, International Voice Technologies, Corp., a Delaware
corporation, merged with and into Visual Telephone (which in the interim had
changed its name to Visual Telephone International, Inc.), with Visual Telephone
surviving. Simultaneous with the merger, Visual Telephone changed its name to
iVoice.com, Inc., and it was planned that Visual Telephone would spin off CRI
prior to the merger with International Voice Technologies. Our current business
is essentially that of International Voice Technologies, and this merger was
aimed at giving that business better access to the capital markets by merging it
into a public company. In addition, we changed our OTC Bulletin Board trading
symbol to "IVOC."
In consideration for the merger with International Voice Technologies,
Jerome R. Mahoney, the sole stockholder of International Voice Technologies,
received 10,000,000 shares of our Class A common stock and 700,000 shares of our
Class B common stock. In addition, the two controlling stockholders of Visual
Telephone sold 300,000 shares of Class B common stock to Mr. Mahoney and
concurrently canceled a total of 2,000,000 shares of their Class A common stock.
The consulting firm of Toby Investments was awarded 2,000,000 shares of common
stock for consulting services on the transaction. The agreement also provided
that certain of the assets of Visual Telephone would be transferred to Visual
Telephone's wholly owned subsidiary, CRI. The merger was accounted for in its
financial statements as a public shell merger. In a public shell merger the
stockholders of the operating company, in this case International Voice
Technologies, become the majority owners of the shell company, in this case
Visual Telephone, and the stockholders of Visual Telephone, the public shell
company, become minority stockholders in International Voice Technologies, the
operating company.
As for the CRI spin-off, on September 18, 2000 CRI filed a registration
statement to provide for the distribution of its shares to Visual Telephone's
stockholders as of May 21, 1999. Visual Telephone's stockholders are to receive
one CRI share for every four shares owned in Visual Telephone. The principal
stockholders, officers and directors of Visual Telephone were Carl Ceragno and
Joel Beagelman. Mr. Ceragno remained with CRI as its President and Mr. Beagelman
entered into a consulting agreement with us.
On April 24, 2000, we entered into an agreement and plan of reorganization
with all the stockholders ThirdCAI, another shell company that was a reporting
company under the Securities Exchange Act of 1934. In this transaction, which
took place by means of a short-form merger, with ThirdCAI's name being changed
to iVoice, we acquired all the issued and outstanding shares of ThirdCAI in
exchange for $150,000.00, and a finder's fee paid to Corporate Architect, Inc.,
consisting of 50,000 shares of our Class A voting common stock. The fee was
negotiated between us and ThirdCAI. The purpose of this transaction was to
enable our business to be conducted by a reporting company, as pursuant to the
"eligibility rule" adopted by the National Association of Securities Dealers,
Inc., or "NASD," as only reporting companies may continue to have stock quoted
on the OTC Bulletin Board.
Our Business
We design, manufacture, and market voice and computer communications
systems for businesses and corporate departments having between two and 20,000
telephones. Among our products are interactive voice response products that
allow information in PC databases to be accessed from a standard touch-tone
telephone using a telephone keypad or voice commands. We sell our products
directly to end-users through dealer and reseller channels, as well as through
original equipment manufacture, or "OEM," agreements with telecommunication and
networking companies.
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Our principal offices and facilities are located at 750 Highway 34,
Matawan, NJ 07747 and our telephone number is (732) 441-7000. Our common stock
is quoted on the OTC Bulleting Board under the trading symbol "IVOC."
Products and Services
We design, manufacture, and market innovative voice and computer telephony
communications systems for businesses and corporate departments with between two
and 20,000 telephones. Our software products enable our customers to communicate
more effectively by integrating their traditional office telephone systems with
voice mail, automated attendant, and interactive voice response, or "IVR,"
functions. We provide IVR products that allow information in PC databases to be
accessed from a standard touch-tone telephone using speech or the telephone
keypad. Our products are designed to be "people oriented," with features that
can be readily used without special training or manuals. Our principal products,
Unified Messaging, iVoice Voice Mail and iVoice IVR, incorporate this
philosophy. We also design, market, and support voice recognition products. We
sell our products directly to end-users via our direct sales force and through
dealer and reseller channels, as well as through agreements with
original-equipment manufacturers, or "OEMs," who incorporate our products into a
fiscal assembled product or system.
Our products use standard open-architecture PC platforms and Microsoft
Windows NT Server and Workstation operating systems, thereby facilitating the
rapid adoption of new PC-based technologies while reducing overall product
costs. Due to market demands, the platform will be changing to Windows NT. We
concentrate our development efforts on software rather than hardware because we
believe that the most efficient way to create product value is to emphasize
software solutions that meet customers' needs. Furthermore, we use standard
PC-related hardware components in our products, in part to limit our need to
manufacture components. Our manufacturing operations consist of final assembly
and quality-control testing of materials, subassemblies, and systems. We obtain
from suppliers components such as PCs, circuit boards, application cards,
faxboards, and voiceboards.
Our flagship product is iVoice IVR, an application generator that allows
full connectivity to the most popular databases, including Microsoft Access,
Microsoft Excel, Microsoft Fox Pro, DBase, Btrieve, and Paradox, or to standard
text files. iVoice IVR can be used to read information from, and write
information to, databases, as well as query databases and return information.
iVoice IVR performs over 40 different customizable commands. Properties can be
set up for each command, as if the commands were being executed manually. iVoice
IVR links a phone system to a database to provide customers with 24-hour
immediate access to account information, via telephone. With iVoice IVR,
polished IVR applications are quick and easy to install. No knowledge of
computer programming and minimal database knowledge is needed. iVoice IVR will
execute any created application when a caller dials in. Using DTMF (touch-tone
telephones) or speech activation allows callers to interact with the system.
Advanced database technology permits reading, writing, appending, searching and
seeking database information. A user can record product inventory, set up games,
keep a record of patients or customers, and perform limitless other
applications. The advanced, innovative technology, backed by a simple,
easy-to-use drag-and-drop interface, makes writing applications simple.
We have updated the IVR to incorporate an Internet access tool, which can
be either connected to the IVR system or run as a standalone. This system also
has a graphical user interface and provides for Internet access to the system.
Once logged onto the Internet, a user can gain access to the IRV system by
clicking on a hypertext link for the user's browser. Upon entering the IVR
system, the response prompts are in text form rather than voice form. The user
can enter selections and get information by clicking on icons or choosing items
from menus.
Some of the Internet applications available are order processing and
transactions, database integration, questions and queries, account status,
delivery information, funds transfer, and claims information. The following
call-processing features can be used independently or in conjunction with the
above IVR platforms:
o Interactive Voice Response. Enables a caller to obtain requested
information in voice form from a local or non-local database.
Examples of IVR range from simply selecting announcements from a
list of options stored in the computer (also know as Audio Text) to
more complex interactive exchanges such as querying a database for
information.
o Speech Recognition. This is the process by which the PC translates
spoken words into commands. You may now speak to all of your Voice
Mail or IVR applications.
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o Unified Messaging. This is a unified inbox application for Windows
NT auto attendant/voice mail system and Windows NT IVR system. With
Unified Messaging, e-mail, voice mail and faxes can be handled
through a desktop PC or the telephone. All messages can be viewed
and acted upon in order of importance via Microsoft Outlook or a Web
Browser. E-mail can also be retrieved over the phone, using
text-to-speech, and responded to with a voice message including
directed to a fax machine.
o Interactive Voice Response/Web Applications. Using the Internet to
access the IVR system, you "DIAL" the system by clicking on a
hypertext link from your browser. The system responds the same way,
except in text form, and not the normal voice prompt. You may enter
selections and get information by clicking on icons or choosing
items from menus.
o Voice Mail. This allows a caller to store voice messages and reply
via the computer. This method provides the caller to conduct a
dialogue with another person without having to be on the same line
at the same time. As with most voice mail systems, the caller can
record, store and delete messages and direct messages to multiple
subscribers.
o Speech Enabled Auto Attendant. Any business can improve and speed up
service for its customers by enabling them to reach the desired
contact person or department by simply saying the appropriate name.
Our speech recognition system is extremely accurate and reliable.
Callers no longer need to punch in letters on a telephone keypad.
We are currently focusing on upgrading and enhancing existing products,
with the aim of adding to some products a full toolkit that would enable a
product to be based on natural language and capable of handling spoken sentences
rather than just single words.
In addition to enhancing our existing products, we are currently
developing the following new products, which we expect to release in December
2000:
o iVoice ACD (Automatic Call Distribution) call-center applications
provide advanced automatic distribution of incoming calls and other
interactions for contact centers and e-businesses. In addition to
telephone calls, iVoice ACD can also queue and distribute text
chats, e-mails, and other Web-based interactions using the same
routing procedure used for telephone calls.
o iVoice PBX (Private Branch Exchange) can act as the entire phone
system for many organizations. The iVoice PBX will provide all the
useful functionality of a traditional PBX, including call transfers
(blind and consult), conference calls (up to 32 participants with a
dedicated conference board), call park, and call pickup. Users can
perform call control operations from their handsets or from the
graphical software phone.
Marketing
Our marketing strategy is to emphasize to our potential customers that our
products are user-friendly PC-based processing applications that offer
integrated access to a broad range of communication avenues with other people
and information sources. Our strategy is built around the following basic
elements:
o Emphasize software, not hardware. We concentrate our developing
software that meets our clients' needs, rather than on designing or
modifying hardware. This allows us to create the most value from our
products.
o Use standard, Microsoft NT-based architecture, open systems and
hardware. Our products use standard, open-architecture PC platforms
and operating systems rather than proprietary computer hardware and
operating systems. As a result, we can quickly adapt to new PC-based
technologies, leveraging the substantial investments made by third
parties in developing these new technologies for the PC environment.
In addition, using available hardware components and software
minimizes our manufacturing activity and thereby reduces the overall
cost of our products.
o Focus on businesses and corporate departments having between two and
20,000 telephones. Our products are designed for use by businesses
and corporate departments with between two and 20,000 telephones in
a wide range of markets, including manufacturing, retail, service,
healthcare, and government. These businesses desire features offered
by large, proprietary call processing systems, but at a more
affordable price. This is what our products offer.
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o Develop user-friendly products. We aim to make our products as easy
as possible to install, maintain, and use. We accomplish this by
incorporating product features that can be used without special
training or manuals. One example of this user oriented philosophy is
exhibited in our voicemail product. which has user prompts that
encourage conversation between callers and subscriber and uses
simplified screens and menus for ease of installation.
o Minimize distribution overhead. We are able to achieve broad market
coverage in the U.S. via a direct sales force, a nationwide network
of independent telephone system dealers, and
original-equipment-manufacturers, or "OEMs." This structure both
minimizes our selling overhead and maximizes our product exposure,
and allows us to focus our resources on product development.
We employ five sales people, four telemarketers, and several independent
sales representatives to bring our products directly to our target market.
Currently we make 90% of our sales through direct sales and 10% through our
dealer channel. We aim to increase our direct sales force and establish more
satellite locations to better serve clients. In addition, we intend to expand
product awareness by displaying the products at shows and conventions and in
industry literature. We are, though, as yet unsure of the extent to which, and
when, we will need to increase our marketing efforts in order to become
profitable.
Fee Structure
We generally require customers to pay 50% down on any product purchased,
with the balance due when installation has been completed. We accept company
checks or Visa/Mastercard.
Sales by Geographic Area
Approximately 70% of our revenues are derived from customers located in
the northeast U.S.; the remaining 30% are from customers located elsewhere in
the continental U.S.
Competition
The call-processing industry is highly competitive. Given added
competition in the form of businesses that have recently entered this market and
strengthened competition in the form of merged competitors, we believe that the
competitive pressures we face will only intensify. Competition means pressure to
lower prices and profit margins.
Currently, our principal competitors fall into two categories:
o Telephone equipment manufacturers which offer their own call-processing
systems or offer their systems as private labels. These competitors
include Lucent Technologies, Inc., Nortel Networks Corp., and Toshiba
America Information Systems, Inc.
o Independent call-processing system manufactures whose products integrate
with multiple telephone systems and are based on PC-based products like
ours (Applied Voice Technologies Inc., Microlog Corporation, and Active
Voice Corporation).
Suppliers
Our suppliers include Dialogic Corporation and Bicom, Inc., for
voiceboards, and iTox, Inc. and Ingram-Micro, Inc., for computer
components.
Research and Development
Our research and development efforts focus on enhancing our existing
product line and the development of new products to be integrated with our
existing product line. We are concentrating on improving the technology through
ease of use and increased reliability. Prior to 2000, we conducted no research
and development. During the first and second quarter of 2000, we began hiring
qualified technical personnel to strengthen our product line and maintain a
competitive edge. We intend to increase our research and development program
once we gain access to financing.
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Licenses
We have a licensing agreement with Nuance Communications, Inc. to resell
their natural language toolkit. Natural language software allows a system to
understand spoken language rather than just simple words, and incorporating this
toolkit in an iVoice IVR allows users to engage in a question-and-response
dialog by telephone, which shortens the time it takes to process calls. This
license includes the right to grant sublicenses to end users. We also have a
worldwide, non-exclusive, irrevocable, royalty-free, fully paid license with
Entropic, Inc., a Microsoft company, to incorporate their speech engine into
customized software applications for our customers. Thirdly, a license with
Lernout & Hauspie Speech Products enables us to incorporate their text-to-speech
software into our applications so clients can listen to e-mail messages from any
telephone.
Employees
As of September 30, 2000, we employed 21 individuals, consisting of 18
full-time employees, two part-time employees, and one full-time consulting
programmer. None of our employees are represented by a labor organization and we
are not a party to any collective bargaining agreements.
MANAGEMENT
Executive Officer and Directors
Members of our board of directors serve until the next annual meeting of
the stockholders or until their successors have been duly elected. Our officers
serve at the pleasure of the board of directors. There are no arrangements for
any officer or director to resign at the request of any other person, and none
of the officers or directors named below is acting on behalf of, or at the
direction of, any other person.
Name Age Position
---- --- --------
Jerome R.Mahoney..................... 39 Chief Executive Officer, President
and Director
Kevin Whalen......................... 36 Chief Financial Officer
Robert Keenan........................ 37 Director of Research
Leo Pudlo............................ 50 Vice President of Operations
Jerome R. Mahoney. Mr. Mahoney has been our Chief Executive Officer
and our sole director since May 21, 1999. Mr. Mahoney started at Executone
Information Systems, a telephone systems manufacturer, and was Director of
National Accounts from 1988 to 1989. In 1989, Mr. Mahoney founded Voice
Express, Inc., a New York that sold voicemail systems and telephone system
service contracts and installed these systems. Mr. Mahoney sold Voice
Express Systems in 1993. From 1993 to 1997, Mr. Mahoney was President of IVS
Corp., and on December 17, 1997, he established International Voice
Technologies, which we merged with on May 21, 1999. Mr. Mahoney received a
B.A. in finance and marketing from Fairleigh Dickinson University,
Rutherford, N.J. in 1983.
Kevin Whalen. Mr. Whalen has been a Certified Public Accountant since
1988 and has over 10 years experience in public accounting and 4 years
experience in industry. From 1996 to 2000, he served as the Corporate
Controller for Willcox and Gibbs, Inc., a $160 million international sales
and distribution company. He was responsible for preparing consolidated
analytical statements and SEC filings and managing the company's independent
audits, and assisted in preparing documentation for an $85 million public
bond offering. From 1986 to 1996, Mr. Whalen was the Tax Supervisor for
Curchin and Company, P.A., where he was responsible for compilation and
review engagements as well as developing tax planning strategies for business
and individual clientele. Mr. Whalen received a B.S. in Commerce from Rider
College, Lawrenceville, N.J. in 1986 and is a member of the American
Institute of Certified Public Accountants.
