1934 ACTS FORMS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
POWER PHONE, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE 11 - 3251013
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1963 Fiftieth Street, Brooklyn, New York 11204
- --------------------------------------------------------------------------------
(Address of Principal's Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (718) 951-7653
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
To be so registered Each class is to be registered
N/A N/A
------------------- ------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
- --------------------------------------------------------------------------------
(Title of Class)
TABLE OF CONTENTS
PAGE No.
--------
ITEM 1. Description of Business
General 2
History and Organization 2
Business 4
Marketing 5
Government Regulations 5
Employees 5
Backlog 5
Insurance 5
Competition 6
ITEM 2. Financial Information 6
Selected Financial Data 7
Management's Discussion and Analysis of Financial
Condition and Results of operations 8
Results of Operations 9
Liquidity and Capital Resources 9
ITEM 3. Properties 9
ITEM 4. Security Ownership of Certain Beneficial Owners and
Management 9
Principal Shareholders 9
ITEM 5. Directors and Executive Officers 11
Executive Officers and Directors 11
Board Meetings and Committees 12
ITEM 6. Executive Compensation 13
Summary of Compensation Table 13
ITEM 7. Certain Relationships and Related Transactions 13
ITEM 8. Legal Proceedings 14
ITEM 9. Market Price of and Dividends on the Registrant's Common
Equity and Related Stockholders Matters 14
Dilution and Absence of Dividends 16
Description of the Company's Securities 16
Common Stock 16
Preferred Stock 17
ITEM 10. Recent Sales of Unregistered Securities 17
ITEM 11. Description of Registrant's Securities to be Registered 18
Common Stock 18
ITEM 12. Indemnification of Directors and Officers 18
ITEM 13. Financial Statements and Supplemental Data 20
ITEM 14. Changes and Disagreements with Accountants on Accounting
and Financial Disclosure 21
ITEM 15. Financial Statements and Exhibits 21
15B.01 Articles of Incorporation 24
15B.02 By-Laws 72
15B.03 Certificate of Good Standing 82
15B.04 Agreement with 800 Power Phone, Inc. 83
15B.05 Agreement with R.T. Marketing, Inc. 84
15B.06 Agreement with Len Garon Enterprises, Inc. 87
15B.07 Audited Balance Sheet for Fiscal Year 1992 92
15B.08 Audited Balance Sheet for Fiscal Year 1993 96
15B.09 Audited Balance Sheet for Fiscal Year 1994 100
15B.10 Audited Balance Sheet for Fiscal Year 1995 104
15B.11 Unaudited Balance Sheet through Third Quarter 1996 112
15B.12 OCI Overlook Communications, Inc. Service Agreement 116
ITEM 1. DESCRIPTION OF BUSINESS.
General
Power Phone, Inc. (the "Company") is engaged in the business of accepting
and processing purchase orders for products offered for sale by Direct Response
Advertisers, as well as the Company's own products, via radio/television and the
news media, using the exclusive, easy-to-remember, toll free telephone number
"800 POWER PHONE" (800-769-3774). The Company will derive its revenue from the
sale of its own inventory as well as from commissions paid by product providers
and/or advertisers for having processed their sales through its Call Center,
which the Company expects to establish shortly. In the interim, the Company
contracted OCI Overlook Communications, Inc. of Atlanta, Georgia, to service all
incoming calls on the 800 POWER PHONE number, at favorable prevailing rates.
Initially, the Company will encourage advertisers to use the 800 POWER PHONE
telephone number as a primary or alternate 800 number for consumers to call when
advertising their products. The Company formally commenced experimental business
operation on about December 1, 1995, with advertisers using its 800 POWER PHONE
number to place orders for their advertised products or information. It is
anticipated that full operation will formally commence on or about August 1,
1996.
History and Organization
The Company was incorporated under the name of David North & Associates,
Inc., an advertising agency, on June 5, 1967, under the laws of the State of New
York. The Company completed a public offering of 100,000 shares of common stock
in a Regulation A Registration, with net proceeds of approximately $270,000,
used to fund the Company's activities during the development stage of its
business. In 1983, the Company discontinued its advertising business, acquired
two subsidiaries, one providing ambulance and ambulette services, the other
supplying hospital equipment primarily to the private sector, and changed its
name to Abbey Medical Supply Corp. On May 27, 1983 changed its name to Abbey
Group, Inc. Since 1983, the Company halted all operations, transactions and
business, and remained inactive until management could consummate the
acquisition of an on-going business.
