UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS Under Section 12(b) or
(g) of the Securities Exchange Act of 1934
General Telephony.com, Inc.
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(Name of Small Business Issuer in its charter)
Nevada 91-2007477
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(State or other jurisdiction of I.R.S. Employer Identification
incorporation or organization) Number
14601 Bellaire Blvd., Suite 338, Houston TX 77083
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(Address of principal executive offices) (zip code)
(281) 564-6418
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Issuer's Telephone Number
Securities to be registered under section 12(b) of the Act:
Title of Each Class Name on each exchange on which
to be registered each class is to be registered
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Securities to be registered under section 12(g)of the Act:
Common Stock, $.001 par value per share, 20,000,000 shares authorized,
3,011,300 issued and outstanding as of September 30, 2000. Preferred Stock,
$.001 par value per share, 5,000,000 shares authorized, none issued nor
outstanding as of September 30, 2000.
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FORWARD LOOKING STATEMENTS
CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
General Telephony.com, Inc., a new pay telephone service company
("General Telephony.com, Inc." or the "Company" or the "Registrant")
cautions readers that certain important factors may affect the
Company's actual results and could cause such results to differ
materially from any forward-looking statements that may be deemed to
have been made in this Document or that are otherwise made by or on
behalf of the Company. For this purpose, any statements contained in
the Document that are not statements of historical fact may be deemed
to be forward-looking statements. These forward-looking statements
can be identified by the use of predictive, future-tense or forward-
looking terminology, such as "believes," "anticipates," "expects,"
"estimates," "plans," "may," "will," or similar terms. These statements
appear in a number of places in this Registration and include statements
regarding the intent, belief or current expectations of the Company, its
directors, or its officers with respect to, among other things: (i) trends
affecting the Company's financial condition or results of operations for
its limited history; (ii) the Company's business and growth strategies;
(iii) the pay telephone services industry; and, (iv) the Company's financing
plans. Investors are cautioned that any such forward-looking statements are
not guarantees of future performance and involve significant risks and
uncertainties, and that actual results may differ materially from those
projected in the forward-looking statements as a result of various factors.
Factors that could adversely affect actual results and performance include,
among others, the Company's limited operating history, dependence on
predictable trends in the pay telephone industry, the Company's inexperience
with running a pay telephone service organization, potential fluctuations in
quarterly operating results and expenses, the inherent risks of running a
business that includes equipment placed in varied unsupervised locations,
government regulation, technological change and competition.
The accompanying information contained in this Registration including,
without limitation, the information set forth under the heading "Risk
Factors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business" identifies important
additional factors that could materially adversely affect actual
results and performance. All of these factors should be carefully
considered and evaluated. All forward-looking statements attributable
to the Company are expressly qualified in their entirety by the
foregoing cautionary statement. Any forward-looking statements in
this report should be evaluated in light of these important risk
factors. The Company is also subject to other risks detailed herein
or set forth from time to time in the Company's filings with the
Securities and Exchange Commission.
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
Part I ......................................................... 4
Item 1. Description of Business.................................. 4
Item 2. Management's Discussion and Analysis or Plan of
Operation................................................ 16
Item 3. Description of Property.................................. 17
Item 4. Security Ownership of Management and Others and Certain
Security Holders......................................... 18
Item 5. Directors, Executives, Officers and Significant
Employees................................................ 19
Item 6. Remuneration of Directors and Executive
Officers................................................. 21
Item 7. Certain Relationships and Related Transactions........... 21
Part II ......................................................... 22
Item 1. Market Price of and Dividends of the Registrant's
Common Equity and Other Stockholder Matters.............. 22
Item 2. Legal Proceedings........................................ 22
Item 3. Recent Sales of Unregistered Securities.................. 22
Item 4. Description of Securities................................ 22
Item 5. Indemnification of Directors and Officers................ 23
Part F/S ......................................................... 25
Item 1. Financial Statements..................................... 25
Item 2. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure..................... 25
Part III ........................................................ 28
Item 1. Index to Exhibits....................................... 28
Item 2. Description of Exhibits................................. 28
The following Registration is qualified in its entirety by, and should
be read in conjunction with, the more detailed information and the
Financial Statements and Notes related thereto appearing elsewhere in
this Registration. Except where the context otherwise requires, all
references in this Registration to (a) the "Registrant" or the "Company"
or "General Telephony.com, Inc." refer to General Telephony.com, Inc.,
a Nevada corporation.
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Part I
Item 1. Description of Business
A. Business Development, Organization and Acquisition Activities
General Telephony.com, Inc., a pay telephone service company,
hereinafter referred to as "General Telephony.com, Inc." or the "
Company" or the "Registrant", was organized by the filing of Articles
of Incorporation with the Secretary of State of the State of Nevada on
November 12, 1999.
The Company is a development stage pay telephone service company which
plans to provide management for the collection of pay telephone coin
revenues.
The Company was incorporated on November 12, 1999 (Nevada file number
C28250-1999) under the name General Telephony.com, Inc. On November
15, 1999, founding shareholders purchased 1,800,000 shares of the
company's authorized but unissued treasury stock at a price of $0.001
per share. On December 5, 1999, the Company completed a Private
Placement Offering 840,000 shares to six (6) investors, pursuant to
Regulation D, Rule 506 of the Securities Act of 1933. The Company filed
an original Form D with the Securities and Exchange Commission.
On May 31, 2000, the Company completed a public offering of shares of
common stock of the Company pursuant to Regulation D, Rule 504 of the
Securities Act of 1933, as amended, whereby it sold 371,300 shares of
its $.001 par value common stock at $.05 per share for cash of $18,565
to approximately fifty unaffiliated shareholders of record. This 504
Offering received prior approval from the Nevada Secretary of State,
Securities Division. The Company filed an original Form D with the
Securities and Exchange Commission.
B. Business of Issuer
1) Principal Products, Services, and Principal Markets
The Company plans to provide management for the collection of pay
telephone coin revenues including the repair and maintenance of
existing pay telephone equipment, and the installation of new
equipment. As well, it will evaluate the profitability of prospective
pay telephone locations and the removal and/or relocation of such
equipment as necessary.
The market that General Telephony.com, Inc. plans to target is the
city of Houston, Texas, where the company is headquartered, and a
radius of 100 miles around Houston. Once it has established this
foothold, the Company will expand its horizons to include larger
portions of the state of Texas and surrounding states, from which
territory it can perfect its replicable techniques, link with other
regions, and establish a national presence.
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The Pay Telephone Service Industry was substantially transformed in
1996-97 when the FCC, as part of its deregulation efforts in the
telecommunications industry as a whole, further deregulated payphones
for further background information, see "Scope of Competition in
Telecommunications Markets of Texas, the 1999 report to the 76th
Congress of Texas by the Public Utilities Commission of Texas ("PUCT")",
available through the Commission's website. In particular, see the
FCC's Payphone Orders, Report and Order (FCC 96-388, September 20,
1996) and Order on Reconsideration (FCC 96-439, November 8, 1996, as
well as implementation orders put in place by the PUCT.) These
changes removed state rate caps on the price of local phone calls and
allowed providers to charge for directory assistance calls from a
payphone. New rates for local calls from payphones range from 35
cents to $1.00. Additionally, private payphone owners are now allowed
to charge long-distance carriers for calls placed to the long-distance
company's toll free numbers from payphones. This so-called "dial-
around" compensation for payphone owners was one of the most
controversial aspects of the FCC's payphone order. The FCC found that
payphone owners should be compensated for the use of the instrument
for each and every completed call. After setting a rate and having it
appealed a the Circuit Court of the District of Columbia by several
long-distance carriers, the Court determined that the appropriate rate
of compensation should be 28.4 cents for each completed call. Carriers
are required to compensate the payphone owner 28.4 cents for each
completed call from a payphone and are passing this cost through to
either the person using the credit card or to the "800" number
subscriber.
