DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) APRIL24, 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 Highway34, Matawan, NJ 07747
(Address of principal executive offices)
Registrant's telephone number, including area code (732) 441-7700
ITEM1. CHANGES IN CONTROL OF REGISTRANT
On April24, 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 April24, 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"). (see "Notes to Financial Statements:
Note12 (a)" and "Financial Statements for Maisoft")
ITEM5. OTHER
The Form10-SB for iVoice.com, Inc. has been included as an
exhibit with this Form8-K.
ITEM6 RESIGNATIONS OF REGISTRANT'S DIRECTORS
On April24,2000, Edmond L. Lonergran, the Company's sole officer
and director appointed Jerome R. Mahoney as a member of the board
of directors.
On April24,2000, 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
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 December31,1999 and1998, 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 December31,1999 and1998, and the
results of its operations and its cash flows for each of 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 Note1(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
IVOICE.COM, INC.
BALANCE SHEETS
December31,
<TABLE>
<S> <c <C> <c <C>
> >
1999 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 195,861 $ 71,328
Accounts receivable, net of allowance
for
doubtful accounts of$50,000 and$7,500 599,026 125,535
Inventory 10,140 8,457
Prepaid expenses and other current 93,808 2,100
assets
Total current assets 898,835 207,420
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 $ 1,443,84 $ 220,163
3
LIABILITIES AND STOCKHOLDERS'
DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 681,754 $132,116
Deferred revenue 567,300 78,670
Due to related parties 21,000 20,000
Convertible debentures 350,000 -
Note payable - 12,318
Total liabilities 1,620,05 243,104
4
Commitments and contingencies - -
STOCKHOLDERS' DEFICIENCY
Common stock, series A - par
value$.01; authorized
75,000,000 and40,000,000
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 outstanding700,000 70 40
and400,000 shares
Additional paid in capital 1,045,67 (85,289)
1
Accumulated deficit (1,762,8
89) (37,692)
Total stockholders' deficiency (176,211
) (22,941)
TOTAL LIABILITIES AND STOCKHOLDERS' $ 1,443,84 $ 220,163
DEFICIENCY 3
</TABLE>
The accompanying notes are an integral part of the financial
statement.
-2-
IVOICE.COM, INC.
STATEMENTS OF OPERATIONS
For the Year Ended
December31,
<TABLE>
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c c
> >
1999 1998
SALES, net $ 776,773 $ 626,486
COST OF SALES 280,317 382,501
GROSS PROFIT 496,456 243,985
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Selling expenses 168,707 33,685
General and administrative expenses 750,617 237,306
Bad debt expense 39,874 7,500
Provision for obsolescence 31,000 -
Depreciation and amortization 69,050 3,186
Total selling, general and administrative 1,059,248 281,677
expenses
LOSS FROM OPERATIONS (562,792) (37,692)
OTHER EXPENSE
Non-recurring expenses (see Note11) (1,155,11 -
3)
Interest expense (7,292) -
Total other expenses (1,162,40 -
5)
LOSS BEFORE INCOME TAXES (1,725,19 (37,692)
7
PROVISION FOR INCOME TAXES - -
NET LOSS $(1,725,1 $(37,692
97) )
NET LOSS PER COMMON SHARE
Basic $( .06 ) $( .004
)
Diluted $( .06 ) $( .004
)
</TABLE>
The accompanying notes are an integral part of the financial
statement.
-3 -
IVOICE.COM, INC.
STATEMENTS OF CASH FLOWS
For the Year Ended
December31,
<TABLE>
<S> <c <C> <c <C>
> >
1999 1998
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $ (1,725,1 $ (37,692
97) )
Adjustments to reconcile net loss to
net
cash provided by (used in) operating
activities
Depreciation and amortization 69,050 3,186
Bad debt expense 42,500 7,500
Provision for obsolescence 31,000 -
Common stock issued for consulting 290,800
services
Common stock issued for compensation 56,500 -
Stock options issued as compensation 256,500 -
Changes in certain assets and
liabilities:
Increase in accounts receivable (515,991 (83,035
) )
Decrease in inventory 81,191 4,075
Increase in accounts payable and
accrued expenses 549,638 116,416
Increase in deferred revenue 488,630 78,670
Total cash provided by (used in) (375,379 89,120
operating activities )
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 (91,708) -
Repayment of notes payable (12,318) (27,554
)
Sale of convertible debentures 350,000 -
Total cash provided by (used in) 501,101 (27,554
financing activities )
NET INCREASE IN CASH AND
CASH EQUIVALENTS 124,533 56,380
CASH AND CASH EQUIVALENTS - BEGINNING 71,328 14,948
OF YEAR
CASH AND CASH EQUIVALENTS - END OF $ 195,861 $ 71,328
YEAR
CASH PAID DURING THE YEAR FOR:
Interest expense $ 41,708 $ -
Income taxes $ - $ -
</TABLE>
The accompanying notes are an integral part of the financial
statement.
-5 -
IVOICE.COM, INC.
STATEMENTS OF CASH FLOWS
DECEMBER31,1999 AND1998
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
a.) On May21,1999, 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 May14,1999, the Company issued9,000,000 stock options to
purchase the Company's class A common stock for$.033 per share.
c) On June15,1999, the Company issued250,000 shares of Class A
common stock in relation to an employee agreement.
d) On June25,1999, the Company issued3,200,000 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, on
August30,1999, a consulting company received2,000,000 shares of
the Company's Class A common stock, valued at .114 per share
or$228,000 for services performed.
f) During the year ended December31,1999, the Company
issued230,000 shares of its Class A common stock valued at$30,800
for services performed.
g) During the year ended December31,1999, the Company
issued400,000 shares of its Class A common stock for legal
services valued at$32,000.
The accompanying notes are an integral part of the financial
statement.
-6 -
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
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 December2,1995, subsequently
changed to Delaware.
Effective May21,1999, Visual and International
Voice Technologies, Corp. ("IVT") entered into a merger
agreement whereby the Company would be the surviving
entity (see Note2 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 (December17,1997
- operations began January1998) through May21,1999, and
that of iVoice from May22,1999 through December31,1999.