2
Toward that end, management decided it was in the best interests of the
shareholders to give control of the Company to present management which has the
ability to bring "hard" assets and expertise in the telecommunications field to
the Company, in exchange for common and preferred stock, in order to commence
building a new business.
At a Special Meeting of Shareholders of the Company held on October 18,
1994, at which a quorum was present, the shareholders of the Company approved,
by more than 99% of the votes cast, a Plan of Reorganization. The Plan of
Reorganization consisted of (a) the reverse split of the common stock of the
Company, one for five and (b) an amendment to the Company's Certificate of
Incorporation to increase the number of shares of authorized common stock from
10,000,000 shares to 25,000,000 shares. After the effective date of the reverse
split on March 6th, 1995, there were 1,488,481 shares issued and outstanding,
owned by approximately 332 shareholders.
A Special Meeting of the Board of Directors was held on March 6th, 1995, to
elect new board members and to fill prior vacancies. Mr. Edwin Mendlinger and
Dr. Louis Birner, the only members of the Board of Directors, elected Messrs.
Noah Steinberg, Isaac Hager, and Joseph Salamon. Thereafter, Mr. Edwin
Mendlinger and Dr. Louis Birner resigned from the Board of Directors. The new
directors will serve until the next Annual Meeting of Shareholders.
The new Board of Directors then voted and approved, subject to shareholder
approval, to acquire specific assets partially owned by the new members of the
Board of Directors, in order to permit the Company to enter the
telecommunications field, and to amend the Company's Certificate of
Incorporation to authorize the creation of a preferred security, which will
empower the Board of Directors, without further shareholder approval, to issue
up to 10,000,000 shares of "blank check" preferred stock. June 16, 1995 was set
as the date of the Annual Meeting of Shareholders.
At the Annual Meeting of Shareholders held on June 16, 1995, the
Shareholders approved all of the aforementioned Directors' recommendations and
reelected the members of the Board of Directors and to change the corporate name
to Power Phone, Inc.
3
On June 16, 1995, the Company acquired 800 Power Phone, Inc., as a wholly
owned subsidiary for 4,393,629 Common Shares.
On June 19, 1995, the Company acquired the exclusive rights to a universal
search software program titled "ASAP" from R.T. Marketing, Inc., a professional
commercial grade software producer, for eighty thousand (80,000) shares of
Series A Redeemable Convertible Preferred Stock. The Company plans to market the
software package.
On June 21, 1995, the Company acquired from Len Garon Enterprises, Inc., at
direct wholesale distributor prices, $2,000,000 of original artwork, limited
edition and hand colored enhanced prints and lithographs, for eighty thousand
(80,000) shares of Series A redeemable convertible preferred stock.
On June 28, 1995 the corporate name was changed to Power Phone, Inc.
Business
The Company has acquired 800 Power Phone, Inc., as a wholly owned
subsidiary, which will be engaged in the business of telecommunications
fulfillment, accepting and processing purchase orders for products offered for
sale by Direct Response Advertisers, as well as the Company's own products, via
radio/television and the news media, using the exclusive, easy-to-remember, toll
free telephone number "800 POWER PHONE" (800-769-3774). The Company will derive
its revenue from the sale of its own inventory as well as from commissions paid
by product providers and/or advertisers for processing their sales through its
Call Center, which the Company expects to establish shortly. The Company will
encourage advertisers to use the 800 POWER PHONE telephone number as the primary
or alternate 800 number for consumers to call when advertising their products.
The Company formally commenced experimental business operation on about December
1, 1995, with advertisers using its 800 POWER PHONE number to place orders for
their advertised products or information. It is anticipated that full operations
will formally commence on or about August 1, 1996.
4
Marketing
The Company formally commenced experimental business operations on about
December 1, 1995, with advertisers using the 800 POWER PHONE number for
consumers to place orders for their advertised products or information. It is
anticipated that full operation will formally commence on or about August 1,
1996. Immediately thereafter the Company will start advertising its own product
lines, using the same 800 POWER PHONE number.
