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As filed with the Securities and Exchange Commission on September 26, 2000
Commission File No. 000-31183
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 1
to
FORM 10-SB
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GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
YAPALOT COMMUNICATIONS HOLDINGS INC.
(Name of Small Business Issuer in its charter)
Delaware 51-0402715
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4884 Dufferin Street, Unit 1, Toronto, Ontario, Canada M3H 5S8
(Address of principal executive offices) (Zip code)
Issuer's telephone number: (416) 736-8882
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common Stock par value $.001
(Title of class)
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TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business............................................3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................8
Item 3. Description of Property............................................11
Item 4. Security Ownership of Certain Beneficial Owners and Management.....11
Item 5. Directors, Executive Officers, Promoters and Control Persons.......11
Item 6. Executive Compensation.............................................13
Item 7. Certain Relationships and Related Transactions ....................13
Item 8. Description of Securities..........................................13
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity
and Other Stockholder Matters......................................14
Item 2. Legal Proceedings..................................................14
Item 3. Changes in and Disagreements with Accountants......................14
Item 4. Recent Sales of Unregistered Securities............................14
Item 5. Indemnification of Directors and Officers..........................14
PART F/S
Financial Statements
PART III
Index to Exhibits
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Yapalot Communications Holdings Inc. was incorporated on April 6, 2000
under the laws of Delaware to deploy and market a global Internet Protocol
("IP") telecommunications network. Yapalot is the holding company for its
wholly-owned subsidiary, Yapalot Communications Inc. which was incorporated
under the laws of Canada on March 8, 2000. Yapalot Communications Holdings Inc.
and Yapalot Communications Inc. are referred to as a single entity throughout
this document as "Yapalot", "we" or "us".
Initially, we began providing flat rate long distance service in July
2000 in several major cities: Toronto, Montreal, Vancouver, Hong Kong, Moscow,
Chicago, Los Angeles, Miami and New York, and in the countries of France, the
United Kingdom, Italy and Israel. In August 2000, we expanded our long distance
services to include the entire continental United States. In September 2000, we
launched additional long distance services in Germany, Norway and the
Netherlands. We anticipate expanding our services in October 2000 to include
Japan and Argentina at a cost of approximately $200,000, and in November 2000 to
include Greece at a cost of approximately $100,000.
Principal Business Activities
Our principal services include the following:
1. Flat rate long distance tolls sold to households and small business
on a yearly subscription basis.
2. Corporate long distance solutions offered as an alternative to high
cost long distance carriers.
3. Prepaid cards sold throughout the world on a retail and wholesale
level featuring a time sensitive rather than a dollar sensitive limitation.
4. Franchises sold outside Canada to qualified persons in the
telecommunications industry. Franchisees will have access to our VoIP network
enabling them to market and offer flat rate long distance services to customers
in their territory.
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Industry Background
As the telecommunication industry has been deregulated, competition has
corrected the high prices of long distance service with competitive cost
effective pricing. Our Voice over Internet Protocol ("VoIP") technology allows
for substantial cost savings over traditional telephone company switching
systems by eliminating all long distance tolls and replacing them with efficient
IP technology. Yapalot was formed by a team of experienced telecommunications
executives.
We have developed strategic alliances with manufacturers such as
Ericsson and Clarent Corporation ("Clarent"). We consulted with Ericsson, on a
non-exclusive basis, in connection with the initial deployment of our long
distance services. Clarent is currently manufacturer of our Yapalot Gateway
Servers. Clarent also provides us with consulting services, technical support
and deployment support, all on a non-exclusive basis. We have also formed
non-exclusive alliances with Equant, UUNET, an MCI Worldcom company, and
Appwerx. Equant and UUNET house our technical equipment in the countries in
which we presently provide services. In addition, they provide the IP bandwith
we require for the operation of our network. Equant, with facilities in over 120
countries, offers us a substantial time savings in hardware deployment. Further,
our alliance with Equant saves us the time and effort of securing locations and
negotiating over local costs and tariffs.
