SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): June 30, 2000
TEL-VOICE COMMUNICATIONS, INC.
------------------------------
(Exact name of registrant as specified in its charter)
Nevada 0-29743 88-0409143
------ ------- ----------
(State of Incorporation) (Commission File Number) (IRS Employer Ident. No.)
7373 East Doubletree Ranch Road, Suite 200
Scottsdale, Arizona 85258
(Address of principal executive offices) (Zip Code)
(480) 368-8080
(Registrant's telephone number, including area code)
16133 Ventura Boulevard, Suite 635
Encino, California 91436
(Former name or former address, if changed since last report)
<PAGE>
Item 1. Changes in Control of Registrant.
On June 30, 2000 Tel-Voice Communications, Inc. (the "Registrant") entered
into a Stock Purchase Agreement and Plan of Reorganization with Smartdotcom,
Inc. ("SDC"), a Nevada corporation whereby Registrant acquired 100% of the
issued and outstanding share of common stock of SDC. This transaction was
approved by the unanimous consent of the Board of Directors of the Registrant.
For accounting purposes this transaction is being accounted for as a reverse
merger as the stockholders of SDC will own a majority of issued and outstanding
shares of common stock of the Registrant and the management team of SDC will
hold a majority of the management positions of the Registrant and will appoint a
majority of Board of Directors. The Registrant issued 4,376,895 shares of common
stock in exchange for all the issued and outstanding shares of SDC. Prior to the
transaction there were 1,121,000 of the Registrant's common stock that were
issued and outstanding. Upon completion of the transaction there were 5,497,895
of the Registrant's common stock issued and outstanding.
A copy of the Stock Purchase Agreement and Plan of Reorganization is filed
as an exhibit to this Form 8-K and is incorporated in its entirety herein.
The following table contains information regarding the number of shares
beneficially owned by the Registrant's current directors and executive officers
(after effect of this transaction) and those persons or entities who
beneficially own more than 5% of its common stock.
Number of shares Percent of Common
of Common Stock Stock Beneficially
Name Beneficially Owned Owned (1)
---- ------------------ -------------------
Jay Budd
7373 East Doubletree Ranch Road
Suite 200
Scottsdale, AZ 85258 3,400,000 (2) 61.8%
Kevin Pickard
28245 Avenue Crocker
Suite 220
Valencia, CA 91355 466,000 (3) 8.1% (4)
(1) The following percentages are based upon 5,497,895 shares of the Registrant
issued and outstanding.
(2) Included 3,000,000 owned by the Budd Family Limited Partnership which Mr.
Budd claims beneficial ownership.
(3) Includes 233,000 options to purchase common stock at $0.25 per share that
vest on July 1, 2001.
(4) Percentage is based on 5,730,895 outstanding assuming the 233,000 options
are exercised.
1
<PAGE>
Item 2. Acquisition or Disposition of Assets.
The shares of the Registrant's issued in this transaction was negotiated
between Registrant and SDC. In evaluating SDC as a candidate for the proposed
transaction, Registrant used criteria such as the value of the technology assets
and relationships established by SDC, SDC ability to attract major organizations
to use its technology in establishing a secured Intranet within the organization
and the experience of SDC's management team in the telecommunication and
Internet industries. In evaluating Registrant, SDC placed a primary emphasis on
Registrant's status as a reporting company under the Section 12(g) of the Act
and Registrant's facilitation of SDC becoming a wholly owned subsidiary and
taking over control of a reporting company under the Act.
BUSINESS
Company
-------
SDC was incorporated in the State of Nevada on April 19, 1999 to engage in any
lawful corporate business, including but not limited to, the developing a
business plan, which provides private electronic networks for labor unions and
integrated communities, both of which include subscribers of the unions and
communities. SDC will provide the hardware, software and technical support
required to setup and maintain the networks. Its principal place of business is
7373 E. Doubletree Ranch Rd., Suite 200, Scottsdale, AZ 85258.
SDC is the first all-inclusive telecom, video, Internet, entertainment and
security provider, as described more fully below (see "Plan of Operation"). We
are in the business of enhancing the lives of our subscribers, who benefit from
the added value of high-quality services and a fully integrated system made
available by a single company. Subscribers are afforded the luxury of accessing
these services using state-of-the-art technology that includes hardware,
software and network connectivity. Consequently, SDC provides market penetration
and incremental revenue for our alliance partners. Multinational Fortune 500
companies, in conjunction with a select project management team, provide our
operations and on-site service. SDC's door-to-door service and warrantee repair
will be unsurpassed by any other companies offering similar services. SDC's
financial model is predicated on transaction revenue and subscriber fees. In
fact, only minimal cash flow is actually generated through consumer-direct
equipment sales.
PLAN OF OPERATION
NOTE REGARDING PROJECTIONS AND FORWARD LOOKING STATEMENTS
This statement includes projections of future results and "forward-looking
statements" as that term is defined in Section 27A of the Securities Act of 1933
as amended (the "Securities Act"), and Section 21E of the Securities Exchange
Act of 1934 as amended (the "Exchange Act"). All statements that are included in
this filing, other than statements of historical fact, are forward-looking
statements. Although Management believes that the expectations reflected in
these forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the expectations are disclosed in
this Statement, including, without limitation, in conjunction with those
forward-looking statements contained in this Statement.