Government Regulations
Radio and television broadcasting and telephone services are regulated by
various local, state and federal government agencies. The Company believes that
its proposed business and future expansion plans meet all the parameters of the
aforementioned regulatory bodies.
Employees
The Company presently employs three (3) officers, and utilizes full-time
and part-time consultants on an as-needed basis. Likewise, the Company will
engage approximately three to five office personnel as needed. None of the
Company's employees are represented by a labor union, and the Company believes
its relations with its employees are satisfactory.
Backlog
The present stage of the Company's business does not involve any backlog.
Insurance
The Company maintains or will maintain general liability and worker's
compensation insurance which covers injury to employees.
5
Competition
The Company will be in direct competition with many entities in the
telecommunications and sales promotion fields. All of these entities, in most
instances, have vastly greater resources than the Company. The Company believes
by being first to offer easy to remember toll free telephone numbers it will be
able to effectively compete in the sales market field.
ITEM 2. FINANCIAL INFORMATION
The selected financial data presented on the following table for, and as of
the end of, each of the years or periods are derived from the financial
statements of the Company, for the periods ended June 30, 1991, 1992, 1993,
1994, and 1995. The financial statements for the years 1991 through 1994 were
audited by David Suss, Certified Public Accountant, and the June 30, 1995
Statement by Michael, Adest & Blumenkrantz, Certified Public Accountants.
The selected financial data should be read in conjunction with the
accompanying consolidated financial statements of the Company and the notes
thereto and "MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS."
6
SELECTED FINANCIAL DATA
Power Phone, Power Phone,
Inc. Inc. Abbey Group, Abbey Group,
3rd Quarter Year to Inc. Inc.
to March 31, June 30, Year to Year to
1996 1995 June 30, 1994 June 30, 1993
Income
Statement
Data:
Revenues $ -0- $ -0- $ -0- $ -0-
----------- ----------- ----------- -----------
Total
operating
expenses $ 75,307 37,590 14,663 9,700
----------- ----------- ----------- -----------
Net income
(loss) $ (75,307) (37,590) (14,663) (9,700)
=========== =========== =========== ===========
Income (loss)
per common
share $ (0.010) $ (0.005) $ -0- $ -0-
=========== =========== =========== ===========
Weighted
average of
shares
outstanding 7,421,818 7,081,818 7,440,904* 7,440,904*
Balance
Sheet Data:
Working
capital
(deficit) 4,140,788 4,212,695 (29,396) (14,733)
Total assets 4,236,425 4,220,525 (29,396) (14,733)
Retained
earnings
(deficit) (669,062) (593,755) (556,165) (541,502)
Shareholders'
Equity 4,140,788 4,212,695 (29,396) (14,733)
* Before reverse split 1 for 5
7
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has not had active business operations or significant revenue
since the Company became dormant in 1983. Since the adoption of the Plan of
Reorganization, the Company has taken certain steps in the telecommunications
field which will allow the Company to commence active operations in its new
business on or about August 1, 1996. The Company commenced experimental
operations on about December 1, 1995, with advertisers using its 800 POWER PHONE
number for consumers to place orders for their advertised products or
information. The Company engaged an independent operating Call Center on a
contractual basis and will require $10,000 for general, administrative and
selling expenses. Thereafter, for the following 12 months, the Company will
require a minimum of $300,000 payable for the operation of the Call Center,
$200,000 for general, administrative and selling expenses, and approximately
$20,000 for interest payments on short-term loans the Company may require to
bridge cash flow; a total of $530,000. The cash flow required for the
expenditures take into account that the officers and directors of the Company
have agreed to serve until June 30, 1995 without compensation, and thereafter,
for the following twelve (12) months, will accept common stock of the Company in
lieu of payments in cash.
In order for the Company to meet its operating budget for the 14 months
ended August 1, 1997 (break-even), the Company must generate $530,000 of
revenues from operations. The Company will be capable of handling additional
revenue of up to $5,000,000 which may translate into as much as ninety percent
(90%) gross profits without an increase in costs.