This action, of course, has had a dramatic effect on the potential
profitability of pay telephone management services and has opened up
opportunities for smaller companies like General Telephony.com, Inc.
The opportunity to set rates is an obvious advantage as it provides
the flexibility to create a profitable business. Calls to Information
are frequent and provide additional revenues. But perhaps most
important, given the number of credit card customers who now access
their long-distance provider using an 800 or other toll-free number,
the ability to charge long-distance carriers for all those calls
placed on the Company's equipment opens another major profit center.
Houston, Texas, the Company's target area, is the fourth-largest city
in the United States. Though its economy was dramatically impaired by
the world-wide oil crisis of the early-80's, its economy has improved
steadily ever since and its current rates of employment and economic
activity are impressive and mark over fifteen years of continuous growth.
According to the U.S. Census Bureau, Harris County, the county that
includes Houston and the area surrounding it, is the third largest county
in the United States with a population of 3,250,404 people and is 1,788
square miles in area. It has some 1.5 million payphones.
In 1996, the Federal Communications Commission (FCC) determined that
all local exchange company ("ILEC") payphones would be deregulated and
removed from the ILEC's investment base, and that the rates for local
services from payphones must be deregulated. The impact of the FCC's
decision on Texas
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consumers is still evolving. While the number of local exchange company
("ILEC")-provided payphone lines steadily decreased during the last data
period, the number held steady during the next period. The portion of the
market shown to be held by non-ILEC providers is artificially low, however,
because this data set did not include payphone service providers
("PSP") on a comprehensive basis.
Furthermore, in 1995 the total revenue from local exchange company
("ILEC") payphones was $135,440,523. and that of non-ILEC payphones was
$293,233. or 0.22% of the total revenues. In 1996, the ILEC revenue was
$138,824,311. and that of non-ILEC payphones was $329,816. or 0.24%.
In 1997, the total was $182,119,540. and the non-ILEC payphones' revenues
had grown to $685,162. or 0.37% of the total, indicating steady growth of
non-ILEC, that is to say, privately-managed pay telephones. It is
relatively difficult to get accurate figures; the Southwestern Bell System,
for example, considers these data to be "proprietary," and refuses to
divulge even the number of its payphone sites, let alone specifics
about their locations or profits. This protection of statistical
information to rearch accurate figures speaks powerfully to the
vulnerability the ILEC provider(s) feel as deregulation opens up more
opportunities to small private providers like the Company.
Competition for small (less than 300 payphones) companies is relatively
nonexistent due to the capital requirements and time involved in running
a successful operation. Typically, one or two family members own small
companies and share the responsibilities for the upkeep of their equipment.
A common complaint by the owners of this type of business entity is that
they have little time to devote to the management of pay telephones
because they do not have sufficient capital to acquire additional locations
and invest in operable equipment, and; they are not interested in becoming
involved on a full time basis.
From their experience running a small operation in Houston, the
founders of the Company have discovered that one or two-person crews
can install or remove equipment at 4-to-6 locations per day provided
the constraints of the sites are minimal. One coin retrieval agent is
able to collect coin revenues on 45-to-60 phones per day, and report
any maintenance requirements for each location. A site locator is able
to canvas a geographical sector within 4 to 5 days generating location
contracts at approximately 20-to-25 new sites. One central office
manager can coordinate routes, assign maintenance problems, answer pay
telephone user questions or problems, program pay telephone equipment
via computer, analyze quarterly dial-around compensation reports,
evaluate the effectiveness of long-distance carrier operations and
revenues generated thereon, and maintain nightly polled telephone
detail. Once 300 pay phones are under management, another maintenance
person is required and once there are 600 both a maintenance/sales
person and an office assistant become necessary. Growing in this
simple way with careful planning and a knowledge of how and where to
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solicit new pay phone sites and contracts for multiple phones at the
sites of larger customers (like those in shopping malls and in gated
communities) the Company plans to hone and develop a model for
running a successful pay telephone enterprise that will be teachable
to others around the country whose regions can ultimately be linked in
a pay telephone service system that can claim a substantial share of a
multi-billion dollar industry.
Management believes that the average gross revenue per unit is forecast
at $1,004 annually. The Company's management hopes to create a business
with positive numbers able to be serviced by a relatively small workforce.
The target number of 600 payphones will themselves produce a business
grossing over $600,000 dollars annually. As the Company plans to penetrate
the greater Houston area and Harris County and then expands into East and
Coastal Texas, it will raise its annual revenues to a million dollars
annually if it can reach 1,000 payphone sites from which point it can
expand arithmetically and greatly increase this figure.
Among other expansion strategies being considered, the Company plans
to develop a training program in how to run a solid pay telephone
services company so that other people looking to run a small business
can learn how to apply a similarly successful enterprise in their own
area, one that can be run efficiently and effectively by relative
novices in the business field, if they, like the founders, have enough
desire, motivation, talent and determination to succeed. This will
also be useful in creating links with other similar and allied service
providers around the country as these smaller operations begin to be
implemented by entrepreneurs trained by and potentially in continuing
contact with the Company through a voluntary mentoring program. The
training and continuing support programs will themselves provide
an additional profit center, as they will include fees for start-up
and consulting services.
These start-up courses can be marketed with short radio spots and infomercials
with campaigns that might carry such messages as, "Find your way to financial
independence with a small business that you can do in your spare time until
it grows." It would aim to attract enterprising couples and families,
especially large families with lots of teenage manpower; parents will be
attracted to such an enterprise because it teaches responsibility and helps
finance college, etc. As stated above, the Company would then seek to help
the smaller start-ups with e-mail and websites available to subscribers on
a General Telephony.com website that would link them to each other for support
purposes and to the Company's central offices. Salaries for training and
support staff would come from fees paid by subscribers and would therefore
make this part of the Company self-supporting. Thus a confederation of small
independent companies would be created over time linked by loyalty and
gratitude as well as by the kinds of ongoing connections that have proved to
be so powerful in other grass roots businesses such as those centered around
multi-level marketing.
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2) RISK FACTORS
(a) LIMITED OPERATING HISTORY
The Company has a limited operating history having been incorporated
in the State of Nevada on 12, 1999. Activities to date have
been limited primarily to organization, initial capitalization,
establishing an appropriate operating facility in Houston, Texas and
commencing with initial operational plans. The Company has yet to
generate any revenues. As of the date of this offering circular, the
Company has developed a business plan, established administrative
offices and started to identify prospective customers for the
collection of pay telephone coin revenues, repair and maintenance of
existing pay telephone equipment.
The Company has a limited operating history and must be considered to
be a developmental stage company. Prospective investors should be
aware of the difficulties encountered by such new enterprises, as the
Company faces all of the risks inherent in any new business and
especially with a developmental stage company. These risks include,
but are not limited to, competition, the absence of an operating
history, the need for additional working capital, and the possible
inability to adapt to various economic changes inherent in a market
economy. The likelihood of success of the Company must be considered
in light of these problems, expenses that are frequently incurred in
the operation of a new business and the competitive environment in
which the Company will be operating.