2
<PAGE>
SDC's management team includes experts in the fields of telecommunications,
technology, Internet protocols, interactive programming, marketing, and finance.
Our senior executives are experienced in managing virtual companies, and have
many successes to their collective credit. One of our goals is to keep our staff
count to a minimum by using contract labor and consultants. We believe that the
structure of SDC positively influences performance and nurtures the strengths of
our management team and support staff.
Telecommunications & Entertainment
----------------------------------
SDC offerings to its subscribers will include voice and video services that are
unparalleled in today's marketplace. In keeping with the philosophies that serve
as the foundation of SDC, telephone and television offerings will be
consolidated. Without compromising simple dial tone and cable access, one
company with one vision can deliver all the telephony and video capabilities a
home or office would need on an easy-to-use, yet high-tech, platform. This
vision will be carried out via the SmartFone and SmartCable services. SDC
features satellite quality and content using a standard cable connection. "Open"
channels can be used to offer special education and craft-related content to our
subscribers, and no reception dish is needed. We are the "cable company". As
such, we can introduce content that is friendly to our markets, and revenue
generating for SDC and its partners. With the near limitless capabilities of the
SmartFone, SDC's telecommunications offerings can be as varied as the particular
market demands. Key features of the SmartFone interactive device include, but
are not limited to:
Total Voice Services
Local and long distance telephone service will be provided at reduced rates.
Multiple-user voice mail ("v-mail") is provided, allowing up to 3 users per
unit. Message notification is customized, including distinguishable tones for
external vs. inter-community v-mail.
Address Book
Personal contacts as well as preloaded entries will be stored, offering
subscribers instant access to front desk, maintenance, life safety providers and
other special service hotlines.
Calendar
A virtual date planner will allow subscribers to schedule activities and
appointments directly on the telephone while completing a voice call. This
enables the user to actually load the date, as it is committed, during a call.
Special dates for community activities will be preloaded.
Memo Pad
The touch-screen capability of the smartfone makes this feature highly
progressive by allowing write-on-screen note taking. The memo pad also boasts 8
colors and a variable-width stylus.
3
<PAGE>
Call Log & Speed Dialing
The SmartFone will include an on-screen dialer, allowing the user to log
incoming and outgoing call details (such as time and date of call) as well as
saving his or her own "favorite" numbers as speed dial shortcuts.
Addressable
All of SDC's telecommunication devices are fully addressable. The SmartFone
functions can identify not only the associated community or group, but also the
individual subscriber.
Implementation of the SDC system empowers the SmartFone as a highly adaptable
and flexible device. In the same vein, SDC will offer limitless content and
satellite-quality picture (no dish required) using existing infrastructure. With
the SDC set-top box, subscribers will choose from 500 open television channels
offering local broadcast programming, games, pay per view, pay per use,
satellite-quality and community targeted programming (local sports, events,
etc.) Future directives will allow our subscribers to experience interactive
television using the SmartFone.
Internet/Intranet
-----------------
At the core of SDC's business is its advanced, community Intranet. This private
network will showcase SDC's fundamental goal of providing high quality
entertainment and communications content in a simple and unassuming fashion.
"Point-and-click" capability is the underlying principle on which the internal
network is modeled. Whatever service or information the subscriber is looking
for can be found just a couple of screens away from the SmartFone Home Page. The
"guessing" usually encountered while surfing the World Wide Web is, thereby,
eliminated.
The SDC Intranet will be a private network, available only to our subscribers.
It will incorporate several levels of redundancy to allow for constant,
dedicated service.
Living and working on-line using the Internet raises many security issues that
can be immediately avoided by way of private networking. This advantage is given
to SDC subscribers. Our private network will incorporate a double-firewall
system, so that users have only one door into the network and one door out.
Logging onto the system will make all of SDC's services instantly available.
As the name suggests, SDC is also a "dot com" company. Once logged off the
community network, subscribers may access the Internet over a high-speed
connection. They can utilize both group-specific internal messaging and global
email over the Internet.
The gateway to it all is the SmartFone. If you can use a telephone, you can
shop, chat, learn, or surf on our dedicated, private network. Subscribers enjoy
the benefit of exclusive network content and global Internet service.
4
<PAGE>
Security
--------
SDC is dedicated, through our exclusive services and technologies, to enriching
the lives of our subscribers. As such, our integrated community homeowners are
also provided with a state-of-art security system. Our security services include
access control, CCTV surveillance, and in-suite security systems. Emergency
communications and life safety systems are inherent features of every solution.
The SDC control center supplies all of the community's monitoring and real time
support.
Our security system architecture includes proprietary and non-proprietary
hardware, customized and standard software. It is designed to be unassuming
while still functioning at the highest level of home and personal safety.
Expert consultants begin the solution design with a security reference report,
followed by implementation of a hardware scheme, and completed with professional
installations.
