UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC20549
FORM 8-K
CURRENT REPORT
Pursuant to Section13 or15(d) of the Securities Exchange Act of1934
Date of Report (Date of earliest event reported) (April 24, 2000)
-------------------------
Ivoice.Com, inc.
(formerly ThirdCAI, INc.)
(Exact name of registrant as specified in its charter)
Delaware 000-29341 86-0974165
- ------------------------------------------------------------------------
(State of (Commission (I.R.S. Employer
organization) File Number) Identification No.)
750 Highway 34, Matawan, NJ 07747
- ---------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (732) 441-7700
<PAGE>
ITEM1. CHANGES IN CONTROL OF REGISTRANT
On April 24, 2000, a change in control of ThirdCAI, Inc., (the "Company")
occurred pursuant to the Agreement and Plan of Reorganization between
iVoice.com, Inc., a Delaware corporation ("IVOC") and the persons being the
owners of record of all of the issued and outstanding stock of ThirdCAI, Inc., a
Nevada corporation (the "Company"). IVOC acquired100% of the outstanding common
stock of the Company in exchange for $150,000 and 50,000 newly issued shares of
IVOC Class A common stock. The cash payment was drawn from the working capital
of IVOC.
ITEM2. ACQUISITION OR DISPOSITION OF ASSETS
On April 24, 2000, the Board of Directors of IVOC approved the purchase of
100% of the outstanding common stock of the Company in exchange for $150,000 and
50,000 newly issued shares of IVOC Class A common stock. The cash payment was
drawn from the working capital of IVOC. The acquisition was consummated pursuant
to the Agreement and Plan of Reorganization between iVoice.com, Inc., a Delaware
corporation and the persons being the owners of record of all of the issued and
outstanding stock of the Company.
The Company entered into a definitive agreement to acquire MaiSoft, Inc.
("MaiSoft"). As of the date of this filing, this transaction has not closed and
it is less than probable that this transaction will close. The Company will only
purchase certain software codes and MaiSoft will operate as a separate
non-related entity. (see "Notes to Financial Statements: Note 12 (a)" and
"Financial Statements for Maisoft")
ITEM5. OTHER
The Form10-SB for iVoice.com, Inc. has been included as an exhibit with this
Form 8-K.
ITEM6 RESIGNATIONS OF REGISTRANT'S DIRECTORS
On April 24,2000, Edmond L. Lonergran, the Company's sole officer and director
appointed Jerome R. Mahoney as a member of the board of directors.
On April 24,2000, the Company accepted the resignation of Edmond L. Lonergran as
a member of the board and the sole officer, effective immediately. Mr. Joel G.
Beagelman was appointed to fill the vacancy left by Mr. Lonergran's resignation.
Mr. Mahoney was also elected as Chief Executive Officer, Mr. Beagelman was also
appointed as Chief Financial Officer and Leo Pudio was also elected as
Vice-President of Operations.
ITEM7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
(b) Form 10-SB
(c) 6.1 Reorganization Agreement
(d) 6.2 Software/Hardware Agreement with Celpage
(e) 6.3 Agreement with Integrity Capital
(f) 6.3A Addendum to Agreement with Integrity Capital
(g) 6.4 Purchase Order with Municipal Traffic
(h) 6.5 Convertible Debenture
(i) 6.7 Second Supplement to Maisoft Agreement
(j) 6.8 Third Supplement to Maisoft Agreement
(k) 11 Legal Opinion of Glenn Bagwell
2
<PAGE>
INVOICE.COM, INC.
FINANCIAL STATEMENT
INDEX
Independent Auditors' Report F2
Balance Sheets F3
Statements of Operations F4
Statements of Stockholders' Equity F5-F6
Statements of Cash Flows F7-F8
Notes to Financial Statement F9-F26
-F1-
<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
- F2 -
<PAGE>
IVOICE.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1999 1998
----------- -----------
ASSETS
CURRENT ASSETS
<S> <C> <C>
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
=========== ===========
The accompanying notes are an integral part of the financial statement.
- F3 -
</TABLE>
<PAGE>
IVOICE.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended
December 31,
1999 1998
-----------------------------
<S> <C> <C>
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)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statement.
- F4 -
<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,
January1,1998, 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.
-F5-
<PAGE>
IVOICE.COM, INC.
STATEMENT OF STOCKHOLDERS' DEFICIENCY (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Additional Total
Paid in Accumulated Stockholders'
Capital Deficit Deficiency
----------- ----------- -----------
<S> <C> <C> <C>
Balance,
January1,1998, 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.
- F6 -
<PAGE>
IVOICE.COM, INC.
STATEMENTS OF CASH FLOWS
<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.
- F7 -
<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.
- F8 -
<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:
(i) 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).
(ii) Re-negotiate the terms relating to their 12% convertible
debentures (see Notes 7 and 12m).
- F9 -
<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)
(iii) 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).
(iv) Expand the company through acquisitions that will enable the
Company to integrate new technology with their existing
technology (see Note 12a).
(v) 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).
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.
- F10 -
<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)
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 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.
- F11 -
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 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:
- F12 -
<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)
As 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 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.
-F13-
<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)
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.
-F14-
<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.
-F15-
<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%
=======
-F16-
<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.
-F17-
<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;
o facilitating the preparation and filing of a Form 10 or
Form 10-SB registration statement with the Securities
and Exchange Commission (the "SEC"),
-F18-
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued)
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 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).
-F19-
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 9 - COMMON STOCK
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.
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).
-F20-
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 10 - STOCK OPTIONS (Continued)
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.
Options outstanding, except options under employee stock option plan
are as follows as of December 31,1999:
-F21-
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 10 - STOCK OPTIONS (Continued)
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 9,510,000 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
-F22-
<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.
-F23-
<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 $ .03 50,000 $ 0.11
Exercised -- $ -- $ --
Canceled -- $ -- (125,866) $ 0.11
---------- -------- ----------- --------
Balance, December 31, 1999 9,510,000 $ .03 655,185 $ 0.12
---------- -------- ----------- --------
Outstanding and Exercisable,
December 31, 1998 -- $ -- 731,051 $ 0.12
---------- -------- ----------- --------
Outstanding and Exercisable,
December 31, 1999 9,000,000$ 03 655,185 $ 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).
-F24-
<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
ii) $1,000,000 to $2,500,000 funded within 60 days of the
initial closing on May 10, 2000.
-F25-
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 12 - SUBSEQUENT EVENTS (Continued)
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.
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.
-F26-
<PAGE>
(b) Form 10-SB of iVoice.Com, Inc.
iVoice.com, Inc.
----------------
(Exact name of registrant as specified in its charter)
Delaware 86-0974165
- ------------------------------------------------------------------------
(State of organization) (I.R.S. Employer Identification No.)
750 Route 34, Matawan, NJ 07747
- -------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (732) 441-7700
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $0.01 per share
3
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS
Background
The Company, formerly Visual Telephone International, Inc., a Delaware
corporation, was incorporated in 1989, and is the successor to Booster
Corporation, a publicly traded Utah corporation, incorporated in 1985.
On February 5, 1988, Articles of Amendment were filed with the state of Utah
changing the name of the Company from Booster Corp. to "Kenneth Dion of
Scottsdale, Inc.".
On January 23, 1990, Articles of Amendment were filed with the state of Utah
changing the name of the Company from Kenneth Dion of Scottsdale, inc. to
"Select Housing Associates, Inc.".
On February 2, 1990, Select Housing Associates, Inc. (a Utah corporation) was
merged into Del Enterprises, Inc. (a Delaware corporation, which was
incorporated on October 20, 1989).
On November 12, 1991, the name of the corporation, Select Housing Associates,
Inc., was changed to "Select Resources, Inc." to differentiate it from the
wholly-owned California subsidiary, Select Housing Associates.
On March 25, 1996, Certificate of Amendment were filed with the state of
Delaware changing the name of the Company from Select Resources, Inc. to "Visual
Telephone of New Jersey, Inc.", and on September 2, 1996 to "Visual Telephone
International, Inc."
During 1995, the Company exchanged all of its Select Housing shares for 100% of
the shares of Visual Telephone of New Jersey as well as changed its name to
Visual Telephone of New Jersey. This name change was pursuant to a stock
exchange agreement. On February 26, 1996, the Company entered into a Stock
Exchange Agreement with Visual Telephone of NJ., Inc. ("Visual Telephone"), a
privately held New Jersey corporation, its shareholders, and three of the
principle shareholders of the Company. The purpose of the agreement was to
acquire all of the outstanding shares of Visual Telephone and to spin-off Select
Housing Associates, Inc. ("SHA"), a wholly owned subsidiary of the Company. As
set forth in the agreement, the Company agreed to issue 5,611,000 shares to one
of the two shareholders of Visual Telephone and to transfer one-half of the
shares of SHA owned by the Company to Joel Beagelman, the other shareholder of
Visual Telephone, in return for all of the outstanding shares of Visual
Telephone. In addition, the Company agreed to transfer the other half of the
shares of SHA owned by the Company to Gary W. Pomeroy and Brad W. Pomeroy in
return for the cancellation of 1,111,000 shares of common stock of the Company
owned by such individuals. Mr. Beagelman and the Pomeroys were directors of the
Company at the time of the transaction. On February 26, 1996, the Stock Exchange
Agreement was approved by the consent of shareholders of the Company owning a
majority of the outstanding shares of common stock of the Company. Visual
telephone would be considered a public shell (explanation to follow).
In July 1996, the Company acquired Communications Research Inc. ("CRI"). On May
21, 1999, International Voice Technologies, Corp. ("IVT") a Delaware
corporation, merged into the Company. Simultaneous with the merger with IVT,
Communications Research, Inc. ("CRI") was spun off and the name of the Company,
Visual Telephone International, Inc., was changed to iVoice.com, Inc.
Additionaly, the Company revised its trading symbol on the NASD OTC Bulletin
Board to "IVOC". In consideration for merging IVT into the Company, the sole
shareholder of IVT, Jerome Mahoney, received:
a. 10,000,000 shares of Class A Common Stock issued, and
4
<PAGE>
b. 700,000 shares of Class B Common Stock. (see "Certain Transactions
and Business Relationships").
c. The firm of Toby Investments consulted on this transaction and was
awarded 2,000,000 shares of Common Stock for his efforts.
During April 2000, the Company issued 37,500 shares of its Class A common stock
for services rendered to Robert Keenan, who received 25,000 shares and to Ken
Glynn, Esq. , who received 12,500 shares. These shares were exempt from the
registration requirements of Section 5 of the Securities Exchange Act of 1934,
as amended, (the "Act") as provided in Section 4(2) of that Act.
During April 2000, the Company sold 1,750,000 shares of its Class A common
stock for approximately $750,000 to Gaston Coldwater, LLC. These shares were
exempt from registration pursuant to Rule 504 of Regulation D.
CRI is currently in the process of filing a registration statement to provide
for the proposed distribution of CRI shares to Visual Telephone shareholders.
The Visual Telephone shareholders are to receive one share of CRI for every four
shares of Visual shares owned. The principal shareholders, officers and
directors of Visual Telephone were Carl Ceragno and Joel Beagelman. Mr. Ceragno
remained with CRI and Mr. Beagelman obtained a consulting agreement with
iVoice.com.
The merger between IVT and Visual Telephone was accounted for in its financial
statements as a public shell merger. In a public shell merger the shareholders
of the operating company (in this case IVT) become the majority owners of the
shell company (Visual Telephone), and the shareholders of the public shell
company become minority shareholders.
The Company's present management team includes:
1. Jerome R. Mahoney President and Chief Executive Officer (1)
2. Joel G. Beagelman Vice President and Chief Financial Officer (1)
3. Leo Pudio Vice President of Operations.
(1) Serves as a member of the Board of Directors
Mr. Beagelman has a consulting agreement with the Company. The consulting
agreement has a five year term with compensation of $104,000 per year. The
Company granted Mr. Beagelman a stock option for the right to purchase up to
9,000,000 shares of Class A common stock. Mr. Beagleman also received 50,000
shares of IntermediaNet Common Stock in lieu of services provided related to the
spin-off of Communications Research, Inc. and the public shell merger of IVT.
The 50,000 shares of IntermedialNet was the result of a claim that arose prior
to the merger between IVT and Visual Telephone where Visual Telephone purchased
a license from IntermediaNet to use its video conferencing equipment. This
equipment did not meet the standards as promoted by IntermediaNet thus the
Company cancelled the agreement and asked for restitution for the time and
monies extended. The claim was settled by IntermediaNet giving Visual Telephone
50,000 shares of its stock. This stock as of May 1999, had an estimated value of
less than $5,000.
The Company's principal offices and facilities are located at 750 Highway 34,
Matawan, NJ 07747 and its telephone number is (732) 441-7000.
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iVoice.com. Inc., (NASDAQ BB: "IVOC"), designs, manufactures and markets voice
and computer technology communications systems for small and mid-size business
and corporate departments. The Company provides interactive voice response (IVR)
products that allow information in PC databases to be accessed from a standard
touch-tone telephone. The Company sells its products through dealer and reseller
channels, as well as through OEM agreements with telecommunication and
networking companies.
The Company's product strategy emphasizes the development of software as opposed
to hardware, and the use of standard PC-related hardware components in its
products, in part to limit its manufacturing activity.
The flagship product of the Company called INSIGHT, is a software development
toolkit providing 32-bit interactive voice response (IVR) capabilities for the
Windows NT platform (complete with a graphical user interface ("GUI")). INSIGHT
is the current generation of the Company's product IVR (interactive voice
response) Tools enabling callers to query and modify database information over
their touch-tone telephone. Phone callers use their touch-tone pad to input
requests, such as ordering a product, obtaining a work schedule, or requesting
account balance information, and the database "speaks" information back to the
caller. IVR also enables customers and businesses to conduct transactions 24
hours a day, seven days a week. INSIGHT utilizes open development languages
(i.e. Microsoft's Visual Basic and Visual FoxPro, Delphi, Access and C++),
database application (i.e. Oracle, Sybase, Btrieve and OBDC) and platforms such
as Windows NT.
The Company also markets several call-processing features. One such feature is a
Unified Messaging System, which is an inbox for all messages. Using Microsoft
Outlook or a Web browser, messages are made available from anywhere in the world
and can be reviewed and acted upon. With this system customers will have access
to all voice, fax and e-mail messages through their PC or the telephone Unified
Messaging System inbox. E-mail can be retrieved over the phone using its
text-to-speech capabilities and responded to with a voice message. Faxes can
also be retrieved over the phone and re-directed to any fax machine from the
phone.
Other call-processing features that the Company markets are Voice Mail,
Automated Attendant (allows a caller to store voice messages and to reply to a
computer thus providing the ability to conduct a dialogue with a person without
having to be on the same line at the same time), Interactive Voice Response
(allows a caller to obtain information in voice form from a local or non-local
database), Text to Speech (converts any computer readable text into intelligible
sounding speech) and Speech Recognition (the process by which the PC translates
spoken words into commands).
Recent Developments
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, Jerry mahoney, 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 of the assets of the Company would be
transferred to Communications Research, Inc., ("CRI"), a wholly owned subsidiary
of Visual. 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.
On April 24, 2000, iVoice.com, Inc. (the "Company") entered into an Agreement
and Plan of Reorganization with all the shareholders of record of all the issued
and outstanding shares of ThirdCAI ("CAI"). The Company acquired all the issued
and outstanding shares of CAI in exchange for US$150,000.00, the finder's fee,
which was paid to Corporate Architect, Inc., and 50,000 shares of the Company's
Class A voting common stock. The fee was negotiated between the Company and CAI.
The shareholders of the Company voted in favor of the transaction. The President
of the Company, Jerry Mahoney holds 80,450,000 votes out of 100,431,061 which is
currently issued and outstanding.
As of April 24, 2000, there were 3 record shareholders of the CAI's issued and
outstanding stock, stock, Carl P. Ranno, Kenneth Lew, and Corporate Architects,
Inc., of which the sole officer and director of CAI, Edmond L. Lonergran, was
also the President.
On February 29, 2000, the Company entered into an agreement with the Municipal
Traffic Department of Shelby County, Tennnessee, which is evidenced by a
purchase order. Under the terms the Company will supply Windows NT IVR Hardware
and Software considerations in exchange for the quoted price of $33,199.00.
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Product and Services
The Company possesses technology of PC/Computer Telephony Integrated ("CTI") -
based call processing systems. The Company's software products enable
small-to-medium sized businesses and offices to communicate by integrating their
traditional office telephone systems with voice mail, automated attendant and
interactive voice functions.
All the Company's products are designed to be user friendly with features that
can be readily used without special training or manuals. The products run on
standard open-architecture PC platforms. Thus, off-the-shelf products such as
Microsoft Windows NT Server/Workstation operating systems and hardware
peripheral items are compatible with iVoice.com's line of products.
The Company emphasizes the development of software and uses standard PC-related
hardware components in its products. The Company's manufacturing operations
consist of final assembly and quality control testing of materials,
subassemblies and systems. Third party vendors are used for hardware components
such as PCs, circuitboards, application cards, faxboards and voiceboards. The
Company obtains voiceboards from Natural Micro Systems and Dialogic, both
domestic suppliers.
INSIGHT is the Company's flagship product. This is a software development
toolkit which provides 32-bit interactive voice response for the Windows NT
platform plus a graphical user interface ("GUI"). INSIGHT enables callers to
query and modify database information over their touch-tone telephone. Here
callers use their touch-tone pad to input requests, such as ordering a product,
obtaining a work schedule, or requesting account balance information upon which
the database "speaks" information back to the caller. INSIGHT includes over 500
built-in voice prompts, which enable users to easily incorporate telephony into
their database applications.
Some of the features and functions that INSIGHT provides are as follows:
1. Windows NT based INSIGHT supports the windows NT platform, a
powerful, reliable operating environment that allows for numerous
advanced interactive voice response ("IVR") applications.
2. MICROSOFT NT based INSIGHT supports the MICROSOFT NT platform. The
Company has updated this system to incorporate an Internet Access
Tool, which can be either connected to the IVR system or ran as a
standalone. This system also has a Graphical User Interface. This
application also provides for Internet access to the system.
Once logged onto the Internet, access to the IVR system is accomplished by
clicking on a hypertext link for your 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 are also available with the above
platforms:
1. IVR: Permits 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.
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2. Speech Recognition: The process by which the PC translates spoken
words into commands. You may now speak to all of your Voice Mail or
IVR Applications.
3. Unified Messaging: Unified messaging is a unified inbox application
for windows NT auto attendant/voice mail system and Windows NT
Interactive Voice Response ("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.
4. IVR/WEB Applications: With the INTERNET access for 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.
5. Voice Mail: Voice mail 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.
6. Speech Enabled Auto attendant: The Automated attendant allows a
caller to direct a computer to switch the call to a telephone
extension different from the one dialed, without the manual
intervention of an operator .
New Products
The Company is presently focusing on upgrading and enhancing existing products,
thus no new products are scheduled to be released other than upgraded products
in the immediate future.
1. Full toolkit from Entropic/Microsoft agreement, enabling this software to
be dialog based, have an interactive understanding of a sentence.
2. ACD call center applications.
3. PBX telephone system development, with IP telephony.
Marketing
The Company's marketing strategy is to focus getting its product in front of
small-to-medium sized offices emphasizing that their products are user friendly,
easy-to-use PC-based processing products that offer integrated access to a broad
range of communication avenues with other people and information sources. The
Company's strategy is built around the following five basic elements:
1. Emphasize Software, Not Hardware- the Company concentrates its
development efforts on software rather than on the design or
modification of hardware. By emphasizing software solutions to meet
its customer's needs, the Company can create the most value of its
products.
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2. Use Standard, Microsoft Windows NT Based Architecture, Open Systems
and Hardware- The Company's products use standard, open-architecture
PC platforms and operating systems rather than proprietary computer
hardware and operating systems. As a result, the Company can quickly
adopt to new PC-based technologies, leveraging the substantial
investments made by third parties in developing these new
technologies for the PC environment. In addition, the user of
available hardware components and software minimizes the Company's
manufacturing activity which reduces the overall cost of its
products.
3. Focus on Small -to-Medium sized Offices- The Company's products are
designed for use by small to medium sized businesses and offices in
a wide range of markets, including manufacturing, retail, service,
healthcare and government settings. Here the Company's products
offer many of the features that are available by the large,
proprietary call processing systems, but at a price that is more
affordable to its target market.
4. Make Products that are Easy to Install, Modify and Use- the Company
strives to maximize ease of use for the installer, the systems
manager and the user- This is accomplished by designing the products
to be "people - oriented," by having product features that can be
used without the need for special training or manuals. One examples
of this user oriented philosophy is exhibited in the Company's voice
mail product which has user prompts that encourage conversation
between callers and subscriber, plus the software has simplified
installation screens and menus for ease of installation.
5. Minimize distribution Overhead- The Company is able to achieve broad
market coverage domestically via a direct sales force, a nationwide
network of independent telephone system dealers and OEM
representatives. This structure both minimizes the Company's selling
overhead and maximizes its product exposure, plus making available
funds for product development
The Company's method to get product in front of its target market is through
four sales people, two telemarketers and several independent sales reps. These
people contact the end users directly. The strategy is to increase the direct
sales force and establish more satellite locations to better serve clients. In
addition the Company will expand product awareness through displaying the
products at show/conventions and through literature.
The Company is unsure as to the timing and size and results fo the marketing
efforts that will be necessary in order for the Company to become profitable.
Customers
As covered in the marketing section, the Company's customers are small-to-large
sized offices.