Our purpose is to provide flexible long distance voice and data
solutions to consumers and businesses by attempting to achieve the following:
o Provide flat rate long distance packages
o Prepaid card service "One Card"
o Post paid billing scenario
o Free long distance calls: PC to phone
o Corporate long distance solutions
o Corporate global voice mail
o International conferencing
o Global fax
During our first year of operations, we are focusing on global
deployment of our gateways, followed by a Canada-wide advertising campaign.
Beginning in our second year, we will place the same promotional efforts
employed in Canada to sell flat rate long distance service subscriptions
worldwide. We have the potential to sell flat rate long distance service
subscriptions in all of the countries available on the Yapalot network.
Subscriptions worldwide will be set up and managed by our customer service
center located in Toronto, Canada, through our inbound call center or through
our website.
Yapalot's VoIP Network
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Our VoIP network was developed using hardware (gateways) manufactured
by Clarent Corporation and software either manufactured by Clarent or
proprietary. We co-located our gateways with UUNET, an MCI-WorldCom company
specializing in data solutions and server location facilities for global
companies, by positioning our gateways, also known as points of presence, in
specific countries in rental space provided by UUNET. We purchased Internet
bandwidth from UUNET that can carry all data between our gateways to avoid data
being carried over public Internet service. Once our gateway is in place it is
linked via the Internet to other gateways owned and operated by Yapalot. The
software is responsible for routing all telephone, fax and video transmissions
from gateway to gateway and then terminating them through a PRI (regular
telephone line). Our initial deployment of 10 gateways in eight different
countries has a one time cost of $380,000 including installation, training and
software. We anticipate an additional fixed cost of $25,000 per gateway and an
ongoing cost of $ 4,000 per gateway to add an additional city to our network.
Yapalot's Products
In North America our services spread across two major markets: consumer
and corporate. The consumer market will be enticed by discounting long distance
and flat rate packages. While business will also be attracted by discounted
rates, they will be more anxious to use new services, such as global voice mail,
global fax and global conference.
We will provide an inbound call center located in Toronto.
International customers will subscribe to our service via e-commerce on
Yapalot's website or contact their local Yapalot representative to subscribe via
phone.
Our services and products will be diverse and all share a common goal:
cost reduction in global communications via voice, fax or data. The network
infrastructure will yield substantial benefits over traditional telephone
companies as follows:
Infrastructure - Based on the Internet standard of IP, which allows for
the flow of data across the globe. This data can then carry voice, fax and video
to almost anywhere.
Performance - Voice over IP or VoIP with a standard T1 data connection
can support over 120 simultaneous phone calls in every country of presence.
Products - The ability to market long distance voice services via phone
to phone, PC to phone and PC to PC. These services can be post paid, prepaid
cards or flat rate service. These services can also migrate to the corporate
world with enhanced network abilities to link corporate offices around the world
with both voice and data transfer, conference calling and global voice mail.
Flexibility - Because the infrastructure backbone is Internet IP based,
the marketing of the services can be done anywhere in the world even without a
point of presence, hence a global reach.
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E-Commerce - The ability to subscribe clients internationally via
commerce giving them access to Yapalot's VoIP network.
Competition for Telecommunications Services
In the world of deregulated telecommunication, competition has
corrected the high prices of long distance service with competitive cost
effective pricing. Communication is expedited due to the Internet and
e-commerce. Management believes that they can capture a substantial portion of
the international market largely due to our "Flat Rate" program. Our services
address these issues by providing value added services that combine with flat
rate service to create a reoccurring revenue stream.
An increasing number of competitors must find ways to effectively
create revenue by attracting clients at lower rates and providing new services.
The competition in North America and many parts of Europe has led to the decline
in profit margins. Bell Canada owns the phone switches and cables, but with
deregulation must wholesale airtime to AT&T, Sprint, and now Telus who resell to
Canadian consumers. Other wholesalers also have entered the market and are
repackaging in the form of Prepaid Cards, and domestic flat rate service like
London Telecom. All these companies ultimately rely on Bell who owns the
network.
According to an October 1999 International Data Corporation report, the
worldwide Internet protocol telephony market will explode from 310 million
minutes of use in 1998 to 2.7 billion by year-end 1999. By 2004, IP telephony
minutes will reach 135 billion. Revenues for this service are estimated to grow
from US $480 million in 1999 to US $19 billion by 2004.
