As filed with the Securities and Exchange Commission on August 3, 2005
Registration No. 333-120506
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
AMENDMENT NO. 5 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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DEEP FIELD TECHNOLOGIES, INC.
(Name of Small Business Issuer in Its Charter)
New Jersey 7373 20-1862733
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Identification No.)
Organization) Classification Code
Number)
750 Highway 34
Matawan, New Jersey 07747
(732) 441-7700
(Address and telephone number of Principal
Executive Offices and Principal Place of Business)
Jerome R. Mahoney
750 Highway 34
Matawan, New Jersey 07747
(732) 441-7700
(Name, address and telephone number of
agent for service)
with copies to:
Scott Rosenblum, Esq.
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036
(212) 715-9100
Telecopier: (212) 715-8000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Proposed
Title of Each Proposed Maximum
Class of Maximum Aggregate Amount of Fee
Securities to Amount to be Offering Price Offering Price Registration
be Registered Registered Per Share (1) (2)
- --------------------------------------------------------------------------------
Class A Common
Stock, no par 10,050,000 $3,000 $0.35
value
- --------------------------------------------------------------------------------
(1) The shares included herein are being distributed to the stockholders of
iVoice, Inc. No consideration will be received by iVoice, Inc. in consideration
of such distribution. Consistent with Rule 457(f)(2), since there is no market
for shares being distributed, the filing fee is based on the book value of
$3,000 of the spun-off subsidiary's assets.
(2) $31.68 previously paid based upon a $250,000 book value of the spun-off
subsidiary's assets with respect to 10,000,000 of the shares to be registered.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated August 3, 2005
Deep Field Technologies, Inc.
10,050,000 Shares of Class A Common Stock
This prospectus relates to the distribution by dividend to all of the
stockholders of iVoice, Inc. of up to 10,050,000 shares of Deep Field
Technologies, Inc. Class A Common Stock (the "Distribution"). Deep Field
Technologies is not selling any shares of Class A Common Stock in this offering
and therefore will not receive any proceeds from this offering. All costs
associated with this registration will be borne by Deep Field Technologies.
Deep Field Technologies is currently a wholly-owned subsidiary of iVoice,
Inc. and after the Distribution Deep Field Technologies will be an independent
public company.
Holders of iVoice common stock, other than affiliates of iVoice, Inc.,
will receive one share of Deep Field Technologies Class A Common Stock for every
988 shares of iVoice common stock that they hold. Holders of less than 988
shares of iVoice common stock will receive one share of Deep Field Technologies
Class A Common Stock. Following the Distribution, 100% of the outstanding Deep
Field Technologies Class A Common Stock will be held by non-affiliates of Deep
Field Technologies or iVoice, Inc. and 100% of the outstanding Deep Field
Technologies Class B Common Stock (including securities convertible into such
shares) will be beneficially owned by affiliates of Deep Field Technologies or
iVoice, Inc. No such affiliates will receive shares of Deep Field Technologies
Class A Common Stock in the Distribution.
You may be required to pay income tax on all or a portion of the value of
the shares of Deep Field Technologies Class A Common Stock received by you in
connection with this Distribution.
Currently, no public market exists for Deep Field Technologies Class A
Common Stock.
These Securities are speculative and involve a high degree of risk.
Please refer to "Risk Factors" beginning on page 11.
No underwriter or person has been engaged to facilitate the Distribution
in this offering.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is ___________, 2005.
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY...........................................................1
SUMMARY OF THE DISTRIBUTION..................................................4
SUMMARY CONDENSED FINANCIAL INFORMATION......................................9
POTENTIAL DILUTION DUE TO CONVERSION AT BELOW MARKET PRICE..................10
RISK FACTORS................................................................11
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS...................27
USE OF PROCEEDS.............................................................27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.............................................................27
OUR BUSINESS................................................................39
DEEP FIELD TECHNOLOGIES' MANAGEMENT.........................................45
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................49
PRINCIPAL STOCKHOLDERS......................................................51
DESCRIPTION OF SECURITIES...................................................52
THE DISTRIBUTION............................................................55
FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION.........................61
CHANGES IN ACCOUNTANTS......................................................62
REASONS FOR FURNISHING THIS DOCUMENT........................................62
RELATIONSHIP BETWEEN IVOICE AND DEEP FIELD TECHNOLOGIES FOLLOWING THE
DISTRIBUTION...........................................................62
WHERE YOU CAN FIND MORE INFORMATION.........................................63
INDEX TO FINANCIAL STATEMENTS..............................................F-1
PART II INFORMATION NOT REQUIRED IN PROSPECTUS...........................II-1
i
PROSPECTUS SUMMARY
Overview
Deep Field Technologies, Inc., which we refer to in this prospectus as
"Deep Field Technologies," "we", "us" or "the Company," was incorporated in New
Jersey on November 10, 2004 as a wholly-owned subsidiary of iVoice, Inc.
("iVoice"). While iVoice has been engaged in the speech recognition software and
computerized telephony business since 1997, iVoice management seeks to leverage
the value of underutilized developed technology and believes that the transition
to an independent company will provide Deep Field Technologies with greater
access to capital. This should provide needed financial resources to potentially
penetrate the market and distribute the product. As such, Deep Field
Technologies' business will be formed from the contribution by iVoice of certain
assets and related liabilities on or about the effective date of the
registration statement of which this prospectus is a part. In connection with a
reorganization of iVoice, immediately prior to the Distribution, iVoice will
transfer to Deep Field Technologies its Unified Messaging software business,
including all intellectual property of iVoice relating to the Unified Messaging
software business and related liabilities. Following the Distribution, Deep
Field Technologies will own and operate iVoice's Unified Messaging software
business. Concurrently with the Distribution, iVoice intends to contribute the
majority of its remaining business lines into two new companies and intends to
distribute the stock of those two companies to its stockholders. iVoice will
retain cash assets of approximately $6.7 million, no part of which will be
transferred to Deep Field Technologies. Following the Distribution and the two
other distributions, iVoice's operating assets will consist of its iVoiceMail
software and its portfolio of patents and patent rights, and its future business
development operations will consist of licensing its intellectual property
rights. iVoice will also continue to seek additional operating income
opportunities through potential acquisitions or investments. Deep Field
Technologies will be a development stage company following the Distribution.
Following the Distribution, Deep Field Technologies may seek to expand its
operations through additional sales and marketing activity and the acquisition
of additional businesses. Any potential acquired additional businesses may be
outside the current field of operations of Deep Field Technologies. Deep Field
Technologies may not be able to identify, successfully integrate or profitably
manage any such businesses or operations. Currently, Deep Field has no plans,
proposals or arrangements, either orally or in writing, regarding any proposed
acquisitions and is not considering any potential acquisitions.
Deep Field Technologies intends to continue to develop, market and license
the Unified Messaging line of computerized telephony software. With Unified
Messaging, e-mail, voice mail and faxes can be handled through a desktop
computer or the telephone. All messages can be viewed and acted upon in order of
importance via Microsoft Outlook or a web browser. E-mail can also be retrieved
over the phone, using text-to-speech, and responded to with a voice message
including directed to a fax machine.
In September 2004, iVoice announced its intention to distribute Deep Field
Technologies Class A Common Stock to its stockholders and to contribute to Deep
Field Technologies its Unified Messaging systems business upon the effectiveness
of required Securities Exchange Commission filings and final approval by the
Board of Directors of the terms and conditions of the Distribution.
The board of directors and management of iVoice believe that the
Distribution is in the best interests of iVoice and its stockholders. iVoice
believes that the Distribution will enhance value for iVoice stockholders and
that the spin off of the Unified Messaging business into Deep Field Technologies
has provided greater access to capital by allowing the financial community to
focus solely on Deep Field Technologies and its Unified Messaging software
business as a stand alone company. In determining the terms of the spin off of
the Unified Messaging business and the Distribution, the board considered the
ability of iVoice to satisfy its working capital needs as a whole as against the
ability of the Unified Messaging business to satisfy its capital needs as a
stand alone company. iVoice's present plan, which is subject to change, is to
become a technology licensing company, and, in order to effectuate that business
plan, iVoice would need to significantly expand its research and development and
hire different types of personnel. In addition, the iVoice board believed that,
as a result of each company's business plan, the Unified Messaging business as a
stand-alone company would more easily be able to obtain financing from third
parties than iVoice would. After considering these issues and the relative
working capital needs of iVoice and Deep Field Technologies, the iVoice board
elected not to transfer any part of the current cash balance of iVoice to Deep
Field Technologies.
Prior to and after the Distribution, members of the Board of Directors and
management of iVoice and Deep Field Technologies have had and will have a
variety of conflicts of interest, as Mr. Jerome Mahoney, the Chairman of the
Board of Deep Field Technologies, will also continue to serve as the Chairman of
the Board and Chief Executive Officer of iVoice. In addition, following the
Distribution, Mr. Mahoney will own iVoice shares and have the right to convert
$190,000 of indebtedness (plus accrued and unpaid interest) into 190,000 shares
(not including shares attributable to conversion of accrued and unpaid interest,
which interest, as of March 31, 2005 totaled $26,334.97) of Deep Field
Technologies Class B Common Stock which is convertible into the number of shares
of Class A Common Stock determined by dividing the number of shares of Class B
Common Stock being converted by a 20% discount of the lowest price at which
iVoice had ever issued its Class A Common Stock. There is no limitation on the
number of shares of Class A Common Stock we may be required to issue to Mr.
Mahoney upon the conversion of this indebtedness. See "Potential Dilution Due to
Conversion at Below Market Price." Each share of Class B Common Stock has voting
rights equal to 100 shares of Class A Common Stock. For example, if Mr. Mahoney
converts $190,000 of his indebtedness into 190,000 shares of Class B Common
Stock, he will have voting rights equal to 19,000,000 shares of Class A Common
Stock and will have control over the management and direction of Deep Field
Technologies, including the election of directors, appointment of management and
approval of actions requiring the approval of stockholders. In addition, Mr.
Mahoney may be deemed to receive personal benefit as a result of the creation of
Deep Field Technologies and the Distribution. This relationship could create, or
appear to create, potential conflicts of interest when Deep Field Technologies'
directors and management are faced with decisions that could have different
implications for Deep Field Technologies and iVoice.
On August 12 and November 19, 2004, Deep Field Technologies issued an
aggregate of $400,000 in secured convertible debentures, with interest payable
at 5% per annum, to Cornell Capital Partners L.P. The debentures were
convertible at the option of the holder only after our Class A Common Stock had
commenced trading on the Over-the-Counter Bulletin Board.
2
On February 28, 2005, Deep Field Technologies' obligations under the
secured convertible debentures were terminated and replaced with a secured
promissory note of the same principal amount, which note accrues interest at a
rate of 12% per annum, but is not convertible into any equity security of Deep
Field Technologies. On February 28, 2005, Deep Field Technologies borrowed an
additional $100,000 pursuant to the promissory note payable to Cornell Capital
Partners. In connection with the issuances of the secured convertible
debentures, Deep Field Technologies paid a fee to Cornell Capital Partners equal
to 10% of the aggregate principal amount of the debentures. When the secured
convertible debentures were terminated, Deep Field Technologies received a
credit for fees that would otherwise have been payable upon the issuance of the
$400,000 in replacement notes. Deep Field Technologies paid Cornell Capital a
fee of $10,000 in connection with its $100,000 borrowing. Deep Field
Technologies' obligations under the secured promissory note issued to Cornell
Capital Partners are secured by a first priority security interest in
substantially all of Deep Field Technologies' assets. iVoice has also guaranteed
the payment of all amounts payable by Deep Field Technologies pursuant to the
secured promissory note, which guarantee will terminate on the date the
registration statement of which this prospectus forms a part is effective.
Why iVoice Sent This Document To You
iVoice, Inc. sent you this document because you were an owner of iVoice
common stock on the record date. This entitles you to receive a distribution of
one share of Class A Common Stock of Deep Field Technologies, Inc., which is
currently a wholly-owned subsidiary of iVoice, for every 988 iVoice shares you
owned on that date. No action is required on your part to participate in the
Distribution and you do not have to pay cash or other consideration to receive
your Deep Field Technologies shares.
This document describes Deep Field Technologies' business, the
relationship between iVoice and Deep Field Technologies, and how this
transaction benefits iVoice and its stockholders, and provides other information
to assist you in evaluating the benefits and risks of holding or disposing of
the shares of Deep Field Technologies stock that you will receive in the
Distribution. You should be aware of certain risks relating to the Distribution
and Deep Field Technologies' businesses, which are described in this document
beginning on page 11.
About Us
Deep Field Technologies was incorporated in New Jersey on November 10,
2004 as a wholly-owned subsidiary of iVoice, Inc. Deep Field Technologies
received by assignment all of the interests in and rights and title to, and
assumed all of the obligations of, all of the agreements, contracts,
understandings and other instruments of iVoice Technology 2, Inc., a Nevada
corporation and affiliate of Deep Field Technologies. These agreements,
contracts, understandings and other instruments consisted of financing
documentation, employment agreements and an administrative services agreement
with iVoice. Since this assignment, iVoice Technology 2 has no operating
business, assets or known liabilities, and is currently in the process of being
dissolved. When we refer to or describe any agreement, contract or other written
instrument of Deep Field Technologies in this prospectus, we are referring to an
agreement, contract or other written instrument that had been entered into by
iVoice Technology 2 and assigned to Deep Field Technologies.
3
Our principal office is located at 750 Highway 34, Matawan, New Jersey
07747. Our telephone number is (732) 441-7700. We will be setting up a company
website, which will be located at www.deep-field.net
SUMMARY OF THE DISTRIBUTION
Distributing Company iVoice, Inc., a New Jersey corporation. As used in
this prospectus, the term iVoice includes iVoice,
Inc. and its wholly-owned and majority-owned
subsidiaries, other than the Company, as of the
relevant date, unless the context otherwise
requires.
Distributed Company Deep Field Technologies, Inc., a New Jersey
corporation. As used in this prospectus, the terms
Deep Field Technologies, the Company, we, our, us
and similar terms mean Deep Field Technologies,
Inc., as of the relevant date, unless the context
otherwise requires.
Deep Field Technologies iVoice will distribute to iVoice stockholders an
shares to be distributed aggregate of up to 10,050,000 shares of Class A
Common Stock, no par value per share, of Deep Field
Technologies. Mr. Mahoney has agreed to forego
receiving any shares of Deep Field Technologies
Class A Common Stock that he is or would be entitled
to receive in the Distribution by virtue of his
ownership of either iVoice Class A Common Stock or
iVoice Class B Common Stock . Based on approximately
9,994,728,373 iVoice shares outstanding on the
Record Date, as defined below, one share of Deep
Field Technologies Class A Common Stock will be
distributed for approximately every 988 shares of
iVoice common stock outstanding on the Record Date.
Deep Field Technologies currently has 10,050,000
shares of Class A Common Stock outstanding. A
100,500-for-one stock split was accomplished by
means of a stock dividend effectuated immediately
prior to the effective date of the registration
statement of which this prospectus is a part. The
shares of Deep Field Technologies Class A Common
Stock to be distributed will constitute 100% of the
Deep Field Technologies Class A Common Stock
outstanding after the Distribution. Immediately
following the Distribution, iVoice and its
subsidiaries will not own any shares of Deep Field
Technologies Class A Common Stock and Deep Field
Technologies will be an independent public company.
Record Date If you own iVoice shares at the close of business
on July 29, 2005 (the "Record Date"), then you
will receive Deep Field Technologies Class A Common
Stock in the Distribution. If you own fewer than
988 iVoice shares on the Record Date, then you
will receive one share of Deep Field Technologies
Class A
4
Common Stock.
Distribution Date We currently anticipate that the Distribution will
occur near the effective date of the registration
statement. If you are a record holder of iVoice
stock, instead of physical stock certificates you
will receive from Deep Field Technologies' transfer
agent shortly after the effective date of the
registration statement a statement of your book
entry account for the shares of Deep Field
Technologies Class A Common Stock distributed to
you. If you are not a record holder of iVoice stock
because such shares are held on your behalf by your
stockbroker or other nominee, your Deep Field
Technologies Class A Common Stock should be
credited to your account with your stockbroker or
other nominee after the effective date of the
registration statement. Following the Distribution,
you may request physical stock certificates if you
wish, and instructions for making that request will
be furnished with your account statement.
Distribution On the Distribution Date, the distribution agent
identified below will begin distributing
certificates representing our Class A Common Stock
to iVoice stockholders that have requested physical
certificates. You will not be required to make any
payment or take any other action to receive your
shares of our Class A Common Stock. The distributed
shares of our Class A Common Stock will be freely
transferable unless you are issued shares in
respect of restricted shares of iVoice common
stock.
Distribution ratio iVoice will distribute to iVoice stockholders an
aggregate of up to 10,050,000 shares of Class A
Common Stock of Deep Field Technologies, based on
approximately 9,994,728,373 iVoice shares
outstanding on the record date. Mr. Mahoney has
agreed to forego receiving any shares of Deep Field
Technologies Class A Common Stock that he is or
would be entitled to receive in the Distribution by
virtue of his ownership of either iVoice Class A
Common Stock or iVoice Class B Common Stock. The
actual number of iVoice shares outstanding on the
Record Date that will participate in the
Distribution is 9,884,728,373. Therefore, for
every 988 shares of iVoice common stock that you
own of record on July 29, 2005, you will receive
one share of Deep Field Technologies Class A Common
Stock. The Distribution ratio is subject to change
depending upon the number of outstanding shares of
iVoice common stock on the Record Date. If you own
fewer than 988 shares of iVoice common stock, you
will receive one share of Deep Field Technologies
Class A Common Stock in the Distribution. iVoice
shareholders are not receiving shares of Deep Field
Technologies Class A Common Stock on a one-for-
5
one basis because Deep Field Technologies'
management has determined that a more modest capital
structure and fewer outstanding shares of common
stock would be more beneficial for stockholders.
Distribution Agent Fidelity Transfer Company. Their address is 1800
South West Temple, Suite 301, Salt Lake City, Utah
84115. Their telephone number is (801) 484-7222.
Transfer Agent and Fidelity Transfer Company. Their address is 1800
Registrar for the Deep South West Temple, Suite 301, Salt Lake City, Utah
Field Technologies shares 84115. Their telephone number is (801) 484-7222.
Fractional shares of our iVoice will not distribute any fractional shares of
common stock Deep Field Technologies Class A Common Stock. In
lieu of distributing a fraction of a share of our
Class A Common Stock to any iVoice stockholder,
fractional shares will be rounded up to the next
higher whole number of shares.
Trading market We anticipate that our Class A Common Stock will be
traded on the Over-the-Counter Bulletin Board under
the proposed symbol "____." We expect that a market
maker will apply for quotation on the
Over-the-Counter Bulletin Board on our behalf prior
to the Distribution. No public trading market for
our Class A Common Stock currently exists. However,
a trading market for the entitlement to receive
shares of our Class A Common Stock in the
distribution, referred to as a when-issued market,
may develop on or after the record date for the
distribution.
Dividend policy iVoice has not paid cash dividends in the past, and
we anticipate that following the Distribution
neither Deep Field Technologies nor iVoice will pay
cash dividends. However, no formal action has been
taken with respect to future dividends, and the
declaration and payment of dividends by Deep Field
Technologies and iVoice will be at the sole
discretion of their respective boards of directors.
Risk factors The distribution and ownership of our Class A
Common Stock involve various risks. You should read
carefully the factors discussed under "Risk
Factors" beginning on page 11. Several of the most
significant risks of the Distribution include:
o The Distribution may cause the trading price
of iVoice Common Stock to decline.
o Substantial sales of shares of Deep Field
Technologies Class A Common Stock may have
6
an adverse impact on the trading price of our
Class A Common Stock.
o There has not been a prior trading market for
Deep Field Technologies Class A Common Stock
and a trading market for our Class A Common
Stock may not develop.
o The Distribution of Deep Field Technologies
Class A Common Stock may result in tax
liability to you.
o iVoice has in the past, and Deep Field
Technologies may in the future, sell or issue
additional unregistered convertible securities
which are convertible into common shares of
Deep Field Technologies, without limitations
on the number of common shares the securities
are convertible into, which could dilute the
value of your holdings and could have other
negative impacts on your investment.
Federal income tax iVoice and Deep Field Technologies do not intend
consequences for the Distribution to be tax-free for U.S.
federal income tax purposes. You will be required
to pay income tax on the value of your shares of
Deep Field Technologies Class A Common Stock
received to the extent of the current or
accumulated earnings and profits of iVoice. You are
advised to consult your own tax advisor as to the
specific tax consequences of the Distribution.
Our relationship with Prior to the Distribution, iVoice and Deep Field
iVoice after the Technologies have entered or will enter into
distribution agreements to transfer to Deep Field Technologies
selected assets and liabilities of iVoice related
to Deep Field Technologies' business and to make
arrangements for the Distribution. iVoice and Deep
Field Technologies have entered into an
administrative services agreement for the provision
of certain services by iVoice to Deep Field
Technologies following the Distribution. The
administrative services agreement will continue on
a month to month basis until Deep Field
Technologies has found replacement services for
those services being provided by iVoice or can
provide these services for itself. Following
termination of the administrative services
agreement, we expect that Deep Field Technologies
will operate on a completely stand-alone basis from
iVoice and there will be no business or operating
relationship between iVoice and Deep Field
Technologies. See "Certain Relationships and
Related
7
Transactions." In addition, after the Distribution,
we anticipate that one of Deep Field Technologies'
two directors will also be a director of iVoice.
After the Distribution, any arrangements with iVoice
that may occur will not be deemed to be on an
"arms-length" basis because of the relationships
between the boards of directors and executive
officers of Deep Field Technologies and iVoice, but
we will seek to establish terms and conditions at
least as favorable as those that could be obtained
from an independent third party.
Board of Directors of Deep After the Distribution, Deep Field Technologies is
Field Technologies expected to have an initial board of two directors.
The initial directors will serve one-year terms.
Jerome R. Mahoney and Mark Meller have been
identified to serve on the initial board. Jerome R.
Mahoney expects to remain on iVoice's board
following the Distribution Date.
Management of Deep Field Mr. Mahoney will serve as Chairman of the Board of
Technologies Deep Field Technologies and will continue to serve
as Chairman of the Board and Chief Executive
Officer of iVoice, and Mark Meller will serve as
President, Chief Executive Officer and Chief
Financial Officer of Deep Field Technologies.
Neither of Mr. Mahoney nor Mr. Meller will provide
services to Deep Field Technologies on a full-time
basis.
Conflicts of Interest After the Distribution, Mr. Mahoney, the Chairman
of the Board of Deep Field Technologies, will
continue to serve as the Chairman of the Board and
Chief Executive Officer of iVoice. Further, Mr.
Mahoney will own both iVoice shares and have the
right to convert $190,000 of indebtedness (and the
amount of accrued and unpaid interest on such
indebtedness) into more than 190,000 shares of Deep
Field Technologies Class B Common Stock which is
convertible into the number of shares of Class A
Common Stock determined by dividing the number of
shares of Class B Common Stock being converted by a
20% discount of the lowest price at which iVoice
had ever issued its Class A Common Stock. There is
no limitation on the number of shares of Class A
Common Stock we may be required to issue to Mr.
Mahoney upon the conversion of this indebtedness.
See "Potential Dilution Due to Conversion at Below
Market Price." Each share of Class B Common Stock
has voting rights equal to 100 shares of Class A
Common Stock. For example, if Mr. Mahoney converts
$190,000 of his indebtedness into 190,000 shares of
Class B Common Stock, he will have voting rights
equal to 19,000,000 shares of Class A Common Stock
and will have control over the management and
direction of Deep Field Technologies, including the
election of directors,
8
appointment of management and approval of actions
requiring the approval of stockholders. In addition,
Mr. Mahoney may be deemed to receive personal
benefit as a result of the creation of Deep Field
Technologies and the Distribution. This relationship
could create, or appear to create, potential
conflicts of interest when Deep Field Technologies'
directors and management are faced with decisions
that have different implications for Deep Field
Technologies and iVoice, such as potential business
acquisitions to be made by Deep Field Technologies
or disputes arising out of any agreements between
the two companies. Deep Field Technologies does not
have any formal procedure in place for resolving
such conflicts of interest which may arise in the
future.
Certain Anti-takeover Some of the provisions of Deep Field Technologies'
Effects certificate of incorporation and bylaws may have
the effect of making the acquisition of control of
Deep Field Technologies in a transaction not
approved by Deep Field Technologies' board of
directors more difficult.
Stockholder inquiries Any persons having inquiries relating to the
Distribution should contact the Shareholder
Services department of the distribution agent at
(801) 484-7222 or Deep Field Technologies, in
writing at Deep Field Technologies, Inc., 750
Highway 34, Matawan, NJ 07747 Attention: Investor
Relations, or by email at information@ivoice.com,
or by telephone at (732) 441-7700.
SUMMARY CONDENSED FINANCIAL INFORMATION
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplates continuation of the company as a going concern. Deep Field
Technologies has traditionally operated as a non-reporting component of iVoice
and accordingly these financial statements have been derived from the
consolidated financial statements and accounting records of iVoice, and reflect
significant assumptions and allocations. iVoice allocated operating costs to
Deep Field Technologies. These allocations are reflected in the selling, general
and administrative, cost of revenue and/or research and development line items
in our statements of operations. The general corporate expense allocation is
primarily for cash management, selling expense, legal, accounting, tax,
insurance, public relations, advertising, and human resources. Other general
categories of operating expense, as well as other income and expense, have been
allocated to Deep Field Technologies by iVoice based upon a ratio of revenue of
Deep Field Technologies over total iVoice revenue for the applicable periods.
Management believes that although the financial information was prepared on a
pro forma basis, the cost of these services charged are a reasonable
representation of the costs that would have been incurred if Deep Field
Technologies had performed these functions as a stand-alone company. Deep Field
Technologies relies on iVoice for administrative and other services. These
financial statements do not necessarily
9
reflect the financial position, results of operations, and cash flows of Deep
Field Technologies had it been a stand-alone company.