The Company is not dependant on any one or few customers.
Fee Structure
Unless special arrangements are made, the Company expects 50% down on any
product purchased with the Balance upon completion of installation. The Company
accepts company checks or Visa/Mastercard.
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Business Partners
The Company has agreements with Nuance and Entropic (owned by Microsoft),
whereby these companies have released their Interactive Voice Response ("IVR")
proprietary codes for evaluation by the Company in achieve a tighter integration
of IVR not their phone systems.
Recent News Releases
MaiSoft, Inc.
On February 15, 2000 a letter of intent ("LOI") was signed whereby the Company
would acquire Maisoft Inc., of Laguna Hills, CA. Maisoft Inc., is a developer,
manufacturer and supports open system-based advanced computer telephony
products, specializing in voice processing and data processing servers known as
unified messaging. The Maisoft "Office Messenger" server for Windows NT was
awarded the "Product of the Year" for 1999 by CTI Magazine (now "TMC
Communications Solutions Magazine").
On April 17, 2000, the Company entered into an acquisition agreement with
Maisoft. Under the terms of the agreement, the Company agreed to purchase,
accept and acquire 100% of the issued and issued and outstanding, goodwill of
and all right, title and interest of Maisoft. As consideration, the Company will
pay $1,000,000.00 in certifiable funds to the two principal shareholders of
Maisoft. The Company also will pay $6,000,000.00 in the Company's common stock,
which would be subject to lock up from trading. The value of such stocks would
be the lowest price of the Company's stock as of March 3, 2000.
On April 20, 2000, the Company entered into a Second Supplemental Agreement to
Acquisition Agreement with Maisoft. Under the terms of the supplemental
agreement, the POP3 integration with direct connection to an ISP (POP3) is to be
completed and delivered on June 1, 2000. On May 25, 2000, Maisoft is to put the
source code in escrow. In consideration of these terms, the Company will place
$1,000,000.00 and 2,400,000 shares of common stock in escrow.
On April 27, 2000, the Company entered into a Third Supplemental Agreement to
Acquisition Agreement with Maisoft due to the fact that the Company could not
meet the terms of the above-referenced agreement by the specified time. Under
the terms of the third supplemental agreement, Maisoft will only sell its
"Unified Messaging Source Code" including "MAPI" and "POP3" to the Company for
$400,000. The Company will not supply any funds for salaries, rent, etc. until
May 25, 2000. The Company has notified Maisoft that it can only purchase the
source codes as discussed in the Third Supplemental Agreeement. There has been
no definitive agreement signed as of the date of this submission, but it is
anticipated that the Company shall execute said agreement with Maisoft, Inc.
Michaels Stores, Inc.
On January 27, 2000, iVoice.com announced that it was in negotiations to receive
an order to purchase a speech-enabled locator system. The development is
complete and this system will be installed sometime mid-April. This system will
enable Michaels'customers and prospects to locate the store nearest to them by
simply saying their zip code through their phone.
411 Technologies, LLC
On February 3, 2000, iVoice announced that it received a contract to develop
software to access Internet by dialing a toll-free number. The system is
currently under development with an estimated installation date in the May to
June 2000 timeframe. This system will allow telephone users voice access to the
Internet obtaining such information as stock quotes, news and weather, plus
additional sites as they become available.
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Panam Wireless, Inc, d.b.a CELPAGE
On February 8, 2000, iVoice announced that it received a contract to provide,
install and maintain the hardware and software of the Celpage system currently
under development. The system is scheduled to be delivered in April or May 2000.
This Voice Processing Platform can handle over 100,000 subscribers at any given
time.
On February 9, 2000, the Company entered into a Software/Hardware Maintenance
Agreement with Panam Wireless, Inc. d/b/a CELPAGE (CELPAGE). Under the terms of
the agreement, the Company will provide the maintenance of the Software and
Hardware (Application Generator, Database and Dialogic Boards) for CELPAGE at an
annual rate of 10% of total cost.
Sales by Geographic Area
North East - 70%
Approximately 30% elsewhere in the continental USA.
Competition
The call-processing industry is highly competitive, especially the segment of
the industry that supplies call-processing systems to small and medium-sized
business offices. The Company believes that the competitive pressures it faces
will only intensify, which is based on the recent new entrants into the market
coupled by the stronger presence of competition via the merging of smaller
companies. This level of competition puts pressure on product pricing and thus
margins.
Presently the Company's principal competitors fall into two categories: 1)
telephone equipment manufacturers that offer their own call-processing systems
or offer their systems as private labels (for example, AT&T, Rolm Co. and
Toshiba America Information Systems, Inc.), and 2) independent call-processing
system manufactures, whose products integrate with multiple telephone systems
and either are based on proprietary hardware (for example, Centigram
communication corporation, Octel Communications Corp., and VMX, Inc.) or are PC
based similar to the Company's products (for example, Applied Voice Technologies
Inc., Microlog corporation and Active Voice corporation).
Currently 90% of the Company's sales have been through its direct sales and 10%
through its dealer channel. The Company in facing the competitive pressure,
emphasizes product pricing, system features, ease of product use, installation
technical and sales support and product reliability.
Suppliers
Dialogic, Bicom, iTox (a DFI company) and Ingram-Micro.
Government Regulation or Government Approval
Through our strategic alliance with Engineering Professional Associates (EPS),
their GSA Schedule is utilized.
Research and Development
The Company's research and development efforts focus on enhancing its existing
product line, focusing on technological enhancements coupled with the ease of
use and reliability of its products. Note that in 1999 there
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were no funds expended in R&D. The Company has been focusing its efforts on
business development and intends to renew its R&D program in the year 2000.
Patents, Trademarks and Licenses
The Company possesses Licensing Agreements with Nuance Com., Entropic (owned by
Microsoft) and Lemout & Hauspie (L & H)
Employees
The Company employs 13 full time employees. None of the employees is represented
by a labor organization and the Company is not a party to any collective
bargaining agreements.
Risk Factors
The Company's business is subject to numerous risk factors, including the
following:
Limited History of Operations:
As a company with limited operating history, it will be subject to all of the
risks, uncertainties and lack of standing generally associated with new
enterprises. Despite the fact that the Company's Chief Executive Officer has
substantial experience in dealing with the target market, there can be
absolutely no assurance that the Company will be able to survive in the highly
competitive and rapidly changing environment of the call processing arena. See
"Business".
Limited Working Capital:
The Company currently has limited working capital. Even if the Company
successfully puts its marketing, research and development, manufacturing and
sales programs in order, it is possible that it will require additional funds to
enable it to implement its advertising and marketing programs and to expand into
other available market segments. See "Financial Statements".
No Restrictions of the Activities of the Company:
Neither the Common Shares nor any other agreement restricts the activities of
the Company with respect to other borrowings or the use of its assets or the
future income to secure Company debts or borrowings for any purpose, including
the acquisition of assets of any nature.
Dividend Policy - No Dividends in Immediate Future :
The Company has no plans to pay any dividends in the near future. The Company
intends to retain all earnings, if any, in the foreseeable future, for use in
its business operations.
Continuing Operating Losses:
iVoice.com has recently generated operating losses. During the fiscal year ended
December 31, 1998, the Company had a net loss of $37,692 on $626,486 of revenue
and for year ended December 31, 1999 a net loss of $6,054,364 on revenue of
$776,773. There can be no assurance that the Company will generate operating
income or net income in the future.
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Thus, the Company is an operating entity that has a continuing need for
additional capital for use in its present business activities and proposed
expansion.
Unpredictability of Future Revenues:
As a result of the Company's limited operating history and the emerging nature
of the voice communications industry and the Internet, the Company is unable to
forecast its expenses and revenues accurately. The Company believes that due
primarily to the relatively brief time call processing has been available to the
general public, there has not yet been developed, implemented and demonstrated a
commercially viable business model from which to successfully operate any form
of voice communications and Internet-based product and/or service business. The
Company's current and future estimated expense levels are based largely on its
estimates of future revenues and may increase because many of its operating
expenses are either fixed, such as rent for office space, or subject to likely
increases. Few, if any, of the Company's operating expenses can be quickly or
easily reduced, such as the laying off of personnel, in a manner which would not
cause a material adverse effect to the Company's business, financial condition
and operating results. In addition, the Company may be unable to adjust spending
in a timely manner to compensate for any unexpected expenditures; and a
shortfall in actual revenues as compared to estimated revenues would have an
immediate material adverse effect on the Company's business, financial condition
and operating results.
Reliance on Management. The success of the Company depends significantly upon
the efforts of the Chief Executive Officer, Jerome R. Mahoney. See "Management".
The loss of services of Mr. Mahoney would likely have a materially adverse
effect on the business and the future prospects of the Company. See "Management
- - Employment Agreement." .
Jerome R. Mahoney, Chief Executive Officer and Director, entered into a five (5)
year employment agreement with the Company on April 28, 1999. The Agreement
called a base salary of $180,000 per year which will be increased by 10%
annually. If Mr. Mahoney terminated by the Company without cause, he will be
entitled to full base salary through the Date of Termination at the rate equal
to the greater of the rate in effect on the date prior to the Change Control and
the rate in effect at the time Notice of Termination is given, plus all other
amounts to which the Executive is entitled under any compensation plan of the
Company in effect on the date. See "Management - Employment Agreement".
Supermajority Voting Control Rights. Jerome Mahoney, CEO, has super majority
voting control rights through ownership of 700,000 shares of Class B stock,
which provides for 100 votes per share or 70,000,000 votes.
Competition. The call-processing industry in general is highly competitive, and
the Company believes that the competitive pressures it faces are likely to
intensify. The segment of the industry that supplies call-processing systems to
small and medium-sized business offices is also extremely competitive, having
endured intense price competition and pressure on margins on the past few years.
Technical Change and Product Obsolescence. The ability of the Company to compete
successfully in the call-processing market that is characterized by rapidly
changing technology will depend in part upon its ability to continually advance
its technology and to develop new applications and designs for its products. See
"Business."
Y2K. The Company did not experience Y2K problems with its systems nor with any
of its vendors or clients systems.
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Forward Looking Statements
This registration statement contains forward-looking statements that are based
on the Company's beliefs as well as assumptions made by and information
currently available to the Company. When used in this registration statement,
the words "believe," "endeavor," "expect," "anticipate," "estimate," "intends,"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks, uncertainties and assumptions,
including, without limitation, the risks and uncertainties concerning
technological changes, increased competition, and general economic conditions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated, or projected. The Company cautions potential
investors not to place undue reliance on any such forward-looking statements,
all of which speak only as of the date made.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Fiscal Year Ended December 31, 1999 Versus Year Ended December 31, 1998
Sales for the year ended December 31, 1999 were $776,773, an increase of
$150,287 or 24% over the prior years sales of $626,486. The increase was a
result of increased marketing efforts.
Unless special arrangements are made, the Company receives 50% of the contract
as a down payment on any product purchased with the balance due upon completion
of the installation. The Company recognizes its revenue using the percentage of
completion method. As of December 31, 1999, the Company has an additional
$567,300 of contracts for which work has not yet been started. These contracts
will begin in January 2000. The Company accepts company checks or
Visa/Mastercard. The increase in receivable is due to the recording of two large
sales in December 1999.
The Company's gross profit for the year ended December 31, 1999 increased
$252,471 or 103% December 31, 1998 to $496,456 from $243,985 in 1998. The
Company's gross margin percentage for the twelve months ended December 31, 1999
was 63.9% versus 38.9% for the prior year. This represents a 25% increase over
the gross profit percentage recorded for the same period prior year. This
increase is a result of changes in some of the components included in the
systems sold where the components themselves had a lower cost then the replaced
component thus increasing the margin of the overall system. The rate should
remain stable unless a similar situation with components should arise again or
more products with different margins are added to the product line.
Operating expenses increased from $281,677 for the year ended December 31, 1998
to $6,514,361 for the year ended December 31, 1999 or an increase of $6,232,684.
This increase is a result of increase of $940,424 in general and administrative
expenses attributable to commissions and salaries to the Company's executives,
an increase of $135,022 in selling expenses , an increase in depreciation of
$68,732, a onetime charge of $31,000 for obsolete inventory. Plus now recurring
expenses totaling $5,028,000, which consist of a $4,800,000 legal settlement
charge and $228,000 in merger costs.
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The net loss from operations for the year ending December 31, 1999 was
$6,017,905 compared to $37,692 for the year ended December 31, 1998 or an
increase of $5,980,213.
Other expense of $1,162,405 are non-recurring expenses consisting of $500,000
legal settlement charge, $427,113 in outside services and $228,000 in merger
costs
Liquidity and Capital Resources
The Company is funding its current operations principally from its operations.
However, the Company is operating on a negative cash flow basis and anticipates
it will require additional financing during the final quarter of 2000. To
achieve the Company's growth potential it will requires additional amounts of
capital. There is no assurance that the Company can obtain any such financing on
terms that will enable the Company to implement its long-term growth strategy.
According, the Company's viability for the foreseeable future is questionable if
additional funding is not obtained. The Company will attempt to obtain such
funds through venture capital, or other private or public financing. Currently,
the Company is not seeking funding. The Company has started to reduce spending
in order to cover day to day operations as best as possible with current cash
flow. However, there can be no assurance that such funds will be available, or
if available, the cost of such funds to the Company.
Material Commitments -
Jerry Mahoney. President, Chairman of the Board and Chief Executive Officer
andChairman. The Company entered into an employment agreement with Mr. Mahoney
on April 28, 1999 that commenced on May 1, 1999 and terminates on April 30,
2004. It provides for a base salary of $180,000 per year which will be increased
by 10% annually.
Leo Pudio. Vice President of Operation. On June 2, 1999, the Company entered
into a three (3) year employment agreement with Mr. Pudio. Thae agreement called
for a base salary of $80,000 with annual increases. In addition, Mr. Pudio was
granted stock options to purchase 140,000 shares of class A common stock of the
Company at $0.35 per share. In addition within sixty (60) days for signing the
agreement, Mr. Pudil was granted 250,000 shares the Company's Class A common
stock.
Joel G. Beagelman. Secretary and Treasurer and Chief Financial Officer. On May
21, 1999 the Company entered into a five (5) year consulting agreement with Mr.
Beagelman. The agreement for a fee of $2,000 per week subject to certain
performance criteria. A subsequent amendment to this agreement granted Mr.
Beagelman stock options for the right to purchae up to 9,000,000 shares of the
Company's Class A common stock. This stock option was exercisable immediately.
Asset Management
The Company manages its inventory by ordering specific hardware and software for
just in time delivery for each installation. The hardware is received checked
modified and shipped to each jurisdiction for installation within a short period
of time. Therefore, the Company usually maintains in inventory only the
equipment needed for programming and testing, Inventory may also include the
hardware needed for a customer's installation that may already be shipped. For
the year ended December 31, 1999, the inventory balance was a nominal $10,140.
As of December 31, 1999 most of the Company's receivable are due under contracts
with various customers. Accounts receivable as of December 31, 1999 was $31,726.
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General Risk Factors Affecting Results
Rapid technological change as well as changes in customer requirements and
references characterize the software industry. The Company believes that its
future quarterly results will depend in large part upon its ability to offer
products that compete favorably with respect to price, product reliability,
performance, range of useful features ease of use, continuing product
enhancements, reputation, support and training. Further, increased competition
in the market for call processing systems could have a negative effect on the
Company's results of operations.
Due to the factors noted above, the Company's future earnings and stock price
may be subject to significant volatility, particularly on a quarterly basis. Any
shortfall in revenues or earnings could have an immediate and significant
adverse effect on the trading price of the Company's stock and warrants.
ITEM 3. DESCRIPTION OF PROPERTY.
On March 15, 2000 the Company entered into a lease for approximately 8,000
square feet of office space to house its corporate headquarters and research
facilities. The office is located at 750 Highway 34, Matawan, New Jersey 07747.
The term of the lease is for two years with a monthly rental of $11,000.
On May 21, 1999 the Company also entered into a lease for 1,500 square feet for
one and one half years from Mejor Angora, L.L.C., at 282 Grand Avenue,
Englewood, New Jersey at an annual rental of $19,800 per year with certain
escalations. The Company also uses this space for its first "satellite" sales
office.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth each person known to the Company, as of May 1,
2000, to be a beneficial owner of five percent (5%) or more of the Company's
common stock, by the Company's directors individually, and by all of the
Company's directors and executive officers as a group. Except as noted, each
person has sole voting and investment power with respect to the shares shown.
Shares
Name/Address Beneficially Percentage
Title of Class of Owner Owned Ownership
Common Jerome R. Mahoney 80,450,000(1) 80.1%
750 Highway 34
Matawan, NJ 07747
Common Joel Beagelman 8,500,000(2) 8.5%
750 Highway 34
Matawan, NJ 07747
Common Leo Pudio 250,000 .25%
750 Highway 34
Matawan, NJ 07747
Common Toby Investments: 2,981,299 3%
Principal: Barry Kobrin
479 Route 79
Morganville, NJ 07751
Common All Officers & Directors 89,200,000 63.5%
As a Group (3 individuals)
16
<PAGE>
1. Includes 450,000 Class A common stock shares held by his minor children
and 700,000 Class B common stock shares held by Mr. Mahoney that may vote
an equivalent of 70,000,000 Class A common stock shares and may be
converted into a like number of Class A common stock shares.
2. Includes 100,000 held by his daughter.
There are no arrangements known to the Company that at a later date may result
in a change in control of the Company.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The members of the Board of Directors of the Company serve until the next annual
meeting of the stockholders, or until their successors have been elected. The
officers serve at the pleasure of the Board of Directors.
There are no agreements 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.
Information as to the directors and executive officers of the Company is as
follows:
Name Age Position
Jerome R. Mahoney 39 President, Chairman of the Board,
Chief Executive Officer and Director
Joel G. Beagelman 57 Chief Financial Officer
Secretary/Treasurer/Director
Leo Pudio 50 Vice-President of Operations
Jerome R. Mahoney; Chief Executive Officer/President/Director
Jerome R. Mahoney, has been Chief Executive Officer and a director of the
Company since May 21, 1999. Prior to joining the Company, Mr. Mahoney founded
Voice Express, Inc. a New York Company, in 1989. Voice Express sold voice mail
systems, telephone system service contracts and installed these systems. Mr.
Mahoney sold Voice Express Systems in 1993 and joined Executive Information
Systems where he was until 1988, at which time he was the Director of National
Accounts. From 1993-1997 Mr. Mahoney was President of IVS Corp., and on December
17, 1997 he established International Voice Technologies (IVT), which merged
with the Company on May 21, 1999. Mr. Mahoney received a B.A. in finance and
marketing from Fairleigh Dickinson University, Rutherford, N.J. in 1983.
Joel G. Beagelman; Chief Financial Officer/Secretary/Treasurer/Director
Joel G. Beagelman has been the Chief Financial Officer for the Company since May
21, 1999 and a Director of the Company since 1998. From 1963 through 1972, Mr.
Beagleman was a Sales Manager and Designer for Nationwide Corrugated Container
and from 1972 through 1978, Mr. Beagelman was the founder and president of
National Fiber Corp., a broker of corrugated products and point-of-purchase
displays. Mr. Beagleman sold National Fiber in 1978 and acted as president of
Fast-Pak Container Corporation from 1979 through 1995. From 1995 to May 21,1999
Mr. Beagelman actively ran Visual Telephone International as President. Mr.
Beagelman received an AAS degree in Business Technology in 1968 from the City
University of New York and in 1987, a BA degree in Economics, Law and Labor
Studies from the William Paterson University.
17
<PAGE>
Leo Pudio; Vice-President of Operations
Leo Pudio. has been Vice President of Operations since June, 1999. Mr. Pudio was
formerly Vice President of Computer Associates, along with 10 years of
consulting experience in the telephony and computer industry.
There is no family relationship between any of the officers and directors of the
Company. The Company's Board of Directors has not established any committees.
Conflicts of Interest
The Company does not currently have a right of first refusal pertaining to
opportunities that come to management's attention insofar as such opportunities
may relate to the Company's proposed business operations.
The officers and directors are, so long as they are officers or directors of the
Company, subject to the restriction that all opportunities contemplated by the
Company's plan of operation which come to their attention, either in the
performance of their duties or in any other manner, will be considered
opportunities of, and be made available to the Company and the companies that
they are affiliated with on an equal basis. A breach of this requirement will be
a breach of the fiduciary duties of the officer or director. Subject to the next
paragraph, if a situation arises in which more than one company desires to merge
with or acquire that target company and the principals of the proposed target
company have no preference as to which company will merge or acquire such target
company, the company of which the President first became an officer and director
will be entitled to proceed with the transaction. Except as set forth above, the
Company has not adopted any other conflict of interest policy with respect to
such transactions.
Investment Company Act of 1940
Although the Company will be subject to regulation under the Securities Act of
1933 and the Securities Exchange Act of 1934, management believes the Company
will not be subject to regulation under the Investment Company Act of 1940
insofar as the Company will not be engaged in the business of investing or
trading in securities. In the event the Company engages in business combinations
that result in the Company holding passive investment interests in a number of
entities, the Company could be subject to regulation under the Investment
Company Act of 1940. In such event, the Company would be required to register as
an investment company and could be expected to incur significant registration
and compliance costs. The Company has obtained no formal determination from the
Securities and Exchange Commission as to the status of the Company under the
Investment Company Act of 1940 and, consequently, any violation of such Act
would subject the Company to material adverse consequences.