In addition to the Company's core business of operating a Call Center, the
Company will be actively engaged in Direct Response Sales through its ownership
and consignment of products for sale. Revenue from these activities is difficult
to estimate at this time.
8
Results of Operations:
During the fiscal year ended June 30, 1995, the Company incurred a net loss
of $37,590 as compared to a net loss of $14,663 for the year ended June 30,
1994. Expenses in fiscal 1995 related primarily to miscellaneous financing fees
and accounting fees. During fiscal 1993 expenses related primarily to services
rendered and out-of-pocket expenses in the amount of $9,700.
During the three quarters ending March 31, 1996, the company incurred a net
loss of $80,391, relating primarily to operational start up costs.
Liquidity and Capital Resources:
The Company will require $530,000, of which $500,000 will be obtained from
lenders or investors, which the Company believes to be sufficient for operating
the Company's core business for the next fourteen months through August 1, 1997.
The Company does not have any firm commitments for the funds but believes that
it will be able to obtain funds as required.
ITEM 3. PROPERTIES
The Company presently occupies office space located at 1963 Fiftieth
Street, Brooklyn, New York 11204, for which it does not have to pay rent.
Shortly, the Company expects to lease office space of approximately 2,000 square
feet, for an estimated annual rent of approximately $40,000.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders
The table below sets forth information as to each person owning of record or who
was known by the Company was to own beneficially more than 5% of the 7,421,810
shares of issued and outstanding Common Stock of the
9
Company as of March 31, 1995, and information as to the ownership of the
Company's Common Stock by each of its directors and executive officers and by
the directors and executive officers as a group. Except as otherwise indicated,
all shares are owned directly, and the persons named in the table have sole
voting and investment power with respect to shares shown as beneficially owned
by them.
Name and Address Number of
of Beneficial Owner Shares Owned Percent
- --------------------------------------------------------------------------------
Noah Steinberg, Esq. 1,100,000 15.5%
(Director, Chief Executive
Officer, and President)
1963 Fiftieth Street
Brooklyn, NY 11204
Isaac Hager 125,000 1.8%
(Director and Vice President)
808 Beverly Road
Brooklyn, NY 11218
Joseph Salamon
(Director, Secretary and Treasurer) 125,000 1.8%
1447 56th Street
Brooklyn, NY 11219
All directors and officers 1,350,000 19.1%
as a group
10
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
Executive Officers and Directors
The following table sets forth the name, age, and position of each
executive officer and director of the Company:
NAME AGE OFFICE SINCE
Noah Steinberg, Esq. 42 President, CEO, March 6, 1995
Director
Isaac Hager 67 Vice President, March 6, 1995
Director
Joseph Salamon 44 Secretary, Treasurer, March 6, 1995
Director
All the directors were elected to the Board of Directors for the first time
at the Special Meeting of Directors on March 6, 1995. The directors were
subsequently reelected at the annual Shareholders meeting of June 16, 1995. The
term of office for each director is one year or until his successor is elected
and qualified at the next Company's annual meeting of shareholders.
Following is a brief account of the business experience during the past
five years of each director and officer.
Noah Steinberg, Esq. has been a practicing attorney since 1979,
specializing in business and corporate law. Mr. Steinberg is also the Chairman
of Lev Avos, an organization under the auspices of and funded by an agency of
the United States Government, dealing in Eastern European governmental and
civilian relationships. Prior to 1979, Mr. Steinberg was associated with the
United States Attorney's Office for the Southern District of New York. He earned
his Juris Doctor degree at Brooklyn Law School, and a Bachelor of Science in
Accounting at Brooklyn College. Mr. Steinberg is married.
11
Isaac Hager is the Chief Executive Officer of Hager Distributors, Inc.,
which was founded by members of his family in 1957. Hager Distributors, Inc.
distributes popular musical records and cassettes, some of which are recorded by
Hager Distributors, Inc., domestically and in the international market. Mr.
Hager is married.
