SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGEACT OF 1934
For the quarterly period ended March 31, 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 000-29341
---------
IVOICE.COM
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(Exact name of registrant as specified in its charter)
Delaware 86-0974165
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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
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 iVoice.com's. common stock, $.01 par value, outstanding as
of March 31, 2000 65,373,561
<PAGE>
IVOICE.COM, INC.
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 2000 and December 31, 1999 1
Statements of Operation -
For the Three Months Ended March 31, 2000 and 1999 2
Statements of Cash Flows -
For the three months ended March 31, 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 -11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12 - 14
<PAGE>
IVOICE.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 70,963 $ 195,861
Accounts receivable, net of allowance for
doubtful accounts of $57,500 and $50,000 267,550 31,726
Inventory 8,870 10,140
Prepaid expenses and other current assets 50,000 52,100
Debt issue costs 399,791 362,541
----------- -----------
Total current assets 797,174 652,368
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $21,540 and $17,836 61,864 55,408
OTHER ASSETS
Software license costs, net of accumulated
amortization of $81,600 and $54,400 462,400 489,600
Deposits and other assets 11,100 --
----------- -----------
Total other assets 473,500 489,600
----------- -----------
TOTAL ASSETS $ 1,332,538 $ 1,197,376
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 199,513 $ 181,754
Legal settlement payable -- 4,800,000
Due to related parties 21,000 21,000
Convertible debentures 500,000 350,000
----------- -----------
Total liabilities 720,513 5,352,754
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' DEFICIENCY
Common stock, series A - par value $.01; authorized
150,000,000 and 75,000,000 shares, 65,373,561
54,093,663 issued and outstanding 653,736 540,937
Common stock, series B - no par value; authorized,
issued and outstanding 700,000 shares 70 70
Additional paid in capital 6,485,491 1,395,671
Accumulated deficit (6,527,272) (6,092,056)
----------- -----------
Total stockholders' deficiency 612,025 (4,155,378)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 1,332,538 $ 1,197,376
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statement.
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<PAGE>
IVOICE.COM, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
---------------------------
2000 1999
--------- --------
<S> <C> <C>
SALES, net $ 397,348 $ 99,615
COST OF SALES 101,677 58,315
--------- --------
GROSS PROFIT 295,671 41,300
--------- --------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Selling expenses 112,987 1,462
General and administrative expenses 425,627 62,195
Research and development 9,620 --
Bad debt expense 7,500 10,625
Provision for obsolescence -- --
Depreciation and amortization 30,903 798
--------- --------
Total selling, general and administrative expenses 586,637 75,080
--------- --------
LOSS FROM OPERATIONS (290,966) (33,780)
OTHER EXPENSE
Interest expense (144,250) --
--------- --------
Total other expenses 144,250 --
--------- --------
LOSS BEFORE INCOME TAXES (435,216) (33,780)
PROVISION FOR INCOME TAXES -- --
--------- --------
NET LOSS $(435,216) $(33,780)
========= ========
NET LOSS PER COMMON SHARE
Basic $ (0.01) $ (.00 )
========= ========
Diluted $ (0.01) $ (.00 )
========= ========
</TABLE>
The accompanying notes are an integral part of the financial statement.