We plan to construct and deploy a new sophisticated network from the
ground up. This VoIP network is intended to bypass Bell and any regulatory body
by accessing the unregulated Internet IP network, hence Voice over IP. At
present, the internet is unregulated as to content, volume and distribution. Any
regulation being discussed for future consideration by Congress concerns
elements of adult content, freedom of speech and taxation on goods sold.
Individual states are addressing the issue of taxation. We use the internet as a
conduit to transfer data. Although we do not anticipate that Congress will pass
legislation to regulate data transfer of this type, any taxation that may be
imposed on this use will be passed on to our customers. Should regulations be
passed, our business model will not change.
This is a new and emerging technology, one that will reward first to
market with greater market share and experience. We are not the first company to
market voice over the internet. Companies such as Net2Phone and DialPad.com have
each launched discounted internet calls from a personal computer ("PC"). This
requires the customer to use his PC to place a long distance call. We are the
first to launch internet voice calls from any standard telephone. We have built
a private digital network by networking computers internationally in multiple
countries. These computers are linked via a dedicated internet "pipe" thus
creating the Yapalot Global Private Network ("YGPN") that consists of computer
servers around the world. We use this network to convert analogue voice signals
from our customers telephone to digital data that we transfer from one PC to the
next across
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the globe. Therefore, our customers are able to make a phone call over the
internet without the use of their PC. Their phone becomes a conduit to voice
transfer over the internet. We anticipate that future internet related services
will soon be available like Internet Fax and Internet Conference Calls without
the use of a PC or specially equipped phone. With the use of this digital
technology, our customers will have voice quality and clarity that is
unparalleled.
We compete with companies that are much larger and have far greater
financial resources than us. While there can be no assurances, we believe our
approach to the international telecommunications market will distinguish our
services and yield cost savings to our customers. We route our calls privately
within our YGPN, thus keeping costs to the consumer low. Our competition still
use legacy networks that require them to hand off each call to local telephone
companies in each country. These telephone companies charge our competitors a
per-minute rate. Furthermore, our approach to marketing our services differs
from competitors, such as Bell, AT&T and Sprint in that they must charge a
per-minute rate. Per-minute rates cannot be avoided as long as the international
phone companies charge each other to route calls. International telephone
companies are the conduits for delivering the long distance services of our
competitors, while we can offer our customers an unlimited flat rate
international long distance service because of our YGPN.
Equipment Suppliers
We have an informal agreement with Clarent Corporation based in Redwood
City, California to manufacture our equipment. Clarent Corporation is the
world's leading IP telephony technology supplier to mainstream carriers and
providers. In addition, Clarent will provide technical training for installing
and operating the hardware and software for the VoIP network. The agreement sets
forth a payment schedule according to the deployment, training and operation of
the VoIP network. We also will be utilizing other routing equipment manufactured
by Cisco Systems, Lucent and IBM. The equipment for the construction and
operation of our network is readily available from these manufacturers. We are
not dependent upon any single company for the purchase of hardware and software
necessary to construct our VoIP network. If any of our suppliers ceased to
exist, it would not affect our ability to operate our network.
Trademark Concerns
The name "Yapalot" is trademarked in Canada and is in the process of
being trademarked abroad. Our network cannot be registered because it is
Internet based and cannot be patented. Franchises will be available for sale
outside of Canada and will allow the franchisee the license to access our VoIP
network.
Government Regulations
Our VoIP network is Internet based and, therefore, does not require
government approval or licensing.
One component of the network, called a "PRI", can be described as a
telephone line. These
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"PRI's" are necessary in any country in which our network has a point of
presence. Some countries require a license to operate a "PRI", although most do
not have such regulations. We will obtain the necessary licensing in those
countries that require it. To date, we have realized an approximate legal cost
of $5,000 per country to obtain the required licensing. We are licensed in Hong
Kong and Russia and we are seeking a license in the Philippines. No licenses are
required in Europe. We do not anticipate that the time or cost involved in
securing licensing will be a limiting factor in our development and growth.