Joseph Salamon, since 1985, has been the Chief Executive Officer of Joseph
Distributors, Inc., a wholesale distributor of electronic business equipment to
more than 600 major accounts in the Northeast United States. From 1974 to 1985,
Mr. Salamon was the New York City Fiscal Officer for Cornell University,
directing and overseeing the financial management of all New York City
operations. From 1971 to 1974, Mr. Salamon was financial officer for New York
University, overseeing all grants and special projects. Mr. Salamon is a member
of Epsilon Sigma Phi, Mensa, American Accounting Association, American
Association of Government Accounts, etc.. Mr. Salamon was appointed to the
United States Congressional Advisory Board in 1981, and has been listed in the
Who's Who in America since 1981. Mr. Salamon earned a Bachelor of Arts at
RAC/Brooklyn College, and numerous Professional Certificates of Institutional
Finance. Mr. Salamon is married.
Board Meetings and Committees
Directors who are employees of the Company receive no compensation for
services as directors.
The Company plans to establish an Audit Committee and a Compensation
Committee, each of which shall consist of two directors.
The Audit Committee will review with the Company's independent accountants,
the scope and timing of the accountants' audit services and any other services
they are asked to perform, their report on the Company's financial statements
following completion of their audit and the Company's policies and procedures
with respect to internal accounting and financial controls. In addition, the
Audit Committee will be asked to make annual recommendations to the Board of
Directors for the appointment of independent public accountants for the ensuing
year.
12
The Compensation Committee will review and recommend to the Board of
Directors the compensation and benefits of all officers and key employees of the
company, and review general policy matters relating to compensation and benefits
of employees of the Company.
ITEM 6. EXECUTIVE COMPENSATION
Summary of Compensation Table
Name and Principal Position Annual Compensation
- --------------------------------------------------------------------------------
Noah Steinberg, Esq. $50,000
President, Chief Executive Officer and Director
Isaac Hager $25,000
Vice President and Director
Joseph Salamon $25,000
Secretary, Treasurer and Director
All the directors and officers served without compensation until June 30,
1995. The directors and officers have agreed to accept, at the option of the
Company, part or all of their compensation for the period ending MAY 31st, 1996,
in Common Stock of the Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 16, 1995 the Company acquired 800 Power Phone, Inc. The
shareholders of 800 Power Phone, Inc. included Messrs. Steinberg, Hager, and
Salamon. The acquisition was for 4,393,629 Common Shares.
On June 19, 1995, the Company acquired the exclusive rights to a universal
search software program titled "ASAP" from R.T. Marketing, Inc., a professional
commercial grade software producer, for eighty thousand (80,000) shares of
Series A Redeemable Convertible Preferred Stock. The Company plans to market the
software package.
13
On June 21, 1995, the Company acquired from Len Garon Enterprises, Inc., at
direct wholesale distributor prices, $2,000,000 of original artwork, limited
edition and hand colored enhanced prints and lithographs, for eighty thousand
(80,000) shares of Series A redeemable convertible preferred stock.
All of the Common Shares and Series A Preferred stock had been acquired by
the respective parties as "Restricted Shares" as such term is used in Rule 144,
promulgated under the Securities Act of 1933, as amended.
ITEM 8. LEGAL PROCEEDINGS
The Company is not involved in any threatened or pending legal proceeding
nor is it aware of any threatened or pending legal proceeding.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
The Company's common stock trades on the National Association of Security
Dealers Automated Over the Counter (OTC) Market Bulletin Board, under the
trading symbol of "PWPH". The following table sets forth the high and low bid
quotation for the common stock as reported by various Bulletin Board market
makers. The quotations do not reflect adjustments for retail mark-ups,
mark-downs, or commissions and may not necessarily represent actual
transactions. Prior to June 30, 1993, the Company's common stock traded rarely
with a bid price of $0.00 and ask price of $0.125. The following table sets
forth the bid price per share prior to the reverse split of the common shares on
October 18, 1994:
14
First Quarter Low Bid High Bid
- ------------- ------- --------
Through September 30, 1993 No Bid (Offered at $0.125)
Second Quarter Low Bid High Bid
- -------------- ------- --------
Through December 31, 1993 No Bid (Offered at $0.125)
Third Quarter Low Bid High Bid
- ------------- ------- --------
Through March 30, 1994 No Bid (Offered at $0.125)
Fourth Quarter Low Bid High Bid
- -------------- ------- --------
Through June 30, 1994 $0.125 $0.125
First Quarter Low Bid High Bid
- ------------- ------- --------
Through September 30, 1994 $0.250 $0.3125
After Reverse Split of Common Stock
Second Quarter Low Bid High Bid
- -------------- ------- --------
Through December 31, 1994 $0.250 $0.250
Third Quarter Low Bid High Bid
- ------------- ------- --------
Through March 30,1995 $0.250 $0.250
Fourth Quarter Low Bid High Bid
- -------------- ------- --------
Through June 30, 1995 $1.500 $2.000
First Quarter Low Bid High Bid
- ------------- ------- --------
Through September 30, 1995 $0.5625 $0.625
Second Quarter Low Bid High Bid
- -------------- ------- --------
Through December 31, 1995 $0.250 $0.500
Third Quarter Low Bid High Bid
- -------------- ------- --------
Through March 31, 1996 $1.750 $1.875
On May 28, 1996 the last reported sales price for the common stock was
$1.375.
