SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ________________________
Commission file number _________________________
IVOICE.COM, INC
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(Exact name of registrant as specified in its charter)
Delaware 52-1750786
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
750 Highway 34
Matawan, NJ 07747
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (732) 441-7700
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act: Class A common,
par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES |X| NO |_|
Number of shares of Class A, common stock, $.01 par value, outstanding as of
November 7, 2000 101,571,566
<PAGE>
IVOICE.COM, INC.
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 2000 (Unaudited) 1
Statements of Operation - For the three months ended
September 30, 2000 and 1999 and nine months ended
September 30, 2000 and 1999 2
Statements of Cash Flows - For the nine months ended
September 30, 2000 and 1999 3 - 4
Notes to the financial statements 5 - 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 12
PART II. OTHER INFORMATION
Item 3. Defaults upon Senior Securities 13
Item 6. Exhibits and Reports on Form 8-K 13 - 15
<PAGE>
IVOICE.COM, INC.
BALANCE SHEETS
SEPTEMBER 30, 2000
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 123,381
Accounts receivable, net of allowance for
doubtful accounts of $25,000 236,248
Inventory 18,875
Prepaid expenses and other current assets 105,186
Debt issue costs 111,291
-----------
Total current assets 594,981
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $37,714 148,331
OTHER ASSETS
Software license costs, net of accumulated
amortization of $136,000 408,000
Deposits and other assets 13,900
Goodwill, net of accumulated amortization of $4,635 227,401
-----------
Total other assets 649,301
-----------
TOTAL ASSETS $ 1,392,613
===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 382,292
Obligations under capital leases - current 26,879
Due to related parties 417,798
Convertible debentures 500,000
-----------
Total current liabilities 1,326,969
-----------
LONG-TERM DEBT
Obligation under Capital leases - non-current 56,602
-----------
Total liabilities 1,383,571
-----------
COMMITMENTS AND CONTINGENCIES --
STOCKHOLDERS' DEFICIENCY
Common stock, series A - par value $.01; authorized
150,000,000 shares, 100,822,428
issued and outstanding 1,008,224
Common stock, series B - no par value; authorized 700,000
shares; 700,000 shares issued; 364,000 shares outstanding 37
Additional paid in capital 7,175,821
Accumulated deficit (8,175,040)
-----------
Total stockholders' deficiency 9,042
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 1,392,613
===========
The accompanying notes are an integral part of the financial statement.
-1-
<PAGE>
IVOICE.COM, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
--------------------------- -----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SALES, net $ 175,343 $ 169,099 $ 677,062 $ 379,420
COST OF SALES 70,663 73,521 232,465 194,320
----------- ----------- ----------- -----------
GROSS PROFIT 104,680 95,578 444,597 185,100
----------- ----------- ----------- -----------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Selling expenses 69,960 22,362 323,734 42,934
General and administrative expenses 407,501 435,919 1,305,976 627,508
Research and development 152,011 -- 260,620 --
Non-recurring expenses -- 228,000 -- 228,000
Bad debt expense 16,652 10,625 39,152 31,875
Depreciation and amortization 39,999 26,403 106,113 27,998
----------- ----------- ----------- -----------
Total selling, general and administrative expenses 686,123 723,309 2,035,595 958,315
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (581,443) (627,731) (1,590,998) (773,215)
OTHER EXPENSE
Interest expense 170,767 -- 491,986 --
----------- ----------- ----------- -----------
Total other expenses 170,767 -- 491,986 --
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES (752,210) (627,731) (2,082,984) (773,215)
PROVISION FOR INCOME TAXES -- -- -- --
----------- ----------- ----------- -----------
NET LOSS $ (752,210) $ (627,731) $(2,082,984) $ (773,215)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE
Basic $ (0.01) $ (0.01) $ (0.03) $ (0.03)
=========== =========== =========== ===========
Diluted $ (0.01) $ (0.01) $ (0.03) $ (0.03)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statement.