E-Commerce
----------
SDC's community network will meet all of the consumer demands that are currently
fueling web-based e-commerce. In practice, subscriber group and community
profiles allow SDC to exceed any conventional market offerings. Through the
collective ability to provide high-end services, developers, labor networks, and
business networks all participate in revenue sharing with SDC.
When subscribers utilize the SDC Intranet, their financial transactions cannot
be compromised. An accredited FDIC-insured financial institution will manage all
settlements, and all transactions are routed through encrypted, cached server
architecture. The Company is acquiring an institution to handle the
transactions. The system is closed, private, and therefore, totally secure.
Subscriber-Based
----------------
All SDC services will be designed with a subscriber-based audience in mind. The
ability to connect various devices and technologies to a collective, private
network produces a marketable advantage for our members. SDC subscribers can
activate single-sourced offerings on the go, at home, and on the job.
Subscribers enjoy all the benefits and possibilities afforded by membership in a
customized, private network. Rather than having to track multiple telecom and
entertainment invoices, our subscribers receive a consolidated statement,
encompassing all transaction fees and monthly charges. Members can even earn
$martDollars, giving them access to applications (offerings) at a reduced rate.
The relationship between a customer and their technology provider is an
important one. The advantages to making that relationship subscriber-based are
impressive. As the subscriber base expands, the revenue generated by SDC for
itself and its partners grows incrementally. This value is inherent in SDC, and
may be recognized as a strong purchase opportunity for telephone, cable, and
Internet companies. The subscriber feels SDC's value in the quality of
offerings, ease-of-use, consolidated service sourcing, and affordability.
5
<PAGE>
Intellectual Property & Technology
----------------------------------
SDC is postured to take advantage of current as well as future technological and
proprietary offerings. This is partially because our internal network connects
devices that conform to the familiar standard of telephone and cable ports.
However, we are equally committed to the ongoing acquisition of relevant
intellectual properties and exclusive distribution agreements for the latest
technological appliances. We are our own vehicle for seeking our high-end
technology and delivering the resulting gadgets to our subscribers in a
user-friendly package.
Since new peripheral devices can be simply and quickly integrated into the
system, the kind of services available to SDC subscribers evolves in concert
with the latest technology as it becomes available. In this way, SDC can
continuously enhance everyday living for its subscribers.
The benchmark on which these principles are based is SDC's La Jolla Project.
This is the flagship model for integrated communities which is an existing
condominium project being redesigned and already in progress. It incorporates
all of SDC's initiatives in a very secure living environment. The SmartFone is
the centerpiece of the group offerings with our internal and security network as
the backbone. This community model is currently the only one of its kind, and
completely proprietary to SDC.
The future of SDC is based on our inventory of intellectual property, and the
ability to implement the tangible end products. The patent and copyright
processes that establish our designs as proprietary are continuously factored
into our financial projections and cash flow summary. There are no licenses
required.
PROPERTY
SDC's offices are located at 7373 E. Doubletree Ranch Rd., Suite 200,
Scottsdale AZ 85258. SDC has occupied this office space since March 1, 2000 and
pays $1,000 per month for office space rental.
LITIGATION
There is no outstanding litigation in which the SDC is involved and the SDC
is unaware of any pending actions or claims against it.
EMPLOYEES
SDC currently employs 2 full-time employees and 1 part-time employee. SDC
subcontracts as many tasks as possible to outside third parties.
6
<PAGE>
MANAGEMENT
The executives of SDC (and subsequently the Registrant) are as follows:
Name Age Position
---- --- --------
Jay H. Budd 44 President/Director
Kevin F. Pickard 37 CFO/Director
Brandon Budd 24 Secretary
Jay H. Budd; President/Director
-------------------------------
o More than 10 years of strategic consulting experience
o Has focused on development of interactive transaction-based content
programs delivered both through public access and in-home devices
o Consulted for leading telecommunications clients such as MCI, Northern
Telecom, Bell Canada Enterprises, Erickson, Turner Broadcasting,
AEGIS, Royal Bank of Canada, Hong Kong Shanghai Bank, as well as a
host of leading cable companies
Kevin F. Pickard; CFO/Director
------------------------------
o CPA with more than 12 year experience working with emerging companies.
o 1987 to 1996: Staff accountant to Senior Manager with Coopers &
Lybrand, L.L.P. (currently PricewaterhouseCoopers LLP)
o 1996 to 1998: Partner with Singer Lewak Greenbaum & Goldstein LLP
o 1998 to 2000: Owner of Pickard & Company, CPA's, P.C.
o Involved in five IPOs and numerous private placement offering over the
past four years.
o Bachelor of Science in Accounting and Master of Accountancy from
Brigham Young University
Brandon Budd; Secretary
-----------------------
o Project and Engineering coordinator for SMARTDOTCOM, Inc. from
November 1999 to present.
o Network Administrator, Director of Information Technologies including
e-business, Internet ventures, web site creation, database
architecture and design for TAG-One Inc. from September 1999 until May
2000.
o Test/design engineer for Bombardier Aerospace (May `97-Aug. '98).
o Bachelor of Applied Science (and Engineering) in Aerospace Engineering
(Division of Engineering Science) from University of Toronto; 3.22
GPA; Graduated June 1999.