ITEM 6. EXECUTIVE COMPENSATION
The following table summarizes the compensation earned and paid by the Company
to each Officer and to all Executive Officers as a group for services rendered
in all capacities during the year ended December 31, 1999:
Summary Compensation Table
Annual compensation Long-term compensation
---------------------------------------------------------
Awards Payouts
-----------------------------
18
<PAGE>
<TABLE>
<CAPTION>
Other Securities
Annual Restricted underlying LTIP All
Bonus Comp. Stock options / Payouts other
Name and Position Year Salary($) ($) ($) Awards ($) SARs (#) ($) Comp.($)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jerome R. Mahoney,
CEO/President/Director 1999 $180,000
Joel G. Beagelman,
CFO/Secretary/Treasurer
Director 1999 104,000
Leo Pudio,
Vice-President of
Operations 1999 80,000
</TABLE>
Option /SAR Grant in Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
Number of Percent of total
securities options / SARs
underlying granted to Exercise or
options / SARs employees in last base price
Name Granted (#) fiscal year ($/sh) Date
<S> <C> <C> <C>
Leo Pudio 140,000 (1) $.35/sh June 15, 1999
</TABLE>
Option Grant Table
Number of Value of
securities unexercised
underlying in-the-money
Shares unexercised option/SARs
acquired options/SARs at at FY-end
on Value FY-end (#) ($)
exercise realized exercisable/ Exercisable/
Name (#) ($) unexercisable unexercisable
Leo Pudio 0
(1) On June 15, 1999, as part of the Employment Agreement, Mr. Pudio was granted
stock options to purchase 140,000 shares of class A common stock of the Company
at $0.35 per share. The option may be exercised at any time commencing on the
one year anniversary of the Commencement Date as to an aggregate of one-third of
the total shares granted on the commencement date. An additional one-third of
the total shares granted on the Commencement Date becoming exercisable upon each
succedding anniversary of the Commencement Date. As of the date of this filing,
Mr. Pudio has not exercised his options.
The Directors who are employees of the Company receive no compensation for their
services as Directors, either on an annual basis or for each meeting. Directors
are not reimbursed for any expenses they may incur in attending meetings of the
Board of Directors.
Employment Agreements
Jerome Mahoney. The Company entered into an employment agreement with Mr.
Mahoney on April 28, 1999 that commenced on May 1, 1999 and terminates on April
30, 2004. It provides for a base salary of $180,000 per year which will be
increased by 10% annually.
Leo Pudio On June 2, 1999, the Company entered into a three (3) year employment
agreement with Mr. Pudio. Thae agreement called for a base salary of $80,000
with annual increases. In addition, Mr. Pudio was granted stock options to
purchase 140,000 shares of class A common stock of the Company at $0.35 per
share. In addition within sixty (60) days for signing the agreement, Mr. Pudil
was granted 250,000 shares the Company's Class A common stock.
19
<PAGE>
Employee Stock Option Plan
The Company adopted the Employee Stock Option Plan ( the "Plan") in order to
attract and retain qualified personnel. Under the Plan, of compensation
committee of the Board of Directors, in its discretion may grant stock options
(either incentive or non-qualified stock options) to officers and employees. The
terms and conditions upon which the options may be exercised are set out in the
Plan. To date, options for the right to purchase 490,000 Class A common stock
shares have been granted under the Plan and remain unexercised. The Plan is
intended to provide a method whereby employees of the Company and others who are
making and are expected to make substantial contributions to the successful
management and growth of the Company are offered an opportunity to acquire
Common Stock as an incentive to remain with the Company and advance its
interests.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April, 1999, the Company granted Jerome Mahoney the right to annual increases
of 10%. On May 21, 1999, Jerome Mahoney was issued 10,000,000 class A shares and
700,000 shares of Class B for the acquisition of IVT. Each Class B share hav a
voting equivalent equal to 100 Class A shares and may be converted into an equal
number of Class A shares.
On June 5, 1999, Saraj Tschand (Founder and owner of Parwan Electronics),
received 3.2 million shares of the Company in exchange for the Company receiving
all of Parwan's pre-developed software code. Parwan retained its existing
international clientele but cannot sell to new or existing accounts.
ITEM 8. DESCRIPTION OF SECURITIES.
The Company has authorized capital stock of 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.
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. The Company has not paid any dividends on its
Common Stock, and none are contemplated in the foreseeable future. It is
anticipated any earnings that may be generated from operations of the Company
will be used to finance the growth of the company. See "Risk Factors -Lack of
Dividends". Holders of Class B Common stock are not entitled to receive
dividends.
Holders of Class A Common stock are entitled to one vote for each share held of
record. There are no cumulative voting rights in the election of directors. Thus
the holders of more than 50% of the outstanding shares of Common Stock can elect
all of the directors of the Company if they choose to do so. No one shareholder
beneficially owns more than 50% of the Company's Class A Common Stock. A total
of 70,431,061 shares of Class A Common stock are outstanding. Jerry Mahoney is
the sole owner of Class B Common Stock. There are 700,000 shares of Class B
Common stock issued and outstanding. Class B Common stock has voting rights of
100 to 1 providing for each Class B Common Stock share has 100 Class A Common
Stock votes.
The holders of Class A Common Stock have no preemptive, subscription, conversion
or redemption rights. Upon liquidation, dissolution or winding-up of the
Company, the holders of the Class A Common Stock are entitled to receive pro
rata the assets of the Company. The holders of Class B Common Stock have the
right to convert each share of Class B Common Stock for one hundred shares of
Class A Common Stock. Holders of Class B Common Stock are not entitled to
receive pro rata the assets of this Company.
20
<PAGE>
Shares Eligible for Future Sale
These shares would be eligible for sale in the public market subject to the
conditions and restrictions of Rule 144. Rule 144 provides in part that a person
who is not an affiliate of the Company and who hold restricted stock for a
period between one and two years may sell all or part of such securities. An
affiliated person would have to hold the restricted securities two years before
gaining the ability to sell all or part of such securities. Sales under Rule 144
are also subject to certain provisions relating to the manner and notice of sale
and availability of current public information about the Company.
Note that if companies currently quoted on the OTC Bulletin Board do not comply
with the new NASD rules, their shares will only be quoted in the less automated
"Pink Sheets", a system run by the National Quotation Bureau, Inc. The
"Eligibility Rule Phase-In Schedule" published by NASD, requires that the
Company become fully reporting by May 1, 2000. The vast majority of
Broker-dealers generally do not engage in the sales or trading of securities of
a "non-reporting" issuer. Development of a trading market is limited by the of
regulations under Rule 15c2-11 of the 1934 Act which require that before a
broker-dealer can make a market in the Company's securities the Company must
provide these broker-dealers with current information about the Company. The
Company presently has formulated no specific plans to distribute information to
broker-dealers and probably will only do so if there appears otherwise to be
adequate interest in making a market in the Company's securities. Furthermore,
in view of the absence of an underwriter and the nature of the Company as a
"non-reporting" issuer, there is virtually no likelihood that a regular trading
market will develop in the near future or that if developed it will be
sustained. Accordingly, an investment in the Company's Common Stock should be
considered highly illiquid.
Restrictions on Transferability of Securities:
The common stock shares of the Company (the "Common Stock") have not been
registered under the U.S. Securities Act of 1933, as amended (the "Securities
Act"). The Common Stock may not be acquired with a view to immediate resale or
distribution thereof. Accordingly, the Common Stock may be offered, sold,
resold, transferred or otherwise disposed of directly or indirectly pursuant to
exemptions from the federal and state securities laws. The Company makes no
representation in respect to or assumes any responsibility for the availability
of any exemption or for undertaking to register the Common Shares. Although
public trading in the Company's securities is not prohibited, there may be no
public market for its Common Shares and there can be no assurance that a market
will develop. See "Description of Securities".
Resale Restrictions. Various state securities laws impose restrictions on
transferring "penny stocks" and as a result, investors in the Common Stock may
have their ability to sell their shares of the Common Stock impaired. For
example, the Utah Securities Commission prohibits brokers from soliciting buyers
for "penny stocks", which makes selling them more difficult.
"Penny Stock" Issues. The shares of the Common Stock are "penny stocks" as
defined in the Exchange Act, which are traded in the over-the-counter market on
the OTC Bulletin Board. As a result, an investor may find it more difficult to
dispose of or obtain accurate quotations as to the price of the shares of the
Common Stock being registered hereby. In addition, the "penny stock" rules
adopted by the Commission under the Exchange Act subject the sale of the shares
of the Common Stock to certain regulations which impose sales practice
requirements on broker-dealers. For example, broker-dealers selling such
securities must, prior to effecting the
21
<PAGE>
transaction, provide their customers with a document that discloses the risks of
investing in such securities. Furthermore, if the person purchasing the
securities is someone other than an accredited investor or an established
customer of the broker-dealer, the broker-dealer must also approve the potential
customer's account by obtaining information concerning the customer's financial
situation, m investment experience and investment objectives. The broker-dealer
must also make a determination whether the transaction is suitable for the
customer and whether the customer has sufficient knowledge and experience in
financial matters to be reasonably expected to be capable of evaluating the risk
of transactions in such securities. Accordingly, the Commission's rules may
limit the number of potential purchasers of the shares of the Common Stock.
If the Company can meet the listing requirements in the future, management
intends to apply to include the shares of the Common Stock being registered
hereby for quotation on The NASDAQ SmallCap Market operated by The NASDAQ Stock
Market. The Common Stock has not yet been approved for quotation on The NASDAQ
SmallCap Market and there can be no assurance that an active trading market will
develop or if such market is developed that it will be sustained. The NASDAQ
Stock Market recently approved changes to the standards for companies to become
listed on The NASDAQ SmallCap Market, including, without limitation, new
corporate governance standards, a new requirement that companies seeking listing
have net tangible assets of $2,000,000, market capitalization of $35,000,000 or
net income of $500,000 and other qualitative requirements. If the Company is
unable to satisfy the requirements for quotation on The NASDAQ SmallCap Market,
trading in the Common Stock being registered hereby would continue to be
conducted on the OTC Bulletin Board. Even if the shares of the Common Stock are
listed for quotation on The NASDAQ SmallCap Market, the market price of the
shares must remain above $5.00 per share or else such shares will be subject to
the "penny stock" rules of the Commission discussed above. If the market price
of such shares falls below $1.00 per share, such shares will be delisted from
The NASDAQ SmallCap Market and will once again be quoted on the OTC Bulletin
Board.
In addition to the recent changes in The NASDAQ SmallCap Market listing
requirements discussed above, the National Association of Securities Dealers,
Inc. (the "NASD") has recently announced changes in the requirements for
continued quotation on the OTC Bulletin Board. Essentially the new rules require
OTC Bulletin Board companies to become a "reporting company" under the
Securities Exchange Act of 1934. If the Company cannot comply with this NASD
rule by the Eligibility Rule Phase-In Schedule, the Common Stock will only be
quoted in the less automated "Pink Sheets", a system run by the National
Quotation Bureau, Inc. The "Eligibility Rule Phase-In Schedule" published by
NASD, requires that the Company become a "reporting company" by May 17, 2000 or
the Company's Common Stock will be traded in the "Pink Sheets". It is
anticipated that the transaction with ThirdCai, Inc. and reported in Item 2 of
the Current Report on Form 8-K dated April 26, 2000, will satisfy this
requirement. There can be no assurance that an active trading market will
develop for the shares of the Common Stock in the "Pink Sheets" or if such
market is developed that it will be sustained.
PART II
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is quoted on the NASD OTC Bulletin Board in the
United States under the symbol IVOC.
Market Price
High Low
1999 (1)
22
<PAGE>
Second Quarter 1999 (2) $.6875 $.32
Third Quarter 1999 $.33 $.125
Fourth Quarter 1999 $.34 $.125
2000
First Quarter 2000 $5.9375 $.29
(1) Trading prices only available since May 28, 1999.
Since April 24, 2000 NASD added the additional trading symbol "E" to the
Company's trading symbol recognizing that the Company's common stock will be
removed from trading on the NASD OTC Bulletin Board, unless prior to May 17,
2000, the Company becomes a reporting company pursuant to the Securities
Exchange Act of 1934.
Effective August 11, 1993, the Securities and Exchange Commission adopted Rule
15g-9, which established the definition of a "penny stock," for purposes
relevant to the Company, as any equity security that has a market price of less
than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require: (i) that a broker or dealer approve a person's
account for transactions in penny stocks; and (ii) the broker or dealer receive
from the investor a written agreement to the transaction, setting forth the
identity and quantity of the penny stock to be purchased. In order to approve a
person's account for transactions in penny stocks, the broker or dealer must (i)
obtain financial information and investment experience and objectives of the
person; and (ii) make a reasonable determination that the transactions in penny
stocks are suitable for that person and that person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks. The broker or dealer must also deliver, prior to
any transaction in a penny stock, a disclosure schedule prepared by the
Commission relating to the penny stock market, which, in highlight form, (i)
sets forth the basis on which the broker or dealer made the suitability
determination; and (ii) that the broker or dealer received a signed, written
agreement from the investor prior to the transaction. Disclosure also has to be
made about the risks of investing in penny stocks in both public offerings and
in secondary trading, and about commissions payable to both the broker-dealer
and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks.
The National Association of Securities Dealers, Inc. (the "NASD"), which
administers NASDAQ, has recently made changes in the criteria for initial
listing on the NASDAQ Small Cap market and for continued listing. For initial
listing, a company must have net tangible assets of $4 million, market
capitalization of $50 million or net income of $750,000 in the most recently
completed fiscal year or in two of the last three fiscal years. For initial
listing, the common stock must also have a minimum bid price of $4 per share. In
order to continue to be included on NASDAQ, a company must maintain $2,000,000
in net tangible assets and a $1,000,000 market value of its publicly traded
securities. In addition, continued inclusion requires two market makers and a
minimum bid price of $1.00 per share.
Management intends to strongly consider undertaking a transaction with any
merger or acquisition candidate that will allow the Company's securities to be
traded without the aforesaid limitations. However, there can be no assurances
that, upon a successful merger or acquisition, the Company will qualify its
securities for listing on NASDAQ or some other national exchange, or be able to
maintain the maintenance criteria necessary to insure continued listing. The
failure of the Company to qualify its securities or to meet the relevant
maintenance
23
<PAGE>
criteria after such qualification in the future may result in the discontinuance
of the inclusion of the Company's securities on a national exchange. In such
events, trading, if any, in the Company's securities may then continue in the
non-NASDAQ over-the-counter market. As a result, a shareholder may find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of, the Company's securities.
Holders
There are 315 holders of the Company's Common Stock. All of the issued and
outstanding shares of the Company's Common Stock were issued in accordance with
the exemption from registration afforded by Section 4(2) of the Securities Act
of 1933.
Dividends
The Registrant has not paid any dividends to date, and has no plans to do so in
the immediate future.
ITEM 2. LEGAL PROCEEDINGS
iVoice.com, Inc. was a party to a lawsuit initiated by a Michael Wong on
November 1, 1999 for a $300,000 investment by Wong into an entity called IVS
between the years 1994 and 1996. This action was filed at the United States
District Court, the Eastern District of New York. IVS was incorporated in 1993
and ceased operations in November, 1997. Wong is claiming rights to some assets
of IVS were transferred out of IVS. The majority shareholder of IVS was Jerome
Mahoney, who is the CEO of iVoice.com. This action was filed at the U.S.
District Court, E.D.N.Y. at the Clerks Office Long Island Courthouse, case
number CV-99 7078.
iVoice.com was the result of a reverse merger on May 21, 1999 between
International Voice Technologies (IVT), a private Delaware corporation
established on December 17, 1997, and Visual Telephone International, the public
entity.
A settlement was reached on February 7, 2000 and executed on February 14, 2000,
whereby the Plaintiff was awarded the sum of $300,000 and 2,000,000 restricted
shares of class A common stock of iVoice.com.
ITEM 4. 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.
No. of shares
Name Date Issued issued
---- ----------- ------
Pickens, Michael O. 2/18/97 100,000
Arrowhead Financial
Principal: Michael Hall 2/18/97 25,000
Knightsbridge Group, Ltd. 3/7/97 30,000
Grail Ives Consultants
Principal: Ted Berk 4/3/97 100,000
Toby Investment Group
Principal: Barry Kobrin 4/15/97 100,000
Toby Investment Group
Principal: Barry Kobrin 5/5/97 200,000
Toby Investment Group
Principal: Barry Kobrin 5/27/97 200,000
Millenium HoldingsGroup, Inc.
Principal: Gary Schultheis 6/23/97 300,000
Schultheis, Gary 6/26/97 100,000
Tabin, Herb 6/26/97 100,000
Toby Investment Group
Principal: Barry Kobrin 9/18/97 133,000
Toby Investment Group
Principal: Barry Kobrin 10/3/97 84,000
Toby Investment Group
Principal: Barry Kobrin 10/8/97 84,000
Evenstone Ltd. 10/14/97 500,000
Toby Investment Group
Principal: Barry Kobrin 10/20/97 87,500
Toby Investment Group
Principal: Barry Kobrin 10/27/97 86,000
Toby Investment Group
Principal: Barry Kobrin 10/31/97 110,000
Evenstone Ltd. 11/5/97 500,000
Toby Investment Group
Principal: Barry Kobrin 12/1/97 242,400
Evenstone Ltd. 12/2/97 402,680
Evenstone Ltd. 12/10/97 493,970
Toby Investment Group
Principal: Barry Kobrin 12/12/97 300,000
Cole, James A. Jr. 12/12/97 242,718
Grail Ives Consultants
Principal: Ted Berk 12/19/97 125,000
Grail Ives Consultants
Principal: Ted Berk 1/6/98 125,000
Toby Investment Group
Principal: Barry Kobrin 1/9/98 500,000
Cole, James A. Jr. 1/12/98 367,647
Toby Investment Group
Barry Kobrin 1/20/98 250,000
Grail Ives Consultants
Principal: Ted Berk 1/20/98 125,000
Toby Investment Group
Principal: Barry Kobrin 2/12/98 250,000
Toby Investment Group
Principal: Barry Kobrin 2/20/98 250,000
Toby Investment Group
Principal: Barry Kobrin 3/6/98 250,000
Toby Investment Group
Principal: Barry Kobrin 3/16/98 250,000
Toby Investment Group
Principal: Barry Kobrin 3/23/98 250,000
Grail Ives Consultants
Principal: Ted Berk 4/2/98 250,000
Grail Ives Consultants
Principal: Ted Berk 4/8/98 250,000
Toby Investment Group
Principal: Barry Kobrin 4/27/98 250,000
Toby Investment Group
Principal: Barry Kobrin 5/1/98 1,000,000
Toby Investment Group
Principal: Barry Kobrin 5/6/98 585,000
Hazlet Investors 5/6/98 1,085,000
Toby Investment Group 5/8/98 500,000
U.S. Water Treatment Co.
Principal: Barry Kobrin 5/8/98 500,000
Arab Commerce Bank Ltd.
Principal: Alexander Westcott
(Jim Mullen) 7/14/98 370,370
Lufeng Investments Ltd.
Principal: Alexander Wescott
(Jim Mullen) 7/14/98 370,370
Swan Alley (Nominees) Ltd.
Principal: Alexander Wescott
(Jim Mullen) 7/15/98 925,925
Millennium HoldingsGroup, Inc.
Principal: Gary Schultheis 7/15/98 157,407
Leibman, Neil 7/15/98 27,778
U.S. Water Treatment Co.
Principal: Barry Kobrin 9/8/98 1,375,000
Toby Investment Group
Principal: Barry Kobrin 9/8/98 1,375,000
RFG, Inc.
Principal: Robert Giordano 12/2/98 300,000
Toby Investment Group
Principal: Barry Kobrin 12/2/98 1,000,000
Toby Investment Group
Principal: Barry Kobrin 12/8/98 300,000
Bagwell, H. Glenn Jr. 12/21/98 1,300,000
Bagwell, H. Glenn Jr. 1/4/99 1,000,000
Toby Investment Group
Principal: Barry Kobrin 1/14/99 1,353,000
J V O Consulting Inc.
Principal: Joe V. Overcash 1/19/99 285,715
Bagwell, H. Glenn Jr. 1/19/99 750,000
Bon Temps Roule, Inc.
Principal: Marilyn Fox 1/22/99 285,715
Bagwell, H. Glenn Jr. 3/15/99 2,500,000
Toby Investment Group
Principal: Barry Kobrin 3/18/99 500,000
Bagwell, H. Glenn Jr. 4/5/99 2,500,000
Toby Investments held shares, sold the shares and then purchased new shares. As
such, they were not an affiliate of the Company.
On May 21, 1999, International Voice Technologies, Corp. ("IVT") a Delaware
corporation, merged into the Company. Simultaneous with the merger with IVT,
Communications Research, Inc. ("CRI") was spun off and the name of the Company,
Visual Telephone International, Inc., was changed to iVoice.com, Inc.
Additionaly, the Company revised its trading symbol on the NASD OTC Bulletin
Board to "IVOC". In consideration for merging IVT into the Company, the sole
shareholder of IVT, Jerome Mahoney, received:
a. 10,000,000 shares of Class A Common Stock issued, and
b. 400,000 shares of Class B Common Stock. (see "Certain Transactions
and Business Relationships").
On February 10, 2000, the Company issued 2,000,000 shares of its common stock
for the settlement of a legal matter with a deemed value of $4,500,000. These
shares were exempt from the registration requirements of Section 5 of the
Securities Exchange Act of 1934, as amended, (the "Act") as provided in Section
4(2) of that Act.