-2-
<PAGE>
IVOICE.COM, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
-----------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $(2,082,984) $ (773,215)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 106,113 30,392
Bad debt expense 39,152 31,875
Amortization of debt issue costs 432,750 --
Common stock issued for consulting services 382,619 288,000
Common stock issued for compensation 69,938 --
Stock options issued as compensation -- 256,500
Changes in certain assets and liabilities:
Accounts receivable (243,674) (92,271)
Inventory (8,735) (2,500)
Accounts payable and accrued liabilities 200,538 (96,039)
Legal settlement payable (300,000) --
Other assets (66,986) 115,763
----------- -----------
Total cash used in operating activities (1,471,269) (241,495)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (112,801) (1,189)
Purchase of goodwill (152,355) --
----------- -----------
Total cash used in investing activities (265,156) (1,189)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 746,000 241,127
Proceeds from exercise of options on common stock 319,166 --
Proceeds from officer loans 396,798 --
Prepaid offering and debt issue costs (31,500) --
Increase in borrowing under capital lease obligations 92,895
Repayment of notes payable (9,414) --
Sale of convertible debentures 150,000 --
----------- -----------
Total cash provided by financing activities 1,663,945 241,127
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (72,480) (1,557)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 195,861 71,328
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 123,381 $ 69,771
=========== ===========
CASH PAID DURING THE PERIOD FOR:
Interest expense $ 7,590 $ --
=========== ===========
Income taxes $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statement.
-3-
<PAGE>
IVOICE.COM, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
SEPTEMBER 30, 2000:
a) During the nine months ended September 30, 2000, the Company converted a
$4,500,000 legal settlement payable into 2,000,000 shares of its class A
restricted common stock.
b) During the nine months ended September 30, 2000, the Company issued
$150,000 of its 12% convertible debentures exercisable at a 50% conversion
price. The 50% conversion discount totaling $150,000 was recorded as a
prepaid debt issue cost and will be amortized over the life of the debt.
c) During the nine months ended September 30, 2000, the Company issued
578,820 shares of its restricted class A common stock for services valued
at $415,972.
d) During the nine months ended September 30, 2000, 179,898 of options were
exercised at the strike price of $0.1035 per share. These shares were
exercised for $18,619 of services performed by the option holder.
e) During the nine months ended September 30, 2000, the Company issued 50,000
shares of its restricted class A common stock to Corporate Architects,
Inc. with a value of $46,875 for the purchase of ThirdCAI, Inc.
f) During the nine months ended September 30, 2000, the Company issued 80,000
shares of its restricted class A common stock as compensation valued at
$69,938.
SEPTEMBER 30, 1999:
a) During the nine months ended September 30, 1999, the Company issued
2,630,000 shares of its restricted class A common stock for services
valued at $288,000.
The accompanying notes are an integral part of the financial statement.
-4-
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The information contained in the accompanying financial statements for the
period ending September 30, 2000 is unaudited, but includes all
adjustments, consisting of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the financial position and
the results of operations for the period.
The Financial statements and notes are presented as permitted by Form
10-QSB, and do not contain certain information included in the Company's
annual statements and notes. These financial statements should be read in
conjunction with the Company's annual financial statement as reported on
its Form 10-SB.
The result of operations for the interim period is not necessarily
indicative of the results to be expected for the full year.
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:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic and Diluted 99,201,830 52,453,827 79,057,659 30,715,767
</TABLE>
-5-
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2000
NOTE 2 - CONVERTIBLE DEBENTURES
As of September 30, 2000, convertible debentures consisted of ten notes
payable totaling $500,000 bearing interest at 12% per annum payable on
December 1, 2000. These debentures are convertible into shares of the
Company's Class A Common Stock at the option of the holder by dividing the
outstanding principal and interest by the conversion price which shall
equal 50% of the average bid price during the 20 trading days before the
conversion date. We have been advised by several of the debenture holders
that we have breached the following terms of the debentures: (a) Failure
to register, on a timely basis, under the Securities Act of 1933, the
shares issuable upon the conversion of the debentures, (b) Registering
additional shares other than the shares issuable upon the conversion of
the debentures, and (c) Failure to provide the debenture holders a
perfected security interest in certain assets of the Company pursuant to a
Security Agreement that was part of the debenture documentation.
NOTE 3 - DUE TO RELATED PARTY
During the period June 1 through June 8, 2000, Jerome R. Mahoney, our
President and Chief Executive Officer, sold 971,000 shares of our common
stock under Rule 144 of the Securities Act of 1933, as amended, realizing
$396,798 of aggregate proceeds from these sales. On July 24, 2000, Mr.
Mahoney loaned us these proceeds pursuant to a loan agreement in order to
fund our working capital requirements.
Under the terms of the loan agreement, we will repay Mr. Mahoney with a
number of shares of common stock equal to the number of shares that he
sold, plus an additional 262,170 shares of our common stock to reimburse
Mr. Mahoney for the income tax he paid upon the sale of his shares of
common stock, plus additional shares with a value equal to interest
calculated at the prime rate.