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 May24,2000 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
December31,1999. 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 note12g)
(ii) Re-negotiate the terms relating to their12% convertible
debentures. (See notes7 and12m)
-7 -
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a.) Basis of Presentation (continued)
(i) 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 provider to take a
portion of any agreed-upon fee in stock or stock options. (See
note12)
(ii) Expand the company through acquisitions that will enable the
Company to integrate new technology with their existing
technology. (See note12a)
(iii) 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$25,000 sales
price). Progress toward completion is measured by
costs incurred to date as a percentage of total
estimated costs for each contract. Unbilled
receivables accrued under percentage of completion
contracts amounted to$-0- at December31,1999 and1998,
respectively. The completed contract method is used
for smaller systems.
-8 -
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE1 - 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. 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 and systems
patented by Parawan Electronics, Corp. ("Parawan").
Amortization is computed using the straight-line
method over a period of five years.
k) Income Taxes
Income taxes are provided for based on the liability
method of accounting pursuant to Statement of Financial
Accounting Standards (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.
-9 -
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
m) 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.
n) 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.
o) 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
December31,
<TABLE>
<S> <C> <C>
1999 1998
Basic and 30,500,0 10,000,0
Diluted EPS 00 00
</TABLE>
-10 -
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
p) 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
December31,1999 and1998, the Company has no items that
represent comprehensive income, and thus, has not
included a statement of comprehensive income.
q) 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's1999 fiscal year. The Company is in the
process of evaluating the disclosure requirements under
this standard.
Statement of Position ("SOP") No.98-1 was issued which
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
December15,1998, but earlier application is acceptable.
Previously capitalized costs will not be adjusted. The
Company believes that it is already in substantial
compliance with the accounting requirements as set
forth in this new pronouncement and therefore believes
that adoption will not have a material effect on
financial condition or operating results.
SOP No. 98-5 was issued which 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.
-11-
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
q) Recent Accounting Pronouncements (continued)
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 June15,2000,
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.
NOTE2 - CORPORATE REORGANIZATION AND MERGER
On May21,1999, 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 May25,1999, 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
sold300,000 shares of the Company's Class B common
stock to IVT's sole shareholder and concurrently
canceled a total of2,000,000 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. 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 the10,000,000 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 of2,000,000 shares was issued on
August30,1999, in connection with the reorganization.
-12-
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE2 - 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 May21,1999 (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:
<TABLE>
<S> < <C>
c
>
Cash and cash $ 191
equivalents
Property and equipment 138,80
9
Accrued expenses
(1,000
)
Net assets acquired $ 138,00
0
</TABLE>
iii) The statements of operations and cash flows include IVT's
results of operations and cash flows from January1,1998 (date
operations began) and Visual's results of operations from the
Effective Date.
-13-
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE3 -PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
December31,
<TABLE>
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> >
1999 1998
Equipment $ 8,932 $ 8,186
Furniture and 64,312 7,743
fixtures
73,244 15,929
Less: Accumulated
depreciation (17,836) (3,186)
property and $55,408 $12,743
equipment, net
</TABLE>
Depreciation expense for the years ended
December31,1999 and1998 was$14,650 and$3,186,
respectively.
NOTE4 - INCOME TAXES
The components of the provision for income taxes are as
follows:
December31,
<TABLE>
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> >
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
</TABLE>
The reconciliation of the effective income tax rate to the
Federal statutory rate is as follows:
<TABLE>
<S> <C>
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%
</TABLE>
-14-
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE4 - INCOME TAXES (Continued)
As of December31,1999 and1998, the Company had net
carryforward losses of approximately$1,700,000
and$38,000 that can be utilized to offset future
taxable income through2014. Utilization of these net
carryforward losses is subject to the limitations of
Internal Revenue Code Section382. 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:
For the Year
Ended
December31,
<TABLE>
<S> <C> <C>
Net Operating Loss $578,000 $12,920
Carryforwards
Less: Valuation Allowance (12,920)
(578,000)
Net Deferred Tax Assets $ - $ -
</TABLE>
Net operating loss carryforwards expire starting in2007
through2014.
NOTE5 - DUE TO RELATED PARTY
As of December31,1999 and1998, due to related parties
represents non-interest bearing advances of$21,000
and$20,000, respectively, from an officer (see also
Notes8,9 and10).
NOTE6 - NOTE PAYABLE
Notes payable represented a$12,318 note payable to the
Bank of New York, as of December31,1998. The note has
been repaid as of December31,1999.
-15-
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE7 - CONVERTIBLE DEBENTURES
As of December31,1999, convertible debentures consisted
of six notes payable totaling$350,000 bearing interest
at12% per annum payable on December1,2000. 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 equal50% of the average
bid price during the20 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 within150 days of the
effective date of the debentures.
NOTE8 - 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:
<TABLE>
<S> <C>
December31,
2000 $51,00
0
2001 44,800
Total $95,80
0
</TABLE>
Rent expense under operating leases for the year ended
December31,1999 and1998 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 May1999, 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 a10% 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:
(i) coordinating investor and public relations, including
working with investment bankers in connection with public or
private equity or debt funding ventures;
(ii) facilitating the preparation and filing of a Form10 or
Form10-SB registration statement with the Securities and Exchange
Commission (the "SEC"),
-16-
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE8 - COMMITMENTS AND CONTINGENCIES (Continued)
1. the subsequent preparation and filing of periodic reports
with the SEC;
2. seeking and evaluating potential business or product line
acquisitions;
3. seeking potential sources of debt or equity financing for
the Company's business activities or growth; and
4. 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
to10% 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 received50,000
shares of common stock of a public company
received by Visual in a Settlement Agreement
dated March5,2000.
e) On June2,1999, subsequently amended January11,2000, the
Company entered into a three year employment agreement, expiring
on May31,2002, with an employee. As compensation, such employee
will receive a base salary and
1) options to purchase140,000 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 November1,1999 relating to an investment made into
an entity called IVS Corp. ("IVS"). This investment was made
between the years1994 and1996. IVS was incorporated in1993 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$500,000 and
accordingly has established a reserve in accounts payable and
accrued expenses. The Company settled this lawsuit during
March2000 (see Note12).
-17-
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE9 -COMMON STOCK
The company has two issuances of common stock:
a) Class A Common Stock
Class A common stock consists of75,000,000 shares
of authorized common stock with a par value
of$.01. Class A stock has voting rights of1:1 and
as of December31,1999 and1998,54,083,663
and10,000,000 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 December31,1999 and1998, the Company has
not paid any dividends on its Common Stock.
b) Class B Common Stock
Class B Common Stock consists of700,000 shares of
authorized common stock with no intrinsic value.
Class B stock has voting rights of100 to1 with
respect to Class A Common Stock. As of
December31,1999 and1998,700,000 and400,000 were
issued and outstanding, respectively (see Note2).