(b) ANTICIPATED LOSSES FOR THE FORESEEABLE FUTURE
The Company has prepared audited financial statements as of September
30, 2000, reporting that the Company is in its developmental stages.
Its ability to continue to operate as a going concern is fully
dependent upon the Company obtaining sufficient financing to continue
its development and operational activities. The ability to achieve
profitable operations is in direct correlation to the Company's
ability to raise sufficient financing. It is important to note that
even if the appropriate financing is received, there is no guarantee
that the Company will ever be able to operate profitably or derive any
significant revenues from its operation. The Company could be
required to raise additional financing to fully implement its entire
business plan.
It is also important to note that the Company anticipates that it will
incur losses and negative cash flow over the next twelve (12) to twenty-
four (24) months. There is no guarantee that the Company will ever operate
profitably or even receive positive cash flows from full operations.
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(c) DEPENDENCE ON CONTINUED USE OF PAY TELEPHONES
This business plan and all the Company's plans for profitability and success
are dependent on the continued use (and even growth) of the pay telephone
industry. Along with all the other massive changes in the telecommunications
and the phone system has been added a new technological change that can have a
marked effect on the Company's prospects: the cell phone. As more people have
their own portable means of being in telephone contact with the open other
people in their business and personal lives, their need for public telephone
sites will correspondingly shrink in ways that could fatally reduce demand for
pay telephone management companies such as our own. No assurances exist that
this will remain a viable industry, let alone business.
(d) POSSIBILITY THAT DEREGULATION MAY NOT CONTINUE TO OPEN THE PAYPHONE MARKET
The Company's plans to succeed in establishing a presence in Houston and then
moving out from there depends entirely upon Federal decisions that have for a
number of years favored the dramatic opening of the former telephone monopoly
to the open market. If this political climate should change, it is possible
that government activities in this area could either shift away from continuing
deregulation or become hostile to small companies trying to maximize their
profits in a market that is still in many ways forced into providing services
at little or no cost to average consumers. No assurances can be given that the
good economic indicators evident up to now will remain positive over the next
few years.
Moreover, the good economic news the country has been generating for the past
eight or so years may not continue sufficient to support the growth of the
industry. Payphone services are now rising with the rising tide of economic
good times; there are no guarantees that this "high tide" will continue to
rise; nor that interest rates favoring new businesses will remain available.
(e) RISK OF EQUIPMENT AND PROPERTY LOSSES AND FAILURES
A part of the business of managing pay telephone sites involves the
maintenance of the actual physical telephones and phone booths that
customers need to be able to access our public telephone service.
Security problems with payphone locations are of course major concerns
for the pay telephone management industry. Time and money are drained
by vandalism, by graffiti defacement of sites, by thievery if assets
are broken into, and in all sorts of other ways relating to the
usability and the popularity of public telephone sites.
Furthermore as phone service is necessary all over the city and in all
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sorts and types of rural locations, it is often necessary to place
company property (and therefore company assets) in all variety of
neighborhoods and city locations, at least some of which are in higher
crime areas or in areas where they are more vulnerable to malicious
mischief. Security for the Company's phones and locations is
impractical, and extra personnel to patrol or to canvass them also
involves added expense should the problem grow out of hand.
The Company has no guarantee that in expanding it will not also put
equipment in jeopardy in ways that could substantially affect the
Company's profitability. There is no guarantee that it can keep
locations desirable for potential customers, and no guarantee that it
will be able to keep on top of the constant need for maintaining sites
if the plans in place concerning maintenance needs should prove to be
inadequate.
In the related matter of property loss or loss of revenue due to equipment
failures, the potential damage to the company's profitability is also
substantial. This of course includes the expenditures related to replacing
or repairing faulty equipment; as well as the possibility that failures or
slowdowns in the communication grid could greatly decrease revenues from
pay telephone sites in large areas of the company's target area.
(f) COMPETITION
As stated above, competition for small (less than 300 payphones)
companies is relatively nonexistent due to the capital requirements
and time involved. Typically, one or two family members who share the
responsibilities for the upkeep of their equipment own small
companies. A common complaint by these type entities is that they
have little time to devote to the business of pay telephones because
they: 10 do not have sufficient capital to acquire additional locations
and invest in operable equipment; and, 2) are not interested in becoming
involved on a full time basis. Larger companies may or may not have
their own maintenance crews, but would also be candidates for the
proposed services outlined here as the principals have the primary
desire of growing their business through mergers/acquisitions and
locating new payphone sites
By the same token, larger companies and particularly Southwestern
Bell, the service provider for the Houston area3/4should they decide
to aggressively pursue a campaign designed to increase their market
share vis-a-vis pay telephones, could significantly affect the
Company's plans to expand and to grow its share of the market. Because
of their size and name recognition and general clout, these companies
have resources that General Telephony.com, Inc., a small start-up
company, could never hope to match, and with which they could
effectively quash its bid to establish itself.
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(g) POSSIBLE INABILITY TO FIND SUITABLE EMPLOYEES.
The Company currently relies exclusively upon the services and expertise
of David D. Selmon, Jr. and Melissa Selmon, its two Officers and only
employess. In order to implement the aggressive business plan of the
Company, management recognizes that additional staff will be required.
The president and secretary are the only personnel at the outset and until
300 payphones are under management. One maintenance member will be added
at the acquisition of a contract for the next 50 payphones and another will
be added when the company has 600 payphones under management. The secretary
can manage the office functions and pay telephone equipment programming until
600 payphones are managed which will require an office assistant to be hired.
To properly support the marketing, sales, general management, and support
functions of the Company, the Company will eventually need to hire field
maintenance crews, sales staff and an office assistant.
No assurances can be given that the Company will be able to find
suitable employees that can support the above needs of the Company or
that these employees can be hired on terms favorable to the Company.
(h) LACK OF EXPERIENCE ON THE PART OF MANAGEMENT
As stated above, the Company currently relies exclusively upon the
services and expertise of David D. Selmon, Jr. and Melissa Selmon (husband
and wife). However, neither David D. Selmon, Jr., nor Melissa Selmon are
experienced in the pay telephone industry, which results in a substantial
handicap in their being able to establish credibility in the industry that
the Company seeks to enter. They are also relatively young (Mr. Selmon is
23, and Mrs. Selmon is 20) and lack experience in the business world.
Especially in a climate so filled with changes that even seasoned
business people are sometimes hard-pressed to stay abreast of them,
this could cause problems if quick decisions need to be made when facing
unforeseen or difficult situations.
It may prove to be too great a challenge, given all the other factors
listed here, for the Company to establish itself sufficiently to become
a viable business. It may develop that the business plan is flawed in
some way hard for management to correct because of its lack of specific
expertise. And though they consult with others who have more breadth of
exposure to these practical details, it may yet happen that this
advice itself will prove to be ineffective when and if difficulties
arise.
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(i) EXPANSION PLANS MAY PROVE UNWORKABLE
Though the Company is committed to the plan stated above and has great
confidence in its ability to establish itself and then expand its influence,
there is no guarantee that it will in fact be able to achieve its goals. As
it is still a small operation run primarily by two related individuals, even
its first steps to establish itself more firmly as a viable organization in
Houston, Texas may prove to be beyond its capacity to achieve. Once at the
level described above (600 payphones under contract), it may not be able to
grow to the next goal which would require a more sophisticated organization.