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<PAGE>
Robert Keenan. Mr. Keenan has over 20 years experience in software
development and has designed, authored, and managed development teams for a
variety of leading-edge software products. Prior to joining us, Mr. Keenan
served as Chief Technologist at SysData International where he authored
RioVision, the first real-time Windows-based administrative tool for controlling
security on IBM OS/390 system. Furthermore, he oversaw the development team for
QuickStart, a checkpoint/restart utility for batch RDBMS applications running on
OS/390 and Unix. At Computer Associates, Mr. Keenan authored CA-Top Secret/VM,
the premier security product for IBM's VM operating system. In addition, he also
managed both the technical support and development teams for CA-Top Secret/MVS.
Leo Pudlo. Mr. Pudlo joined us in May 1999. Since 1989, he has served as a
private consultant to various organizations providing recommendations regarding
operating systems, developing client server products, and expanding software
licensing to international markets. Previously, Mr. Pudlo was Vice President of
Development and Support at Computer Associates International, where he
overhauled the lowest-rated product and turned it into one of the company's key
products. He successfully managed numerous programming projects that brought
innovative software to the IBM environment. Prior to 1981, Mr. Pudlo has held
various positions in managing IBM systems, software and IBM data centers at
multiple locations. He holds a BA in Business Administration from Roosevelt
University and an AA in Computer Science from Bryant and Stratton Business
College.
Conflicts of Interest
There is no family relationship between any of the officers and directors.
The board of directors has not established any committees.
Compensation of Directors
As Mr. Mahoney, the sole director, is also an employee, he receives no
compensation for his services as director, either on an annual basis or for each
meeting, and neither is he reimbursed for any expenses he incurs in attending
meeting of the board of directors.
Executive Compensation
The following table sets forth compensation information for services
rendered by certain of our executive officers in all capacities during the 1999
fiscal year. None of the executives were employed by us during fiscal years 1998
or 1997. Other than as set forth below, no executive officer's salary and bonus
exceeded $100,000 in any of the applicable years. The following information
includes the dollar value of base salaries, bonus awards, the number of stock
options granted, and certain other compensation, if any, whether paid or
deferred.
<TABLE>
<CAPTION>
Summary Compensation Table
Other Securities All
Annual Restricted Underlying LTIP Other
Name and Position(s) Year Salary ($) Bonus Compensation Stock Options/SARs Payouts Compensation
-------------------- ---- ---------- ----- ------------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jerome R. Mahoney....... 1999 $180,000 0 0 0 0 0 0
Chief Executive
Officer and
President
Leo Pudlo............... 1999 $80,000 0 0 250,000(1) 140,000 0 0
Vice President of
Operations
Joel G. Beagelman(2) 1999 $104,000 0 0 0 0 0 0
Former CFO,
Secretary and
Treasurer
</TABLE>
(1) Represents restricted stock that may not be sold unless pursuant to an
exemption under the Securities Act of 1933.
(2) Effective May 16, 2000, Mr. Beagelman resigned as our Chief Financial
Officer, Secretary, and Treasurer.
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<PAGE>
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Mr. Mahoney has an employment agreement with us dated April 28, 1999. His
period of employment commenced on May 1, 1999, and terminates on April 30, 2004.
The agreement provides for a base salary of $180,000 per year, with an annual
increase of 10%.
Mr. Pudlo has an employment agreement with us dated January 11, 2000. This
agreement provides for a three-year period term and a base salary of $80,000
with annual increases. In addition, we granted Mr. Pudlo 250,000 shares of our
Class A common stock and stock options to purchase a further 140,000 shares of
our Class A common stock at $0.35 per share.
Joel Beagelman had a consulting agreement with us that was terminated with
Mr. Beagelman's resignation on May 16, 2000. It had a five-year term with
compensation of $104,000 per year. We also granted Mr. Beagelman stock options
to purchase up to 9,000,000 shares of our Class A common stock. Mr. Beagelman
also received 50,000 shares of IntermediaNet common stock in lieu of services
provided related to the merger of International Voice Technologies into Visual
Telephone (see "Description of Business--Background.") We acquired these shares
as the result of settlement of a contract dispute with IntermediaNet; as of May
1999, these shares had an estimated value of less than $5,000.
Stock Options
During the 1999 fiscal year we awarded the following options under our
1999 Stock Option Plan to the executive officers named in the "Summary
Compensation Table:"
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Number of % of Total
Securities Options/SARs Exercise of
Underlying Granted to Base
Options/SARs Employees Price Expiration
Name Granted in Fiscal Year ($/Share) Date
---- ------- -------------- --------- ----
Leo Pudlo (1) 140,000 29.8% $0.35 6/15/04
(1) We granted Mr. Pudlo these options as part of his employment agreement
dated June 2, 1999, which has been replaced by an agreement dated January
11, 2000. One third of these options become exercisable on May 24, 2000,
the one year anniversary of Mr. Pudlo's commencement date, with a further
one third becoming exercisable on each succeeding anniversary of the
commencement date. As of the date of this filing, Mr. Pudlo has not
exercised any of his options.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUE TABLE
Number of
Securities
Shares Underlying Value of Unexercised
Acquired Unexercised In-the-Money
on Options/SARs at Options/SARs at
Exercise Value FY-End FY-End
Name (#) Realized ($) (Exercised/Unexercised)(1) (Exercisable/Unexercisable)(2)
---- --- ------------ -------------------------- ------------------------------
<S> <C> <C> <C> <C>
Leo Pudlo None None 0/140,000 $9,188/18,378
</TABLE>
(1) As of September 29, 2000.
(2) The options have an exercise price of $0.35 per share. The closing price
of our common stock on September 29, 2000 was $0.5469 per share.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April, 1999, we granted Jerome R. Mahoney the right to an annual
increase of 10% in his salary. On May 21, 1999, we issued to Mr. Mahoney
10,000,000 shares of our Class A common stock shares and 700,000 shares of our
Class B common stock in the merger of International Voice Technologies into
Visual Telephone. (See "Description of Business--Background."). Each share of
our Class B common stock has voting rights equivalent to 100 shares of Class A
common stock and may be converted into an equal number of shares of our Class A
common stock.
On June 5, 1999, Saraj Tschand, the founder and owner of Parwan
Electronics, received 3.2 million shares of our common stock in exchange for
giving us all Parwan Electronics pre-developed software code. Parwan Electronics
retained its existing international clientele but cannot sell to new or existing
domestic or international accounts.
During the period June 1 through June 8, 2000, Jerome R. Mahoney, our
President and Chief Executive Officer, sold 971,000 shares of our common stock
under Rule 144 of the Securities Act of 1933, as amended, realizing $396,798 of
aggregate proceeds from these sales. Mr. Mahoney loaned us these proceeds
pursuant to a loan agreement in order to fund our working capital requirements.
Under the terms of the loan agreement, we will repay Mr. Mahoney with a number
of shares of common stock equal to the number of shares that he sold, plus an
additional 262,170 shares of our common stock to reimburse Mr. Mahoney for the
income tax he paid upon the sale of his shares of common stock, plus additional
shares with a value equal to interest calculated at the prime rate.
During the period August 24 through September 29, 2000, Mr. Mahoney sold a
further 537,000 shares of our common stock under Rule 144 realizing $239,118 of
aggregate proceeds from these sales. Mr. Mahoney loaned to us these proceeds
pursuant to a second loan agreement to fund our working capital requirements.
Under the terms of the loan agreement, we will repay Mr. Mahoney with a number
of shares of our common stock equal to the number of shares that he sold, plus
an additional 144,990 common stock shares to reimburse him for the income tax he
paid upon the sale of his shares, plus additional shares with a value equal to
interest calculated at the prime rate.
On December 1,1998, Mr. Mahoney loaned us $21,000. He also deferred sales
commissions of $34,000, deferred salary increases of $9,000 for the period of
April 1 through September 30, 1999, and deferred reimbursement of expenses
totaling $5,400. In total, Mr. Mahoney deferred payments aggregating $69,400. In
consideration of further deferring these payments, we have issued Mr. Mahoney
600,000 shares of our Class B common stock. In an agreement between Mr. Mahoney
and us, Mr. Mahoney has agreed not to convert these shares of Class B common
stock into Class A common stock.
DESCRIPTION OF PROPERTY
In April 2000, we entered into a non-cancelable lease commitment for
office furniture and equipment for our Matawan, New Jersey facility. The lease
calls for 36 equal monthly payments of $2,150.69 plus applicable state sales
taxes. The lease, payable to JDR Capital Corporation, has a $1 purchase option
and imputed interest rate of 20.78%. In June 2000, we entered into a
non-cancelable lease commitment for computer equipment for our Matawan, New
Jersey facility. The lease calls for 36 equal monthly payments of $1,366.87,
which includes applicable state sales taxes. The lease, payable to
Fisher-Anderson, LLC, has a $1 purchase option an imputed interest rate of
22.31%.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to us with
respect to the beneficial ownership of our common stock on September 30, 2000,
by (1) all persons who are beneficial owners of 5% or more of our common stock,
(2) each director and nominee, (3) the executive officers named in the "Summary
Compensation Table," and (4) all directors and executive officers as a group.
The number of shares beneficially owned is determined under rules
promulgated by the SEC, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under those rules, beneficial
ownership includes any shares as to which the individual has sole or shared
voting power or investment power and also any shares which the individual has
the right to acquire within 60 days of September 30, 2000, through the exercise
or conversion of any stock option, convertible security, warrant or other right.
Including those shares in the tables does not, however,
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<PAGE>
constitute an admission that the named stockholder is a direct or indirect
beneficial owner of those shares. Unless otherwise indicated, each person or
entity named in the table has sole voting power and investment power (or shares
that power with that person's spouse) with respect to all shares of capital
stock listed as owned by that person or entity. The shares of our Class A common
stock represented here includes the shares of our Class A common stock that the
beneficial holders would directly possess if they converted all shares of our
Class B common stock held by them.
Amount and Nature
Name and Address of of Beneficial Percentage of
Beneficial Owner Title of Class Owner Common Stock (1)
---------------- -------------- ----- ----------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Joel Beagelman Class A common stock 8,703,184 (2) 6.3%
750 Highway 34
Matawan, NJ 07747
SECURITY OWNERSHIP OF MANAGEMENT
Jerome R. Mahoney Class A common stock 42,092,00 (3) 41.7%
c/o iVoice.com, Inc. Class B common stock 364,000 (4) 100%
750 Highway 34
Matawan, New Jersey
07747
Leo Pudlo Class A common stock 250,000 *
c/o iVoice.com, Inc.
750 Highway 34
Matawan, New Jersey
07747
Kevin Whalen Class A common stock 55,000 *
c/o iVoice.com, Inc.
750 Highway 34
Matawan, New Jersey
07747
Robert Keenan Class A common stock 25,000 *
c/o iVoice.com, Inc.
750 Highway 34
Matawan, New Jersey
07747
* Less than 1%
(1) Based on 100,822,428 outstanding shares of our Class A common stock and
364,000 shares of our Class B common stock, which Class B shares are
convertible into 36,400,000 shares of Class A common stock.
(2) Includes 300,000 shares held by Mr. Beagelman's three children and
3,184 shares held by his wife.
(3) Includes 450,000 shares of our Class A common stock held by Mr. Mahoney's
minor children and 364,000 shares of Class B common stock held by Mr.
Mahoney that have the voting power of, and may be converted into
36,400,000 shares of Class A common stock.
(4) The shares of Class B common stock held by Mr. Mahoney have the voting
power of, and may be converted into 36,400,000 shares of Class A common
stock.
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DESCRIPTION OF SECURITIES
We are authorized to issue 150,000,000 shares of Class A common stock, par
value $.01 per share and 700,000 shares of Class B common stock, par value $.01
per share.
Class A Common Stock
Each holder of Class A common stock is entitled to one vote for each share
held of record. Holders of Class A common stock have no preemptive,
subscription, conversion, or redemption rights. Upon our liquidation,
dissolution or winding-up, the holders of Class A common stock are entitled to
receive our assets pro rata. Each holder of Class A common stock is entitled to
receive ratably any dividends declared by our board of directors out of funds
legally available for the payment of dividends. We have not paid any dividends
on our common stock and do not contemplate doing so in the foreseeable future.
We anticipate that any earnings generated from operations will be used to
finance our growth.
A total of 100,822,428 shares of Class A common stock were issued and
outstanding as of September 30, 2000.
Class B Common Stock
Each holder of Class B common stock has voting rights equal to 100 shares
of Class A common stock. Holders of Class B common stock are not entitled to
receive dividends. Jerome R. Mahoney is the sole owner of Class B common stock,
of which there are 700,000 shares issued and 364,000 shares outstanding as of
September 30, 2000. Each holder of Class B common stock has the right to convert
shares of Class B common stock into 100 shares of Class A common stock. Upon our
liquidation, dissolution, or winding-up, holders of Class B common stock will
not be entitled to receive any distributions.
There are no cumulative voting rights with respect to election of
directors, so holders of more than 50% of the outstanding shares of common stock
can elect all of the directors if they choose to do so.
Options and Warrants
As of September 30, 2000, we had outstanding options to purchase 811,500
shares of our Class A common stock granted under our 1999 Stock Option Plan. One
of these option grants vests in increments of 33% per year and all other option
grants vest 25% annually. All options expire five years from the date of grant.
The exercise price of the options ranges between $0.29 and $3.75 per share. As
of September 30, 2000, 61,620 of the options were exercisable.
As of September 30, 2000, we had outstanding warrants to purchase 470,000
shares of our Class A common stock. These warrants have exercise prices ranging
from $0.0583 per share to $2.00 per share. These warrants will expire at various
times between January 1, 2001 and April 6, 2004.
Debt
As of September 30, 2000, we had outstanding ten convertible debentures
with an aggregate principal of $500,000. These debentures bear interest at 12%
per annum, are payable on December 1, 2000, and are convertible into shares of
our Class A common stock at the option of the holder by dividing the outstanding
principal and interest by the conversion price. The conversion price equals 50%
of the average bid price during the 20 trading days before the conversion date.
The convertible debentures are subject to default for our failure to register
the shares under a regulation offering within 150 days of October 18, 1999, the
effective date of the debentures. As we are only now registering these shares in
the registration statement of which this prospectus forms a part, we are in
default under the agreement. In consideration of this default, we have agreed to
issue 100,000 shares of our Class A common stock in lieu of the damages and
penalty charges specified in the debenture agreements. These additional shares
are included in the shares being registered in the registration statement of
which this prospectus forms a part.
Statutory Provisions Under Delaware General Corporation Law
Section 203 of the Delaware General Corporation Law provides, in general,
that a stockholder acquiring more than 15% of the outstanding voting shares of a
publicly-held Delaware corporation subject to the statute (an "Interested
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Stockholder") may not engage in certain "Business Combinations" with the
corporation for a period of three years subsequent to the date on which the
stockholder became an Interested Stockholder unless (i) prior to such date the
corporation's board of directors approved either the Business Combination or the
transaction in which the stockholder became an Interested Stockholder or (ii)
upon consummation of the Business Combination, the Interested Stockholder owns
85% or more of the outstanding voting stock of the corporation (excluding shares
owned by directors who are also officers of the corporation or shares held by
employee stock option plans that do not provide employees with the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer), or (iii) the Business Combination is
approved by the corporation's board of directors and authorized at an annual or
special meeting of stockholders, and not by written consent, by the affirmative
vote of at least two-thirds of the outstanding voting stock of the corporation
not owned by the Interested Stockholder.
Section 203 defines the term "Business Combination" to encompass a wide
variety of transactions with or caused by an Interested Stockholder in which the
Interested Stockholder receives or could receive a benefit on other than a pro
rata basis with other stockholders, including mergers, certain asset sales,
certain issuances of additional shares to the Interested Stockholder or
transactions in which the Interested Stockholder receives certain other
benefits.
These provisions could have the effect of delaying, deferring or
preventing a change of control. Our stockholders, by adopting an amendment to
our certificate of incorporation or bylaws, may elect not to be governed by
Section 203, effective twelve months after adoption. Neither our certificate of
incorporation nor our bylaws currently exclude us from the restrictions imposed
by Section 203.