For the For the
Three Three
Months Months For the For the Year
Ended Ended Year Ended Ended
March 31, March 31, December December 31,
2005 2004 31, 2004 2003
---------- --------- ---------- -------------
Statement of Operations Data: $ 112 $ 2,852 $ 7,344 $ 8,505
Sales
- --------------------------------------------------------------------------------
Cost of sales - - 1,138 2,352 3,447
- --------------------------------------------------------------------------------
Gross profit 112 1,714 4,992 5,058
- --------------------------------------------------------------------------------
Selling, general, and 62,876 12,419 125,738 24,288
Administrative expenses
- --------------------------------------------------------------------------------
Loss from operations (62,764) (10,705) (120,746) (19,230)
- --------------------------------------------------------------------------------
Net Loss $ (77,397) $ (44,071) $ (194,261) $ (28,938)
- --------------------------------------------------------------------------------
March 31, December December 31,
2005 31, 2004 2003
----------- ---------- ------------
Balance Sheet Data:
- --------------------------------------------------------------------------------
Current Assets $378,567 $302,883 $390
- --------------------------------------------------------------------------------
Liabilities 600,706 447,625 $ 0
- --------------------------------------------------------------------------------
Stockholders' equity (deficiency) (222,139) (144,742) $390
- --------------------------------------------------------------------------------
POTENTIAL DILUTION DUE TO CONVERSION AT BELOW MARKET PRICE
The net tangible book value of Deep Field Technologies as of December 31,
2004 was ($144,742) or ($.0144) per share of Class A Common Stock. Net
tangible book value per share is determined by dividing the tangible book value
of Deep Field Technologies (total tangible assets less total liabilities) by the
number of outstanding shares of our common stock. Since no proceeds from this
offering will be paid to Deep Field Technologies, our net tangible book value
will be unaffected by this offering. Our net tangible book value, however, will
be impacted if common stock is issued under the proposed equity line of credit.
The amount of dilution will depend on the offering price and number of shares to
be issued under the proposed equity line of credit if Deep Field Technologies is
able to obtain the equity line of credit. The following example shows the
dilution to new investors at an offering price of $0.01 per share.
If we assume that Deep Field Technologies will issue 1,052,6341,579 shares
of Class A Common Stock under its proposed equity line of credit at an assumed
offering price of $0.01 per share (i.e., the maximum number of shares needed in
order to raise a total of $10.0 million under the equity line of credit,
excluding the commitment fee), less a retention fee of $600,000, offering
expenses of $113,500, and repayment of the promissory note, our net tangible
book value as of December 31, 2004 would have been $8,741,758 or $0.00804 per
share. Such an offering would represent an immediate increase in net tangible
book value to existing stockholders of $.02244 per share and an immediate
dilution to new stockholders of $0.00196 per share, or 19.6%. The following
table illustrates the per share dilution:
10
Assumed public offering price per share $ 0.01000
Net tangible book value per share before this ($.01440)
offering
Increase attributable to new investors $.02244
----------
Net tangible book value per share after this
offering $ 0.00804
--------------
Dilution per share to new stockholders $ 0.00196
==============
The conversion price of our Class A Common Stock is based on the
then-existing market price. In order to provide you an example of dilution per
share you may experience, we have prepared the following table showing the
dilution per share at various assumed market prices (assuming that Mr. Mahoney
converts $190,000 of indebtedness):
Assumed Market No. of Shares to Dilution per Share
Price be issued (1) to New Investors
------------------- ------------------- --------------------
$0.0100 1,052,631,579 $0.00196
$0.0075 1,403,508,772 $0.00146
$0.0050 2,105,263,158 $0.00096
$0.0025 4,210,526,316 $0.00048
RISK FACTORS
You should carefully consider each of the following risk factors and all
of the other information in this information statement. The following risks
relate principally to the Distribution and Deep Field Technologies' business.
If any of the following risks and uncertainties develops into actual
events, the business, financial condition or results of operations of Deep Field
Technologies could be materially adversely affected. If that happens, the
trading prices of Deep Field Technologies shares could decline significantly.
The risk factors below contain forward-looking statements regarding the
Distribution and Deep Field Technologies. Actual results could differ materially
from those set forth in the forward-looking statements. See "Cautionary
Statement Regarding Forward-Looking Statements" below.
Risks Related to Our Business
Deep Field Technologies will face many of the difficulties that companies in the
early stage may face.
As a result of the Company's limited operating history, the currently
difficult economic conditions of the telecommunications marketplace and the
emerging nature of the unified messaging industry, it may be difficult for you
to assess our growth and earnings potential. The Company believes that due
primarily to the relatively brief time its Unified Messaging software has been
available to the general public, there has not yet been developed, implemented
and demonstrated a commercially viable business model from which to successfully
operate any form of business that relies on the products and services that we
intend to market, sell, and
11
distribute. Therefore, we have faced many of the difficulties that companies in
the early stages of their development in new and evolving markets often face as
they are described herein.
We may continue to face these and other difficulties in the future, some
of which may be beyond our control. If we are unable to successfully address
these problems, our future growth and earnings will be negatively affected.
Deep Field Technologies has no operating history as an independent public
company and may be unable to operate profitably as a stand-alone company.
Although iVoice has operated as a reporting public company since 2000 and
has sold computerized telephony software since 1997, Deep Field Technologies
does not have an operating history as an independent public company.
Historically, since the businesses that comprise each of Deep Field Technologies
and iVoice have been under one ultimate parent, they have been able to rely, to
some degree, on the earnings, assets, and cash flow of each other for capital
requirements. iVoice has operated the Unified Messaging software business since
the first quarter of 2000. After the Distribution, Deep Field Technologies will
be able to rely only on the Unified Messaging software business for such
requirements. The Unified Messaging software business has operated at a loss in
the past for iVoice, and as an independent company such losses may continue or
increase. Additionally, Deep Field Technologies' business has relied on iVoice
for financial, administrative and managerial expertise in conducting its
operations. Following the Distribution, Deep Field Technologies will maintain
its own credit and banking relationships and perform its own financial and
investor relations functions. Deep Field Technologies may not be able to
successfully put in place the financial, administrative and managerial structure
necessary to operate as an independent public company, and the development of
such structure will require a significant amount of management's time and other
resources.
iVoice's operations demonstrate a history of net losses and cash flow shortfalls
and Deep Field Technologies' likely will as well.
iVoice, of which Deep Field Technologies was a part, has incurred
recurring operating losses. iVoice used cash in operations of approximately
$1,213,000 and $1,142,000 during the years ended December 31, 2004 and 2003,
respectively, and has a history of net losses. iVoice had a cash balance of
approximately $8,000,000 and $4,500,000 at December 31, 2004 and 2003,
respectively, and current assets exceeded current liabilities by approximately
$5,100,000 and $3,200,000 at December 31, 2004 and 2003, respectively. iVoice
had stockholders' equity of approximately $5,400,000 and $3,400,000 at December
31, 2004 and 2003, respectively. The Unified Messaging software business had net
losses of approximately $194,000 and $29,000 for the years ended December 31,
2004 and 2003, respectively, and used cash in operations of approximately
$150,000 and $27,000 during the years ended December 31, 2004 and 2003,
respectively . iVoice has been and may, in the future, be dependent upon outside
and related party financing to develop and market their software products,
perform their business development activities, and provide for ongoing working
capital requirements. During the year ended December 31, 2004 and the three
months ending March 31, 2005, substantially all of this financing has been
provided by Cornell Capital Partners. There can be no assurance that Deep Field
Technologies will have operations separately that fare any better than those of
iVoice.
12
Our historical information has limited relevance to our results of operations as
a separate company.
The historical financial information we have included in this prospectus
does not reflect what our results of operations, financial position and cash
flows would have been had we been a separate, stand-alone entity during the
periods presented or what our results of operations, financial position and cash
flows will be in the future. This is because iVoice did not account for us as,
and we were not operated as, a single stand-alone business for the periods
presented. For more information about the preparation of our financial
statements from the financial statements of iVoice, see "Summary Consolidated
Financial Information" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Deep Field Technologies has received a going concern opinion from its
independent auditors that describes the uncertainty regarding its ability to
continue as a going concern.
Deep Field Technologies has received a report from its independent
auditors for the fiscal years ended December 31, 2004 and December 31, 2003
containing an explanatory paragraph that describes the uncertainty regarding the
Company's ability to continue as a going concern due to its historical negative
cash flow and because, as of the date of the auditors' opinion, the Company did
not have access to sufficient committed capital to meet its projected operating
needs for at least the next 12 months.
Our consolidated financial statements have been prepared on the basis of a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. We have not made any
adjustments to our consolidated financial statements as a result of the going
concern modification to the report of our independent registered public
accounting firm. If we become unable to continue as a going concern, we could
have to liquidate our assets, which means that we are likely to receive
significantly less for those assets than the values at which such assets are
carried on our consolidated financial statements. Any shortfall in the proceeds
from the liquidation of our assets would directly reduce the amounts, if any,
that holders of our common stock could receive in liquidation.
There can be no assurance that management's plans will be successful, and
other unforeseeable actions may become necessary. Any inability to raise capital
may require us to reduce the level of our operations. Such actions would have a
material adverse effect on our business and operations and result in charges
that would be material to our business and results of operations.
Deep Field Technologies' future revenue and operating results are
unpredictable and may fluctuate, which could cause Deep Field Technologies'
stock price to decline.
Our short operating history and the rapidly changing nature of the market
in which we compete make it difficult to accurately forecast our revenues and
operating results. Our operating results are unpredictable and we expect them to
fluctuate in the future due to a number of factors. These factors may include,
among others:
o the timing of sales of our products and services, particularly in
light of our minimal sales history;
13
o the introduction of competitive products by existing or new
competitors;
o reduced demand for any given product;
o difficulty in keeping current with changing technologies;
o unexpected delays in introducing new products, new product features
and services;
o increased or uneven expenses, whether related to sales and
marketing, product development or administration;
o deferral of recognition of our revenue in accordance with applicable
accounting principles due to the time required to complete projects;
o the mix of product license and services revenue;
o seasonality in the end-of-period buying patterns of foreign and
domestic software markets;
o the market's transition between operating systems; and
o costs related to possible acquisitions of technology or businesses.
Due to these factors, forecasts may not be achieved, either because
expected revenues do not occur or because they occur at lower prices or on terms
that are less favorable to us. In addition, these factors increase the chances
that our results could diverge from the expectations of investors and analysts.
If so, the market price of our stock would likely decline.
Deep Field Technologies has in the past and may in the future sell additional
unregistered convertible securities, possibly without limitations on the number
of shares of common stock the securities are convertible into, which could
dilute the value of the holdings of current stockholders and have other
detrimental effects on your holdings.
We have relied on the private placement of convertible debentures and
promissory notes to obtain working capital and may continue to do so in the
future. As of the date of the registration statement of which this prospectus is
a part, we have outstanding convertible obligations. The $190,000 promissory
note owing to Mr. Mahoney provides that, at Mr. Mahoney's option, principal and
interest due on the note can be converted into shares of the Company's Class B
Common Stock which is convertible into the number of shares of Class A Common
Stock determined by dividing the number of shares of Class B Common Stock being
converted by a 20% discount of the lowest price at which iVoice had ever issued
its Class A Common Stock. There is no limit upon the number of shares that we
may be required to issue upon conversion of any of these obligations.
In order to obtain working capital in the future, we intend to issue
additional equity securities and convertible obligations.
14
In the event that the price of our Class A Common Stock decreases, and our
convertible obligations (or any other convertible obligations we may issue) are
converted into shares of our Class A Common Stock,
o the percentage of shares outstanding that will be held by these
holders upon conversion will increase accordingly,
o increased share issuance, in addition to a stock overhang of an
indeterminable amount, may depress the price of our Class A Common
Stock,
o the sale of a substantial amount of convertible debentures to
relatively few holders could effectuate a possible change in control
of the Company, and
o in the event of our voluntary or involuntary liquidation while the
secured convertible debentures are outstanding, the holders of those
securities will be entitled to a preference in distribution of our
property.
In addition, if the market price declines significantly, we could be
required to issue a number of shares of Class A Common Stock sufficient to
result in our current stockholders not having an effective vote in the election
of directors and other corporate matters. In the event of a change in control of
the Company, it is possible that the new majority stockholders may take actions
that may not be consistent with the objectives or desires of our current
stockholders.
We are required to convert our existing convertible obligations based upon
a formula that varies with the market price of our common stock. As a result, if
the market price of our Class A Common Stock increases after the issuance of our
convertible obligations, it is possible, that, upon conversion of our
convertible obligations, we will issue shares of Class A Common Stock at a price
that is far less than the then-current market price of our Class A Common Stock.
If the market price of our Class A Common Stock decreases after issuance
of our convertible obligations, upon conversion, we will have to issue an
increased number of shares to the holders of our convertible obligations. Any
sale of convertible obligations may result in a very large conversion at one
time. If we do not have a sufficient number of shares to cover the conversion,
we may have a risk of a civil lawsuit.
For more information, please see "Potential Dilution Due to Conversion at
Below Market Price."
If Deep Field Technologies loses the services of any key personnel, including
our chief executive officer or our directors, our business may suffer.
We are dependent on our key officers and directors, including Jerome R.
Mahoney and Mark Meller, our Chairman of the Board and our President, Chief
Executive Officer and Chief Financial Officer, respectively. The loss of any of
our key personnel could materially harm our business because of the cost and
time necessary to retain and train a replacement. Such a loss would also divert
management attention away from operational issues. To minimize the effects of
such loss, Deep Field Technologies has entered into employment contracts with
Jerome Mahoney and Mark Meller.
15
Our potential future business acquisitions may be unpredictable and may cause
our business to suffer.
Deep Field Technologies may seek to expand its operations through the
acquisition of additional businesses. These potential acquired additional
businesses may be outside the current field of operations of Deep Field
Technologies. Deep Field Technologies may not be able to identify, successfully
integrate or profitably manage any such businesses or operations. The proposed
expansion may involve a number of special risks, including possible adverse
effects on Deep Field Technologies' operating results, diversion of management
attention, inability to retain key personnel, risks associated with
unanticipated events and the financial statement effect of potential impairment
of acquired intangible assets, any of which could have a materially adverse
effect on Deep Field Technologies' business, financial condition and results of
operations. In addition, if competition for acquisition candidates or assumed
operations were to increase, the cost of acquiring businesses or assuming
customers' operations could increase materially. The inability of Deep Field
Technologies to implement and manage its expansion strategy successfully may
have a material adverse effect on the business and future prospects of Deep
Field Technologies. Furthermore, through the acquisition of additional
businesses, Deep Field Technologies may effect a business acquisition with a
target business which may be financially unstable, under-managed, or in its
early stages of development or growth. While Deep Field Technologies may, under
certain circumstances, seek to effect business acquisitions with more than one
target business, as a result of its limited resources, Deep Field Technologies,
in all likelihood, will have the ability to effect only a single business
acquisition at one time. Currently, Deep Field Technologies has no plans,
proposals or arrangements, either orally or in writing, regarding any proposed
acquisitions and is not considering any potential acquisitions.
Members of Deep Field Technologies' Board of Directors and management may have
conflicts of interest after the Distribution; Deep Field Technologies does not
have any formal procedure for resolving conflicts in the future.
After the Distribution, Mr. Mahoney, a member of the board of directors,
will own iVoice shares and have the right to convert $190,000 of indebtedness
into 190,000 shares of Deep Field Technologies Class B Common Stock which are
convertible into the number of shares of Class A Common Stock determined by
dividing the number of shares of Class B Common Stock being converted by a 20%
discount of the lowest price at which iVoice had ever issued its Class A Common
Stock. In addition, Mr. Mahoney has the right to convert the amount of all
accrued and unpaid interest on such indebtedness into one share of Deep Field
Technologies Class B Common Stock for each dollar of accrued and unpaid
interest. As of March 31, 2005, accrued and unpaid interest on this indebtedness
was $26,334.91. There is no limitation on the number of shares of Class A Common
Stock we may be required to issue to Mr. Mahoney upon the conversion of this
indebtedness. In addition, following the Distribution, we anticipate that Mr.
Mahoney, the Chairman of the Board of Deep Field Technologies will also continue
to serve as the Chairman of the Board and Chief Executive Officer of iVoice.
These relationships could create, or appear to create, potential conflicts of
interest when Deep Field Technologies' directors and management are faced with
decisions that could have different implications for Deep Field Technologies and
iVoice. For example, Mr. Mahoney may experience conflicts of interest with
respect to the allocation of his time, services and functions among iVoice, Deep
Field Technologies and any other projects. Other examples could include
potential business
16
acquisitions that would be suitable for either Deep Field Technologies or
iVoice, activities undertaken by iVoice in the future that could be in direct
competition with Deep Field Technologies, or the resolution of disputes arising
out of the agreements governing the relationship between iVoice and Deep Field
Technologies following the Distribution. Also, the appearance of conflicts, even
if such conflicts do not materialize, might adversely affect the public's
perception of Deep Field Technologies following the Distribution. Furthermore,
Deep Field Technologies does not have any formal procedure for resolving such
conflicts of interest should they arise following the Distribution.
Deep Field Technologies' industry is characterized by rapid technological change
and failure to adapt our product development to these changes may cause our
products to become obsolete.
We participate in a highly dynamic industry characterized by rapid change
and uncertainty relating to new and emerging technologies and markets. Future
technology or market changes may cause some of our products to become obsolete
more quickly than expected.
Deep Field Technologies stockholders may experience significant dilution if
future equity offerings are used to fund operations or acquire businesses.
On March 9, 2005, we obtained a non-binding letter of commitment from
Cornell Capital Partners to provide a $10 million standby equity line of credit.
If working capital or future acquisitions are financed through the issuance of
equity securities, such as through the possible sale of Class A Common Stock on
the terms of the non-binding commitment from Cornell Capital Partners, L.P. (see
"Certain Relationships and Related Transactions" beginning on page 49), Deep
Field Technologies stockholders would experience significant dilution. In
addition, the conversion of outstanding debt obligations into equity securities
would have a dilutive effect on Deep Field Technologies' shareholders. Further,
securities issued in connection with future financing activities or potential
acquisitions may have rights and preferences senior to the rights and
preferences of the Deep Field Technologies Class A Common Stock.
Except for the potential sale of Class A Common Stock to Cornell Capital
partners on the terms of the non-binding letter of commitment, Deep Field
Technologies has no expectations or plans to conduct future equity offerings.
Management believes that, if the transaction contemplated by the non-binding
commitment are consummated, the Company will have sufficient capital resources
to conduct its business as currently planned over the 12-month period following
the Distribution. However, Cornell Capital Partners is under no obligation to
execute any definitive agreements with Deep Field Technologies. Furthermore, if
a definitive agreement is executed, Cornell Capital Partners is under no
obligation to purchase shares of Class A Common Stock unless certain conditions
are satisfied by Deep Field Technologies, including completion of the
Distribution, listing our Class A Common Stock on the Over-the-Counter Bulletin
Board and having the registration statement relating to such Class A Common
Stock declared effective. If Cornell Capital Partners does not execute the
definitive agreements or Deep Field Technologies cannot satisfy the requirements
for Cornell Capital Partners to purchase the Class A Common Stock under the
terms of the definitive documents, we will not have sufficient capital resources
to conduct our business on a long-term basis, which would have a material
adverse effect on us and our financial condition. Management believes that its
going-
17
forward expenses over the next 12 months will be approximately $240,000 and,
assuming that Deep Field Technologies has no revenues, Deep Field Technologies
expects to have aggregate cash expenditures of approximately $240,000 which
includes salaries of Deep Field Technologies' officers and employees for the
year ending December 31, 2005. Management has no current plan to hire additional
employees, perform additional research and development or purchase additional
equipment or services beyond the requirements of the administrative services
agreement with iVoice. Management believes that the deficiency between the
Company's expenses and net revenues will be more than covered by the cash
available from the proceeds of the secured promissory note. If there are
additional deficiencies that are in excess of the proceeds of the secured
promissory note, and Deep Field Technologies is unable to obtain funds from the
equity line of credit, management believes that Deep Field Technologies can
limit its operations, defer payments to management and maintain its business at
nominal levels until it can identify alternative sources of capital.
The trend toward consolidation in Deep Field Technologies' industry may impede
its ability to compete effectively.
As consolidation in the software industry continues, fewer companies
dominate particular markets, changing the nature of the market and potentially
providing consumers with fewer choices. Also, many of these companies offer a
broader range of products than us, ranging from desktop to enterprise solutions.
We may not be able to compete effectively against these competitors.
Furthermore, we may use strategic acquisitions, as necessary, to acquire
technology, people and products for our overall product strategy. The trend
toward consolidation in our industry may result in increased competition in
acquiring these technologies, people or products, resulting in increased
acquisition costs or the inability to acquire the desired technologies, people
or products. Any of these changes may have a significant adverse effect on our
future revenues and operating results.
Deep Field Technologies faces intense price-based competition for licensing of
its products which could reduce profit margins.
Price competition is often intense in the software market, especially for
computerized telephony software products. Many of our competitors have
significantly reduced the price of their products. Price competition may
continue to increase and become even more significant in the future, resulting
in reduced profit margins. Neither iVoice nor Deep Field Technologies has
experienced any pressure from price competition on the pricing of its Unified
Messaging software products in the past, but Deep Field Technologies believes
that this pressure could occur in the future.
Deep Field Technologies may be unsuccessful in adapting to changes in the
dynamic technological environment of telecommunications in a timely manner.
Critical issues concerning the commercial use of telecommunications,
including security, reliability, cost, ease of use, accessibility, quality of
service or potential tax or other government regulation, remain unresolved and
may affect the use of telecommunications as a medium to distribute or support
our software products and the functionality of some of our products. If we are
unsuccessful in timely assimilating changes in the telecommunications
environment into our
18
business operations and product development efforts, our future net revenues and
operating results could be adversely affected.
Deep Field Technologies may be unsuccessful in continuing existing distribution
channels or in developing new distribution channels.
Due to our limited operating history, we currently offer products directly
to end-users and through dealer and reseller channels established by iVoice. We
intend to assume iVoice's relationships and contractual arrangements with these
dealers and resellers. However, there can be no assurance that these dealers and
resellers will wish to continue their existing arrangements, or create new
arrangements, with us. If we cannot continue to use iVoice's existing dealer and
reseller channels, we will need to develop a new network of dealers and
resellers. However, we may not be able to effectively develop our own network of
resellers and dealers to distribute our software products. If we cannot assume
iVoice's existing distribution channels and we cannot develop our own new
distribution channels this would have a material adverse effect on us and our
financial condition. The adoption of new channels may adversely impact existing
channels and/or product pricing, which may reduce our future revenues and
profitability.
Restrictive product return policies may limit Deep Field Technologies' sales and
penetration into the marketplace.
Deep Field Technologies only permits returns from authorized dealers and
resellers of unused inventory, subject to the consent of the Company and a
twenty-five percent restocking fee. End users who purchase products directly
from Deep Field Technologies may not return such products to Deep Field
Technologies under any circumstances. Such policies may deter resellers and end
users from purchasing our products in a competitive and quickly evolving
marketplace, and have a material adverse effect on our ability to remain
competitive with similar products.
Deep Field Technologies may depend on distribution by resellers and distributors
for a significant portion of revenues.
We may distribute some of our products through resellers and distributors.
We intend to assume iVoice's existing relationships and contractual
relationships with its resellers and distributors. To effectively do so, we must
establish and maintain good working relationships with these resellers and
distributors. If we are unsuccessful in establishing and maintaining
relationships with iVoice's existing resellers and distributors or with new
resellers and distributors, or if these resellers and distributors are
unsuccessful in reselling our products, our future net revenues and operating
results may be adversely affected. Deep Field Technologies does not have any
material relationship with any single distributor or reseller.
The limited scope of results of Deep Field Technologies' research and
development may limit the ability of Deep Field Technologies to expand or
maintain its sales and products in a competitive marketplace.
Deep Field Technologies currently has no plans to engage in research and
development of new products or improvements on existing technologies. Failure to
engage in such research and to develop new technologies or products or upgrades,
enhancements, applications or uses for
19
existing technologies may place Deep Field Technologies at a competitive
disadvantage in the marketplace for its products. As no current research and
development program currently exists within Deep Field Technologies, any future
research and development programs could cause us to incur substantial fixed
costs which may result in such programs being prohibitively expensive to
initiate without substantial additional financing being obtained on favorable
terms. Also, the lack of any current research and development program may result
in an extended launch period for a research and development program at a point
in our business when time is of the essence. These delays could have a material
adverse effect on the amount and timing of future revenues.
Such limited research and development may also adversely affect the
ability of Deep Field Technologies to test any new technologies which may be
established in the future in order to determine if they are successful. If they
are not technologically successful, our resulting products may not achieve
market acceptance and our products may not compete effectively with products of
our competitors currently in the market or introduced in the future.
If Deep Field Technologies must restructure its operations, valuable resources
will be diverted from other business objectives.
We intend to continually evaluate our product and corporate strategy. We
have in the past undertaken, and will in the future undertake, organizational
changes and/or product and marketing strategy modifications. These
organizational changes increase the risk that objectives will not be met due to
the allocation of valuable limited resources to implement changes. Further, due
to the uncertain nature of any of these undertakings, these efforts may not be
successful and we may not realize any benefit from these efforts.
Potential software defects and product liability could result in delays in
market acceptance, unexpected costs and diminished operating results.
Software products frequently contain errors or defects, especially when
first introduced or when new versions or enhancements are released. Defects and
errors could be found in current versions of our products, future upgrades to
current products or newly developed and released products. Software defects
could result in delays in market acceptance or unexpected reprogramming costs,
which could materially adversely affect our operating results. Most of our
license agreements with customers contain provisions designed to limit our
exposure to potential product liability claims. It is possible, however, that
these provisions limiting our liability may not be valid as a result of federal,
state, local or foreign laws or ordinances or unfavorable judicial decisions. A
successful product liability claim may have a material adverse effect on our
business, operating results and financial condition.
Deep Field Technologies relies on third party technologies which may not support
Deep Field Technologies products.
Our software products are designed to run on the Microsoft(R) Windows(R)
operating system and with industry standard hardware. Although we believe that
the operating systems and necessary hardware are and will be widely utilized by
businesses in the corporate market, businesses may not actually adopt such
technologies as anticipated or may in the future migrate to other computing
technologies that we do not support. Moreover, if our products and
20
technology are not compatible with new developments from industry leaders such
as Microsoft, our business, results of operations and financial condition could
be materially and adversely affected.
Deep Field Technologies faces aggressive competition in many areas of the
business, and the business will be harmed if Deep Field Technologies fails to
compete effectively.
We encounter aggressive competition from numerous competitors in many
areas of our business. Many of our current and potential competitors have longer
operating histories, greater name recognition and substantially greater
financial, technical and marketing resources than we have. We may not be able to
compete effectively with these competitors. Our competition may engage in
research and development to develop new products and periodically enhance
existing products in a timely manner, while we have no established plan or
intention to engage in any manner of research or development. We anticipate that
we may have to adjust the prices of many of our products to stay competitive. In
addition, new competitors may emerge, and entire product lines may be threatened
by new technologies or market trends that reduce the value of these product
lines. The market in which we compete is influenced by the strategic direction
of major computer hardware manufacturers and operating system software
providers.
We may not be able to access sufficient funds when needed.
We are dependent on external financing to fund our operations. Our
financing needs are expected to be provided, through the possible sale of Class
A Common Stock on the terms of the non-binding letter of intent to provide an
equity line of credit from Cornell Capital Partners.