On March 31, 1996, the Company had approximately 680 shareholders.
15
Dilution and Absence of Dividends
The Company has not paid any cash dividends on its common or preferred
stock and does not anticipate paying any such cash dividends in the foreseeable
future. Earnings, if any, will be retained to finance future growth. The Company
may issue shares of its common stock and preferred stock in private or public
offerings to obtain financing, capital, or to acquire other businesses that can
improve the performance and growth of the Company. Issuance and or the sale of
substantial amounts of common stock could adversely affect prevailing market
prices in the Common Stock of the Company.
Description of the Company's Securities
The authorized capital stock of the Company consists of 25,000,000 shares,
$0.01 par value ("Common Stock"), of which 7,421,810 shares are issued and
outstanding as at March 31, 1996.
The authorized capital preferred stock consists of 10,000,000 shares of
which 160,000 Series A Redeemable Convertible shares are outstanding as at March
31, 1996.
The Series A Preferred Stock is convertible at any time in whole or in part
into ten (10) common shares par value $0.01 per share of the Company and pays an
annual dividend of $2.00 (semi-annually). At the option of the Company, the
dividend may be paid in common stock of the Company. The price per share shall
be fixed by the mean trading price of the common stock in the OTC market thirty
(30) days prior to the due date of the dividend. The preferred shares are
callable by the Company for redemption at any time at a redemption price of
$25.00 per share plus accrued interest.
Common Stock
The holders of Common Stock are entitled to one vote per share for the
election of directors and all other purposes and do not have cumulative voting
rights. The holders of Common Stock are entitled to receive dividends when, as,
and if declared by the Board of Directors, and, in
16
the event of the liquidation by the Company, to receive pro-rata, all assets
remaining after payment of debts and expenses and liquidation of the preferred
stock. Holders of the Common Stock do not have any pre-emptive or other right to
subscribe for or purchase additional shares of capital stock. All the
outstanding shares of Common Stock are fully paid non-assessable.
Preferred Stock
The Board of Directors of the Company (without further action by the
shareholders) has the option to issue from time to time authorized but unissued
shares of Preferred Stock and to fix and determine the terms, limitations,
residual rights and preferences of such shares ("Blank Check Preferred"). When
any shares of Preferred Stock are issued, certain rights of the holders of
Preferred Stock may affect the rights of the holders of the Common Stock. Among
other things, in addition to any other powers conferred in the Preferred Stock,
holders of the Preferred Stock will have, under the Delaware General Corporation
Law ("DGCL"), the right to vote as a class on any increases, decreases, or
change in the rights of the Preferred Stock. The affirmative vote of at least a
majority of the outstanding shares of Preferred Stock will be required for
approval of any such increases, decreases, or change. The authority of the Board
of Directors to issue shares of Preferred Stock with characteristics which it
determines (such as preferential voting, conversion redemption and liquidation
rights) may have a deterrent effect on persons who might wish to make a takeover
bid to purchase shares of the Company at a price which might be attractive to
its shareholders. However, the Board of Directors must fulfill its fiduciary
obligation to the Company and its shareholders in evaluating any takeover bid.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
No sale of stock other than stock distributions described in Item 1 and
Item 7 above.