During the period August 24 through September 29, 2000, Mr. Mahoney sold a
further 537,000 shares of our common stock under Rule 144 realizing
$239,118 of aggregate proceeds from these sales. On November 7, 2000, Mr.
Mahoney loaned to us these proceeds pursuant to a second loan agreement to
fund our working capital requirements. Under the terms of the loan
agreement, we will repay Mr. Mahoney with a number of shares of our common
stock equal to the number of shares that he sold, plus an additional
144,990 common stock shares to reimburse him for the income tax he paid
upon the sale of his shares, plus additional shares with a value equal to
interest calculated at the prime rate.
As of September 30, 2000 the total outstanding balance to Mr. Mahoney
totaled $417,798.
-6-
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2000
NOTE 4 - COMMITMENTS AND CONTINGENCIES
On May 17, 2000, the Company was de-listed from the Over-the-Counter
Bulletin Board (OTCBB) Market System for failure to comply with the
Eligibility Rule adopted by the National Association of Securities Dealers
(NASD) and approved by the Securities and Exchange Commission (SEC) on
January 5, 1999. This rule permits only those companies that report their
current financial information to the SEC, banking or insurance regulators
to be quoted on the OTCBB. On September 27, 2000 the Company the cleared
the review and comment process with the Securities and Exchange Commission
(SEC) and is now a fully reporting entity under Section 12 of the
Securities Exchange Act of 1934. Therefore, on October 6, 2000, the
Company's common shares were re-listed on the OTCBB market system.
In April 2000, the Company entered into a non-cancelable lease commitment
for office furniture and equipment for its Matawan, New Jersey facility.
The lease calls for 36 equal monthly payments of $2,150.69 plus applicable
state sales taxes. The lease, payable to JDR Capital Corporation, has a $1
purchase option and imputed interest rate of 20.78%.
In June 2000, the Company entered into a non-cancelable lease commitment
for computer equipment for its Matawan, New Jersey facility. The lease
calls for 36 equal monthly payments of $1,366.87, which includes
applicable state sales taxes. The lease, payable to Fisher-Anderson, LLC,
has a $1 purchase option an imputed interest rate of 22.31%.
NOTE 5 - COMMON STOCK
The Company issuance of common stock for the nine months ended September
30, 2000 is as follows:
a) Class A Common Stock
Class A common stock consists of the following as of September 30,
2000: 150,000,000 shares of authorized common stock with a par value
of $.01. Class A stock has voting rights of 1:1 and as of September
30, 2000, 100,822,428 shares were issued and outstanding.
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 never paid any dividends on its Common Stock.
For the nine months ended September 30, 2000, the Company issued
578,820 shares of its Class A common stock for services rendered.
During April 2000, the Company sold 1,240,047 shares of its Class A
common stock for approximately $750,000.
-7-
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2000
NOTE 5 - COMMON STOCK (Continued)
a) Class A Common Stock (continued)
For the nine months ended September 30, 2000, the Company issued
80,000 shares of its Class A common stock to its officers as
compensation.
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 never paid any dividends on its Common Stock.
For the nine months ended September 30, 2000, the Company issued
578,820 shares of its Class A common stock for services rendered.
During April 2000, the Company sold 1,240,047 shares of its Class A
common stock for approximately $750,000.
For the nine months ended September 30, 2000, options were exercised
for 9,179,898 shares of Class A common stock.
During the nine months ended September 30, 2000, the Company issued
50,000 shares of its restricted class A common stock to Corporate
Architects, Inc. for the purchase of ThirdCAI, Inc.
For the nine months ended September 30, 2000, the Company issued
2,000,000 shares of Class A common stock for legal settlements.
On May 2, 2000, 306,000 shares of class B common stock was converted
to Class A common stock at a ratio of 100 to 1.
On August 21, 2000, an additional 30,000 shares of class B common
stock were converted to Class A common stock at a ratio of 100 to 1.
As of September 30, 2000, a total of 33,600,000 shares of Class A
common stock were issued upon conversion of class B common stock.
-8-
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2000
NOTE 5 - COMMON STOCK (Continued)
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 September 30,
2000, 700,000 shares were issued; and 364,000 shares were
outstanding. Class B common stockholders are not entitled to receive
dividends.
-9-
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations ("MD&A") should be read in conjunction with our Financial
Statements included herein.