However, Cornell Capital Partners is under no obligation to execute any
definitive agreements with Deep Field Technologies. Furthermore, if definitive
agreements are executed Cornell Capital Partners is under no obligation to
purchase any shares of Class A Common Stock, Cornell Capital Partners will be
obligated to purchase shares of Class A Common Stock only upon the satisfaction
of certain conditions being met by Deep Field Technologies, including completing
of the Distribution, listing our Class A Common stock on the Over-the-Counter
Bulletin Board and having the registration statement relating to such Class A
Common Stock declared effective. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources." If Cornell Capital Partners does not execute the definitive
agreements or Deep Field Technologies cannot satisfy the requirements for
Cornell Capital Partners to purchase the Class A Common Stock under the terms of
the definitive documents, we will not have sufficient capital resources to
operate our business and we have no current plans to obtain other financing. If
we obtain the equity line of credit, we cannot assure you that we will be able
to access such financing in sufficient amounts or at all when needed. Our
inability to obtain sufficient financing would have an immediate material
adverse effect on us, our financial condition and our business.
Our obligations under the secured promissory note are secured by substantially
all of our assets.
Our obligations under the secured promissory note issued to Cornell
Capital Partners are secured by substantially all of our assets. As a result, if
we default under the terms of the
21
secured promissory note, Cornell Capital Partners could foreclose its security
interest and liquidate all of our assets. This would cause operations to cease.
Jerome Mahoney, the Chairman of the Board of Deep Field Technologies, may have
control over the management and direction of Deep Field Technologies.
Mr. Mahoney will have the right to convert $190,000 of indebtedness,
together with any accrued but unpaid interest on such indebtedness, into 190,000
shares (not including shares receivable upon conversion of accrued and unpaid
interest on the promissory note) of Deep Field Technologies Class B Common
Stock, which Class B Stock is convertible into the number of shares of Class A
Common Stock determined by dividing the number of shares of Class B Common Stock
being converted by a 20% discount of the lowest price at which iVoice had ever
issued its Class A Common Stock. Interest accrues on the outstanding principal
balance of the note at a rate of 2% per annum. There is no limitation on the
number of shares of Class A Common Stock we may be required to issue to Mr.
Mahoney upon the conversion of this indebtedness. Each share of Class B Common
Stock has voting rights equal to 100 shares of Class A Common Stock. If Mr.
Mahoney converts his indebtedness into 190,000 shares of Class B Common Stock,
he will have voting rights equal to 19,000,000 shares of Class A Common Stock
and will have control over the management and direction of Deep Field
Technologies, including the election of directors, appointment of management and
approval of actions requiring the approval of stockholders.
In addition, Mark Meller, our Chief Executive Officer and Chief Financial
Officer, has granted an irrevocable proxy to Jerome Mahoney (or his designee) to
vote and exercise all voting and related rights with respect to certain shares
of our Common Stock that are owned at any time by Mr. Meller.
Deep Field Technologies' management team is new and its working relationships
are untested.
We have only recently assembled our management team as part of the
Distribution and changes in our operating structure. Some members of our
management team have worked with each other in the past, although at this time
we cannot assess the effectiveness of their working relationships after the
Distribution. As a result, we may be unable to effectively develop and sell our
software products and Deep Field Technologies, as a business, may fail.
Deep Field Technologies relies on intellectual property and proprietary rights
which may not remain unique to Deep Field Technologies.
We regard our software as proprietary and underlying technology as
proprietary. We seek to protect our proprietary rights through a combination of
confidentiality agreements and copyright, patent, trademark and trade secret
laws.
We do not have any patents or statutory copyrights on any of our
proprietary technology that we believe to be material to our future success. Our
future patents, if any, may be successfully challenged and may not provide us
with any competitive advantages. We may not develop proprietary products or
technologies that are patentable and other parties may have prior claims.
22
In selling our products, we rely primarily on shrink-wrap licenses that
are not signed by licensees. Therefore, such licenses may be unenforceable under
the laws of some jurisdictions. In addition, existing copyright laws afford
limited practical protection. Furthermore, the laws of some foreign countries do
not offer the same level of protection of our proprietary rights as do the laws
of the United States.
Patent, trademark and trade secret protection is important to us because
developing and marketing new technologies and products is time-consuming and
expensive. We do not own any U.S. or foreign patents or registered intellectual
property. We may not obtain issued patents or other protection from any future
patent applications owned by or licensed to us.
Our competitive position is also dependent upon unpatented trade secrets.
Trade secrets are difficult to protect. Our competitors may independently
develop proprietary information and techniques that are substantially equivalent
to ours or otherwise gain access to our trade secrets, such as through
unauthorized or inadvertent disclosure of our trade secrets.
There can be no assurance that our means of protecting our proprietary
rights will be adequate or that our competitors will not independently develop
similar technology substantially equivalent or superseding proprietary
technology. Furthermore, there can be no assurance that any confidentiality
agreements between us and our employees will provide meaningful protection of
our proprietary information, in the event of any unauthorized use or disclosure
thereof. As a consequence, any legal action that we may bring to protect
proprietary information could be expensive and may distract management from
day-to-day operations.
Deep Field Technologies may become involved in future litigation, which may
result in substantial expense and may divert our attention from the
implementation of our business strategy.
We believe that the success of our business depends, in part, on obtaining
intellectual property protection for our products, defending our intellectual
property once obtained and preserving our trade secrets. Litigation may be
necessary to enforce our intellectual property rights, to protect our trade
secrets and to determine the validity and scope of our proprietary rights. Any
litigation could result in substantial expense and diversion of our attention
from our business, and may not adequately protect our intellectual property
rights.
In addition, we may be sued by third parties which claim that our products
infringe the intellectual property rights of others. This risk is exacerbated by
the fact that the validity and breadth of claims covered in technology patents
involve complex legal and factual questions for which important legal principles
are unresolved. Any litigation or claims against us, whether valid or not, could
result in substantial costs, place a significant strain on our financial
resources, divert management resources and harm our reputation. Such claims
could result in awards of substantial damages, which could have a material
adverse impact on our results of operations. In addition, intellectual property
litigation or claims could force us to:
o cease licensing, incorporating or using any of our products that
incorporate the challenged intellectual property, which would
adversely effect our revenue;
23
o obtain a license from the holder of the infringed intellectual
property right, which license may not be available on reasonable
terms, if at all; and
o redesign our products, which would be costly and time-consuming.
Deep Field Technologies may incur increased expenses after the administrative
services agreement with iVoice is terminated.
In connection with its spin-off, Deep Field Technologies has entered into
an administrative services agreement with iVoice. Under this agreement, iVoice
is providing Deep Field Technologies with services in such areas as inventory
purchasing, material and inventory control, employee benefits administration,
payroll, financial accounting and reporting, and other areas where Deep Field
Technologies needs assistance and support. The agreement will continue following
the completion of the Distribution on a month-to-month basis. Upon termination
of the agreement, Deep Field Technologies will be required to obtain such
services from a third party or increase its headcount to provide such services.
This could be more expensive than the fees which Deep Field Technologies has
been required to pay under the administrative services agreement.
Risks Relating to the Distribution
The Distribution may cause the trading price of iVoice common stock to decline.
Following the Distribution, iVoice expects that its common stock will
continue to be listed and traded on the Over-the-Counter Bulletin Board under
the symbol "IVOC." Following the Distribution and the intended distributions of
the two other new subsidiaries of iVoice to the iVoice stockholders, iVoice's
operating assets will consist of its portfolio of patents and patent rights, and
its future business development operations will consist of licensing its
intellectual property rights. A trading market may not continue for the shares
of iVoice common stock or ever develop for the Deep Field Technologies Class A
Common Stock. As a result of the Distribution, the trading price of iVoice
common stock immediately following the Distribution may be substantially lower
than the trading price of iVoice common stock immediately prior to the
Distribution.
The combined trading prices of iVoice common stock and the Deep Field
Technologies Class A Common Stock after the Distribution may be less than the
trading price of iVoice common stock immediately prior to the Distribution.
Further, the combined trading prices of iVoice common stock, the Deep Field
Technologies Class A Common Stock and the common stock of each of the two other
new companies being distributed to iVoice stockholders after the Distribution
and the two other distributions may be less than the trading price of iVoice
common stock immediately prior to these distributions.
24
Substantial sales of shares of Deep Field Technologies Class A Common Stock may
have an adverse impact on the trading price of the Deep Field Technologies Class
A Common Stock.
After the Distribution, some Deep Field Technologies stockholders may
decide that they do not want shares in a company consisting of the Unified
Messaging software operations, and may sell their Deep Field Technologies common
stock following the Distribution.
Based on the number of shares of iVoice common stock anticipated to be
outstanding on the record date and the number of shares of iVoice common stock
anticipated to be outstanding on the Record Date and that will actually
participate in the Distribution, iVoice will distribute to iVoice stockholders a
total of up to 10,050,000 shares of Deep Field Technologies Class A Common
Stock. Under the United States federal securities laws, substantially all of
these shares may be resold immediately in the public market, except for (1)
shares of Deep Field Technologies Class A Common Stock held by affiliates of
Deep Field Technologies or (2) shares which are issued in respect of restricted
shares of iVoice common stock. Deep Field Technologies cannot predict whether
stockholders will resell large numbers of shares of Deep Field Technologies
Class A Common Stock in the public market following the Distribution or how
quickly they may resell these shares of Deep Field Technologies Class A Common
Stock. If Deep Field Technologies stockholders sell large numbers of shares of
Deep Field Technologies Class A Common Stock over a short period of time, or if
investors anticipate large sales of shares of Deep Field Technologies Class A
Common Stock over a short period of time, this could adversely affect the
trading price of the Deep Field Technologies Class A Common Stock.
There has not been any prior trading market for the Deep Field Technologies
Class A Common Stock and a trading market for the Deep Field Technologies Class
A Common Stock may not develop.
There is no current trading market for the Deep Field Technologies Class A
Common Stock, although a when-issued trading market may develop prior to
completion of the Distribution. We anticipate that the Deep Field Technologies
Class A Common Stock will be listed on the Over-the-Counter Bulletin Board under
the proposed symbol "___."
Shares of Deep Field Technologies Class A Common Stock may not be actively
traded or the prices at which the Deep Field Technologies Class A Common Stock
will trade may be low. Some of the iVoice stockholders who receive Deep Field
Technologies Class A Common Stock may decide that they do not want shares in a
company consisting of a Unified Messaging software business, and may sell their
shares of Deep Field Technologies Class A Common Stock following the
Distribution. This may delay the development of an orderly trading market in
Deep Field Technologies Class A Common Stock for a period of time following the
Distribution. Until the shares of Deep Field Technologies Class A Common Stock
are fully distributed and an orderly market develops, the prices at which the
Deep Field Technologies Class A Common Stock trade may fluctuate significantly
and may be lower than the price that would be expected for a fully distributed
issue. Prices for Deep Field Technologies Class A Common Stock will be
determined in the marketplace and may be influenced by many factors, including
the depth and liquidity of the market for the shares, Deep Field Technologies'
results of operations, what
25
investors think of Deep Field Technologies and the unified messaging software
industry, changes in economic conditions in the unified messaging software
industry, and general economic and market conditions. Market fluctuations could
have a material adverse impact on the trading price of the Deep Field
Technologies Class A Common Stock.
Our common stock is deemed to be "penny Stock" which may make it more difficult
for investors to sell their shares due to suitability requirements.
Our common stock is deemed to be "penny stock" as that term is defined in
Rule 3A51-1 promulgated under the Securities Exchange Act of 1934. Penny stocks
are stock:
o with a price of less than $5.00 per share;
o that are not traded on a "recognized" national exchange;
o whose prices are not quoted on the Nasdaq automated quotation system
(Nasdaq listed stock must still have a price of not less than $5.00
per share); or
o in issuers with net tangible assets of less than $2.0 million (if
the issuer has been in continuous operation for at least three
years) or $5.0 million (if in continuous operation for less than
three years), or with average revenues of less than $6.0 million for
the last three years.
Broker/dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks. Moreover,
broker/dealers are required to determine whether in investment in a penny stock
is a suitable investor for a prospective investor. These requirements may reduce
the potential market for our common stock by reducing the number of potential
investors. This may make it more difficult for investors in our common stock to
sell shares to third parties or to otherwise dispose of them. This could cause
our stock price to decline.
If we are able to sell shares of our Class A Common Stock to Cornell Capital
Partners, stockholders would experience significant dilution from such sale of
shares.
Under the terms of the non-binding letter of intent received by Deep Field
Technologies, if we executed definitive agreements and satisfy the conditions
therein, Deep Field Technologies may issue and sell to Cornell Capital Partners
shares of Class A Common Stock for a total purchase price of up to $10.0
million. As stated above under " -- We may not be able to access sufficient
funds when needed," the commitment provides that our ability to obtain funds
under any definitive agreement will be subject to the satisfaction of certain
conditions that we may not be able to satisfy. See also "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources." If we consummate the transactions contemplated by the
commitment and are able to sell such shares of Class A Common Stock to Cornell
Capital Partners, such sale of shares will have a dilutive impact on our
stockholders. As a result, our net income per share could decrease in future
periods, and the market price of our Class A Common Stock could decline. In
addition, if our stock price declines, the price at which we sell such shares to
Cornell Capital Partners could decrease, and we would need to issue a
26
greater number of shares of Class A Common Stock. If our stock price is lower,
then Deep Field Technologies stockholders would experience greater dilution.
The Distribution of Deep Field Technologies Class A Common Stock may result in
tax liability to you.
You will be required to pay income tax on the value of your shares of Deep
Field Technologies Class A Common Stock received to the extent of the current or
accumulated earnings and profits of iVoice. Any excess will be treated as a
tax-free return of capital and thereafter as capital gain. You are advised to
consult your own tax advisor as to the specific tax consequences of the
Distribution.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Information included in this prospectus may contain forward-looking
statements. This information may involve known and unknown risks, uncertainties
and other factors which may cause our actual results, performance or
achievements to be materially different from the future results, performance or
achievements expressed or implied by any forward-looking statements.
Forward-looking statements, which involve assumptions and describe our future
plans, strategies and expectations, are generally identifiable by use of the
words "may," "will," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative of these words or other variations on
these words or comparable terminology.
This prospectus contains forward-looking statements, including statements
regarding, among other things, (a) our projected sales and profitability, (b)
our growth strategies, (c) anticipated trends in our industry, (d) our future
financing plans, and (e) our anticipated needs for working capital. These
statements may be found under "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" and "Our Business," as well as in this
prospectus generally. Actual events or results may differ materially from those
discussed in forward-looking statements as a result of various factors,
including, without limitation, the risks outlined under "Risk Factors" and
matters described in this prospectus generally. In light of these risks and
uncertainties, there can be no assurance that the forward-looking statements
contained in this prospectus will in fact occur.
USE OF PROCEEDS
Deep Field Technologies will receive no proceeds from the distribution of
securities in this Distribution.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our audited
financial statements and related notes included elsewhere in this prospectus.
Our fiscal year currently ends on December 31, and each of our fiscal quarters
ends on the final day of a calendar quarter (each March 31, June 30 and
September 30). The following discussion contains forward-looking statements.
Please see "Cautionary Statement Regarding Forward-Looking Statements" for a
discussion of uncertainties, risks and assumptions associated with these
statements.
27
Overview
Deep Field Technologies has traditionally operated as a non-reporting
component of iVoice and accordingly the financial statements discussed below
have been derived from the consolidated financial statements and accounting
records of iVoice, and reflect significant assumptions and allocations. These
financial statements do not necessarily reflect the financial position, results
of operations and cash flows of Deep Field Technologies had it been a
stand-alone entity.
Deep Field Technologies seeks to leverage the value of underutilized
developed technology and believes that the transition to an independent company
will provide Deep Field Technologies with greater access to capital. This should
provide needed financial resources to potentially penetrate the market and
distribute the product. As such, Deep Field Technologies' business will be
formed from the contribution by iVoice of certain assets and related liabilities
on or about the effective date of the registration statement of which this
prospectus is a part. In connection with a reorganization of iVoice, immediately
prior to the Distribution, iVoice will transfer to Deep Field Technologies its
Unified Messaging software business and related liabilities, including all
intellectual property of iVoice relating to the Unified Messaging software
business. The board and management of iVoice has elected not to transfer any
part of the working cash balance of iVoice to Deep Field Technologies. Based
upon the current intention of Deep Field Technologies not to conduct any
research and development or hire additional employees and instead focus on the
sale of the existing Unified Messaging technology, the board has determined
that, on balance, Deep Field Technologies has the ability to satisfy its working
capital needs as a whole. The board and management of iVoice also determined
that Deep Field Technologies has the ability to obtain financing to satisfy any
addition working capital needs as a stand-alone company.
The emerging nature of the unified messaging industry and unforeseen
expenses from the separation from iVoice, make it difficult to assess the future
growth of Deep Field Technologies.
The Unified Messaging software business has operated at a loss in the past
for iVoice, and as an independent company such losses may continue or increase.
Additionally, Deep Field Technologies' business has relied on iVoice for
financial, administrative and managerial expertise in conducting its operations.
Following the Distribution, Deep Field Technologies will develop and maintain
its own credit and banking relationships and perform its own financial and
investor relations functions. Deep Field Technologies may not be able to
successfully put in place the financial, administrative and managerial structure
necessary to operate as an independent public company, and the development of
such structure will require a significant amount of management's time and other
resources.
Deep Field Technologies has received a going concern opinion from its
auditors. Its continuation as a going concern is dependent upon obtaining the
financing necessary to operate its business. Our financing needs are expected to
be provided, in large part, from the sale of Class A Common Stock to Cornell
Capital Partners pursuant to the terms of definitive documents executed pursuant
to the non-binding letter of intent Deep Field Technologies has received from
Cornell Capital. Such Class A Common Stock would then be sold to Cornell Capital
Partners at the discretion of the Company to fund working capital needs.
However, Cornell Capital Partners
28
is under no obligation to execute any definitive agreements with Deep Field
Technologies. Furthermore, Cornell Capital Partners is under no obligation to
purchase any shares of Class A Common Stock until the execution of the
definitive agreements, following which Cornell Capital Partners will be
obligated to purchase shares of Class A Common Stock only upon the satisfaction
of certain conditions being met by Deep Field Technologies, including completing
of the Distribution, listing our Class A Common Stock on the Over-the-Counter
Bulletin Board and having the registration statement relating to the Standby
Equity Distribution Agreement declared effective. See "-- Liquidity and Capital
Resources." If Cornell Capital Partners does not execute the definitive
agreements or Deep Field Technologies cannot satisfy the requirements for
Cornell Capital Partners to purchase the Class A Common Stock under the terms of
any definitive documents, we will not be able to obtain sufficient capital
resources to operate our business, and we have no current plans to obtain other
financing. We cannot assure you that we will be able to access any financing in
sufficient amounts or at all when needed. Our inability to obtain sufficient
financing would have an immediate material adverse effect on us, our financial
condition and our business.
Separation from iVoice
Deep Field Technologies was incorporated under the laws of the State of
New Jersey on November 10, 2004, as a wholly-owned subsidiary of iVoice. Deep
Field Technologies will have no material assets or activities until the
contribution of the IVR software business described in this prospectus. After
the Distribution, Deep Field Technologies will be an independent public company,
with iVoice having no continuing ownership interest in Deep Field Technologies.
Separation From iVoice
Deep Field Technologies was incorporated under the laws of the State of
New Jersey on November 10, 2004 as a wholly-owned subsidiary of iVoice. Deep
Field Technologies will have no material assets or activities until the
contribution of the Unified Messaging software business described in this
prospectus. After the Distribution, Deep Field Technologies will be an
independent public company, with iVoice having no continuing ownership interest
in Deep Field Technologies.
On November 11, 2004, Deep Field Technologies received by assignment all
of the interests in and rights and title to, and assumed all of the obligations
of, all of the agreements, contracts, understandings and other instruments of
iVoice Technology 2, Inc., a Nevada corporation and affiliate of Deep Field
Technologies. These agreements, contracts, understandings and other instruments
consisted of the documentation relating to the issuance of the secured
convertible debentures and the equity line of credit, the employment agreements
with Messrs. Mahoney and Meller and the administrative services agreement. Since
this assignment, iVoice Technology 2 has no operating business, assets or known
liabilities, and is currently in the process of being dissolved. When we refer
to or describe any agreement, contract or other written instrument of Deep Field
Technologies in this prospectus, we are referring to an agreement, contract or
other written instrument that had been entered into by iVoice Technology 2 and
assigned to Deep Field Technologies.
29
Deep Field Technologies' financial statements have been prepared in
accordance with accounting principles generally accepted in the United States,
and reflect the historical financial position, results of operations, and cash
flows of the business to be transferred to Deep Field Technologies from iVoice
as part of the Distribution. The financial information included in this
prospectus, however, is not necessarily indicative of what Deep Field
Technologies' results of operations or financial position would have been had it
operated as an independent company during the periods presented, nor is it
necessarily indicative of its future performance as an independent company.
Deep Field Technologies will operate the Unified Messaging software
business. This business has historically operated as a non-reportable segment of
iVoice due to its low sales volume and business activity relative to iVoice's
other business activities. Even if Deep Field Technologies was to operate the
Unified Messaging business on a stand alone basis, management is uncertain that
sufficient cash to sustain its operations will be generated in the next twelve
months, or beyond, by the sales activity of Unified Messaging. Deep Field
Technologies intends to use a portion of the proceeds from any financing
arrangements, on sales and marketing efforts for Unified Messaging. It is
unclear whether such efforts will result in a reasonably successful operating
business due to iVoice's previous lack of sales and marketing efforts on Unified
Messaging, Deep Field Technologies' lack of operating history, the current
economic environment and, more specifically, the uncertainty of the
telecommunications market.
Upon effectiveness of the registration statement of which this prospectus
is a part, Deep Field Technologies will be allocated the iVoice corporate
assets, liabilities and expenses related to the Unified Messaging software
business, including the Unified Messaging software and all intellectual property
of iVoice relating to the Unified Messaging software business and the assignment
of iVoice's existing agreements and arrangements with dealers and resellers.
This allocation of assets, liabilities and expenses will be based on an estimate
of the proportion of such amounts allocable to Deep Field Technologies,
utilizing such factors as total revenues, employee headcount and other relevant
factors. Deep Field Technologies believes that these allocations have been made
on a reasonable basis. Deep Field Technologies believes that all costs allocated
to Deep Field Technologies are a reasonable representation of the costs that
Deep Field Technologies would have incurred if Deep Field Technologies had
performed these functions as a stand-alone company.
In conjunction with the separation of the Unified Messaging software
business from iVoice, Deep Field Technologies entered into an administrative
services agreement with iVoice for the provision of certain services by iVoice
to Deep Field Technologies following the Distribution. This agreement will
continue on a month to month basis until Deep Field Technologies has found
replacement services for those services being provided by iVoice or can provide
these services for itself. See "Relationship Between iVoice and Deep Field
Technologies Following the Distribution" for a description of this
administrative services agreement. Following the termination of the
administrative services agreement, we expect that Deep Field Technologies will
operate on a completely stand-alone basis from iVoice and there will be no
business or operating relationship between iVoice and Deep Field Technologies.
Deep Field Technologies has no current intention to terminate the administrative
services agreement, seek replacement services or provide services for itself in
the near future.
30
iVoice announced in September 2004 its intention to distribute our shares
to its stockholders upon effectiveness of required Securities and Exchange
Commission filings, including the registration statement of which this
prospectus is a part.
Results of Operations for the Year Ended December 31, 2004 as Compared with the
Year Ended December 31, 2003
All revenues reported by Deep Field Technologies are derived from the sale
or license of our unified messaging systems, which store all messages in one
location for access, typically a groupware database with one single list of
users for e-mail, voice, telephones and computers. Total revenues for the years
ended December 31, 2004 and December 31, 2003 were $7,344 and $8,505,
respectively. The Unified Messaging business has only operated as a division of
iVoice and has never operated on a stand-alone basis. The low sales volume of
the Unified Messaging business is attributable to the minimal resources made
available by iVoice for the sales and marketing of the Unified Messaging
software products. Management feels that the sales of the Unified Messaging
software products may increase if greater financial and operational resources
are made available for the sales and marketing of the products. If Deep Field
Technologies can obtain funds under the equity line of credit, Deep Field
Technologies will be able to devote more resources to operating the business.
See " -- Liquidity and Capital Resources."
Gross margin for the years ended December 31, 2004 and December 31, 2003
was $4,992 (68.0%) and $5,058 (59.5%), respectively. The decrease in gross
margin percentage is a result of a change in the products and services mix being
sold. The net decrease in gross margin dollars is the result of reduced sales.
In an attempt to garner increased market share Deep Field Technologies also
offered demonstration units and other incentives to selected dealers and value
added resellers.
Total operating expenses increased to $125,738 for the year ended December
31, 2004 from $24,288 for the year ended December 31, 2003, an increase of
$101,450. This increase in the current year is attributable to accrued
professional and consulting fees in connection with financing the operation of
the business and the anticipated registration of shares of Deep Field
Technologies.
The loss from operations for the year ended December 31, 2004 was
$(120,746) compared to $(19,230) for the year ended December 31, 2003, an
increase of $101,516. As discussed above, this increase was attributable to
accrued professional and consulting fees in connection with financing the
operating of the business and the anticipated registration of shares of Deep
Field Technologies.
Other income (expenses) on the Statements of Operations for the year ended
December 31, 2004 were $73,515 as compared to $9,708 for the year ending
December 31, 2003, an increase of $63,807. During the year ended December 31,
2004, Deep Field Technologies recorded $77,953 of interest and financing costs.
Of these costs, $31,546 was attributed to allocations from iVoice for stock
issued and fees paid to Cornell Capital for initial and additional financing
arrangements during 2004 and $40,000 was paid to Cornell Capital for fees
related to the issuance of $400,000 of secured convertible debentures. Accrued
interest expense on such debentures was $5,014 in 2004. A portion of iVoice
interest expense was allocated to Deep
31
Field Technologies in 2004 and 2003 as a result of the funding for the loss from
operations. These amounts were $1,393 and $14,888 respectively. These costs were
offset by increases in other income of $2,272 related to the write-off of
certain accounts payable and $2,115 in interest income. In future periods, Deep
Field Technologies will incur additional interest expense on and additional fees
related to borrowings from the promissory note issued in replacement of the
convertible debentures and, if the equity line of credit is consummated, the
anticipated sale of shares to fund working capital needs. There is no assurance
that Deep Field Technologies will enter into the equity line of credit, or, if
it does obtain such line of credit, that it will be able to raise funds by
selling its common stock.
Results of Operations for the three months ending March 31, 2005 as Compared
with the three months ending March 31, 2004.