Class B common stockholders are not entitled to
receive dividends (see Note12h).
NOTE10 - STOCK OPTIONS
During1997, the Company issued the following options:
a) On December15,1997, issued options to purchase75,866 shares
of Class A common stock at$.12, which expired on December15,1999.
During1998, the Company issued various options as
follows:
b) On January1,1998, issued options to purchase400,000 shares
of Class A common stock, at an average exercise price of$1.33 for
services, with expiration on January1,2001.
c) On July13,1998, issued options to purchase50,000 shares
of Class A common stock at$.10 per share expiring in12 months
(expired).
d) On July14,1998, issued options to purchase195,185 shares of
Class A common stock at$.1035 for investment banking services,
exercisable within three years (see note10).
-18-
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE10 - STOCK OPTIONS (Continued)
e) On October5,1998, issued options to purchase1,000,000 shares
of Class A common stock at$.03 (exercised).
f) On November23,1998, issued options to purchase300,000 shares
of Class A common stock at$.05 (exercised).
g) On December22,1998, issued options to purchase10,000 shares
of Class A common stock at$.10 for investment banking services.
During1999, the Company issued various options as
follows:
h) On January5,1999, issued options to purchase10,000 share of
Class A common stock at$.12 per share expiring in five years.
i) On January21,1999, issued options to purchase10,000 shares
of Class A common stock at$.107 per share expiring in five years.
j) On February5,1999, issued options to purchase10,000 shares
of Class A common stock at$.107 per share expiring in five years.
k) On March17,1999, issued options to purchase10,000 shares of
Class A common stock at$.107 per share expiring in five years.
l) On April6,1999, issued options to purchase10,000 shares of
Class A common stock at$.107 per share expiring in five years.
m) On May14,1999, the Company issued an option to
purchase9,000,000 shares of Class A Common Stock at$.033 per
share expiring in five years.
Options outstanding, except options under employee
stock option plan are as follows as of December31,1999:
-19-
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE10 - STOCK OPTIONS (Continued)
<TABLE>
<S> <C> <C>
Expiration Date Exercise Shares
Price
a)December15,1999 .1200 75,866
(Expired)
c)July13,1999 (Expired) .1000 50,000
d)July14,2001 .1035 195,185
b)January1,2001 .3100 100,000
b)January1,2001 1.0000 100,000
b)January1,2001 2.0000 200,000
g)December22,2003 .1000 10,000
h-l)January - April2004 .1096 50,000
781,051
</TABLE>
n) Employee Stock Option Plan
During the year ended December31,1999, 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 than85% 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 December31,1999,20,000,000 shares were
reserved for future issuance under the plan of
which9,490,000 shares were granted subsequent to
the adoption as detailed below:
<TABLE>
<S> <C> <C> <C>
Optionee Date # Shares Price
Joel Beagleman 05/14/99 9,000,00 0.033
0
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. 09/07/99 20,000 0.210
Alberding
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
9,510,0
00
</TABLE>
-20-
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE10 - 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 Employees", 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
December31,
<TABLE>
<S> < <C> <c <C>
c >
>
1999 1998
Net Loss
As Reported $ $ -
(1,662,70
2)
Proforma $ $ -
(1,945,12
3)
Basic Loss Per
Share
As Reported $ (.026) $ -
Proforma $ (.031) $ -
</TABLE>
These proforma amounts may not be representative of
future disclosures because they do not take into effect
proforma compensation expense related to grants made
before1997. 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 December31,1999
and1998: dividend yield of 0%; expected volatility
of320%; risk-free interest rates of5.84%; and expected
life of3.0 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.
-21-
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE10 - STOCK OPTIONS (Continued)
The following summarizes the stock option and warrant
transactions:
<TABLE>
<S> <C> <C> <C> <C>
Weighted Other Weighted
Employee Average Options Average
Stock Exercise and Exercise
Options
Outstandi Price Warrants Price
ng
Balance, - $ - 75,866 $ 0.12
December31,1997
Granted - $ - 1,955,185 $ 0.06
Exercised - $ - (1,300,000 0.03
)
Canceled - $ - - -
Balance, - $ - 731,051 $ 0.12
December31,1998
Granted 9,510,0 $ .033 50,000 $ 0.11
00
Exercised - $ - - $ -
Canceled - $ - (125,866) $ 0.11
Balance, 9,510,0 $ .033 655,185 $ 0.12
December31,1999 00
Outstanding and
Exercisable,
December31,1998 - $ - 731,051 $ 0.12
Outstanding and
Exercisable,
December31,1999 9,000,0 $ .033 655,185 $ 0.12
00
</TABLE>
The weighted average remaining contractual lives of
the employee stock options is2.5 years at
December31,1999.
NOTE11 - NON-RECURRING EXPENS
ES
Non-recurring expenses consisted of the following for
the year ended December31,1999:
<TABLE>
<S> <C>
a)Legal Settlements $500,000
b)Outside Services 427,113
c)Merger Costs 228,000
Total non-recurring $1,155,1
expenses 13
</TABLE>
a) The Company recognized$500,000 of expenses relating to legal
settlements.
b) The Company recognized$427,113 of outside services relating
to non-operating activities.
-22-
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999 AND1998
NOTE11 - NON-RECURRING EXPENS
ES (Continued)
c) In connection with the Reorganization Agreement, on
August30,1999, a consulting company received2,000,000 shares of
the Company's Class A common stock, valued at .114 per share
or$228,000 for services performed.
NOTE12 - SUBSEQUENT EVENTS
a) On March27,2000, 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 issue2,400,000
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.
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 common stock.
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.
-23-
IVOICE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND1998
NOTE12 -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 $2,500,000 raise will be
convertible at a 50% discount, utilizing a twenty (20) day
average closing bid price to the market price at the time of
conversion. The Debenture may be converted at any time and must
be converted within one year from the date of an effective
registration.