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<PAGE>
IVOICE.COM, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Months Ended
March 31,
---------------------
2000 1999
--------- --------
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $(435,216) $(33,779)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities
Depreciation and amortization 30,903 798
Bad debt expense 7,500 10,625
Provision for obsolescence -- --
Legal settlement expense -- --
Interest expense 144,250 --
Common stock issued for consulting services 252,619 --
Common stock issued for compensation -- --
Stock options issued as compensation -- --
Changes in certain assets and liabilities:
Accounts receivable (243,324) 4,457
Inventory 1,270 1,850
Accounts payable and accrued liabilities 17,759 (30,799)
Legal settlement payable (300,000) --
Other assets (9,000) --
Deferred revenue -- 16,172
--------- --------
Total cash provided by (used in) operating activities (533,239) (30,676)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (10,159) --
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for exercise of options 300,000 --
Prepaid offering and debt issue costs (31,500) --
Repayment of notes payable -- --
Sale of convertible debentures 150,000 --
--------- --------
Total cash provided by (used in) financing activities 418,500 --
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS (124,898) (30,676)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 195,861 71,328
--------- --------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 70,963 $ 40,652
--------- --------
CASH PAID DURING THE YEAR FOR:
Interest expense $ $ --
========= ========
Income taxes $ $ --
========= ========
The accompanying notes are an integral part of the financial statement.2
- 3 -
<PAGE>
IVOICE.COM, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE QUARTER ENDED MARCH 31, 2000
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
a) During the three months ended March 31, 2000, the Company converted a
$4,500,000 legal settlement payable into 2,000,000 shares of its class A
restricted common stock.
b) During the three months ended March 31, 2000, the Company issued $150,000 of
its 12% convertible debentures exercisable at a 50% conversion price. The 50%
conversion discount totaling $150,000 was recorded as a prepaid debt issue
cost and will be amortized over the life of the debt.
c) During the three months ended March 31, 2000, the Company issued 100,000
shares of its restricted class A common stock for services valued at
$234,000.
d) During the three months ended March 31, 2000, 179,898 of options were
exercised at the strike price of $0.1035 per share. These shares were
exercised for $18,619 of services performed by the option holder.
The accompanying notes are an integral part of the financial statement.
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<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and
Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation have been
included. The balance sheet of the Company as of December 31, 1999
has been derived from the audited balance sheet of the Company as of
that date.
For further information, refer to the financial statements and
footnotes included in Form 10-SB for the year ended December 31,
1999.
The result of operations for the three month periods ended March 31,
2000 and 1999 are not necessarily indicative of the results to be
expensed for the full year.
The accompanying financial statements include the accounts of
iVoice.com, Inc. (the "Company" or "iVoice"), formerly known as
Visual Telephone International, Inc. ("Visual"), which was
incorporated under the laws of Utah on December 2, 1995,
subsequently changed to Delaware.
Effective May 21, 1999, Visual and International Voice Technologies,
Corp. ("IVT") entered into a merger agreement whereby the Company
would be the surviving entity (see Note 2 for Reorganization). As a
result, IVT's former shareholder obtained control of Visual. For
accounting purposes, this acquisition has been treated as a
recapitalization of IVT.
The Company is publicly traded and is currently exempt from the
requirement to register with a non-reporting public company traded
on the Over The Counter Bulletin Board ("OTCBB"). The Company is
required to become a fully reporting company by May 24, 2000 in
order to continue to be quoted on the OTCBB.
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<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
b) Earnings Per Share
SFAS No. 128, "Earnings Per Share" requires presentation of basic
earnings per share ("Basic EPS") and diluted earnings per share
("Diluted EPS").
The computation of basic earnings per share is computed by dividing
income available to common stockholders by the weighted average
number of outstanding common shares during the period. Diluted
earnings per share gives effect to all dilutive potential common
shares outstanding during the period. The computation of diluted EPS
does not assume conversion, exercise or contingent exercise of
securities that would have an anti-dilutive effect on earnings. The
shares used in the computations are as follows:
As of March 31,
--------------------------
2000 1999
----------- ----------
Basic and Diluted EPS 57,438,638 10,000,000
=========== ==========
NOTE 2 - CONVERTIBLE DEBENTURES
As of March 31, 2000 and December 31, 1999, convertible debentures
consisted of ten and six notes payable totaling $500,000 and
$350,000, respectively, bearing interest at 12% per annum payable on
December 1, 2000. These debentures are convertible into shares of
the Company's Class A Common Stock at the option of the holder by
dividing the outstanding principal and interest by the conversion
price which shall equal 50% of the average bid price during the 20
trading days before the conversion date. The convertible debentures
are subject to default if the Company has not registered its shares
under a regulation offering within 150 days of the effective date of
the debentures.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
a) The Company was a party to a lawsuit initiated by an
individual on November 1, 1999 relating to an investment made
into an entity called IVS Corp. ("IVS"). This investment was
made between the years 1994 and 1996. IVS was incorporated in
1993 and ceased operations in November, 1997. The majority
shareholder of IVS is the majority shareholder and CEO of the
Company. The Company believes this lawsuit should not exceed
$500,000 and accordingly has established a reserve in accounts
payable and accrued expenses. The Company settled this lawsuit
during March 2000. During February 2000, the Company settled a
lawsuit (see Note 8F). As settlement, the Company paid
$300,000 in cash and issued 2,000,000 shares of its Class A
common stock.