The Delaware General Corporation Law permits a corporation, through its
certificate of incorporation, to eliminate the personal liability of its
directors to the corporation or its stockholders for monetary damages for breach
of fiduciary duty of loyalty and care as a director with certain exceptions. The
exceptions include a breach of the director's duty of loyalty, acts or omissions
not in good faith or which involve intentional misconduct or knowing violation
of law, and improper personal benefit. Our certificate of incorporation
exonerates our directors from monetary liability to the fullest extent permitted
by this statutory provision.
Transfer Agent and Registrar
Our transfer agent and registrar is Fidelity Transfer Company, 1800 South
West Temple, Suite 301, Salt Lake City, UT 84115.
INVESTMENT AGREEMENT
Overview
On August 17, 2000, we entered into an investment agreement with Swartz
Private Equity, LLC. The investment agreement entitles us to issue and sell our
Class A common stock from time to time for up to an aggregate of $20 million
during a maximum of three years following the effective date of the registration
statement of which this prospectus forms a part, on condition that we meet
certain listing and pricing requirements described in the investment agreement.
This right is referred to as a "put right." The aggregate put right amount will
be increased to $40 million if our shares are quoted on the Nasdaq SmallCap
Market or National Market and if the lowest closing price of our common stock
for the 15 trading days immediately preceding listing is at least $2.50.
Put Rights
In order to invoke a put right, we must have an effective registration
statement on file with the SEC registering the resale of the shares of our Class
A common stock that we issue as a consequence of our invoking the put right.
Additionally, we must give at least ten but not more than 20 business days
advance notice to Swartz of the date on which we intend to exercise a particular
put right and we must indicate the number of shares of common stock we intend to
sell to Swartz. At our option, we may also designate a maximum dollar amount of
Class A common stock (not to exceed $2 million) that we will sell to Swartz
during the put and/or a minimum purchase price per common share at which Swartz
may purchase shares during the put. The number of shares of our Class A common
stock we sell to Swartz may not exceed the lesser of (1) 1,500,000 shares, (2)
15% of the aggregate daily reported trading volume of our common shares,
excluding certain block trades of our
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common stock, during the 20 business days after the date of our put
notice, excluding any trading days in which our Class A common stock trades
below a price based upon a minimum price, if any, that we specify in our put
notice; (3) 15% of the aggregate daily reported trading volume of our Class A
common shares, excluding certain block trades of our common stock, during the 20
business days before the put date, and (4) a number of shares that, when added
to the number of shares acquired by Swartz under the investment agreement during
the 31 days preceding the put date, would exceed 9.99% of our total number of
shares of Class A common stock outstanding (as calculated under Section 13(d) of
the Securities Exchange Act of 1934).
The market price of shares of our Class A common stock during the 20
business days immediately following the put notice date is used to determine the
purchase price Swartz will pay and the number of shares we will issue in return.
For each share of our Class A common stock, Swartz will pay us the lesser of (1)
the market price for each share, minus $.075, and (2) 91% of the market price
for each share. except that Swartz must pay at least the designated minimum per
share price, if any, we specify in our notice. Market price is defined as the
lowest closing bid price for our Class A common stock during the 20 business day
pricing period immediately following the put date.
Warrants
Within five business days after the end of each pricing period, we are
required to issue and deliver to Swartz a warrant to purchase a number of shares
of our Class A common stock equal to 10% of the shares of Class A common stock
issued to Swartz in the applicable put. Each warrant will be exercisable at a
price that will initially equal 110% of the lowest closing bid price on the put
date for the applicable put. Each warrant will have semi-annual reset
provisions, will be immediately exercisable, and will have a term beginning on
the date of issuance and ending five years thereafter.
Limitations and Conditions Precedent to our Put Rights
Swartz is not required to acquire and pay for any shares of our Class A
common stock with respect to any particular put for which:
o we have issued shares of our Class A common stock that have been
paid for by Swartz and is equal to the maximum offering amount;
o we have announced or implemented a stock split or combination of our
Class A common stock;
o we have paid a Class A common stock dividend;
o we have made a distribution of our Class A common stock or of all or
any portion of our assets between the put notice date and the date
the particular put closes; or
o we have consummated a major transaction (including a transaction,
which constitutes a change of control) between the advance put
notice date and the date the particular put closes.
Short Sales
Swartz and its affiliates are prohibited from engaging in short sales of
our Class A common stock unless they have received a put notice and the amount
of shares involved in a short sale does not exceed the number of shares
specified in the put notice.
Cancellation of Puts
We must cancel a particular put between the date of the advance put notice
and the last day of the pricing period if we discover an undisclosed material
fact relevant to Swartz's investment decision, the registration statement
registering the resales of the Class A common shares becomes ineffective, or our
shares of Class A common stock are delisted from the then primary exchange. If a
put is canceled it will continue to be effective, but the pricing period for the
put will terminate on the date notice of cancellation of the put is given to
Swartz. Because the pricing period will be shortened, the number of shares
Swartz will be required to purchase in the canceled put may be smaller than it
would have been had the put not been canceled.
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Stockholder Approval
If we become listed on the Nasdaq Small Cap Market or the Nasdaq National
Market, then we must get stockholder approval to issue more than 19.99% of our
outstanding shares. Since we are currently quoted on the OTC Bulletin Board, we
will not need this stockholder approval.
Termination of Investment Agreement
We may terminate our right to initiate further puts or terminate the
investment agreement by providing Swartz with notice of such intention to
terminate; however, any such termination will not affect any other rights or
obligations we have concerning the investment agreement or any related
agreement.
Restrictive Covenants
During the term of the investment agreement and for a period of 30 days
thereafter, we are prohibited from certain transactions. These include the
issuance of any debt or equity securities in a private transaction. We are also
prohibited from entering into any private equity line type agreements similar to
the investment agreement without first obtaining Swartz's written approval.
Right of First Refusal
Swartz has a right of first refusal to purchase any shares of our common
stock or any other equity securities we may issue, including debt that is
convertible, exercisable, exchangeable for, or carries the right to receive,
additional shares offered by us in any private capital raising transaction of
equity securities that closes on or prior to 30 days after the termination of
the investment agreement.
Indemnification
We are obligated to indemnify Swartz (including their stockholders,
officers, directors, employees and agents) from all liability and losses
resulting from any misrepresentations or breaches we made in connection with the
investment agreement, our registration rights agreement, other related
agreements, or the registration statement.
CONVERTIBLE DEBENTURES
During fourth quarter 1999 and first quarter 2000, we entered into
purchase agreements with four investors for the purchase of our 12% secured
convertible debentures in the aggregate principal amount of $500,000.
The debentures are set to mature on December 1, 2000, with interest to
accrue at 12% per annum from the date the debentures were issued until the
payment in full of the principal sum, payable quarterly in arrears, on March 31,
June 30, September 30, and December 31 of each year, and on each conversion
date, commencing on the earlier to occur of a conversion date for such principal
amount and January 1, 2000, in cash or shares of our Class A common stock.
The debentures are convertible by the holder into shares of our Class A
common stock at the holder's option at any time, or from time to time, in whole
or in part, after October 29, 1999 (the original issue date), subject to certain
restrictions. The conversion price is equal to 50% of the average of the bid
price during the 20 trading days immediately preceding a conversion date,
providing certain events do not occur during that 20-day period, in which case
the number of trading days is to be extended. We are obligated to reserve for
issuance upon conversion a number of shares of our Class A common stock equal to
200% of the number of shares of Class A common stock into which the convertible
debentures, together with the payment of interest thereon, are convertible, and
to register those reserved shares of Class A common stock, in accordance with
the terms and conditions of a registration rights agreement, and to maintain the
effectiveness of a registration statement for those shares.
We received proceeds from the sale of the debentures in the amount of
$500,000, less an escrow and administrative fee and legal expenses totaling
$77,000
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The debentures are subject to certain events of default, one of which is
our failure to register within 150 days of the effective date of the debentures,
the shares of Class A common stock underlying the debentures. As of June 30,
2000, we had not registered any of the shares underlying the debentures and are
in default under this agreement. As a consequence of this default, we are
required to pay a penalty in the amount of 2.5% of the outstanding amount of the
debentures. The penalty is payable on December 28, 1999, the date on which we
were required to file a registration statement, and every month thereafter until
we file a registration statement. We are in discussions with the debenture
holders regarding paying this penalty in 100,000 additional shares of our Class
A common stock.
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
selling stockholder as of September 30, 2000. Except as set forth below, no
selling stockholder is an affiliate of ours or has had a material relationship
with us during the past three years. The selling stockholders are not affiliated
with registered broker-dealers.
<TABLE>
<CAPTION>
Beneficial Amount and
Ownership of Maximum Number Percentage of
Common Stock of Shares of Common Stock
as of Common Stock Beneficially Owned
Name September 30, 2000 Offered for Sale After the Offering (1)
---- ------------------ ---------------- ----------------------
Number Percentage
------ ----------
<S> <C> <C> <C> <C>
Swartz Private Equity, LLC 5,490,000 (2) 5,490,000 0 *
Swartz Private Equity, LLC 38,610,000 (3) 38,610,000 0 *
AJW Partners, LLC or its 1,890,000 (4) 1,890,000 0 *
registered assigns
New Millenium Capital 1,260,000 (4) 1,260,000 0 *
Partners, LLC, or its
registered assigns
New Millenium Capital 630,000 (4) 630,000 0 *
Partners, II LLC, or its
registered assigns
Bank Insinger de 420,000 (4) 420,000 0 *
Beaufort, N.V. or its
registered assigns
Lawrence A. Muenz 500,000 (5) 500,000 0 *
</TABLE>
* Less than 1%.
(1) Assumes that the selling stockholder will sell all of its shares of our
Class A common stock offered in this prospectus. We cannot assure you that
the selling stockholder will sell all or any of its shares.
(2) Represents 5,490,000 shares of our Class A common stock issuable upon
exercise of outstanding warrants issued to Swartz Private Equity, LLC as a
commitment fee for entering in the investment agreement that are currently
exercisable, representing approximately 5.4% of our issued and outstanding
Class A common stock as of September 30, 2000.
(3) Includes (solely for purposes of this prospectus) up to an aggregate of
35,100,000 shares of our Class A common stock that we may sell to Swartz
pursuant to our investment agreement with Swartz and 3,510,000 shares of
Class A common stock underlying warrants to purchase shares of our Class A
common stock issuable in connection with the investment agreement, which
shares would represent 10% of the amount of shares of Class A common stock
sold to Swartz, but would not be deemed beneficially owned within the
meaning of Sections 13(d) and 13(g) of the Exchange Act before they were
acquired by Swartz. It is expected that Swartz will not beneficially own
more than 9.9% of our outstanding Class A common stock at any time.
(4) Represents 4,200,000 shares of Class A common stock issuable upon
conversion of a 12% secured convertible debentures that is currently
convertible into shares of Class A common stock, and which represents
approximately 4.1% of our issued and outstanding Class A common stock as
of September 30, 2000.
(5) Represents 500,000 shares of our Class A common stock issued to Mr. Muenz
in lieu of cash payment for legal services rendered to us to date and
includes 50,000 shares held by Mr. Muenz as custodian for his minor
children.
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PLAN OF DISTRIBUTION
We are registering the resale of our Class A common stock on behalf of the
selling stockholders. A selling stockholder includes donees, transferees and
pledges selling shares of Class A common stock received from a named selling
stockholder after the date of this prospectus. This prospectus may also be used
by transferees of the selling stockholders or by other persons acquiring shares,
including brokers who borrow the shares to settle short sales of our common
stock. If any of the selling stockholders transfer any of their shares, each
transferee must be bound to the same restrictions and limitations that apply to
the selling stockholders described in this prospectus. We will bear all costs,
expenses and fees in connection with the registration of the shares offered in
this prospectus. The selling stockholders will bear all brokerage commissions
and similar selling expenses associated with the sale of the shares.
The selling stockholders may offer their shares of our Class A common
stock at various times in one or more of the following transactions:
o on any stock exchange, market or trading facility on which the
shares are traded;
o in privately negotiated transactions or otherwise, including an
underwritten offering;
o in connection with short sales of the shares of our common stock;
o in ordinary brokerage transactions and transactions in which a
broker solicits purchasers;
o in connection with the writing of non-traded and exchange-traded
call or put options, in hedge transactions and in settlement of
other transactions in standardized or over-the-counter options;
o in a block trade in which a broker-dealer, as agent, may resell a
portion of the block, as principal, in order to facilitate the
transaction;
o in a purchase by a broker-dealer, as principal, and resale by the
broker-dealer for its account;
o in a combination of any of the above transactions; or
o any other method permitted pursuant to applicable law.
The selling stockholders may sell their shares at market prices prevailing
at the time of sale, at prices related to the prevailing market prices, at
negotiated prices or at fixed prices. Each of the selling stockholders reserves
the right to accept, and together with their agents from time to time, to
reject, in whole or in part, any proposed purchase of the Class A common stock
to be made directly or through agents.
The selling stockholders may use broker-dealers to sell their shares in
which case broker-dealers will either receive discounts, commissions or
concessions from purchasers of shares for whom they act as agents.
Broker-dealers engaged by the selling stockholders may allow other
broker-dealers to participate in resales.
Swartz Private Equity, LLC is an underwriter within the meaning of Section
2(11) of the Securities Act of 1933 with respect to any shares of common stock
that it sells. The other selling stockholders and any broker-dealers or agents
that act in connection with the sale of shares might be deemed to be
underwriters and any commissions received by such broker-dealers and any profit
on the resale of the shares sold by them while acting as principals might be
deemed to be underwriting discounts or commissions under the Securities Act.
Because Swartz Private Equity, LLC is an underwriter within the meaning of
Section 2(11) of the Securities Act and because the other selling stockholders
might be deemed to be underwriters, they will be subject to the prospectus
delivery requirements of the Securities Act. We have informed the selling
stockholders that the anti-manipulative provisions of Regulation M promulgated
under the Securities Exchange Act of 1934 may apply to their sales of our Class
A common stock in the market.
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In addition to selling shares of our Class A common stock under this
prospectus, the selling stockholders may resell all or a portion of their shares
in open market transactions in reliance upon Rule 144 under the Securities Act,
provided that they meet the criteria and conform to the requirements of Rule
144.
LEGAL PROCEEDINGS
We have been named a defendant in a lawsuit brought about by Communication
Research, Inc., or "CRI." In this lawsuit, CRI makes claims against us of
constructive eviction, trespass, breach of contract, conversion, interference
with economic relations, and quantum merit. We believe that we will prevail in
the case, and in any event the outcome could not have a material adverse effect
on our business.
We have been named defendant in a lawsuit brought by Fisher Scientific
International, Inc. filed April 11, 2000. In this lawsuit, Fisher makes claims
against International Voice Technologies, Inc., a company of which the successor
(see "Description of Business--Background"), of breach of contract, fraudulent
misrepresentation, and breach of implied warranty of merchantability for failure
of a voicemail system sold to Fisher by International Voice Technologies to
perform to operate as represented. This suit calls for compensatory damages of
$17,999 plus reasonable internal costs associated with the assistance of the
voicemail installation and punitive damages of $20,000. We have not accrued any
amounts with respect to this lawsuit, and the outcome could not have a material
adverse effect on our business.
LEGAL MATTERS
Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, New York, New York
10022, has passed on the validity of the Class A common stock being offered in
this prospectus.
EXPERTS
The audited consolidated financial statements, included in this
Prospectus, have been examined by Merdinger, Fruchter, Rosen & Corsp, P.C.,
independent certified public accountants, and are included herein in reliance
upon the report of said firm given upon their authority as experts in accounting
and auditing.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form SB-2 with the Securities
and Exchange Commission relating to the common stock offered by this prospectus.
This prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules to the registration
statement. Statements contained in this prospectus concerning the contents of
any contract or other document referred to are not necessarily complete and in
each instance we refer you to the copy of the contract or other document filed
as an exhibit to the registration statement, each such statement being qualified
in all respects by such reference.