Even if it is successful in Houston, it may prove unable to expanding into the
1o mile radius around the city that is its next target. And once it achieves
that goal with a greatly expanded number of telephones under its umbrella, its
plan to include in its territory more of Texas, Southwestern Louisiana, and
parts of Oklahoma may not be something it can so readily do.
Furthermore, its plans to train other entrepreneurs and continue to offer them
consulting support in exchange for fees and for networking links to other parts
of the country may not actually develop into a working blueprint. The pay
telephone service industry may not have sufficient draw for starter-uppers
because of the relatively more "modern" and "high-tech" cellular phone industry
which is perceived by many as the death knoll of payphone service. It may be
impossible to find enough motivated individuals, couples, or families to make
the training and networking part of the company work. No guarantees can be
offered as to the soundness of this idea. The carryover from other industries
in which versions of it have worked will not translate into the payphone
service industry. The deregulation of the payphone system will not open the
payphone management market sufficiently to make it viable for new business
owners without much experience to successfully negotiate the always-difficult
first three to five years of a start-up. Potential investors should consider
carefully the feasibility of the expansion plans explained above.
(j) POTENTIAL DIFFICULTY FINDING ENROLEES FOR ITS TRAINING PROGRAM
The ideas being developed to help others start their own pay telephone service
business might be an excellent idea that does not actually catch on with the
people who would pay for training and then for ongoing consultive support and
enrollment in a website where questions could be answered and support from
other entrepreneurs in the same industry could be found. The use of a
website to "link" people through their computers has worked in other
industries and environments but that does not imply in any way that it will
work in this instance.
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(k) POTENTIAL FLUCTUATION IN OPERATING RESULTS; QUARTERLY FLUCTUATIONS
The Company's operating results may fluctuate significantly in the
future as a result of a variety of factors, many of which are outside
the Company's control. See "--Limited Operating History." As a
strategic response to changes in the competitive environment, the
Company may from time to time make certain pricing, marketing
decisions or acquisitions that could have a material short-term or
long-term adverse effect on the Company's business, results of
operations and financial condition.
(l) LACK OF CASH DIVIDENDS.
The Company has not paid any cash dividends on the Common Shares to
date, and there can be no guarantee that the Company will be able to
pay any cash dividends on the Common Shares in the foreseeable future.
Initial earnings that the Company may realize, if any, will be
retained to finance the growth of the Company. Any future dividends,
of which there can be no guarantee, will be directly dependent upon
earnings of the Company, its financial requirements and other factors
that are not determined. (See "CAPITALIZATION")
(m) INABILITY TO ATTRACT FUTURE INVESTORS
As stated above, the Company does not currently have capital sufficient to
enact all its plans. Ultimately, the Company will have to acquire more
capital to bring its plans into reality. If it cannot attract investors
willing to invest on its current accomplishments, results and vision of the
future, it will be unable to maintain its status as a going concern. If
unable to attract investor capital, it will neither be able to afford more
phone sites nor afford more equipment to place in them. For any of the
reasons listed here, investor money may freeze up and force the Company to
shut its doors.
(n) GOVERNMENT REGULATION.
Although the Company plans on obtaining all required federal and state
permits, licenses, and bonds to operate its facilities, there can be
no assurance that the Company's operation and profitability will not
be subject to more restrictive regulation or increased taxation by
federal, state, or local agencies.
(o) POSSIBLE LIABILITY FOR SERVICE PROVIDED.
There is no guarantee that the level of coverage secured by the
Company will be adequate to protect the Company from risks associated
with claims that exceed the level of coverage maintained. As a result
of the Company's limited operations to date, no threatened or actual
claims have been made upon the Company for service liability.
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(p) RISKS ASSOCIATED WITH NEW CAMPAIGNS AND ATTEMPTS TO EXPAND
There can be no assurance that the Company will be able to expand its
operations in a cost-effective or timely manner or that any such
efforts will maintain or increase overall market acceptance.
Furthermore, any concerted but unsuccessful attempts by the Company to
find new pay telephone sites or to expand its base beyond Houston
could damage the Company's reputation and diminish the value of its
name. Expansion of the Company's operations in this manner would also
require significant additional expenses and development, that could strain
the Company's management, financial and operational resources.
The lack of market acceptance of the Company's services could result
in the Company's inability to generate satisfactory revenues and its
inability to offset their costs could have a material adverse effect
on the Company's business, results of operations and financial
condition.
(q) RISKS ASSOCIATED WITH ACQUISITIONS
If appropriate opportunities present themselves, the Company would
acquire businesses, technologies, services or product(s) that the
Company believes are strategic and would help it to expand its pay
telephone sites or the regions within which it operates.
The Company currently has no understandings, commitments or agreements
with respect to any other material acquisition and no other material
acquisition is currently being pursued. There can be no assurance
that the Company will be able to identify, negotiate or finance future
acquisitions successfully, or to integrate such acquisitions with its
current business. The process of integrating an acquired business,
technology, service or product(s) into the Company may result in
unforeseen operating difficulties and expenditures and may absorb
significant management attention that would otherwise be available
for ongoing development of the Company's business. Moreover, there
can be no assurance that the anticipated benefits of any acquisition
will be realized.
Future acquisitions could result in potentially dilutive issuances of
equity securities, the incurrence of debt, contingent liabilities
and/or amortization expenses related to goodwill and other intangible
assets, which could materially adversely affect the Company's
business, results of operations and financial condition. Any future
acquisitions of other businesses, technologies, services or product(s)
might require the Company to obtain additional equity or debt
financing, which might not be available on terms favorable to the
Company, or at all, and such financing, if available, might be
dilutive.
(r) Impact on Environmental Laws
As the Company is involved in servicing and installing pay phones,
it does not expect to have any impact on environmental laws.
14
<PAGE>
(s) Employees
The Company currently has two (2) employee: one President and one Secretary,
who are husband and wife. Until the Company can grow and generate revenues,
the Company does not plan on adding any new employees for at least the next
year.
(t) Year 2000 Issue
The Company's business does not currently utilize any electronic processing
systems and therefore is not directly at risk for having systems that will not
recognize the Year 2000 ("Y2K") or treat any date after December 31, 1999 as a
date during the twentieth century. However, no assurances can be given that the
Company will be able to avoid all Y2K problems, especially those that might
originate with third parties with whom the Company transacts business, such as
financial institutions, and the Company has not undertaken any investigation to
determine the Y2K readiness of such parties. If the Company, or any third party
with whom the Company does business were to have a Y2K problem, the business of
the Company could be disrupted and the Company's financial condition and
results of operations could be materially adversely affected.
15
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
A. Management's Plan of Operation
The Company was formed on November 12, 1999, under the laws of the State of
Nevada.
On November 15, 1999, the Company issued 1,800,000 shares of its $.001 par
value common stock for cash of $1,800.
On December 5, 2000, the Company issued 840,000 shares of its $.001 par value
common stock at $.05 per share for cash of $42,000 to six investors, pursuant
to Regulation D, Rule 506 of the Securities Act of 1933. The Company filed
an original Form D with the Securities and Exchange Commission.