On February 18, 2000, the Company issued 100,000 shares of its common stock for
services rendered to the Company with a deemed value of $234,000. These shares
were exempt from the registration requirements of Section 5 of the Securities
Exchange Act of 1934, as amended, (the "Act") as provided in Section 4(2) of
that Act.
March 14, 2000 the Company issued 179,898 shares of its common stock for
services rendered to the Company with a deemed value of $18,619. These shares
were exempt from the registration requirements of Section 5 of the Securities
Exchange Act of 1934, as amended, (the "Act") as provided in Section 4(2) of
that Act.
1. EPS: This firm supplied training to the Company in exchange for
stock. Here the stock was issued in exchange for services, therefore
the transaction would not integrate because a sale of stock was not
involved. Additionally, the purpose of issuing this 4(2) stock
(services) would be deemed different than the purpose of issuing 504
stock (raise money).
2. Carl Ceragno and Joel Beagelman's stock were cancelled and therefore
will not be considered.
3. Jerome Mahoney: Stock received by Mr. Mahoney was in exchange for
his company, International Voice Technologies. Here two Companies
exchanged stock and therefore a sale of stock was not involved.
Thus, integration would not occur. Additionally, the purpose of
issuing this 4(2) stock (stock swap) would be deemed different than
the purpose of issuing 504 stock (raise money).
4. Suraj Tschand: Here the stock was issued in exchange for software
development and consultation services. Here the stock was issued in
exchange for services, therefore the transaction would not integrate
because a sale of stock was not involved. Additionally, the purpose
of issuing this 4(2) stock (services) would be deemed different than
the purpose of issuing 504 stock (raise money).
5. Toby Investments: Here the stock was issued for payment of
consultation services provided on the International Voice
Technologies merger. Here the stock was issued in exchange for
services, therefore the transaction would not integrate because a
sale of stock was not involved. Additionally, the purpose of issuing
this 4(2) stock (services) would be deemed different than the
purpose of issuing 504 stock (raise money).
6. John Mahoney, Sr. Mr. Mahoney was issued a small portion of shares
owed Jerry Mahoney in relation to the International Voice
Technologies acquisition. This would not integrate for the same
reason as Jerry Mahoney.
7. Daniel Timpone: Mr. Timpone was issued a small portion of shares
owed Jerry Mahoney in relation to the International Voice
Technologies acquisition. This would not integrate for the same
reason as Jerry Mahoney.
8. RFG Inc. RFG exercised some options. Here the option was not part of
the 504 offering and could be considered a different kind of
security as that offered in the 504, thus not integrating.
9. Jason Christman: This stock was issued in exchange for web-site
development services. Here the stock was issued in exchange for
services, therefore the transaction would not integrate because a
sale of stock was not involved. Additionally, the purpose of issuing
this 4(2) stock (services) would be deemed different than the
purpose of issuing 504 stock (raise money).
10. Merle Katz: Mr. Katz was issued stock in exchange for consulting
services. The shares were issued to his wife. Here the stock was
issued in exchange for services, therefore the transaction would not
integrate because a sale of stock was not involved. Additionally,
the purpose of issuing this 4(2) stock (services) would be deemed
different than the purpose of issuing 504 stock (raise money).
Beneficial owners of the section 4(2) offering are listed. All invested were
accredited.
Consultation on Merger valued at .114 or $228,000. The ultimate beneficial owner
for these shares is Barry Kobrin and is an accredited investor.
Dot.Com Funding purchased 981,229 shares in the Regulation D Rule 504 Offering.
On July 21, 1999, Dot.com Funding sold 30,000 shares. On July 28, 1999, Dot.com
Funding sold 25,000 shares. On July 29, 1999, Dot.com Funding sold 300,000
shares. On August 2, 1999, Dot.com Funding sold 5,000 shares. On August 5, 1999,
Dot.com Funding sold 30,000 shares. On December 3, 1999, Dot.com Funding sold
165,000 shares. On December 22, 1999, Dot.com Funding sold 10,000 shares. On
December 28, 1999, Dot.com Funding sold 20,000 shares. On December 29, 1999,
Dot.com Funding sold 255,655 shares. On January 4, 2000, Dot.com Funding sold
55,000 shares. On January 5, 2000, Dot.com Funding sold 66,644 shares. On
January 14, 2000, Dot.com Funding sold 50,000 shares.
During April 2000, the Company issued 37,500 shares of its Class A common stock
for services rendered on behalf of the Company to Robert Keenan, who received
25,000 shares and to Ken Glynn, Esq., who received 12,500 shares. These shares
were exempt from the registration requirements of Section 5 of the Securities
Exchange Act of 1934, as amended, (the "Act") as provided in Section 4(2) of
that Act.
During April 2000, the Company sold 1,750,000 shares of its Class A common stock
for approximately $750,000 to Gaston Coldwater, LLC. K. J. Kampmann was the
authorized representative to sign on behalf of Gaston Coldwater, LLC. These
shares were exempt from registration pursuant to Rule 504 of Regulation D.
On April 24, 2000, the Company acquired all the issued and outstanding shares of
CAI in exchange for US$150,000.00 and 50,000 shares of the Company's Class A
voting common stock, which was issued to Corporate Architects, Inc., of which
the sole officer and director is also the President.
The Company issued 179,000 shares of its Class A shares to Alexander Wescott
which was exempt from the registration requirements of Section 5 of the
Securities Exchange Act of 1934, as amended, (the "Act") as provided in Section
4(2) of that Act.
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ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation provides that a director of the
Company shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director.
The Company's Certificate of Incorporation provides that the Company 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, the
Company's 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 the 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 (the "Act") may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
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.
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Part F/S
The financial statements are attached at the end of this Form 10-SB.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
iVoice.com, Inc.
By: /s/Jerome R. Mahoney
--------------------
Jerome R. Mahoney, President
26
6.1 Reorganization Agreement
AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") between iVoice.com,
Inc., a Delaware corporation ("IVOC") and the persons being the owners of record
(collectively the "Shareholders")of all of the issued and outstanding stock of
ThirdCAI, Inc., a Nevada corporation ("CAI").
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Whereas, IVOC wishes to acquire and the Shareholders wish to transfer all
of the issued and outstanding securities of CAI in a transaction intended to
qualify as a reorganization within the meaning of368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended.
Now, therefore, IVOC and the Shareholders adopt this plan of
reorganization and agree as follows:
1. Exchange of Stock.
1.1. Number of Shares. The Shareholders agree to transfer to IVOC at the
Closing (defined below) all of the shares of common stock of CAI,$.01 par value
per share in exchange for US$150,000.00 and50,000 shares of Class A voting
common stock of IVOC,$.01 par value per share.
1.2. Exchange of Certificates. Each holder of an outstanding certificate
or certificates theretofore representing shares of CAI common stock shall
surrender such certificate(s) for cancellation to IVOC, and shall receive in
exchange a certificate or certificates representing the number of full shares of
IVOC common stock into which the shares of CAI common stock represented by the
certificate or certificates so surrendered shall have been converted. The
transfer of CAI shares by the Shareholders shall be effected by the delivery to
IVOC at the Closing of certificates representing the transferred shares endorsed
in blank or accompanied by stock powers executed in blank.
1.3. Fractional Shares. Fractional shares of IVOC common stock shall not
be issued, but in lieu thereof IVOC shall round up fractional shares to the next
highest whole number.
1.4. Further Assurances. At the Closing and from time to time thereafter,
the Shareholders shall execute such additional instruments and take such other
action as IVOC may request in order more effectively to sell, transfer, and
assign the transferred stock to IVOC and to confirm IVOC's title thereto.
2. Ratio of Exchange. The securities of CAI owned by the Shareholders, and
the relative securities of IVOC for which they will be exchanged.
3. Closing.
3.1. Time and Place. The Closing contemplated herein shall be held as soon
as possible at the offices of Chapman and Flanagan at2080 East Flamingo, Las
Vegas, Nevada, unless another place or time is agreed upon in writing by the
parties without requiring the meeting of the parties hereof. All proceedings to
be taken and all documents to be executed at the Closing shall be deemed to have
been taken, delivered and executed simultaneously, and no proceeding shall be
deemed taken nor documents deemed executed or delivered until all have been
taken, delivered and executed. The date of Closing may be accelerated or
extended by agreement of the parties.
3.2. Form of Documents. Any copy, facsimile telecommunication or other
reliable reproduction of the writing or transmission required by this Agreement
or any signature required thereon may be used in lieu of an original writing or
transmission or signature for any and all purposes for which the original could
be used, provided that such copy, facsimile telecommunication or other
reproduction shall be a complete reproduction of the entire original writing or
transmission or original signature.
4. Unexchanged Certificates. Until surrendered, each outstanding
certificate that prior to the Closing represented CAI common stock shall be
deemed for all purposes, other than the payment of dividends or other
distributions, to evidence ownership of the number of shares of IVOC common
stock into which it was
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<PAGE>
converted. No dividend or other distribution shall be paid to the holders of
certificates of CAI common stock until presented for exchange at which time any
outstanding dividends or other distributions shall be paid.
5. Representations and Warranties of the Shareholders
The Shareholders, individually and separately, represent and warrant as
follows:
5.1. Title to shares. The Shareholders, and each of them, are the owners,
free and clear of any liens and encumbrances, of the number of CAI shares which
are listed in the attached schedule and which they have contracted to exchange.
5.2. Litigation. There is no litigation or proceeding pending, or to any
Shareholder's knowledge threatened, against or relating to shares of CAI held by
the Shareholders.
6. Representations and Warranties of IVOC
IVOC represents and warrants as follows:
6.1 Corporate Status. IVOC is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and is
licensed or qualified as a foreign corporation in all states in which the nature
of its business or the character or ownership of its properties makes such
licensing or qualification necessary.
6.2 Capitalization. The authorized capital stock of IVOC consists of
shares of common stock, par value per share, of which shares are issued and
outstanding, all fully paid and nonassessable and no shares of non-designated
preferred stock.
6.3 Subsidiaries. IVOC has no subsidiaries.
6.4 Litigation. There is no litigation or proceeding pending, or to the
Company's knowledge threatened, against or relating to IVOC, its properties or
business, except as set forth in a list certified by the president of IVOC and
delivered to the Shareholders.
6.5 Contracts. IVOC is not a party to any material contract other than
those listed as an attachment hereto.
6.6 No Violation. Execution of this Agreement and performance by IVOC
hereunder has been duly authorized by all requisite corporate action on the part
of IVOC, and this Agreement constitutes a valid and binding obligation of IVOC
and performance hereunder will not violate any provision of any charter, bylaw,
indenture, mortgage, lease, or agreement, or any order, judgement, decree, law,
or regulation to which any property of IVOC is subject or by which IVOC is
bound.
6.7 Taxes. IVOC has filed in correct form all federal, state, and other
tax returns of every nature required to be filed by it and has paid all taxes as
shown on such returns and all assessments, fees and charges received by it to
the extent that such taxes, assessments, fees and charges have become due. IVOC
has also paid all taxes which do not require the filing of returns and which are
required to be paid by it. To the extent that tax liabilities have accrued, but
have not become payable, they have been adequately reflected as liabilities on
the books of IVOC and are reflected in the financial statements furnished
hereto.
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6.8 Title to Property. IVOC has good and marketable title to all
properties and assets, real and personal, reflected in IVOC's Financial
Statements, except as since sold or otherwise disposed of in the ordinary course
of business, and IVOC's properties and assets are subject to no mortgage,
pledge, lien, or encumbrance, except for liens shown therein, with respect to
which no default exists.
6.9 Corporate Authority. IVOC has full corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder, and will
deliver at the Closing a certified copy of resolutions of its board of directors
authorizing execution of this Agreement by its officers and performance
thereunder.
6.10 Investment Intent. IVOC is acquiring the CAI shares to be transferred
to it under this Agreement for investment and not with a view to the sale or
distribution thereof. 7. Conduct Pending the Closing
IVOC and the Shareholders covenant that between the date of this Agreement
and the Closing as to each of them:
7.1. No change will be made in the charter documents, by-laws, or other
corporate documents of IVOC.
7.2. IVOC will use its best efforts to maintain and preserve its business
organization, employee relationships and goodwill intact, and will not enter
into any material commitment except in the ordinary course of business.
7.3. None of the Shareholders will sell, transfer, assign, hypothecate,
lien, or otherwise dispose or encumber the CAI shares of common stock owned by
them.
8. Conditions Precedent to Obligation of the Shareholders
The Shareholder's obligation to consummate this exchange shall
be subject to fulfillment on or before the Closing of each of
the following conditions, unless waived in writing by the
Shareholders as appropriate:
8.1. IVOC Representations and Warranties. The representations and
warranties of IVOC set forth herein shall be true and correct at the Closing as
though made at and as of that date, except as affected by transactions
contemplated hereby.
8.2. IVOC Covenants. IVOC shall have performed all covenants required by
this Agreement to be performed by it on or before the Closing.
8.3. Board of Director Approval. This Agreement shall have been approved
by the Board of Directors of IVOC.
8.4. Supporting Documents of IVOC. IVOC shall have delivered to the
Shareholders supporting documents in form and substance reasonably satisfactory
to the Shareholders, to the effect that:
(a) IVOC is a corporation duly organized, validly existing, and in good
standing;
(b) IVOC's authorized capital stock is as set forth herein;
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<PAGE>
(c) Certified copies of the resolutions of the board of directors of IVOC
authorizing the execution of this Agreement and consummation hereof;
(d) Secretary's certificate of incumbency of the officers and directors of
IVOC;
(e) Any document as may be specified herein or required to satisfy the
conditions, representations and warranties enumerated elsewhere herein.
9. Conditions Precedent to Obligation of IVOC
IVOC obligation to consummate this merger shall be subject to
fulfillment on or before the Closing of each of the following
conditions, unless waived in writing by IVOC:
9.1. Shareholder's Representations and Warranties. The representations and
warranties of the Shareholders set forth herein shall be true and correct at the
Closing as though made at and as of that date, except as affected by
transactions contemplated hereby.
9.2. Shareholder's Covenants. The Shareholders shall have performed all
covenants required by this Agreement to be performed by them on or before the
Closing.
10. Termination. This Agreement by be terminated (1) by mutual consent in
writing; (2) by either the Shareholders or IVOC if there has been a material
misrepresentation or material breach of any warranty or covenant by any other
party; or (3) by either Shareholders or IVOC if the Closing shall not have taken
place within 15 days following execution of this Agreement, unless adjourned to
a later date by mutual consent in writing.
11. Survival of Representations and Warranties. The representation and
warranties of the Shareholders and IVOC set out herein shall survive the
Closing.
12. Arbitration
12.1. Scope. The parties hereby agree that any and all claims (except only
for requests for injunctive or other equitable relief) whether existing now, in
the past or in the future as to which the parties or any affiliates may be
adverse parties, and whether arising out of this agreement or from any other
cause, will be resolved by arbitration before the American Arbitration
Association within the State of Nevada
12.2. Consent to Jurisdiction, Situs and Judgment. The parties hereby
irrevocably consent to the jurisdiction of the American Arbitration Association
and the situs of the arbitration (and any requests for injunctive or other
equitable relief) within the State of Nevada. Any award in arbitration may be
entered in any domestic or foreign court having jurisdiction over enforcement of
such awards.
12.3 Applicable Law. The law applicable to the arbitration and this
agreement shall be that of the State of Nevada, determined without regard to its
provisions which would otherwise apply to a question of conflict of laws.
12.4. Disclosure and Discovery. The arbitrator may in its discretion,
allow the parties to make reasonable disclosure and discovery in regard to any
matters which are the subject of the arbitration and to compel compliance with
such disclosure and discovery order. The arbitrator may order the parties to
comply with all or any of the disclosure and discovery provisions of the Federal
Rules of Civil Procedure, as they then
5
<PAGE>
exist, as may be modified by the arbitrator consistent with the desire to
simplify the conduct and minimize the expense of the arbitration.
12.5. Rules of Law. Regardless of any practices of arbitration to the
contrary, the arbitrator will apply the rules of contract and other law of the
jurisdiction whose law applies to the arbitration so that the decision of the
arbitrator will be, as much a possible, the same as if the dispute had been
determined by a court of competent jurisdiction.
12.6. Finality and Fees. Any award or decision by the American Arbitration
Association shall be final, binding and non-appealable except as to errors of
law or the failure of the arbitrator to adhere to the arbitration provisions
contained in this agreement. Each party to the arbitration shall pay its own
costs and counsel fees except as specifically provided otherwise in this
agreement.
12.7. Measure of Damages. In any adverse action, the parties shall
restrict themselves to claims for compensatory damages and/or securities issued
or to be issued and no claims shall be made by any party or affiliate for lost
profits, punitive or multiple damages.
12.8. Covenant Not to Sue. The parties covenant that under no conditions
will any party or any affiliate file any action against the other (except only
requests for injunctive or other equitable relief) in any forum other than
before the American Arbitration Association, and the parties agree that any such
action, if filed, shall be dismissed upon application and shall be referred for
arbitration hereunder with costs and attorney's fees to the prevailing party.
12.9. Intention. It is the intention of the parties and their affiliates
that all disputes of any nature between them whenever arising, whether in regard
to this agreement or any other matter, from whatever the cause based on whatever
law, rule or regulation, whether statutory or common law, and however
characterized, be decided by arbitration as provided herein and that no party or
affiliate be required to litigate in any other forum any disputes or other
matters except for requests for injunctive or equitable relief. This agreement
shall be interpreted in conformance with this stated intent of the parties and
their affiliates.
12.10. Survival. The provisions for arbitration contained herein shall
survive the termination of this agreement for any reason.
13. General Provisions
13.1. Further Assurances. From time to time, each party will execute such
additional instruments and take such actions as may be reasonably required to
carry out the intent and purposes of this agreement.
13.2. Waiver. Any failure on the part of either party hereto to comply
with any of its obligation, agreements, or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
13.3. Brokers. Each party agrees to indemnify and hold harmless the other
party against any fee, loss, or expense arising out of claims by brokers or
finders employed or alleged to have been employed by the indemnifying party.
13.4. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent by
prepaid first-class certified mail, return receipt requested or recognized
commercial courier service as follows:
If to IVOC, to:
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Jerome R. Mahoney
750 Route34
Matawan, NJ 07747
If to the Shareholders, to:
ThirdCAI, Inc.
4300 N. Miller Rd., Suite120
Scottsdale, AZ85251-3620
13.5. Governing Law. This agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Nevada.
13.6. Assignment. This agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns; provided.
However, that any assignment by either party of its rights under this agreement
without the written consent of the other party shall be void.
13.7. Counterparts. This agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Signatures sent by
facsimile transmission shall be deemed to be evidence of the original execution
thereof.
13.8. Exchange Agent and Closing Date. The Exchange Agent shall be the law
firm of Chapman and Flanagan, Las Vegas, Nevada. The Closing shall take place
upon the fulfillment by each party of all the conditions of Closing required
herein, but not later than15 days following execution of this agreement unless
extended by mutual consent of the parties.
13.9. Review of the Agreement. Each party acknowledges that it has had
time to review this agreement and, as desired, consult with counsel. In the
interpretation of this agreement, no adverse presumption shall be made against
any party on the basis that it has prepared, or participated in the preparation
of, this agreement.
13.10. Schedules. All schedules attached hereto, if any shall be
acknowledged by each party by signature or initials thereon and shall be dated.
13.11. Effective date. This effective date of this agreement shall be upon
its execution.
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Signature Page to Agreement and Plan of Reorganization between
iVoice.com and the Shareholders of ThirdCAI
IN WITNESS WHEREOF, the parties have executed this agreement.
IVOICE.COM, INC.
By /s/ Jerome R. Mahoney
JEROME R. MAHONEY, President
THE SHAREHOLDERS OF
THIRDCAI, INC.:
By Edmond L. Lonergran
FOR CORPORATE ARCHITECTS, INC.
By /s/ Carl P. Ranno
CARL P. RANNO
By Kenneth R. Lew
KENNETH R. LEW
8
6.2 Software/Hardware Agreement with Celpage
Schedule 1
General Terms & Conditions
Software/Hardware Agreement between IVoice.com, Inc . (IVOICE.COM, INC.) with
offices at 1230 Highway 34 Aberdeen, NJ 07747 and Panam Wireless, Inc. d/b/a
CELPAGE CELPAGE, with offices located at
ROAD 20 MARTINEZ NADAL AVENUE GUAYNABO, PR 00966 (USA) dated February 9, 2000
("Agreement")
is entered into by the parties as of the same date ('Effective Date').
The parties agree that the Agreement is as follows:
IVOICE.COM, INC. agrees to the following.
Provide software and hardware specified in pricing quote attached as Schedule 2.
2, Provide maintenance for 1 year on software and hardware as specified in
Schedule 3 Note: Maintenance period starts upon completion of installation
of product
3. Provide installation of software as specified in Schedule 2.
4. Provide training as specified in Schedule 2. 2. Training site to tie
agreed upon,
5. Support and stand-by the clarifications given in e-mail dated Monday,
Jaunary 24, 2000 7:26 PM and attached as Schedule 4
CELPAGE agrees to the following:
1. Agreement to Schedules 1, 2, & 3 is authorization of order along with PO #,
2. Provide reasonable access to IVOICE . COM, INC. personnel for purposes of
installation.
3. Give "acceptance" to installed and tested work completed, 50% Contract, 25%
BALANCE payment upon acceptance.
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4. Agree that installation travel and expenses are separate and billed as
5. Provide that order is accepted in whole as outlined in Schedule 2.
6. CELPAGE will provide and pay for an escrow agreement for the iVoice.com
for tie source code.