For further information with respect to us and the common stock we are
offering, please refer to the registration statement. A copy of the registration
statement can be inspected by anyone without charge at the public reference room
of the Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's Regional Offices located at 7 World Trade Center, Suite
1300, New York, New York 10048, and 500 West Madison Street, Chicago, Illinois
60601. Please call the Commission at 1-800-SEC-0330 for further information on
the operation of the public reference room. Copies of these materials can be
obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a website (http://www.sec.gov) that contains information regarding
registrants that file electronically with the Commission.
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INDEX TO Financial Statements
FINANCIAL STATEMENTS
December 31, 1999
Item Page
---- ----
Independent Auditors'Report............................................... F-1
Balance Sheets as of December 31, 1999 and 1998........................... F-2
Statements of Operations for the years ended December 31, 1999
and 1998.................................................................. F-3
Statements of Changes in Shareholders' Equity for the years ended
December 31, 1999 and 1998................................................ F-4
Statements of Cash Flows for the years ended December 31, 1999
and 1998.................................................................. F-6
Notes to FinancialStatements.............................................. F-8
FINANCIAL STATEMENTS
March 31, 2000
Balance Sheet as of March 31, 2000 and December 31, 1999
(unaudited).............................................................. F-27
Statements of Operations for the three months ended March 31, 2000 and
1999 (unaudited)......................................................... F-28
Statements of Cash Flows for the three months ended March 31, 2000 and
1999 (unaudited)......................................................... F-29
Notes to Financial Statements (unaudited)................................ F-31
FINANCIAL STATEMENTS
June 30, 2000
Balance Sheet as of June 30, 2000 and December 31, 1999
(unaudited).............................................................. F-34
Statements of Operations for the three months ended June 30, 2000 and
1999 (unaudited)......................................................... F-35
Statements of Cash Flows for the three months ended June 30, 2000 and
1999 (unaudited)......................................................... F-36
Notes to Financial Statements (unaudited)................................ F-38
27
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS' OF
IVOICE.COM, INC.
We have audited the accompanying balance sheets of iVoice.com, Inc. as of
December 31, 1999 and 1998, and the related statements of operations,
stockholders' deficiency and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of iVoice.com, Inc. as of December
31, 1999 and 1998, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1(a), the Company
had a loss and a negative cash flow from operations along with negative working
capital which raises substantial doubt about its ability to continue as a going
concern. Management's plans in regards to these matters are also discussed in
Note 1(a). The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
Certified Public Accountants
New York, New York
April 24, 2000
F-1
<PAGE>
IVOICE.COM, INC.
BALANCE SHEETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
December 31,
1999 1998
--------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 195,861 $ 71,328
Accounts receivable, net of allowance for
doubtful accounts of $50,000 and $7,500 31,726 46,865
Inventory 10,140 8,457
Prepaid expenses and other current assets 52,100 2,100
Debt issue costs 362,541 --
----------- -----------
Total current assets 652,368 128,750
Property and equipment, net of accumulated
depreciation of $17,836 and $3,186 55,408 12,743
Software license costs, net of accumulated
amortization of $54,400 489,600 --
----------- -----------
TOTAL ASSETS $ 1,197,376 $ 141,493
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 181,754 $ 132,116
Legal settlement payable 4,800,000 --
Due to related parties 21,000 20,000
Convertible debentures 350,000 --
Note payable -- 12,318
----------- -----------
Total liabilities 5,352,754 164,434
Commitments and contingencies -- --
STOCKHOLDERS' DEFICIENCY
Common stock, series A - par value $.01; authorized
75,000,000 and 40,000,000 shares, 54,093,663 and
10,000,000 issued and outstanding 540,937 100,000
Common stock, series B - no par value; authorized,
issued and outstanding 700,000 and 400,000 shares 70 40
Additional paid in capital 1,395,671 (85,289)
Accumulated deficit (6,092,056) (37,692)
----------- -----------
Total stockholders' deficiency (4,155,378) (22,941)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 1,197,376 $ 141,493
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statement.
F-2
<PAGE>
IVOICE.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
For the Year Ended
December 31,
1999 1998
-------- ---------
SALES, net $ 776,773 $ 626,486
COST OF SALES 280,317 382,501
----------- -----------
GROSS PROFIT 496,456 243,985
----------- -----------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Selling expenses 168,707 33,685
General and administrative expenses 1,177,730 237,306
Bad debt expense 39,874 7,500
Provision for obsolescence 31,000 --
Non-recurring expenses (see Note 11) 5,028,000 --
Depreciation and amortization 69,050 3,186
----------- -----------
Total selling, general and administrative expenses 6,514,361 281,677
----------- -----------
LOSS FROM OPERATIONS (6,017,905) (37,692)
OTHER EXPENSE
Interest expense (36,459) --
----------- -----------
LOSS BEFORE INCOME TAXES (6,054,364) (37,692)
PROVISION FOR INCOME TAXES -- --
----------- -----------
NET LOSS $(6,054,364) $ (37,692)
=========== ===========
NET LOSS PER COMMON SHARE
Basic $ (.20) $ (.00)
=========== ===========
Diluted $ (.20) $ (.00)
=========== ===========
The accompanying notes are an integral part of the financial statement.
F-3
<PAGE>
IVOICE.COM, INC.
STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Common Stock Common Stock
Series A Series B
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Balance,
January 1,1998, adjusted to reflect
outstanding shares of Visual 10,000,000 $ 100,000 400,000 $ 40
Net loss for the year ended
December 31,1998 -- -- -- --
---------- ---------- ---------- ----------
Balance at December 31,1998 10,000,000 100,000 400,000 40
Acquisition of net asset of Visual 36,932,364 369,324 300,000 30
Issuance of common stock for
software license costs 3,200,000 32,000 -- --
Issuance of common stock for services 2,630,000 26,300 -- --
Issuance of common stock for exercise
of stock options 100,000 1,000 -- --
Issuance of common stock for cash 981,299 9,813 -- --
Issuance of common stock for compensation 250,000 2,500 -- --
Issuance of stock options as compensation -- -- -- --
Issuance of convertible bonds -- -- -- --
Net loss for the year ended December 31,1999 -- -- -- --
---------- ---------- ---------- ----------
Balance at December 31,1999 54,093,663 $ 540,937 700,000 $ 70
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statement.
F-4
<PAGE>
IVOICE.COM, INC.
STATEMENT OF STOCKHOLDERS' DEFICIENCY (Continued)
FOR THE YEARS ENDED DECEMBER 31,1999 AND1998
<TABLE>
<CAPTION>
Additional Total
Paid in Accumulated Stockholders'
Capital Deficit Deficiency
<S> <C> <C> <C>
Balance,
January 1,1998, adjusted to reflect
outstanding shares of Visual $ (85,289) $ -- $ 14,751
Net loss for the year ended
December 31,1998 -- (37,692) (37,692)
----------- ----------- -----------
Balance at December 31,1998 (85,289) (37,692) (22,941)
Acquisition of net asset of Visual (231,354) -- 138,000
Issuance of common stock for
software license costs 512,000 -- 544,000
Issuance of common stock for services 264,500 -- 290,800
Issuance of common stock for exercise
of stock options 13,000 -- 14,000
Issuance of common stock for cash 231,314 -- 241,127
Issuance of common stock for compensation 85,000 -- 87,500
Issuance of stock options as compensation 256,500 -- 256,500
Issuance of convertible bonds 350,000 -- 350,000
Net loss for the year ended December 31,1999 -- (6,054,364) (6,054,364)
Balance at December 31,1999 $ 1,395,671 $(6,092,056) $(4,155,378)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statement.
F-5
<PAGE>
IVOICE.COM, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
For the Year Ended
December 31,
1999 1998
--------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $(6,054,364) $ (37,692)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities
Depreciation and amortization 69,050 3,186
Bad debt expense 42,500 7,500
Provision for obsolescence 31,000 --
Legal settlement expense 4,500,000 --
Debt issue expense 32,959 --
Common stock issued for consulting services 290,800 --
Common stock issued for compensation 56,500 --
Stock options issued as compensation 256,500 --
Changes in certain assets and liabilities:
Increase in accounts receivable (27,361) (4,365)
Decrease in inventory 81,191 4,075
Increase in prepaid expense -- --
Increase in accounts payable and
accrued expenses 49,638 116,416
Increase in legal settlement payable 300,000 --
----------- -----------
Total cash (used in) provided by operating activities (371,587) 89,120
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (1,189) (5,186)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 255,127 --
Prepaid offering and debt issue costs (95,500) --
Repayment of notes payable (12,318) (27,554)
Sale of convertible debentures 350,000 --
----------- -----------
Total cash provided by (used in) financing activities 497,309 (27,554)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 124,533 56,380
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 71,328 14,948
----------- -----------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 195,861 $ 71,328
=========== ===========
CASH PAID DURING THE YEAR FOR:
Interest expense $ 41,708 $ --
=========== ===========
Income taxes $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statement.
F-6
<PAGE>
IVOICE.COM, INC.
STATEMENTS OF CASH FLOWS (Continued)
DECEMBER 31, 1999 AND 1998
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
a) On May 21, 1999, the Company executed a Reorganization Agreement
that provided that the Company and International Voice Technologies,
Corp. ("IVT") would be merged and the Company would be the surviving
entity. In connection with the merger transaction, the sole
shareholder of IVT, received the following:
i) 10,000,000 shares of the Company's Class A common stock
and
ii) 400,000 shares of the Company's Class B common stock.
b) On May 14, 1999, the Company issued 9,000,000 stock options to
purchase the Company's class A common stock for $.033 per share.
c) On June 15, 1999, the Company issued 250,000 shares of Class A
common stock in relation to an employee agreement.
d) On June 25, 1999, the Company issued 3,200,000 shares of the their
Class A common stock valued at .17 per share or $544,000 in
connection with the purchase of pre-developed software codes.
e) In connection with the Reorganization Agreement, the stock price was
calculated using an average of the share price before the merger
when the agreement was accepted. A consulting company received
2,000,000 shares of the Company's Class A common stock, valued at
.114 per share or $228,000 for services performed during April and
May 1999.
f) The Company issued 230,000 shares of its Class A common stock valued
at $30,800 for services performed relating to the merger during May
1999.
g) The Company issued 400,000 shares of its Class A common stock for
legal services valued at $32,000 for services performed relating to
the merger during April and May 1999.
h) The Company incurred non-cash debt issue costs totaling $350,000 in
relation to their 50% discount on the issuance of the 12%
convertible bonds (see Note 7).
i) As described in notes 8(f) and 12(b), the Company issued 2,000,000
shares of its Class A common stock valued at $4,500,000 in relation
to a legal settlement.
The accompanying notes are an integral part of the financial statement.
F-7
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
The accompanying financial statements include the accounts of
iVoice.com, Inc. (the "Company"), formerly known as Visual Telephone
International, Inc. ("Visual"), which was incorporated under the
laws of Utah on December 2, 1995, subsequently changed to Delaware.
Effective May 21, 1999, Visual and International Voice Technologies,
Corp. ("IVT") entered into a merger agreement whereby the Company
would be the surviving entity (see Note 2 for Reorganization). As a
result, IVT's former shareholder obtained control of Visual. For
accounting purposes, this acquisition has been treated as a
recapitalization of IVT.
The financial statements presented include only the accounts of IVT
from its inception (December 17, 1997 - operations began January
1998) through May 21, 1999, and that of iVoice (Visual and IVT
merged) from May 22, 1999 through December 31, 1999.
The Company is publicly traded and is currently exempt from the
requirement to register with a non-reporting public company traded
on the Over The Counter Bulletin Board ("OTCBB"). The Company is
required to become a fully reporting company by May 24, 2000 in
order to continue to be quoted on the OTCBB.
As reflected in the accompanying financial statements, the Company
had a loss and a negative cash flow from operations as well as a
negative working capital as of December 31, 1999. These matters
raise substantial doubt about the Company's ability to continue as a
going concern.
In view of the matters described in the preceding paragraph,
recoverability of a major portion of the recorded asset amounts
shown in the accompanying balance sheet is dependent upon continued
operations of the Company which, in turn, is dependent upon the
Company's ability to continue to raise capital and generate positive
cash flows from operations. The financial statements do not include
any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classifications of liabilities
that might be necessary should the Company be unable to continue its
existence.
Management plans to take the following steps that it believes will
be sufficient to provide the Company with the ability to continue in
existence:
F-8
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation (continued)
---------------------------------
o The Company has entered into a letter of intent with an
investment banking firm to raise between $1,000,000 to
$5,000,000 in convertible debentures (see Note 12g).
o Re-negotiate the terms relating to their 12% convertible
debentures (see Notes 7 and 12m).
o Structure arrangements for the provision of services by
outside consultants and third party providers in a manner
which reserves the cash flow of the Company, such as through
agreements which require those consultants or service
providers to take a portion of any agreed-upon fee in stock or
stock options (see Note 12).
o Expand the company through acquisitions that will enable the
Company to integrate new technology with their existing
technology (see Note 12a).
o Expand their sales force to help grow sales.
b) Line of Business
The Company is a communication company primarily engaged in the
development, manufacturing and marketing of voice and computer
technology communication systems for small-to-medium sized
businesses and corporate departments. The technology allows these
businesses to communicate more effectively by integrating their
traditional office telephone systems with voicemail, automated
attendant and Interactive Voice Response ("IVR") functions. IVR
products allow information in PC databases to be accessed from a
standard touch-tone telephone system. The Company sells its products
through Dealer and Reseller channels as well as through OEM
agreements with certain telecommunications and networking companies
throughout the United States.
c) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could
differ from those estimates.
d) Revenue Recognition
The Company obtains its income from the sale of its systems and from
commissions obtained from securing telephone usage contracts for a
regional telecommunications company. These commissions are a monthly
percentage of the gross usage charges of the customers obtained by
the Company. The Company recognizes revenue at the time of shipment
for sales of systems which do not require customization to be
performed by the Company. Revenue for systems which require
customization to be performed by the Company are recognized by the
contract method of accounting, using percentage of completion for
larger more complex systems (generally over a $25,000 sales price).
F-9
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
d) Revenue Recognition (continued)
Progress toward completion is measured by costs incurred to date as
a percentage of total estimated costs for each contract. Unbilled
receivables accrued under percentage of completion method amounted
to $-0- as of December 31, 1999 and 1998, respectively. The
completed contract method is used for smaller systems.
The Company recognizes revenue from services at the time the service
is performed or over the period of the contract for
maintenance/support.
e) Advertising Costs
Advertising costs are expensed as incurred and are included in
selling expenses. For the years ended December 31, 1999 and 1998,
advertising expense amounted to $42,136 and $0, respectively.
f) Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
g) Concentration of Credit Risk
The Company places its cash in what it believes to be credit-worthy
financial institutions. However, cash balances exceeded FDIC insured
levels at various times during the year.
h) Inventory
Inventory, consisting primarily of system components, is valued at
the lower of cost or market. Cost is determined on a first-in,
first-out basis.
i) Property and Equipment
Property and equipment is stated at cost. Depreciation is computed
using the straight-line method based upon the estimated useful lives
of the assets, generally five to seven years. Maintenance and
repairs are charged to expense as incurred.
j) Software License Cost
Software license costs are recorded at the lower of cost or fair
market value as of the date of purchase. These costs represent the
purchase of various exploitation rights to certain software,
pre-developed codes and systems patented by Parawan Electronics,
Corp. ("Parawan"), a non-related third party. As of December 31,
1999, these costs are capitalized pursuant to Statement of Financial
Accounting Standards ("SFAS") 86, paragraph 7 and are being
amortized using the straight-line method over a period of five
years. As described in Note 1 o), the Company has adopted SFAS No.
121. The carrying value of software license costs are regularly
reviewed by the Company and a loss would be recognized if the value
of
F-10
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
the estimated un-discounted cash flow benefit related to the asset
falls below the unamortization cost. No impairment loss should be
recognized as of December 31, 1999.
k) Income Taxes
Income taxes are provided for based on the liability method of
accounting pursuant to SFAS No. 109, "Accounting for Income Taxes".