Employees
At present, we have a total of twenty full-time employees and no part
time employees. They are responsible for the construction of the VoIP network,
software design and business operations. In July 2000, we hired an additional 12
full-time employees dedicated to customer service. Over the next 12 months and
once the VoIP network is complete, we will require approximately 13 additional
full-time employees for various functions throughout the company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
Through our wholly-owned subsidiary, Yapalot Communications Inc., we
are creating and marketing a global Internet Protocol telecommunications
network. During the next 12 months, we anticipate completing the launch of ten
initial gateways, plus an additional 22 gateways. The ten initial gateways were
financed using the private funds of our founding members. We believe that we
will generate sufficient positive cash flow from operations to meet our
operating requirements and the purchase of the 22 gateways over the next 12
months. If we do not generate sufficient positive cash flow to meet our cash
requirements, we may, from time to time, seek to raise capital from additional
sources, including setting up lines of credit, project specific financings and
public or private debt or equity financings. However, there can be no assurance
that we will be able to obtain any sort of financing on commercially acceptable
terms, if at all.
To achieve our business plan, we plan to build a customer service team
of more than 12 full time employees and approximately ten full-time employees in
the areas of administration, marketing and sales.
We are a holding company and have no independent operating history
other than Yapalot Communications. Inc. Revenues and expenses for the period
ended April 30, 2000 represent consolidated costs since inception.
SELECTED FINANCIAL DATA
The following table sets forth summary financial data for the date and
period indicated. The financial data is derived from financial statements of the
Company audited by Bromberg & Associate, Chartered Accountant, appearing under
PART F/S. All figures in this registration
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statement and the financial statements are set forth in U.S. dollars.
Statement of Operations Data:
Revenues $ --
Expenses 26,509
Other Income (Expense) --
Net loss (26,509)
Balance Sheet Data:
Working capital (deficit) $ 58,640
Total assets 238,898
Total liabilities 249,407
Stockholders' equity (10,509)
Results of Operations
From inception through April 30, 2000, we have not yet commenced
generating revenues. We anticipate revenues to commence with the initial launch
of our network during summer 2000.
Expenses during the period generally related to start-up and
incorporation costs for Yapalot Communications Inc. and Yapalot Communications
Holdings Inc.
Liquidity and Capital Resources
Since inception, our primary source of liquidity has been contributions
to operating capital by our founders. To date they have loaned approximately
$215,917 to finance the start-up of Yapalot Communications Holdings Inc. and
Yapalot Communications Inc. We conducted an offering pursuant to Regulation D,
Rule 504 of the Securities Act of 1933, as amended, of 4,000,000 shares of
common stock at $0.25 during late summer 2000 to raise $1,000,000 for working
capital.
We anticipate that we will begin to generate revenues upon the launch
of our network. The initial launch in selected cities in eight countries
(Canada, the United States, the United Kingdom, France, Italy, Russia, China,
Israel) commenced on July 24, 2000. We plan to add an additional city every two
to three weeks to establish a presence in 16 countries by the end of 2000.
Our sources of revenues should be as follows in order of their launch
sequence.
Flat rate long distance: Will be sold to households and small
businesses throughout the country on a yearly subscription basis creating
re-occurring revenues. Subscribers will be billed a monthly fee for unlimited
long distance to one or more countries of their preference. Customers will
subscribe via our inbound customer service order center or via e-commerce from
any where in the world.
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Prepaid "One-Card" plan: Will be sold to retail locations across the
country at a fixed cost rate per card. For a pay in advance set price customers
can purchase a disposable or rechargeable card, which gives them access to our
VoIP network via a personal PIN number. Once purchased customers dial into our
network and are prompted to chose one country of their choice to have one month
of unlimited long distance to that country.
Corporate long distance solutions: All corporations doing business
outside of their local area can take advantage of our VoIP network. We intend to
offer corporations large reductions in their long distance costs with contracted
flat rate monthly service.
Franchising: We currently are speaking to International Franchising
Specialists to locate highly qualified persons outside of Canada in the
telecommunications industry. Management expects franchises will be sold to
qualified persons who will generate revenues from franchise and master franchise
agreements. Franchisees will be given complete access to our VoIP network
connecting them to the world. Billing and System Access will be monitored by our
Central Command Center (CCC) located in Toronto, Canada. Ongoing royalty fees
will be charged to all franchisees generating increasing re-occurring monthly
revenues.