On May 31, 2000, the Company issued 371,300 shares of its $.001 par value
common stock at $.05 per share for cash of $18,565 to approximately fifty
unaffiliated shareholders of record. The shares were issued pursuant to a
Securities and Exchange Commission Rule 504 offering. The Company filed
an original Form D with the Securities and Exchange Commission.
The Company plans to provide management for the collection of pay
telephone coin revenues including the repair and maintenance of
existing pay telephone equipment, and the installation of new
equipment. As well, it will evaluate the profitability of prospective
pay telephone locations and the removal and/or relocation of such
equipment as necessary. At some point in the future, the Company
plans to set up a website, where sales and be tracked and service
provided. However, the Company does not have the resources to establish
this website at this time.
Initially, the market that General Telephony.com , Inc. plans to
target is the city of Houston, Texas, where the company is
headquartered, and a radius of 100 miles around Houston. Once it has
established this foothold, the Company will expand its horizons to
include larger portions of the state of Texas and surrounding states,
from which territory it can perfect its replicable techniques, link
with other regions, and establish a national presence. Management
recognizes that the Company needs to be further capitalize before it
can initiate its business plan.
As stated in Financial Footnote #5 ("Going Concern") the Company does not
have significant cash or other material assets, nor does it have an established
source of revenues sufficient to cover its operating costs and to allow it to
continue as a going concern. "Without realization of additional capital, it
would be unlikely for the Company to continue as a going concern." It is,
however, the intent of the Company to seek to raise additional capital via a
private placement offering pursuant to Regulation "D" Rule 505 or 506 or a
private placement.
16
<PAGE>
The Company does not have any preliminary agreements or understandings between
the company and its stockholders/officers and directors with respect to loans or
financing to operate the company. The Company currently has no arrangements or
commitments for accounts and accounts receivable financing. There can be no
assurance that any such financing can be obtained or, if obtained, that it will
be on reasonable terms. As of September 30, 2000, the Company has yet to
generate any revenues. In addition, the Company does not expect to generate
any revenues over the next approximately twelve to twenty-four months.
(ii) No engineering, management or similar report has been prepared or
provided for external use by the Company in connection with the offer of its
securities to the public.
(iii) Management believes that the Company's future growth and success will be
largely dependent on its ability to place pay phone systems in high foot
traffic areas.
The Company has not incurred any research and development costs from November
12, 1999 (date of inception) through September 30, 2000. Any research
activities are not expected to be borne by any of the Company's customers, of
which there are none, but rather by the Company.
(iv) The Company does not expect to purchase or sell any of its facilities or
equipment.
(v) Management does not anticipate any significant changes in the number of
its employees over the next approximately twelve (12) months.
B. Segment Data
As of September 30, 2000, no sales revenue has been generated by the Company.
Accordingly, no table showing percentage breakdown of revenue by business
segment or product line is included.
Item 3. Description of Property
A. Description of Property
The Company's corporate headquarters are located at: 14601 Bellaire Blvd.,
Suite 338, Houston TX 77083, phone: (281) 564-6418 The office space
is provided by the officer of the Company at no cost to the Company.
B. Investment Policies
The Company does not currently own and the Company has not made any investments
in real estate, including real estate mortgages, and the Company does not
intend to make such investments in the near future.
17
<PAGE>
Item 4. Security Ownership of Management and Certain Security Holders
A. The following table sets forth information concerning stock ownership of
(i) each director, (ii) each executive officer, (iii) the directors and
officers of the Company as a group, (iv) and each person known by the Company
to own beneficially more than five percent (5%) of the Common Stock of the
Company. Unless otherwise indicated, the owners have sole voting and
investment power with respect to their respective shares.
<TABLE>
<CAPTION>
Amount
Title Name and Address of shares Percent
of of Beneficial held by Date of
Class Owner of Shares Position Owner Purchased Class
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common David D. Selmon, Jr.(1) President/Director 900,000 11/15/99 29.6%
Common Melissa Selmon(2) Secretary/Director 900,000 11/15/99 29.6%
-------------------------------------------------------------------------------
Common All Executive Officers and
Directors as a Group (2 persons) 1,800,000 59.2%
</TABLE>
(1) David D. Selmon, 14601 Bellaire Blvd, Suite 338, Houston, TX 77083.
(2) Melissa Selmon, 14601 Bellaire Blvd, Suite 338, Houston, TX 77083.
B. Persons Sharing Ownership of Control of Shares
No persons other than David D. Selmon, Jr. and Melissa Selmon, owns or
shares the power to vote five percent (5%) or more of the Company's securities.
C. Non-voting Securities and Principal Holders Thereof
The Company has not issued any non-voting securities.
D. Options, Warrants and Rights
There are no options, warrants or rights to purchase securities of the
Company.
E. Parents of the Issuer
Under the definition of parent, as including any person or business
entity who controls substantially all (more than 80%) of the issuers of
common stock, the Company has no parents.
18
<PAGE>
Item 5. Directors, Executive Officers and Significant Employees
A. Directors, Executive Officers and Significant Employees
The names, ages and positions of the Company's directors and executive officers
are as follows:
<TABLE>
<CAPTION>
Name Age Position
------------ --- -------------------------------
<S> <C> <C>
David D. Selmon, Jr. 23 President, Chief Executive
Officer, Chief Financial
Officer, and Director
Melissa Selmon 20 Secretary, Director
</TABLE>
B. Family relationships
The Company's two Officers/Directors are husband and wife.
C. Work Experience
David D. Selmon, Jr.
The Company is managed and led by David D. Selmon, Jr. Mr. Selmon, Jr., spent
the past 4 years in the United States Marines. He was responsilbe for the
unit's motor pool maintenance as well as being in charge of a seven (7) man
squad to include their military readiness and attitude. He is currently
employed at Dave and Buster's Restaurant as a part time bartender.
Mr. Selmon plans to devote 20-25 hours per week to his position as President
of General Telephony.com, Inc. He is currently enrolled at Houston Community
College.
Melissa Selmon
Melissa Selmon is currently employed at Berryhill's restaurant in Houston as a
cashier. She has helped manage nightclubs and other entertainment facilities.
She curently helps manage the computers used in retrieving daily data from the
Company payphone business (68 phones) and is responsible for programming the
phones when necessary. Mrs. Selmon plans to devote 15-25 hours per week to
Her position as Secretary of General Telephony.com, Inc. She is currently
enrolled at Houston Community College.
19
<PAGE>
D. Involvement on Certain Material Legal Proceedings During the Last Five
Years
(1) No director, officer, significant employee or consultant has been
convicted in a criminal proceeding, exclusive of traffic violations.
(2) No bankruptcy petitions have been filed by or against any business or
property of any director, officer, significant employee or consultant
of the Company nor has any bankruptcy petition been filed against a
partnership or business association where these persons were general
partners or executive officers.
(3) No director, officer, significant employee or consultant has been
permanently or temporarily enjoined, barred, suspended or otherwise
limited from involvement in any type of business, securities or banking
activities.
(4) No director, officer or significant employee has been convicted of
violating a federal or state securities or commodities law.
Item 6. Executive Compensation
(i) Remuneration of Directors and Executive Officers
The Company currently does not have employment agreements with its executive
officers. The executive officers will not draw any salary from the Company,
and the Company - in order to prudently manage its limited financial
resources - does not plan on compensating its executive officers for their
present services rendered to the Company for the foreseeable future (See Item 5
(C) "Work Experience").