The debentures and underlying securities shall be
registered by an appropriate registration statement
filed no later than sixty (60) days from the date of
the initial closing of this offering.
h) On April24,2000, the Company filed to amend its Articles of
Incorporation to state that Class B common stock is convertible
into its Class A common stock at a conversion rate of one share
of Class B common stock for one hundred shares of Class A common
stock. The conversion ratio is in relation to the voting ratio.
i) On April24,2000, the Company terminated its agreement with
their former investment banking firm. The Company has agreed to
issue shares of its restricted Class A common stock as settlement
for all obligations relating to their agreement. This settlement
is not yet finalized.
j) On March21,2000,9,000,000 stock options were exercised to
purchase9,000,000 shares of the Company's Class A common stock at
a strike price of$.033 (see Note10m).
k) During April2000, the Company issued37,500 shares of its
Class A common stock for services rendered.
l) During April2000, the Company sold1,750,000 shares of its
Class A commons stock for approximately$750,000.
m) On April24,2000, the Company entered into discussions to
issue100,000 shares of its Class A common stock to the12%
convertible debenture holders, to extend the default term of the
debentures for a period of six months.
-24-
IVOICE.COM, INC.
STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER31,1999 AND1998
<TABLE>
<S> <C> <C> <C> <C>
Common Stock Common Stock
Series A Series B
Shares Amount Shares Amoun
t
Balance,
January1,1998, adjusted to
reflect
outstanding shares of 10,000,0 $100,00 400,0 $40
visual 00 0 00
Net loss for the year ended - - - -
December31,1998
Balance at December31,1998 10,000,0 100,000 400,00 40
00 0
Acquisition of net asset of 36,932,3 369,324 300,00 30
Visual 64 0
Issuance of common stock
for
software license costs 3,200,00 32,000 - -
0
Issuance of common stock 2,630,00 26,300 - -
for services 0
Issuance of common stock
for exercise
of stock options 100,000 1,000 - -
Issuance of common stock 981,299 9,813 - -
for cash
Issuance of common stock 250,000 2,500 - -
for compensation
Issuance of stock options - - - -
as compensation
Net loss for the year ended - - - -
December31,1999
Balance at December31,1999 54,093,6 $540,93 700,00 $70
63 7 0
</TABLE>
The accompanying notes are an integral part of the financial
statement.
-4
IVOICE.COM, INC.
STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER31,1999 AND1998 (continued)
<TABLE>
<S> <C> <C> <C>
Additiona Total
l
Paid in Accumulate Stockholde
d rs'
Capital Deficit Deficiency
Balance,
January1,1998, adjusted
to reflect
outstanding shares of $(85,289 $ - $14,751
visual )
Net loss for the year - (37,692) (37,692)
ended December31,1998
Balance at (85,289) (37,692) (22,941)
December31,1998
Acquisition of net asset (231,354 - 138,000
of Visual )
Issuance of common stock
for
software license costs 512,000 - 544,000
Issuance of common stock 264,500 - 290,800
for services
Issuance of common stock
for exercise
of stock options 13,000 - 14,000
Issuance of common stock 231,314 - 241,127
for cash
Issuance of common stock 85,000 - 87,500
for compensation
Issuance of stock options 256,500 - 256,500
as compensation
Net loss for the year - (1,725,197 (1,725,197
ended December31,1999 ) )
Balance at $1,045,6 $(1,762,88 $(176,211)
December31,1999 71 9)
</TABLE>
The accompanying notes are an integral part of the financial
statement.
(b) Financial Statements of Maisoft, Inc.
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS' OF
MAISOFT, INC.
We have audited the accompanying balance sheet of Maisoft, Inc.
as of December31,1999, and the related statements of income,
stockholders' equity and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit 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
audit provides 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 Maisoft, Inc. as of December31,1999, and the results of its
operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
MERDINGER, FRUCHTER, ROSEN & CORSO,
P.C.
Certified Public Accountants
New York, New York
April6,2000
MAISOFT, INC.
BALANCE SHEET
DECEMBER31,1999
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $94,772
Accounts receivable, net of allowance for
doubtful accounts of$-0- 23,610
Total current assets 118,382
Property and equipment, net of accumulated
depreciation of$7,854 22,820
TOTAL ASSETS $141,202
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $25,373
Income taxes payable 1,415
Total liabilities 26,788
Commitments and contingencies -
STOCKHOLDERS' EQUITY
Common stock - par value$.001; authorized
300,000 shares,300,000 issued and outstanding 300
Retained earnings 114,114
Total stockholders' equity 114,414
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $141,202
</TABLE>
The accompanying notes are an integral part of the financial
statement.
-2-
MAISOFT, INC.
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER31,1999
<TABLE>
<S> <C> <C>
SALES, net $425,530
COST OF SALES 98,345
GROSS PROFIT 327,185
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Selling expenses 40,749
General and administrative 182,274
expenses
Bad debt expense 3,690
Depreciation and amortization 6,135
Total selling, general and 232,848
administrative expenses
INCOME BEFORE INCOME TAXES 94,337
PROVISION FOR INCOME TAXES (1,415)
NET INCOME $92,922
NET INCOME PER COMMON SHARE
Basic and Diluted $ .310
</TABLE>
The accompanying notes are an integral part of the financial
statement.
-3 -
MAISOFT, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER31,1999
<TABLE>
<S> <C> <C> <C> <C>
Total
Common Stock Retained Stockholde
rs'
Shares Amount Earnings Equity
Balance, 300,000 $300 $21,192 $21,492
January1,1999
Net income for the
year ended
December31,1999 - - 92,922 92,922
Balance at 300,000 $300 $114,114 $114,414
December31,1999
</TABLE>
The accompanying notes are an integral part of the financial
statement.
-4
MAISOFT, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER31,1999
<TABLE>
<S> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $92,92
2
Adjustments to reconcile net income to net
cash
provided by operating activities
Depreciation and amortization 6,135
Increase in accounts receivable (10,600)
Decrease in supplies on hand 14,950
Increase in overdraft (29,523)
Decrease in accounts payable 20,888
Total cash provided by operating activities 94,772
NET INCREASE IN CASH AND
CASH EQUIVALENTS 94,772
CASH AND CASH EQUIVALENTS - BEGINNING OF -
YEAR
CASH AND CASH EQUIVALENTS - END OF YEAR $94,772
CASH PAID DURING THE YEAR FOR:
Interest expense $ -
Income taxes $ -
</TABLE>
The accompanying notes are an integral part of the financial
statement.
-5 -
MAISOFT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999
NOTE1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Organization
Maisoft, Inc. ("Maisoft"), was incorporated under the
laws of California on June14,1994.
b) b) Line of Business
The Company is engaged in the marketing of voice and
computer technology communication systems for small-to-
medium sized businesses and corporate departments. The
Company is a developer and manufacturer of telephone
and voice-activated applications. The Company developed
the Unified Messaging Software ("UMS") which
incorporates the latest technology with voice
recognition, automated attendant, text-to-speech, fax
routing, call control and screen pop-up. UMS allows the
seamless operation from one technological standard to
the other. The Company sells its products through
Dealer and Reseller channels.