Global voice mail and fax and international conferencing services are
being developed at present.
Forward Looking Statements
Statements that are not historical facts included in this registration
statement are "forward-looking statements" and involve risks and uncertainties
that could cause actual to differ from projected results. Such statements
address activities, events or developments that we expect, believe, project,
intend or anticipate will or may occur, including such matters as future
capital, business strategies, expansion and growth of our operations and future
net cash flows. Factors that could cause actual results to differ materially are
described throughout this registration statement. Cautionary disclosures
include, among others: general economic conditions, the markets for and market
price of our services, the strength and financial resources of our competitors,
our ability to find and retain skilled personnel, the results of financing
efforts and regulatory developments and compliance. We disclaim any obligation
to update or revise any forward-looking statement to reflect events or
circumstances occurring hereafter or to reflect the occurrence of anticipated or
unanticipated events, other than as required by law.
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ITEM 3. DESCRIPTION OF PROPERTY
We lease offices at 4884 Dufferin Street, Unit 1, Toronto, Ontario,
Canada M3H 5S8. The 6,000 square foot facility is occupied pursuant to a five
year lease that commenced on April 1, 2000 with an option to renew for an
additional five years. The monthly rental is $4,083.00 per month including
taxes, maintenance and insurance.
The headquarters were designed as an open concept, forty employee
facility with the capacity to oversee and manage worldwide operations, handle
customer service and support, house sales and marketing staff, conduct billing
and offer a retail sales outlet. Management believes these facilities are
adequate for our current needs and anticipated future needs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 30, 2000 with
respect to persons known to us to be beneficial owners of more than 5% of our
voting common stock. The table also states the beneficial ownership of such
common stock by each director of us and by all directors and executive officers
of us as a group.
Name and Address of
Beneficial Owner Number of Shares Percent
Yuval Barzakay 9,600,000 60%
4884 Dufferin Street, Unit 1
Toronto, Ontario
Canada M3H 5S8
Marilyn Benlolo 6,400,000 40%
4884 Dufferin Street, Unit 1
Toronto, Ontario
Canada M3H 5S8
Directors and executive officers
As a group (2 persons) 16,000,000 100%
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth certain information about our directors,
executive officers and significant employees.
Name Age Position
Yuval Barzakay (1) (2) 29 Chairman, President and CEO
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Marilyn Benlolo 56 Chief Operating Officer and
Director
Meyer Keslassy 55 Chief Financial Officer and
Director
Albert Kshoznicer(1) 54 Director
Alon Barzakay (2) 27 Director
Dimitra Kagiannis 28 Secretary
(1) Yuval Barzakay is a son-in-law to Albert Kshoznicer.
(2) Yuval Barzakay and Alon Barzakay are brothers.
Yuval Barzakay, Chairman, President and CEO - Mr. Barzakay has been our
Chairman, President and CEO since inception. He was CEO of Absolute Mobility
Inc. from 1990 to April 2000 and founder and CEO of Absolute Total Security
since 1992. Mr. Barzakay attended York University in Toronto.
Marilyn Benlolo, Chief Operating Officer and Director - Mrs. Benlolo has been
our Chief Operating Officer and Director since inception. From May 1999 until
April 2000, she was president and founder of Nations Discount Finance Corp., a
finance company specializing in business development financing, auto leasing and
mortgaging with annual revenues in excess of ten million dollars. She was a
teacher specializing in languages with the North York Board of Education in
Toronto, Canada, from 1962-1998. Mrs. Benlolo received her Bachelor of Arts from
the University of Toronto in 1962.
Meyer Keslassy, Chief Financial Officer and Director - Mr. Keslassy has been our
Chief Financial Officer and Director since April 2000. Since August 1998, he was
CFO of Bolton Steel Corp., with annual revenues in excess of $50 Million. From
1980 to 1998, he was the owner and President of M.K. Accounting Services in
Toronto, Canada. He graduated from the University Hautes Etudes Commerciales,
Paris with a H.E.C. degree (accounting degree) in 1965.