(ii) Compensation of Directors
There were no arrangements pursuant to which any director of the Company was
compensated for the period from November 12, 1999 (date of inception) to
September 30, 2000 for any service provided as a director. In addition, no
such arrangement is contemplated for the foreseeable future.
Item 7. Interest of Management and Others in Certain Transactions
Because of the Company's development stage nature and its relatively recent
inception, November 12, 2000, the Company has no relationships or
transactions to disclose.
20
<PAGE>
Part II
Item 1. Legal Proceedings
The Company is not currently involved in any legal proceedings nor does it have
knowledge of any threatened litigation.
Item 2. Market for Common Equity and Related Stockholder Matters
A. Market Information
(1) The common stock of the Company is currently not traded on the OTC
Bulletin Board or any other formal or national securities exchange. There is
no trading market for the Company's Common Stock at present and there has
been no trading market to date. At this time, management has not undertaken
any discussions, preliminary or otherwise, with any prospective market maker
concerning the participation of such market maker in the aftermarket for the
Company's securities, but the Company may initiate such discussions in the
future. In addition, being a start-up, there is no fiscal history to disclose.
(2)(i) There is currently no Common Stock which is subject to outstanding
options or warrants to purchase, or securities convertible into, the Company's
Common Stock.
(ii) There is currently no common Stock of the Company which could be sold
under Rule 144 under the Securities Act of 1933, as amended, or that the
registrant has agreed to register for sale by the security holders.
(iii) There is currently no common equity that is being or is proposed to be
publicly offered by the registrant, the offering of which could have a material
effect on the market price of the issuer's common equity.
B. Dividends
The Company has never paid or declared any dividend on its Common Stock and
does not anticipate paying cash dividends in the foreseeable future.
C. Holders
As of September 30, 2000, the Company has approximately sixty (60) stockholders
of record.
D. Reports to Shareholders
The Company intends to furnish its shareholders with annual reports containing
audited financial statements and such other periodic reports as the Company may
determine to be appropriate or as may be required by law. Upon the
effectiveness of this Registration Statement, the Company will be required to
comply with periodic reporting, proxy solicitation and certain other
requirements by the Securities Exchange Act of 1934.
E. Transfer Agent and Registrar
The Transfer Agent for the shares of common voting stock of the Company is
Shelley Godfrey, Pacific Stock Transfer Company, 5844 S. Pecos, Suite D, Las
Vegas, Nevada 89120 (702) 361-3033.
21
<PAGE>
Item 3. Recent Sales of Unregistered Securities
The Company is authorized to issue 20,000,000 shares of its $0.001 par value
common stock and 5,000,000 shares of its $0.001 par value preferred stock.
On November 15, 1999, the Company issued 1,800,000 shares of its $.001 par
value common stock for cash of $1,800.
On December 5, 2000, the Company issued 840,000 shares of its $.001 par value
common stock at $.05 per share for cash of $42,000 to six unaffiliated
investors. The shares were issued pursuant to a Securities and Exchange
Commission Rule 506 offering. The Company filed an original Form D with the
Securities and Exchange Commission.
On May 31, 2000, the Company issued 371,300 shares of its $.001 par value
common stock at $.05 per share for cash of $18,565. The shares were issued
pursuant to a Securities and Exchange Commission Rule 504 offering, and a
Registration to sell 504 shares was issued by the Nevada Secretary of State
Security Division. The Company filed an original Form D with the Securities
and Exchange Commission.
Item 4. Description of Securities
A. Common Stock
(1) Description of Rights and Liabilities of Common Stockholders
i. Dividend Rights - The holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available therefore at such
times and in such amounts as the Board of Directors of the Company may from
time to time determine. The board of directors of the Company will review its
dividend policy from time to time to determine the desirability and feasibility
of paying dividends after giving consideration the Company's earnings,
financial condition, capital requirements and such other factors as the board
may deem relevant.
ii. Voting Rights - Each holder of the Company's common stock are entitled to
one vote for each share held of record on all matters submitted to the vote of
stockholders, including the election of directors. All voting is
noncumulative, which means that the holder of fifty percent (50%) of the
shares voting for the election of the directors can elect all the directors.
The board of directors may issue shares for consideration of previously
authorized but unissued common stock without future stockholder action.
iii. Liquidation Rights - Upon liquidation, the holders of the common stock
are entitled to receive pro rata all of the assets of the Company available
for distribution to such holders.
iv. Preemptive Rights - Holders of common stock are not entitled to preemptive
rights.
v. Conversion Rights - No shares of common stock are currently subject to
outstanding options, warrants, or other convertible securities.
vi. Redemption rights - no redemption rights exist for shares of common stock.
vii. Sinking Fund Provisions - No sinking fund provisions exist.
viii. Further Liability For Calls - No shares of common stock are subject to
further call or assessment by the issuer. The Company has not issued stock
options as of the date of this registration statement.
22
<PAGE>
(2) Potential Liabilities of Common Stockholders to State and Local
Authorities
No material potential liabilities are anticipated to be imposed on stockholders
under state statutes. Certain Nevada regulations, however, require regulation
of beneficial owners of more than 5% of the voting securities. Stockholders
that fall into this category, therefore, may be subject to fines in
circumstances where non-compliance with these regulations are established.
B. Debt Securities
The Company is not registering any debt securities, nor are any outstanding.
C. Other Securities To Be Registered
The Company is not registering any security other than its Common Stock.
Item 5. Indemnification of Directors and Officers
The Bylaws of the Company provide for indemnification of its directors,
officers and employees as follows:
Every director, officer, or employee of the Corporation shall be indemnified by
the Corporation against all expenses and liabilities, including counsel fees,
reasonably incurred by or imposed upon him/her in connection with any
proceeding to which he/she may be made a party, or in which he/she may become
involved, by reason of being or having been a director, officer, employee or
agent of the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of the Corporation, partnership,
joint venture, trust or enterprise, or any settlement thereof, whether or not
he/she is a director, officer, employee or agent at the time such expenses are
incurred, except in such cases wherein the director, officer, employee or agent
is adjudged guilty of willful misfeasance or malfeasance in the performance of
his/her duties; provided that in the event of a settlement the indemnification
herein shall apply only when the Board of Directors approves such settlement
and reimbursement as being for the best interests of the Corporation.
The Bylaws of the Company further states that the Company shall provide to
any person who is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of the corporation, partnership, joint
venture, trust or enterprise, the indemnity against expenses of a suit,
litigation or other proceedings which is specifically permissible under
applicable Nevada law. The Board of Directors may, in its discretion, direct
the purchase of liability insurance by way of implementing the provisions of
this Article. However, the Company has yet to purchase any such insurance and
has no plans to do so.
The Articles of Incorporation of the Company states that a director or
officer of the corporation shall not be personally liable to this corporation
or its stockholders for damages for breach of fiduciary duty as a director or
officer, but this Article shall not eliminate or limit the liability of a
director or officer for (i) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of the law or (ii) the unlawful
payment of dividends. Any repeal or modification of this Article by
stockholders of the corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director or
officer of the corporation for acts or omissions prior to such repeal or
modification.
23
<PAGE>
Article VI of the Articles of Incorporation states: "A director or officer
of the Corporation shall not be personally liable to this Corporation or its
stockholders for damages for breach of fiduciary duty as a director or officer,
but this Article shall not eliminate or limit the liability of a director or
officer for (i) acts or omissions which involve international misconduct, fraud
or a knowing violation of the law or (ii) the unlawful payment of dividends.