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<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000
NOTE 3 - COMMITMENTS AND CONTINGENCIES (Continued)
b) On March 27, 2000, the Company entered into a definitive
agreement to acquire MaiSoft, Inc. ("MaiSoft"). MaiSoft
possesses unified messaging technology which will be
integrated with the Company's present technology. The terms of
the agreement specify that the Company will pay $1,000,000 in
cash and issue 2,400,000 shares of its class A common stock in
exchange for certain assets of Maisoft. The agreement is
subject to a repricing mechanism after one year based upon
certain levels of the Company's common stock price. As of the
date of this report, this transaction has not closed.
NOTE 4 - COMMON STOCK
The company has two issuances of common stock:
a) Class A Common Stock
Class A common stock consists of the following as of March 31,
2000 and December 31, 1999: 150,000,000 and 75,000,000 shares
of authorized common stock with a par value of $.01,
respectively. Class A stock has voting rights of 1:1 and as of
March 31, 2000 and December 31, 1999, 65,373,561 and
54,083,663 were issued and outstanding, respectively.
Each holder of Class A Common stock is entitled to receive
ratably dividends, if any, as may be declared by the Board of
Directors out of funds legally available for the payment of
dividends. As of March 31, 2000 and December 31, 1999, the
Company has not paid any dividends on its Common Stock.
b) Class B Common Stock
Class B Common Stock consists of 700,000 shares of authorized
common stock with no intrinsic value. Class B stock has voting
rights of 100 to 1 with respect to Class A Common Stock. As of
March 31, 2000 and December 31, 1999, 700,000 shares were
issued and outstanding. Class B common stockholders are not
entitled to receive dividends (see Note 5c).
- 7 -
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000
NOTE 5 - SUBSEQUENT EVENTS
a) On April 21, 2000, the Company executed an agreement and plan of
reorganization with ThirdCAI, Inc. ("ThirdCAI"), a fully
reporting holding company. The agreement stipulates that ThirdCAI
and the Company would be merged and the Company would be the
surviving entity. The Company will issue 50,000 shares for all
outstanding shares of ThirdCAI. A finders fee of $150,000 is also
payable in relation to the agreement
b) On April 19, 2000, the Company entered into a letter of intent
with an investment banking firm to issue a minimum of $1,000,000
and a maximum of $5,000,000 of 6% convertible debentures, due in
one year, on a "best efforts" basis, as follows:
i) $1,000,000 to $2,500,000 funded by May 10, 2000; and
ii) $1,000,000 to $2,500,000 funded within 60 days of the
initial closing on May 10, 2000.
The debentures are convertible at the lessor of :
(a) 50% discount of the lowest closing bid price from April
18, 2000 until the date of the initial closing; or
(b) a 50% discount, utilizing a twenty (20) day average
closing bid price to the market price at the time of
conversion for the first $2,500,000 raise. The second
$2,500,000 raise will be convertible at a 50% discount,
utilizing a twenty (20) day average closing bid price to
the market price at the time of conversion. The
Debenture may be converted at any time and must be
converted within one year from the date of an effective
registration.