All revenues reported by Deep Field Technologies are derived from the sale
or license of our unified messaging systems, which store all messages in one
location for access, typically a groupware database with one single list of
users for e-mail, voice, telephones and computers. Total revenues for the three
months ended March 31, 2005 and March 31, 2004 were $112 and $2,852,
respectively. The Unified Messaging business has only operated as a division of
iVoice and has never operated on a stand-alone basis. The low sales volume of
the Unified Messaging business is attributable to the minimal resources made
available by iVoice for the sales and marketing of the Unified Messaging
software products. Management feels that the sales of the Unified Messaging
software products may increase if greater financial and operational resources
are made available for the sales and marketing of the products. If Deep Field
Technologies can obtain funds under the equity line of credit, Deep Field
Technologies will be able to devote more resources to operating the business.
See "Liquidity and Capital Resources."
Gross margin for the three months ended March 31, 2005 and March 31, 2004
was $112 (100.0%) and $1,714 (60.1%), respectively. The revenue in 2005 consists
solely of deferred maintenance and incurred no direct costs. The net decrease in
gross margin dollars is the result of reduced sales.
Total operating expenses increased to $62,876 for the three months ended
March 31, 2005 from $12,419 for the three months ended March 31, 2004, an
increase of $50,457. This increase in the current year is attributable to
accrued salaries per the employment agreements with Mr. Mahoney and Mr. Meller
and professional fees in connection with audit of the Deep Field results and the
preparation of the SEC filings.
The loss from continuing operations before other income (expense) for the
three months ended March 31, 2005 was $62,764 compared to $10,705 for the three
months ended March 31, 2004, an increase in the loss of $52,059. As discussed
above, this increase in the loss was attributable to the reduced gross profit
and increases in accrued salaries and professional fees.
Total other income (expense) for the three months ended March 31, 2005
were $14,633 as compared to $33,366 for the three months ending March 31, 2004,
an decrease of $18,733. During the three months ended March 31, 2005, Deep Field
Technologies recorded $5,343 of interest expense and $10,000 financing costs on
the issuance of $100,000 of secured convertible debentures. In the three months
ending March 31, 2004, iVoice, Inc allocated $33,971 for
32
financing costs, $240 for interest expenses and $845 for other income to Deep
Field Technologies. The allocated finance costs were for stock issued and fees
paid to Cornell Capital for initial and additional financing arrangements. The
allocated other income was primarily from interest earned on the cash accounts.
The allocated interest expense was for accrued interest on related party debts.
Net loss for the three months ending March 31, 2005 was $77,397 as
compared to a loss of $44,071 for the three months ending March 31, 2004. The
increase in net loss of $33,326 was the result of the factors discussed above.
Liquidity and Capital Resources
To date, Deep Field Technologies has incurred substantial losses, and will
require financing for working capital to meet its operating obligations. We
anticipate that we will require financing on an ongoing basis for the
foreseeable future.
If we execute definitive documentation and satisfy necessary conditions
under the equity line of credit described in our non-binding letter of
commitment with Cornell Capital Partners, we intend to sell shares of Class A
Common Stock as soon as possible following the completion of the Distribution in
order to generate capital necessary to sustain our operations. In the event
that, in the judgment of the Board of Directors, sufficient capital has not been
raised from the proceeds of such sales for Deep Field Technologies to both
sustain its business operations and to make payment to each of Mr. Mahoney and
Mr. Meller, Mr. Mahoney and Mr. Meller have agreed to accept shares of Deep
Field Technologies Class B Common Stock (on a dollar-per-share basis) in
satisfaction of certain of Deep Field Technologies' obligations under their
employment agreements.
In August 2004, the Company entered into an agreement with Sloan
Securities Corporation to as an agent for the private placement of secured
convertible debentures to Cornell Capital Partners, L.P. Under the placement
agent agreement, the Company agreed to issue to Sloan on or about the date of
effectiveness of the registration statement covering the Distribution, a number
of shares of Class A Common Stock to equal to $10,000 divided by the closing bid
price of the Class A Common Stock on the date of effectiveness of the
registration statement covering the Distribution. On August 12 and November 19,
2004, Deep Field Technologies issued an aggregate of $400,000 in secured
convertible debentures, with interest payable at 5% per annum, to Cornell
Capital Partners. On February 28, 2005, Deep Field Technologies' obligations
under the secured convertible debentures were terminated and replaced with a
secured promissory note of the same principal amount, which note accrues
interest at rate of 12% per annum, but is not convertible into any equity
security of Deep Field Technologies. On February 28, 2005, Deep Field
Technologies borrowed an additional $100,000 pursuant to such promissory note.
In connection with the issuances of the secured convertible debentures, Deep
Field Technologies paid a fee to Cornell Capital Partners equal to 10% of the
aggregate principal amount of the debentures. When the secured convertible
debentures were terminated, Deep Field Technologies received a credit for fees
that would otherwise have been payable upon the issuance of the $400,000 in
replacement notes. Deep Field Technologies paid Cornell Capital a fee of $10,000
in connection with its $100,000 borrowing. Deep Field Technologies' obligations
under the secured promissory note issued to Cornell
33
Capital Partners are secured by a first priority security interest in
substantially all of its assets. iVoice has also guaranteed the payment of all
amounts payable by Deep Field Technologies pursuant to the secured promissory
note.
Effective August 12, 2004, Deep Field Technologies entered into a Standby
Equity Distribution Agreement with Cornell Capital Partners to obtain an equity
line of credit. On February 28, 2005, Deep Field Technologies entered into a
Termination Agreement with Cornell Capital Partners, pursuant to which the
equity line transaction was terminated. On March 9, 2005, Deep Field
Technologies received a non-binding letter of intent from Cornell Capital
whereby Cornell Capital offered, subject to satisfaction of certain conditions,
to purchase shares of Deep Field Technologies' common stock upon the terms set
forth in the non-binding letter of intent and the definitive documentation to be
executed after satisfaction of those closing conditions. Pursuant to the terms
of the non-binding letter of intent, if the definitive documentation is
executed, Deep Field Technologies may, from time to time, issue and sell to
Cornell Capital Partners Class A Common Stock for a total purchase price of up
to $10.0 million. The purchase price for the shares would be equal to 95% of the
market price, which is defined as the lowest closing bid price of the Class A
Common Stock during the five trading days following the date that Deep Field
Technologies delivers to Cornell Capital Partners a notice requiring it to
advance funds to us. A cash fee equal to six percent (6%) of the cash proceeds
of the draw down would also be payable at the time of funding. In addition,
Cornell Capital Partners would receive, as additional compensation, the number
of shares of Class A Common Stock equal to one and one half percent (1.5%) of
the number of shares of Class A Common Stock outstanding on the date that a
registration statement in respect of the shares to be distributed pursuant to
the equity line of credit becomes effective.
However, Cornell Capital Partners is under no obligation to execute any
definitive agreements with Deep Field Technologies. Furthermore, Cornell Capital
Partners is under no obligation to purchase any shares of Class A Common Stock
until the execution of the definitive agreements, following which Cornell
Capital Partners will be obligated to purchase shares of Class A Common Stock
only upon the satisfaction of certain conditions being met by Deep Field
Technologies, including completing of the Distribution, listing our Class A
Common Stock on the Over-the-Counter Bulletin Board and having the registration
statement relating to the Standby Equity Distribution Agreement declared
effective. If Cornell Capital Partners does not execute definitive agreements or
Deep Field Technologies cannot satisfy the requirements for Cornell Capital
Partners to purchase the Class A Common Stock under the terms of the definitive
documents, we will not be able to obtain sufficient capital resources to operate
our business, and we have no current plans to obtain other financing. We cannot
assure you that we will be able to access any financing in sufficient amounts or
at all when needed. Our inability to obtain sufficient financing would have an
immediate material adverse effect on us, our financial condition and our
business. Management believes that its going-forward expenses for the twelve
months following the distribution will be approximately $240,000, which includes
salaries for Deep Field Technologies' officers and employees, and assuming Deep
Field Technologies has no revenues in such period, Deep Field Technologies
expects to incur cash expenditures, for the year ending December 31, 2005 of
approximately $240,000. Management has no current plan to hire additional
employees, perform additional research and development or purchase additional
equipment or services beyond the requirements of the administrative services
agreement with iVoice. Management believes that the deficiency between the
Company's expenses and net
34
revenues will be more than covered by the cash available from the proceeds of
the secured promissory note. If there are additional deficiencies that are in
excess of the proceeds of the secured promissory note, and Deep Field
Technologies is unable to obtain funds from the sale of Class A Common Stock to
Cornell Capital Partners, management believes that Deep Field Technologies can
limit its operations, defer payments to management and maintain its business at
nominal levels until it can identify alternative sources of capital.
Except for these two financing agreements, the Company has no other
significant sources of working capital or cash commitments. However, no
assurance can be given that Deep Field Technologies will enter into the equity
line of credit or raise sufficient funds from such financing arrangements, or
that Deep Field Technologies will ever produce sufficient revenues to sustain
its operations, or that a market will develop for its common stock for which a
significant amount of Deep Field Technologies' financing is dependent upon.
Upon the date of this prospectus, Deep Field Technologies will assume an
aggregate of $190,000 in liabilities from iVoice and iVoice will assign to Deep
Field Technologies assets having an aggregate book value of $3,000. See
"Selected Historical and Pro Forma Financial Information" contained in the
financial statements of Deep Field Technologies at the back of this prospectus.
Deep Field Technologies believes that the fair value of these assets may be
greater than the book value, although it has not undertaken an appraisal. The
assumed obligations are described below.
Deep Field Technologies has agreed to assume from iVoice upon the date of
this prospectus an outstanding promissory note in the amount of $190,000 payable
to Jerry Mahoney. This amount is related to funds that had been loaned to iVoice
in July 2000 that were used to develop the Unified Messaging software business.
The amount of $190,000 includes approximately $24,000 for interest on the
original loan from Jerry Mahoney to iVoice. Deep Field Technologies, for value
received, will promise to pay to Mr. Mahoney the principal sum of $190,000 that
will bear interest at the prime rate plus 2% per annum on the unpaid balance
until paid or until default. Interest payments will be due annually. All accrued
interest becomes due on the date of any payment of the promissory note. At the
time of default (if any) the interest rate shall increase to 20% until the
principal balance has been paid. Under the terms of the promissory note, at the
option of the note holder, principal and interest can be converted into either
(i) one share of Class B Common Stock of Deep Field Technologies, par value
$0.01, for each dollar owed, (ii) the number of shares of Class A Common Stock
of Deep Field Technologies calculated by dividing (x) the sum of the principal
and interest that the note holder has requested to have prepaid by (y) eighty
percent (80%) of the lowest issue price of Class A Common Stock since the first
advance of funds under this note, or (iii) payment of the principal of this
note, before any repayment of interest. Deep Field Technologies has yet to
record this liability on its financial statements, as the promissory note will
not be assumed by Deep Field Technologies until the effectiveness of the
registration statement.
Mr. Mahoney has agreed to forego receiving any shares of Deep Field
Technologies Class A Common Stock or Deep Field Technologies Class B Common
Stock he is or would be entitled to receive in the Distribution by virtue of his
ownership of either iVoice Class A Common Stock or iVoice Class B Common Stock.
35
Deep Field Technologies has entered into employment contracts with its
Non-Executive Chairman of the Board of Directors and its President, Chief
Executive Officer and Chief Financial Officer. As consideration, Deep Field
Technologies agreed to pay Mr. Mahoney the sum of $85,000 the first year with an
annual increase based on the Consumer Price Index every year thereafter.
However, when Deep Field Technologies achieves annual sales equal to or greater
than $2,000,000, Mr. Mahoney's base annual compensation will automatically be
increased to $145,000. Mr. Mahoney will also be entitled to incentive
compensation based upon acquisitions completed by Deep Field Technologies. The
employment agreement with Mr. Mahoney provides for a severance payment to him of
three hundred percent (300%), less $100, of his gross income for services
rendered to Deep Field Technologies in each of the five prior calendar years (or
shorter period during which Mr. Mahoney shall have been employed by Deep Field
Technologies) should his employment be terminated following a change in control,
as defined in the employment agreement.
Deep Field Technologies entered into an employment agreement with Mr.
Meller as of October 1, 2004. Mr. Meller will serve as Deep Field Technologies'
President, Chief Executive Officer and Chief Financial Officer for a term of
five years. As consideration, Deep Field Technologies agreed to pay Mr. Meller a
base salary of $85,000 the first year with an annual increase based on the
Consumer Price Index every year thereafter. However, when Deep Field
Technologies achieves annual sales equal to or greater than $2,000,000, Mr.
Meller's base annual salary will automatically be increased to $145,000. Mr.
Meller will also be entitled to incentive compensation based upon acquisitions
completed by Deep Field Technologies. The employment agreement with Mr. Meller
provides for a severance payment to him of three hundred percent (300%), less
$100, of his gross income for services rendered to Deep Field Technologies in
each of the five prior calendar years (or shorter period during which Mr. Meller
shall have been employed by Deep Field Technologies) should his employment be
terminated following a change in control, as defined in the employment
agreement. Mr. Meller shall also be paid the sum of $50,000 upon the completion
of the Distribution. Mr. Meller has agreed to forego receipt of the $50,000
until such time that management believes it has sufficient financing in place to
fund this obligation.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of
operations are based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America (GAAP). The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate these estimates, including
those related to bad debts, inventory obsolescence, intangible assets, payroll
tax obligations, and litigation. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of certain assets and liabilities. Actual results may differ
from these estimates under different assumptions or conditions.
We have identified below the accounting policies, revenue recognition and
software costs, related to what we believe are most critical to our business
operations and are discussed
36
throughout Management's Discussion and Analysis of Financial Condition and
Results of Operations where such policies affect our reported and expected
financial results.
Revenue Recognition
With respect to the sale of software license fees, the Company recognizes
revenue in accordance with Statement of Position 97-2, Software Revenue
Recognition (SOP 97-2), as amended, and generally recognizes revenue when all of
the following criteria are met: (1) persuasive evidence of an arrangement exists
generally evidenced by a signed, written purchase order from the customer, (2)
delivery of the software product on Compact Disk (CD) or other means to the
customer has occurred, (3) the perpetual license fee is fixed or determinable
and (4) collectibility, which is assessed on a customer-by-customer basis, is
probable.
With respect to customer support services, upon the completion of one year
from the date of sale, the Company offers customers an optional annual software
maintenance and support agreement for subsequent one-year periods. Sales of
purchased maintenance and support agreements are recorded as deferred revenues
and recognized over the respective terms of the agreements.
The Company derives its revenues from the licensing of its software
product and optional customer support (maintenance) services. Presently, 100% of
the revenues reported by the Company are derived from the licensing of the
Company's Unified Messaging software. No revenues have been derived from the
sale of optional customer support services. The Company's standard license
agreement provides for a one-time fee for use of the Company's product in
perpetuity for each computer or CPU in which the software will reside. The
Company's software application is fully functional upon delivery and
implementation and does not require any significant modification or alteration.
The Company also offers customers an optional annual software maintenance and
support agreement for the subsequent one-year periods. Such maintenance and
support services are free for the first year the product is licensed. The
software maintenance and support agreement provides free software updates, if
any, and technical support the customer may need in deploying or changing the
configuration of the software. Generally, the Company does not license its
software in multiple element arrangements whereby the customer purchases a
combination of software and maintenance. In a typical arrangement, software
maintenance services are sold separately from the software product; are not
considered essential to the functionality of the software and are purchased at
the customer's option upon the completion of the first year licensed.
The Company does not offer any special payment terms or significant
discount pricing. Normal and customary payment terms require payment for the
software license fees when the product is shipped. Payment for software
maintenance is due prior to the commencement of the maintenance period. It is
also the Company's policy not to provide direct customers (as opposed to
resellers and dealers) the right to refund any portion of its license fees. The
Company accepts Visa and MasterCard as well as company checks.
Customers may license the Company's products through our telesales
organization and through promotions or reseller agreements with independent
third parties. Deep Field Technologies only permits returns from authorized
dealers and resellers of unused inventory,
37
subject to the consent of the Company and a twenty-five percent restocking fee.
End users who purchase products directly from Deep Field Technologies may not
return such products to Deep Field Technologies under any circumstances.
Accordingly, the Company records a provision for product returns and allowances
against product revenue in the same period the revenue is recorded. The
estimates are based on historical sales returns and other known data as well as
market and economic conditions.
Our current products are not sold through retail distribution channels.
Current reseller agreements provide for a limited contractual right of return
and do not provide for future price concessions, minimum inventory commitments
nor is payment contingent upon the reseller's future sales or our products.
Revenues generated from products licensed through marketing channels where the
right of return exists, explicitly or implicitly, is reduced by reserves for
estimated product returns. Such reserves are estimates based on returns history
and current economic and market trends.
Software Costs
Software license costs are recorded at cost, which approximates fair
market value as of the date of purchase. These costs represent the purchase of
various exploitation rights to certain software, pre-developed codes and systems
developed by a non-related third party. These costs are capitalized pursuant to
Statement of Financial Accounting Standards ("SFAS") 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed". The
Company has adopted SFAS No. 121. The carrying value of software license costs
are regularly reviewed by the Company and a loss would be recognized if the
value of the estimated undiscounted cash flow benefit related to the asset falls
below the unamortized cost. The Company develops software for licensing to its
customers and capitalizes software development costs when technological
feasibility has been established. Software development costs not qualifying for
capitalization are expensed and classified as research and development expenses
in the statements of operations. Research and development expenses and the
capitalization rate will fluctuate from period to period depending upon the
number and status of software development projects that are in process and the
related number of people assigned to those projects.
Purchased software and capitalized software development costs are
amortized using the greater of the revenue method or the straight-line method
with useful lives ranging from three to five years. Amortization expense is
classified in costs of revenue on the statements of operations. Our products
operate on or with other third party software and operating systems. When
determining the useful life of a product we consider factors such as the current
state of the technology, operating systems on which our products run,
competitive products and the potential use of our products by the end user.
Technological advances in software operating systems and other software
technologies on which our products rely may shorten the expected life cycle of
our products. We make an assessment of the useful lives of our products at each
balance sheet date. If that assessment determines that a shortened product life
has occurred, we amortize the remaining unamortized balances over the new
estimated useful life of the product and provide disclosure regarding a change
in estimate in the notes to the financial statements pursuant to Accounting
Principles Board Opinion No. 20 "Accounting Changes."
38
The Company evaluates the estimated net realizable value of each software
product at each balance sheet date. The estimate is based on historical and
forecasted net revenue for each product. Net revenue is the product revenue
reduced by the estimated costs of revenue and, if in development, the estimated
cost to complete the development of the product. When the net book value exceeds
the estimate of net realizable value, the Company records a write-down to net
realizable value on each product affected. Management's ability to achieve its
revenue forecast is subject to judgment, competitive pressures, market and
economic conditions and management's ability to successfully license its
products to its customers. A change in one or more of these factors may
influence management's estimates. Accordingly, currently estimated net
realizable values are subject to being reduced resulting in corresponding
charges for impairment in the future.
In January 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46"), which requires
variable interest entities to be consolidated by the primary beneficiary of the
entity if certain criteria are met. FIN 46 is effective for all new variable
interest entities created after January 31, 2003. For variable interest entities
created or acquired before February 1, 2003, the provisions of FIN 46 become
effective for the Company on September 1, 2003. The Company does not expect that
the adoption of FIN 46 will have a material impact on its financial position,
results of operations or cash flows.
In April, 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities." This statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." Except
as noted below, the Company is required to adopt this statement by the first
quarter of the fiscal year, 2004. Certain provisions of this statement relating
to SFAS No. 133 implementation issues that have been effective for prior fiscal
quarters will continue to be applied in accordance with their respective
effective dates. The Company does not expect that the adoption of SFAS No. 149
will have a material impact on its financial position, results of operations or
cash flows.
In May, 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 establishes standards for classification and measurement of certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 is effective for the Company on September 1, 2003. The Company does not
expect that the adoption of SFAS No. 150 will have a material impact on the
Company's financial position, results of operations or cash flows.
OUR BUSINESS
Background
Deep Field Technologies, Inc. (the "Company") was incorporated in New
Jersey on November 10, 2004 as a wholly-owned subsidiary of iVoice, Inc. It is
engaged in the design, manufacture, and marketing of specialized
telecommunication equipment. As of December 31, 2004, the Company employed no
full-time employees and two part-time employees. Following the Distribution,
Deep Field Technologies may seek to expand its operations through additional
39
sales and marketing activity and the acquisition of additional businesses. Any
potential acquired additional businesses may be outside the current field of
operations of Deep Field Technologies. Deep Field Technologies may not be able
to identify, successfully integrate or profitably manage any such businesses or
operations. Currently, Deep Field Technologies has no plans, proposals or
arrangements, either orally or in writing, regarding any proposed acquisitions
and is not considering any potential acquisitions
The following description of our business is intended to provide an
understanding of our product and the direction of our initial marketing
strategy. As the Company is in its developmental stages, any focus described in
the following pages may change and different initiatives may be pursued, at the
discretion of Management.
Products
Our flagship product is the Unified Messaging software, which enables
users to access e-mail, voice mail, facsimiles and paging messages in a single
session at a personal computer. The system displays a listing of all of the
user's messages and enables the user to access and control all of his or her
messages with a click of the computer mouse.
Unified Messaging technology provides the power to reach people almost
anywhere, at any time, and the flexibility to allow people to control when they
can be reached. This is based on a concept of "your time" communications where
subscribers can interface with messages when and how they want. With Unified
Messaging, subscribers reduce the number of places they must check for incoming
voice, fax and e-mail messages. From a single interface, they can check for all
message types.
Our Unified Messaging product serves small to medium-sized organizations,
and is designed to support from four to 32 ports. Unified Messaging provides LAN
integration and close integration with other application servers. The Unified
Messaging platform comes complete with analog and digital networking, allowing
communication between geographically dispersed offices. In addition to the
Unified Messaging interface from a desktop PC, laptop computer or a telephone,
Unified Messaging also provides desktop call management capabilities for
individuals and small workgroups. The Unified Messaging products run on
off-the-shelf server hardware and Microsoft Windows-based server operating
systems and interface with a wide variety of telephony and computer equipment.
Distribution
As a product line of iVoice, Inc., Unified Messaging has produced minimal
sales revenues for the past three fiscal years. In the past, iVoice devoted
limited resources to the marketing of Unified Messaging. The Company's future
revenues depend on its ability to develop a customer base through the
establishment of a reseller channel using various marketing and sales
promotions.
Deep Field Technologies intends to market its products directly, with a
sales force, and through a nationwide network of independent telephone system
dealers, strategic partners and domestic re-sellers. Deep Field Technologies
intends to enter into arrangements with resellers to broaden distribution
channels and to increase its sales penetration to specific markets and
40
industries. Distributors will be selected based on their access to the markets,
industries and customers that are candidates for the products.
Competition
The Company competes generally with a number of other manufacturers of
supplemental telecommunications software, telecommunications integrators, as
well as application service providers (ASPs), which provide Unified Messaging
software to other businesses and organizations either through internet servers
or telecommunication servers. System design and engineering, application
technical features, built-in speech recognition capabilities and simplicity of
user implementation and administration are the principal characteristics of our
Unified Messaging software that differentiates it from competing products.
The Unified Messaging market is fragmented and highly competitive. The
Company's major competitors in this market are Lucent Technologies Inc., Nortel
Networks Limited, Siemens Business Communications Systems, Inc., BayPoint
Innovations, Comverse Technology, Inc., ActiveVoice LLC and AVT Corporation. The
principal competitive factors in this market include product pricing and
quality, systems features, ease of use and installation, technical and sales
support and product reliability. The Company believes that its product line of
solutions, combined with its professional and technical services and its
extensive customer base, allow it to compete favorably in this market. However,
this market has endured intense price competition and pressure on margins in the
past few years and has experienced several new market entrants and
consolidations of smaller competitors into larger entities.
No assurance can be given that our competitors will not develop new
technologies or enhancements to their existing products or introduce new
products that will offer superior price or performance features. We expect our
competitors to offer new and existing products at prices necessary to gain or
retain market share. Certain of our competitors have substantial financial
resources, which may enable them to withstand sustained price competition or a
market downturn better than us. There can be no assurance that we will be able
to compete successfully in the pricing of our products, or otherwise, in the
future.
Deep Field Technologies' product strategy emphasizes the development of
software as opposed to hardware, and the use of standard PC-related hardware
components in its products, in part to limit its manufacturing activity. Deep
Field Technologies' manufacturing operations consist primarily of final assembly
and quality control testing of materials, subassemblies and systems. Deep Field
Technologies does not manufacture or perform significant modifications on any
hardware components, and is therefore dependent upon third-party manufacturers
or vendors of certain critical hardware components such as PCs and voice boards.
Deep Field Technologies' products incorporate a number of commercially
available application cards, voice boards, and other circuitboards that enable
integration with certain telephone systems. Voice boards are available in
quantity from very few domestic suppliers.
The business of the Company is not seasonal. The Company maintains no
special arrangements relating to working capital items, and as far as it is
aware this is standard in the industry. The Company is not subject to
environmental protection regulations during the
41
foreseeable future. The Company has spent nothing on research and development in
the last three fiscal years. None of Deep Field Technologies' present business
is subject to renegotiation of profits or termination of contracts or
subcontracts at the election of the government.
Product Development
Deep Field Technologies considers its current products to be competitive
with products offered by others in its industry segment. It does not foresee
spending any significant capital on new product development in the foreseeable
future.
To date, Deep Field Technologies has experienced significant post-release
errors and bugs in its products. There can be no assurance that any of these
problems will be avoided in the future, particularly as its products become more
complex and sophisticated.
Business Development
Business development objectives at Deep Field Technologies will be to
focus on three primary functions as listed below:
1. Negotiate and secure a nationwide network of independent telephone
systems dealers and reseller accounts;
2. Negotiate, secure and manage strategic alliances with various
manufacturers of telephone systems and business equipment; and
3. Provide leads for a sales staff which will need to be hired.
Dealer and Reseller Relationships
While we have traditionally sold our product primarily on a direct basis,
we will seek to obtain relationships with independent telephone systems dealers
and resellers that will serve as an extension of our sales team which has yet to
be hired. We will seek to develop relationships with related telecommunications
businesses and professional organizations in order to develop co-marketing
programs that will expand market share for our products and develop brand
recognition. In addition, we hope to enter into agreements with various
resellers who have the marketing capability and technical expertise to
effectively sell our products. We have not entered into any relationships with
any dealers or resellers, nor are we currently negotiating any such
relationships.