7. if the base system Is returned within 30 days, Celpage will be charged
a 25% restocking fee.
IVOICE.COM, INC. INC. Panam Wireless, Inc. d/b/a
CELPAGE
By '/i- * 0
1
Name:_ Name, Jose Jaime Romero
Tile: Title. VP & General Manager
Date:_ It Date February 9. 2003
2
<PAGE>
7
SECOND SYSTEM TO GROW TO 192 PORTS
PENTIUM 11 SBC W/VIDEO
PENTIUM III - 500 MHZ W/FAN*****
256 MEG SDRAM M 168 PIN (ECC) PC- 100
19" RACKMOUNT CHASSIS-20 SLOT
2 19 SLOT PICMG BACKPLANE -- -
2 600 WATT HOT SWAP REDUNDANT P * 'SUPPLY
ADAPTEC 131 ULTA2 SCSI PLAID CONTROLLER KIT
6 36GB (36ZX) SCSI GMR 10,000 RPM DRIVES (FOR DATA ONLY)
4 SCSI REMOVABLE ULTRA HOT SWAP DRIVE SAY
2 PANASONIC 1.44MB FLOPPY DRIVE
MICROSOFT NT WORKSTATION 4.0 MEDIA & 1-U LICENSE
TEMPERATURE ALARM
TOSHIBA 40X CD-ROM DRIVE
3COM JOOO MEG NETWORK CARD-MODEL #3C985B
ASSEMBLY-RAID SYSTEM, WITH SOFTWARE
RACKMOUNTABLE PC $27,500.00
- -- I - 24 PORT DIALOGIC VOICE PROCESSING BOARDS
MODEL NUMBER D240SCTI, MADE BY DIALOGIC (PCI BASED)
T1 PRICING $7,000.00 PER 24 PORTS
SOFTWARE:
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<PAGE>
GROWTH TO 480 PORTS
1 -24 PORT INSIGHT IVR AND VOICEMAIL APPLICATION DEVELOPMENT
TOTAL SOFTWARE TOOLS $9,750.00 PER 24 PORTS
- --24 PORT INS IGHT APPLICATION DEVELOPMENT AS PER ATTACHED SCRIPT
TOTAL DEVELOPMENT COSTS $9,875.00 PER 24 PORTS
TOTAL DATABASE DEVELOPMENT $4,500.00 PER 24 PORTS
- --CUSTOMER TO PROVIDE THE DATABASE AND SAMPLE CUSTOMER RECORD FOR DEVELOPMENT
Ownership
All hardware facilitating the system developed by IVOICE.COM, INC. for Customer
will become the property of Customer upon completion of payment of this
development contract. The "object" code of the custom software developed for the
operation of the system will become the property of Customer upon completion of
this development contract.
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Software/Hardware Maintenance Agreement Agreement
-Sche-dule 3
Agreement between. IVOICE.COM, INC. INC. Corporation, with offices at 1230,
Highway 34, Aberdeen. NJ. 07747 and Panam Wireless Inc. d/b/a CELAPGE with
offices at ROAD 2 0 HART INE Z NADAL AVENUE GUAYNABO PR 00966 (USA) dated,
February 9, 2000 ("Agreement") is entered into by the parties as of the same
date I
"Effective Date").
The parties agree !,hat the Agreement I's as fol lows:
Whereas IVOICE.COM, INC. and Customer desire to enter an agreement to provide
- --or the maintenance of the Software and Hardware listed in Schedule A attached
he., eto,
Now, therefore, IVOICE.COM, INC. and Customer agree that IVOICE.COM. INC. shall
provide maintenance for the Software and Hardware listed in Schedule A in
accordance with the terms and conditions herein and at the charges as herein
determined. IVOICE.COM, , provide
IN
C. Shall exclusively
ide maintenance for such Software and Hardware,
All such maintenance shall be subject to all] the provisions of this Agreement,
which both parties
acknowledge that they have read,and to the terms and conditions of which they
agree
Definitions
Confidential Information means any and all information disclosed by either
party, without regard to form, which Is .dentified to be confidential or
proprietary. Confidential Information includes but is not limited to the terms
of this Agreement. and- to the extent such Information is not defined as a Trade
Secret below, any other information marked or noticed as confidential by either
party. Confidential Information shall not include any item which: (i) is
published or public knowledge at the time of disclosure: (ii) becomes published
or public
5
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- -----------------------------------------------
6
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P AGE 0 5
pt, by breach of this Agreement, i) was e possession of either party at the time
of disclosure as evidenced by written records of that party aid was as not
acquired directly or indirectly from the other party; (iv) is received by either
party hereto from a third party who is not under an obligation of confidence
with respect to such information, or (v) is independently developed by the other
party.
Documentation means the reference materials provided by IVOICE. COM, INC. INC.
to Customer, which instruct Customer in the requirements, structure. operation.
and maim ance of the Software and Hardware. Documentation is provided in a
combination of printed and electronic formats and shall include flow charts.
logic diagrams, input and output forms, manuals, specifications, instructions
arid other materials related to the 'Software. and Hardware.
Effective Date means the date this Agreement Is, signed by both parties
Errors. Malfunctions and Defects means deviations between the Software and the
Hardware and the Documentation furnished by IVOICE.COM, INC. INC. for such
Software and Hardware.
Hardware means a) the physical units listed on Schedule A (b) the Documentation
for the Hardware, -and (c) any enhancements, modifications, or revisions of the
Hardware,
Maintenance Period means a period of twelve 1'1,2) consecutive months commencing
on the INSTALLATION Date of this Agreement, or the anniversary thereof. Each
subsequent Maintenance period will begin on the anniversary of the Effective
Date of this Agreement.
Maintenance Services means the specific services which IVOICE.COM, INC. will
provide to Customer as set forth in Section I of this Agreement, attached
Schedule A entitled "Annual Maintenance Charges" and attached Schedule C
entitled "Customer Support Services"
Software Updates means any updates, error corrections, modifications or
enhancements for the Software listed it Schedule A when such Software Updates
are developed or published by IVOICE.COM, INC and made generaIly available to
other licensees of :be
7
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Software Upgrade means the feature upgrades to the Software, which will be
offered to Customer at IVOICE.COM, Inc.'s then current published rates.
So means (a) the object-code -version. of the software listed in attached
Schedule A; (b) the periodic improvements of or additions to the functionality
se, forth in the Documentation; (c) the Documentation:, and (d) any other
enhancements, modifications, or revisions of the foregoing and all copies of the
foregoing.
8
<PAGE>
Software and Hardware Support Services means the procedure listed in Schedule C
for receiving Software or Hardware assistance from IVOICE.COM, INC. INC.
Standard Support Service means the support services, which IVOICE.COM, INC.
provides to warranty, monthly rental plan and standard maintenance plan
subscribers as listed in Schedule C.
Trade Secret means information disclosed by either party. without regard to
form, including, but not limited to, the Software, the Hardware, technical or
nontechnical data, research data, a formula, a pattern, a compilation, a
program. a device, a method, a technique, a drawing, a process, financial data,
financial plans,
product plans. or a list of actual or potential customers or suppliers which is
not commonly known by or available to the public, and which information (i)
derives economic value. actual or potential, from not being generally known to.
and not being readily ascertainable by proper means by, other persons who can
obtain --conornic value from it-, disclosure or use, and ii) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.
1. Maintenance Service
a) IVOICE.COM, INC. agrees to provide and Customer agrees to accept the
Maintenance Services described in Section I of this Agreement and in attached
Schedule C for the IVOICE.COM, INC, Software and Hardware I if) attached
Schedule A.
b) IVOICE.COM, Inc.'s maintenance obligations under this Agreement Shall be
limited to the then current Hardware and Software including the latest Software
Update and/or Software Upgrade. IVOICE.COM, INC. shall have no obligations with
respect to Software and Hardware which has been altered by any party other than
IVOICE COM. INC, without the prior consent of IVOICE.COM, INC., or has been used
otherwise than as provided in the governing Software License Agreement, or has
not been used or stored in accordance with the instructions contained in the
Documentation. IVOICE.COM, INC. shall have no obligation to repair or replace
faulty magnetic tapes or discs on which the Software may be stored by the
Customer.
c) I'VOICE.C01M, INC. shall have no obligations with respect to Hardware that
has been used otherwise than as provided in the Hardware Documentation. or has
not beer) stored it. accordance with the instructions contained in the
Documentation.
d) Nothing in this Agreement shall impose an obligation on IVOICE.COM, INC. INC
to modify the Software or to produce or release a new version of the Software.
9
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2. Term
This Agreement and the Maintenance -Services provided hereunder shall commence
on the Effective Date of this Agreement and shall continue until this Agreement
is terminated in accordance with +the provisions set forth herein."
3. Charges
a) Invoices. The annual maintenance charges for ;Maintenance Services shall be
billed initially at the annual rates set forth in Schedule A. commencing on the
INSTALLATION Date of this Agreement. IVOICE.COM, INC- will invoice Customer for
the annual maintenance charges prior to the commencement of the ensuing
Maintenance Period in accordance with the terms set forth in Section 3.c).
b) Additional Charges IVOICE.COM, I.N~--'. shall bill Customer for any
additional charges on a monthly basis, an.,--; payment will be due within thirty
(30) days of the date of invoice. If Customer disputes any invoice or portion
thereof, Customer shall notify IVOICE.COM., INC. in writing as to the alleged
error and IVOICE.COM, INC. shall thereupon review its records, and, if it does
riot concur with the Customer, provide the Customer with IVOICE.COM, Inc.'s
documentation to support the invoice whereupon Customer pay the invoice if it
agrees that IVOICE.COM, Inc.'s documentation supports ht invoice
c) Change in Maintenance Charges. On or before sixty (60) days preceding the end
of each Maintenance Period, IVOICE.COM, INC. shall notify Customer of its
maintenance charges for the ensuing Maintenance Period. Unless Customer elects
to terminate this Agreement as provided in Section 7 hereof, such charges shall
become effective upon the anniversary of the Effective Date of this Agreement,
which is the beginning of the next annual Maintenance Period.
4. Payment
a) When Payable. Maintenance charges in accordance with Section 3 above shall be
payable in advance. All payments shall be due within 30 days of receipt of
IVOICE.COM. Inc.'s invoice. All overdue invoices shall bear interest at the rate
of 19.56 percent per annum (1.5 percent per month compunded monthly).
10
<PAGE>
b)Taxes. In addition to the charges stated in Schedule A, Customer is
responsible for the payment of all duties, and applicable sales, use, excise or
simiilar taxes levied against the Maintenance Services or otherwise against
transactions under this Agreement, exclusive of personal taxes based upon
IVOICE.C0M, Inc.'s net income.
5. Warranty
11
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CE INC. WARRANTS THAT IT WILL USE IT$ -: BEST -
a) IVOICE.COM, INC. -COM71.
EFFORTS TO MAINTAIN THE SOFTWARE AND HARDWARE LISTED IN SCHEDULE A IN A
SATISFACTORY OPERATING CONDITION.
b) THE FOREGOING WARRANTIES ARE IN LIEU OF ALL
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS.
6. Limitations on Liabilities
a) Under no circumstances shall IVOICE.COM, INC. have an, liability to Customer
or any third party for am indirect, incidental special, consequential or
exemplary damages or costs (including attorney's fees) or loss of goodwill
resulting from, any claim (including any cause of action in contract. tort,
negligence. strict liability or product liability) resulting from or in
connection with. the use of or inability to use., or performance or
nonperformance of, the Soft ware or Hardware,
b) 'in no event shall IVOICE.COM, INC, be liable to Customer under this
Agreement in an am ount that exceeds $ 100,000, regardless of the form of claim
or action
IVOICE.COM, Inc.'s limitation of liability under Sections 6. a) and 6. b) shall
12
<PAGE>
not apply to direct damages due to the proven fault of IVOICE.COM INC. for
claims of bodily in , Jury or tangible property damages to the extent caused by
IVOICE.COM, INC. or for willful
misconduct of IVOICE.COM, INC.,
7 1 1 1
the provisions of this Section 6 shall survive termination of this Agreement.
7
Termination
a) In the event that either party falls to comply with any material term or
Condition
30) days following receipt of
of this Agreement and the default has not been cured within thirty (30) written
notice given by the other party specifying such default, the other pan) shall be
entitled It, addition to any other rights it may have under this Agreement or
otherwise under to terminate this Agreement by giving written notice to take
effect immediate])-.
b) Either party may terminate this Agreement as to the other party by a notice
in writing to such other party should an), of the following -vents occur:
1) Any party becomes insolvent,
13
<PAGE>
- -ny party makes
an asses
, A nment for the benefit of craditbrs' or:
3) Any party admits in --viriting its inability to pay its debts as they
mature-,
4) A trustee or receiver of an), party or of any substantial part of arn party's
assets is appointed by any court and is not removed or discharged within sixty
(60) days,
5) A proceeding is instituted by or against such an) party under any provision
of the Federal Bankruptcy Act which is acquiesced in or results in a final
adjudication of bankruptcy: or
6) An), part,. ceases to carry on business. or is "woun up,"
c) This Agreement shall terminate automatically upon termination or expration of
A licenses for the Software listed in attached Schedule A.
Assignment
Neither party shall have the right to assign this Agreement or the benefit
thereof without the express written permission of the other, which Consent shall
be unreasonably withheld or delayed. Notwithstanding the. foregoing, either
party may assign its rights under this
14
<PAGE>
to any corporation controlled by or under common control with the assigning
party. or in connection with the acquisition of. or- the sale of substantially
all of. the assets of the business to which this Agreement pertain.;.
9. Force Majeure
Neither party shall be held responsible for delay or failure to perform its
. if
obligations under this Agreement if such delay or failure is due to
Circumstances beyond its,
ssible of
reasonable control. Each Party agrees to notify the carrier as soon as
reasonably so circumstances which cause failure or delay to perform an
obligation hereunder
10. Waiver
The failure of either party to insist in one or more ;instances upon strict
performance of the covenants of this Agreement, or to exercise any option herein
contained, shall not be construed a waiver, or relinquishment for the future,
and such covenant and/or option shag remain and continue in full force and
effect. Any waiver shall be effective only if made in writing
15
<PAGE>
11. Entire Agreement
This Agreement, including Schedule A and attachments. constitutes the entire
agreement between the parties With respect to the subject matter of this
Agreement and supersedes all previous negotiations, proposals, commitments, and
understandings of any nature whatsoever. There are no representations or
warranties with respect to the subject matter of this Agreement other than those
expressed herein. 'No consent, modification or change of terms of this Agreement
shall bind either part), unless in writing signed by both parties.
12, Severability
If one or more of the provisions in this Agreement shall, for an, reason, be
declared by a court of competent jurisdiction to be unenforceable or invalid in
any respect, such unenforceability or invalidity shall not affect any other
provision of -.he Agreement which can be given effect without the unenforceable
or invalid provision or provisions, and to such end the provisions of this
Agreement are declared severable,
1.3, Notices
Notices required or authorized to be given hereunder shall be deemed
sufficiently given if in -writing and sent by registered mail to the address of
the party given on page I of this Agreement, unless otherwise specified in
writing by either party. and if so mailed be
deemed to have been received by the other party or, the fifth business day
following the date of mailing (excluding periods during which strikes or other
occurrences interfere with normal mail service.)
14. Headings
The section headings contained herein are for reference only and shall no-
affect in and way the meaning and interpretation of the terms and conditions set
forth herein.
15. Trade Secrets and Confidential Information
Each party acknowledges that certain information ill will acquire from the other
party may constitute Trade Secrets and Confidential Information. Having
acknowledged the foregoing, each party agrees (i) to exercise a reasonable
degree of care and protection with respect to the other party's Trade Secrets
and Confidential Information and (ii) not to, directly or indirectly, use,
disclose, copy. transfer or allow access to any Trade Secrets and Confidential
16
<PAGE>
- -Ink- ~ab from the. other party; provided, however, each party may use 4a'- disc
I a se Trade Secrets and Con idential Information to employees mid third parties
performing services for such party related to this Agreement who have a need to
know and who have agreed in writing to comply with the restrictions, set forth
herein,
16, Governing Law
This Agreement shall be governed by and enforced in accordance with the laws of
the Stale of New Jersey.
IVOICE.COM, INC Panam Wireless Inc.
By:
Name: Jose Jaime Romero
Title: VP & General Manager
Date: Date; February 9. 2000
17
<PAGE>
Index of Schedules
Schedule A - Annual Maintenance Charges
Schedule 3 - Holiday List
Schedule C - Customer Support Services
18
<PAGE>
SCHEDULE A
Annual Maintenance Charges
Annual Maintenance Total Annual
IVOICE.COM, INC. Software Units Charge/Unit
Maintenance
Application Generator 10% of total Cost 10% of total Cost
Database 101-0, of total cost
of total cost
Note: new software comes with 90 day warranty
Annual Maintenance Total Annual
IVOICE.COM, INC. Hardware ~-r -it s Charge/Unit
Maintenance
Dialogic Boards 3
Note new hardware comes with one -Cdr warranty
WC Fits, -sear
TOTAL 0 1,/. o f total I e ver all i Cos.
Note: Any additional software purchased will also have maintenance of 10 %
of total over all
19
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cost
"All hardware is covered under the maintenance contract.
20
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-SCHEDULEB
IVOICE.COM, INC. Holiday List
New Year's Day Good Friday Memorial Dev Independence Day Labor Day - Monday,
Thanksgiving Christmas s Eve - Thursday (1/2 day), December 31
21
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SCHEDULE C
i
lq~- IF F~ I -
22
<PAGE>
Customer Support Services
23
<PAGE>
Software Support Services
The following software support services are ava ]able to warranty and standard
maintenance plan subscribers,
Help Desk IVOICE.COM, INC. will provide telephone assistance to
answer
questions concerning installation or ope ration of the product
from 9 , 00 a.m. to 5-00 p in.
Fastcm Standard Time, Nlonday through Friday. excludirig
Public holidays. s.
Problem Reporting iVOICE.COM, INC. will acknowledge identify, and resolve
or advise customers of proposed resolutions to reported
failures of the product to perform as
described in the corresponding user documentation.
Internal fault tracking arid escalation procedures will be
employed to ensure that
problems are resolved in a timely manner.
Enhancement Requesting IVOICE.COM, INC. will accept requests for
enhancements to existing software products
and will consider these requests in the development of future
releases of its products
Media Replacement During the 90 day limited warranty period, IVOICE.COM, INIC,
will replace
free of charge, any IVOICE COM, INC. software product
distribution medium ,
diskette tape, etc ) that becomes damaged and is returned to
IVOICE.COM, INC. at the user s expense
After the 90-day limited warrant)IVOICE.COM, INC, Aiii replace
any damaged
IVOICE.COM, INC. software product distribution medium (i.e.
diskette, tape, etc.) that
is returned to IVOICE.COM, INC. at the owner's expense. A nom
inal fee will be
charged to cover the cost if materials (1,.-. distribution
medium) plus shipping and
handling
24
<PAGE>
Software Updates IVOICE.COM, INC. will issue. free of charge,
software updates as the% -are
released. Software feature upgrades will be made available at
a Cos? to be determined at
the time of release of the upgrade. Tariff table revisions
will be issued once per quarter.
Documentation Updates IVOICE.COM, INC. will issue, free of charge, documentation
updates as they are
released
25
<PAGE>
Hardware Support Services
The following hardware support services are available to warranty, monthly
rental plain and standard maintenance plan subscribers.
Help Desk IVOICE.COM, INC. will provide telephone assistance to
answer
questions concerning Installation or operation of the
product from 9:00 am to 5:00 pm
Eastern Standard Time, Monday through Tracey, excluding
public holidays
Problem Reporting IVOICE.COM, INC. will acknowledge, identify, and
resolve or advise customers of
proposed described custorners of proposed resolutions to
reported failures of tie product to perform as
described in the corresponding user documentation.
Internal fault tracking and escalation procedures will
be employed to snsure 'hat problems and ae resolved in a
timely manner. tre resolved in a !imel~ manner,
Enhancement Requesting IVOICE.COM,, INC. will accept requests for
enhancement to existing harware products and will
consider these requests in the development of future
releases of its products.
Hardware/Repair Hardware is warranted for one (1) year
from the date of shipment from IVOICE.COM, INC.
IVOICE.COM, INC. will repare any IVOICE.COM unit that fails to perform as
decribed in the corresponding user documentation
during the warranty or maintenance period. See the
Hardware Fault Reporting and Return procedures outlined
in Schedule C..
Repair and maintenance of other hardware including
computerhardware and peripherals will be
subject to the customer specific terms outlined in the
Attachment A of the Maintenance Agreement.
Firmware Updates IVOICE.COM, INC. will make available, at a nominal
charge, firmware updates for
IVOICE.COM, INC. manufactures hardware as they are released.
Documentation Updates IVOICE.COM, INC. will issue, free of charge, documentation
updates as they are released.
26
<PAGE>
27
<PAGE>
Product Support Procedures
If you require product assistance, please ensure that you follow the steps
listed below so that we can providc you with tirrely and efficient service.
I. Locate your IVOICE.COM, INC. account number
2. Depending on whether you require assistance on IVOICE.COM, INC. hardware
software and/or documentation.
assemble the following information:
Software
Product name
Product version number (e.g Vx.x)
System Hardware
* Host computer configuration (i.e manufacturer model total memory disk,
* Peripheral equipment (Terminals, Printers, Network Interface Cards)
* System operating system and version
IVOICE.COM, INC. Hardware Product name Ptoduct model Serial number PBX cable
type (e.g. cable "A") PBX configuration (i.e. manufacturer, model, hardware
version, software version. etc.)