The debentures and underlying securities shall be registered by
an appropriate registration statement filed no later than sixty
(60) days from the date of the initial closing of this offering.
c) On April 24, 2000, the Company filed to amend its Articles of
Incorporation to state that Class B common stock is convertible
into its Class A common stock at a conversion rate of one share
of Class B common stock for one hundred shares of Class A common
stock. The conversion ratio is in relation to the voting ratio.
- 8 -
<PAGE>
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000
NOTE 5 - SUBSEQUENT EVENTS (Continued)
d) On April 24, 2000, the Company terminated its agreement with
their former investment banking firm. The Company has agreed to
issue shares of its restricted Class A common stock as settlement
for all obligations relating to their agreement. This settlement
is not yet finalized.
e) During April 2000, the Company issued 37,500 shares of its Class
A common stock for services rendered.
f) During April 2000, the Company sold 1,750,000 shares of its Class
A commons stock for approximately $750,000.
g) On April 24, 2000, the Company entered into discussions to issue
100,000 shares of its Class A common stock to the 12% convertible
debenture holders, to extend the default term of the debentures
for a period of six months.
- 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
March 31, 2000 Versus Year Ended March 31, 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 months ended March 31, 2000 were
approximately $397,348 as compared to approximately $99,615 for the three months
ended March 31, 1999 an increase of approximately $297,733 or 299%. The increase
was primarily the result of the Company's 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. The Company accepts company checks or Visa/Mastercard. The
increase in receivable is due to the recording of two large sales in March 2000.
Gross margin for the quarter ended March 31, 2000 was approximately $295,671 or
74.4% as compared to approximately $41,300 or 41.4% for the three months ended
March 31, 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
communication products. The increase in gross margin from the first quarter of
1999 was primarily due to the recognition of revenues on projects that were not
hardware intensive and improved installation and configuration efficiencies.
Operating expenses increased from $75,080 for the three months ended March 31,
1999 to $586,637 for the three months ended March 31, 2000 or an increase of
$511,557. This increase is a result of increase of $363,432 in general and
administrative expenses attributable to commissions and salaries to the
Company's executives, an increase of $111,525 in selling expenses , an increase
in depreciation of $30,105.
The loss from operations for the three months ended March 31, 2000 was $30,105
compared to $33,780 for the thre months ended March 31, 1999 or an increase of
$257,186.
Interest expense of $144,250 was incurred in relation to the amortization of
debt issue costs.
- 10 -
<PAGE>
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.
- 11 -
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. 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.
ITEM 2. CHANGE IN SECURITIES
Amount of
Date of Securities Description of the
Transaction Type of Securities Sold Transaction
------------- -------------------- ------------- ----------------------
Services rendered
2/18/00 Common 100,000 valued at $234,000
Settlement of legal
issues valued at
2/10/00 Common 2,000,000 $4,500,000
Option exercised
3/21/00 Common 9,000,000 valued at $300,000
Services rendered
3/14/00 Common 179,898 valued at $18,619
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 - Financial Data Table
(b) Reports filed on Form 8-K.
None.
- 12 -
<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
Jerome R. Mahoney, President
- 13 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 70,963
<SECURITIES> 0
<RECEIVABLES> 267,550
<ALLOWANCES> 57,500
<INVENTORY> 0
<CURRENT-ASSETS> 797,174
<PP&E> 61,864
<DEPRECIATION> 21,540
<TOTAL-ASSETS> 1,332,538
<CURRENT-LIABILITIES> 720,513
<BONDS> 500,000
0
0
<COMMON> 653,806
<OTHER-SE> (41,781)
<TOTAL-LIABILITY-AND-EQUITY> 1,332,538
<SALES> 397,348
<TOTAL-REVENUES> 397,348
<CGS> 101,677
<TOTAL-COSTS> 586,637
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 144,250
<INCOME-PRETAX> (435,216)
<INCOME-TAX> 0
<INCOME-CONTINUING> (435,216)
<DISCONTINUED> 0
<EXTRAORDINARY> (435,216)
<CHANGES> 0
<NET-INCOME> (435,216)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