The liability method requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of
temporary differences between the reported amount of assets and
liabilities and their tax basis.
l) Offering Costs
Offering costs consist primarily of professional fees. These costs
are charged against the proceeds of the sale of common stock in the
periods in which they occur. As of December 31, 1999 the Company has
prepaid offering costs totaling $50,000.
m) Debt Issue Costs
Debt issue costs represent various commissions paid and the
estimated cost of the 50% conversion discount feature relating to
the issuance of the Company's convertible debentures. These costs
are being amortized over the life of the debt (see Note 7).
n) Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts
receivable, inventory, accounts payable and accrued expenses and
deferred revenue approximates fair value due to the relatively short
maturity of these instruments.
o) Long-Lived Assets
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of", requires that
long-lived assets and certain identifiable intangibles to be held
and used or disposed of by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company has
adopted this statement and determined that an impairment loss should
not be recognized for applicable assets of continuing operations.
p) Earnings Per Share
SFAS No. 128, "Earnings Per Share" requires presentation of basic
earnings per share ("Basic EPS") and diluted earnings per share
("Diluted EPS").
The computation of basic earnings per share is computed by dividing
income available to common stockholders by the weighted average
number of outstanding common shares
F-11
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
p) Earnings per share (continued)
during the period. Diluted earnings per share gives effect to all
dilutive potential common shares outstanding during the period. The
computation of diluted EPS does not assume conversion, exercise or
contingent exercise of securities that would have an anti-dilutive
effect on earnings. The shares used in the computations are as
follows:
As of December 31,
1999 1998
Basic and Diluted EPS 30,500,000 10,000,000
========== ==========
q) Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income", establishes
standards for the reporting and display of comprehensive income and
its components in the financial statements. The items of other
comprehensive income that are typically required to be displayed are
foreign currency items, minimum pension liability adjustments, and
unrealized gains and losses on certain investments in debt and
equity securities. As of December 31, 1999 and 1998, the Company has
no items that represent comprehensive income, and thus, has not
included a statement of comprehensive income.
r) Recent Accounting Pronouncements
SFAS No. 131, "Disclosure About Segments of an Enterprise and
Related Information" changes the way public companies report
information about segments. SFAS No. 131, which is based on the
selected segment information quarterly and entity-wide disclosures
about products and services, major customers, and the material
countries in which the entity holds assets and reports revenue. This
statement is effective for the Company's 1999 fiscal year. The
Company is in the process of evaluating the disclosure requirements
under this standard.
SFAS No. 133, "Accounting for Derivative Instruments and for Hedging
Activities" requires that certain derivative instruments be
recognized in balance sheets at fair value and for changes in fair
value to be recognized in operations. Additional guidance is also
provided to determine when hedge accounting treatment is appropriate
whereby hedging gains and losses are offset by losses and gains
related directly to the hedged item. While the standard, as amended,
must be adopted in the fiscal year beginning after June 15, 2000,
its impact on the Company's consolidated financial statements is not
expected to be material as the Company has not historically used
derivative and hedge instruments.
Statement of Position ("SOP") No. 98-1 specifies the appropriate
accounting for costs incurred to develop or obtain computer
software for internal use. The new pronouncement
F-12
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
r) Recent Accounting Pronouncements (continued)
provides guidance on which costs should be capitalized, and over
what period such costs should be amortized and what disclosures
should be made regarding such costs. This pronouncement is effective
for fiscal years beginning after December 15, 1998, but earlier
application is acceptable. Previously capitalized costs will not be
adjusted. The Company believes that it is already in substantial
compliance with the accounting requirements as set forth in this new
pronouncement and therefore believes that adoption will not have a
material effect on financial condition or operating results.
SOP No. 98-5 requires that companies write-off defined previously
capitalized start-up costs including organization costs and expense
future start-up costs as incurred. The Company believes that it is
already in substantial compliance with the accounting requirements
as set forth in this new pronouncement and therefore believes that
adoption will not have a material effect on financial condition or
operating results.
NOTE 2 - CORPORATE REORGANIZATION AND MERGER
On May 21, 1999, the Company executed a Reorganization Agreement
(the "Agreement") that provided that the Company and International
Voice Technologies, Corp. ("IVT") would be merged and the Company
would be the surviving entity. On May 25, 1999, a certificate of
merger was filed with the State of Delaware. In connection with the
merger transaction, the sole shareholder of IVT, received the
following:
i) 10,000,000 shares of the Company's Class A common stock;
and
ii) 400,000 shares of the Company's Class B common stock.
In addition, the two controlling shareholders of Visual sold 300,000
shares of the Company's Class B common stock to IVT's sole
shareholder and concurrently canceled a total of 2,000,000 shares of
their Class A common stock.
The Agreement also provided that certain assets of the Company would
be transferred to Communications Research, Inc., ("CRI"), a wholly
owned subsidiary of Visual. It also provided that the shares of CRI
would be distributed pro rata to the Class A shareholders of the
Company before the issuance of the 10,000,000 shares to the sole
shareholder of IVT. The stock of CRI was distributed at the rate of
one share of CRI for each four shares of the Company's Class A
stock.
A finder's fee of 2,000,000 shares was issued on August 30, 1999, in
connection with the reorganization.
F-13
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 2 - CORPORATE REORGANIZATION AND MERGER (Continued)
This merger transaction has been accounted for in the financial
statements as a public shell merger. As a result of this transaction
the former shareholders of IVT acquired or exercised control over a
majority of the shares of Visual. Accordingly, the transaction has
been treated for accounting purposes as a recapitalization of IVT
and, therefore, these financial statements represent a continuation
of the legal entity, IVT, not Visual, the legal survivor.
Consequently, the comparative figures are those of iVoice.com.
Because the historical financial statements are presented in this
manner, proforma financial statements are not required.
In accounting for this transaction:
i) IVT is deemed to be the purchaser and surviving company
for accounting purposes. Accordingly, its net assets are
included in the balance sheet at their historical book
values;
ii) Control of the net assets and business of Visual was
acquired effective May 21, 1999 (the "Effective Date").
This transaction has been accounted for as a purchase of
the assets and liabilities of Visual by IVT at the fair
value of $138,000. The historical cost of the net assets
acquired was $90,780. A summary of the assigned values
of the net assets acquired is as follows:
Cash and cash equivalents $ 191
Property and equipment 138,809
Accrued expenses (1,000)
------------
Net assets acquired $ 138,000
============
iii) The statements of operations and cash flows include
IVT's results of operations and cash flows from January
1, 1998 (date operations began) and Visual's results of
operations from the Effective Date.
F-14
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
December 31,
1999 1998
Equipment $ 8,932 $ 8,186
Furniture and fixtures 64,312 7,743
-------- --------
73,244 15,929
Less: Accumulated depreciation ( 17,836) ( 3,186)
--------- --------
property and equipment, net $ 55,408 $ 12,743
======== ========
Depreciation expense for the years ended December 31, 1999 and 1998
was $14,650 and $3,186, respectively.
NOTE 4 - INCOME TAXES
The components of the provision for income taxes are as follows:
December 31,
--------------------
1999 1998
------- -------
Current Tax Expense
U.S. Federal $ - $ -
State and Local - -
------ ------
Total Current - -
------- ------
Deferred Tax Expense
U.S. Federal - -
State and Local - -
------- ------
Total Deferred - -
------ ------
Total Tax Provision from Continuing
Operations $ - $ -
===== ======
The reconciliation of the effective income tax rate to the Federal
statutory rate is as follows:
Federal Income Tax Rate (34.0)%
Deferred Tax Charge (Credit) -
Effect on Valuation Allowance 34.0%
State Income Tax, Net of Federal Benefit -
-----
Effective Income Tax Rate 0.0%
=====
F-15
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 4 - INCOME TAXES (Continued)
As of December 31, 1999 and 1998, the Company had net carryforward
losses of approximately $1,700,000 and $38,000 that can be utilized
to offset future taxable income through 2014. Utilization of these
net carryforward losses is subject to the limitations of Internal
Revenue Code Section 382. Because of the current uncertainty of
realizing the benefit of the tax carryforward, a valuation allowance
equal to the tax benefit for deferred taxes has been established.
The full realization of the tax benefit associated with the
carryforward depends predominantly upon the Company's ability to
generate taxable income during the carryforward period.
Deferred tax assets and liabilities reflect the net tax effect of
temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and amounts used for
income tax purposes. Significant components of the Company's
deferred tax assets and liabilities are summarized as follows:
December 31
--------------------------
1999 1998
--------------------------
Net Operating Loss Carryforwards $ 578,000 $ 12,920
Less: Valuation Allowance ( 578,000) ( 12,920)
----------- -----------
Net Deferred Tax Assets $ -- $ --
=========== ===========
Net operating loss carryforwards expire starting in 2007 through
2014.
NOTE 5 - DUE TO RELATED PARTY
As of December 31, 1999 and 1998, due to related parties represents
non-interest bearing advances of $21,000 and $20,000, respectively,
from an officer (see also Notes 8, 9 and 10).
NOTE 6 - NOTE PAYABLE
Note payable represented a $12,318 note payable to the Bank of New
York, as of December 31, 1998. The note has been repaid as of
December 31, 1999.
F-16
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 7 - CONVERTIBLE DEBENTURES
Convertible debentures consisted of six notes payable totaling
$350,000 bearing interest at 12% per annum payable on December 1,
2000, which were sold by the Company to non-related third parties as
of December 1, 1999. These debentures are convertible into shares of
the Company's Class A Common Stock at the option of the holder by
dividing the outstanding principal and interest by the conversion
price which shall equal 50% of the average bid price during the 20
trading days before the conversion date. The convertible debentures
are subject to default if the Company has not registered its shares
under a regulation offering within 150 days of the effective date of
the debentures (also see Note 1(m)).
NOTE 8 - COMMITMENTS AND CONTINGENCIES
a) The Company's future minimum annual aggregate rental payments
required under operating that have initial or remaining
non-cancelable lease terms in excess of one year are as
follows:
December 31,
2000 $ 51,000
2001 44,800
-----------
Total $ 95,800
==========
Rent expense under operating leases for the year ended December 31,
1999 and 1998 was $70,185 and $1,000, respectively.
b) The Company is committed to a monthly lease agreement for
their office currently utilized as the corporate headquarters.
Monthly lease payments total $1,450.
c) During May 1999, the Company entered into a five year
employment agreement with its majority shareholder (the
"Executive"). He will serve as the Company's Chairman of the
Board and its Chief Executive Officer for a term of five
years. As consideration, the Company agrees to pay the
Executive a sum of $180,000 the first year with a 10% increase
every year thereafter.
d) In connection with the Reorganization Agreement, the Company
entered into a five-year consulting agreement with one of
Visual's Directors (the "Director"). The agreement provides
that the Director will devote his part-time efforts to:
o coordinating investor and public relations, including
working with investment bankers in connection with
public or private equity or debt funding ventures;
F-17
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued)
o facilitating the preparation and filing of a Form 10 or
Form 10-SB registration statement with the Securities
and Exchange Commission (the "SEC"),
o the subsequent preparation and filing of periodic
reports with the SEC;
o seeking and evaluating potential business or product
line acquisitions;
o seeking potential sources of debt or equity financing
for the Company's business activities or growth; and
o monitoring, and reporting to management of the Company
on a monthly basis of, the activities of each of the
subsidiaries, if any, of the Company; and such other
activities as shall be mutually agreed upon by the
parties.
As compensation for his services, the Director shall receive a
fee of $104,000 per year provided, however, that such fee
shall be paid only from up to 10% of any equity or debt funds
raised by the Company. If such funds are not available for
payment of the consulting fee when due, such amount shall be
accrued and paid by the Company as soon as such equity or debt
funds are received by the Company. If any accrued consulting
fees are outstanding at the termination of the Agreement, the
Company will have no further obligation to pay the Consultant
any accrued fees. As consideration for entering into the
Consulting Agreement, the Director received 50,000 shares of
common stock of a public company received by Visual in a
Settlement Agreement dated March 5, 2000.
e) On June 2, 1999, subsequently amended January 11, 2000, the Company
entered into a three-year employment agreement, expiring on May 31,
2002, with an employee. As compensation, such employee will receive
a base salary and
1) options to purchase 140,000 shares of the Company's
Class A common stock; and
2) 250,000 shares of the Company's Class A common stock.
f) The Company is a party to a lawsuit initiated by an individual on
November 1, 1999 relating to an investment made into an entity
called IVS Corp. ("IVS"). This investment was made between the years
1994 and 1996. IVS was incorporated in 1993 and ceased operations in
November, 1997. The majority shareholder of IVS is the majority
shareholder and CEO of the Company. The Company believes this
lawsuit should not
F-18
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 9 - COMMON STOCK
exceed $4,800,000 and accordingly has established a reserve in
accounts payable and accrued expenses. The Company settled this
lawsuit during March 2000 (also see Note 12).
The company has two issuances of common stock:
a) Class A Common Stock
Class A common stock consists of 75,000,000 shares of
authorized common stock with a par value of $.01. Class A
stock has voting rights of 1:1 and as of December 31, 1999 and
1998, 54,083,663 and 10,000,000 were issued and outstanding,
respectively.
Each holder of Class A Common stock is entitled to receive
ratably dividends, if any, as may be declared by the Board of
Directors out of funds legally available for the payment of
dividends. As of December 31, 1999 and 1998, the Company has
not paid any dividends on its Common Stock.
b) Class B Common Stock
Class B Common Stock consists of 700,000 shares of authorized
common stock with no intrinsic value. Class B stock has voting
rights of 100 to 1 with respect to Class A Common Stock. As of
December 31, 1999 and 1998, 700,000 and 400,000 were issued
and outstanding, respectively (see Note 2). Class B common
stockholders are not entitled to receive dividends (see Note
12h).
NOTE 10 - STOCK OPTIONS
During 1997, the Company issued the following options:
a) On December 15, 1997, issued options to purchase 75,866 shares
of Class A common stock at $.12, which expired on December 15,
1999.
During 1998, the Company issued various options as follows:
b) On January 1, 1998, issued options to purchase 400,000 shares
of Class A common stock, at an average exercise price of $1.33
for services, with expiration on January 1, 2001.
F-19
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 10 - STOCK OPTIONS (Continued)
c) On July 13, 1998, issued options to purchase 50,000 shares of
Class A common stock at $.10 per share expiring in 12 months
(expired).
d) On July 14, 1998, issued options to purchase 195,185 shares of
Class A common stock at $.1035 for investment banking
services, exercisable within three years (see note 10).
e) On October 5, 1998, issued options to purchase 1,000,000
shares of Class A common stock at $.03 (exercised).
f) On November 23, 1998, issued options to purchase 300,000
shares of Class A common stock at $.05 (exercised).
g) On December 22, 1998, issued options to purchase 10,000 shares
of Class A common stock at $.10 for investment banking
services.
During 1999, the Company issued various options as follows:
h) On January 5, 1999, issued options to purchase 10,000 share of
Class A common stock at $.12 per share expiring in five years.
i) On January 21, 1999, issued options to purchase 10,000 shares
of Class A common stock at $.107 per share expiring in five
years.
j) On February 5, 1999, issued options to purchase 10,000 shares
of Class A common stock at $.107 per share expiring in five
years.
k) On March 17, 1999, issued options to purchase 10,000 shares of
Class A common stock at $.107 per share expiring in five
years.
l) On April 6, 1999, issued options to purchase 10,000 shares of
Class A common stock at $.107 per share expiring in five
years.
m) On May 14, 1999, the Company issued an option to purchase
9,000,000 shares of Class A Common Stock at $.033 per share
expiring in five years.