7
<PAGE>
Alan Schram; Director
---------------------
o Founder, Sitestar Corporation, (OTCBB:SYTE)
o 1997 to 1999: Portfolio Manager, InterGroup Corporation (NASDAQ:INTG),
overseeing $125 million in capital under management
o 1994 to 1997: Wellington Capital Management, Los Angeles, CA,
Portfolio manager and analyst
o Master of Business Administration, The Anderson School, University of
California, Los Angeles (UCLA), graduated with honors June 1997.
o Bachelor of Business Economics, University of California, Los Angeles
(UCLA), GPA 3.75, graduated June 1995.
Sheldon J. Epstein; Director
----------------------------
o CPA and partner with Gaintner, Bandler, Reed, PLC.
o 30 years accounting experience
o Over 20 years as partner in a "Big 6" firm
o Director of NYSE listed company
EXECUTIVE COMPENSATION
SDC has paid no cash compensation to any of its executive officers, and
will not do so until SDC begins substantial operations at which time Mr. Budd
will be paid $275,000 annually and Mr. Pickard will be paid $90,000 annually.
Mr. Pickard does not currently devote 100% of his time to SDC. There are stock
and option plans being developed for the future. Directors do not receive
compensation for services on the Board of Directors.
RISK FACTORS RELATING TO SDC BUSINESS
SDC has only recently begun operations, and is entering into an area with
impressive growth potential, but with real risk factors as well. These factors
include the following:
Lack of Prior Operations and Experience
SDC is newly organized, has no significant assets, and has no revenues from
operations. There can be no assurance that SDC will operate at a profitable
level in the future, or that SDC will generate revenues.
Competition
SDC may experience substantial competition in its efforts to attract retail
merchants and customers. Other providers, many of whom have greater experience,
resources, and managerial capabilities than the Company, are in a better
position to obtain access to attractive clientele. SDC hopes to minimize this
risk by seeking a specific niche in the Internet marketplace.
8
<PAGE>
Success of Management
Any potential investment should be evaluated in light of: (i) the limited
diversification of the venture capital opportunities afforded to the SDC, (ii)
the high-risk nature and limited liquidity of the SDC, and (iii) SDC's ability
to utilize funds for the successful development and distribution of revenues as
derived by the revenues received by SDC's yet undeveloped portfolio of clients,
and any new potentially profitable ventures, among other things. SDC can offer
no assurance that any particular client and/or property under its management
contract will become successful.
Lack of Diversification
The size of SDC makes it unlikely that SDC will be able to commit its funds
to the acquisition of any major accounts until SDC has a more well established
track record, and SDC may not be able to achieve the same level of
diversification as larger entities engaged in this type of business. The lack of
diversification may make the value of SDC's proposed shares dependent on the
success of a relatively few and perhaps even one client.
Conflicts of Interest
The officers and directors have other interests to which they devote
substantial time and each will continue to do so notwithstanding the fact that
management time may be necessary to the business of SDC. As a result, certain
conflicts of interest exist and will continue to exist between SDC and its
officers and directors which may not be susceptible to resolution. Conflicts of
interest may arise in the area of corporate opportunities which can only be
resolved through exercise by the officers and directors of such judgment as is
consistent with their fiduciary duties to SDC. It is the intention of
management, so as to minimize any potential conflicts of interest, to present
first to SDC's Board of Directors any proposed investments for its evaluation.
Additional Financing Required
The funds available to SDC may not be adequate for it to be competitive in
the industry. There is no assurance that additional funds will be available from
any source when needed by SDC for expansion; and, if not available, SDC may not
be able to expand its operation as rapidly as it could if such financing were
available. Financing could come in the form of debt/preferred stock or a private
placement of common stock. If additional shares were issued to obtain financing,
investors in this offering would suffer a dilutive effect on their percentage of
stock ownership in SDC. However, the book value of their shares would not be
diluted, provided additional shares are sold at a price greater than that paid
by investors in this offering.
Absence of Cash Dividends
The Board of Directors does not anticipate paying cash dividends on the
Common Stock for the foreseeable future and intends to retain any future
earnings to finance the growth of SDC's business. Payment of dividends, if any,
will depend, among other factors, on earnings, capital requirements and the
general operating and financial condition of SDC as well as legal limitations on
the payment of dividends out of paid-in capital.
9
<PAGE>
Item 5. Other Events
Upon the closing of this transaction, the officers and directors of the
Registrant resigned and were replaced with the officers and directors of SDC.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
SMARTDOTCOM, INC.
FINANCIAL STATEMENTS
FROM INCEPTION (FEBRUARY 1, 1998) TO DECEMBER 31, 1998
AND FOR THE YEAR ENDED DECEMBER 31, 1999
PAGE
INDEPENDENT AUDITORS' REPORT 11
BALANCE SHEET 12
STATEMENT OF OPERATIONS 13
STATEMENT OF STOCKHOLDERS' DEFICIENCY 14
STATEMENT OF CASH FLOWS 15
NOTES TO FINANCIAL STATEMENTS 16-23
10
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF SMARTDOTCOM, INC.:
We have audited the accompanying balance sheets of Smartdotcom, Inc. as of
December 31, 1999 and 1998 and the related statement of operations,
stockholders' deficiency and cash flows for the year ended December 31, 1999 and
for the period from February 1, 1998 (inception) to December 31, 1998. 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 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 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 the Company as of December 31,
1999 and 1998 and the results of its operations and its cash flows for the year
ended December 31, 1999 and for the period from February 1, 1998 (inception) to
December 31, 1998 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 to the
accompanying financial statements, the Company's recurring losses from
operations, negative cash flow from operations and its negative working capital
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also discussed in Note 1.
These financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Stonefield Josephson, Inc.
Certified Public Accountants
Santa Monica, California
December 6, 2000
11
<PAGE>
<TABLE>
<CAPTION>
SMARTDOTCOM, INC.
BALANCE SHEET
December 31, December 31,
1999 1998
------------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,424 $ -
Accounts receivable, net of allowance for
doubtful accounts of $0 - 61,200
Stock subscription receivable 5,000 -
------------- -----------
TOTAL CURRENT ASSETS $ 7,424 $ 61,200
============= ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 9,004 $ 8,781
Stockholder's advances 200,606 73,827
------------- -----------
TOTAL CURRENT LIABILITIES 209,610 82,608
------------- -----------
STOCKHOLDERS' DEFICIENCY
Common stock, $0.001 par value;
25,000,000 shares authorized;
4,180,000 and 4,000,000 shares issued
and outstanding 4,180 4,000
Additional paid-in-capital 44,820 -
Accumulated deficit (251,186) (25,408)
------------- -----------
TOTAL STOCKHOLDERS' DEFICIENCY (202,186) (21,408)
------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 7,424 $ 61,200
============= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
12
<PAGE>
<TABLE>
<CAPTION>
SMARTDOTCOM, INC.
STATEMENT OF OPERATIONS
For the Period
For the from February 1,
Year Ended 1998 (inception)
December 31, to December 31,
1999 1998
--------------- ----------------
<S> <C> <C>
REVENUE $ 122,000 $ 100,000
GENERAL AND ADMINISTRATIVE EXPENSES 347,778 125,408
--------------- ----------------
LOSS FROM OPERATIONS (225,778) (25,408)
PROVISION FOR INCOME TAXES - -
--------------- ----------------
NET LOSS $ (225,778) $ (25,408)
=============== ================
NET LOSS PER COMMON SHARE - basic and diluted $ (0.06) $ (0.01)
=============== ================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - basic and diluted 4,022,877 4,000,000
=============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements
13
<PAGE>
<TABLE>
<CAPTION>
SMARTDOTCOM, INC.
STATEMENT OF STOCKHOLDERS' DEFICIENCY
Common Stock Additional Total
----------------------- Paid-In Accumulated Stockholders'
Shares Amount Capital Deficit Deficiency
---------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, February 1, 1998 - $ - $ - $ - $ -
Issuance of shares to Company
founder for cash 4,000,000 4,000 - - 4,000
Net loss - - - (25,408) (25,408)
---------- -------- ---------- ----------- -------------
Balance, December 31, 1998 4,000,000 4,000 - (25,408) (21,408)
Issuance of shares for cash 180,000 180 44,820 - 45,000
Net Loss - - - (225,778) (225,778)
---------- -------- ---------- ----------- -------------
Balance, December 31, 1999 4,180,000 $ 4,180 $ 44,820 $ (251,186) $ (202,186)
========== ========= ========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
14
<PAGE>
<TABLE>
<CAPTION>
SMARTDOTCOM, INC.
STATEMENT OF CASH FLOWS
For the Period
For the from February 1,
Year Ended 1998 (inception)
December 31, to December 31,
1999 1998
------------ ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (225,778) $ (25,408)
(Increase) decrease in accounts receivable 61,200 (61,200)
Increase in accounts payable and accrued expenses 223 8,781
Increase in stockholder's advances 126,779 73,827
------------ ----------------
NET CASH USED IN OPERATING ACTIVITIES (37,576) (4,000)
------------ ----------------
CASH FLOWS FROM FINANCING ACTIVITIES -
Issuance of common stock for cash 40,000 4,000
------------ ----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,424 -
CASH AND CASH EQUIVALENTS - beginning of year - -
------------ ----------------
CASH AND CASH EQUIVALENTS - ending of year $ 2,424 $ -
============ ================
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
For the year ended December 31, 1999 and for the period from February 1, 1998
(inception) to December 31, 1998, the Company paid no interest or income
taxes.
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
In conjunction with the Company's private placement of its common stock, the
Company issued 20,000 shares with an aggregate value of $5,000 on
subscription, which was received in January 2000.
The accompanying notes are an integral part of these financial statements
15
<PAGE>
SMARTDOTCCOM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
--------------------
Smartdotcom, Inc. (the "Company") was incorporated under the laws of
the State of Nevada on April 19, 1999. However, the operations of the
Company started on February 1, 1998 and from that date until April 19,
1999, the financial activities of the Company were reported in a
company controlled by the Company's founder. The accompanying
financial statements reflect the operations of the Company as if it
were incorporated on February 1, 1998. The Company has developed a
technology that provides private electronic networks for labor unions
and integrated communities, both of which include subscribers of the
unions and communities. The Company will provide the hardware,
software and technical support required to setup and maintain the
networks.