Any repeal or modification of the Article by stockholders of the Corporation
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director or officer of the Corporation for acts of
omissions prior to such repeal of modification."
Article VII of the Articles of Incorporation states: "Every person who was or
is a party to, or is threatened to be made a party to, or is involved in any
such action, suit or proceeding, whether civil, criminal, administrative or
investigative, by the reason of the fact that he or she or a person with whom
he or she is a legal representative, is or was a director of the Corporation,
or who is serving at the request of the Corporation as a director or officer
of another corporation, or is a representative in a partnership, joint venture,
trust or other enterprise, shall be indemnified and held harmless to the
fullest extent legally permissible under the laws of the State of Nevada from
time to time against all expenses, liability and loss (including attorneys'
fees, judgments, fines, and amounts paid or to be paid in a settlement)
reasonably incurred or suffered by him or her in connection therewith. Such
right of indemnification shall be contract right which may be enforced in any
manner desired by such person. The expenses of officers and directors incurred
in defending a civil suit or proceeding must be paid by the Corporation as
incurred and in advance of the final disposition of the action, suit, or
proceeding, under receipt of an undertaking by or on behalf of the director
or officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by the
Corporation. Such right of indemnification shall not be exclusive of any
other right of such directors, officers or representatives may have or
hereafter acquire, and without limiting the generality of such statement, they
shall be entitled to their respective rights of indemnification under any
bylaw, agreement, vote of stockholders, provision of law, or otherwise, as
well as their rights under this article."
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
24
<PAGE>
Part F/S
Item 1. Financial Statements
The following documents are filed as part of this report:
a) General Telephony.com, Inc.
<TABLE>
Page
<S> <C>
Financial Statements
Report of G. Brad Beckstead, CPA F-1
Balance Sheet as of September 30, 2000 F-2
Statement of Operations for the period from
November 12, 1999 through September 30, 2000 F-3
Statement of Stockholder's Equity for the period from
November 12, 1999 through September 30, 2000 F-4
Statement of Cash Flows for the period from
November 12, 1999 through September 30, 2000 F-5
Notes to Financial Statements F-6-7
</TABLE>
b) Interim Financial Statements are not provided at this time as they are not
applicable at this time.
c) Financial Statements of Businesses Acquired or to be acquired are not
provided at this time, as they are not applicable at this time.
d) Proforma Financial Information is not provided at this time, as it is not
applicable at this time.
Item 2. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None -- Not Applicable.
25
<PAGE>
General Telephony.com, Inc.
(A Development Stage Company)
Balance Sheet
as of
September 30, 2000
and
Statements of Income,
Stockholders' Equity, and
Cash Flows
for the period
November 12, 1999 (Inception)
to September 30, 2000
26
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
Independent Auditor's Report F-1
Balance Sheet F-2
Income Statement F-3
Statement of Stockholders' Equity F-4
Statement of Cash Flows F-5
Footnotes F-6-7
27
<PAGE>
G. BRAD BECKSTEAD
-------------------------------
Certified Public Accountant
330 E. Warm Springs
Las Vegas, NV 89119
702.528.1984
425.928.2877 (efax)
INDEPENDENT AUDITOR'S REPORT
October 4, 2000
Board of Directors
General Telephony.com, Inc.
Las Vegas, NV
I have audited the Balance Sheet of General Telephony.com, Inc. (the
"Company") (A Development Stage Company), as of September 30, 2000, and the
related Statements of Operations, Stockholders' Equity, and Cash Flows
for the period November 12, 1999 (Date of Inception) to September 30, 2000.
These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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 statement presentation. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. I
believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the balance sheet of General Telephony.com, Inc.,
(A Development Stage Company), as of September 30, 2000, and its related
statements of operations, equity and cash flows for the period November
12, 1999 (Date of Inception) to September 30, 2000, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, the Company has had limited operations and have not
commenced planned principal operations. This raises substantial doubt
about its ability to continue as a going concern. Management's plan in
regard to these matters are also described in Note 5. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ G. Brad Beckstead
-----------------------
G. Brad Beckstead, CPA
F-1
<PAGE>
General Telephony.com, Inc.
(A Development Stage Company)
Balance Sheet
September 30, 2000
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET
Assets
<S> <C>
Cash $ 48,251
---------
Total Assets $ 48,251
=========
Liabilities and Stockholders' Equity
Common stock, $0.001 par value,
20,000,000 shares authorized; 3,011,300
shares issued and outstanding
at 9/30/00 3,011
Additional paid-in capital 59,354
Deficit accumulated during development stage (14,114)
---------
Total Stockholders' Equity 48,251
---------
Total Liabilities and Stockholders' Equity $ 48,251
=========
</TABLE>
See accompanying Independent Auditor's Report and notes to financial statements.
F-2
<PAGE>
General Telephony.com, Inc.
(A Development Stage Company)
Income Statement
For the period
November 12, 1999 (Date of Inception) to
September 30, 2000
<TABLE>
<CAPTION>
INCOME STATEMENT
November 12, 1999
(Inception) to
September 30, 2000
-------------------
<S> <C>
Revenue $ -0-
General and administrative expenses (14,114)
-----------
Net loss $ (14,114)
===========
Weighted average number of
common shares outstanding 3,011,300
Net loss per share $ -0-
===========
</TABLE>
See accompanying Independent Auditor's Report and notes to financial statements.
F-3
<PAGE>
General Telephony.com, Inc.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
For the period
November 12, 1999 (Date of Inception)
to September 30, 2000
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Deficit
Common Stock Accumulated
------------ Additional During Total
Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
November 15, 1999
Founders shares
issued
for cash 1,800,000 $1,800 $ -0- $ -0- $ 1,800
December 5, 2000
Shares issued
for Cash
pursuant to
Rule 506
Offering 840,000 840 41,160 42,000
May 31, 2000
Shares issued
For cash
Pursuant to Rule
504 Offering 371,300 371 18,194 18,565
Net Loss,
Nov. 12, 1999
(inception) to
Sept 30, 2000 (14,114) (14,114)
--------------------------------------------------------
Balance as of
Sept 30, 2000 3,011,300 $3,011 $59,354 $(14,114) $48,251
========================================================
</TABLE>
See accompanying Independent Auditor's Report and notes to financial statements.
F-4
<PAGE>
General Telephony.com, Inc.
(A Development Stage Company)
Statement of Cash Flows
For the period
November 12, 1999 (Date of Inception)
to September 30, 2000
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
CASH FLOWS USED BY OPERATING ACTIVITIES
<S> <C>
Net loss (14,114)
--------
Net cash used by operating activities (14,114)
--------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used by investing activities -0-
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of capital stock 3,011
Additional paid-in capital 59,354
-------
Net cash provided by financing activities 62,365
-------
Beginning cash -0-
-------
Ending cash 48,251
=======
NON-CASH TRANSACTIONS
Interest expense -0-
Income taxes -0-
</TABLE>
See accompanying Independent Auditor's Report and notes to financial statements.
F-5
<PAGE>
General Telephony.com, Inc.
(A Development Stage Company)
Footnotes
September 30, 2000
Note 1 - History and organization of the company
The Company was organized November 12, 1999 (Date of Inception) under the
laws of the State of Nevada. The Company has no operations and in accordance
with SFAS #7, the Company is considered a development stage company. The
Company is authorized to issue 20,000,000 shares of $0.001 par value common
stock and 5,000,000 of its $0.001 par value common stock.