F-20
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 10 - STOCK OPTIONS (Continued)
Options outstanding, except options under employee stock option plan
are as follows as of December 31,1999:
Expiration Date Exercise Price Shares
--------------- -------------- ------
a) December 15, 1999 (Expired) .1200 75,866
c) July 13, 1999 (Expired) .1000 50,000
d) July 14, 2001 .1035 195,185
b) January 1, 2001 .3100 100,000
b) January 1, 2001 1.0000 100,000
b) January 1, 2001 2.0000 200,000
g) December 22, 2003 .1000 10,000
h-l)January - April 2004 .1096 50,000
--------
781,051
n) Employee Stock Option Plan
During the year ended December 31, 1999, the Company adopted
the Employee Stock Option Plan (the "Plan") in order to
attract and retain qualified personnel. Under the Plan, the
Board of Directors (the "Board"), in its discretion may grant
stock options (either incentive or non-qualified stock
options) to officers and employees to purchase the company's
common stock at no less than 85% of the market price on the
date the option is granted. Options generally vest over four
years and have a maximum term of five to ten years. During the
year ended December 31, 1999, 20,000,000 shares were reserved
for future issuance under the plan of which 9,490,000 shares
were granted subsequent to the adoption as detailed below:
Optionee Date # Shares Price
-------- ---- -------- -----
Joel Beagleman 05/14/99 9,000,000 0.033
Leo Pudlo 06/15/99 140,000 0.350
Carolyn Mikuski 08/02/99 10,000 0.290
Arlene Wiko 08/02/99 5,000 0.290
Peter Spohrer 08/02/99 20,000 0.290
Randy Gerber 08/02/99 5,000 0.290
David B. Alberding 09/07/99 20,000 0.210
Robert Weist 08/02/99 20,000 0.290
Greg M. Shanken 10/15/99 20,000 0.160
John Bianco 11/08/99 100,000 0.165
John Bianco 11/08/99 150,000 0.210
Derek Rowe 12/27/99 20,000 0.350
----------
9,510,000
=========
F-21
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 10 - STOCK OPTIONS (Continued)
The Company has adopted only the disclosure provisions of SFAS No.
123. It applies Accounting Principles Bulletin ("APB") Opinion No.
25, "Accounting for Stock Issued to Employess", and its related
interpretations in accounting for its plan. It does not recognize
compensation expense for its stock-based compensation plan other
than for restricted stock and options/warrants issued to outside
third parties. If the Company had elected to recognize compensation
expense based upon the fair value at the grant date for awards under
its plan consistent with the methodology prescribed by SFAS No. 123,
the Company's net loss and loss per share would be increased to the
proforma amounts indicated below:
For The Year Ended,
December 31,
------------
1999 1998
---------- --------
Net Loss
As Reported $(1,662,702) $ --
=========== ===========
Proforma $(1,945,123) $ --
=========== ===========
Basic Loss Per Share
As Reported $ (.026) $ --
=========== ===========
Proforma $ (.031) $ --
=========== ===========
These proforma amounts may not be representative of future
disclosures because they do not take into effect proforma
compensation expense related to grants made before 1997. The fair
value of these options were estimated at the date of grant using the
Black-Scholes option-pricing model with the following
weighted-average assumptions for the years ended December 31, 1999
and 1998: dividend yield of 0%; expected volatility of 320%;
risk-free interest rates of 5.84%; and expected life of 3.0 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because the Company's
employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide
a reliable single measure of the fair value of its employee stock
options.
F-22
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 10 - STOCK OPTIONS (Continued)
The following summarizes the stock option and warrant transactions:
Weighted Other Weighted
Employee Average Options Average
Stock Options Exercise and Exercise
Outstanding Price Warrants Price
Balance, December 31, 1997 -- $ -- 75,866 $ 0.12
Granted -- $ -- 1,955,185 $ 0.06
Exercised -- $ -- (1,300,000) 0.03
Canceled -- $ -- -- --
--------- ----- ------- --------
Balance, December 31, 1998 -- $ -- 731,051 $ 0.12
Granted 9,510,000 $.033 50,000 $ 0.11
========= ===== ======= ========
Exercised -- $ -- -- $ --
Canceled -- $ -- (125,866) $ 0.11
--------- ----- ------- --------
Balance, December 31, 1999 9,510,000 $.033 655,185 $ 0.12
========= ===== ======= ========
Outstanding and Exercisable,
December 31, 1998 -- $ -- 731,051 $ 0.12
========= ===== ======= ========
Outstanding and Exercisable,
December 31, 1999 9,000,000 $.033 655,185 $ 0.12
========= ===== ======= ========
The weighted average remaining contractual lives of the employee
stock options is 2.5 years at December 31, 1999.
NOTE 11 - NON-RECURRING EXPENSES
Non-recurring expenses consisted of the following for the year ended
December 31, 1999:
a) Legal Settlements $ 4,800,000
b) Merger Costs 228,000
-----------
Total non-recurring expenses $ 5,028,000
===========
a) The Company recognized $4,800,000 of expenses relating to
legal settlements. During February 2000, the Company settled a
lawsuit and agreed to pay $300,000 in cash and issue 2,000,000
shares of its Class A restricted common stock valued at
$4,500,000 (see Note 12b).
F-23
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 11 - NON-RECURRING EXPENSES (Continued)
b) In connection with the Reorganization Agreement, a consulting
company received 2,000,000 shares of the Company's Class A
common stock, valued at .114 per share or $228,000 for
services performed. These shares were for services performed
during the merger (see Note 2).
NOTE 12 - SUBSEQUENT EVENTS
a) On March 27, 2000, the Company entered into a definitive
agreement to acquire MaiSoft, Inc. ("MaiSoft"). MaiSoft
possesses unified messaging technology which will be
integrated with the Company's present technology. The terms of
the agreement specify that the Company will pay $1,000,000 in
cash and issue 2,400,000 shares of its class A common stock in
exchange for certain assets of Maisoft. The agreement is
subject to a repricing mechanism after one year based upon
certain levels of the Company's common stock price. As of the
date of this report, this transaction has not closed and it is
less than probable that this transaction will close.
b) During February 2000, the Company settled a lawsuit (see Note
8F). As settlement, the Company paid $300,000 in cash and
issued 2,000,000 shares of its Class A restricted common stock
valued at $4,500,000.
c) During March 2000, the Company increased its authorized shares
of its Class A common stock from 75,000,000 to 150,000,000.
d) During March 2000, 195,185 of outstanding stock options were
exercised.
e) During January, February and March 2000, the Company issued
four additional 12% secured convertible debentures due
December 1, 2000, totaling $150,000.
f) On April 21, 2000, the Company executed an agreement and plan
of reorganization with ThirdCAI, Inc. ("ThirdCAI"), a fully
reporting holding company. The agreement stipulates that
ThirdCAI and the Company would be merged and the Company would
be the surviving entity. The Company will issue 50,000 shares
for all outstanding shares of ThirdCAI. A finders fee of
$150,000 is also payable in relation to the agreement
g) On April 19, 2000, the Company entered into a letter of intent
with an investment banking firm to issue a minimum of
$1,000,000 and a maximum of $5,000,000 of 6% convertible
debentures, due in one year, on a "best efforts" basis, as
follows:
i) $1,000,000 to $2,500,000 funded by May 10, 2000; and
F-24
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 12 - SUBSEQUENT EVENTS (Continued)
ii) $1,000,000 to $2,500,000 funded within 60 days of
the initial closing on May 10, 2000.
The debentures are convertible at the lessor of :
(a) 50% discount of the lowest closing bid price from
April 18, 2000 until the date of the initial
closing; or
(b) a 50% discount, utilizing a twenty (20) day
average closing bid price to the market price at
the time of conversion for the first $2,500,000
raise. The second $2,500,000 raise will be
convertible at a 50% discount, utilizing a twenty
(20) day average closing bid price to the market
price at the time of conversion. The Debenture may
be converted at any time and must be converted
within one year from the date of an effective
registration.
The debentures and underlying securities shall be registered
by an appropriate registration statement filed no later than
sixty (60) days from the date of the initial closing of this
offering.
h) On April 24, 2000, the Company filed to amend its Articles of
Incorporation to state that Class B common stock is
convertible into its Class A common stock at a conversion rate
of one share of Class B common stock for one hundred shares of
Class A common stock. The conversion ratio is in relation to
the voting ratio.
i) On April 24, 2000, the Company terminated its agreement with
their former investment banking firm. The Company has agreed
to issue shares of its restricted Class A common stock as
settlement for all obligations relating to their agreement.
This settlement is not yet finalized.
j) On March 21, 2000, 9,000,000 stock options were exercised to
purchase 9,000,000 shares of the Company's Class A common
stock at a strike price of $.033 (see Note 10m).
k) During April 2000, the Company issued 37,500 shares of its
Class A common stock for services rendered to two non-related
individuals. These services were valued at the closing market
price of the Company's Class A common stock on the date of
issuance which approximated $72,000.
l) During April 2000, the Company sold 1,750,000 shares of its
Class A commons stock for approximately $750,000.
F-25
<PAGE>
m) On April 24, 2000, the Company entered into discussions to
issue 100,000 shares of its Class A common stock to the 12%
convertible debenture holders, to extend the default term of
the debentures for a period of six months.
F-26
<PAGE>
IVOICE.COM, INC.
BALANCE SHEETS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
March 31, December
2000 31, 1999
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 70,963 $ 195,861
Accounts receivable, net of allowance for doubtful
accounts of $57,500 and $50,000 267,550 31,726
Inventory 8,870 10,140
Prepaid expenses and other current assets 50,000 52,100
Debt issue costs 399,791 362,541
----------- -----------
Total current assets 797,174 652,368
----------- -----------
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $21,540 and $17,386 61,864 55,408
----------- -----------
OTHER ASSETS
Software license costs, net of accumulated amortization
of $81,600 and $54,400 462,400 489,600
Deposits and other assets 11,100 --
----------- -----------
Total other assets 473,500 489,600
----------- -----------
TOTAL ASSETS $ 1,332,538 $ 1,197,376
=========== ===========
LIABILITIES AND STOCKHOLDERS DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 199,513 $ 181,754
Legal settlement payable -- 4,800,000
Due to related parties 21,000 21,000
Convertible debentures 500,000 350,000
----------- -----------
Total liabilities 720,513 5,352,754
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' DEFICIENCY
Common stock, series A - par value $.01; authorized
150,000,000 and 75,000,000 shares, 65,373,561 and
54,093,663 issued and outstanding 653,736 540,937
Common stock, series B - no par value; authorized,
issued and outstanding 700,000 shares 70 70
Additional paid in capital 6,485,491 1,395,671
Accumulated deficit (6,527,272) (6,092,056)
----------- -----------
Total stockholders' deficiency 612,025 (4,155,378)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 1,332,538 $ 1,197,376
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statement.
F-27
<PAGE>
IVOICE.COM, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
For the Three Months Ended
March 31,
---------------------------
2000 1999
---- ----
SALES, net $ 397,348 $ 99,615
COST OF SALES 101,677 58,315
--------- ---------
GROSS PROFIT 295,671 41,300
--------- ---------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling expenses 112,987 1,462
General and administrative expenses 425,627 62,195
Research and development 9,620 --
Bad debt expense 7,500 10,625
Provision for obsolescence -- --
Depreciation and amortization 30,903 798
--------- ---------
Total selling, general and administrative 586,637 75,080
--------- ---------
expenses
LOSS FROM OPERATIONS (290,966) (33,780)
OTHER EXPENSE
Interest expense (144,250) --
--------- ---------
Total other expenses 144,250 --
--------- ---------
LOSS BEFORE INCOME TAXES (435,216) (33,780)
PROVISION FOR INCOME TAXES -- --
--------- ---------
NET LOSS $(435,216) $ (33,780)
========= =========
NET LOSS PER COMMON SHARE
Basic $ (0.01) $ (.00)
========= =========
Diluted $ (0.01) $ (.00)
========= =========
The accompanying notes are an integral part of the financial statement.
F-28
<PAGE>
IVOICE.COM, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
For the Three Months Ended
March 31,
--------------------------
2000 1999
---- ----
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $(435,216) $ (33,779)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities
Depreciation and amortization 30,903 798
Bad debt expense 7,500 10,625
Provision for obsolescence -- --
Legal settlement expense -- --
Interest expense 144,250 --
Common stock issued for consulting services 252,619 --
Common stock issued for compensation -- --
Stock options issued as compensation -- --
Changes in certain assets and liabilities:
Accounts receivable (243,324) 4,457
Inventory 1,270 1,850
Accounts payable and accrued liabilities 17,759 (30,799)
Legal settlement payable (300,000) --
Other assets (9,000) --
Deferred revenue -- 16,172
--------- ---------
Total cash provided by (used in) operating (533,239) (30,676)
--------- ---------
activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (10,159) --
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for exercise of options 300,000 --
Prepaid offering and debt issue costs (31,500) --
Repayment of notes payable -- --
Sale of convertible debentures 150,000 --
--------- ---------
Total cash provided by (used in) financing 418,500 --
--------- ---------
activities
NET INCREASE IN CASH AND CASH EQUIVALENTS (124,898) (30,676)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 195,861 71,328
--------- ---------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 70,963 $ 40,652
CASH PAID DURING THE YEAR FOR:
Interest expense $ -- $ --
========= =========
Income taxes $ -- $ --
========= =========
The accompanying notes are an integral part of the financial statement.
F-29
<PAGE>
IVOICE.COM, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE QUARTER ENDED MARCH 31, 2000
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
a) During the three months ended March 31, 2000, the Company converted a
$4,500,000 legal settlement payable into 2,000,000 shares of its class
A restricted common stock.
b) During the three months ended March 31, 2000, the Company issued
$150,000 of its 12% convertible debentures exercisable at a 50%
conversion price. The 50% conversion discount totaling $150,000 was
recorded as a prepaid debt issue cost and will be amortized over the
life of the debt.
c) During the three months ended March 31, 2000, the Company issued
100,000 shares of its restricted class A common stock for services
valued at $234,000.
d) During the three months ended March 31, 2000, 179,898 of options were
exercised at the strike price of $0.1035 per share. These shares were
exercised for $18,619 of services performed by the option holder.
The accompanying notes are an integral part of the financial statement.
F-30
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form
10-QSB and Regulation S-B. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting only of normal
recurring adjustments) considered necessary for a fair
presentation have been included. The balance sheet of the Company
as of December 31, 1999 has been derived from the audited balance
sheet of the Company as of that date.
For further information, refer to the financial statements and
footnotes included in Form 10-SB for the year ended December 31,
1999.
The result of operations for the three month periods ended March
31, 2000 and 1999 are not necessarily indicative of the results
to be expensed for the full year.
The accompanying financial statements include the accounts of
iVoice.com, Inc. (the "Company" or "iVoice"), formerly known as
Visual Telephone International, Inc. ("Visual"), which was
incorporated under the laws of Utah on December 2, 1995,
subsequently changed to Delaware.
Effective May 21, 1999, Visual and International Voice
Technologies, Corp. ("IVT") entered into a merger agreement
whereby the Company would be the surviving entity (see Note 2 for
Reorganization). As a result, IVT's former shareholder obtained
control of Visual. For accounting purposes, this acquisition has
been treated as a recapitalization of IVT.
The Company is publicly traded and is currently exempt from the
requirement to register with a non-reporting public company
traded on the Over The Counter Bulletin Board ("OTCBB"). The
Company is required to become a fully reporting company by May
24, 2000 in order to continue to be quoted on the OTCBB.
b) Earnings Per Share
SFAS No. 128, "Earnings Per Share" requires presentation of basic
earnings per share ("Basic EPS") and diluted earnings per share
("Diluted EPS").
The computation of basic earnings per share is computed by
dividing income available to common stockholders by the weighted
average number of outstanding common shares during the period.