Strategic Alliances
Deep Field Technologies' business development efforts will seek to engage
and secure strategic alliances with various manufacturers of telephone systems
and business equipment. By entering into strategic alliances with companies that
offer telecommunications devices or services to businesses or professional
organizations, we will seek to obtain access to an installed customer base as
well as new sales opportunities of our products. Ideally, a strategic alliance
that provides distribution of our software product along with the manufacturer's
own telecommunication equipment could produce the most widespread distribution
and acceptance of
42
our product at minimal distribution costs. In addition, many of these
manufacturers may have extensive and established reseller channels that could
provide an alternative avenue of distribution for our software. We have not
entered into any strategic alliances, nor are we currently negotiating any such
strategic alliances.
Sales and Marketing
Deep Field Technologies intends to market its products directly and
through a nationwide network of independent telephone system dealers, strategic
partners and domestic re-sellers. Deep Field Technologies intends to enter into
arrangements with resellers to broaden distribution channels and to increase its
sales penetration to specific markets and industries. Distributors will be
selected based on their access to the markets, industries and customers that are
candidates for the products.
The Company is actively seeking strategic relationships with companies to
build its developing partner program. The partner program will be built by
establishing relationships in basic areas consisting of software and technology
solution partners and system integration partners. These relationships will
enhance the Company's technological strength, improve its market position,
facilitate shorter time-to-market, enhance its ability to deliver end-to-end
solutions, and broaden its market coverage.
Developing market possibilities will be crucial to our success. However,
we cannot provide any assurance that we will be able to effectively market and
sell our products for these uses or that they will be accepted by our perceived
market.
Intellectual Property Rights
We regard some features of our Unified Messaging software and
documentation to be proprietary intellectual property. We have been and will be
dependent in part on our ability to protect our proprietary technology. We will
seek to use copyright, trademarks, trade secret laws, confidentiality agreements
and other measures if necessary to establish and protect our rights in our
proprietary technology. We have not filed any provisional patent applications
with respect to some of our application and intellectual property rights. If we
were to file for any patent or copyright protection, we cannot be certain that
others will not develop substantially equivalent or superseding proprietary
technology before any patent or copyright protection is awarded to us. Any
provisional patent application requires that we file one or more non-provisional
patent applications within 12 months from the date of filing to specify the
claims asserted for patent protection. Furthermore, there can be no assurance
that any confidentiality agreements between our employees and us will provide
meaningful protection of our proprietary information in the event of any
unauthorized use or disclosure of such proprietary information.
There can be no assurance that we will not become the subject of claims of
infringement with respect to intellectual property rights associated with our
products. In addition, we may initiate claims or litigation against third
parties for infringement of our proprietary rights or to establish the validity
of our proprietary rights. Any such claims could be time consuming and could
result in costly litigation or lead us to enter into royalty or licensing
agreements rather than disputing the merits of such claims.
43
Employees
As of December 31, 2004, we had no full-time employees and two part-time
employees. Mr. Meller was hired as our President, Chief Executive Officer and
Chief Financial Officer as of October 1, 2004. We have entered into employment
agreements with our President, Chief Executive Officer and Chief Financial
Officer (Mr. Meller) and our Chairman of the Board (Mr. Mahoney). Mr. Mahoney
and Mr. Meller will only provide services to Deep Field Technologies on a
part-time basis. Many services that would be provided by employees are currently
being provided to Deep Field Technologies by iVoice under the administrative
services agreement. We do not currently have any plans to hire additional
personnel and we expect our current officers and employees to continue to
fulfill orders for Deep Field Technologies' products received by telephone and
over the internet. However, if Deep Field Technologies can obtain funds under
the equity line of credit, Deep Field Technologies will be able to devote more
resources to expanding its personnel and we expect our current officers and
employee to continue to fulfill orders received by telephone and the internet
for Deep Field Technologies' products. See " Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
Within the industry, competition for key technical and management
personnel is intense, and there can be no assurance that we can retain our
future key technical and managerial employees or that, should we seek to add or
replace key personnel, we can assimilate or retain other highly qualified
technical and managerial personnel in the future.
Government Regulation
We are subject to licensing and regulation by a number of authorities in
the state and municipality in which we conduct operations. These may include
health, safety, and fire regulations. Our operations are also subject to federal
and state minimum wage laws governing such matters as working conditions and
overtime.
We are not subject to any necessary government approval or license
requirement in order to market, distribute or sell our principal or related
products other than ordinary federal, state, and local laws that govern the
conduct of business in general.
Legal Proceedings
Deep Field Technologies is not party to any material legal proceedings,
nor to the knowledge of Deep Field Technologies, is any such proceeding
threatened against it.
Properties
We do not own any real property. We currently co-occupy the same space as
iVoice and are subleasing from iVoice some of the office space located at 750
Highway 34, Matawan, New Jersey. The rent payment for the sublease is currently
included in the administrative services agreement. Following the Distribution,
we intend to continue subleasing such space pursuant to the administrative
services agreement and anticipate no relocation of our offices in the
foreseeable future.
44
DEEP FIELD TECHNOLOGIES' MANAGEMENT
Deep Field Technologies initially intends to have a board of directors
that will consist of two directors. Listed below is certain information
concerning individuals who are expected to serve as directors and executive
officers of Deep Field Technologies following the Distribution. Mr. Mahoney is
currently a director of iVoice and we anticipate that Mr. Mahoney will remain a
director of both iVoice and Deep Field Technologies following the Distribution.
Position with Director Term
Name Age Deep Field Technologies, Inc. since Expires
---- --- ----------------------------- ----- -------
Jerome R. Mahoney 43 Non-Executive Chairman of the 2004 2005
Board
Mark Meller 45 Director, President, Chief 2004 2005
Executive Officer and Chief
Financial Officer
Jerome R. Mahoney. Mr. Mahoney is Deep Field Technologies' Chairman of the
Board. He has been a director of iVoice since May 21, 1999. Mr. Mahoney is also
the Chairman of the Board of Trey Resources, Inc. and has been a director of
Trey Resources since January 1, 2002. He is also the Chairman of the Board of
iVoice Technology, Inc. and SpeechSwitch, Inc. and has been a director of iVoice
Technology and SpeechSwitch since August 2004. Mr. Mahoney started at Executone
Information Systems, a telephone systems manufacturer, and was Director of
National Accounts from 1988 to 1989. In 1989, Mr. Mahoney founded Voice Express,
Inc., a New York company that sold voicemail systems and telephone system
service contracts and installed these systems. Mr. Mahoney sold Voice Express
Systems in 1993. From 1993 to 1997, Mr. Mahoney was President of IVS Corp., and
on December 17, 1997, he established International Voice Technologies, with
which iVoice merged on May 21, 1999. Mr. Mahoney received a B.A. in finance and
marketing from Fairleigh Dickinson University, Rutherford, N.J. in 1983.
Mark Meller. Mr. Meller has been Deep Field Technologies' President, Chief
Executive Officer and Chief Financial Officer and a director since October 1,
2004. Mr. Meller has also been the President, Chief Executive Officer and Chief
Financial Officer of Trey Resources and a director of Trey Resources since
September 2003. Since 1988, Mr. Meller has been Chief Executive Officer of
Bristol Townsend & Co., Inc., a New Jersey-based consulting firm providing
merger and acquisition advisory services to middle market companies. From 1986
to 1988, Mr. Meller was Vice President of Corporate Finance and General Counsel
of Crown Capital Group, Inc., a New Jersey-based consulting firm providing
advisory services for middle market leveraged buy-outs (LBO's). Prior to 1986,
Mr. Meller was a financial consultant and practiced law in New York City. He is
a member of the New York State Bar.
Compensation of Executive Officers
The following table sets forth compensation information for services
rendered by certain of our executive officers in all capacities during the last
three completed fiscal years. The following information includes the dollar
value of base salaries, bonus awards, the number of stock options granted, and
certain other compensation, if any, whether paid or deferred.
45
Summary Compensation Table
Other Securities All Other
Name and Annual Restricted Underlying Compensation
Position(s) Year Salary($) Bonus Compensation Stock Options
Jerome R.
Mahoney(1)
Chairman of the 2004 $21,250 $0 $0 $0 $0 $0
Board
2003 $0 $0 $0 $0 $0 $0
2002 $0 $0 $0 $0 $0 $0
Mark Meller (2) 2004 $21,250 $0 $0 $0 $0 $0
President, Chief 2003 $0 $0 $0 $0 $0 $0
Executive
Officer and 2002 $0 $0 $0 $0 $0 $0
Chief Financial
Officer
(1) Mr. Mahoney has been serving as our Chairman of the Board since August 3,
2004. Mr. Mahoney's salary is accrued and unpaid.
(2) Mr. Meller has been serving as our President, Chief Executive Officer and
Chief Financial Officer since October 1, 2004. Mr. Meller's salary is
accrued and unpaid.
Aggregate Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired on Value Options/SARs at Options/SARs at
Exercise Realized FY-End (#) FY-End ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- --- --- ------------------------- -------------------------
None 0 0 0 0 / 0
Employment Agreements
Jerome Mahoney
Deep Field Technologies entered into a five-year employment agreement with
Mr. Mahoney as of August 3, 2004. Mr. Mahoney will serve as Deep Field
Technologies' Non-Executive Chairman of the Board for a term of five years. As
consideration, Deep Field Technologies agreed to pay Mr. Mahoney the sum of
$85,000 the first year with an annual increase based on the Consumer Price Index
every year thereafter. However, when Deep Field Technologies achieves annual
sales equal to or greater than $2,000,000, Mr. Mahoney's base annual
compensation will automatically be increased to $145,000. Deep Field
Technologies also agreed to pay Mr. Mahoney a bonus for each merger or
acquisition completed by the Company equal to six percent (6%) of the gross
consideration paid or received by Deep Field Technologies in a merger or
acquisition completed by the Company during the term of the agreement. This
bonus would be payable in the form of cash, debt or shares of Class B Common
Stock at the option of Mr. Mahoney.
In the event Mr. Mahoney's employment agreement is terminated by Deep
Field Technologies for cause or due to Mr. Mahoney's disability or retirement,
Deep Field
46
Technologies will pay him his full base salary for five years from
the date of termination at the highest salary level under the agreement. Under
his agreement, "cause" means (1) the willful and continued failure of Mr.
Mahoney to substantially perform his duties to the Company after written demand
for such performance is delivered to Mr. Mahoney by the Company's board of
directors, (2) the willful engaging by Mr. Mahoney in conduct that is
demonstrably and materially injurious to the Company, monetarily or otherwise,
(3) the conviction of Mr. Mahoney of a felony, which is limited solely to a
crime that relates to the business operations of the Company or that results in
his being unable to substantially carry out his duties as set forth in the
agreement, or (4) the commission of any act by Mr. Mahoney against the Company
that may be construed as embezzlement, larceny, and/or grand larceny. However,
Mr. Mahoney will not be deemed to have been terminated for cause unless the
board of directors determines, by a vote of at least 75% of the members of the
board of directors that Mr. Mahoney was guilty of conduct described in items
(1), (2) or (4) above. As the board of directors consists solely of Mr. Mahoney
and Mr. Meller, Mr. Mahoney, pursuant to his employment agreement, would be
required to recuse himself from any discussions or vote regarding any potential
termination. Mr. Meller would be required to determine if Mr. Mahoney should be
terminated for cause.
In the event Mr. Mahoney's employment agreement is terminated due to Mr.
Mahoney's death, Deep Field Technologies will pay to his estate his full base
salary for eight years from the date of termination at the highest salary level
under the agreement. In the event Mr. Mahoney's employment agreement is
terminated by Deep Field Technologies within three years following a change in
control, as defined in the employment agreement, or by Mr. Mahoney for good
reason within three years following a change in control, Mr. Mahoney will be
entitled to receive a severance payment equal to three hundred percent (300%),
less $100, of his gross income for services rendered to Deep Field Technologies
in each of the five prior calendar years (or shorter period during which Mr.
Mahoney shall have been employed by Deep Field Technologies). Under his
employment agreement, "good reason" means, among other things, (1) any
limitation on Mr. Mahoney's powers as Chairman of the Board, (2) a reduction in
compensation, (3) a relocation of the Company outside New Jersey or (4) the
failure of the Company to make any required payments under the agreement. The
employment agreement restricts Mr. Mahoney from competing with Deep Field
Technologies during the term of the agreement and for one year after he is no
longer employed by the Company; provided that Mr. Mahoney is receiving severance
or other compensation from the Company pursuant to the employment agreement for
at least one year.
Mark Meller
Deep Field Technologies entered into a five-year employment agreement with
Mr. Meller as of October 1, 2004. Mr. Meller will serve as Deep Field
Technologies' President, Chief Executive Officer and Chief Financial Officer for
a term of five years. As consideration, Deep Field Technologies agreed to pay
Mr. Meller the sum of $85,000 the first year with an annual increase based on
the Consumer Price Index every year thereafter. However, when Deep Field
Technologies achieves annual sales equal to or greater than $2,000,000, Mr.
Meller's base annual salary will automatically be increased to $145,000. Deep
Field Technologies also agreed to pay Mr. Meller a bonus for each merger or
acquisition completed by the Company equal to six percent (6%) of the gross
consideration paid or received by Deep Field Technologies, net of any debt or
other liabilities assumed by the Company, in a merger or acquisition completed
by the
47
Company during the term of the agreement. This bonus would be payable in
the form of cash, debt or shares of Class B Common Stock at the option of Mr.
Meller.
In the event Mr. Meller's employment agreement is terminated by Deep Field
Technologies for cause or due to Mr. Meller's disability or retirement, Deep
Field Technologies will pay him his full base salary for five years from the
date of termination at the highest salary level under the agreement. Under his
agreement, "cause" means (1) the willful and continued failure of Mr. Meller to
substantially perform his duties to the Company after written demand for such
performance is delivered to Mr. Meller by the Company's board of directors, (2)
the willful engaging by Mr. Meller in conduct that is demonstrably and
materially injurious to the Company, monetarily or otherwise, (3) the conviction
of Mr. Meller of a felony, which is limited solely to a crime that relates to
the business operations of the Company or that results in his being unable to
substantially carry out his duties as set forth in the agreement, or (4) the
commission of any act by Mr. Meller against the Company that may be construed as
embezzlement, larceny, and/or grand larceny. However, Mr. Meller will not be
deemed to have been terminated for cause unless the board of directors
determines, by a vote of at least 75% of the members of the board of directors
that Mr. Meller was guilty of conduct described in items (1), (2) or (4) above.
As the board of directors consists solely of Mr. Mahoney and Mr. Meller, Mr.
Meller, pursuant to his employment agreement, would be required to recuse
himself from any discussions or vote regarding any potential termination. Mr.
Mahoney would be required to determine if Mr. Meller should be terminated for
cause.
In the event Mr. Meller's employment agreement is terminated due to Mr.
Meller's death, Deep Field Technologies will pay to his estate his full base
salary for eight years from the date of termination at the highest salary level
under the agreement. In the event Mr. Meller's employment agreement is
terminated by Deep Field Technologies within three years following a change in
control, as defined in the employment agreement, or by Mr. Meller for good
reason within three years following a change in control, Mr. Meller will be
entitled to receive a severance payment equal to three hundred percent (300%),
less $100, of his gross income for services rendered to Deep Field Technologies
in each of the five prior calendar years (or shorter period during which Mr.
Meller shall have been employed by Deep Field Technologies). Under his
employment agreement, "good reason" means, among other things, (1) any
limitation on Mr. Meller's powers as Chief Executive Officer, President and
Chief Financial Officer, (2) a reduction in compensation, (3) a relocation of
the Company outside New Jersey or (4) the failure of the Company to make any
required payments under the agreement. The employment agreement restricts Mr.
Meller from competing with Deep Field Technologies during the term of the
agreement and for one year after he is no longer employed by the Company;
provided that Mr. Meller is receiving severance or other compensation from the
Company pursuant to the employment agreement for at least one year.
Mr. Meller shall also be paid the sum of $50,000 upon the completion of
the Distribution. Mr. Meller has agreed to forego receipt of the $50,000 until
such time that management believes it has sufficient financing in place to fund
this obligation.
In addition, Mr. Meller has granted an irrevocable proxy to Jerome Mahoney
(or his designee) to vote and exercise all voting and related rights with
respect to the following shares that are owned at any time by Mr. Meller of: (i)
the Company's Class B Common Stock or (ii)
48
the Class A Common Stock that are issued to Mr. Meller upon the conversion of
any of his Class B Common Stock. The irrevocable proxy is terminable only upon
the written consent of Jerome Mahoney.
Equity Compensation Plans
There are no existing equity compensation plans and Deep Field
Technologies has no current plans, proposals or arrangements to establish, or
provide any awards under, any such equity compensation plans.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 12 and November 19, 2004, Deep Field Technologies issued an
aggregate of $400,000 in secured convertible debentures, with interest payable
at 5% per annum, to Cornell Capital Partners L.P. The debentures were intended
to be convertible at the option of the holder only after our Class A Common
Stock has commenced trading on the Over-the-Counter Bulletin Board. On February
28, 2005, Deep Field Technologies' obligations under the secured convertible
debentures were terminated and replaced with a secured promissory note of the
same principal amount, which note accrues interest at rate of 12% per annum, but
is not convertible into any equity security of Deep Field Technologies. On
February 28, 2005, Deep Field Technologies borrowed an additional $100,000
pursuant to the promissory note payable to Cornell Capital Partners. In
connection with the issuances of the secured convertible debentures, Deep Field
Technologies paid a fee to Cornell Capital Partners equal to 10% of the
aggregate principal amount of the debentures. When the secured convertible
debentures were terminated, Deep Field Technologies received a credit for fees
that would otherwise have been payable upon the issuance of the $400,000 in
replacement notes. Deep Field Technologies paid Cornell Capital a fee of $10,000
in connection with its $100,000 borrowing. Deep Field Technologies' obligations
under the secured promissory note issued to Cornell Capital Partners are secured
by a first priority security interest in substantially all of its assets. iVoice
has also guaranteed the payment of all amounts payable by Deep Field
Technologies pursuant to the secured promissory note.
Effective August 12, 2004, Deep Field Technologies entered into a Standby
Equity Distribution Agreement with Cornell Capital Partners to obtain an equity
line of credit. On February 28, 2005, Deep Field Technologies entered into a
Termination Agreement with Cornell Capital Partners, pursuant to which the
equity line transaction was terminated. On March 9, 2005, Deep Field
Technologies received a non-binding letter of intent from Cornell Capital
whereby Cornell Capital offered, subject to satisfaction of certain conditions,
to purchase shares of Deep Field Technologies' common stock upon the terms set
forth in the non-binding letter of intent and the definitive documentation to be
executed after satisfaction of closing conditions. Pursuant to the terms of the
non-binding letter of intent, if the definitive documentation is executed, Deep
Field Technologies may then issue and sell to Cornell Capital Partners Class A
Common Stock for a total purchase price of up to $10.0 million. The purchase
price for the shares would be equal to 95% of the market price, which is defined
as the lowest closing bid price of the Class A Common Stock during the five
trading days following the date that Deep Field Technologies delivers to Cornell
Capital Partners a notice requiring it to advance funds to us. A cash fee equal
to six percent (6%) of the cash proceeds of the draw down would also be
49
payable at the time of funding. In addition, Cornell Capital Partners would
receive, as additional compensation, the number of shares of Class A Common
Stock equal to one and one half percent (1.5%) of the number of shares of Class
A Common Stock outstanding on the date that the registration statement in
respect of the shares to be distributed pursuant to the equity line of credit
becomes effective.
However, Cornell Capital Partners is under no obligation to execute any
definitive agreements with Deep Field Technologies. Furthermore, Cornell Capital
Partners is under no obligation to purchase any shares of Class A Common Stock
until the execution of the definitive agreements, following which Cornell
Capital Partners will be obligated to purchase shares of Class A Common Stock
only upon the satisfaction of certain conditions being met by Deep Field
Technologies, including completing of the Distribution, listing our Class A
Common Stock on the Over-the-Counter Bulletin Board and having the registration
statement relating to the Standby Equity Distribution Agreement declared
effective. If Cornell Capital Partners does not execute the definitive
agreements or Deep Field Technologies cannot satisfy the requirements for
Cornell Capital Partners to purchase the Class A Common Stock under the terms of
the definitive documents, we will not be able to obtain sufficient capital
resources to operate our business, and we have no current plans to obtain other
financing. We cannot assure you that we will be able to access any financing in
sufficient amounts or at all when needed. Our inability to obtain sufficient
financing would have an immediate material adverse effect on us, our financial
condition and our business.
Upon the effective date of the registration statement of which this
prospectus is a part, Deep Field Technologies will assume an aggregate of
$190,000 in liabilities from iVoice and iVoice will assign to Deep Field
Technologies assets having an aggregate book value of $3,000. See "Selected
Historical and Pro Forma Financial Information" contained in the financial
statements of Deep Field Technologies at the back of this prospectus. Deep Field
Technologies believes that the fair value of these assets may be greater than
the book value, although it has not undertaken an appraisal. The assumed
obligations are described below.
In connection with the assumption of assets and liabilities by Deep Field
Technologies from iVoice, Deep Field Technologies will assume from iVoice
immediately prior to the date of this prospectus $190,000 of outstanding
indebtedness from iVoice to Jerry Mahoney. The debt will be subject to a
promissory note having substantially the same terms as the note from iVoice to
Mr. Mahoney. Deep Field Technologies, upon the date of this prospectus, will
issue a promissory note in the amount of $190,000 payable to Mr. Mahoney that
will bear interest at the prime rate plus 2% per annum on the unpaid balance
until paid or until default. Interest payments are due and payable annually.
Under the terms of the promissory note, at the option of the note holder,
principal and interest can be converted into either (i) one share of Class B
Common Stock of Deep Field Technologies, par value $0.01, for each dollar owed,
(ii) the number of shares of Class A Common Stock of Deep Field Technologies
calculated by dividing (x) the sum of the principal and interest that the note
holder has requested to have prepaid by (y) eighty percent (80%) of the lowest
issue price of Class A Common Stock since the first advance of funds under this
note, or (iii) payment of the principal of this note, before any repayment of
interest. There is no limitation on the number of shares of Class A Common Stock
we may be required to issue to Mr. Mahoney upon the conversion of this
indebtedness. See "Potential Dilution Due to Conversion at Below Market Price."
50
Mr. Mahoney has agreed to forego receiving any shares of Deep Field
Technologies' Class A Common Stock or Class B Common Stock he is or would be
entitled to receive in the Distribution by virtue of his ownership of either
iVoice Class A Common Stock or iVoice Class B Common Stock.
Deep Field Technologies entered into two separate employment agreements
with Mr. Mahoney, its Chairman of the Board, and Mr. Meller, its President,
Chief Executive Officer and Chief Financial Officer, respectively, as of August
3, 2004 and October 1, 2004, respectively. Each of the employment agreements
provides for annual compensation of $85,000 per annum with an annual increase
based on the Consumer Price Index every year thereafter. However, when Deep
Field Technologies achieves annual sales equal to or greater than $2,000,000,
each of Mr. Mahoney and Mr. Meller's base annual compensation will automatically
be increased to $145,000. Each of Mr. Mahoney and Mr. Meller will also be
entitled to additional incentive compensation based upon acquisitions completed
by Deep Field Technologies. Mr. Meller's agreement also provides for a bonus of
$50,000 to be paid upon successful completion of the Distribution. Mr. Meller
has agreed to forego receipt of the $50,000 until such time that management
believes that it has sufficient financing in place to fund this obligation. Deep
Field Technologies believes that the compensation provided to each of Mr.
Mahoney and Mr. Meller are commensurate with compensation levels paid by other
companies to management having equivalent experiences and capabilities.
In August 2004, Deep Field Technologies entered into an administrative
services agreement with iVoice. Pursuant to that agreement, iVoice is providing
Deep Field Technologies with physical premises, inventory purchasing services,
material and inventory control services, source code management and other
personnel and data processing services for a period ending upon completion of
the Distribution. For these services Deep Field Technologies is paying iVoice
$5,000 per month during the term of the agreement. The administrative services
agreement will continue on a month to month basis until Deep Field Technologies
has found replacement services for those services being provided by iVoice or
until Deep Field Technologies can provide these services for itself. Following
completion of the Distribution and termination of the administrative services
agreement, we expect that Deep Field Technologies will operate on a completely
stand-alone basis from iVoice and there will be no business or operating
relationship between iVoice and Deep Field Technologies.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this prospectus,
information with respect to the beneficial ownership of our common stock by (i)
persons known by us to beneficially own more than five percent of the
outstanding shares, (ii) the director, (iii) each executive officer and (iv) all
directors and executive officers as a group.
51
Common Common
Stock Stock
Beneficially Beneficially
Owned Owned
Before Percentage After Percentage
Name Title of Class Distribution Ownership Distribution Ownership
- ------------------- -------------------- ------------- ---------- -------------- -----------
Jerome R. Mahoney Class A Common Stock 0(1) 0%(1) 0(1) 0%(1)
- -------------------------------------------------------------------------------------------------
Class B Common Stock 190,000(2) 100%(2) 190,000(2) 100%(2)
- -------------------------------------------------------------------------------------------------
Class C Common Stock 0 0% 0 0%
- -------------------------------------------------------------------------------------------------
Mark Meller Class A Common Stock 0 0% 0 0%
- -------------------------------------------------------------------------------------------------
Class B Common Stock 0 0% 0 0%
- -------------------------------------------------------------------------------------------------
Class C Common Stock 0 0% 0 0%
- -------------------------------------------------------------------------------------------------
iVoice, Inc. Class A Common Stock 10,050,000 100% 0 0%
- -------------------------------------------------------------------------------------------------
Class B Common Stock 0 0% 0 0%
- -------------------------------------------------------------------------------------------------
Class C Common Stock 0 0% 0 0%
- -------------------------------------------------------------------------------------------------
All directors and Class A Common Stock 0(1) 0%(1) 0(1) 0%(1)
executive officers
as a group (2
persons)
- -------------------------------------------------------------------------------------------------
Class B Common Stock 190,000(2) 100%(2) 190,000(2) 0%(2)
- -------------------------------------------------------------------------------------------------
Class C Common Stock 0 0% 0 0%
- -------------------------------------------------------------------------------------------------
(1) Does not give effect to the right of Mr. Mahoney pursuant to the promissory
note to be executed by Mr. Mahoney and Deep Field Technologies in the amount of
$190,000 to convert $190,000 of indebtedness, plus accrued and unpaid interest,
into more than 190,000 shares of Class B Common Stock which is convertible into
the number of shares of Class A Common Stock determined by dividing the number
of shares of Class B Common Stock being converted by a 20% discount of the
lowest price at which iVoice had ever issued its Class A Common Stock. There is
no limitation on the number of shares of Class A Common Stock we may be required
to issue to Mr. Mahoney upon the conversion of this indebtedness.
