SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
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
Identification 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 SDC, 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 Registrants'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) Includes 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 developed 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 set up
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. SDCs 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.
2
<PAGE>
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.
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.
3
<PAGE>
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.
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.
4
<PAGE>
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.
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.
5
<PAGE>
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.
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
condominimum 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.
6
<PAGE>
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.
MANAGEMENT
The executives of the SDC (and subsequently the Registrant) are as follows:
Name Age Position
---- --- --------
Jay H. Budd 44 President/Director
Kevin F Pickard 36 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
7
<PAGE>
Kevin F. Pickard; CFO/Director
o CPA with more than 12 years 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.
Eric Manlunas; Director
o Founder and Director of Sitestar Corporation since October of 1998,
serves as the Company's Chairman of the Board since July 1999.
o Since 1995, Mr. Manlunas has managed Gateway Holdings, Inc., a private
equity fund based in Los Angeles.
o 1992 to 1995: Associate with Arthur Andersen LLP's Retail Management
Consulting division.
o Mr. Manlunas also serves as Director for MenuDirect, Inc., a Delaware
corporation, and Xcel Medical Pharmacy, a California corporation.
o Bachelor of Science degree in Journalism from Florida University and a
Masters of Business Administration degree from Pepperdine University.
8
<PAGE>
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 the 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.
9
<PAGE>
SUCCESS OF MANAGEMENT
Any potential investment should be evaluated in light of: (i) the
limited diversification of the venture capital opportunities afforded to
SDC, (ii) the high-risk nature and limited liquidity of 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.
10
<PAGE>
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.
ITEM 5. OTHER EVENTS
Resignation of Directors and Executive Officers
Upon the closing of this transaction, the officers and directors of the
Registrant resigned and were replaced with the officers and directors of SDC.
11
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired.
SMARTDOTCOM, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
12
<PAGE>
SMARTDOTCOM, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
PAGE
INDEPENDENT AUDITORS' REPORT 13
BALANCE SHEET 14
STATEMENT OF OPERATIONS 15
STATEMENT OF STOCKHOLDERS' DEFICIENCY 16
STATEMENT OF CASH FLOWS 17
NOTES TO FINANCIAL STATEMENTS 18-22
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF SMARTDOTCOM, INC.:
We have audited the accompanying balance sheet of Smartdotcom, Inc. (A
Development Stage Company) as of December 31, 1999 and the related statement of
operations, stockholders' deficiency and cash flows for the period from April
19, 1999 (inception) to December 31, 1999. 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 the Company as of December
31, 1999 and the results of its operations and its cash flows for the period
from April 19, 1999 (inception) to December 31, 1999 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 has no established source of
revenue, which raises substantial doubt about its ability to continue as a going
concern. Management's plans in regard to this matter is also discussed in
Note 1. These 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
Los Angeles, California
March 29, 2000
13
<PAGE>
SMARTDOTCOM, INC.
(A Development Stage Company)
BALANCE SHEET
December 31,
1999
--------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,424
Stock subscription receivable 5,000
--------------
TOTAL CURRENT ASSETS $ 7,424
==============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts Payable $ -
Stockholders Advances 148,208
--------------
STOCKHOLDERS' DEFICIENCY
Common stock, $0.001 par value;
25,000,000 shares authorized;
4,180,000 shares issued and outstanding 4,180
Additional paid-in-capital 222,044
Deficit accumulated during
the development stage (367,008)
--------------
TOTAL STOCKHOLDERS' DEFICIENCY (140,784)
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 7,424
==============
The accompanying notes are an integral part of the financial statements
14
<PAGE>
SMARTDOTCOM, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the Period
from April 19,
1999 (inception)
to December 31,
1999
----------------
REVENUE $ -
GENERAL AND ADMINISTRATIVE EXPENSES 367,008
----------------
LOSS FROM OPERATIONS (367,008)
PROVISION FOR INCOME TAXES
-
----------------
NET LOSS $ (367,008)
================
NET LOSS PER COMMON SHARE - basic and diluted $ (0.13)
================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - basic and diluted 2,742,162
================
The accompanying notes are an integral part of the financial statements
15
<PAGE>
<TABLE>
<CAPTION>
SMARTDOTCOM, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
Deficit
Accumulated
Common Stock Additional During the Total
------------------------- Paid-In Development Stockholders'
Shares Amount Capital Stage Deficiency
----------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, April 19, 1999 - $ - $ - $ - $ -
Issuance of shares for business
plan on 04/19/99 at $0.05 4,000,000 4,000 177,224 - 181,224
Issuance of shares for cash
10/14/99 at $0.25 50,000 50 12,450 - 12,500
10/27/99 at $0.25 25,000 25 6,225 - 6,250
11/08/99 at $0.25 25,000 25 6,225 - 6,250
12/12/99 at $0.25 60,000 60 14,940 - 15,000
12/13/99 at $0.25 20,000 20 4,980 - 5,000
Net Loss - - - ( 367,008) ( 367,008)
----------- ---------- ----------- ------------- -------------
Balance, December 31, 1999 4,180,000 $ 4,180 $ 222,044 $( 367,008) $( 140,784)
=========== ========== =========== ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements
16
<PAGE>
SMARTDOTCOM, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Period
from April 19,
1999 (inception)
to December 31,
1999
----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (367,008)
Shares issued for services rendered 181,224
Increase in stockholder advances 148,208
-------------
NET CASH USED IN OPERATING ACTIVITIES (37,576)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES -
Issuance of common stock for cash 40,000
-------------
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
=============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
For the period from April 19, 1999 (inception) to December 31, 1999, the
Company paid no interest or income taxes.