Diluted earnings per share gives effect to all dilutive potential
common shares outstanding during the period. The computation of
diluted EPS does not assume conversion, exercise or contingent
exercise of securities that would have an anti-dilutive effect on
earnings. The shares used in the computations are as follows:
As of March 31,
------------------------
2000 1999
Basic and Diluted EPS 57,438,638 10,000,000
========== ==========
F-31
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
NOTE 2 - CONVERTIBLE DEBENTURES
As of March 31, 2000 and December 31, 1999, convertible debentures
consisted of ten and six notes payable totaling $500,000 and $350,000,
respectively, bearing interest at 12% per annum payable on December 1,
2000. These debentures are convertible into shares of the Company's
Class A Common Stock at the option of the holder by dividing the
outstanding principal and interest by the conversion price which shall
equal 50% of the average bid price during the 20 trading days before
the conversion date. The convertible debentures are subject to default
if the Company has not registered its shares under a regulation
offering within 150 days of the effective date of the debentures.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
a) The Company was a party to a lawsuit initiated by an individual on
November 1, 1999 relating to an investment made into an entity
called IVS Corp. ("IVS"). This investment was made between the years
1994 and 1996. IVS was incorporated in 1993 and ceased operations in
November, 1997. The majority shareholder of IVS is the majority
shareholder and CEO of the Company. The Company believes this
lawsuit should not exceed $500,000 and accordingly has established a
reserve in accounts payable and accrued expenses. The Company
settled this lawsuit during March 2000. During February 2000, the
Company settled a lawsuit (see Note 8F). As settlement, the Company
paid $300,000 in cash and issued 2,000,000 shares of its Class A
common stock.
b) On March 27, 2000, the Company entered into a definitive agreement
to acquire MaiSoft, Inc. ("MaiSoft"). MaiSoft possesses unified
messaging technology which will be integrated with the Company's
present technology. The terms of the agreement specify that the
Company will pay $1,000,000 in cash and issue 2,400,000 shares of
its class A common stock in exchange for certain assets of Maisoft.
The agreement is subject to a repricing mechanism after one year
based upon certain levels of the Company's common stock price. As of
the date of this report, this transaction has not closed.
NOTE 4 - COMMON STOCK
The company has two issuances of common stock:
a) Class A Common Stock Class A common stock consists of the following
as of March 31, 2000 and December 31, 1999: 150,000,000 and
75,000,000 shares of authorized common stock with a par value of
$.01, respectively. Class A stock has voting rights of 1:1 and as of
March 31, 2000 and December 31, 1999, 65,373,561 and 54,083,663 were
issued and outstanding, respectively.
Each holder of Class A Common stock is entitled to receive ratably
dividends, if any, as may be declared by the Board of Directors out
of funds legally available for the payment of dividends. As of March
31, 2000 and December 31, 1999, the Company has not paid any
dividends on its Common Stock.
b) Class B Common Stock Class B Common Stock consists of 700,000 shares
of authorized common stock with no intrinsic value. Class B stock
has voting rights of 100 to 1 with respect to Class A Common Stock.
As of March 31, 2000 and December 31, 1999, 700,000 shares were
issued and outstanding. Class B common stockholders are not entitled
to receive dividends (see Note 5c).
F-32
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
NOTE 5 - SUBSEQUENT EVENTS
a) On April 21, 2000, the Company executed an agreement and plan of
reorganization with ThirdCAI, Inc. ("ThirdCAI"), a fully reporting
holding company. The agreement stipulates that ThirdCAI and the
Company would be merged and the Company would be the surviving
entity. The Company will issue 50,000 shares for all outstanding
shares of ThirdCAI. A finders fee of $150,000 is also payable in
relation to the agreement
b) On April 19, 2000, the Company entered into a letter of intent with
an investment banking firm to issue a minimum of $1,000,000 and a
maximum of $5,000,000 of 6% convertible debentures, due in one year,
on a "best efforts" basis, as follows:
i) $1,000,000 to $2,500,000 funded by May 10, 2000; and
ii) $1,000,000 to $2,500,000 funded within 60 days of the
initial closing on May 10, 2000.
The debentures are convertible at the lessor of :
a) 50% discount of the lowest closing bid price from April 18, 2000
until the date of the initial closing; or
b) a 50% discount, utilizing a twenty (20) day average closing bid
price to the market price at the time of conversion for the first
$2,500,000 raise. The second $2,500,000 raise will be convertible at
a 50% discount, utilizing a twenty (20) day average closing bid
price to the market price at the time of conversion. The Debenture
may be converted at any time and must be converted within one year
from the date of an effective registration.
The debentures and underlying securities shall be registered by an
appropriate registration statement filed no later than sixty (60)
days from the date of the initial closing of this offering.
c) On April 24, 2000, the Company filed to amend its Articles of
Incorporation to state that Class B common stock is convertible into
its Class A common stock at a conversion rate of one share of Class
B common stock for one hundred shares of Class A common stock. The
conversion ratio is in relation to the voting ratio.
d) On April 24, 2000, the Company terminated its agreement with their
former investment banking firm. The Company has agreed to issue
shares of its restricted Class A common stock as settlement for all
obligations relating to their agreement. This settlement is not yet
finalized.
e) During April 2000, the Company issued 37,500 shares of its Class A
common stock for services rendered.
f) During April 2000, the Company sold 1,750,000 shares of its Class A
commons stock for approximately $750,000.
g) On April 24, 2000, the Company entered into discussions to issue
100,000 shares of its Class A common stock to the 12% convertible
debenture holders, to extend the default term of the debentures for
a period of six months.
F-33
<PAGE>
IVOICE.COM, INC.
BALANCE SHEETS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
June 30, December
2000 31, 1999
---- --------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 135,886 $ 195,861
Accounts receivable, net of allowance for doubtful
accounts of
$20,000 and $50,000 222,308 31,726
Inventory 21,195 10,140
Prepaid expenses and other current assets 68,2610 52,100
Debt issue costs 255,541 362,541
----------- -----------
Total current assets 703,191 652,368
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $28,024 and $17,836 158,305 55,408
OTHER ASSETS
Software license costs, net of accumulated amortization
of $108,800 and $54,400 435,200 489,600
Deposits and other assets 13,900 --
Goodwill, net of accumulated amortization of $1,526 and 226,255 --
----------- -----------
Total other assets 675,355 489,600
----------- -----------
TOTAL ASSETS $ 1,536,851 $ 1,197,376
=========== ===========
LIABILITIES AND STOCKHOLDERS DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses 232,846 181,754
Obligations under capital leases - current 25,668 --
Legal settlement payable -- 4,800,000
Due to related parties 21,000 21,000
Convertible debentures 500,000 350,000
-----------
Total liabilities 779,514 5,352,754
----------- -----------
LONG TERM DEBT
Obligation under Capital leases - non-current 62,985 --
----------- -----------
Total liabilities 842,499 --
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' DEFICIENCY
Common stock, series A - par value $.01; authorized
150,000 and 75,000,000 shares, 97,650,037 54,093,663
issued and outstanding 976,500 540,937
Common stock, series B - no par value; authorized,
700,000 40 70
shares; 394,000 and 700,000 shares issued and
outstanding
Additional paid in capital 7,140,642 1,395,671
Accumulated deficit (7,422,830) (6,092,056)
----------- -----------
Total stockholders' deficiency 694,352 (4,155,378)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 1,536,851 $ 1,197,376
----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statement.
F-34
<PAGE>
INVOICE.COM, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
For the Three For the Six Months
Months Ended Ended
June 30, June 30,
--------------------------------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES, net $ 104,371 $ 110,706 $ 501,719 $ 210,321
COST OF SALES 60,125 62,484 161,802 120,799
----------- ----------- ----------- -----------
GROSS PROFIT 44,246 48,222 339,917 89,522
----------- ----------- ----------- -----------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Selling expenses 140,787 19,110 253,774 20,572
General and administrative 472,848 129,394 898,475 191,589
expenses
Research and development 98,989 -- 108,609 --
Bad debt expenses 15,000 10,625 22,500 21,250
Depreciation and amortization 35,211 797 66,114 1,595
----------- ----------- ----------- -----------
Total selling general and 762,835 159,926 1,349,472 235,006
----------- ----------- ----------- -----------
administrative expenses
LOSS FROM OPERATIONS (718,589) (111,704) (1,009,555) (145,484)
OTHER EXPENSE
Interest expense 176,969 -- 321,219 --
----------- ----------- ----------- -----------
Total other expenses 176,969 -- 321,219 --
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES (895,558) (111,704) (1,330,774) (145,484)
PROVISION FOR INCOME TAXES -- -- -- --
----------- ----------- ----------- -----------
NET LOSS $ (895,558) $ (111,704) $(1,330,774 $ (145,484)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE
Basic $(0.01) $(.00) $(0.02) $(0.00)
Diluted $(0.01) $(.00) $(0.02) $(0.00)
</TABLE>
The accompanying notes are an integral part of the financial statement.
F-35
<PAGE>
IVOICE.COM, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
---------------------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $(1,330,774) $ (145,484)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities
Depreciation and amortization 66,114 1,595
Bad debt expense 22,500 21,250
Amortization of debt issue costs 288,500 --
Common stock issued for consulting services 336,619 32,000
Common stock issued for compensation 50,938 --
Changes in certain assets and liabilities:
Accounts receivable (213,082) 71,334
Inventory (11,055) (2,500)
Accounts payable and accrued liabilities 51,092 (24,994)
Legal settlement payable --
Other assets (300,000) --
(30,061) --
----------- -----------
Total cash provided by (used in) operating
activities (1,069,209) (46,799)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (113,085) (1,189)
Purchase of goodwill (150,000) --
----------- -----------
(263,085) (1,189)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 746,000 --
Proceeds from exercise of options on common stock 319,166 90,000
Prepaid offering and debt issue costs (31,500) --
Increase in borrowing under capital lease 92,895
obligations
Repayment of notes payable (4,242) --
Sale of convertible debentures 150,000 --
----------- -----------
Total cash provided by (used in) financing
activities 1,272,319 90,000
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS (59,975) 42,012
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 195,861 71,328
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 135,886 $ 113,340
=========== ===========
CASH PAID DURING THE PERIOD FOR:
Interest expense $ 3,577 $ --
=========== ===========
Income taxes $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statement.
F-36
<PAGE>
IVOICE.COM, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
a) During the six months ended June 30, 2000, the Company converted a
$4,500,000 legal settlement payable into 2,000,000 shares of its
class A restricted common stock.
b) During the six months ended June 30, 2000, the Company issued
$150,000 of its 12% convertible debentures exercisable at a 50%
conversion price. The 50% conversion discount totaling $150,000 was
recorded as a prepaid debt issue cost and will be amortized over the
life of the debt.
c) During the six months ended June 30, 2000, the Company issued
456,429 shares of its restricted class A common stock for services
valued at $368,072.
d) During the six months ended June 30, 2000, 179,898 of options were
exercised at the strike price of $0.1035 per share. These shares
were exercised for $18,619 of services performed by the option
holder.
e) During the six months ended June 30, 2000, the Company issued 50,000
shares of its restricted class A common stock to Corporate
Architects, Inc. with a value of $46,875 for the purchase of
ThirdCAI, Inc.
f) During the six months ended June 30, 2000, the Company issued 30,000
shares of its restricted class A common stock as compensation valued
at $50,938.
The accompanying notes are an integral part of the financial statement.
F-37
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Regulation
S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included. The
balance sheet of the Company as of December 31, 1999 has been derived
from the audited balance sheet of the Company as of that date.
For further information, refer to the financial statements and
footnotes included in Form 10-SB for the year ended December 31, 1999.
The result of operations for the six month periods ended June 30, 2000
and 1999 are not necessarily indicative of the results to be expected
for the full year.
The accompanying financial statements include the accounts of
iVoice.com, Inc. (the "Company" or "iVoice"), formerly known as Visual
Telephone International, Inc. ("Visual"), which was incorporated under
the laws of Utah on December 2, 1995, subsequently changed to Delaware.
Effective May 21, 1999, Visual and International Voice Technologies,
Corp. ("IVT") entered into a merger agreement whereby the Company would
be the surviving entity. As a result, IVT's former shareholder obtained
control of Visual. For accounting purposes, this acquisition has been
treated as a recapitalization of IVT.
On April 24, 2000, the Company filed to amend its Articles of
Incorporation to state that Class B common stock is convertible into
its Class A common stock at a conversion rate of one share of Class B
common stock for one hundred shares of Class A common stock. The
conversion ratio is in relation to the voting ratio.
On April 21, 2000, the Company executed an agreement and plan of
reorganization with ThirdCAI, Inc. ("ThirdCAI"), a fully reporting
holding company. The agreement stipulates that ThirdCAI and the Company
would be merged and the Company would be the surviving entity. The
Company issued 50,000 shares for all outstanding shares of ThirdCAI. A
finders fee of $150,000 is also payable in relation to the agreement
F-38
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Share
SFAS No. 128, "Earnings Per Share" requires presentation of basic
earnings per share ("Basic EPS") and diluted earnings per share
("Diluted EPS").
The computation of basic earnings per share is computed by dividing
income available to common stockholders by the weighted average number
of outstanding common shares during the period. Diluted earnings per
share gives effect to all dilutive potential common shares outstanding
during the period. The computation of diluted EPS does not assume
conversion, exercise or contingent exercise of securities that would
have an anti-dilutive effect on earnings. The shares used in the
computations are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
Basic and Diluted 81,759,579 29,575,882 70,202,758 21,186,218
NOTE 2 - CONVERTIBLE DEBENTURES
As of June 30, 2000 and December 31, 1999, convertible debentures
consisted of ten and six notes payable totaling $500,000 and $350,000,
respectively, bearing interest at 12% per annum payable on December 1,
2000. These debentures are convertible into shares of the Company's
Class A Common Stock at the option of the holder by dividing the
outstanding principal and interest by the conversion price which shall
equal 50% of the average bid price during the 20 trading days before
the conversion date. The convertible debentures are subject to default
if the Company has not registered its shares under a regulation
offering within 150 days of the effective date of the debentures. As of
June 30, 2000, the Company has not registered any shares under a
regulation offering and is in default under this agreement.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
The Company was a party to a lawsuit initiated by an individual on
November 1, 1999 relating to an investment made into an entity called
IVS Corp. ("IVS"). This investment was made between the years 1994 and
1996. IVS was incorporated in 1993 and ceased operations in November
1997. The majority shareholder of IVS is the majority shareholder and
CEO of the Company. The Company settled this lawsuit during March 2000.
As settlement, the Company paid $300,000 in cash and issued 2,000,000
shares of its Class A common stock.
F-39
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
NOTE 3 - COMMITMENTS AND CONTINGENCIES (Continued)
On March 27, 2000, the Company entered into a definitive agreement to
acquire MaiSoft, Inc. ("MaiSoft"). MaiSoft possesses unified messaging
technology which will be integrated with the Company's present
technology. The terms of the agreement specify that the Company will
pay $1,000,000 in cash and issue 2,400,000 shares of its class A common
stock in exchange for certain assets of Maisoft. The agreement is
subject to a repricing mechanism after one year based upon certain
levels of the Company's common stock price. On May 25, 2000, this
transaction has been cancelled.
On April 24, 2000, the Company terminated its agreement with their
former investment banking firm. The Company had agreed to issue shares
of its restricted Class A common stock as settlement for all
obligations relating to their agreement. This settlement was contingent
upon the closing of the Maisoft acquisition which, subsequently, did
not close. No shares were issued to the former investment banking firm
under this agreement.
On May 17, 2000, the Company was de-listed from the Over-the-Counter
Bulletin Board (OTCBB) Market System for failure to comply with the
Eligibility Rule adopted by the National Association of Securities
Dealers (NASD) and approved by the Securities and Exchange Commission
(SEC) on January 5, 1999. This rule permits only those companies that
report their current financial information to the SEC, banking or
insurance regulators to be quoted on the OTCBB. As of the date of this
filing, the Company has filed all required documentation in order to be
listed on the OTCBB and is awaiting final approval on it's filings from
the SEC. The Company currently trades in the "Pink Sheets" under the
symbol IVOC.
In April 2000, the Company entered into a non-cancelable lease
commitment for office furniture and equipment for it's Matawan, New
Jersey facility. The lease calls for 36 equal monthly payments of
$2,150.69 plus applicable state sales taxes. The lease, payable to JDR
Capital Corporation, has a $1 purchase option and imputed interest rate
of 20.78%.