(2) Mr. Mahoney may at his option convert the $190,000 promissory note held by
him into Class B Common Stock of Deep Field Technologies at a rate of one dollar
per share. The Class B Common Stock is convertible at any time into Class A
Common Stock at a rate equal to 80% of the lowest price that Deep Field
Technologies issues shares of Class A Common Stock subsequent to the date of the
note. Thus by virtue of Mr. Mahoney's right to convert $190,000 of indebtedness,
not including accrued and unpaid interest, into more than 190,000 shares of
Class B Common Stock, Mr. Mahoney is deemed to beneficially own such shares for
the purpose of computing the percentage of ownership by him, but such shares are
not treated as outstanding for the purpose of computing the percentage ownership
of any other person.
DESCRIPTION OF SECURITIES
Pursuant to Deep Field Technologies' certificate of incorporation, as
amended, we are authorized to issue 10,000,000,000 shares of Class A Common
Stock, no par value per share, 50,000,000 shares of Class B Common Stock, par
value $0.01 per share, 20,000,000 shares of Class C Common Stock, par value
$0.01 per share, and 1,000,000 shares of Preferred Stock, par value of $1.00 per
share. Below is a description of Deep Field Technologies' outstanding
securities, including Class A Common Stock, Class B Common Stock, Class C Common
Stock, and Preferred Stock.
Class A Common Stock
Each holder of our Class A Common Stock is entitled to one vote for each
share held of record. Holders of our Class A Common Stock have no preemptive,
subscription, conversion, or redemption rights. Upon liquidation, dissolution or
winding-up, the holders of Class A Common Stock are entitled to receive our net
assets pro rata. Each holder of Class A Common
52
Stock is entitled to receive ratably any dividends declared by our board of
directors out of funds legally available for the payment of dividends. We have
not paid any dividends on our Common Stock and do not contemplate doing so in
the foreseeable future. We anticipate that any earnings generated from
operations will be used to finance our growth. As of March 31, 2005, there was
one record holder of Class A Common Stock and Deep Field Technologies had 100
shares of Class A Common Stock outstanding. Deep Field Technologies currently
has 10,050,000 shares of Class A Common Stock outstanding. A 100,500-for-one
stock split was accomplished by means of a stock dividend effectuated
immediately prior to the effective date of the registration statement of which
this propectus is a part.
Class B Common Stock
Each holder of Class B Common Stock has voting rights equal to 100 shares
of Class A Common Stock. Holders of Class B Common Stock are entitled to receive
dividends in the same proportion as the Class B Common Stock conversion rights
have to Class A Common Stock. There are 50,000,000 shares authorized and 0
shares issued and outstanding as of March 31, 2005. A holder of Class B Common
Stock has the right to convert each share of Class B Common Stock into the
number of shares of Class A Common Stock determined by dividing the number of
shares of Class B Common Stock being converted by a 20% discount of the lowest
price that Deep Field Technologies had ever issued its Class A Common Stock.
Upon our liquidation, dissolution, or winding-up, holders of Class B Common
Stock will be entitled to receive distributions.
Class C Common Stock
Each holder of our Class C Common Stock is entitled to 1,000 votes for
each one share held of record. Holders of our Class C Common Stock have no
preemptive, subscription, conversion, or redemption rights. Shares of Class C
Common Stock are not convertible into Class A Common Stock. There are 20,000,000
shares authorized and 0 shares issued and outstanding as of March 31, 2005. Upon
liquidation, dissolution or winding-up, the holders of Class C Common Stock are
not entitled to receive our net assets pro rata. We have not paid any dividends
on our common stock and do not contemplate doing so in the foreseeable future.
We anticipate that any earnings generated from operations will be used to
finance our growth.
Preferred Stock
Deep Field Technologies is authorized to issue 1,000,000 shares of
Preferred Stock, par value $1.00 per share. As of March 31, 2005, Deep Field
Technologies has not issued any shares of Preferred Stock. Deep Field
Technologies has no current plans to issue any shares of preferred stock.
Our board of directors is authorized (by resolution and by filing an
amendment to our certificate of incorporation and subject to limitations
prescribed by the New Jersey Business Corporation Act) to issue, from to time,
shares of Preferred Stock in one or more series, to establish from time to time
the number of shares to be included in each series, and to fix the designation,
powers, preferences and other rights of the shares of each such series and to
fix the
53
qualifications, limitations and restrictions thereon, including, but without
limiting the generality of the foregoing, the following:
o the number of shares constituting that series and the distinctive
designation of that series;
o the dividend rate on the shares of that series, whether dividends
are cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on
shares of that series;
o whether that series has voting rights, in addition to voting rights
provided by law, and, if so, the terms of those voting rights;
o whether that series has conversion privileges, and, if so, the terms
and conditions of conversion, including provisions for adjusting the
conversion rate in such events as our board of directors determines;
o whether or not the shares of that series are redeemable, and, if so,
the terms and conditions of redemption, including the dates upon or
after which they are redeemable, and the amount per share payable in
case of redemption, which amount may vary under different conditions
and at different redemption dates;
o whether that series has a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount
of that sinking fund;
o the rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of Deep Field
Technologies, and the relative rights of priority, if any, of
payment of shares of that series; and
o any other relative powers, preferences and rights of that series,
and qualifications, limitations or restrictions on that series.
If we liquidate, dissolve or wind up our affairs, whether voluntarily or
involuntarily, the holders of Preferred Stock of each series will be entitled to
receive only that amount or those amounts as are fixed by the Company's
certificate of incorporation or the certificate of designations or by resolution
of the board of directors providing for the issuance of that series.
Transfer Agent
iVoice and Deep Field Technologies' transfer agent is Fidelity Transfer
Company. The address is 1800 South West Temple, Suite 301, Salt Lake City, Utah
84115. The telephone number is (801) 484-7222.
Limitation of Liability: Indemnification
Our by-laws include an indemnification provision under which we have
agreed to indemnify directors of Deep Field Technologies to the fullest extent
possible from and against
54
any and all claims of any type arising from or related to future acts or
omissions as a director of Deep Field Technologies.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Deep Field Technologies pursuant to the foregoing, or otherwise, Deep Field
Technologies has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.
THE DISTRIBUTION
Introduction
In September 2004, iVoice's board of directors declared a distribution
payable to the holders of record of outstanding iVoice common stock at the close
of business on November 1, 2004. A new record date of July 29, 2005 (the "Record
Date") has been set. iVoice currently anticipates that it will distribute to
iVoice stockholders, other than Mr. Mahoney, an aggregate of up to 10,050,000
shares of Deep Field Technologies Class A Common Stock. Accordingly, the
Distribution will consist of one share of Deep Field Technologies Class A Common
Stock for approximately every 988 shares of iVoice common stock outstanding on
the Record Date. Holders of less than 988 shares of iVoice common stock will
receive one share of Deep Field Technologies Class A Common Stock. We currently
anticipate that the Distribution will be effected near the effective date of the
registration statement.
Deep Field Technologies is currently a wholly-owned subsidiary of iVoice.
As a result of the Distribution, 100% of the outstanding Deep Field Technologies
Class A Common Stock will be distributed to iVoice stockholders. Immediately
following the Distribution, iVoice and its subsidiaries will not own any shares
of Deep Field Technologies Class A Common Stock and Deep Field Technologies will
be an independent public company. The Deep Field Technologies Class A Common
Stock will be distributed by book entry. Instead of stock certificates, each
iVoice stockholder that is a record holder of iVoice shares will receive a
statement of such stockholder's book entry account for the Deep Field
Technologies Class A Common Stock distributed to such stockholder. Account
statements reflecting ownership of the Deep Field Technologies Class A Common
Stock will be mailed shortly after the Distribution Date. Deep Field
Technologies Class A Common Stock should be credited to accounts with
stockbrokers, banks or nominees of iVoice stockholders that are not record
holders after the effective date of the Distribution.
Deep Field Technologies was incorporated on November 10, 2004. On November
11, 2004, Deep Field Technologies received by assignment all of the interests in
and rights and title to, and assumed all of the obligations of, all of the
agreements, contracts, understandings and other instruments of iVoice Technology
2, Inc., a Nevada corporation and affiliate of Deep Field Technologies. These
agreements, contracts, understandings and other instruments consisted of the
documentation relating to the issuance of the secured convertible debentures and
the equity line of credit, the employment agreements with Messrs. Mahoney and
Meller and the administrative services agreement. Since this assignment, iVoice
Technology 2 has no operating business, assets or known liabilities, and is
currently in the process of being dissolved. When we
55
refer to or describe any agreement, contract or other written instrument of Deep
Field Technologies in this prospectus, we are referring to an agreement,
contract or other written instrument that had been entered into by iVoice
Technology 2 and assigned to Deep Field Technologies. Deep Field Technologies'
principal executive offices are located at 750 Highway 34, Matawan, New Jersey
07747, and its telephone number is (732) 441-7700. Deep Field Technologies will
own and operate the Unified Messaging software business of iVoice.
Concurrently with the Distribution, iVoice intends to contribute the
majority of its remaining business lines into two new companies and distribute
the stock of those two companies to its stockholders. Following the Distribution
and the two other distributions, iVoice's operating assets will consist of its
iVoiceMail software and its portfolio of patents and patent rights, and its
future business development operations will consist of licensing its
intellectual property rights.
Reasons for the Distribution
The board of directors and management of iVoice believe that the
Distribution is in the best interests of iVoice, Deep Field Technologies and
iVoice stockholders. iVoice believes that the Distribution will enhance value
for iVoice stockholders and give Deep Field Technologies the financial and
operational flexibility to take advantage of potential growth opportunities in
the Unified Messaging systems business.
iVoice's board of directors and management believe that the Distribution
will enhance the ability of each of Deep Field Technologies and iVoice to focus
on strategic initiatives and new business opportunities, improve cost structures
and operating efficiencies and design equity-based compensation programs
targeted to its own performance. In addition, iVoice's board of directors
expects that the transition to an independent company will provide Deep Field
Technologies with greater access to capital by allowing the financial community
to focus solely on Deep Field Technologies and allow the investment community to
measure Deep Field Technologies' performance relative to its peers.
The Unified Messaging systems business also has some important traits that
make this business distinct from iVoice's other operations with respect to
markets, products, capital needs and plans for growth. The Distribution will
give Deep Field Technologies direct access to the capital markets as a stand
alone company.
The board of directors and management of iVoice believe that the
Distribution is in the best interests of iVoice and its stockholders. iVoice
believes that the Distribution will enhance value for iVoice stockholders and
that the spin off of the Unified Messaging business into Deep Field Technologies
has provided greater access to capital by allowing the financial community to
focus solely on Deep Field Technologies and its Unified Messaging software
business as a stand alone company. In determining whether of not to spin off the
Unified Messaging business and make the Distribution, the board considered the
ability of iVoice to satisfy its working capital needs as a whole as against the
ability of the Unified Messaging business to satisfy its capital needs as a
stand alone company. As financing was available to the Unified Messaging
business as a stand alone company, it was determined that the Unified Messaging
business would be transferred to Deep Field Technologies. After considering the
availability of such financing and
56
the relative working capital needs of iVoice and Deep Field Technologies, the
board elected not to transfer any part of the current cash balance of iVoice to
Deep Field Technologies.
As part of iVoice, the Unified Messaging systems business competed with
iVoice's other core business groups for capital to finance expansion and growth
opportunities. As a separate entity, Deep Field Technologies will be free of
iVoice's capital structure restrictions and should be in a better position to
fund the implementation of its business strategy. The Distribution will also
enable Deep Field Technologies to provide its management and employees incentive
compensation in the form of equity ownership in Deep Field Technologies,
enhancing Deep Field Technologies' ability to attract, retain and motivate key
employees, and, if Deep Field Technologies seeks to hire additional or
replacement personnel, attract such personnel. However, there are no present
plans, proposals or arrangements to establish, or provide any awards under, any
such incentive compensation plan.
Manner of Effecting the Distribution
The Distribution will be made on the basis of one share of Deep Field
Technologies Class A Common Stock for approximately every 988 shares of iVoice
common stock outstanding on the Record Date. Holders of less than 988 shares of
iVoice common stock will receive one share of Deep Field Technologies Class A
Common Stock. Based on approximately 9,994,728,373 iVoice shares outstanding on
the Record Date and approximately 9,884,728,373 iVoice shares outstanding on the
Record Date that will actually participate in the Distribution, we currently
anticipate that an aggregate of up to 10,050,000 shares of Deep Field
Technologies Class A Common Stock will be distributed to iVoice stockholders. At
the time of the Distribution, the shares of Deep Field Technologies Class A
Common Stock to be distributed will constitute 100% of the outstanding Deep
Field Technologies Class A Common Stock. Immediately following the Distribution,
iVoice will not own any Deep Field Technologies Class A Common Stock and Deep
Field Technologies will be an independent public company.
The shares of Deep Field Technologies Class A Common Stock being
distributed in the Distribution will be fully paid and non-assessable and the
holders thereof will not be entitled to preemptive rights. See "Description of
Securities" beginning on page 52.
iVoice will use a book entry system to distribute the shares of Deep Field
Technologies Class A Common Stock in the Distribution. Following the
Distribution, each record holder of iVoice stock on the Record Date will receive
from the Distribution Agent a statement of the shares of Deep Field Technologies
Class A Common Stock credited to the stockholder's account. If you are not a
record holder of iVoice stock because your shares are held on your behalf by
your stockbroker or other nominee, your shares of Deep Field Technologies Class
A Common Stock should be credited to your account with your stockbroker or
nominee after the effective date of the registration statement. After the
Distribution, stockholders may request stock certificates from Deep Field
Technologies' transfer agent instead of participating in the book entry system.
No fractional shares of Deep Field Technologies Class A Common Stock will
be issued. If you own a fractional share of iVoice common stock as of the Record
Date or own a number of iVoice shares that is not a multiple of 988, you will
receive the next higher whole number of
57
shares of Deep Field Technologies Class A Common Stock in the Distribution. If
you own less than 988 shares you will receive one share of Deep Field
Technologies Class A Common Stock.
No iVoice stockholder will be required to pay any cash or other
consideration for the shares of Deep Field Technologies Class A Common Stock
received in the Distribution, or to surrender or exchange iVoice shares in order
to receive shares of Deep Field Technologies Class A Common Stock. The
Distribution will not affect the number of, or the rights attaching to,
outstanding iVoice shares. No vote of iVoice stockholders is required or sought
in connection with the Distribution, and iVoice stockholders will have no
appraisal rights in connection with the Distribution.
In order to receive shares of Deep Field Technologies Class A Common Stock
in the Distribution, iVoice stockholders must be stockholders at the close of
business on the Record Date.
Results of the Distribution
After the Distribution, Deep Field Technologies will be a separate public
company operating the Unified Messaging systems business. Based on approximately
9,994,728,373 iVoice shares outstanding on the Record Date and approximately
9,884,728,373 iVoice shares outstanding on the Record Date that will actually
participate in the Distribution, immediately after the Distribution, Deep Field
Technologies expects to have approximately 20,000 holders of record of Deep
Field Technologies Class A Common Stock, and up to 10,050,000 shares of Deep
Field Technologies Class A Common Stock outstanding. The Distribution will not
affect the number of outstanding iVoice shares or any rights of iVoice
stockholders.
Listing and Trading of the Deep Field Technologies Class A Common Stock
Neither Deep Field Technologies nor iVoice makes recommendations on the
purchase, retention or sale of shares of iVoice common stock or shares of Deep
Field Technologies Class A Common Stock. You should consult with your own
financial advisors, such as your stockbroker, bank or tax advisor.
If you do decide to purchase or sell any iVoice or Deep Field Technologies
shares, you should make sure your stockbroker, bank or other nominee understands
whether you want to purchase or sell iVoice common stock or Deep Field
Technologies Class A Common Stock, or both. The following information may be
helpful in discussions with your stockbroker, bank or other nominee.
There is not currently a public market for the Deep Field Technologies
Class A Common Stock, although a when-issued market may develop prior to
completion of the Distribution. When-issued trading refers to a transaction made
conditionally because the security has been authorized but is not yet issued or
available. Even though when-issued trading may develop, none of these trades
would settle prior to the effective date of the Distribution, and if the
Distribution does not occur, all when-issued trading will be null and void. On
the first trading day following the date of the Distribution, when-issued
trading in respect of shares of Deep Field Technologies Class A Common Stock
will end and regular-way trading will begin. Regular-way trading refers to
trading after a security has been issued and typically involves a transaction
that
58
settles on the third full business day following the date of a transaction. We
anticipate that the Deep Field Technologies Class A Common Stock will trade on
the Over-the-Counter Bulletin Board under the proposed symbol "____."
The shares of Deep Field Technologies Class A Common Stock distributed to
iVoice stockholders will be freely transferable, except for (1) shares of Deep
Field Technologies Class A Common Stock received by persons who may be deemed to
be affiliates of Deep Field Technologies under the Securities Act of 1933, as
amended (the "Securities Act"), and (2) shares of Deep Field Technologies Class
A Common Stock received by persons who hold restricted shares of iVoice common
stock. Persons who may be deemed to be affiliates of Deep Field Technologies
after the Distribution generally include individuals or entities that control,
are controlled by, or are under common control with Deep Field Technologies and
may include certain directors, officers and significant stockholders of Deep
Field Technologies. Persons who are affiliates of Deep Field Technologies will
be permitted to sell their shares of Deep Field Technologies Class A Common
Stock only pursuant to an effective registration statement under the Securities
Act or an exemption from the registration requirements of the Securities Act,
such as the exemptions afforded by Section 4(1) of the Securities Act and the
provisions of Rule 144 thereunder.
There can be no assurance as to whether the Deep Field Technologies Class
A Common Stock will be actively traded or as to the prices at which the Deep
Field Technologies Class A Common Stock will trade. Some of the iVoice
stockholders who receive shares of Deep Field Technologies Class A Common Stock
may decide that they do not want shares in a company consisting of the Unified
Messaging systems business, and may sell their shares of Deep Field Technologies
Class A Common Stock following the Distribution. This may delay the development
of an orderly trading market in Deep Field Technologies Class A Common Stock for
a period of time following the Distribution. Until the shares of Deep Field
Technologies Class A Common Stock are fully distributed and an orderly market
develops, the prices at which the Deep Field Technologies Class A Common Stock
trades may fluctuate significantly and may be lower than the price that would be
expected for a fully distributed issue. Prices for Deep Field Technologies Class
A Common Stock will be determined in the marketplace and may be influenced by
many factors, including the depth and liquidity of the market for the shares,
Deep Field Technologies' results of operations, what investors think of Deep
Field Technologies and the Unified Messaging systems industry, the amount of
dividends that Deep Field Technologies pays, changes in economic conditions in
the Unified Messaging systems industry and general economic and market
conditions.
Following the Distribution, iVoice expects that its common stock will
continue to be listed and traded on the Over-the-Counter Bulletin Board under
the symbol "IVOC." Following the Distribution and the distribution of the two
other new subsidiaries of iVoice, iVoice will have no remaining businesses other
than the licensing of its intellectual property rights. A trading market may not
continue for the shares of iVoice common stock or ever develop for the Deep
Field Technologies Class A Common Stock. As a result of the Distribution, the
trading price of iVoice common stock immediately following the Distribution may
be substantially lower than the trading price of iVoice common stock immediately
prior to the Distribution. The combined trading prices of iVoice common stock
and the Deep Field Technologies Class A Common Stock after the Distribution may
be less than the trading price of iVoice common stock immediately
59
prior to the Distribution. Further, the combined trading prices of iVoice common
stock, the Deep Field Technologies Class A Common Stock and the common stock of
each of the two other new companies being distributed to iVoice stockholders
after the Distribution and the two other distributions may be less than the
trading price of iVoice common stock immediately prior to these distributions.
Even though iVoice is currently a publicly held company, there can be no
assurance as to whether an active trading market for iVoice common stock will be
maintained after the Distribution and the two other distributions or as to the
prices at which the iVoice common stock will trade. iVoice stockholders may sell
their iVoice common stock following the Distribution. These and other factors
may delay or hinder the return to an orderly trading market in the iVoice common
stock following the Distribution. Whether an active trading market for iVoice
common stock will be maintained after the Distribution and the prices for iVoice
common stock will be determined in the marketplace and may be influenced by many
factors, including the depth and liquidity of the market for the shares,
iVoice's results of operations, what investors think of iVoice and its
industries, changes in economic conditions in its industries and general
economic and market conditions.
In addition, the stock market often experiences significant price
fluctuations that are unrelated to the operating performance of the specific
companies whose stock is traded. Market fluctuations could have a material
adverse impact on the trading price of the Deep Field Technologies Class A
Common Stock and/or iVoice common stock.
As described elsewhere in this prospectus, Deep Field Technologies issued
to Cornell Capital Partners $400,000 aggregate principal amount of secured
convertible debentures. On February 28, 2005, Deep Field Technologies'
obligations under the secured convertible debentures were terminated and
replaced with a secured promissory note of the same principal amount, which note
accrues interest at a rate of 12% per annum, but is not convertible into any
equity security of Deep Field Technologies.
Mr. Mahoney will have the right to convert $190,000 of indebtedness (plus
accrued and unpaid interest) into 190,000 (plus, on a dollar per share basis,
amounts of accrued and unpaid interest) shares of Deep Field Technologies Class
B Common Stock which is convertible into the number of shares of Class A Common
Stock determined by dividing the number of shares of Class B Common Stock being
converted by a 20% discount of the lowest price at which iVoice had ever issued
its Class A Common Stock. There is no limitation on the number of shares of
Class A Common Stock we may be required to issue to Mr. Mahoney upon the
conversion of these obligations. See "Potential Dilution Due to Conversion at
Below Market Price." However, assuming a market price for Deep Field
Technologies Class A Common Stock of $0.01, we would be required to issue
23,750,000 shares of Class A Common Stock to Mr. Mahoney, not including shares
attributable to accrued and unpaid interest, upon conversion of his promissory
note. As of March 31, 2005, there was $26,334.97 of accrued and unpaid interest
on the promissory note.
60
FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
The following discussion summarizes the material U.S. federal income tax
consequences resulting from the Distribution. This discussion is based upon the
U.S. federal income tax laws and regulations now in effect and as currently
interpreted by courts or the Internal Revenue Service and does not take into
account possible changes in such tax laws or such interpretations, any of which
may be applied retroactively.
The following summary is for general information only and may not be
applicable to stockholders who received their shares of iVoice stock pursuant to
an employee benefit plan or who are foreign persons or who are otherwise subject
to special treatment under U.S. federal income tax laws. Each stockholder's
individual circumstances may affect the tax consequences of the Distribution to
such stockholder. In addition, no information is provided with respect to tax
consequences under any applicable foreign, state or local laws. Consequently,
each iVoice stockholder is advised to consult his own tax advisor as to the
specific tax consequences of the Distribution to him and the effect of possible
changes in tax laws.
General
Each iVoice stockholder who receives shares of Deep Field Technologies
Class A Common Stock in the Distribution will generally be treated as receiving
a taxable dividend equal to the fair market value on the Distribution date of
the shares received to the extent of the current or accumulated earnings and
profits of iVoice as of the end of the year in which the Distribution occurs.
Any earnings and profits will be proportionately allocated among the shares
received. iVoice does not have any accumulated earnings and profits.
Following the end of the year in which the Distribution occurs, iVoice
will provide, or otherwise make available, to its stockholders information
setting forth the portion of the Distribution, if any, that is treated as a
dividend.
Dividends received by non-corporate taxpayers generally are taxed at the
same preferential rates that apply to long-term capital gains. Any portion of
the Distribution that exceeds such earnings and profits will be treated as a
tax-free return of capital to the extent of the stockholder's adjusted tax basis
in the iVoice shares and thereafter as gain from the sale or exchange of iVoice
shares. Stockholders which are corporations may be subject to additional special
provisions dealing with taxable distributions, such as the dividends received
deduction and the extraordinary dividend rules.
The basis of shares received in the Distribution will be equal to their
fair market value on the Distribution date, and a stockholder's holding period
with respect to the shares received will begin on the day following the date of
the Distribution.
61
You should consult your own tax advisor as to the particular consequences
of the Distribution to you, including the application of state, local and
foreign tax laws.
CHANGES IN ACCOUNTANTS
On February 23, 2005, Deep Field Technologies terminated the services of
its independent account, Mendlowitz Weitsen, LLP. For the two most recent fiscal
years and through the subsequent interim period ending upon such termination,
(i) the independent account's report did not contain an adverse opinion or
disclaimer of opinion, nor was it modified as to uncertainty, audit scope, or
accounting principles and (ii) there were no disagreements with the former
accountant, whether or not resolved, on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the former accountant's satisfaction, would have
caused it to make reference to the subject matter of the disagreement(s) in
connection with its report. The decision to change accountants was recommended
by Deep Field Technologies' Audit Committee.
On February 23, 2005, Deep Field Technologies engaged the independent
accounting firm of Bagell, Josephs & Company, L.L.C. as principal accountant to
audit Deep Field Technologies' financial statements for the fiscal years ended
December 31, 2004 and December 31, 2003.
REASONS FOR FURNISHING THIS DOCUMENT
This document is being furnished solely to provide information to iVoice
stockholders who will receive Deep Field Technologies Class A Common Stock in
the Distribution. It is not, and is not to be construed as, an inducement or
encouragement to buy or sell any securities of iVoice or Deep Field
Technologies. Neither iVoice nor Deep Field Technologies will update the
information contained in this document except in the normal course of their
respective public disclosure practices. However, this document will be amended
if there is any material change in the terms of the Distribution.
RELATIONSHIP BETWEEN IVOICE AND DEEP FIELD
TECHNOLOGIES FOLLOWING THE DISTRIBUTION
To provide for an orderly transition to the status of two independent
companies, iVoice and Deep Field Technologies have entered into an
administrative services agreement. Under this agreement, iVoice is providing
Deep Field Technologies services in such areas as inventory purchasing, material
and inventory control, sharing of office space, source code management, employee
benefits administration, payroll, electronic data processing services, financial
accounting and reporting, claims administration and reporting, and other areas
where Deep Field Technologies needs transitional assistance and support. Under
the administrative services agreement, iVoice is providing Deep Field
Technologies substantially the same level of service and use substantially the
same degree of care as iVoice's personnel provided and used in providing such
services prior to the execution of the agreement. For these services, Deep Field
Technologies pays iVoice a fee of $5,000 per month. Deep Field Technologies
believes that the terms and conditions of the administrative services agreement
are as favorable to Deep Field Technologies as those available from unrelated
parties for a comparable arrangement.
62
The administrative services agreement will continue on a month to month
basis until Deep Field Technologies has found replacement services for those
services being provided by iVoice or can provide these services for itself.