Albert Kshoznicer, Director - Mr. Kshoznicer has been a Director since April
2000. He is President and Treasurer of ABS Woodworking Inc., a
multimillion-dollar company located in Toronto, Ontario, since 1980. He is
Chairman of Shelby Investments Inc., a Toronto based property developer, from
1985 to present. From 1970 to 1975, he was President and founder of Vital Hotel,
Winnipeg, Manitoba and prior to that he was President of Balik Development Inc.,
a home development company in Toronto.
Alon Barzakay, Director - Mr. Barzakay has been a Director since April 2000. He
practices corporate and commercial litigation at Bienstock and Clark, Attorneys
at Law, since 1998. He received his J.D. from Detroit College of Law at Michigan
State University in 1998.
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Dimitra Kagiannis, Secretary - Ms. Kagiannis has been Secretary since April
2000. Previously she was Accounts Administrator of Absolute Mobility and
Absolute Security from 1996 to April, 2000. She received her Administration
Diploma from the CDI Institute for Office Administration in Toronto in 1993.
Directors serve for a term of one year or until their successors are
elected and qualified. Executive officers are appointed by and serve at the will
of the Board of Directors.
ITEM 6. EXECUTIVE COMPENSATION
No remuneration currently is being paid to our officers and senior
management. Compensation will commence once the Company becomes profitable.
There is no employment agreement with any executive officer.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Yapalot Communications Inc. currently has two outstanding loans to its
two founders: Yuval Barzakay $166,000 and Marilyn Benlolo $267,000. Both loans
are interest free and the funds were used to finance Yapalot Communications Inc.
since its inception in March 2000. Both loans are for a term of no less than one
year and are payable after one year or when revenues reach a level in which the
loans can be repaid. They are non-interesting bearing loans.
ITEM 8. DESCRIPTION OF SECURITIES
Yapalot has authorized 50,000,000 shares of common stock , $.001 par
value per share. As of June 30, 2000, there were 16,000,000 shares issued and
outstanding.
All shares are of the same class and have the same rights, preferences
and limitations. Holders of shares are entitled to receive dividends in cash,
property or shares when and if dividends are declared by the Board of Directors
out of funds legally available therefore. The By-Laws impose no limitations on
the payment of dividends. A quorum for any meeting of shareholders is a majority
of shares then issued and outstanding and entitled to be voted at the meeting.
Holders of shares are entitled to one vote per share. Upon liquidation,
dissolution or winding up of the business of the Company, any assets will be
distributed to the holders of shares after payment or provision for payment of
all debts, obligations or liabilities of the Company. Except as provided in this
Offering, there are no preemptive rights, subscription rights, or redemption
provisions relating to the shares and none of the shares carries any liability
for further calls.
Dividend Policy
Dividends may be declared by the Board of Directors and paid from time
to time to the holders of common stock, on such record dates as may be
determined by the Board of Directors out of the net profits or surplus of the
Company.
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We have never declared or paid a dividend on our common stock. We
intend to retain our earnings to finance the growth and development of our
business.
PART II
ITEM 1. MARKET PRICE OF DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
Yapalot's common stock currently is not traded. The amount of common
stock that can be sold by our founders pursuant to Rule 144 is 160,000 shares.
ITEM 2. LEGAL PROCEEDINGS
Neither Yapalot nor its officers or directors are a party to any
litigation affecting the Company or its assets. To our knowledge, no litigation
has been threatened or is anticipated against the Company or its officers and
directors acting in their fiduciary capacity.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
We have had no changes in or disagreements with our accountants since
inception.
ITEM 4. RECENT SALE OF UNREGISTERED SECURITIES
The following sets forth certain information for all securities the
Company sold since inception without registration under the Securities Act of
1933, as amended. All transactions were effected in reliance on the exemption
from registration afforded by Rule 4(2) of the Securities Act for transactions
not involving a public offering.
In March 2000, Yuval Barzakay and Marilyn Benlolo were issued 60 and 40
shares of Common Stock of Yapalot Communications Inc. in consideration for U.S.