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. The Company recognizes revenue at the time of
shipment for sales of systems which do not require
customization to be performed by the Company. The
Company recognizes revenue from services at the time
the service is performed.
e) Advertising Costs
Advertising costs are expensed as incurred and are
included in selling expenses. For the years ended
December31,1999, advertising expense amounted
to$11,270.
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) 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. Maintenance
and repairs are charged to expense as incurred.
-6 -
MAISOFT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999
NOTE1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
i) Income Taxes
The Company elected to be taxed under the provisions of
subchapter "S" of the Internal Revenue Code. Under
those provisions, the Company does not pay Federal and
State income taxes on its taxable income. Instead, the
stockholders are liable for individual income taxes on
their respective shares of the Company's taxable
income. For California purposes, the Company is subject
to a California franchise tax at the greater of 1 1/2%
of taxable income or $800.
j) 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.
k) 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.
l) 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>
<S> <C>
As of
December31,1999
Basic and Diluted EPS 30
0,
00
0
</TABLE>
-7 -
MAISOFT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999
NOTE1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
m) 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
December31,1999, the Company has no items that
represent comprehensive income, and thus, has not
included a statement of comprehensive income.
n) 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's1999 fiscal year. The Company is in the
process of evaluating the disclosure requirements under
this standard.
Statement of Position ("SOP") No.98-1 was issued which
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
December15,1998, but earlier application is acceptable.
Previously capitalized costs will not be adjusted. The
Company believes that it is already in substantial
compliance with the accounting requirements as set
forth in this new pronouncement and therefore believes
that adoption will not have a material effect on
financial condition or operating results.
SOP No.98-5 was issued which 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.
-8 -
MAISOFT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999
NOTE1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
n) Recent Accounting Pronouncements (continued)
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 June15,2000,
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.
NOTE2 - PROPERTY AND EQUIPMENT
Property and equipment as of December31,1999 is summarized as
follows:
<TABLE>
<S> <C>
Equipment $30,674
Less: Accumulated
depreciation (7,854)
property and equipment, $22,820
net
</TABLE>
Depreciation expense for the year ended December31,1999
was$6,135.
NOTE3 - COMMITMENTS AND CONTINGENCIES
g) 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:
<TABLE>
<S> <C>
December31,
2000 $29,90
0
2001 31,400
Total $61,300
</TABLE>
Rent expense under operating leases for the year ended
December31,1999 was$29,900.
-9 -
MAISOFT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER31,1999
NOTE4 - SUBSEQUENT EVENTS
n) On March27,2000, iVoice.com, Inc. ("Ivoice") entered into a
definitive agreement to acquire the Company. The terms of the
agreement specify that iVoice will pay$1,000,000 in cash and
issue2,400,000 shares of class A common stock in exchange for100%
of Maisoft's outstanding stock. The agreement is subject to a
repricing mechanism after one year based upon certain levels of
the Company's stock price. As of the date of this report, the
transaction has not closed.
-10 -
(c) Pro Forma Financial Information
UNAUDITED PROFORMA CONSOLIDATED FINANCIAL DATA
The Unaudited Proforma Consolidated Statements of Operations of
iVoice.com, Inc., (the "Company") for the year ended
December31,1999 (the "Proforma Statements of Operations"), and
the Unaudited Proforma Consolidated Balance Sheet of the Company
as of December31,1999 (the "Proforma Balance Sheet" and, together
with the Proforma Statements of Operations, the "Proforma
Financial Statements"), have been prepared to illustrate the
estimated effect of the acquisition of MaiSoft, Inc. ("Maisoft")
and the plan of reorganization with ThirdCAI, Inc. ("ThirdCAI").
The Proforma Financial Statements do not reflect any anticipated
cost savings from the Acquisition, or any synergies that are
anticipated to result from the Acquisition, and there can be no
assurance that any such cost savings or synergies will occur. The
Proforma Statements of Operations give proforma effect to the
acquisition of MaiSoft as if it had occurred on January1,1999. No
Proforma adjustments were made for the Statement of Operations
for ThirdCAI since it was accounted for as a reorganization with
a shell company. The Proforma Balance Sheet gives proforma effect
to the of Maisoft and the reorganization with ThirdCAI as if it
had occurred on December31,1999. The Proforma Financial
Statements do not purport to be indicative of the results of
operations or financial position of the Company that would have
actually been obtained had such Acquisitions been completed as of
the assumed date and for the period presented, or which may be
obtained in the future. The proforma adjustments are described in
the accompanying notes and are based upon available information
and certain assumptions that the Company believes are reasonable.
A preliminary allocation of the purchase price has been made to
major categories of assets and liabilities in the accompanying
Proforma Financial Statements based on available information. The
actual allocation of the purchase price and the resulting effect
on income from operations may differ significantly from the
proforma amounts included herein. These proforma adjustments
represent the Company's preliminary determination of purchase
accounting adjustments and are based upon available information
and certain assumptions that the Company believes to be
reasonable. Consequently, the amounts reflected in the Proforma
Financial Statements are subject to change and the final amounts
may differ substantially.
IVOICE.COM, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER31,1999
<TABLE>
<S> <C> < <C> <<C> < < <C>
C C C C
> > > >
IVOICE MAISOFT Pro Pro
Forma Forma
Adjust Consoli
ments dated
NET SALES $776,7 $425,53 $1
73 0 ,2
02
,3
03
COST OF SALES 280,31 98,345 378,662
7
GROSS PROFIT 496,45 327,185 - 823,641
6
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
Selling expenses 168,70 40,749 209,456
7
General and administrative expenses 750,61 182,274 150,00 ( 1,082,8
7 0 d 91
)
Bad debt expense 39,874 3,690 43,564
Provision for obsolescence 31,000 - 31,000
Depreciation and amortization 69,050 6,135 462,30 ( 537,491
6 a
)
Total general and administrative 1,059, 232,848 612,30 1,904,4
expenses 248 6 02
LOSS FROM OPERATIONS (562,7 94,337 (612,3 (1,080,
92) 06) 761)
OTHER INCOME (EXPENSES)
Non-recurring expenses (1,155 - 1,155, ( -
,113) 113 b
)
Interest expense (7,292 - (7,292)
)
Total other expenses (1,162 - 1,155, (7,292)
,405) 113
LOSS BEFORE INCOME TAXES (1,725 94,337 542,80 (1,088,
,197) 7 053)
INCOME TAXES - (1,415) - (1,415)
NET INCOME (LOSS) $(1,72 $92,922 $542,8 $(1,089
5,197) 07 ,468)
</TABLE>
Note1
The following is a description of the Pro Forma adjustments for
the year ended December 31,1999
Pro Forma consolidated statement of operations:
(a) Amortization of acquired goodwill relating to the
acquisition of MaiSoft by iVoice.