Recent Developments
In August 2000, we filed three patent applications and one trademark application
with the U.S. Patent and Trademark Office, and in September 2000 we filed an
additional trademark application. The titles of the patents are "Voice Activated
Voice Operated Copier," "Voice Activated Voice Operational Universal Remote
Control" and "Voice Activated Voice Responsive Hear I Am Voice Locator." The
trademark applications register the taglines "Our technology speaks for itself"
and "Hear I am."
On September 27, 2000 the Company cleared the review and comment process with
the Securities and Exchange Commission (SEC) and is now a fully reporting entity
under Section 12 of the Securities Exchange Act of 1934. Subsequently, on
October 6, 2000, the Company was relisted and continues to be quoted on the
Over-the Counter Bulletin Board
On October 13, 2000, in accordance with our obligations under our investment
agreement with Swartz Private Equity, LLC, dated August 17, 2000, we registered
for sale, 44,100,000 shares of our common stock by filing Form SB-2 with the
Securities and Exchange Commission.
Also on October 13, 2000, in conjunction with the registration of the shares
under the Swartz agreement, we registered for sale, 500,000 shares of our Class
A common stock issued to Lawrence A. Muenz (of which 50,000 shares were issued
to Mr. Muenz in a custodial capacity) in consideration for legal services
rendered to us by Mr. Muenz.
On November 1, 2000 the holders of our 12% convertible debentures converted
$120,000 in debenture principal into 609,138 Class A common shares at $.197 per
share in accordance with the conversion terms of the debenture agreement.
September 30, 2000 compared to September 30, 1999
Revenues are derived primarily from the sale of voice and computer technology
communication systems for small-to-medium sized businesses and corporate
departments. Total revenues for the three and nine months ended September 30,
2000 were $175,343 and $677,062, respectively, as compared to $169,099 and
$379,420 for the three and nine months ended September 30, 1999, an increase of
$6,244 or 3.7% and $297,642 or 78.4%, respectively. On September 22, 2000, the
Company's Vice-president of Sales resigned. The Company is aggressively seeking
a suitable replacement.
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. The Company determines the expected costs on a particular
installation by estimating the hardware costs and anticipated labor hours to
configure and install a
-10-
<PAGE>
September 30, 2000 compared to September 30, 1999 (Continued)
system. Revenues are then recognized in proportion to the amount of costs
incurred as of the reporting date over the total estimated costs anticipated. As
of September 30, 2000, in addition to several smaller installation projects, the
Company had two (2) contracts for the installation of its products each with a
total contract price in excess of $99,000. The progress towards the completion
of these contracts on a percentage basis ranges from 10% to 50%. The Company
expects these contracts to be fully completed by the end of the fourth quarter
reporting period. The Company accepts company checks or Visa/Mastercard.
Gross margin for the three and nine months ended September 30, 2000 was $104,680
and $444,597 or 59.7% and 65.7%, respectively, as compared to $95,578 and
$185,100 or 56.5% and 48.8% for the three and nine months ended September 30,
1999. The gross margin is dependent, in part, on product mix, which fluctuates
from time to time; complexity of a communication system installation which
determines necessary hardware requirements and may not have a proportionate
relationship with the system selling price; and the ability of Company
technology personnel to efficiently configure and install the Company's
communicaitons products. While in the current quarter ending September 30, 2000,
the change in gross margin was slightly higher due to product mix, the $259,497
increase in gross margin for the nine months ended September 30, 2000 as
compared to the nine months ending September 30, 1999 was primarily attributable
to the recognition of revenues on projects that were not hardware intensive and
improved installation and configuration efficiencies.
Total operating expenses decreased from $723,309 for the three months ended
September 30, 1999 to $686,123 for the three months ended September 30, 2000 due
to non-recurring expenses related to the merger of Visual Telephone
International, Inc with International Voice Technologies, Inc. in May of 1999
not properly accrued in the second quarter of 1999 and reflected in the three
months ending September 30, 1999. These expenses were not incurred in the
current quarter. Without these non-recurring expenses, operating expenses for
the three months ending September 30, 2000 would have reflected an increase of
$190,814 over the same period in the prior year. For the nine months ended
September 30, total operating expenses increased by $1,077,280 from $958,315 in
1999 to $2,035,595 in 2000. Excluding the non-recurring charges in 1999,
operating expenses increased by $1,305,280. Included in total operating expenses
for the three months ending September 30, 2000 and 1999 respectively were
payroll expenses of $347,913 versus $104,043, an increase of $243,870 resulting
from the addition of technical and sales personnel; personnel recruiting fees of
$64,744 versus none in 1999 related to the hiring of additional employees; legal
and accounting fees of $36,850 versus $13,739 an increase of $23,111; rent of
$35,660 versus $9,360 an increase of $26,300 resulting from the move to larger
office facilities in April 2000; and depreciation and amortization charges of
$39,999 versus $26,403 and increase of $13,596 related to the amortization of
purchased software costs. Total operating expenses classified as research and
development include $152,011 and $260,620 for the three and nine months ended
September 30, 2000 respectively, incurred to develop new products and enhance
existing products. These costs were not incurred in the same periods of 1999.