28
<PAGE>
Documentation
o Product name
o Document version number (e.g, Vx.x Issue x)
o Section and page numberless)
If you are reporting a problem, please provide a detailed description of it
including the process (eg. key, trokes) used to create -or reproduce it. Note or
print out any on-screen messages you may rec-!ive when the problem occurs. Also,
if ,, is necessary, to diagnose a problem, you may . be asked for the telephone
number and password to your host computer and/or data acquisition device.
3. if you will be contacting IVOICE.COM, INC. by phone, have your User Manual
(s) oil hand
4. Contact IVOICE.COM, Inc.'s Customer Support Department:
From 9:00 am to 5-00 p.m. Eastern Standard Time, Monday through Friday,
excluding public holidays Phone:
732-441-7700
Fax : 732-44, -9895
Email;-: inforrnatoo~jivoict.ca
29
<PAGE>
.Mail: 1230 Highway -34. Aberdeen, NJ 07747
Upon receiving a Product Support Request (PSR). IVOICE.COM, INC. will pro vide
the request or acknowledgment of its receipt by way of a PSR Reference Number
(PSR Ref. #).
6. Prior to processing a PSR. IVOICE.COM, INC. will perform a support status
check. If you are NOT covered
under warranty or maintenance plan or on a monthly rental plan, you will be
required to provide IVOICE.COM,
INC. with an open purchase order number
7. In processing a PSR, IVOICE.COM, INC. will classify each PSR and use its best
efforts to respond to and resolve
problems in accordance with the following:
Critical (or Emergency) - This type of problem renders the product unusable (eg.
system down). IVOICE.COM, INC. will respond to critical priority PSR's within
two working hours of receipt and thereafter will provide immediate and constant
attention until the problem is resolved
High (or Maior Service: Affecting) -This type of problem represents a rnajcr
hindrance to the basic operation of the product. IVOICE.COM, INC, will respond
to high priority PSR's within four (4) working hours of receipt and will provide
constant attention until the problem is resolved.
Medium (or Minor Service Affecting) - This type of problem represents a nuisance
but does not sign ificantly affect the basic operation of the product.
IVOICE.COM, INC. will respond to medium priority PSR's s within two (2) working
days of receipt and will provide corrective action at its discretion. Usually
this means providing a correction in the next scheduled release of the product.
30
<PAGE>
Low (or Non Service Affecting) - This type of problem is largely cosmetic in
nature and has no real impact on the operation of the product. IVOICE.COM, INC.
will respond to low priority PSR's within five (5) working days of receipt and
will provide corrective action at its discretion. Usually, this means providing
a correction in a subsequent release of the product.
< NOTE >Response times may vary for users requesting "Per Occasion" support as
PSRF processing priority will be given to
warranty, amintenance and rental plan users.
8. As a further measure to ensuire a timely resolution, IVOICE.COM, INC. will
follow these escalation guidelines
Critical - If after acknowledging a problem, the first level Customer Support
Representative is unable to resolve the PSR within 2 working hours, it is
escalated to a second level Customer Support Representative. If the problem
persists after an additional 2 working hours, it is escalated to the appropriate
product development team. If the problem persists after an additional 4 working
hours, it is escalated to the appropriate produce development manager.
High - If after acknowledging a problem, the first level Custorner Support
Representative is unable to resolve the PSR within 4 working hours. it is
escalated to a second level Custorner Support Representative. If the problem
persists after an additional working dat, it is escalated to the appropriate
product development team. If the problem persistsa after additional working day,
it is escalated to the appropriate product development manager.
31
<PAGE>
Hardware Fault Reporting and Return Procedures
If suspect a fault with an IVOICE.COM, INC. hardware product., please follow
these steps;
1. Refer to die trouble shooting section of the appropriate User Manual and
perform any recommended actions to
resolve the problem
2. If the problem persists, contact IVOICE.COM, Inc.'s Customer Support
Department by phone at; 732) 441-7700)
from 9:00 am to 5:00 pin Eastern Standard Time Monday through Friday (excluding
public holidays). When
calling, please have the following information available:
Your account number
Product name
Product model
Serial number
PBX cable type (e.g. cable "A")
PBX configuration (i.e. manufacturer model, hardware version software version,
etc.%.
Host communications software and version used e.g. SEM for Solaris Vx.x)
Detailed description of the problem
You may also be requested to provide remote telecommunications access (ie.
telephone number and password) to any faulty unit to permit fault verification
and diagnosis,
3. Upon receipt of a hardware fault report. IVOICE COM, INC'. will perform a
support status ;:heck. It the unit is
NOT covered under warranty or maintenance plan, you will be required to provide
IVOICE.COM, INC. with an
open purchase order number
4. If it is determined that the problem can be resolved through firmware
replacement IVOICE.COM, INC will
32
<PAGE>
provide a replacement EPROM which you will be required to install in the faulty
unit In accordance with the
instructions contained in the installation guide supplied with tile EPROM.
Units covered under warranty or maintenance plan will receive the replacement
PROM either free of charge or at a nominal fee.
5. If it has been determined that hardware repair or replacement is required,
[VOICE COM, INC. will assign a
Return Authorization Number (R.A. 4) and fax you a Hardware Return Form Complete
the Appropriate sections
and sign the form to confirm that the information -is accurate, including the
billing class warranty.
maintenance, or parts & labor).
IVOICE.COM, INC. cannot accept delivery of any product without a Return
Authorization Number.
6. Prepare the unit for return to IVOICE.COM.. INC. by
33
<PAGE>
Disabling AC power (i.e. AC switch in "OFF" position & power cord disconnected
from wall outlet. or external power supply disconnected from wall outlet)
Disabling DC power (i.e. "BAT" button flush with faceplate or external power
supply disconnected from the unit)
IMPORTANT: F ailure to disable 0C power may result in permanent damage to
battery.
Securely package the unit in its original container and be sure to include:
- - Telephone cord
- - PBX cable
- - AC power cord or external power supply
8. Attach the completed Hardware Return Form to the shipping documents (i.e.
packing list) and keep a copy for
your own records as it contains your Return Authorization Number (R.A. #) which
you must quote when
contacting IVOICE.COM, Inc.'s Customer Support Department regarding the status
of a repair.
9. Return the unit to the appropriate office.
To:
IVOICE.COM, INC. Corporation.
1230 Highway 34.
Aberdeen, NJ 07747
Please note that you are responsible for the transportation costs of eturning
the unit to IVOICE.COM, INC.,
including duties if any while IVOICE.COM, INC. is responsible for tile
transportation costs of return [Ill., t - le unit
34
<PAGE>
to you.
10. IVOICE.COM, INC. will use its best efforts to return repaired or replacement
units within 23 days from tile date
of receipt be, IVOICE.COM, INC.
35
<PAGE>
Schedule 4
From
Sent: Monday January 24, 2000 7 26 PM
To: ia~alaZ.Celpaile com
Subject:
iVQiV4.CCM retil) IS
I - We have not receive your response for the specifications 'or this proposal.
When can we received the your response?
A In the contract, it state's "As per proposal sent by
in! e system proposed has 500MHz Pentium III and 256 MB RAM. Is it possible to
get a faster processor and max out the memory?
A. We .;an provide a faster processor and more memory, but what we quoted is
fine for -he application.
>What is the effect of more memory on ;he operation of the system?
A. The memory being supplied is fine based an our experience.
>3. There is no mention of the capacity of the two IBM hard drives- We know
about the ultimate size of the system but for the trail system?
A. The drive sizes 9 to 10 Gb per drive.
>4. How does the system grow to 480 ports? Please give me a rough diagram of the
network configuration up to its maximum capacity and all features possible.
,A. I will forward a diagram soon.
>5. Do you the capability or are planning to have voice mail to WAV. file
capability to send the -riessages to email"
A. We will be releasing a Unified Messaging platform that connects the voice
mail to e-mail, this an optional feature, which can be added to the system. this
an optional feature, which can be added to the system
>6. What is the relationship of ports and traffic that can be handled?
36
<PAGE>
A A T1, 24 ports handles 8- 10,000 calls
37
<PAGE>
>7. We need a quote of all the spare parts and training at both their premises
and at ours.
A. T1 card $7,000.00 per 24 ports PC full blown with raid is roughly $15,000,00
>8. Are the drawings and the documentation part of the deliverables with the
system'?
A. Yes
>9. What you mean "IVOiCE.COM "shall exclusively provide maintenance for such
Software and Hardware". If the system goes down, we cant wait 24 hours for them
to deliver a replacement. If we can change some parts, we should be able to do
it. should be able to do it.
A Celpage car, maintain the system oil their own.
Please call with any additional questions.
Sincerely.
Jerry
6.3 Agreement with Integrity Capital, Inc.
1
<PAGE>
To: Joel Beagelman
From: Integrity Capital
Re: Investor Relations Proposal
DOW November 15,19"
Whereas: iVoice.com ( IVOC ' is seeking services Of AD investor and public
relations company to communicate to their current Shareholder base and to locate
now shareholders
Whereas, Integrity Capital, Inc,, (Integrity Capital) is an investor and public
relations company offering services based on the following contract proposal,
1. U2211: It must be recognized that the achievement Of Boats Can be hindered
due to certain market: and external forces acting upon IVOC \ Integrity Capital.
Conditions such as inharmonious relations between key personnel or market
conditions that are uncontrollable. Integrity Capital will, in a professional
and diligent manner, work to deal with these situations as they arise to promote
the success of these goals, A: Ulm interest from retail brokers and individual
investors by showcasing the merits of IVOC through mass marketing tools,
8: Seek and obtain research and media support from brokerage
houses and the, media.
C. Build a following via the Internet, newsletters, investor
groups, and radio interviews. D: Enhance the image of IVOC through creation of
news release&, corporate packages, mid creation of high profile Internet
structure. Provide professional critique of corporate packets and corporate
information and design new corporate material if necessary.
E: Build a structure for investors and brokers to receive
information and communicate with Integrity capital about IVOC
F: Cram back office support programs that manages the current
shareholder but.
0: Prepare IVOC for institutional following by advising
company of share structure, corporate image and other necessary changes at the
right time to effectively attract institutional following.
H: Assist in the development of relationships with brokerage
or investment banking houses for the procurement of additional funding through
equity and debt offerings.
2
<PAGE>
Capital Inc.
Judson Street
L
Lynden Wa 98264
I STRATEGY
Generate brokerage support through telemarketing to firms
familiar with Integrity Capital and follow up through
various forms of
communication to familiarize those firms wit the attractiveness and investment
potential of IVOC.
2) Attract newsletter support from newsletter$, present IVOC to them in a
fashion that w ill
cause them to cover the stock,
3) Attract new investment into the stock of IVOC by creating 4 lead generation
campaign
using the internet, newsletters, telemarketing and other forms of advertising
4) Write and submit press releases (with assistance and approval from IVOC in a
timely
and effective manner as to capitalize on the most captive audiences,
5) E-mail programs to entire current database ad to all now leads as generated
through our
campaign.
6) Manage current shareholder database to keep investors current by answering
calls
from your call-forwarded toll free telephone line.
7) Enhance the market of IVOC by issuing investment opinions about IVOC to
international
news services.
8) Build the market of IVOC and restructure it If necessary to become Attractive
institutions
3
<PAGE>
and large shareholders.
Ill, PROGRAM TOOLS
Mailing Packet: Rework to communicate more effectively and appeal to
institutions and The media.
Newsletters: Contact 1200 newsletters by the and of the first quarter, who would
be most interested in following the stock . Write articles for them reprint and
publish. Generate a, significant media kit for them to pull from. Network to
locate research which will aid it the development of a so".
4
<PAGE>
Wa.
News releases- Integrity Capital will fix, mail and e-mail to Investors each of
IVOC's news releases which will also be posted on our web sits* and placed in
the corporate packet. IVOC is responsible fbr listing on the wire services.
Integrity Capital will submit news releases to Wire Services if your PR/BW
account number is provided to its. Integrity capital will write or assist in
writing and editing all news releases, with approval from IVOC. Integrity
Capital's telephones number will be 'listed on these news releases so that the
information flow is positioned exactly as it should be,
Advertising: Advertise in major financial publications such as The Wall St.
Journal, Barons Bull and Bear and Investors Business Daily. Integrity Capital
will create, copy, and edit all ads, IVOC will have the final approval All leads
will come through Integrity's 800# for prmewng. The choice of advertising media
shall be tip to Integrity Capital a to what wirework best for the program. Costs
associated with advertising are cot cowed by the contract fees.
Internet: Integrity will place IVOC information on its web site and affiliate
web sites. Create Chat
Line fbr the investors in popular chat rooms with links to any
existing sire. Initial updates
will be completed by the end of The first month, The Web site
will be enhanced to be
more attractive to institutions and Investors.
Media: Editors sod column writers will be contacted to be&
coverage of the company in their
newspapers. Any coverage will be added to the corporate packet
and Internet. This we will
require a media kit and an information flow that will be in
place.
Telemarketing: A call forwarded tall free line will capture incoming calls, We
will also contact our current database of followers to produce interest
Continued coverage oil die telephones will insure communication lines are open
to the investment community. Conference calls will be arranged with
shareholders, large brokers, and investors to facilitate larger buy tickets when
events warrant, such as quarterly earnings, etc.
Research: Integrity Capital will create 4-page research report, to send to
investors and the media,
The report will be included in all packets sent to Investors.
Updates shall be made
quarterly unless major events or fundamentals change.
5
<PAGE>
Integrity Capital, Inc.
60J Judson Street
Lynden Wa. 982,64P
IV. FEE STRUCTURE
Cash payments are to be made in advance. monthly, Integrity Capital will provide
a specific plan for each month. The proposed plan is open for discussion for
five working days after initial tax, Once an agreed upon program is reached, a
signature oil the plan from the Signing authority at the company will activate
the next months' program, Stock will be issued and cash payments made in
advance, monthly'.
IVOC would agree to pay according to the following schedule (Asper Exhibit A)
Tow Cost: 3 55M cub on a monthly basis for a minimum of three (3) months.
Integrity Capital requests stock and or options to be agreed upon a later date.
This contract will continue on a Mont to month basis after the three month
period is complete as per mutual agreement of both parties.
All external expenses including telephone, printing and postage will be billed
directly to IVOC. No further costs except as Set forth in this Article TV, IVOC
shall have no additional obligation to make any payments to Integrity Capital or
to assume any costs for any efforts by Integrity Capital hereunder. IVOC. No
further costs except as Identified by this contract will be billed to IVOC.
without prior approval,
V. ARBITRATION
joint Management: It is understood that IVOC and Integrity Capital shall
administer this contract so no disputes arise in the course of its fulfillment.
Integrity Capital is being incited to work as diligently as possible to provide
the necessary outcomes. Except for illegal activity, this contract will continue
as written for the full term.
Market Forces: It is the nature, of this business that forces acting on the
markets of companies, which are outside of Integrity Capitals control May hinder
the effectiveness of the campaign. Integrity Capita! is not
responsible for price level of the Stock at any time. it is understood that the
volume of the stock shall wax and wane as now investors come into play and older
ones leave. Therefore, cancellation of this contract cannot be due to the price
of the stock, or the volume of the issue or forces, which Integrity Capital does
not control.
Cancellation., This agreement may not be canceled except for cause for a period
of one year from the date here of. Cause includes failure to Perform any or the
obligations by this agreement, or the violation of the laws of any federal,
state or local jurisdiction applying to the issuance or sale of securities such
as the prohibition against the solicitation of a potential purchaser of IVOC
stock except by a broker/dealer properly holding all required My issued licenses
required by all applicable federal and state law.
The contract. in order to be effective, must go full tem. However, disputes do
arise and Integrity Capital wishes to avoid any interruptions of service while
this contract is in progress. Any disputes arising under this contract and or
transactions contemplated hereby will be resolved before the American
Arbitration Association in the city, county and State of Whatcom County,
Washington, in accordance with the commercial arbitration rules then in effect.
While the dispute resolution is progressing payment according to the schedule "I
be made to keep the continuity of the program,
6
<PAGE>
Inc.
Lqnaen . WXL 'qg') 6-P
This agreement constitutes the full and complete agreement between the parties,
and any prior agreements, statements, promises Or representations of any type
Whatsoever, whether oral or written, are merged herein and superseded by this
agreement, Ibis Agreement may not be modified or changed in any way except in
writing, signed by both IVOC ad Integrity Capital.
By signature affixed below, the parties, separately and together, agree to the
terms specified heroin, Integrity Capital, Inc. to provide mid services as
outlined herein is sections 1, 11, 111 and IVOC to provide payment of such
services As outlined in section V. Both parties agree to arbitration of any
disputes to arrive at a continued relationship as set forth in section Vt.
Signature will enact the relationship and set forth the parameters of said
relationship and an invoice 'Nil] be forthcoming. facsimile copies of contracts
and invoices are sufficient to enact. Hard copies wilt be delivered no later
than 3 0 days Into the contract period for both parties.
7
ADDENDUM
Dated: November 15, 1999
Whereas: The parties entered into that certain Investor
Relations Proposal dated November 15, 1999.
Whereas: The parties wish to modify said Agreement, the parties hereby agree as
follows:
With respects to cancellation, the parties agree that this Agreement may
be cancelled at any time by either party upon seven (7) days written
notice.
That the original Agreement provided that services would be rendered for a
minimum of three (3) months during the period, which was previously set
for one (1) year. The parties wish to clarify said issue and agree that
the agreement in question shall only be for a duration of three (3) months
and may be cancelled by iVoice.com (IVOC) at any time provided that seven
(7) days prior written notice is given.
Integrity Capital, Inc.
By: Paula Kane Date 11/15/99
--------------------------------
Authorizing Agent
IVoice.com
By: /s/ Jerry Mahoney Date 11/15/99
--------------------------------
Jerry Mahoney
6.4 Purchase Order with Municipal Traffic Department of Shelby County,
Tennessee
October 19, M
Mr. Maury Wessels
Manager of Information Systems
General Sessions cow Clerk's Office
140 Mavis, Room 13-14
1
<PAGE>
Meng* TN. 32103
Dear Mr. Wessels,
Re: IVR System
Communication Systems, Inc. and IVoice, Inc. want to assure you At the IVR
System proposed does not inherently produce a long lag time from inquiry to
answer response. ODBC connectivity does provide the technical means to provide
quick quay-answer capabilities just as a keyboard nuking a query receives a
response to the CRT.
C.S.I. and I Voice are willing to Mond Our warranty coverage in the following
manner: Should the IVR System produce unacceptable log time, ( 7 to 20
seconds.). from quay to answer from a condition created by the IVR System the
System will be corrected to an acceptable lag time or the System removed if no
fix is provided and A monies except shipping costs and installation refunded.
C.S. I. and I Voice do not warrant and are not responsible for log time which
occurs within your Network or Mainframe which shall be The responsibility of
Shelby County a well as any fix required.
We am confident that you will not encounter any lag time problems because of our
system. However, we offer this added assurance of this fact due to the proven
performance of our system and also to provide you with a mar* comfortable
feeling since there is no way to provide you with a live demonstration of your
application without building the IVR application.
Should you have any other questions do not hesitate contacting me. We took
forward to working with you on this project and hopefully many more in the
future.
Joseph R. Brown
TQ-A(- P, 02
2
<PAGE>
'PURCHASE ORDER
N2 12421
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3
<PAGE>
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4
6.5 Convertible Debentures
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
No. 10 $25,000.00
1
<PAGE>
-------------
12% SECURED CONVERTIBLE DEBENTURE
DUE DECEMBER 1, 2000
THIS DEBENTURE is issued by IVOICE.COM, INC., a Delaware corporation
having a principal place of business at 1230 Highway 34, Aberdeen, New Jersey
07747 (the "Company"), and is designated as the Company's 12% Secured
Convertible Debentures, due December 1, 2000 (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to AJW PARTNERS, LLC, or
its registered assigns (the "Holder"), the principal sum of Twenty-five and
no/100 ($25,000.00) Dollars, on December 1, 2000 or such earlier date as the
Debentures are required or permitted to be repaid as provided hereunder (the
"Maturity Date") and to pay interest to the Holder on such principal sum at the
rate of 12% per annum, payable on a quarterly basis on March 31, June 30,
September 30 and December 31 of each year while such Debentures are outstanding
(each an "Interest Payment Date") and on each Conversion Date (as defined
herein) for such principal amount, commencing on the earlier to occur of a
Conversion Date for such principal amount and January 1, 2000, in cash or shares
of Common Stock (as defined in Section 7). Subject to the terms and conditions
herein, the decision whether to pay interest hereunder in Common Stock or cash
shall be at the discretion of the Company. Interest shall accrue daily
commencing on the Original Issue Date (as defined in Section 7) until payment in
full of the principal sum, together with all accrued and unpaid interest and
other amounts which may become due hereunder, has been made. Any interest not
paid on any Interest Payment Date shall continue to accrue and shall be due and
payable upon conversion of the Debentures. Interest hereunder will be paid to
the Person (as defined in Section 7) in whose name this Debenture is registered
on the records of the Company regarding registration and transfers of Debentures
(the "Debenture Register"). All overdue accrued and unpaid interest shall entail
a late fee at the rate of 15% per annum (to accrue daily, from the date such
interest is due hereunder through and including the date of payment), payable in
cash. Not less than ten (10) Trading Days (as defined in Section 7) prior to
Interest Payment Date, the Company shall provide the Holder notice of its
intention to pay interest in cash or shares of Common Stock (the Company may
indicate in such notice that the election contained in such notice shall
continue for later periods until revised). If interest is paid in shares of
Common Stock, the number of shares of Common Stock issuable on account of such
interest shall equal the cash amount of such interest on such Interest Payment
Date divided by the Conversion Price (as defined below) on such date.