Amortization is recorded as if the acquisition took place as
of the first day of the year.
Amortization is computed over a period of 15 years.
(b) To eliminate non-recurring expenses for the year ended
December31,1999.
(c) There are no proforma adjustments for the ThirdCAI
reorganization since ThirdCAI has no operations.
(d) Payment of$150,000 finders fee relating to ThirdCAI.
IVOICE.COM, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER31,1999
<TABLE>
<S> <C> <<C> < <C> < <C> < < <C>
C C C C C
> > > > >
IVOICE MAISOF THIRDCA Pro Pro
T I Forma Forma
Adjustme Consol
nts idated
ASSETS
CURRENT ASSETS
Cash and cash $195,8 $94,77 $1,000 $(1,000, ( $-
equivalents 61 2 000) a
)
(150,000 (
) c
)
858,367 (
d
)
Accounts 599,02 23,610 622,63
receivable 6 6
Inventory 10,140 - 10,140
Other receivables - - -
Prepaid license - -
costs
Prepaid expenses 93,808 - 93,808
Total Current 898,83 118,38 1,000 (291,633 726,58
Assets 5 2 ) 4
Property and 55,408 22,820 78,228
equipment
Software license 489,60 - 489,60
costs 0 0
Investment 114,114 ( -
a
)
1,000 (
b
)
(115,114 (
) e
)
Goodwill - - 6,885,58 ( 6,472,
6 a 280
)
49,000 (
b
)
(462,306 (
) c
)
$1,443 $141,2 $1,000 $6,180,6 $7,766
,843 02 47 ,692
</TABLE>
IVOICE.COM, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER31,1999
<TABLE>
<S> <C> <<C> < <C> < <C> < < <C>
C C C C C
> > > > >
LIABILITIES AND
STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable and $681,7 $26,78 $708,5
accrued expenses 54 8 42
Cash Overdraft 858,367 ( 858,36
d 7
)
Deferred revenue 567,30 - 567,30
0 0
Due to related 21,000 - 21,000
parties
Convertible 350,00 350,00
debentures 0 0
Total Current 1,620, 26,788 - 858,367 2,505,
liabilities 054 209
STOCKHOLDERS'
EQUITY
Common stock, 540,93 300 504 24,000 ( 565,43
series A 7 a 7
)
500 (
b
)
(804)
Common stock, 70 - 70
series B
Additional Paid-in 1,045, - 496 5,976,00 ( 7,071,
Capital 671 0 a 171
)
49,500 (
b
)
(496) (
e
)
Accumulated Deficit (1,762 114,11 (612,306 (
,889) 4 ) c (2,375
) ,195)
(114,114 (
) e
)
Total (176,2 114,41 1,000 5,322,28 5,261,
Stockholders' 11) 4 0 483
Equity
TOTAL LIABILITIES $1,443 $141,2 $1,000 $6,180,6 $7,766
AND STOCKHOLDERS' ,843 02 47 ,692
EQUITY
</TABLE>
IVOICE.COM, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER31,1999
Note1
For purposes of this Pro Forma Balance Sheet, December31,1999,
the audited information was used.
Note2
The following is a description of the Pro Forma adjustments as of
December31,1999 for the Pro Forma Balance Sheet
(a) To record the issuance of2,400,000 shares of the Company's
Class A common stock and payment of$1,000,000 in cash relating to
the purchase of MaiSoft, Inc.
(b) To record issuance of50,000 shares of Class A common stock
relating to reorganization with ThirdCAI.
(c) To record$150,000 finders fee and amortization expense of
goodwill. Goodwill is recorded as if the two acquisitions had
occurred on the first day of the period. Amortization is computed
over a period of15 years.
(d) To reclass cash overdraft as current liabilities.
(e) To adjust stockholders' equity and zero-out investments.
(d) Form10-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 Route34, Matawan, NJ 07747
(Address of principal executive offices)
Registrant's telephone number, including area code (732)441-7700
Securities to be registered pursuant to Section12(b) of the Act:
None
Securities to be registered pursuant to Section12(g) of the Act:
Class A Common Stock, par value$0.01 per share
ITEM1. DESCRIPTION OF BUSINESS
Background
The Company, formerly Visual Telephone International, Inc., a
Delaware corporation, was incorporated in1989, and is the
successor to Booster Corporation, a publicly traded Utah
corporation, incorporated in1985.
On February5,1988, 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 January23,1990, 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 February2,1990, Select Housing Associates, Inc. (a Utah
corporation) was merged into Del Enterprises, Inc. (a Delaware
corporation, which was incorporated on October20,1989).
On November12,1991, 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 March25,1996, 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
September2,1996 to "Visual Telephone International, Inc."
During1995, the Company exchanged all of its Select Housing
shares for100% 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
February26,1996, 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
issue5,611,000 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 of1,111,000
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 February26,1996, 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 July1996, the Company acquired Communications Research Inc.
("CRI"). On May21,1999, 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. Additionally, 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. 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 awarded2,000,000 shares of Common Stock for his efforts.
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:
Jerome R. Mahoney President and Chief Executive
Officer (1)
Joel G. Beagelman Vice President and Chief Financial
Officer (1)
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 to9,000,000 shares of Class A
common stock. Mr. Beagleman also received50,000 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. The50,000 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 Telephone50,000 shares of
its stock. This stock as of May1999, had an estimated value of
less than$5,000.
The Company's principal offices and facilities are located at750
Highway34, Matawan, NJ 07747 and its telephone number is (732)441-
7000.
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 providing32-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
transactions24 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).
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 provides32-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 over500 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.
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. Universal Messaging: Universal messaging is a universal
inbox application for windows NT auto attendant/voice mail system
and Windows NT Interactive Voice Response ("IVR") system. With
Universal 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.
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.
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 expects50% down
on any product purchased with the Balance upon completion of
installation. The Company accepts company checks or
Visa/Mastercard.