Basis of Presentation
---------------------
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. As reflected in the
accompanying financial statements, the company has had recurring loss
and negative cash flow from operations, and negative working capital.
This factor raises substantial doubt about the Company's ability to
continue as a going concern. Without realization of additional
capital, it would be unlikely for the Company to continue as a going
concern. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset
amount, or amounts and classification of liabilities that might be
necessary should the Company be unable to continue in existence.
Subsequent to year-end, the Company has been successful in raising
$300,000 through the sale of 720,000 shares of common stock and merged
with a public shell (see Note 5). As a result of the Company being a
public company through the reverse merger that took place on June 30,
2000, Management believes that it will be successful in raising
additional equity capital to fund the Company's operations. Management
believes the above actions already taken and the successful raising of
additional capital will be sufficient to provide the Company with the
ability to continue in existence.
16
<PAGE>
SMARTDOTCCOM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
Concentration of Credit Risk
The Company places its cash in what it believes to be credit-worthy
financial institutions. However, cash balances may exceed FDIC insured
levels at various times during the year.
Revenue
-------
Revenue consists of consulting fees received in connection with
providing technical support for the implementation of the Company's
technology in an integrated community in La Jolla, California. The
Company generally obtains written contracts with its customers to
provide consulting services. Revenue is recognized as the Company
performs consulting services outlined in the contract. All the revenue
from February 1, 1998 (inception) to December 31, 1999 was from
consulting fees generated from a project in La Jolla, California.
Income Taxes
------------
Income taxes are provided for based on the liability method of
accounting pursuant to SFAS No. 109, "Accounting for Income Taxes".
Deferred income taxes, if any, are recorded to reflect the tax
consequences on future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts at each
year-end.
17
<PAGE>
SMARTDOTCCOM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loss Per Share
--------------
The Company calculates earnings per share in accordance with SFAS No.
128, "Earnings Per Share", which requires presentation of basic loss
per share ("Basic LPS") and diluted loss per share ("Diluted LPS").
The computation of Basic LPS is computed by dividing loss available to
common stockholders by the weighted average number of outstanding
common shares during the period. Diluted LPS gives effect to all
dilutive potential common shares outstanding during the period. The
computation of Diluted LPS does not assume conversion, exercise or
contingent exercise of securities that would have an antidilutive
effect on earnings. As of December 31, 1999 and 1998, the Company has
no securities that would affect loss per share if they were to be
dilutive.
Comprehensive Income
--------------------
In June 1998, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components in the financial
statements. As of December 31, 1999, the Company has no items that
represent comprehensive income and, therefore, has not included a
schedule of Comprehensive Income in the accompanying financial
statements.
Impact of Year 2000 Issue
-------------------------
As of December 31, 1999, the Company does not have any computer
systems or customers and suppliers; therefore, the issue of the year
2000 has no effect on the Company's current activities.
Stock Based Compensation
------------------------
The Company accounts for employee stock options in accordance with
Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for
Stock Issued to Employees". Under APB 25, the Company recognizes no
compensation expense related to employee stock options, as no options
are granted at a price below market price on the date of grant. As of
December 31, 1999 there were no such options outstanding.
18
<PAGE>
SMARTDOTCCOM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock Based Compensation, continued
-----------------------------------
In 1996, SFAS No. 123 "Accounting for Stock-Based Compensation",
became effective for the Company. SFAS No. 123, which prescribes the
recognition of compensation expense based on the fair value of options
on the grant date, allows companies to continue applying APB 25 if
certain pro forma disclosures are made assuming hypothetical fair
value method, for which the Company uses the Black-Scholes
option-pricing model.
For non-employee stock based compensation the Company recognizes an
expense in accordance SFAS No. 123 and values the equity securities
based on the fair value of the security on the date of grant. For
stock-based awards the value is based on the market value for the
stock on the date of grant and if the stock has restrictions as to
transferability a discount is provided for lack of tradability. Stock
option awards are valued using the Black-Scholes option-pricing model.
Recently Issued Accounting Pronouncements
-----------------------------------------
In December 1999, the Securities and Exchange Commission (the
Commission) issued Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements, which is to be applied beginning
with the fourth fiscal quarter of fiscal years beginning after
December 15, 1999, to provide guidance related to recognizing revenue
in circumstances in which no specific authoritative literature exists.
The Company is reviewing the application of the Staff Accounting
Bulletin to the Company's financial statements, however, any potential
accounting changes are not expected to result in a material change in
the amount of revenues we ultimately expect to realize.
In March 2000, the Financial Accounting Standards Board (FASB) issued
FASB Interpretation No. 44 (Interpretation 44), "Accounting for
Certain Transactions Involving Stock Compensation". Interpretation 44
provides criteria for the recognition of compensation expense in
certain stock-based compensation arrangements that are accounted for
under APB Opinion No. 25, Accounting for Stock-Based Compensation.