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Upon its formation, the Company issued 4,000,000 shares of its common stock
to a founding stockholder of the Company. The shares were valued at $181,224,
which relates to the stockholder's actual out-of-pocket costs to develop the
Company's business plan.
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 2000.
The accompanying notes are an integral part of the financial statements
17
<PAGE>
SMARTDOTCOM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operation
Smartdotcom, Inc. (the "Company") is currently a development stage
company under the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 7. the Company was incorporated under the laws
of the State of Nevada on April 19, 1999. Management has developed a
business plan, which incorporates the Company to provide 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. However, the Company
has no established source of revenue. 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 amounts and classification of
liabilities that might be necessary should the Company be unable to
continue in 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:
o Management has begun the implementation of its business plan.
Also, management expects that the Company will need approximately
$900,000 over the next twelve months to sustain operations and
implement the business plan.
o Management is in the process of completing a $262,500 private
placement for the issuance of up to 350,000 shares of the
Company's common stock. These funds will be used to complete a
public offering of its common stock to raise an additional
$1,000,000.
o Management believes that the $1,000,000 to be raised from a
public offering of its common stock and the $95,000 raised
subsequent to December 31, 1999 (see Note 5 - Subsequent Event)
will be sufficient to cover the Company's expected cash flow
needs over the next twelve months.
18
<PAGE>
SMARTDOTCOM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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.
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.
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, the Company has no
securities that would affect loss per share if they were to be
dilutive.
19
<PAGE>
SMARTDOTCOM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
NOTE 2 - RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. A
stockholder provides office space and services. These services are
minimal and have not been accounted for in these financial statements.
For the period from April 19, 1999 (inception) to December 31, 1999,
the Company paid approximately $21,000 to a company owned by the
majority stockholder of the Company and as of December 31, 1999 owed
approximately $148,208 to this same company. These amounts were for
expenditures paid by the related party on behalf of the Company.
NOTE 3 - STOCKHOLDERS' EQUITY
Upon its formation, the Company issued 4,000,000 shares of the
Company's common stock to the founding stockholder of the Company. The
shares were valued at $181,224, which relates to the stockholders'
actual out-of-pocket costs to develop the Company's business plan.
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 was collected in January
2000.
20
<PAGE>
SMARTDOTCOM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 4 -INCOME TAXES
The components of the provision for income taxes for the period from
April 19, 1999 (inception) to December 31, 1999, are as follows:
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%
Effect of Valuation Allowance ( 34.0)%
---------
Effective Income Tax Rate 0.0%
=========
At December 31, 1999, the Company had net carryforward losses of
approximately $367,000. 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.
21
<PAGE>
SMARTDOTCOM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 4 - INCOME TAXES (Continued)
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 $ 125,000
Less: Valuation Allowance ( 125,000)
------------
Net Deferred Tax Assets $ -
============
Net operating loss carryforwards expire starting in 2019.
NOTE 5 - SUBSEQUENT EVENT
Private Placement
-----------------
Subsequent to December 31, 1999, the Company issued an additional
180,000 shares of common stock for proceeds of $45,000.
In April 2000, the Company received an additional $50,000 on
subscriptions for 200,000 shares of its common stock (unaudited).
22
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (continued)
(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
---------- ----------- ----------- ---------
ASSETS
<S> <C> <C> <C> <C>
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 $ - $ 9,123 - $ 9,123
Stockholder advances - 103,208 - 103,208
---------- ----------- ----------- ----------
TOTAL CURRENT LIABILITIES
- 112,331 - 112,331
---------- ----------- ----------- ----------
STOCKHOLDERS' DEFICIENCY
Common stock, $.001 par value;
75,000,000 shares authorized
1,121,000 (actual) and 4,833,842
(pro forma) shares issued
and outstanding 1,121 4,46 a) (747) 4,834
Additional paid in capital 4,484 291,764 a) (4,858) 291,390
Deficit accumulated during development
stage (5,605) (398,654) a) 5,605 (398,654)
========== =========== =========== ==========
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $ - $ 9,901 $ - $ 9,901
========== =========== =========== ==========
</TABLE>
See accompanying notes to pro forma financial information
23
<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 $ - $ - $ - $ -
GENERAL AND ADMINISTRATIVE EXPENSES - 31,646 - 31,646
---------- ----------- ----------- ---------
LOSS FROM OPERATIONS - (31,646) - (31,646)
PROVISION FOR INCOME TAXES - - - -
---------- ----------- ----------- ---------
NET LOSS $ - $ (31,646) $ - $ (31,646)
========== =========== =========== =========
BASIC AND DILUTED LOSS PER SHARE $ - $ (0.01)
========== =========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,121,000 4,711,644
========== =========
</TABLE>
See accompanying notes to pro forma financial information
24
<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 $ - $ - $ - $ -
GENERAL AND ADMINISTRATIVE EXPENSES - 367,008 - 367,008
---------- ----------- ----------- ---------
LOSS FROM OPERATIONS - (367,008) - (367,008)
PROVISION FOR INCOME TAXES - - - -
---------- ----------- ----------- ---------
NET LOSS $ - $ (367,008) $ - $(367,008)
========== =========== =========== =========
BASIC AND DILUTED LOSS PER SHARE $ - $ (0.12)
========== =========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,121,000 3,116,004
========== =========
</TABLE>
See accompanying notes to pro forma financial information
25
<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 SDC, 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 adjustments are necessary to effect this transaction.
a) To adjust the stockholders' equity section to reflect that 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.
26
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (continued)
(c) Exhibits
2.1 Stock Purchase Agreement and Plan of Reorganization
27
<PAGE>
SIGNATURES
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: July 11, 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