$67 (Canadian $100). Upon creation of Yapalot Communications Holdings Inc., all
100 issued and outstanding shares of Yapalot Communications Inc. were
transferred to Yapalot Communications Holdings Inc. In exchange for their shares
and an additional aggregate payment of $15,933, Mr. Barzakay and Mrs. Benlolo
were issued 9,600,000 and 6,400,000 shares of Yapalot Communications Holdings
Inc., respectively.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article XII of our Bylaws provides for indemnification of officers and
directors against expenses incurred in connection with any legal action they
become a party to by reason of being or having been a director or officer of us.
Such indemnification is not available if such officer or director is adjudged to
be liable for negligence or misconduct in the performance of their duties.
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We currently do not maintain indemnity insurance for our officers and
directors.
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PART F/S
The following financial statements are filed as part of this
registration statement on Form 10-SB. The financial statements as of April 30,
2000 have been audited by Bromberg & Associate, Chartered Accountants,
independent public accountants, as stated in their report appearing herein.
Index to Financial Statements
April 30, 2000
Auditors'Report..............................................................F-2
Consolidated Balance Sheet as of April 30, 2000..............................F-3
Consolidated Statement of Operations for the period ended April 30,2000......F-4
Consolidated Statement of Cash Flows for the period ended April 30, 2000.....F-5
Notes to Consolidated Financial Statements...................................F-6
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[LETTERHEAD OF BROMBERG & ASSOCIATE]
AUDITORS' REPORT
Board of Directors and Shareholders
Yapalot Communications Holdings Inc.
We have audited the consolidated balance sheet of Yapalot Communications
Holdings Inc as at April 30, 2000 and the consolidated statements of operations
and cash flows for the period then ended. These financial statements are the
responsibility of the corporation'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 an audit to obtain reasonable
assurance whether the consolidated financial statements are free of material
misstatement. An audit includes examining on 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, these consolidated financial statements present fairly, in all
material respects, the financial position of the corporation as at April 30,
2000 and the results of its operations and its cash flows for the period then
ended in conformity with United States generally accepted accounting principles.
/s/ Bromberg & Associate
CHARTERED ACCOUNTANTS
TORONTO, CANADA
June 14, 2000
<PAGE>
YAPALOT COMMUNICATIONS HOLDINGS INC
CONSOLIDATED BALANCE SHEET
AS AT APRIL 30, 2000
US FUNDS
ASSETS
CURRENT
Bank $ 58,640
Prepaid expenses 16,956
----------
$ 75,596
CAPITAL ASSETS (Notes 3 & 4) 159,196
------------
234,792
------------
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 34,479
ADVANCES BY SHAREHOLDERS (Note 5) 215,917
------------
250,396
SHAREHOLDERS' EQUITY
SHARE CAPITAL
Authorized
50,000,000 common shares with par value of $0.001.
Issued
16,000,000 common shares 16,000
Deficit (31,604)
------------
$ 234,792
APPROVED ON BEHALF OF THE BOARD
------------ ------------
Director Director Page 2
<PAGE>
YAPALOT COMMUNICATIONS HOLDINGS INC
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED APRIL 30, 2000
US FUNDS
Revenue $ -
-----------
Expenses
Professional Fees $ 5,195
Office and General $ 4,813
Amortization $ 4,469
Consulting Fees $ 3,497
Wages $ 2,718
Rent $ 2,246
Foreign Exchange $ 1,516
Telephone $ 1,006
Utilities $ 459
Data Expense $ 396
Payroll Costs $ 176
Bank Charges and interest $ 1,007
Incorporation costs $ 4,106
-----------
$ 31,604
-----------
Net Loss $ (31,604)
===========
Loss per Share $ (0.002)
===========
Weighted average number
of common shares
outstanding 16,000,000
===========
Page 3
<PAGE>
YAPALOT COMMUNICATIONS HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD ENDED APRIL 30, 2000
US FUNDS
<TABLE>
<CAPTION>
Common Paid-in Contributed
Shares Capital surplus
--------------------------------------------
<S> <C> <C> <C>
Opening Balance - - -
Issued 16,000,000 shares
For cash consideration of $16,000 16,000,000 $ 16,000 -
--------------------------------------------
Ending Balance 16,000,000 $ 16,000 -
--------------------------------------------
</TABLE>
Page 4
<PAGE>
YAPALOT COMMUNICATIONS HOLDINGS INC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED APRIL 30, 2000
US FUNDS
Cash flows from operating activities
Net Loss $ (31,604)
Less-item not requiring cash outlay
Amortization 4,469
--------------
Adjustments to reconcile with net cash used
For operating activities
Increase in prepaid expenses (16,956)
Increase in accounts payable 34,479
--------------
Net cash used for operating activities (9,612)
--------------
Cash flows from financing activities
Advances by shareholders 215,917
Issue of common shares 16,000
--------------
Net cash provided by financing activities 231,917
--------------
Cash flows from investing activities
Purchase of capital assets (163,665)
--------------
(163,665)
--------------
Bank, end of period $ 58,640
--------------
Page 5
<PAGE>
YAPALOT COMMUNICATIONS HOLDINGS INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT APRIL 30, 2000
1. Nature of business
Yapalot Communications Holdings Inc was incorporated on April 6, 2000 in the
state of Delaware. The Company will be involved in many aspects of the
communications industry.