Interpretation 44 is effective July 1, 2000, with certain provisions
that are effective retroactively to December 15, 1998 and January 12,
2000. Interpretation 44 is not expected to have an impact on the
Company's financial statements.
19
<PAGE>
SMARTDOTCCOM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Recently Issued Accounting Pronouncements, continued
----------------------------------------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal
years beginning after June 15, 2000. SFAS No. 133 requires the Company
to recognize all derivatives as either assets or liabilities and
measure those instruments at fair value. It further provides criteria
for derivative instruments to be designated as fair value, cash flow
and foreign currency hedges and establishes respective accounting
standards for reporting changes in the fair value of the derivative
instruments. Upon adoption, the Company will be required to adjust
hedging instruments to fair value in the balance sheet and recognize
the offsetting gains or losses as adjustments to be reported in net
income or other comprehensive income, as appropriate. The Company is
evaluating its expected adoption date and currently expects to comply
with the requirements of SFAS 133 in fiscal year 2001. The Company
does not expect the adoption will be material to the Company's
financial position or results of operations since the Company does not
believe it participates in such activities.
NOTE 2 - RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. The
majority stockholder provides office space. The cost of the office
space is minimal and has not been accounted for in these financial
statements.
As of December 31, 1999, the majority stockholder of the Company had
unpaid advances of $200,606. These advances are unpaid salary and
Company related expenses paid by the majority stockholder that have
not been reimbursed. The majority stockholder has accrued a salary of
$60,000 and $180,000 in 1998 and 1999, respectively, and has been paid
a salary of $15,000 per month in 2000. From January 1, 2000 to
September 30, 2000, the Company has reimbursed the majority
stockholder $81,140 of the outstanding balance at December 31, 1999.
20
<PAGE>
SMARTDOTCCOM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 3 - STOCKHOLDERS' EQUITY
Upon its formation, the Company issued 4,000,000 shares of the
Company's common stock to the founding stockholder for $4,000.
In October 1999, the Company initiated a private placement of its
common stock. Each subscriber received one share of the Company's
common stock for $0.25. As of December 31, 1999, the Company issued
180,000 shares of its common stock for $45,000, of which $40,000 was
collected in 1999 and the remaining $5,000, which has been recorded as
a subscription receivable in the accompanying balance sheet, was
collected in January 2000.
NOTE 4 -INCOME TAXES
The components of the provision for income taxes for year ended
December 31, 1999 and the period from February 1, 1998 to December 31,
1998, are as follows:
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 (Benefit)
from Continuing Operations $ - $ -
================ =================
The reconciliation of the effective income tax rate to the Federal
statutory rate is as follows:
Federal Income Tax Rate 34.0% 34.0%
Effect of Valuation Allowance ( 34.0)% ( 34.0)%
-------- ---------
Effective Income Tax Rate 0.0% 0.0%
======== ==========
21
<PAGE>
SMARTDOTCCOM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 4 - INCOME TAXES (Continued)
At December 31, 1999, the Company had net operating loss carryforwards
of approximately $110,000. The difference between the net operating
loss carryforwards and the cumulative losses of the Company is related
to book/tax differences and losses recorded in the company controlled
by the Company's majority stockholder prior to the incorporation of
the Company. Because of the current uncertainty of realizing the
benefits of the tax carryforward, a valuation allowance equal to the
tax benefits 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 as of December 31, 1999 are as follows:
Deferred Tax Assets
Loss Carryforwards $ 44,000
Less: Valuation Allowance (44,000)
---------------
Net Deferred Tax Assets $ -
===============
Net operating loss carryforwards expire starting in 2019.
NOTE 5 - SUBSEQUENT EVENTS
Subsequent to December 31, 1999, the Company issued an additional
480,000 and 240,000 shares of its common stock in two separate private
placement offerings for gross proceeds of $120,000 and $180,000,
respectively.
In May 2000, the Company issued 233,000 shares to a consultant for
services valued at $58,250. These shares were valued at the most
recent sales of common stock in the private placement offering of
$0.25.
In May 2000, the Company adopted an employee stock option program to
attract and retain key employees. The stock option plan contains
1,000,000 shares of which 433,000 were issued in May 2000.
22
<PAGE>
SMARTDOTCCOM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 5 - SUBSEQUENT EVENTS (Continued)
Effective June 30, 2000, the Company merged with Tel-Voice
Communications, Inc., a public shell ("Tel-Voice"). In connection with
this merger, the Company paid $150,000 and issued 374,895 shares of
its common stock. As a result of this transaction, the stockholders of
the Company acquired or exercised control over a majority of the
shares of Tel-Voice. Accordingly, the transaction has been treated for
accounting purposes as a recapitalization of the Company and,
therefore, the continuing financial statements will represent a
continuation of the legal subsidiary, the Company, not Tel-Voice, the
legal parent. In accounting for this transaction:
(i) The Company is deemed to be the purchaser and parent company
for accounting purposes. Accordingly, its net assets will be
included in the consolidated balance sheet at their historical
book values;
(ii) As of the date of the transaction, Tel-Voice had no
operations and no assets; therefore, the Company will treat the
transaction as a reverse merger and not record any excess cost
over net assets acquired;
(iii) The consolidated statements of operations and cash flows
will include the Company's results of operations and cash flows
from February 1, 1998 (date of inception) and Tel-Voice's results
of operations from the June 30, 2000.