Notwithstanding anything to contrary set forth herein, for purposes of
determining the number of shares of Common Stock that are
2
<PAGE>
issuable as payment of interest hereunder, the Conversion Price shall not be
subject to any Floor to which the Conversion Price would otherwise be subject.
Notwithstanding anything to the contrary contained herein, the Company may
not issue shares of Common Stock in payment of interest on the principal amount
if:
(i) the number of shares of Common Stock at the time authorized,
unissued and unreserved for all purposes, or held as treasury stock, is
insufficient to pay interest hereunder in shares of Common Stock;
(ii) after the Interest Effectiveness Date (as defined in Section 7)
such shares (x) are not registered for resale pursuant to an effective
Underlying Shares Regulation A Filing (as defined in Section 7) and (y) may not
be sold without volume restrictions pursuant to Rule 144(k) promulgated under
the Securities Act (as defined in Section 7), as determined by counsel to the
Company pursuant to a written opinion letter, addressed to the Company's
transfer agent in the form and substance acceptable to the applicable Holder and
such transfer agent (if the Company is permitted and elects to pay interest in
shares of Common Stock under this clause (ii) prior to the Interest
Effectiveness Date and thereafter an Underlying Shares Regulation A Filing shall
be declared effective by the Commission (as defined in Section 7), the Company
shall, within three (3) Trading Days after the date of such declaration of
effectiveness, exchange such shares for shares of Common Stock that are free of
restrictive legends of any kind)
(iii) such shares are not listed or quoted on either the Nasdaq
National Market ("NASDAQ") or on the New York Stock Exchange, American Stock
Exchange or the Nasdaq SmallCap Market or OTC Bulletin Board (each, a
"Subsequent Market");
(iv) the Company has failed to timely satisfy its conversion
obligations hereunder; or
(v) the issuance of such shares would result in a violation of
Section 4(a)(ii)(A).
3
<PAGE>
This Debenture is subject to the following additional provisions:
Section 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.
Section 2 Prior to due presentment to the Company for transfer of
this Debenture, the Company and any agent of the Company may treat the Person
(as defined in Section 7) in whose name this Debenture is duly registered on the
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture is
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.
Section 3 Events of Default.
(a) "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment of the principal of, interest on or
liquidated damages in respect of, this Debenture, free of any claim of
subordination except in accordance with a subordination agreement executed
by the Holder, as and when the same shall become due and payable (whether
on the applicable Interest Payment Date, a Conversion Date or the Maturity
Date or by acceleration or otherwise);
(ii) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any
breach of any of, this Debenture, the Purchase Agreement, the Registration
Rights Agreement (as defined in Section 7) or the Security Agreements (as
defined in Section 7), and such failure or breach shall not have been
remedied within 30 days after the date on which notice of such failure or
breach shall have been given;
4
<PAGE>
(iii) the Company or any of its subsidiaries shall commence, or
there shall be commenced against the Company or any such subsidiary a case
under any applicable bankruptcy or insolvency laws as now or hereafter in
effect or any successor thereto, or the Company commences any other
proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction whether now or hereafter in effect relating to the
Company or any subsidiary thereof or there is commenced against the
Company or any subsidiary thereof any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 60 days; or the
Company or any subsidiary thereof is adjudicated insolvent or bankrupt; or
any order of relief or other order approving any such case or proceeding
is entered; or the Company or any subsidiary thereof suffers any
appointment of any custodian or the like for it or any substantial part of
its property which continues undischarged or unstayed for a period of 60
days; or the Company or any subsidiary thereof makes a general assignment
for the benefit of creditors; or the Company shall fail to pay, or shall
state that it is unable to pay, or shall be unable to pay, its debts
generally as they become due; or the Company or any subsidiary thereof
shall call a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or the Company or
any subsidiary thereof shall by any act or failure to act indicate its
consent to, approval of or acquiescence in any of the foregoing; or any
corporate or other action is taken by the Company or any subsidiary
thereof for the purpose of effecting any of the foregoing;
(iv) the Company shall default in any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement or other
instrument under which there may be issued, or by which there may be
secured or evidenced any indebtedness of the Company in an amount
exceeding ten thousand dollars ($10,000), whether such indebtedness now
exists or shall hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise become due and payable;
(v) the Common Stock shall be delisted from either the NASDAQ or a
Subsequent Market or shall be suspended from trading on the NASDAQ without
resuming trading and/or being relisted thereon or on a Subsequent Market
or having such suspension lifted, as the case may be, within two (2) days;
(vi) the Company shall be a party to any Change of Control
Transaction (as defined in Section 7), shall agree to sell or dispose all
or in excess of 50% of its assets in
5
<PAGE>
one or more transactions (whether or not such sale would constitute a
Change of Control Transaction), or shall redeem or repurchase more than a
de minimis number of shares of Common Stock or other equity securities of
the Company (other than redemptions of Underlying Shares (as defined in
Section 7));
(vii) an Underlying Shares Regulation A Filing shall not have been
declared effective by the Commission on or prior to the 150th day after
the date hereof (the "Effectiveness Date").
(viii) if, during the Effectiveness Period, the effectiveness of the
Underlying Shares
Regulation A Filing lapses for any reason for more than an aggregate of
five (5) Trading Days (which need not be consecutive days), or the Holder
shall not be permitted to resell Registrable Securities under the
Underlying Shares Regulation A Filing for more than an aggregate of five
(5) Trading Days (which need not be consecutive days);
(ix) an Event (as hereinafter defined) shall not have been cured to
the satisfaction of the Holder prior to the expiration of thirty (30) days
from the Event Date (as defined below) relating thereto (other than an
Event resulting from a failure of an Underlying Shares Regulation A Filing
to be declared effective by the Commission on or prior to the
Effectiveness Date, which shall be covered by Section 3(a)(vii));
(xi) the Company shall fail for any reason to deliver certificates
to a Holder prior to the tenth (10th) day after a Conversion Date pursuant
to Section 4(b) or the Company shall provide notice to the Holder,
including by way of public announcement, at any time, of its intention not
to comply with requests for conversions of any Debentures in accordance
with the terms hereof;
(xii) the Company shall fail for any reason to
deliver the payment in cash pursuant to a Buy-In
within seven (7) days after notice is deemed
delivered hereunder;
6
<PAGE>
(xiii) the Company shall issue any shares of Common Stock or Common
Stock Equivalents (as defined herein) in connection with or to any present
or future lender or creditor of the Company or any subsidiary thereof;
(xiv) the Company shall agree to pay or settle any litigation or
claim for an amount in stock or cash that exceeds by more than $25,000 the
insurance coverage for such litigation or claim; or
(xv) the Company shall restructure any material portion of its
present or future debt obligations or payables.
(b) If any Event of Default occurs and is continuing, the full
principal amount of this Debenture (and, at the Holder's option, all other
Debentures then held by such Holder), together with interest and other amounts
owing in respect thereof, to the date of acceleration shall become, immediately
due and payable in cash. The aggregate amount payable upon an Event of Default
shall be equal to the sum of (i) the Optional Prepayment Price (as defined in
Section 7) plus (ii) the product of (A) the number of Underlying Shares issued
in respect of conversions hereunder or as payment of interest hereunder, in
either case, within thirty (30) days of the date of a declaration of an Event of
Default and then held by the Holder and (B) the Per Share Market Value (as
defined in Section 7) on the date prepayment is due or the date the full
prepayment price is paid, whichever is greater. Interest shall accrue on the
prepayment amount hereunder from the seventh day after such amount is due (being
the date of an Event of Default) through the date of prepayment in full thereof
at the rate of 15% per annum. All Debentures and Underlying Shares for which the
full repayment price hereunder shall have been paid in accordance herewith shall
be promptly surrendered to or as directed by the Company. The Holder need not
provide and the Company hereby waives any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without expiration of any
grace period enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Such declaration may be
rescinded and annulled by Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
Section 4. Conversion.
7
<PAGE>
(a) (i) Conversion at Option of Holder. This Debenture shall be
convertible into shares of Common Stock at the option of the Holder, in whole or
in part at any time and from time to time, after the Original Issue Date
(subject to the limitations on conversion set forth in Section 4(a)(ii) hereof).
The number of shares of Common Stock issuable upon a conversion hereunder shall
be determined by dividing the outstanding principal amount of this Debenture to
be converted, plus all accrued but unpaid interest thereon, by the Conversion
Price. The Holder shall effect conversions by surrendering the Debentures (or
such portions thereof) to be converted, together with the form of conversion
notice attached hereto as Exhibit A (a "Conversion Notice") to the Company. Each
Conversion Notice shall specify the principal amount of Debentures to be
converted and the date on which such conversion is to be effected, which date
may not be prior to the date such Conversion Notice is deemed to have been
delivered hereunder (a "Conversion Date"). If no Conversion Date is specified in
a Conversion Notice, the Conversion Date shall be the date that such Conversion
Notice is deemed delivered hereunder. Subject to Section 4(b), each Conversion
Notice, once given, shall be irrevocable. If the Holder is converting less than
all of the principal amount represented by the Debenture(s) tendered by the
Holder with the Conversion Notice, or if a conversion hereunder cannot be
effected in full for any reason, the Company shall honor such conversion to the
extent permissible hereunder and shall promptly deliver to such Holder (in the
manner and within the time set forth in Section 4(b)) a new Debenture for such
principal amount as has not been converted.
(ii) Certain Conversion Restrictions
(A)(1) A Holder may not convert Debentures or receive shares
of Common Stock as payment of interest hereunder to the extent such conversion
or receipt of such interest payment would result in the Holder, together with
any affiliate thereof, beneficially owning (as determined in accordance with
Section 13(d) of the Exchange Act (as defined in Section 7) and the rules
promulgated thereunder) in excess of 4.999% of the then issued and outstanding
shares of Common Stock, including shares issuable upon conversion of, and
payment of interest on, the Debentures held by such Holder after application of
this Section. The Holder shall have the sole authority and obligation to
determine whether the restriction contained in this Section applies and to the
extent that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the principal amount of
Debentures are convertible shall be in the sole discretion of the Holder. The
provisions of this Section may be waived by a Holder (but only as to itself and
not to any other Holder) upon not less than 5 days prior notice to the Company.
Other Holders shall be unaffected by any such waiver.
8
<PAGE>
(2) A Holder may not convert Debentures or receive shares of
Common Stock as payment of interest hereunder to the extent such conversion or
receipt of such interest payment would result in the Holder, together with any
affiliate thereof, beneficially owning (as determined in accordance with Section
13(d) of the Exchange Act and the rules promulgated thereunder) in excess of
9.999% of the then issued and outstanding shares of Common Stock, including
shares issuable upon conversion of, and payment of interest on, the Debentures
held by such Holder after application of this Section. The Holder shall have the
sole authority and obligation to determine whether the restriction contained in
this Section applies and to the extent that the Holder determines that the
limitation contained in this Section applies, the determination of which portion
of the principal amount of Debentures are convertible shall be in the sole
discretion of the Holder. The provisions of this Section may be waived by a
Holder (but only as to itself and not to any other Holder) upon not less than 15
days prior notice to the Company. Other Holders shall be unaffected by any such
waiver.
(B) If the Common Stock is then listed for trading on the
NASDAQ or the Nasdaq SmallCap Market and the Company has not obtained the
Shareholder Approval (as defined below), then the Company may not issue in
excess of [ ] shares of Common Stock upon conversions of Debentures or as
payment of interest thereon in shares of Common Stock, which number shall be
subject to adjustment pursuant to Sections 4(c)(ii), (iii), (v), (vi) and (x)
(such number of shares, the "Issuable Maximum"). The Issuable Maximum equals
19.999% of the number of shares of Common Stock outstanding immediately prior to
the closing of transactions set forth in the Purchase Agreement. If on any
Conversion Date (A) the Common Stock is listed for trading on the NASDAQ or the
Nasdaq SmallCap Market, (B) the Conversion Price then in effect is such that the
aggregate number of shares of Common Stock that would then be issuable upon
conversion in full of all then outstanding Debentures and as payment of interest
thereon in shares of Common Stock, together with any shares of Common Stock
previously issued upon conversion of Debentures and as payment of interest
thereon, would exceed Issuable Maximum, and (C) the Company shall not have
previously obtained the vote of shareholders (the "Shareholder Approval"), if
any, as may be required by the applicable rules and regulations of the Nasdaq
Stock Market (or any successor entity) applicable to approve the issuance of
shares of Common Stock in excess of the Issuable Maximum pursuant to the terms
hereof, then the Company shall issue to the Holder so requesting a conversion a
number of shares of Common Stock equal to the Issuable Maximum and, with respect
to the remainder of the principal amount of Debentures then held by such Holder
for which a conversion in accordance with the Conversion Price would result in
an issuance of shares of Common Stock in excess of the Issuable Maximum (the
"Excess Principal"), the converting Holder shall have the option to require the
Company to either (1) use its best efforts to obtain the Shareholder Approval
applicable to such issuance as soon as is possible, but in any event not later
than the 75th day after such request, or (2) pay cash to the converting Holder
in an amount equal to the Optional Prepayment Amount for the Excess Principal.
If the Company fails to pay the Optional Prepayment Amount in full pursuant to
this Section, the Company will pay interest thereon at a
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rate of 15% per annum to the converting Holder, accruing daily from the
Conversion Date until such amount, plus all such interest thereon, is paid in
full.
(b) (i) Not later than five (5) Trading Days after any Conversion
Date, the Company will deliver to the Holder (i) a certificate or certificates
which shall be free of restrictive legends and trading restrictions representing
the number of shares of Common Stock being acquired upon the conversion of
Debentures (subject to the limitations set forth in Section 4(a)(ii) hereof),
(ii) Debentures in a principal amount equal to the principal amount of
Debentures not converted, (iii) a bank check in the amount of accrued and unpaid
interest (if the Company has elected or is required to pay accrued interest in
cash), and (iv) if the Company has elected and is permitted hereunder to pay
accrued interest in shares of Common Stock, certificates, which shall be free of
restrictive legends and trading restrictions (other than those required by
Section 3.1 (b) of the Purchase Agreement), representing such shares of Common
Stock; provided, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of the principal
amount of Debentures until Debentures are delivered for conversion to the
Company, or the Holder notifies the Company that such Debentures have been lost,
stolen or destroyed and provides a bond (or other adequate security) reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection therewith. The Company shall, upon request of the Holder, if
available, use its best efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions. If in the case of any Conversion
Notice such certificate or certificates, including for purposes hereof, any
shares of Common Stock to be issued on the Conversion Date on account of accrued
but unpaid interest hereunder, are not delivered to or as directed by the
applicable Holder by the third (3rd) Trading Day after the Conversion Date, the
Holder shall be entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return the
certificates representing the principal amount of Debentures tendered for
conversion.
(ii) If the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 4(b)(i), including for purposes
hereof, any shares of Common Stock to be issued on the Conversion Date on
account of accrued but unpaid interest hereunder, by the fifth (5th) Trading Day
after the Conversion Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, $250.00 for each Trading Day after such
fifth (5th) Trading Day until such certificates are delivered. Nothing herein
shall limit a Holder's right to pursue actual damages for the Company's failure
to deliver certificates representing shares of Common Stock upon conversion
within the period specified herein and such Holder shall have the right to
pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief. The
exercise of any such
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<PAGE>
rights shall not prohibit the Holders from seeking to enforce damages pursuant
to any other Section hereof or under applicable law. Further, if the Company
shall not have delivered any cash due in respect of conversions of Debentures or
as payment of interest thereon by the fifth (5th) Trading Day after the
Conversion Date, the Holder may, by notice to the Company, require the Company
to issue shares of Common Stock pursuant to Section 4(c), except that for such
purpose the Conversion Price applicable thereto shall be the lesser of the
Conversion Price on the Conversion Date and the Conversion Price on the date of
such Holder demand. Any such shares will be subject to the provision of this
Section.
(iii) In addition to any other rights available to the Holder,
if the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 4(b)(i), including for purposes hereof, any shares of Common
Stock to be issued on the Conversion Date on account of accrued but unpaid
interest hereunder, by the fifth (5th) Trading Day after the Conversion Date,
and if after such fifth (5th) Trading Day the Holder purchases (in an open
market transaction or otherwise) Common Stock to deliver in satisfaction of a
sale by such Holder of the Underlying Shares which the Holder anticipated
receiving upon such conversion (a "Buy-In"), then the Company shall (A) pay in
cash to the Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the
product of (1) the aggregate number of shares of Common Stock that such Holder
anticipated receiving from the conversion at issue multiplied by (2) the market
price of the Common Stock at the time of the sale giving rise to such purchase
obligation and (B) at the option of the Holder, either reissue Debentures in
principal amount equal the principal amount of the attempted conversion or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its delivery requirements under
Section 4(b)(i). For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of Debentures with respect to which the market price of the
Underlying Shares on the date of conversion was a total of $10,000 under clause
(A) of the immediately preceding sentence, the Company shall be required to pay
the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
Notwithstanding anything contained herein to the contrary, if a Holder requires
the Company to make payment in respect of a Buy-In for the failure to timely
deliver certificates hereunder and the Company timely pays in full such payment,
the Company shall not be required to pay such Holder liquidated damages under
Section 4(b)(ii) in respect of the certificates resulting in such Buy-In.
(c) (i) The conversion price (the "Conversion Price") in effect on
any Conversion Date shall be 50% of the average of the bid price during the
twenty (20) Trading Days immediately preceding the applicable Conversion Date,
provided, that such twenty (20) Trading Day period shall be extended for the
number of Trading Days during such period in which (A)
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<PAGE>
trading in the Common Stock is suspended by the NASDAQ or a Subsequent Market on
which the Common Stock is then listed, or (B) after the date declared effective
by the Commission, the Underlying Shares Regulation A Filing is not effective,
or (C) after the date declared effective by the Commission, the Prospectus
included in the Underlying Shares Regulation A Filing may not be used by the
Holder for the resale of Underlying Shares. If (a) an Underlying Shares
Regulation A Filing is not filed on or prior to the Filing Date (as defined
under the Registration Rights Agreement) (if the Company files such Underlying
Shares Regulation A Filing without affording the Holder the opportunity to
review and comment on the same as required by Section 3(a) of the Registration
Rights Agreement, the Company shall not be deemed to have satisfied this clause
(a)), or (b) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 12d1-2 promulgated under the Exchange Act,
within five (5) days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that an Underlying Shares
Regulation A Filing will not be "reviewed," or not subject to further review, or
(c) the Underlying Shares Regulation A Filing is not declared effective by the
Commission on or prior to the Effectiveness Date, or (d) such Underlying Shares
Regulation A Filing is filed with and declared effective by the Commission but
thereafter ceases to be effective as to all Registrable Securities at any time
prior to the expiration of the Effectiveness Period (as defined in the
Registration Rights Agreement), without being succeeded within ten (10) days by
an amendment to such Underlying Shares Regulation A Filing or by a subsequent
Underlying Shares Regulation A Filing filed with and declared effective by the
Commission, or (e) the Common Stock shall be delisted or suspended from trading
on the NASDAQ or on any Subsequent Market for more than three (3) Business Days
(which need not be consecutive days), (f) the conversion rights of the Holders
are suspended for any reason or (g) an amendment to the Underlying Shares
Regulation A Filing is not filed by the Company with the Commission within ten
(10) days of the Commission's notifying the Company that such amendment is
required in order for the Underlying Shares Regulation A Filing to be declared
effective (any such failure or breach being referred to as an "Event," and for
purposes of clauses (a), (c), (f) the date on which such Event occurs, or for
purposes of clause (b) the date on which such five (5) day period is exceeded,
or for purposes of clauses (d) and (g) the date which such 10 day-period is
exceeded, or for purposes of clause (e) the date on which such three (3)
Business Day-period is exceeded, being referred to as "Event Date"), then, on
the Event Date and on each monthly anniversary thereof until such time as the
applicable Event is cured, the Company shall pay to the Holder 2.5% of the
aggregate principal amount of the Debentures then outstanding in cash, as
liquidated damages and not as penalty. The provisions of this Section are not
exclusive and shall in no way limit the Company's obligations under the
Registration Rights Agreement.
(ii) If the Company, at any time while any Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c) combine
outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by
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<PAGE>
reclassification of shares of the Common Stock any shares of capital stock of
the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding after such
event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
(iii) INTENTIONALLY OMITTED
(iv) If the Company or any subsidiary thereof, as applicable
with respect to Common Stock Equivalents (as defined below), at any time while
Debentures are outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities or debt that is convertible into or
exchangeable for shares of Common Stock ("Common Stock Equivalents") entitling
any Person to acquire shares of Common Stock at a price per share less than the
Conversion Price, then the Conversion Price shall be multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such shares of Common Stock or such Common
Stock Equivalents plus the number of shares of Common Stock which the offering
price for such shares of Common Stock or Common Stock Equivalents would purchase
at the Conversion Price, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to such issuance
plus the number of shares of Common Stock so issued or issuable, provided, that
for purposes hereof, all shares of Common Stock that are issuable upon
conversion, exercise or exchange of Common Stock Equivalents shall be deemed
outstanding immediately after the issuance of such Common Stock Equivalents.
Such adjustment shall be made whenever such shares of Common Stock or Common
Stock Equivalents are issued.