-11-
<PAGE>
September 30, 2000 compared to September 30, 1999 (Continued)
As of September 30, 2000, the Company had 18 full-time employees, two part-time
employees and one consulting developer for a total of 21 individuals. The
company is actively pursuing additions to its sales and technical staff which
will increase operating expenditures for payroll and related benefit costs in
future quarters.
The loss from operations for the three and nine months ended September 30, 2000
was $752,210 and $1,590,998 compared to $627,731 and $773,215 for the three and
nine months ended September 30, 1999, an increase of $1,009,555 and $145,484,
respectively
Interest expense of $170,767 was incurred for the three month period ending
September 30, 2000. This amount includes 12% interest on $500,000 in outstanding
debentures, interest at the prime lending rate of 9.5% on officer loans,
amortization of debt issue costs, and interest on capital leases. For the nine
month period ending September 30, 2000 interest totalled $491,986. Interest
expense was not incurred in the same periods of the prior year.
Net loss for the three and nine month period ending September 30, 2000 was
$752,210 and $2,082,984 as compared to $627,731 and $773,215 for the three and
nine months of 1999. The increase in net loss of $124,479 and $1,309,769 was a
result of the factors discussed above.
Liquidity and Capital Resources
We are funding our current operations principally from loans from our principal
stockholder that in the aggregate, amount to $656,916. We are operating on a
negative cash flow basis and anticipate that we will require additional
financing during the final quarter of 2000. To achieve our growth potential we
will require additional amounts of capital.
On August 17, 2000, we entered into an investment agreement with Swartz Private
Equity, LLC. The investment agreement entitles us to issue and sell our Class A
common stock from time to time for up to an aggregate of $20 million. This
amount will be increased to $40 million if our shares are quoted on the Nasdaq
SmallCap Market or National Market and if the lowest closing price of our common
stock for the 15 trading days immediately preceding listing is at least $2.50.
The investment agreement will be effective for a maximum of three years
following the effective date of the registration statement filed on form SB-2 on
October 13, 2000. As of the date of this filing, the registration statement has
not yet been determined to be effective by the SEC.
This financing allows iVoice to issue common stock and warrants at the Company's
discretion as often as monthly as funds are needed in amounts based upon certain
market conditions, and subject to an effective registration statement. The
pricing of each common stock sale is based upon current market prices at the
time of each drawdown, and iVoice may set a floor price for the shares at the
Company's discretion.
There is no assurance that this financing arrangement will enable us to
implement our long-term growth strategy. Accordingly, our sources of financing
are uncertain if the desired proceeds from the Swartz equity financing
arrangement is not obtained.
-12-
<PAGE>
PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
As of September 30, 2000 convertible debentures consisted of ten notes
payable totaling $500,000 bearing interest at 12% per annum payable on
December 1, 2000. These debentures are convertible into shares of the
Company's Class A Common Stock at the option of the holder by dividing the
outstanding principal and interest by the conversion price which shall
equal 50% of the average bid price during the 20 trading days before the
conversion date. We have been advised by several of the debenture holders
that we have breached the following terms of the debentures: (a) Failure
to register, on a timely basis, under the Securities Act of 1933, the
shares issuable upon the conversion of the debentures, (b) Registering
additional shares other than the shares issuable upon the conversion of
the debentures, and (c) Failure to provide the debenture holders a
perfected security interest in certain assets of the Company pursuant to a
Security Agreement that was part of the debenuture documentation. The
Company is in discussions with the debenture holders attempting to resolve
these issues in a mutually favorable manner. However, it is uncertain
whether the Company will be able to reach an agreement under terms
favorable to iVoice.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 - Financial Data Table
(b) Reports filed on Form 8-K.
None.
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned therunto duly authorized.
iVoice.com, Inc.
By: /s/ Jerome R. Mahoney
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Jerome R. Mahoney, President
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