23
<PAGE>
(b) Pro forma financial information.
<TABLE>
<CAPTION>
Tel-Voice Communications, Inc.
Pro forma Balance Sheet
As of March 31, 2000
Tel-Voice SDC Adjustments Proforma
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ - $ 9,901 $ - $ 9,901
--------- ---------- ----------- ----------
TOTAL CURRENT ASSETS - 9,901 - 9,901
--------- ---------- ----------- ----------
OTHER ASSETS - - - -
--------- ---------- ----------- ----------
TOTAL ASSETS $ - $ 9,901 $ - $ 9,901
========= ========== =========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expense $ - $ 11,623 - $ 11,623
Stockholder advances - 147,306 - 147,306
--------- ---------- ----------- ----------
TOTAL CURRENT LIABILITIES - 158,929 - 158,929
--------- ---------- ----------- ----------
STOCKHOLDERS' DEFICIENCY
Common stock, $.001 par value;
75,000,000 shares authorized
1,121,000 (actual) and 4,834,895 (pro forma)
shares issued and outstanding 1,121 4,460 a) (746) 4,835
Additional paid in capital 4,484 114,540 a) (4,859) 114,165
Accumulated deficit (5,605) (268,028) a) 5,605 (268,028)
--------- ---------- ----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $ - $ 9,901 $ - $ 9,901
========= ========== =========== ==========
</TABLE>
See accompanying notes to pro forma financial information
24
<PAGE>
<TABLE>
<CAPTION>
Tel-Voice Communications, Inc.
Pro forma Statement of Operations
For the Three Months Ended March 31, 2000
Tel-Voice SDC Adjustments Proforma
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUE $ - $ 45,000 $ - $ 45,000
GENERAL AND ADMINISTRATIVE EXPENSES - 61,842 - 61,842
--------- ---------- ----------- ----------
LOSS FROM OPERATIONS - (16,842) - (16,842)
PROVISION FOR INCOME TAXES - - - -
--------- ---------- ----------- ----------
NET LOSS $ - $ (16,842) $ - $ (16,842)
========= ========== =========== ==========
BASIC AND DILUTED LOSS PER SHARE $ - $ (0.00)
========= ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,121,000 4,761,049
========= ==========
</TABLE>
See accompanying notes to pro forma financial information
25
<PAGE>
<TABLE>
<CAPTION>
Tel-Voice Communications, Inc.
Pro forma Statement of Operations
For the Year Ended December 31, 1999
Tel-Voice SDC Adjustments Proforma
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUE $ - $ 122,000 $ - $ 122,000
GENERAL AND ADMINISTRATIVE EXPENSES - 347,778 - 347,778
--------- ---------- ----------- ----------
LOSS FROM OPERATIONS - (225,778) - (225,778)
PROVISION FOR INCOME TAXES - - - -
--------- ---------- ----------- ----------
NET LOSS $ - $ (225,778) $ - (225,778)
========= ========== =========== ==========
BASIC AND DILUTED LOSS PER SHARE $ - $ (0.05)
========= ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,121,000 4,397,782
========= ==========
</TABLE>
See accompanying notes to pro forma financial information
26
<PAGE>
Tel-Voice Communications, Inc.
Notes to Pro forma Financial Information
On June 30, 2000 Tel-Voice Communications, Inc. (the "Registrant") entered into
a Stock Purchase Agreement and Plan of Reorganization with Smartdotcom, Inc.
("SDC"), a Nevada corporation whereby Registrant acquired 100% of the issued and
outstanding share of common stock of SDC. This transaction was approved by the
unanimous consent of the Board of Directors of the Registrant. For accounting
purposes this transaction is being accounted for as a reverse merger as the
stockholders of SDC will own a majority of issued and outstanding shares of
common stock of the Registrant and the management team of SDC will hold a
majority of the management positions of the Registrant and will appoint a
majority of Board of Directors.
The accompanying pro forma balance sheet as of March 31, 2000 assumes that the
Merger of Tel-Voice Communications, Inc. and SDC took place on March 31, 2000.
The following as adjustments are necessary to effect this transaction.
a. To adjust the stockholders' equity section to reflect that of SDC as
SDC will be the operating entity in the future in this reverse merger
transaction.
The accompanying statement of operations for the three months ended March 31,
2000 and for the year ended December 31, 1999 reflect the operations of the
combined companies as if the transaction took place on January 1, 2000 and
January 1, 1999, respectively. There are no adjustments necessary to the
statement of operations to effect this transaction.
27
<PAGE>
(c) Exhibits
2.1 Stock Purchase Agreement of Plan of Reorganization
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: December 7, 2000
TEL-VOICE COMMUNICATIONS, INC.
By: /s/ Jay Budd
---------------------
Name: Jay Budd
Title: Chairman and Chief Executive Officer
28
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ ------------
2.1 Stock Purchase Agreement and Plan of Reorganization
29