17
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE
REGISTERED
Common Stock
The authorized capital stock of the Company consists of 25,000,000 shares,
$0.01 par value ("Common Stock"), of which 7,421,810 shares are issued and
outstanding as of March 31, 1996.
The holders of Common Stock are entitled to one vote per share for the
election of directors and all other purposes and do not have cumulative voting
rights. The holders of Common Stock are entitled to receive dividends when, as,
and if declared by the Board of Directors, and, in the event of the liquidation
by the Company, to receive pro-rata all assets remaining after payment of debts
and expenses and liquidation of the preferred stock. Holders of the Common Stock
do not have any pre-emptive or other right to subscribe for or purchase
additional shares of capital stock, no conversion rights, redemption or
sinking-fund provisions. In the event of dissolution, whether voluntary or
involuntary, of the Company, each share of the common stock is entitled to share
ratably in the assets available for distribution to holders of the equity
securities of the Company after satisfaction of all liabilities. All the
outstanding shares of Common Stock are fully paid non-assessable.
The Transfer Agent for the Company is Manhattan Transfer and Registrar
Company of Lake Ronkonkoma, New York.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As a Delaware corporation, the Company is bound by Section 145 of the
General Corporation Law of Delaware which allows the indemnification of
officers, directors employees or agents of the Company against liabilities and
expenses arising out of actions brought by a third party, provided that the
Board of Directors determines that such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to a criminal matter, had no reasonable cause to
believe his conduct was unlawful. Such law also permits indemnification against
expenses in
18
actions brought by a shareholder on behalf of a corporation or by the
corporation itself if the standards of conduct required for indemnification in
third party actions are met, and either (i) such person was not adjudged liable
to the corporation, or (ii) the Delaware Chancery Court or other court in which
the action was brought determines that such person is fairly and reasonably
entitled to be indemnified. The Company may make advances for expenses incurred
in defending a suit upon the receipt of an undertaking by an officer, director,
employee or agent to repay such amount if it is ultimately determined that such
person is not entitled to be indemnified.
The Company's Certificate of Incorporation provides that directors and
officers of the Company are indemnified to the fullest extent permitted by law
and states that no director or officer shall have any personal liability to the
Company or its stockholders for any monetary damages for breach of fiduciary
duty as a director except for liability resulting from (i) breach of the duty of
loyalty to the Company or its stockholders, (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of Delaware corporation law (relating to unlawful
dividends or redemptions), or (iv) for any transaction from which such director
or officer derived an improper personal benefit. The indemnification is against
all expenses arising from the lawsuit or action unless the director or officer
is finally adjudged to be liable for gross negligence, recklessness or willful
misconduct in the performance of his duty to the Company (unless the Delaware
Chancery Court determines that in view of the circumstances of the case, the
person is entitled to indemnity as determined by the court). Expenses are paid
or reimbursed as incurred in advance of final disposition upon receipt of an
unsecured contractual written undertaking that such amount must be repaid if it
is determined that the person is not entitled to the indemnity.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers, or persons controlling the registrant pursuant to the foregoing
provisions, the registrant has been informed 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.
19
The Company does not currently maintain any directors' or officers'
liability insurance but intends to maintain such insurance in the future.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
See ITEM 15B for listing of financial statements and exhibits herein, which
include:
1. Audited Financial Statements consisting of the Company's balance sheet
as of June 30, 1992, the end of its last fiscal year, and related statements of
income, cash flow, and changes in stockholder equity for the year ended June 30,
1992, as audited by David Suss, Certified Public Account, along with its report
thereon.
2. Audited Financial Statements consisting of the Company's balance sheet
as of June 30, 1993, the end of its last fiscal year, and related statements of
income, cash flow, and changes in stockholder equity for the year ended June 30,
1992, as audited by David Suss, Certified Public Account, along with its report
thereon.
3. Audited Financial Statements consisting of the Company's balance sheet
as of June 30, 1994, the end of its last fiscal year, and related statements of
income, cash flow, and changes in stockholder equity for the year ended June 30,
1994, as audited by David Suss, Certified Public Account, along with its report
thereon.