Note 2 - Summary of significant accounting policies
Accounting policies and procedures have not been determined except as follows:
1. The Company uses the accrual method of accounting.
2. 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 significantly from those
estimates.
3. The Company maintains a cash balance in a non-interest-bearing bank that
currently does not exceed federally insured limits. For the purpose of the
statements of cash flows, all highly liquid investments with the maturity of
three months or less are considered to be cash equivalents. There are no
cash equivalents as of September 30, 2000.
4. Earnings per share (EPS) is computed using the weighted average number of
shares of common stock outstanding during the period. Diluted EPS is computed
by dividing net income by the weighted average shares outstanding, assuming all
dilutive potential common shares were issued. Since the Company has no common
shares that are potentially issuable, such as stock options, convertible
preferred stock and warrants, basic and diluted EPS are the same. The Company
had no dilutive common stock equivalents such as stock options as of May 31,
2000.
5. The Company has not yet adopted any policy regarding payment of dividends.
No dividends have been paid since inception.
6. The Company will review its need for a provision for federal income tax
after each operating quarter and each period for which a statement of
operations is issued.
7. The Company has adopted December 31 as its fiscal year end.
Note 3 - Income taxes
Income taxes are provided for using the liability method of accounting in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS #109)
"Accounting for Income Taxes". A deferred tax asset or liability is recorded
for all temporary differences between financial and tax reporting. Deferred
tax expenses (benefit) results from the net change during the year of deferred
tax assets and liabilities.
There is no provision for income taxes for the year ended September 30, 2000,
due to the net loss and no state income tax in Nevada.
F-6
<PAGE>
General Telephony.com, Inc.
(A Development Stage Company)
Footnotes
September 30, 2000
Note 4 - Stockholders' Equity
The Company is authorized to issue 20,000,000 shares of its $0.001 par value
common stock and 5,000,000 shares of its $0.001 par value preferred stock.
On November 15, 1999, the Company issued 1,800,000 shares of its $.001 par
value common stock for cash of $1,800.
On December 5, 1999the Company issued 840,000 shares of its $.001 par value
common stock at $.05 per share for cash of $42,000. The shares were issued
pursuant to a Securities and Exchange Commission Rule 506 offering. Of the
total, $840 is considered common stock, and $41,160 is considered additional
paid-in capital.
On May 31, 2000, the Company issued 371,300 shares of its $.001 par value
common stock at $.05 per share for cash of $18,565. The shares were issued
pursuant to a Securities and Exchange Commission Rule 504 offering. Of the
total, $371 is considered common stock, and $18,194 is considered additional
paid-in capital.
There have been no other issuances of common or preferred stock.
Note 5 - Going concern
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has not commenced its planned principal
operations. Without realization of additional capital, it would be unlikely
for the Company to continue as a going concern.
Note 6 - Related party transactions
The Company does not lease or rent any property. Office services are provided
without charge by a director. Such costs are immaterial to the financial
statements and, accordingly, have not been reflected therein. The officers and
directors of the Company are involved in other business activities and may, in
the future, become involved in other business opportunities. If a specific
business opportunity becomes available, such persons may face a conflict in
selecting between the Company and their other business interests. The Company
has not formulated a policy for the resolution of such conflicts.
Note 7 - Warrants and options
There are no warrants or options outstanding to acquire any additional shares
of common stock.
Note 7 - Year 2000 issue
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information
using year 2000 dates is processed. In addition, similar problems may arise in
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 issue may be experienced before, on, or
after January 1, 2000, and if not addressed, the impact on operations and
financial reporting may range from minor errors to significant system failure
which could affect an entity's ability to conduct normal business operations.
It is not possible to be certain that all aspects of the Year 2000 issue
affecting the entity, including those related to the efforts of customers,
suppliers, or other third parties will be fully resolved.
F-7
<PAGE>
Part III
Item 1. Index to Exhibits (Pursuant to Item 601 of Regulation SB)
Exhibit Number Name and/or Identification of Exhibit
----------------------------------------------------------------------
1. Underwritten agreement
None. Not Applicable
2. Plan of Acquisition, Reorganization, Arrangement, Liquidation, or
Succession.
a) Valuation engagement of General Telephony.com, Inc. and Related Proxy
Information
None. Not Applicable
b) Asset Purchase and Liability Assumption Agreement
None. Not Applicable
c) Interest Purchase Agreement
d) Agreement for Bill of Sale and Assignment of Assets
None. Not Applicable
e) Exchange Stock Agreement
None. Not Applicable
3. Articles of Incorporation & By - Laws
3.1 Articles of Incorporation of the Company Filed November 12, 1999
3.2 By-Laws of the Company adopted November 18, 1999
d) Certificate of Amendment for By-Laws
None. Not Applicable
4. Instruments Defining the Rights of Security Holders
Those included in exhibit 3, and sample of Stock Certificate
5. Option of Legality
None. Not Applicable
6. Option on Liquidation Preference
None. Not Applicable
7. Option on Liquidation Matters
None. Not Applicable
28
<PAGE>
8. Option on Tax Matters
None. Not Applicable
9. Voting Trust Agreement and Amendments
None. Not Applicable
10. Material Contracts
a) Premise Lease <none>
b) Consulting Agreement with <none>
c) Employment Agreement with:
None. Not applicable.
d) Licensing Agreement dated <none>
11. Statement Re Computation of Per Share Earnings
Not applicable-Computation of per share earnings can be clearly determined
from the Statement of Operations in the Company's financial statements.
12. No Exhibit Required
None. Not applicable
13. Annual or Quarterly Reports - Form 10-Q
None. Not Applicable
14. Material Foreign Patents
None. Not Applicable
15. Letter of Unaudited Interim Financial Information
None. Not Applicable
16. Letter on Change in Certifying Accountant
None. Not Applicable
17. Letter of Director Resignation
None. Not Applicable
18. Letter on Change in Accounting Principles
None. Not Applicable
19. Reports Furnished to Security Holders
None. Not Applicable
29
<PAGE>
20. Other Documents or Statements to Security Holders
None. Not Applicable
21. Subsidiaries of Small Business Issuers
None. Not Applicable
22. Published Report Regarding Matters Submitted to Vote of Security Holders
None. Not Applicable
23. Consent of Experts and Counsel
Letter of Consent from G. Brad Beckstead, CPA
24. Power of Attorney
None. Not Applicable
25. Statement of Eligibility of Trustee
None. Not Applicable
26. Invitations for Competitive Bids
None. Not Applicable
27. Financial data Schedule
Financial Data Schedule of General Telephony.com, Inc. ending
September 30, 2000.
28. Information from Reports Furnished to State Insurance Regulatory
Authorities
Not applicable
99. Additional Exhibits -- State Registration Statements
30
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
General Telephony.com, Inc.
-----------------------------
(Registrant)
Dated: October 5, 2000
By: /s/ David D. Selmon, Jr.
------------------------------
David D. Selmon, Jr.,
Chairman of the Board,
President and Chief Executive Officer,
Chief Financial Officer
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
General Telephony.com, Inc.
-----------------------------
(Registrant)
Dated: October 5, 2000
By: /s/ Melissa Selmon
------------------------------
Melissa Selmon, Secretary and Director
31
<PAGE>