(v) INTENTIONALLY OMITTED
(vi) In case of any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holders shall have the right
thereafter to, at their option, (A) convert the then outstanding principal
amount, together with all accrued but unpaid interest and any other amounts then
owing hereunder in respect of this Debenture only into the shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of
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<PAGE>
the Common Stock following such reclassification or share exchange, and the
Holders of the Debentures shall be entitled upon such event to receive such
amount of securities, cash or property as the shares of the Common Stock of the
Company into which the then outstanding principal amount, together with all
accrued but unpaid interest and any other amounts then owing hereunder in
respect of this Debenture could have been converted immediately prior to such
reclassification or share exchange would have been entitled or (B) require the
Company to prepay the aggregate of its outstanding principal amount of
Debentures, plus all interest and other amounts due and payable thereon, at a
price determined in accordance with Section 3(b). The entire prepayment price
shall be paid in cash. This provision shall similarly apply to successive
reclassifications or share exchanges.
(vii) All calculations under this Section 4 shall be made to
the nearest 1/100th of a cent or share, as the case may be.
(viii) Whenever the Conversion Price is adjusted pursuant to
any of Section 4(c)(ii) - (v), the Company shall promptly mail to each Holder a
notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
(ix) If (A) the Company shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share of exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of the Debentures, and shall
cause to be mailed to the Holders at their last addresses as they shall appear
upon the stock books of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become
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<PAGE>
effective or close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange;
provided, however, that the failure to mail such notice or any defect therein or
in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice. Holders are entitled to convert
Debentures during the 20-day period commencing the date of such notice to the
effective date of the event triggering such notice.
(x) In case of any (1) merger or consolidation of the Company
with or into another Person that would constitute a Change of Control
Transaction, or (2) sale by the Company of more than one-half of the assets of
the Company (on an as valued basis) in one or a series of related transactions,
or (3) tender or other offer or exchange (whether by the Company or another
Person) pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, stock, cash or property of the
Company or another Person; then a Holder shall have the right to (A) if
permitted under Section 3(b) hereof, exercise its rights of prepayment under
Section 3(b) with respect to such event, (B) convert its aggregate principal
amount of Debentures then outstanding into the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such merger, consolidation or sale, and such Holder shall
be entitled upon such event or series of related events to receive such amount
of securities, cash and property as the shares of Common Stock into which such
aggregate principal amount of Debentures could have been converted immediately
prior to such merger, consolidation or sales would have been entitled, (C) in
the case of a merger or consolidation, (x) require the surviving entity to issue
shares of convertible preferred stock or convertible debentures with such
aggregate stated value or in such face amount, as the case may be, equal to the
aggregate principal amount of Debentures then held by such Holder, plus all
accrued and unpaid interest and other amounts owing thereon, which newly issued
shares of preferred stock or debentures shall have terms identical (including
with respect to conversion) to the terms of this Debenture (except, in the case
of preferred stock, as may be required to reflect the differences between equity
and debt) and shall be entitled to all of the rights and privileges of a Holder
of Debentures set forth herein and the agreements pursuant to which the
Debentures were issued (including, without limitation, as such rights relate to
the acquisition, transferability, registration and listing of such shares of
stock other securities issuable upon conversion thereof), and (y) simultaneously
with the issuance of such convertible preferred stock or convertible debentures,
shall have the right to convert such instrument only into shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such merger or consolidation, or (D) in the
event of an exchange or tender offer or other transaction contemplated by clause
(3) of this Section, tender or exchange its aggregate principal amount of
Debentures for such securities, stock, cash and other property receivable upon
or deemed to be held by holders of Common Stock that have tendered or exchanged
their shares of Common Stock following such tender or exchange, and such Holder
shall be entitled upon such exchange or tender to receive such amount of
securities, cash and
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<PAGE>
property as the shares of Common Stock into which such aggregate principal
amount of Debentures could have been converted (taking into account all then
accrued and unpaid dividends) immediately prior to such tender or exchange would
have been entitled as would have been issued. In the case of clause (C), the
conversion price applicable for the newly issued shares of convertible preferred
stock or convertible debentures shall be based upon the amount of securities,
cash and property that each share of Common Stock would receive in such
transaction and the Conversion Price in effect immediately prior to the
effectiveness or closing date for such transaction. The terms of any such
merger, sale, consolidation, tender or exchange shall include such terms so as
continue to give the Holders of Debentures the right to receive the securities,
cash and property set forth in this Section upon any conversion or redemption
following such event. This provision shall similarly apply to successive such
events.
(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock solely for
the purpose of issuance upon conversion of the Debentures and payment of
interest on the Debentures, each as herein provided, free from preemptive rights
or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of the Common Stock as shall
(subject to any additional requirements of the Company as to reservation of such
shares set forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 4(b)) upon the conversion of the
outstanding principal amount of the Debentures and payment of interest
hereunder. The Company covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly and validly authorized, issued and fully
paid, nonassessable and, if the Underlying Shares Regulation A Filing has been
declared effective under the Securities Act, registered for public sale in
accordance with such Underlying Shares Regulation A Filing.
(e) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of the Common Stock,
but may if otherwise permitted, make a cash payment in respect of any final
fraction of a share based on the Per Share Market Value at such time. If the
Company elects not, or is unable, to make such a cash payment, the Holder shall
be entitled to receive, in lieu of the final fraction of a share, one whole
share of Common Stock.
(f) The issuance of certificates for shares of the Common Stock on
conversion of the Debentures shall be made without charge to the Holders thereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate
16
<PAGE>
upon conversion in a name other than that of the Holder of such Debentures so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries to be
provided by the Holders of the Debentures hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to the Company, at
1230 Highway 34, Aberdeen, New Jersey 07747 facsimile number (732) 441-7700),
attention Chief Executive Officer, or such other address or facsimile number as
the Company may specify for such purposes by notice to the Holders delivered in
accordance with this Section, with a copy to The N.I.R. Group, LLC, 155 First
Street, Suite B, Mineola, New York 11501 (facsimile number (516) 739-7115),
attention CSR. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to each Holder of
the Debentures at the facsimile telephone number or address of such Holder
appearing on the books of the Company, or if no such facsimile telephone number
or address appears, at the principal place of business of the holder. Any notice
or other communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section prior to 8:00 p.m. (New York City time), (ii) the date
after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section later than
8:00 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York
City time) on such date, (iii) four days after deposit in the United States
mail, (iv) the Business Day following the date of mailing, if send by nationally
recognized overnight courier service, or (v) upon actual receipt by the party to
whom such notice is required to be given.
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Section 5. Optional Prepayment.
(a) The Company shall have the right, exercisable at any time upon
twenty (20) Trading Days prior written notice to the Holders of the Debentures
to be prepaid and accompanied by any waiver required by holders of senior
indebtedness of the Company for such prepayment (the "Optional Prepayment
Notice"), to prepay, all or any portion of the outstanding principal amount of
the Debentures which have not previously been repaid or for which Conversion
Notices have not previously been delivered. The prepayment price applicable to
such prepayments shall equal the Optional Prepayment Price (as defined in
Section 7) and shall be paid in cash. Any such prepayment shall be free of any
claim of subordination. The Holders shall have the right to tender, and the
Company shall honor, Conversion Notices delivered prior to the expiration of the
twentieth (20th) Trading Day after receipt by the Holders of an Optional
Prepayment Notice for such Debentures (the 20th Trading Day after receipt by the
Holders of an Optional Prepayment Notice is referred to herein as the "Optional
Prepayment Date").
(b) If any portion of the Optional Prepayment Price shall not be
paid by the Company by the second (2nd) Business Day following the Optional
Prepayment Date, the Optional Prepayment Price shall be increased by 15% per
annum (to accrue daily) until paid (which amount shall be paid as liquidated
damages and not as a penalty). In addition, if any portion of the optional
Prepayment Price remains unpaid through the expiration of the Optional
Prepayment Date, the Holder subject to such prepayment may elect by written
notice to the Company to either (x) demand conversion in accordance with the
formula and the time period therefor set forth in Section 4 of any portion of
the principal amount of Debentures for which the Optional Prepayment Price, plus
accrued liquidated damages thereof, has not been paid in full (the "Unpaid
Prepayment Principal Amount"), in which event the applicable Per Share Market
Value shall be the lower of the Per Share Market Value calculated on the
Optional Prepayment Date and the Per Share Market Value as of the Holder's
written demand for conversion, or (y) invalidate ab initio such optional
redemption, notwithstanding anything herein contained to the contrary. If the
Holder elects option (x) above, the Company shall within three (3) Trading Days
such election is deemed delivered hereunder to the Holder the shares of Common
Stock issuable upon conversion of the Unpaid Prepayment Principal Amount subject
to such conversion demand and otherwise perform its obligations hereunder with
respect thereto; or, if the Holder elects option (y) above, the Company shall
promptly, and in any event not later than three (3) Trading Days from receipt of
notice of such election, return to the Holder new Debentures for the full Unpaid
Prepayment Principal Amount. If, upon an election under option (x) above, the
Company fails to deliver the shares of Common Stock issuable upon conversion of
the Unpaid Prepayment Principal Amount within the time period set forth in this
Section, the Company shall pay to the Holder in cash, as liquidated damages and
not as a penalty, $2,500 per day until the Company delivers such Common Stock to
the Holder.
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Section 6. INTENTIONALLY OMITTED
Section 7. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York or the State of California are authorized or required by law
or other government action to close.
"Change of Control Transaction" means the occurrence of any of (i)
an acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in
excess of 33% of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's board of directors which is
not approved by those individuals who are members of the board of directors on
the date hereof in one or a series of related transactions, (iii) the merger of
the Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions, unless following such transaction, the holders of the Company's
securities continue to hold at least 33% of such securities following such
transaction or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Class A Common Stock, $.01 par value per
share, of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
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"Interest Effectiveness Date" means the earlier to occur of (x) the
Effectiveness Date and (y) the date that an Underlying Shares Regulation A
Filing is declared effective by the Commission.
"Optional Prepayment Price" for any Debentures shall equal 120% of
principal amount of Debentures to be prepaid, plus all accrued and unpaid
interest thereon.
"Original Issue Date" shall mean the date of the first issuance of
the Debentures regardless of the number of transfers of any Debenture and
regardless of the number of instruments which may be issued to evidence such
Debenture.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the NASDAQ or on
such Subsequent Market on which the Common Stock is then listed or quoted, or if
there is no such price on such date, then the closing bid price on the NASDAQ or
on such Subsequent Market on the date nearest preceding such date, or (b) if the
Common Stock is not then listed or quoted on the NASDAQ or a Subsequent Market,
the closing bid price for a share of Common Stock in the over-the-counter
market, as reported by the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (c) if the Common Stock is not then reported
by the National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the "Pink
Sheet" quotes for the relevant conversion period, as determined in good faith by
the Holder, or (d) if the Common Stock is not then publicly traded the fair
market value of a share of Common Stock as determined by an Appraiser selected
in good faith by the Holders of a majority in interest of the principal amount
of Debentures then outstanding.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Secured Convertible Debenture
Purchase Agreement, dated as of the Original Issue Date, between the Company and
the original Holder of Debentures, as amended, modified or supplemented from
time to time in accordance with its terms.
20
<PAGE>
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, between the Company and the
original Holder of Debentures, as amended, modified or supplemented from time to
time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreements" means the Security Agreement, of even date
herewith between the Company and the original Holder of Debentures, as amended
modified or supplemented from time to time in accordance with its terms.
"Trading Day" means (a) a day on which the Common Stock is traded on
the NASDAQ or on such Subsequent Market on which the Common Stock is then listed
or quoted, or (b) if the Common Stock is not listed on the NASDAQ or a
Subsequent Market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, however, that in the event that
the Common Stock is not listed or quoted as set forth in (a), (b) and (c)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of Debentures or as payment of interest in accordance with the terms
hereof.
"Underlying Shares Regulation A Filing" means a filing pursuant to
Regulation a meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares and
naming the Holder as a "selling stockholder" thereunder.
Section 8. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and
21
<PAGE>
unconditional, to pay the principal of, interest and liquidated damages (if
any) on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct obligation of the
Company. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein. The Company may only
voluntarily prepay the outstanding principal amount on the Debentures in
accordance with Section 5 hereof.
Section 9. This Debenture shall not entitle the Holder to any of the
rights of a stockholder of the Company, including without limitation, the right
to vote, to receive dividends and other distributions, or to receive any notice
of, or to attend, meetings of stockholders or any other proceedings of the
Company, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.
Section 10. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
Section 11. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company and the Holders hereby irrevocably submit
to the exclusive jurisdiction of the state and federal courts sitting in the
County of Nassau, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, or that such suit, action or proceeding is improper. Each of the
Company and the Holder hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
receiving a copy thereof sent to the Company at the address in effect for
notices to it under this instrument and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.
Section 12. Any waiver by the Company or the Holder of a breach of
any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure
22
<PAGE>
of the Company or the Holder to insist upon strict adherence to any term of this
Debenture on one or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Debenture. Any waiver must be in writing.
Section 13. If any provision of this Debenture is invalid, illegal
or unenforceable, the balance of this Debenture shall remain in effect, and if
any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
Section 14. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.
Section 15. The payment obligations under this Debenture and the
obligations of the Company to the Holder arising upon the conversion of all or
any of the Debentures in accordance with the provisions hereof are secured
pursuant to the Security Agreements.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
23
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Secured Convertible
Debenture to be duly executed by a duly authorized officer as of the date first
above indicated.
IVOICE.COM, INC.
By:________________________________
Name:
Title:
Attest:
By:___________________________
Name:
Title:
No. 10
24
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert the attached Debenture into shares of
Class A Common Stock, no par value per share (the "Common Stock"), of
____________________(the "Company") according to the conditions hereof, as of
the date written below. If shares are to be issued in the name of a person other
than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations: ________________________________________________
Date to Effect Conversion
________________________________________________
Principal Amount of Debentures to be Converted
Number of shares of Common Stock to be Issued
________________________________________________
Applicable Conversion Price
________________________________________________
Signature
25
<PAGE>
________________________________________________
Name
________________________________________________
Address
26
11 Legal Opinion of Glenn Bagwell
MAY-09-00 07:11 AM P.03
JUN-i4-&S 18,12 FROM- 101 PACE 1/4
Law Offices of H. Glenn Bagwell, Jr.
H. Glenn Bagwell, Jr.
3005 Anderson Drive, Suite 204
Raleigh, North Carolina 27609
Tdephone, 919.785-3113 rakWkr. 919.785.3116
June 14,1999
Mr. Kevin Kopaunik, President
Fidelity Transfer Company
1800 South West Temple, Suite 301-53 (Four me$ total)
1
<PAGE>
Salt Lake City, Utah 84115
[VIA FACSUVELE'801.466.41223
Confirmation Number. 80 1 -484,7222
Re: Issuance of Common Stock of iVoice.com, Inc. (OTC: BB Trading Symbol
"IVOC") Pursuant to Rule 504 of Regulation D
Dear Iva. Kopaunik:
I IVoice.com Inc., a Delaware Corporation (the "Company"), has requested me, to
deliver to you this opinion, solely in connection with your due diligence
investigation of-the Company for purposes of issuing up to 1,000,000 shams of
common stock of the Company, $.01 par value per share (the "Shares"), to Dot Com
Funding, Inc. (the "Shareholder"), pursuant to certain subscription/purchase
agreements between the Company and the Shareholder dated as of June 14, 1999, a
copy of which will be provided by the Company at your request (collectively, the
"Agreement") The Agreement calls for the Sham to be issued pursuant to Rule 504
of Regulation D promulgated under the Securities Act of 1933, as amended (the
"1933 Act"), and applicable exemptions from registration under the Colorado
Revised Statutes (1998) without restrictive legend of any kind. The Company
%rill forward to you under separate cover an
instruction letter and Directors' resolution as necessary re hares
arding issuance of the S
As you know, the US- Securities mid Exchange Commission ("SEC") revised Rule 504
of Regulation D to prohibit issuance of non-legended securities under We 504
except in two circumstances, the second of which, relevant for purposes of this
opinion letter, permits the issuance of non-legended securities if the other
requirements of Rule 504 are met and if the securities am offered and sold
pursuant to a state exemption from registration which permits general
solicitation and advertising so long as sales are made only to accredited
investors.
Colorado Revised Statutes Section 308(l)(p) and Regulation 51-3.13.B and 51-3.19
permit offering and solicitation in the state of Colorado, so long as sales are
made only to accredited investors, The Shareholder has represented in the
Agreement that it is a Colorado corporation and each party has represented that
there was no advertising with respect to the offering of securities contemplated
by the Agreement, that the Company contacted the Shareholder directly about the
said transactions, and that each party has acted in accordance with Rule 504 and
with the applicable ruler, and regulations of the Colorado Revised Statutes
(1998).
2
<PAGE>
MAY-09-00 07:11 AM
Jme 14,1999
Lwer to ~&. Kopaunik
Page Two
For purposes of rendering this opinion, i have examined and relied upon the
Agreement, along with such other documents, agreements and records as I deemed
necessary to render the opinions set forth below. In addition I have materially
relied upon the written certifications of certain executive officer(s) of the
Company dated as of the date hereof
In connection with this examination. I have assumed the following. (i) that the
Agree- has been fully and properly executed by each of the parties thereto in
the same form as the forms which I have examined; (ii) the genuineness of all
signatures, the legal capacity of neural persons, the authenticity and accuracy
of all documents submitted to me as originals, and the, conformity to originals
of all documents submitted to me as copies (including facsimiles); (iii) that
each of the Agreements has been duly and validly authorized, executed and
delivered by the party or parties thereto, on the dates noted thereon; (iv) that
each of the Agreements constitutes the valid and binding agreement of the party
or parties thereto, enforceable against such party or parties in accordance with
the Agreements' terms; and (v) that written certifications to me by certain
executive officer(s) of the Company dated as of June. 14, 1999, were true and
correct when made and as of the date of this letter.
I have also assumed the following matters to be factual:
I. From the Company's inception through the date of this letter, the Company
has made no registered offers or sales of securities except to officers and
directors, and no unregistered offers and Wes of securities based on any
exemption from registration promulgated pursuant to Section 3(b) of the 1933 Act
except pursuant to Rule 504 of Regulation D promulgated under the 1933 Act;
2. Within the thirteen (13) month period commencing June 1, 1998 (the "Exemption
Window'), the Company has not and shall not have made any offers or sales of
securities in the United States unless such offers or sales of securities "I
have been registered under the 1933 Act and under any applicable state
securities laws; provided, however, that the Company may have made additional
sales of securities within the Exemption Window pursuant to Role 504 of
Regulation D (and corresponding state exemptions from registration,, if
available) to the extent that the aggregate offering price, of prior sales and
the ' sales under the Agreement does not exceed a total offering price of
US$1,000,000.00. Should the Company have made any registered offerings or sales
of securities within the Exemption Window. such offerings and Wes were made on
ter= that shall not cause it/them to be subject to "integration," within the
meaning of Rule: 502 of Regulation D, with any prior offering by the Company,
including that reflected in the Agreement;
3
<PAGE>
Letter to Mr. Kopaunik
Page Tbree
I No general solicitation or advertising was conducted by the Company in
connection with the offering of any of the Sham as contemplated by the
Agreement,
4. At no time has the Company been (1) subject to the reporting requirements of
Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or (2) an "investment company" within the, meaning of the federal
securities laws;
5. Neither the Company, not any predecessor of the Company, nor any director or
officer of the Company, nor any beneficial owner of I 0% or more of any class of
the Company's equity securities, nor any promoter currently connected with the
Company in any capacity, has been convicted within the past ten (10) years of
any felony in connection with the purchase or We of any security,
6. The offers and sales of securities by the Company pursuant to the offering
contemplated by the Agreement were not attempts to evade any registration or
resale requirements of the securities laws of the United States or any of the
States;
7. The Shareholder is not nor has ever been affiliated with any director,
officer or promoter of the Company or any beneficial owner of 10% or more of the
Company's securities;
8. The Company bas at all times complied with the requirements of Rule 504 of
Regulation D and of applicable state exemptions from registration in the Offers
and sales by the Company of its securities in the offering contemplated by the
Agreement, including without limitation the, offering of the Shares to the
Shareholder.
Based upon the foregoing, including without limitation the written
certifications of certain officer(s) of the Company, and subject to the
qualifications and limitations stated in this letter, to the best of my
knowledge, I am of the opinion that the Shares are not subject to the resale
restrictions imposed by the 1933 Act. Therefore, the certificate(s) representing
the Shares purchased by the Shareholder may be issued without any restrictive
legend or stop transfer order.
This opinion is furnished to you by me as counsel for the Company, is Solely for
your
benefit in connection with your due diligence investigation of the Company fbr
purposes of issuing the certificate(s) for the Shares. This opinion may be
relied on only by you in connection with the transactions contemplated by the
4
<PAGE>
Agreement, and my riot be relied upon by any other person without my prior
written consent. With respect to the intended recipient of this letter, a
facsimile of this letter executed by me will be, binding upon me,
5
<PAGE>
Letter to Mr. Kopaunik
Page Four
Please issue the Shares as requested on the issuance instruction letter from the
Company, which the Company Will deliver to you under separate cover.
very truly yours.
H. Glenn Bagwell, Jr.
Fc. Mr. Joel Beagelman @ iVoice.com Inc. Mr. Larry Effluent, Esq.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
iVoice.com, Inc.
By: /s/ Jerome Mahoney
Jerome Mahoney, President
Date: May 11, 2000