On April 19, 2000, the Company entered into a letter of intent with an
investment banking firm to issue a minimum of $1,000,000 and a maximum
of $5,000,000 of 6% convertible debentures, due in one year, on a "best
efforts" basis. On May 10, the agreement automatically terminated
without penalty and no additional obligations exist under such
financing arrangement. This letter of intent expired as of June 30,
2000.
In June 2000, the Company entered into a non-cancelable lease
commitment for computer equipment for it's Matawan, New Jersey
facility. The lease calls for 36 equal monthly payments of $1,366.87,
which includes applicable state sales taxes. The lease, payable to
Fisher-Anderson, LLC, has a $1 purchase option an imputed interest rate
of 22.31%.
F-40
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
NOTE 4 - COMMON STOCK
The Company issuance of common stock for the six months ended June 30,
2000 is as follows:
a) Class A Common Stock
Class A common stock consists of the following as of June 30,
2000 and December 31, 1999: 150,000,000 and 75,000,000 shares of
authorized common stock with a par value of $.01, respectively.
Class A stock has voting rights of 1:1 and as of June 30, 2000
and December 31, 1999, 97,650,037 and 54,093,663 shares were
issued and outstanding, respectively.
Each holder of Class A Common stock is entitled to receive
ratably dividends, if any, as may be declared by the Board of
Directors out of funds legally available for the payment of
dividends. As of June 30, 2000 and December 31, 1999, the Company
has not paid any dividends on its Common Stock.
For the six months ended June 30, 2000, the Company issued
456,429 shares of its Class A common stock for services rendered.
During April 2000, the Company sold 1,240,047 shares of its Class
A common stock for approximately $750,000.
For the six months ended June 30, 2000, the Company issued 30,000
shares of its Class A common stock to its officers as
compensation.
For the six months ended June 30, 2000, options were exercised
for 9,179,898 shares of Class A common stock.
During the six months ended June 30, 2000, the Company issued
50,000 shares of its restricted class A common stock to Corporate
Architects, Inc. for the purchase of ThirdCAI, Inc.
For the six months ended June 30, 2000, the Company issued
2,000,000 shares of Class A common stock for legal settlements.
On May 2, 2000, 306,000 shares of class B common stock was
converted to Class A common stock at a ratio of 100 to 1.
30,600,000 shares of Class A common stock were issued as of June
30, 2000.
b) Class B Common Stock
Class B Common Stock consists of 700,000 shares of authorized
common stock with no intrinsic value. Class B stock has voting
rights of 100 to 1 with respect to Class A Common Stock. As of
June 30, 2000 and December 31, 1999, 394,000 and 700,000 shares
were issued and outstanding. Class B common stockholders are not
entitled to receive dividends.
F-41
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make representations other than those contained in this
prospectus, and if given or made, such information or representations must not
be relied upon as having been authorized by us or the selling stockholders.
Neither the delivery of this prospectus nor any sale hereunder will, under any
circumstances, create an implication that the information herein is correct as
of any time subsequent to its date. This prospectus does not constitute an offer
to or solicitation of offers by anyone in any jurisdiction in which such an
offer or solicitation is not authorized or in which the person making such an
offer is not qualified to do so or to anyone to whom it is unlawful to make such
an offer or solicitation.
48,800,000 SHARES
IVOICE.COM, INC.
COMMON STOCK
PROSPECTUS
_________, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Our certificate of incorporation provides that a director shall not be
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director.
In addition, our certificate of incorporation provides that we shall
indemnify to the fullest extent permitted by law any person made or threatened
to be made a party to any action, suit or proceeding, whether criminal, civil,
administrative or investigative (a "legal action"), whether such legal action be
by or in the right of the corporation or otherwise, by reason of the fact that
such person is or was a director or officer of the company, or serves or served
at the request of the Company as a director or officer, of another corporation,
partnership, joint venture, trust or any other enterprise. In addition, our
certificate of incorporation provides for indemnification of any person made or
threatened to be made a party to any legal action by reason of the fact that
such person is or was a director or officer of the Company and is or was serving
as a fiduciary of, or otherwise rendering to, any employee benefit plan of or
relating to the Company. The indemnification obligation of the Company in our
certificate of incorporation is permitted under Section 145 of the General
Corporation Law of the State of Delaware.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, we
have been advised that in the opinion of the SEC, such indemnification is
against public policy as expressed in the Securities Act and is, therefore
unenforceable.
Item 25. Other Expenses of Issuance and Distribution.
The Registrant estimates that expenses payable by the Registrant in
connection with the offering described in this Registration Statement will be as
follows:
Total
-----
SEC registration fee (actual) .......................................$6,862.35
Accounting fees and expenses ........................................$5,000.00
Legal fees and expenses.............................................$36,000.00
Printing and engraving expenses......................................$1,000.00
Miscellaneous expenses...............................................$1,000.00
Item 26. Recent Sales of Unregistered Securities
The following table denotes the sales of securities made within the past
three years which were exempt from registration pursuant to Rule 504 of
Regulation D. All shares issued were shares of our Class A common stock and were
purchased for cash.
Name Date Issued No. of Shares
---- ----------- -------------
Toby Investments Group 9/18/97 133,000
Toby Investments Group 10/3/97 84,000
Toby Investments Group 10/8/97 84,000
Evenstone Ltd. 10/14/97 500,000
Toby Investments Group 10/27/97 87,500
Toby Investments Group 10/27/97 86,000
Toby Investments Group 10/31/97 110,000
Evenstone Ltd. 11/5/97 500,000
Toby Investments Group 12/1/97 242,000
II-1
<PAGE>
Name Date Issued No. of Shares
---- ----------- -------------
Evenstone Ltd. 12/2/97 402,680
Evenstone Ltd. 12/10/97 493,970
Toby Investments Group 12/12/97 300,000
James A. Cole, Jr. 12/12/97 242,718
Grail Ives Consultants 12/19/97 125,000
Grail Ives Consultants 1/6/98 125,000
Toby Investments Group 1/9/98 500,000
James A. Cole, Jr. 1/12/98 367,647
Toby Investments Group 1/20/98 250,000
Grail Ives Consultants 1/20/98 125,000
Toby Investments Group 2/12/98 250,000
Toby Investments Group 2/20/98 250,000
Toby Investments Group 3/6/98 250,000
Toby Investments Group 3/16/98 250,000
Toby Investments Group 3/23/98 250,000
Grail Ives Consultants 4/2/98 250,000
Grail Ives Consultants 4/8/98 250,000
Toby Investments Group 4/27/98 250,000
Toby Investments Group 5/1/98 1,000,000
Toby Investments Group 5/6/98 585,000
Hazlet Investors 5/6/98 1,085,000
U.S. Water Treatment Co. 5/8/98 500,000
Toby Investments Group 5/8/98 500,000
Arab Commerce Bank Ltd. 7/14/98 370,370
Lufeng Investments Ltd. 7/14/98 370,370
Swan Alley (Nominees) Ltd. 7/15/98 925,925
Millenium Holdings Group, Inc. 7/15/98 157,407
Neil Liebman 7/15/98 27,778
U.S. Water Treatment Co. 9/8/98 1,375,000
Toby Investments Group 9/8/98 1,375,000
RFG, Inc 12/2/98 300,000
Toby Investments Group 12/2/98 1,000,000
Toby Investments Group 12/8/98 300,000
H. Glenn Bagwell, Jr. 12/21/98 1,300,000
H. Glenn Bagwell, Jr. 1/4/99 1,000,000
Toby Investments Group 1/14/99 1,353,000
J V O Consulting, Inc. 1/19/99 285,715
H. Glenn Bagwell, Jr. 1/19/99 750,000
Bon Temps Roule, Inc. 1/22/99 285,715
H. Glenn Bagwell, Jr. 3/15/99 2,500,000
Toby Investments Group 3/18/99 500,000
H. Glenn Bagwell, Jr. 4/5/99 2,500,000
Dot Com Funding 6/2/99 981,299
H. Glenn Bagwell, Jr. 4/5/00 1,240,047
II-2
<PAGE>
Item 27. Exhibits.
(a) List of Exhibits
No. Description
--- -----------
3.1* Certificate of incorporation of Del Enterprises, Inc., filed October
20, 1989.
3.2 * Certificate of amendment to the certificate of incorporation of Del
Enterprises, Inc., filed March 14, 2000.
3.3 * Certificate of merger of International Voice Technologies, Inc. into
Visual Telephone International, Inc., filed May 21, 1999.
3.4 * Certificate of amendment to the certificate of incorporation of
iVoice.com, Inc., filed April 27, 2000.
3.5 * Bylaws of Del Enterprises, Inc.
4.1* Debenture No.1 issued by iVoice.com, Inc. for $50,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to AJW Partners, LLC on October
29, 1999.
4.2* Debenture No. 2 issued by iVoice.com, Inc. for $50,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to New Millenium Capital
Partners, LLC on October 29, 1999.
4.3* Debenture No. 3 issued by iVoice.com, Inc. for $50,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to AJW Partners, LLC on
October 29, 1999.
4.4* Debenture No. 4 issued by iVoice.com, Inc. for $50,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to AJW Partners, LLC on
October 29, 1999.
4.5* Debenture No. 5 issued by iVoice.com, Inc. for $50,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to Bank Insinger de
Beaufort, N.V. on October 29, 1999.
4.6* Debenture No. 6 issued by iVoice.com, Inc. for $100,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to New Millenium Capital
Partners, LLC on October 29, 1999.
4.7* Debenture No. 7 issued by iVoice.com, Inc. for $50,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to New Millenium Capital
Partners II, LLC on October 29, 1999.
4.8* Debenture No. 8 issued by iVoice.com, Inc. for $50,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to AJW Partners, LLC on
October 29, 1999.
4.9* Debenture No. 9 issued by iVoice.com, Inc. for $25,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to New Millenium Capital
Partners II, LLC on October 29, 1999.
4.10* Debenture No. 10 issued by iVoice.com, Inc. for $25,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to AJW Partners, LLC, on
October 29, 1999.
5.1* Opinion of Kramer Levin Naftalis & Frankel LLP.
10.1* iVoice.com, Inc. 1999 Option Stock Plan.
10.2* Investment Agreement dated August 17, 2000, between iVoice.com, Inc. and
Swartz Private Equity, LLC with exhibits.
II-3
<PAGE>
10.3* Registration rights agreement dated August 17, 2000, between
iVoice.com, Inc. and Swartz Private Equity, LLC.
10.4* Registration rights agreement by and among iVoice.com, Inc. and the
investor signatories thereto dated as of October 28, 1999.
10.5* Warrant to purchase 5,490,000 shares of iVoice.com, Inc. issued
to Swartz Private Equity, LLC, dated August 17, 2000.
11* Statements Regarding Computation of Per Share Earnings.
13.1 Form 10-SB12G (incorporated by reference and previously filed on February
4, 2000 with the Commission).
13.2 Form 10-QSB for the quarter ending March 31, 2000 (incorporated by
reference and previously filed with the Commission).
13.3 Form 10-QSB for the quarter ending June 30, 2000 (incorporated by
reference and previously filed with the Commission).
15 Letter on unaudited interim financial information (incorporated by
reference and previously filed with the Commission).
23.1* Consent of Merdinger, Fruchter, Rosen & Corso, P.C.
23.2* Consent of Kramer Levin Naftalis & Frankel LLP (contained in the opinion
filed as Exhibit 5.1 hereto).
24.1* Power of attorney (contained on the signature page of this Registration
Statement).
---------------------
* Filed herewith
Item 28. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
i. To include any prospectus required by Section 10(a)(3) of the
Securities Act;
ii. To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement(or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
iii. To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that clauses (i) and (ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by such
clauses is contained in periodic reports file with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement;
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof;
II-4
<PAGE>
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Matawan, New Jersey, on October 12, 2000.
IVOICE.COM, INC.
By: /s/ Jerome R. Mahoney
----------------------
Jerome R. Mahoney
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jerome R. Mahoney his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully for all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
/s/ Jerome R. Manhoney Chief Executive Officer, President October 12, 2000
---------------------- and Director
Jerome R. Mahoney
/s/ Kevin Whalen Chief Financial Officer October 12, 2000
----------------
Kevin Whalen
/s/ Robert Keenan Director of Research October 12, 2000
-----------------
Robert Keenan
/s/ Leo Pudlo Vice President of Operations October 12, 2000
-------------
Leo Pudlo
II-6
<PAGE>
EXHIBIT INDEX
No. Description
--- -----------
3.1* Certificate of incorporation of Del Enterprises, Inc., filed October
20, 1989.
3.2* Certificate of amendment to the certificate of incorporation of Del
Enterprises, Inc., filed March 14, 2000.
3.3* Certificate of merger of International Voice Technologies, Inc. into
Visual Telephone International, Inc., filed May 21, 1999.
3.4* Certificate of amendment to the certificate of incorporation of
iVoice.com, Inc., filed April 27, 2000.
3.5* Bylaws of Del Enterprises, Inc.
4.1* Debenture No.1 issued by iVoice.com, Inc. for $50,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to AJW Partners, LLC on October
29, 1999.
4.2* Debenture No. 2 issued by iVoice.com, Inc. for $50,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to New Millenium Capital
Partners, LLC on October 29, 1999.
4.3* Debenture No. 3 issued by iVoice.com, Inc. for $50,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to AJW Partners, LLC on
October 29, 1999.
4.4* Debenture No. 4 issued by iVoice.com, Inc. for $50,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to AJW Partners, LLC on
October 29, 1999.
4.5* Debenture No. 5 issued by iVoice.com, Inc. for $50,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to Bank Insinger de
Beaufort, N.V. on October 29, 1999.
4.6* Debenture No. 6 issued by iVoice.com, Inc. for $100,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to New Millenium Capital
Partners, LLC on October 29, 1999.
4.7* Debenture No. 7 issued by iVoice.com, Inc. for $50,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to New Millenium Capital
Partners II, LLC on October 29, 1999.
4.8* Debenture No. 8 issued by iVoice.com, Inc. for $50,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to AJW Partners, LLC on
October 29, 1999.
4.9* Debenture No. 9 issued by iVoice.com, Inc. for $25,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to New Millenium Capital
Partners II, LLC on October 29, 1999.
4.10* Debenture No. 10 issued by iVoice.com, Inc. for $25,000 in 12% Secured
Convertible Debenture Due December 1, 2000 to AJW Partners, LLC, on
October 29, 1999.
5.1* Opinion of Kramer Levin Naftalis & Frankel LLP.
10.1* iVoice.com, Inc. 1999 Option Stock Plan.
10.2* Investment Agreement dated August 17, 2000, between iVoice.com, Inc. and
Swartz Private Equity, LLC with exhibits.
<PAGE>
10.3* Registration rights agreement dated August 17, 2000, between
iVoice.com, Inc. and Swartz Private Equity, LLC.
10.4* Registration rights agreement by and among iVoice.com, Inc. and the
investor signatories thereto dated as of October 28, 1999.
10.5* Warrant to purchase 5,490,000 shares of iVoice.com, Inc. issued
to Swartz Private Equity, LLC, dated August 17, 2000.
11* Statements Regarding Computation of Per Share Earnings.
13.1 Form 10-SB12G (incorporated by reference and previously filed on February
4, 2000 with the Commission).
13.2 Form 10-QSB for the quarter ending March 31, 2000 (incorporated by
reference and previously filed with the Commission).
13.3 Form 10-QSB for the quarter ending June 30, 2000 (incorporated by
reference and previously filed with the Commission).
15 Letter on unaudited interim financial information (incorporated by
reference and previously filed with the Commission).
23.1* Consent of Merdinger, Fruchter, Rosen & Corso, P.C.
23.2* Consent of Kramer Levin Naftalis & Frankel LLP (contained in the opinion
filed as Exhibit 5.1 hereto).
24.1* Power of attorney (contained on the signature page of this Registration
Statement).
-------------------
* Filed herewith