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 February15,2000 a letter of intent ("LOI") was signed whereby
the Company would acquire Maisoft Inc., of Laguna Hills, CA. The
terms of the agreement were finalized on February28,2000 with the
final agreement to be signed sometime in March,2000. Audited
financial statements for the year ended December31,1999 are
attached as an exhibit to the Current Report Form8-K dated
April24,2000.
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" for1999 by CTI Magazine
(now "TMC Communications Solutions Magazine").
Michaels Stores, Inc.
On January27,2000, 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 February3,2000, 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 June2000 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.
Panam Wireless, Inc, d.b.a CELPAGE
On February8,2000, 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 May2000. This Voice
Processing Platform can handle over100,000 subscribers at any
given time.
Sales by Geographic Area
North East -70%
Approximately30% 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.), and2) 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).
Currently90% of the Company's sales have been through its direct
sales and10% 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 in1999 there 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 year2000.
Patents, Trademarks and Licenses
The Company possesses Licensing Agreements with Nuance Com.,
Entropic (owned by Microsoft) and Lemout & Hauspie (L & H)
Employees
The Company employs13 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 December31,1998, the Company had a net loss
of$37,692 on$626,486 of revenue and for year ended
December31,1999 a net loss of$1,725,197 on revenue of$776,773.
There can be no assurance that the Company will generate
operating income or net income in the future.
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
April28,1999. The Agreement called a base salary of$180,000 per
year which will be increased by10% 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 of700,000
shares of Class B stock, which provides for100 votes per share
or70,000,000 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.
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.
ITEM2. 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 December31,1999 Versus Year Ended
December31,1998
Sales for the year ended December31,1999 were$776,773, an
increase of$150,287 or24% over the prior years sales of$626,486.
The increase was a result of increased marketing efforts.
Unless special arrangements are made, the Company receives50% 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 December31,1999 and1998 the Company has deferred revenue
of$567,300 and$78,670, respectively for contracts not completed.
The Company accepts company checks or Visa/Mastercard. The
increase in receivable is due to the recording of two large sales
in December1999.
The Company's gross profit for the year ended December31,1999
increased$252,471 or103% December31,1998 to$496,456 from$243,985
in1998. The Company's gross margin percentage for the twelve
months ended December31,1999 was63.9% versus38.9% for the prior
year. This represents a25% 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
December31,1998 to$1,059,248 for the year ended December31,1999
or an increase of$777,571. This increase is a result of increase
of$513,311 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 plus a onetime charge of$31,000 for obsolete inventory.
The net loss from operations for the year ending December31,1999
was$562,792 compared to$37,692 for the year ended December31,1998
or an increase of$254,412.
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 of2000. 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 and Chairman. The Company entered into an
employment agreement with Mr. Mahoney on April28,1999 that
commenced on May1,1999 and terminates on April30,2004. It
provides for a base salary of$180,000 per year which will be
increased by10% annually.
Leo Pudio. Vice President of Operation. On June2,1999, the
Company entered into a three (3) year employment agreement with
Mr. Pudio. The agreement called for a base salary of$80,000 with
annual increases. In addition, Mr. Pudio was granted stock
options to purchase140,000 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 granted250,000 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 to9,000,000 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 $634,252.
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.
ITEM3. DESCRIPTION OF PROPERTY.
On March 15, 2000 the Company entered into a lease for
approximately8,000 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 for1,500
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.
ITEM4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth each person known to the Company,
as of March3,2000, 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.
<TABLE>
<S> <C> <C> <C>
Title of Name/Address Shares Percentage
Class of Owner Beneficially Ownership
Owned
Common Jerome R. Mahoney 80,450,000 57.3%
3 Berkley Place (1)
Colts Neck, NJ 07722
Common Joel Beagelman 8,500,000 (2) 12.1%
21 Cambridge Place
Wayne, NJ 07470
Common Leo Pudio 250,000 .35%
Deererest Drive
Holmdel, NJ 07733
Common All Officers & 89,200,000 63.5%
Directors As a Group (3
individuals)
</TABLE>
1. Includes450,000 Class A common stock shares held by his
minor children and700,000 Class B common stock shares that may
vote an equivalent of70,000,000 Class A common stock shares and
may be converted into a like number of Class A common stock
shares.
2. Includes100,000 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.
ITEM5. 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:
<TABLE>
<S> <C> <C>
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
</TABLE>
Jerome R. Mahoney; Chief Executive Officer/President/Director
Jerome R. Mahoney, has been Chief Executive Officer and a
director of the Company since May21,1999. Prior to joining the
Company, Mr. Mahoney founded Voice Express, Inc. a New York
Company, in1989. Voice Express sold voice mail systems, telephone
system service contracts and installed these systems. Mr. Mahoney
sold Voice Express Systems in1993 and joined Executive
Information Systems where he was until1988, at which time he was
the Director of National Accounts. From1993-1997 Mr. Mahoney was
President of IVS Corp., and on December17,1997 he established
International Voice Technologies (IVT), which merged with the
Company on May21,1999. Mr. Mahoney received a B.A. in finance and
marketing from Fairleigh Dickinson University, Rutherford, N.J.
in1983.
Joel G. Beagelman; Chief Financial
Officer/Secretary/Treasurer/Director
Joel G. Beagelman has been the Chief Financial Officer for the
Company since May21,1999 and a Director of the Company since1998.
From1963 through1972, Mr. Beagleman was a Sales Manager and
Designer for Nationwide Corrugated Container and from1972
through1978, 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 in1978
and acted as president of Fast-Pak Container Corporation from1979
through1995. From1995 to May21,1999 Mr. Beagelman actively ran
Visual Telephone International as President. Mr. Beagelman
received an AAS degree in Business Technology in1968 from the
City University of New York and in1987, a BA degree in Economics,
Law and Labor Studies from the William Paterson University.
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 with10 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 of1940
Although the Company will be subject to regulation under the
Securities Act of1933 and the Securities Exchange Act of1934,
management believes the Company will not be subject to regulation
under the Investment Company Act of1940 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 of1940.
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
of1940 and, consequently, any violation of such Act would subject
the Company to material adverse consequences.
ITEM6. 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 December31,1999:
Summary Compensation Table
Annual compensation Long-term compensation
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Awards Payout
s
Name and Position Year Salary Bonus Other Restric Securit LTIP A
($) ($) Annua ted ies Payout l
l Stock underly s ($) l
Comp. Awards ing o
($) ($) options t
/ SARs h
(#) e
r
C
o
m
p
.