Following termination of the administrative services agreement, we expect that
Deep Field Technologies will operate on a completely stand-alone basis from
iVoice and there will be no business or operating relationship between iVoice
and Deep Field Technologies. Upon termination of the agreement, Deep Field
Technologies would be required to obtain such services from a third party or
increase its headcount to provide such services. This could be more expensive
than the fees which Deep Field Technologies has been required to pay under the
administrative services agreement.
WHERE YOU CAN FIND MORE INFORMATION
Deep Field Technologies has filed with the Securities and Exchange
Commission the registration statement under the Securities Act with respect to
the Deep Field Technologies Class A Common Stock. This document does not contain
all of the information set forth in the registration statement and the exhibits
and schedules thereto, to which reference is hereby made. Statements made in
this document as to the contents of any contract, agreement or other document
referred to herein are not necessarily complete. The registration statement and
the exhibits thereto filed by Deep Field Technologies with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
information can be obtained by mail from the Public Reference Branch of the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The Commission maintains a website that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
Commission's website is http://www.sec.gov. Upon the effectiveness of the
registration statement, Deep Field Technologies will be required to comply with
the reporting requirements of the Securities Exchange Act of 1934 and to file
with the Commission reports, proxy statements and other information as required
by the Exchange Act. Additionally, Deep Field Technologies will be required to
provide annual reports containing audited financial statements to its
stockholders in connection with its annual meetings of stockholders. These
reports, proxy statements and other information will be available to be
inspected and copied at the public reference facilities of the Commission or
obtained by mail or over the Internet from the Commission, as described above.
63
INDEX TO FINANCIAL STATEMENTS
Contents
- --------
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM F-2
AUDITED FINANCIAL STATEMENTS
Balance Sheets at December 31, 2004 and 2003 F-3
Statements of Operations for the years ended
December 31, 2004 and 2003 F-4
Statements of Owner's Equity (Deficiency) for the
years ended December 31, 2004 and 2003 F-5
Statements of Cash Flow for the years ended
December 31, 2004 and 2003 F-6
NOTES TO AUDITED FINANCIAL STATEMENTS F-7
UNAUDITED FINANCIAL STATEMENTS
Balance Sheet at March 31, 2005 F-17
Statements of Operations for the three months ended
March 31, 2005 and 2004 F-18
Statements of Cash Flow for the three months ended
March 31, 2005 and 2004 F-19
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS F-20
SELECTED HISTORICAL AND PRO FORMA
FINANCIAL INFORMATION F-29
Condensed Unaudited Pro Forma Balance Sheet at
December 31, 2004 F-30
Condensed Unaudited Pro Forma Balance Sheet at
March 31, 2005 F-31
Pro Forma Statement of Operations for the year ended
December 31, 2004 F-32
Pro Forma Statement of Operations for the year ended
December 31, 2003 F-33
Pro Forma Statement of Operations (Unaudited) for the
three months ended March 31, 2005 F-34
NOTES TO CONDENSED UNAUDITED PRO FORMA FINANCIAL INFORMATION F-35
F-1
Bagell, Josephs & Company, LLC
200 Haddonfield Berlin Road, Gibbsboro, NJ 08026
Tel: 856.346.2628 Fax: 856.346.2882
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF DEEP FIELD TECHNOLOGIES, INC.
Matawan, New Jersey
We have audited the accompanying balance sheets of the unified messaging
software business of iVoice, Inc. (Deep Field Technologies, Inc., a wholly
owned subsidiary of iVoice, Inc.) as of December 31, 2004 and 2003 and the
related statements of operations, owner's equity and cash flows for the years
ended December 31, 2004 and 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the interactive voice
response software business of iVoice, Inc. (Deep Field Technologies, Inc.) as
of December 31, 2004 and 2003, and the results of its operations and its cash
flows for the years ended December 31, 2004 and 2003, in conformity with
accounting principles generally accepted in the United States of America.
These financial statements have been derived from the consolidated financial
statements and accounting records of iVoice, Inc., and reflect significant
assumptions and allocations. Moreover, as indicated in Note 1, the Company
relies on iVoice, Inc. for administrative, management, research and other
services. Accordingly, these financial statements do not necessarily reflect
the financial position, results of operations, and cash flows of the Company
had it been a stand-alone Company.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3, the Company
had net losses and negative cash flows from operations for the years ended
December 31, 2004 and 2003, and as of those dates had negative working
capital, which raises substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also
discussed in Note 3. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
BAGELL, JOSEPHS & COMPANY, L.L.C.
Gibbsboro, New Jersey
March 21, 2005
F-2
DEEP FIELD TECHNOLOGIES, INC.
BALANCE SHEETS
December 31, 2004 and 2003
December 31,
2004 2003
ASSETS --------- ---------
CURRENT ASSETS
Cash and cash equivalents $ 299,566 $ 0
Accounts receivable 3,000 0
Inventory, net 317 315
Cost in excess of billing 0 75
--------- ---------
Total current assets 302,883 390
--------- ---------
TOTAL ASSETS $ 302,883 $ 390
========= =========
LIABILITIES AND OWNER'S EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 47,513 $ 0
5% Convertible debentures 400,000 0
Deferred maintenance contracts 112 0
--------- ---------
Total current liabilities 447,625 0
OWNER'S EQUITY (DEFICIENCY)
Common Stock
Class A, no par value; Authorized 10,000,000,000
shares; 10,050,000 shares issued and outstanding
as of 12/31/04 and 0 shares issued and outstanding
as of 12/31/03 0 0
Class B, par value $.01; Authorized 50,000,000
shares; no shares issued and outstanding 0 0
Class C, par value $.01; Authorized 20,000,000
shares; no shares issued and outstanding 0 0
Preferred Stock; Par value $1.00; Authorized
1,000,000 shares; no shares issued and outstanding 0 0
Net investment, iVoice, Inc. 148,302 99,173
Accumulated deficit (293,044) (98,783)
--------- ---------
Total owner's equity (deficiency) (144,742) 390
--------- ---------
TOTAL LIABILITIES AND OWNER'S EQUITY (DEFICIENCY) $ 302,883 $ 390
========= =========
The Notes to Financial Statements are an integral part of these statements.
F-3
DEEP FIELD TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2004 and 2003
2004 2003
--------- ---------
SALES, net $ 7,344 $ 8,505
COST OF SALES 2,352 3,447
--------- ---------
GROSS PROFIT 4,992 5,058
--------- ---------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling expenses 1,807 1,923
General & administrative expense 121,949 15,892
Research & development 1,982 3,604
Depreciation & amortization -- 2,869
--------- ---------
Total Selling, General & Administrative expense 125,738 24,288
--------- ---------
LOSS FROM CONTINUING OPERATIONS (120,746) (19,230)
--------- ---------
OTHER INCOME (EXPENSE)
Other income 4,494 2,836
Write off of financing costs (71,546) 0
Gain on sale of securities held for sale 0 1,944
Interest expense (6,407) (14,488)
Other expense (56) 0
--------- ---------
Total other expense (73,515) (9,708)
--------- ---------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (194,261) (28,938)
--------- ---------
PROVISION FOR INCOME TAXES 0 0
--------- ---------
NET LOSS FROM CONTINUING OPERATIONS $(194,261) $ (28,938)
========= =========
NET LOSS PER COMMON SHARE:
Basic $ (.02) $ (.00)
========= =========
Diluted $ (.02) $ (.00)
========= =========
The Notes to Financial Statements are an integral part of these statements.
F-4
DEEP FIELD TECHNOLOGIES, INC.
STATEMENT OF OWNER'S EQUITY (DEFICIENCY)
For the Years Ended December 31, 2004 and 2003
Total
Common Common Net Owner's
Stock Stock Investment Accumulated Equity
Shares Amount iVoice, Inc Deficit (Deficiency)
--------- --------- ----------- ----------- ----------
Balance at January 1, 2003 0 $ 0 $ 71,715 $ (69,845) $ 1,870
Net transactions with iVoice, Inc. 27,458 27,458
Net loss for the twelve months ended
December 31, 2003 (28,938) (28,938)
--------- --------- --------- --------- ---------
Balance at December 31, 2003 0 0 99,173 (98,783) 390
Issuance of common stock 100 0 0
Retroactive treatment of 100,500:
1 stock split 10,049,900 0 0
Net transactions with iVoice, Inc. 49,129 49,129
Net loss for the twelve months ended
December 31, 2004 (194,261) (194,261)
--------- --------- --------- --------- ---------
Balance at December 31, 2004 (As
Retroactively Restated) 10,050,000 $ 0 $ 148,302 $(293,044) $(144,742)
========= ========= ========= ========= =========
The Notes to Financial Statements are an integral part of these statements.
F-5
DEEP FIELD TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOW
For The Years December 31, 2004 and 2003
2004 2003
-------- ---------
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $(194,261) $ (28,938)
Depreciation and amortization 0 2,869
Changes in operating assets and liabilities
Increase in accounts receivable (3,000) 0
Increase in inventory (2) 0
Decrease in cost in excess of billing 75 0
Increase (decrease) in accounts payable and
accrued expenses 47,513 (1,389)
Increase in deferred maintenance contracts 112 --
--------- ---------
Net cash used in operating activities (149,563) (27,458)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Allocation of costs by iVoice 49,129 27,458
Sale of convertible debentures 400,000 --
--------- ---------
Net cash provided by financing activities 449,129 27,458
--------- ---------
NET INCREASE (DECREASE) IN CASH 299,566 0
CASH - beginning 0 0
CASH - end $ 299,566 $ 0
========= =========
CASH PAID DURING THE YEAR FOR:
Interest expense $ 0 $ 14,468
========= =========
Income taxes $ 0 $ 0
========= =========
The Notes to Financial Statements are an integral part of these statements.
F-6
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 1. BACKGROUND
Deep Field Technologies, Inc. ("Deep Field Technologies" or the "Company") was
incorporated under the laws of New Jersey on November 10, 2004 as a wholly
owned subsidiary of iVoice, Inc. ("iVoice"). The Company received by
assignment all of the interests in and rights and title to, and assumed all of
the obligations of, all of the agreements, contracts, understandings and other
instruments of iVoice Technologies 2, Inc., a Nevada corporation and affiliate
of the Company. When we refer to or describe any agreement, contract or other
written instrument of the Company in these notes, we are referring to an
agreement, contract or other written instrument that had been entered into by
Deep Field Technologies 2 and assigned to the Company.
On September 1, 2004, the Board of Directors of iVoice, Inc. resolved to
pursue the separation of iVoice software business into three publicly owned
companies. iVoice will continue to focus on its own computerized telephony
technology and related business development operations. Deep Field
Technologies intends to continue to develop, market and license the Unified
Messaging line of computerized telephony software.
In September, 2004, iVoice Inc. announced that it intends to distribute to its
shareholders all of the Deep Field Technologies Class A Common Stock.
The spin-off transaction will be accomplished by the distribution of certain
intellectual property, representing the software codes of Unified Messaging,
and certain accrued liabilities and related party debt to Deep Field
Technologies (the "Distribution"), the shares of common stock of which will be
distributed to iVoice shareholders in the form of a taxable dividend.
In conjunction with the spin-off, Deep Field Technologies has entered into an
administrative services agreement with iVoice. The administrative services
agreement will continue on a month to month basis until Deep Field
Technologies has found replacement services for those services being provided
by iVoice or can provide those services for itself.
Deep Field Technologies also intends to assume $190,000 in accrued liabilities
and related party debt presently outstanding and incurred by iVoice. The debt
being assumed will be convertible into Class B Common Stock of Deep Field
Technologies at the option of the holder as later described in these notes.
NOTE 2. BUSINESS OPERATIONS
The Company will continue to develop, market and license the Unified Messaging
line, which was developed by iVoice. With Unified Messaging, e-mail, voice
mail and faxes can be handled through a desktop computer or telephone. All
messages can be viewed and acted upon in order of importance via Microsoft
Outlook or a web browser. E-mail can also be retrieved over the phone, using
text-to-speech, and responded to with a voice message including directed to a
fax machine.
F-7
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 3. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America,
which contemplates continuation of the Company as a going concern. The Company
has traditionally operated as a non-reporting component of iVoice, Inc. and
accordingly these financial statements have been derived from the consolidated
financial statements and accounting records of iVoice, Inc., and reflect
significant assumptions and allocations. The Company relies on iVoice, Inc.
for administrative, management, research and other services. These financial
statements do not necessarily reflect the financial position, results of
operations, and cash flows of the Company had it been a stand-alone company.
As of December 31, 2004, the Company had a net loss, a negative cash flow from
operations as well as negative working capital. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
Therefore, recoverability of a major portion of the recorded asset amounts
shown in the accompanying balance sheets is dependent upon continued
operations of the Company, which in turn, is dependent upon the Company's
ability to raise capital and/or generate positive cash flow from operations.
In order to provide necessary working capital, in August 2004, the Company
entered into a subscription agreement, pursuant to which the Company issued
$200,000 of secured convertible debentures in August 2004, and an additional
$200,000 of secured convertible debentures in November 2004 around the time of
filing of the registration statement for the Class A Common Stock. Interest on
the secured convertible debentures is payable at 5% per annum and the secured
convertible debentures are convertible into the Company's Class A Common Stock
at a price equal to the lesser of (a) an amount equal to one hundred twenty
percent (120%) of the initial bid price of the Class A Common Stock on the
date of effectiveness of the registration statement, or (b) an amount equal to
eighty percent (80%) of the lowest closing bid price of the Class A Common
Stock for the five (5) trading days immediately preceding the conversion date.
Additionally, the Company had also entered into a Standby Equity Distribution
Agreement, subsequently terminated, where the Company could, at its
discretion, periodically sell to an investor shares of Class A Common Stock to
raise capital to fund working capital needs. These two financing transactions
required the Company to register its common stock under Section 12 (g) of the
U.S. Securities Exchange Act of 1934 and subsequently register for resale a
number of shares to facilitate these financing transactions.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
NOTE 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
The accompanying financial statements have been derived from the
consolidated financial statements and accounting records of iVoice using the
historical results of operations and historical basis of assets and
liabilities of the Company's Interactive Voice Response
F-8
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
business. Management believes the Assumptions underlying the financial
statements are reasonable. However, the financial statements included herein
may not necessarily reflect the Company's results of operations, financial
position, and cash flows in the future or what its results of operations,
financial position and cash flows would have had the Company been a
stand-alone company during the periods presented.
b) Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from
those estimates.
c) Software License Costs
Software license costs are recorded at cost, which approximates fair
market value as of the date of purchase. These costs represent the purchase of
various exploitation rights to certain software, pre-development codes and
systems developed by a non-related third party. These costs are capitalized
pursuant to Statement of Financial Accounting Standards ("SFAS") 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed". The Company has adopted SFAS No. 121. The carrying value of
software license costs are regularly reviewed by the Company and a loss would
be recognized if the value of the estimated un-discounted cash flow benefit
related to the asset falls below the unamortized cost. Historically the
Unified Messaging software technology has produced limited sales revenue.
However, management believes that the limited sales generated result from a
lack of application of Company sales and marketing resources to the software.
It is Management's plan to devote such resources to its software technology to
recognize the technology's potential value and therefore, no impairment loss
has been recorded.
d) Revenue Recognition
The Company derives its revenues from the licensing of its software
product and optional customer support (maintenance) service. The Company's
standard license agreement provides for a one-time fee for use of the
Company's product in perpetuity for each computer or CPU in which the software
will reside. The Company's software application is fully functional upon
delivery and implementation and does not require any significant modification
or alteration. The Company also offers customers an optional annual software
maintenance and support agreement for the subsequent one-year periods. Such
maintenance and support services are free for the first year the product is
licensed and is considered the warranty period. The software maintenance and
support agreement provides free software updates, if any, and technical
support the customer may need in deploying or changing the configuration of
the software. Generally, the Company does not license its software in multiple
element arrangements whereby the customer purchases a combination of software
and maintenance. In a typical arrangement, software maintenance services are
sold separately from the software product; are not considered essential to the
functionality of the software and are purchased at the customer's option upon
the completion of the first year licensed.
F-9
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
The Company does not offer any special payment terms or significant
discount pricing. Normal and customary payment terms require payment for the
software license fees when the product is shipped. Payment for software
maintenance is due prior to the commencement of the maintenance period. It is
also the Company's policy to not provide customers the right to refund any
portion of its license fees. The Company accepts Visa and MasterCard as well
as company checks.
With respect to the sale of software license fees, the Company
recognizes revenue in accordance with Statement of Position 97-2, Software
Revenue Recognition (SOP 97-2), as amended, and generally recognizes revenue
when all of the following criteria are met: (1) persuasive evidence of an
arrangement exists generally evidenced by a signed, written purchase order
from the customer, (2) delivery of the software product on Compact Disk (CD)
or other means to the customer has occurred, (3) the perpetual license fee is
fixed or determinable and (4) collectibility, which is assessed on a
customer-by-customer basis, is probable.
With respect to customer support services, upon the completion of one
year from the date of sale, considered to be the warrantee period, the Company
offers customers an optional annual software maintenance and support agreement
for subsequent one-year periods. Sales of purchased maintenance and support
agreements are recorded as deferred revenue and recognized over the respective
terms of the agreements.
e) Product Warranties
The Company estimates its warranty costs based on historical warranty
claims experience in estimating potential warranty claims. Due to the limited
sales of the Company's products, management has determined that warranty costs
are immaterial and has not included an accrual for potential warranty claims.
Presently, costs related to warranty coverage are expensed as incurred.
Warranty claims are reviewed quarterly to verify that warranty liabilities
properly reflect any remaining obligation based on the anticipated
expenditures over the balance of the obligation period.
f) Research and development costs
Research and development costs will be charged to expense as incurred.
g) Inventory
Inventory, consisting primarily of system components such as computer
components, voice cards, and monitors, is valued at the lower of cost or
market. Cost is determined on a first-in, first-out basis.
h) Income Taxes
The Company accounts for income taxes under the Financial Accounting
Standards Board ("FASB") of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes" ("Statement 109"). Under Statement 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax basis.
F-10
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
The Company, not being a separate reporting entity, will not receive any
benefit from the approximately $100,000 net operating loss allocated to the
unified messaging software business contained in these financial statements.
i) Organization Costs
Organization costs consist primarily of professional and filing fees
relating to the formation of the Company. These costs have been expensed.
j) Earnings Per Share
SFAS No. 128, "Earnings Per Share" requires presentation of basic
earnings per share ("basic EPS") and diluted earnings per share ("diluted
EPS").
The computation of basic pro forma EPS is computed by dividing income
available to common shareholders by the expected number of shares to be issued
in connection with the Company's proposed spin-off from iVoice, Inc. Diluted
earnings per share gives effect to all dilutive potential Common shares
outstanding during the period. The computation of diluted EPS does not assume
conversion, exercise or contingent exercise of securities that would have an
anti-dilutive effect on earnings resulting from the Company's net loss
position. Since the earnings per share information is being shown on a pro
forma basis, only the most recent year has been presented. The shares used in
the computation are as follows:
As of As of
December 31, December 31,
2004 2003
------------ ------------
Pro Forma Basis and diluted purposes 10,050,000 10,050,000
k) Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income", establishes standards
for the reporting and display of comprehensive income and its components in
the financial statements. The items of other comprehensive income that are
typically required to be displayed are foreign currency items, minimum pension
liability adjustments, and unrealized gains and losses on certain investments
in debt and equity securities. As of December 31, 2004 and 2003, the Company
has no items that represent comprehensive income, and thus, has not included a
statement of comprehensive income.
l) Recent Accounting Pronouncements
F-11
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
In December 2003, the FASB issued Interpretation No. 46-R,
"Consolidation of Variable Interest Entities" ("FIN 46-R"). FIN 46-R, which
modifies certain provisions and effective dates of FIN No. 46, sets forth
criteria to be used in determining whether an investment in a variable
interest entity should be consolidated, and is based on the general premise
that companies that control another entity through interests other than voting
interests should consolidate the controlled entity. The provisions of FIN 46
became effective for the Company during the third quarter of Fiscal 2004. The
adoption of this new standard did not have any impact on the Company's
financial position, results of operations or cash flows.
In December, 2003, the FASB issued a revision to SFAS No. 132
"Employers' Disclosures about Pensions and Other Post retirement Benefits."
This revised statement requires additional annual disclosures regarding types
of pension plan assets, investment strategy, future plan contributions,
expected benefit payments and other items. The statement also requires
quarterly disclosure of the components of net periodic benefit cost and plan
contributions. This currently has no effect on the Company.
m) Reclassification
Certain amounts in the 2003 financial statements were reclassified to
conform to the 2004 presentation. The reclassification results in no changes
in the net loss for that period.
n) RELATED PARTY TRANSACTIONS
During the years ended December 31, 2004 and 2003, iVoice allocated
operating costs of $49,129 and $27,458, respectively to Deep Field
Technologies. These allocations are reflected in the selling, general and
administrative, cost of revenue and research and development line items in our
statements of operations. The general corporate expense allocation is
primarily for cash management, selling expense, legal, accounting, tax,
insurance, public relations, advertising, and human resources. The
amortization of the Unified Messaging software has been reflected as cost of
sales. Other general categories of operating expense, as well as other income
and expense, have been allocated to Deep Field Technologies by iVoice based
upon a ratio of revenue of the Unified Messaging software over total iVoice
revenue for the applicable periods. Management believes the costs of these
services charged are a reasonable representation of the costs that would have
been incurred if Deep Field Technologies had performed these functions as a
stand-alone company.
In conjunction with the spin-off, Deep Field Technologies has entered into an
administrative services agreement with iVoice. The administrative services
agreement will continue on a month to month basis until Deep Field
Technologies has found replacement services for those services being provided
by iVoice or can provide these services for itself.
NOTE 6 - INCOME TAXES
The reconciliation of the effective income tax rate to the Federal Statutory
rate is as follows:
F-12
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
Federal Income Tax Rate (34.0)%
Deferred Tax charge (Credit) 0.0 %
Effect on Valuation Allowance 38.1 %
State Income Tax, Net of Federal Benefits ( 4.1)%
Effective Income Tax Rate 0.0 %
Prior to the spin-off, the Company was included as part of iVoice's
consolidated federal income tax return. However the income tax expense
presented in these financial statements has been computed on a separate return
basis.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
As discussed in Note 3, the Company has entered into a subscription agreement
with certain purchasers for the sale of $500,000 in convertible debentures. The
debentures were to be convertible into Class A common stock at the discretion of
the holders. Additionally, the Company had entered into a Standby Equity
Distribution Agreement whereby the Company, at its discretion, may periodically
sell to an investor shares of Class A Common Stock to raise capital to fund its
working capital needs. These transactions would have required the Company to
register its common stock under Section 12 (g) of the Securities Exchange Act of
1934 and subsequently register for resale a number of shares to facilitate these
financial transactions. On February 28, 2005, the Standby Equity Distribution
Agreement was terminated.
On February 28, 2005, convertible debentures equal in principal to $400,000 were
terminated and replaced with a secured promissory note of the same value. In
addition, on February 28, 2005, Deep Field Technologies borrowed an additional
$100,000 under the promissory note.
The Company has obtained a non-binding commitment for a Standby Equity
Distribution Agreement whereby the Company, at its discretion may periodically
sell to an investor shares of Class A Common Stock to raise capital to fund its
working capital needs. This transaction will require the Company to register its
Class A Common Stock for resale to facilitate this financial transaction.
The Company will also assume an outstanding promissory note in the amount of
$190,000 payable to Jerry Mahoney, President and Chief Executive Officer of
iVoice and Non-Executive Chairman of the Board of Deep Field Technologies.
This amount is related to funds loaned to iVoice and is unrelated to the
operations of. Deep Field Technologies. The note will bear interest at the
rate of Prime plus 2.0% per annum on the unpaid balance until paid. Under the
terms of the Promissory Note, at the option of the Note holder, principal and
interest can be converted into either (i) one share of Class B Common Stock of
Deep Field Technologies, Inc., par value $.01 per share, for each dollar owed,
(ii) the number of shares of Class A Common Stock of Deep Field Technologies,
Inc. calculated by dividing (x) the sum of the principal and interest that the
Note holder has requested to have prepaid by (y) eighty percent (80%) of the
lowest issue price of Class A Common Stock since the first advance of funds
under this Note, or (iii) payment of the principal of this Note, before any
repayment of interest.
Deep Field Technologies, Inc. entered into employment agreements with Jerome
Mahoney, its Chairman of the Board and Mark Meller, its President, Chief
Executive Officer and Chief Financial Officer, as of August 3, 2004 and
October 1, 2004, respectively.
Each of the employment agreements is for a term of five years and provides for
annual compensation of $85,000 with an annual increase based on the Consumer
Price Index. However, if Deep Field Technologies, Inc. achieves annual sales
equal to or greater than $2,000,000, Mr. Mahoney and Mr. Meller will each be
entitled to an automatic increase to $145,000. Each will also be entitled to
additional bonus incentives based on any mergers or acquisitions completed by
the Company.
F-13
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
Mr. Meller will also be entitled to a sum of $50,000 upon the completion of
the Distribution. Mr. Meller has agreed to defer the receipt of said sum until
such time that management believes it has sufficient financing in place to
fund this obligation.
In conjunction with the various spin-offs, Deep Field Technologies has entered
into an administrative services agreement with iVoice. The administrative
services agreements will continue on a month-to- month basis until these
companies have found replacement services for those services being provided by
iVoice or can provide these services for itself.
NOTE 8 - CAPITAL STOCK
Pursuant to Deep Field Technologist's certificate of incorporation, as
amended, the Company is authorized to issue 10,000,000,000 shares of Class A
Common Stock, no par value per share, 50,000,000 shares of Class B Common
Stock, par value $0.01 per share, 20,000,000 shares of Class C Common Stock,
par value $0.01 per share, and 1,000,000 shares of Preferred Stock, par value
of $1.00 per share. Below is a description of Deep Field Technologies'
outstanding securities, including Class A Common Stock, Class B Common Stock,
Class C Common Stock, and Preferred Stock.
a) Class A Common Stock
As of December 31, 2004, there are 10,000,000,000 shares of Class A Common
Stock authorized, no par value, and 100 shares were issued and outstanding.
Subsequent to December 31, 2004, upon the registration statement becoming
effective, the Company's proposed 100,500-for-one stock split retroactively
increased the shares to 10,050,000. (See note 9).