2. Consolidated Financial Statements -
The consolidated financial statements include the assets, liabilities, revenue
and expenses of its wholly owned subsidiary, Yapalot Communications Inc, which
was incorporated on March 8, 2000.
3. Summary of significant accounting policies.
a) Capital assets and amortization
Capital assets are recorded at cost, Amortization is recorded as
follows:
Network equipment - 20% declining balance method
Leasehold improvements - straight line balance method over the terms of
the lease
Office furniture and equipment 20% declining balance method
Computer equipment - 30% declining balance method
b) General
These financial statementshave been prepared in accordance with United
States generally accepted accounting principles (GAAP), as they relate
to these financial statements.
c) Revenue
Revenue is recognized by the company upon receipt of payment from the
customer.
d) 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
e) Cash and Cash Equivalents
The Company considers all short-term investments with an original
maturity of three months or less to be cash equivalents.
f) Income Taxes
Deferred income taxes are provided for temporary differences between
the financial and tax bases of assets and liabilities. These
differences primarily relate to the accounting for fixed assets,
including capital lease assets, and for net operating loss and credit
carryforwards.
4. Capial assets
Accumulated
Cost Amortization Net
Network Equipment $ 93,259 $ 1,856 $ 91,403
Leasehold Improvements $ 30,518 $ 903 $ 29,615
Office Furniture and Equipment $ 4,112 $ 123 $ 3,989
Computer Equipment $ 35,776 $ 1,587 $ 34,189
----------- -----------------------------
$ 163,665 $ 4,469 $ 159,196
----------- -----------------------------
5. Advances by Shareholders
The advances by shareholders bear interest at a rate of 7% and do not have any
terms of repayment.
6. Subsequent event
Subsequent to April 30, 2000, the Company received additional funds from its
shareholders, resulting in a total amount of advances from shareholders of
$450,000.
Page 6
<PAGE>
PART III
Index of Exhibits
2.1 Articles of Incorporation of Yapalot Communications Holdings Inc.*
2.2 Bylaws of Yapalot Communications Holdings Inc.*
2.3 Articles of Incorporation of Yapalot Communications Inc.*
2.4 Bylaws of Yapalot Communications Inc.*
4.1 Specimen Stock Certificate*
10.1 Office Lease Agreement*
16.1 Consent of Independent Auditors --Bromberg & Associate*
16.2 Consent and Opinion of Counsel - Shustak Jalil & Heller*
27 Financial Data Schedule*
99.1 Clarent Sales and Purchase Order Form
* Previously filed
17
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of
1934, the registrant caused this Amendment No. 1 to the registration statement
to be signed on its behalf by the undersigned, hereunto duly authorized this
22nd day of September 2000.
YAPALOT COMMUNICATIONS HOLDINGS INC.
BY: /s/ Yuval Barzakay
--------------------------------------------------
Yuval Barzakay, President, Chief Executive Officer
and Chairman
18