4. Audited Financial Statements consisting of the Company's balance sheet
as of June 30, 1995, the end of its last fiscal year, and related statements of
income, cash flow, and changes in stockholder equity for the year ended June 30,
1995, as audited by Michael, Adest & Blumenkrantz, Certified Public Accounts,
P.C., along with their report thereon.
5. Unaudited interim financial statements consisting of a Balance Sheet as
of March 31, 1996, the last day of the Company's most recent past fiscal quarter
(Third Quarter 1995/1996) and related statements of income, cash flow, and
changes in stockholder equity for the Company's respective Third Quarter,
1995/1996.
20
ITEM 14. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
A. The following is a list of each financial statement filed under ITEM 13
of this registration statement:
1. Audited Financial Statements consisting of the Company's balance sheet
as of June 30, 1992, the end of its last fiscal year, and related statements of
income, cash flow, and changes in stockholder equity for the year ended June 30,
1992, as audited by David Suss, Certified Public Account, along with its report
thereon.
2. Audited Financial Statements consisting of the Company's balance sheet
as of June 30, 1993, the end of its last fiscal year, and related statements of
income, cash flow, and changes in stockholder equity for the year ended June 30,
1992, as audited by David Suss, Certified Public Account, along with its report
thereon.
3. Audited Financial Statements consisting of the Company's balance sheet
as of June 30, 1994, the end of its last fiscal year, and related statements of
income, cash flow, and changes in stockholder equity for the year ended June 30,
1994, as audited by David Suss, Certified Public Account, along with its report
thereon.
4. Audited Financial Statements consisting of the Company's balance sheet
as of June 30, 1995, the end of its last fiscal year, and related statements of
income, cash flow, and changes in stockholder equity for the year ended June 30,
1995, as audited by Michael, Adest & Blumenkrantz, Certified Public Accounts,
P.C., along with their report thereon.
21
5. Unaudited interim financial statements consisting of a Balance Sheet as
of March 31, 1996, the last day of the Company's most recent past fiscal quarter
(Third Quarter 1995/1996) and related statements of income, cash flow, and
changes in stockholder equity for the Company's respective Third Quarter,
1995/1996.
B. Index of Exhibits:
The following exhibits are included as part of this report:
ITEM 15B. EXHIBITS AND SEC REFERENCE NUMBERS
Number Title of Document Location
- --------------------------------------------------------------------------------
Index of Exhibits:
15B.01 Articles of Incorporation
15B.02 By-Laws
15B.03 Certificate of Good Standing
15B.04 Agreement between 800 Power Phone, Inc.
and Power Phone, Inc.
15B.05 Agreement between R.T. Marketing, Inc.
and Power Phone, Inc.
15B.06 Agreement between Len Garon Enterprises, Inc.
and Power Phone, Inc.
15B.07 Audited Balance Sheet for Fiscal Year 1992
as at June 30, 1992
15B.08 Audited Balance Sheet for Fiscal Year 1993
as at June 30, 1993
15B.09 Audited Balance Sheet for Fiscal Year 1994
as at June 30, 1994
15B.10 Audited Balance Sheet for Fiscal Year 1995
as at June 30, 1995
15B.11 Unaudited Balance Sheet through Third Quarter
of Fiscal Year 1996 as at March 31, 1996
15B.12 Service Agreement between OCI Overlook Communications,
Inc. and Power Phone, Inc.
22
SIGNATURES
In accordance with section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this Report on Form 10-K to be signed on its behalf
by the undersigned, thereto duly authorized individual.
Date: May 29, 1996
POWER PHONE, INC.
By /s/ Noah Steinberg
-----------------------------
Noah Steinberg, Esq.
President, Chief
Executive Officer,
Director
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated on this 19th day
of April, 1996.
Name Title Date
- --------------------------------------------------------------------------------
/s/ Noah Steinberg President, Chief May 29, 1996
- ---------------------- Executive Officer,
Noah Steinberg, Esq. Director
/s/ Isaac Hager Vice President, May 29, 1996
- ---------------------- Director
Isaac Hager
/s/ Joseph Salamon Secretary, May 29, 1996
- ---------------------- Treasurer,
Joseph Salamon Director
23