(
$
)
Jerome R. 1999 $180,00
Mahoney, 0
CEO/President/Dir
ector
Joel G. 1999 104,000
Beagelman,
CFO/Secretary/Tre
asurer
Director
Leo Pudio, 1999 80,000
Vice-President of
Operations
</TABLE>
Option /SAR Grant in Last Fiscal Year
Individual Grants
<TABLE>
<S> <C> <C> <C> <C>
Name Number of Percent of total Exercise or base Date
securities options / SARs price ($/sh)
underlying granted to
options / SARs employees in
Granted (#) last fiscal year
Leo Pudio 140,000 $.35/sh J
u
n
e
1
5
,
1
9
9
9
</TABLE>
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 April28,1999 that commenced on May1,1999 and
terminates on April30,2004. It provides for a base salary
of$180,000 per year which will be increased by10% annually.
Leo Pudio On June2,1999, 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 purchase140,000 shares of
class A common stock of the Company at$0.35 per share. In
addition within sixty (60) days for signing the agreement, Mr.
Pudil was granted250,000 shares the Company's Class A common
stock.
Employee Stock Option Plan
The Company adopted the Employee Stock Option Plan ( the "Plan")
in order to attract and retain qualified personnel. Under the
Plan, of compensation committee of the Board of Directors, in its
discretion may grant stock options (either incentive or non-
qualified stock options) to officers and employees. The terms and
conditions upon which the options may be exercised are set out in
the Plan. To date, options for the right to purchase490,000 Class
A common stock shares have been granted under the Plan and remain
unexercised. The Plan is intended to provide a method whereby
employees of the Company and others who are making and are
expected to make substantial contributions to the successful
management and growth of the Company are offered an opportunity
to acquire Common Stock as an incentive to remain with the
Company and advance its interests.
ITEM7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April,1999, the Company granted Jerome Mahoney the right to
annual increases of10%. On May21,1999, Jerome Mahoney was
issued10,000,000 class A shares and700,000 shares of Class B for
the acquisition of IVT. Each Class B share hav a voting
equivalent equal to100 Class A shares and may be converted into
an equal number of Class A shares.
On June5,1999, Saraj Tschand (Founder and owner of Parwan
Electronics), received3.2 million shares of the Company in
exchange for the Company receiving all of Parwan's pre-developed
software code. Parwan retained its existing international
clientele but cannot sell to new or existing accounts.
ITEM8. DESCRIPTION OF SECURITIES.
The Company has authorized capital stock of150,000,000 shares of
Class A Common Stock, par value$.01 per share and700,000 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 than50% 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 than50% of the Company's Class
A Common Stock. A total of70,431,061 shares of Class A Common
stock are outstanding. Jerry Mahoney is the sole owner of Class B
Common Stock. There are700,000 shares of Class B Common stock
issued and outstanding. Class B Common stock has voting rights
of100 to1 providing for each Class B Common Stock share has100
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.
Shares Eligible for Future Sale
These shares would be eligible for sale in the public market
subject to the conditions and restrictions of Rule144. Rule144
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 Rule144 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 May1,2000. 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 Rule15c2-11 of the1934 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.
If in the future the Company exceeds$10 million in assets, it
would have to register as a reporting issuer under rule12(g) of
the1934 Act. In such event, the Company is prepared to register
as a reporting company and thereafter to comply with the
reporting requirements of the1934 Act.
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 of1933, 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 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 of1934. 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 May17,2000 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 Item2 of the Current Report on Form8-K dated
April26,2000, 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
ITEM1. 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
<TABLE>
<S> <C> <C>
High Low
1999 (1)
Second Quarter1999 $.6875 $.32
(2)
Third Quarter1999 $.33 $.125
Fourth Quarter1999 $.34 $.125
2000
First Quarter2000 $5.9375 $.29
</TABLE>
(1) Trading prices only available since May28,1999.
Since April24,2000 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 May17,2000, the Company becomes a
reporting company pursuant to the Securities Exchange Act of1934.
Effective August11,1993, the Securities and Exchange Commission
adopted Rule15g-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 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 Section4(2) of the Securities Act of1933.
Dividends
The Registrant has not paid any dividends to date, and has no
plans to do so in the immediate future.
ITEM2. LEGAL PROCEEDINGS
iVoice.com, Inc. was a party to a lawsuit initiated by a Michael
Wong on November1,1999 for a$300,000 investment by Wong into an
entity called IVS between the years1994 and1996. This action was
filed at the United States District Court, the Eastern District
of New York. IVS was incorporated in1993 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-997078.
iVoice.com was the result of a reverse merger on May21,1999
between International Voice Technologies (IVT), a private
Delaware corporation established on December17,1997, and Visual
Telephone International, the public entity.
A settlement was reached on February7,2000 whereby the Plaintiff
was awarded the sum of$300,000 and2,000,000 restricted shares of
class A common stock of iVoice.com.
ITEM4. RECENT SALES OF UNREGISTERED SECURITIES.
With respect to the sales made, the Registrant relied on
Section4(2) of the Securities Act of1933, as amended. No
advertising or general solicitation was employed in offering the
shares. The securities were offered for investment only and not
for the purpose of resale or distribution, and the transfer
thereof was appropriately restricted.
In general, under Rule144, a person (or persons whose shares are
aggregated) who has satisfied a one year holding period, under
certain circumstances, may sell within any three-month period a
number of shares which does not exceed the greater of one percent
of the then outstanding Common Stock or the average weekly
trading volume during the four calendar weeks prior to such sale.
Rule144 also permits, under certain circumstances, the sale of
shares without any quantity limitation by a person who has
satisfied a two-year holding period and who is not, and has not
been for the preceding three months, an affiliate of the Company.
ITEM5. 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 Section145 of the General
Corporation Law of the State of Delaware.
Insofar as indemnification for liabilities arising under the
Securities Act of1933 (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.
Part F/S
The financial statements are attached at the end of this Form10-
SB.
SIGNATURES
Pursuant to the requirements of Section12 of the Securities
Exchange Act of1934, the Registrant has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date of REPORT (DATE OF EARLIEST
EVENT REPORTED)
APRIL24,2000
By: /s/ Jerome R. Mahoney
Jerome R. Mahoney, President
(e) 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").
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 of1986, 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 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.
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;
(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
within15 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 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:
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.
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
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of1934, 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: April24,2000