Each holder of Class A Common stock is entitled to receive ratably
dividends, if any, as may be declared by the Board of Directors out of funds
legally available for payment of dividends. The Company has never paid any
dividends on its Common Stock and does not contemplate doing so in the
foreseeable future. The Company anticipates that any earnings generated from
operations will be used to finance its growth objectives.
b) Class B Common Stock
As of December 31, 2004, there are 50,000,000 shares of Class B Common
Stock authorized, par value $.01 per share. Each holder of Class B Common
Stock has voting rights equal to 100 shares of Class A Common Stock. A holder
of Class B Common Stock has the right to convert each share of Class B Common
Stock into the number of shares of Class A Common Stock determined by dividing
the number of Class B Common Stock being converted by a 20% discount of the
lowest price that Deep Field Technologies, Inc. had ever issued its Class A
Common Stock. Upon our liquidation, dissolution, or winding-up, holders of
Class B Common Stock will be entitled to receive distributions. As of December
31, 2004, no shares were issued or outstanding.
c) Class C Common Stock
As of December 31, 2004, there are 20,000,000 shares of Class C Common
Stock authorized, par value $.01 per share. Each holder of Class C Common
Stock is entitled to 1,000 votes for each share held of record. Shares of
Class C Common Stock are not convertible into Class A Common Stock. Upon
liquidation, dissolution or wind-up, the holders of Class C
F-14
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
Common Stock are not entitled to receive our net assets pro rata. As of
December 31, 2004, no shares were issued or outstanding.
d) Preferred Stock
Deep Field Technologies is authorized to issue 1,000,000 shares of
Preferred Stock, par value $1.00 per share. As of December 31, 2004, Deep
Field Technologies has not issued any shares of Preferred Stock.
NOTE 9 - SUBSEQUENT EVENTS
In August 2004, the Company entered into an agreement with Sloan Securities
Corporation to act as an agent for the private placement of secured
convertible debentures to Cornell Capital Partners, L.P. Under the placement
agent agreement, the Company agreed to issue to Sloan on or about the date of
effectiveness of the registration statement for the Class A Common Stock a
number of shares of Class A Common Stock equal to $10,000 divided by the
closing bid price of the Class A Common Stock on the date of effectiveness of
such registration statement. The Company issued $200,000 of secured
convertible debentures on the dates and in the amounts as followed: August
2004 for $200,000 and November 2004 for $200,000. These were convertible into
shares of Class A Common Stock at a price equal to the lesser of (a) an amount
equal to one hundred twenty percent (120%) of the initial bid price of the
Class A Common Stock on the date of effectiveness of the registration
statement of which this prospectus is a part or (b) an amount equal to eighty
percent (80%) of the lowest closing bid price of the Class A Common Stock for
the five trading days immediately preceding the conversion date. The secured
convertible debentures had a term of two years with all accrued interest due
at the expiration of the term. At our option, these debentures may be redeemed
at a 20% premium prior to August 12, 2006. The secured convertible debentures
were secured by a first priority security interest in substantially all of the
assets of Deep Field Technologies.
On February 28, 2005, the Company renegotiated the terms and conditions of its
Convertible Debentures with the holders of such debentures. The parties thereto
agreed to terminate the Convertible Debentures replacing them with a Promissory
Note. The Promissory Note was in the amount of $500,000, $400,000 of which
replaced the convertible debentures, and $100,000 of which was advanced on
February 28, 2005. A commitment fee of 10% of the face amount of the Convertible
Debentures was paid at the time of each advance on the Convertible Debentures.
Such commitment fees were credited against commitment fees due and owing against
the Note. The balance of the commitment fee against the Note was paid on
February 28, 2005, at the time that such $100,000 was advanced to the Company.
The Promissory Note bears interest at the rate of 12% per annum. Principal on
the Note will be amortized in equal weekly installments of $10,000 commencing
on July 4, 2005. Payments of interest shall commence on September 1, 2005 and
shall continue on the first day of each calendar month thereafter until the
principal is paid in full. Payment in full of the principal and interest on
the Note is due on or before July 4, 2006. In the event all principal and
interest has not been paid by the one year anniversary from the initial
payment on July 4, 2005, in accordance with the amortization schedule
described above, the Company will make a lump sum payment of all outstanding
interest and principal on July 4, 2006.
F-15
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
On February 28, 2005, iVoice, Inc. agreed to provide a full and unconditional
guaranty of the payment and performance obligations of Deep Field Technologies
under the promissory note which cannot be discharged, except as specifically
provided in the promissory note and the related documents. Under the guaranty,
if Deep Field Technologies defaults in payment or performance of any of its
obligations under the promissory note, iVoice, Inc. is required to pay or
perform such obligations upon two days' written notice or demand by the holders
of the promissory notes and to take an advance or advances, as may be necessary,
from the Standby Equity Distribution Agreement by and between iVoice Inc. and
Cornell Capital Partners, LP. Notwithstanding anything to the contrary, so long
as the outstanding principal amount is zero or would be made zero simultaneously
with the termination, iVoice, Inc. shall have the right to terminate the
guaranty at any time by providing written notice of such termination.
Notwithstanding anything to the contrary, this Guaranty shall be discharged and
terminated upon the Company's registration statement in connection with the
Distribution being declared effective by the U.S Securities and Exchange
Commission.
Effective August 12, 2004, Deep Field Technologies entered into a Standby
Equity Distribution Agreement with Cornell Capital Partners to obtain an
equity line of credit. Under this agreement, Deep Field Technologies may issue
and sell to Cornell Capital Partners Class A Common Stock for a total purchase
price of up to $10.0 million. Effective February 28, 2005, the Deep Field
Technologies terminated its Standby Equity Distribution Agreement, dated
August 2004, entered into by and between the Company and Cornell Capital
Partners, LLP. On March 9, 2005, the Company executed a non-binding letter
agreement with Cornell Capital Partners LLP whereby the parties agreed subject
to the satisfaction of certain conditions to enter into a Standby Equity
Distribution Agreement following the date that the Company's registration
statement on Form SB-2, as filed with the Securities and Exchange Commission
on November 2004, is deemed effective by that agency. Subject to various
conditions, the non-binding letter of commitment provides that, upon execution
of definitive documents and the satisfaction of any conditions that may be set
forth in such documents Deep Field Technologies will be entitled to commence
drawing funds under this agreement when the resale of the Class A Common Stock
issuable under the equity line of credit is registered with the Securities and
Exchange Commission, and the equity line of credit will remain outstanding for
two years thereafter. The non-binding letter of commitment provides that
purchase price for the shares will be equal to 95% of the market price, which
is defined as the lowest closing bid price of the Class A Common Stock during
the five trading days following the date that Deep Field Technologies delivers
to Cornell Capital Partners a notice requiring it to advance funds to the
Company. A cash fee equal to six percent (6%) of the cash proceeds of the draw
down is also payable at the time of funding. In addition, non-binding letter
of commitment provides that Cornell Capital Partners will receive, as
additional compensation, the number of shares of Class A Common Stock equal to
one and one half percent (1.5%) of the number of shares of Class A Common
Stock outstanding on the date that the registration statement in respect of
the shares to be distributed pursuant to the equity line of credit becomes
effective. To date, Deep Field Technologies has not drawn down on the equity
line of credit.
According to the registration statement for the distribution of the Deep Field
Technologies Class A Common Stock, a 100,500-for-one stock split was
accomplished by means of a stock dividend effectuated immediately prior to the
effective date of the registration statement. The Company has retroactively
restated the shares outstanding at December 31, 2004 for this stock split.
F-16
DEEP FIELD TECHNOLOGIES, INC.
BALANCE SHEET
(Unaudited)
ASSETS March 31,
- ------ 2005
---------
CURRENT ASSETS
Cash and cash equivalents $ 375,250
Accounts receivable 3,000
Inventory, net 317
---------
Total current assets 378,567
TOTAL ASSETS $ 378,567
LIABILITIES AND OWNER'S EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 100,706
Notes Payable 500,000
---------
Total current liabilities 600,706
OWNER'S EQUITY (DEFICIENCY)
Preferred stock, par value $1; Authorized
1,000,000 shares; no shares issued or outstanding
Common Stock 0
Class A, no par value; Authorized 10,000,000,000
shares; 10,050,000 shares issued and outstanding 0
Class B, par value $.01; Authorized 50,000,000 shares;
no shares issued and outstanding 0
Class C, par value $.01; Authorized 20,000,000
shares; no shares issued and outstanding 0
Net investment, iVoice, Inc. 148,302
Accumulated deficit (370,441)
---------
Total owner's equity (deficiency) (222,139)
---------
TOTAL LIABILITIES AND OWNER'S EQUITY (DEFICIENCY) $ 378,567
=========
The Notes to the Unaudited Financial Statements are an integral part of these
statements.
F-17
DEEP FIELD TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
For The Three Months Ended March 31, 2005 and 2004
(Unaudited)
2005 2004
-------- --------
SALES, net $ 112 $ 2,852
COST OF SALES -- 1,138
-------- --------
GROSS PROFIT 112 1,714
-------- --------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling expenses -- 962
General & administrative expense 62,876 10,527
Research & development -- 930
-------- --------
Total Selling, General & 62,876 12,419
Administrative expenses
-------- --------
LOSS FROM CONTINUING OPERATIONS (62,764) (10,705)
-------- --------
OTHER INCOME (EXPENSE)
Other income 710 845
Write off of financing costs (10,000) (33,971)
Interest expense (5,343) (240)
-------- --------
Total other income (expense) (14,633) (33,366)
-------- --------
LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES (77,397) (44,071)
--------
PROVISION FOR INCOME TAXES -- --
--------
NET LOSS FROM CONTINUING OPERATIONS $(77,397) $(44,071)
========== ==========
NET LOSS PER COMMON SHARE:
Basic $ (.01) $ (.00)
========== ==========
Diluted $ (.01) $ (.00)
========== ==========
Average weighted common shares 10,050,000 10,050,000
========== ========
The Notes to the Unaudited Financial Statements are an integral part of these
statements.
F-18
DEEP FIELD TECHNOLGIES, INC.
STATEMENTS OF CASH FLOW
For The Three Months Ended March 31, 2005 and 2004
(Unaudited)
2005 2004
--------- ---------
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $ (77,397) $ (44,071)
Changes in operating assets and liabilities
Decrease in inventory -- 66
Decrease in cost in excess of billing -- 44
Increase in accounts payable and accrued
expenses 53,193 --
(Decrease) in deferred maintenance
contracts (112) --
--------- ---------
Net cash (used in) operating activities (24,316) (43,961)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Allocation of costs by iVoice -- 43,961
Sale of convertible debentures 100,000 --
--------- ---------
Net cash provided by financing activities 100,000 43,961
--------- ---------
NET INCREASE IN CASH 75,684 --
CASH - Beginning of period 299,566 --
--------- ---------
CASH - End of period $ 375,250 $ --
========= =========
NOTE 12 - SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID DURING THE PERIOD FOR:
Interest expense $ -- $ --
========= =========
Income taxes $ -- $ --
========= =========
The Notes to the Unaudited Financial Statements are an integral part of these
statements.
F-19
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
NOTE 1 - BACKGROUND
The unaudited interim financial statements included herein have been prepared
by Deep Field Technologies, Inc., without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"). Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted as
allowed by such rules and regulations, and the Company believes that the
disclosures are adequate to make the information presented not misleading. It
is suggested that these financial statements be read in conjunction with the
December 31, 2004 audited financial statements and the accompanying notes
thereto. While management believes the procedures followed in preparing these
financial statements are reasonable, the accuracy of the amounts are in some
respects dependent upon the facts that will exist, and procedures that will be
accomplished by the Company later that year.
The management of the Company believes that the accompanying unaudited
financial statements contain all adjustments (including normal recurring
adjustments) necessary to present fairly the operations and cash flows for the
periods presented.
Deep Field Technologies, Inc. ("Deep Field Technologies" or the "Company") was
incorporated under the laws of New Jersey on November 10, 2004 as a wholly
owned subsidiary of iVoice, Inc. ("iVoice"). The Company received by
assignment all of the interests in and rights and title to, and assumed all of
the obligations of, all of the agreements, contracts, understandings and other
instruments of Deep Field Technologies, Inc., a Nevada corporation and
affiliate of the Company. When we refer to or describe any agreement, contract
or other written instrument of the Company in these notes, we are referring to
an agreement, contract or other written instrument that had been entered into
by Deep Field Technologies 2 and assigned to the Company.
In September 2004, the Board of Directors of iVoice resolved to pursue the
separation of iVoice software business into three publicly owned companies.
iVoice will continue to focus on its own computerized telephony technology and
related business development operations. Deep Field Technologies indends to
continue to develop, market and license the Unified Messaging line of
computerized telephony software.
The spin-off transaction will be accomplished by the distribution of certain
intellectual property, representing the software codes of Unified Messaging, and
certain accrued liabilities and related party debt to Deep Field Technologies
(the "Distribution"), the shares of common stock of which will be distributed to
iVoice shareholders in the form of a taxable dividend.
In conjunction with the spin-off, Deep Field Technologies has entered into a
temporary administrative services agreement with iVoice. The agreement will
terminate upon completion of the Distribution. However, if, following the
Distribution, Deep Field Technologies is unable to replace any or all of the
services currently being provided by iVoice under the administrative services
agreement, the administrative
F-20
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
services agreement will be continued with respect to those services on a
month-to-month basis.
Deep Field Technologies also intends to assume $190,000 in accrued liabilities
and related party debt presently outstanding and incurred by iVoice. The debt
being assumed will be convertible into Class B Common Stock of Deep Field
Technologies at the option of the holder as later described in these notes.
NOTE 2 - BUSINESS OPERATIONS
The Company will continue to develop, market and license the Unified Messaging
line, which was developed by iVoice. With Unified Messaging, e-mail, voice
mail and faxes can be handled through a desktop computer or telephone. All
messages can be viewed and acted upon in order of importance via Microsoft
Outlook or a web browser. E-mail can also be retrieved over the phone, using
text-to-speech, and responded to with a voice message including directed to a
fax machine.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America,
which contemplates continuation of the Company as a going concern. The Company
has traditionally operated as a non-reporting component of iVoice, Inc. and
accordingly these financial statements have been derived from the consolidated
financial statements and accounting records of iVoice, Inc., and reflect
significant assumptions and allocations. The Company relies on iVoice, Inc.
for administrative, management, research and other services. These financial
statements do not necessarily reflect the financial position, results of
operations, and cash flows of the Company had it been a stand-alone company.
As of March 31, 2005, the Company had a net loss, a negative cash flow from
operations as well as negative working capital. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
Therefore, recoverability of a major portion of the recorded asset amounts
shown in the accompanying balance sheets is dependent upon continued
operations of the Company, which in turn, is dependent upon the Company's
ability to raise capital and/or generate positive cash flow from operations.
In order to provide necessary working capital, in August 2004, the Company
entered into a subscription agreement, pursuant to which the Company issued
$200,000 of secured convertible debentures in August 2004, and an additional
$200,000 of secured convertible debentures in November 2004. On February 28,
2005, convertible debentures equal in principal to $500,000 were terminated and
replaced with a secured promissory note in the amount of $500,000 ($400,000
representing replacement notes and $100,000 representing new financing).
F-21
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
The accompanying financial statements have been derived from the
consolidated financial statements and accounting records of iVoice using the
historical results of operations and historical basis of assets and
liabilities of the Company's Interactive Voice Response business. Management
believes the assumptions underlying the financial statements are reasonable.
However, the financial statements included herein may not necessarily reflect
the Company's results of operations, financial position, and cash flows in the
future or what its results of operations, financial position and cash flows
would have had the Company been a stand-alone company during the periods
presented.
b) Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from
those estimates.
c) Software License Costs
Software license costs are recorded at cost, which approximates fair
market value as of the date of purchase. These costs represent the purchase of
various exploitation rights to certain software, pre-development codes and
systems developed by a non-related third party. These costs are capitalized
pursuant to Statement of Financial Accounting Standards ("SFAS") 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed". The Company has adopted SFAS No. 121. The carrying value of
software license costs are regularly reviewed by the Company and a loss would
be recognized if the value of the estimated un-discounted cash flow benefit
related to the asset falls below the unamortized cost. Historically the
Interactive Voice Response software technology has produced limited sales
revenue. However, management believes that the limited sales generated result
from a lack of application of Company sales and marketing resources to the
software, It is Management's plan to devote such resources to its software
technology to recognize the technology's potential value and therefore, no
impairment loss has been recorded.
d) Revenue Recognition
The Company derives its revenues from the licensing of its software
product and optional customer support (maintenance) service. The Company's
standard license agreement provides for
F-22
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
a one-time fee for use of the Company's product in perpetuity for each
computer or CPU in which the software will reside. The Company's software
application is fully functional upon delivery and implementation and does not
require any significant modification or alteration. The Company also offers
customers an optional annual software maintenance and support agreement for
the subsequent one-year periods. Such maintenance and support services are
free for the first year the product is licensed and is considered the warranty
period. The software maintenance and support agreement provides free software
updates, if any, and technical support the customer may need in deploying or
changing the configuration of the software. Generally, the Company does not
license its software in multiple element arrangements whereby the customer
purchases a combination of software and maintenance. In a typical arrangement,
software maintenance services are sold separately from the software product;
are not considered essential to the functionality of the software and are
purchased at the customer's option upon the completion of the first year
licensed.
The Company does not offer any special payment terms or significant
discount pricing. Normal and customary payment terms require payment for the
software license fees when the product is shipped. Payment for software
maintenance is due prior to the commencement of the maintenance period. It is
also the Company's policy to not provide customers the right to refund any
portion of its license fees. The Company accepts Visa and MasterCard as well
as company checks.
With respect to the sale of software license fees, the Company
recognizes revenue in accordance with Statement of Position 97-2, Software
Revenue Recognition (SOP 97-2), as amended, and generally recognizes revenue
when all of the following criteria are met: (1) persuasive evidence of an
arrangement exists generally evidenced by a signed, written purchase order
from the customer, (2) delivery of the software product on Compact Disk (CD)
or other means to the customer has occurred, (3) the perpetual license fee is
fixed or determinable and (4) collectibility, which is assessed on a
customer-by-customer basis, is probable.
With respect to customer support services, upon the completion of one
year from the date of sale, considered to be the warrantee period, the Company
offers customers an optional annual software maintenance and support agreement
for subsequent one-year periods. Sales of purchased maintenance and support
agreements are recorded as deferred revenue and recognized over the respective
terms of the agreements.
e) Product Warranties
The Company estimates its warranty costs based on historical warranty
claims experience in estimating potential warranty claims. Due to the limited
sales of the Company's products, management has determined that warranty costs
are immaterial and has not included an accrual for potential warranty claims.
Presently, costs related to warranty coverage are expensed as incurred.
Warranty claims are reviewed quarterly to verify that warranty liabilities
properly reflect any remaining obligation based on the anticipated
expenditures over the balance of the obligation period.
F-23
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
f) Research and development costs
Research and development costs will be charged to operations as
incurred.
g) Inventory
Inventory, consisting primarily of system components such as computer
components, voice cards, and monitors, is valued at the lower of cost or
market. Cost is determined on a first-in, first-out basis.
h) Income Taxes
The Company accounts for income taxes under the Financial Accounting
Standards Board ("FASB") of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes" ("Statement 109"). Under Statement 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax basis. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Upon completion of the spin-off the Company will have access to
approximately $400,000 net operating loss allocated to the unified voice
messaging software business contained in these financial statements.
i) Organization Costs
Organization costs consist primarily of professional and filing fees
relating to the formation of the Company. These costs have been expensed.
j) Earnings Per Share
SFAS No. 128, "Earnings Per Share" requires presentation of basic
earnings per share ("basic EPS") and diluted earnings per share ("diluted
EPS").
The computation of basic pro forma EPS is computed by dividing income
available to common shareholders by the expected number of shares to be issued
in connection with the Company's proposed spin-off from iVoice, Inc. Diluted
earnings per share gives effect to all dilutive potential Common shares
outstanding during the period. The computation of diluted EPS does not assume
conversion, exercise or contingent exercise of securities that would have an
anti-dilutive effect on earnings resulting from the Company's net loss
position. Since the earnings per share information is being shown on a pro
forma basis, only the most recent year has been presented. The shares used in
the computation are as follows:
F-24
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
As of As of
March 31, March 31,
2005 2004
-------- ---------
Pro Forma Basis and diluted purposes 10,050,000 10,050,000
k) Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income", establishes standards
for the reporting and display of comprehensive income and its components in
the financial statements. The items of other comprehensive income that are
typically required to be displayed are foreign currency items, minimum pension
liability adjustments, and unrealized gains and losses on certain investments
in debt and equity securities, As of March 31, 2005 and 2004, the Company has
no items that represent comprehensive income, and thus, has not included a
statement of comprehensive income.
l) Recent Accounting Pronouncements
In December 2003, the FASB issued Interpretation No. 46-R,
"Consolidation of Variable Interest Entities" ("FIN 46-R"). FIN 46-R, which
modifies certain provisions and effective dates of FIN No. 46, sets forth
criteria to be used in determining whether an investment in a variable
interest entity should be consolidated, and is based on the general premise
that companies that control another entity through interests other than voting
interests should consolidate the controlled entity. The provisions of FIN 46
became effective for the Company during the third quarter of fiscal 2004. The
adoption of this new standard did not have any impact on the Company's
financial position, results of operations or cash flows.
In December 2003, the FASB issued a revision to SFAS No. 132 "Employers'
Disclosures about Pensions and Other Post retirement Benefits." This revised
statement requires additional annual disclosures regarding types of pension
plan assets, investment strategy, future plan contributions, expected benefit
payments and other items. The statement also requires quarterly disclosure of
the components of net periodic benefit cost and plan contributions. This
currently has no effect on the Company.
On December 16, 2004, the Financial Accounting Standards Board ("FASB")
published Statement of Financial Accounting Standards No. 123 (Revised 2004),
Share-Based Payment ("SFAS 123R"). SFAS 123R requires that compensation cost
related to share-based payment transactions be recognized in the financial
statements. Share-based payment transactions within the scope of SFAS 123R
include stock options, restricted stock plans, performance-based awards, stock
appreciation rights, and employee share purchase plans. The provisions of SFAS
123R are effective for small business issuers as of the first interim period
that begins after December 15, 2005. Accordingly, the Company will implement
the revised standard in the fourth quarter of fiscal year 2005. Currently, the
Company accounts for its share-based payment transactions under the provisions
of APB 25, which does not necessarily require the recognition of compensation
cost in the financial statements (note 3(d)). Management is assessing the
implications of this revised standard, which may materially impact the
Company's results of operations in the fourth quarter of fiscal year 2005 and
thereafter.
F-25
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
NOTE 5 - RELATED PARTY TRANSACTIONS
During the three months ended March 31, 2004, iVoice allocated operating costs
of $43,961 to Deep Field Technologies. These allocations are reflected in the
selling, general and administrative, cost of revenue and research and
development line items in our statements of operations. The general corporate
expense allocation is primarily for cash management, selling expense, legal,
accounting, tax, insurance, public relations, advertising, and human resources.
The amortization of the Unified Messaging software has been reflected as cost of
sales. Other general categories of operating expense, as well as other income
and expense, have been allocated to Deep Field Technologies by iVoice based upon
a ratio of revenue of the Unified Messaging software over total iVoice revenue
for the applicable periods. Management believes the costs of these services
charged are a reasonable representation of the costs that would have been
incurred if Deep Field Technologies had performed these functions as a
stand-alone company.
In conjunction with the spin-off, Deep Field Technologies has entered into a
temporary administrative services agreement with iVoice. The administrative
services agreement will continue on a month to month basis until Deep Field
Technologies has found replacement services for those services being provided by
iVoice or can provide these services for itself.
NOTE 6 - INCOME TAXES
The reconciliation of the effective income tax rate to the Federal Statutory
rate is as follows:
Federal Income Tax Rate (34.0)%
Deferred Tax charge (Credit) 0.0 %
Effect on Valuation Allowance 38.1 %
State Income Tax, Net of Federal Benefits ( 4.1)%
Effective Income Tax Rate 0.0 %
Prior to the spin-off, the Company was included as part of iVoice's consolidated
federal income tax return. The Company has provided a 100% valuation of its
deferred tax assets.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
As discussed in Note 3, the Company has entered into a subscription agreement
with certain purchasers for the sale of $500,000 in convertible debentures. The
debentures were to be convertible into Class A common stock at the discretion of
the holders. Additionally, the Company had entered into a Standby Equity
Distribution Agreement whereby the Company, at its discretion, may periodically
sell to an investor shares of Class A Common Stock to raise capital to fund its
working capital needs. These transactions would have required the Company to
register its common stock under Section 12 (g) of the Securities Exchange Act of
1934 and subsequently register for resale a number of shares to facilitate these
financial transactions. On February 28, 2005, the Standby Equity Distribution
Agreement was terminated.
F-26
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
On February 28, 2005, convertible debentures equal in principal to $400,000 were
terminated and replaced with a secured promissory note in the amount of $500,000
($400,000 representing replacement notes and $100,000 representing new
financing).
The Company has obtained a non-binding commitment for a Standby Equity
Distribution Agreement whereby the Company, at its discretion may periodically
sell to an investor shares of Class A Common Stock to raise capital to fund its
working capital needs. This transaction will require the Company to register its
Class A Common Stock for resale to facilitate this financial transaction.
The Company will also assume an outstanding promissory note in the amount of
$190,000 payable to Jerry Mahoney, President and Chief Executive Officer of
iVoice and Non-Executive Chairman of the Board of Deep Field Technologies. This
amount is related to funds loaned to iVoice and is unrelated to the operations
of Deep Field Technologies. The note will bear interest at the rate of Prime
plus 2.0% per annum on the unpaid balance until paid. Under the terms of the
Promissory Note, at the option of the Note holder, principal and interest can be
converted into either (i) one share of Class B Common Stock of Deep Field
Technologies, Inc., par value $.01 per share, for each dollar owed, (ii) the
number of shares of Class A Common Stock of Deep Field Technologies, Inc.
calculated by dividing (x) the sum of the principal and interest that the Note
holder has requested to have prepaid by (y) eighty percent (80%) of the lowest
issue price of Class A Common Stock since the first advance of funds under this
Note, or (iii) payment of the principal of this Note, before any repayment of
interest.
Deep Field Technologies, Inc. entered into employment agreements with Jerome
Mahoney, its Chairman of the Board and Mark Meller, its President, Chief
Executive Officer and Chief Financial Officer, as of August 3, 2004 and
October 1, 2004, respectively.
Each of the employment agreements is for a term of five years and provides for
annual compensation of $85,000 with an annual increase based on the Consumer
Price Index. However, if Deep Field Technologies, Inc. achieves annual sales
equal to or greater than $2,000,000, Mr. Mahoney and Mr. Meller will each be
entitled to an automatic increase to $145,000. Each will also be entitled to
additional bonus incentives based on any mergers or acquisitions completed by
the Company.
Mr. Meller will also be entitled to a sum of $50,000 upon the completion of
the Distribution. Mr. Meller has agreed to defer the receipt of said sum until
such time that management believes it has sufficient financing in place to
fund this obligation.
In conjunction with the various spin-offs, Deep Field Technologies has entered
into temporary administrative services agreement with iVoice. The
administrative services agreements will continue on a month-to- month basis
until these companies have found replacement services for those services being
provided by iVoice or can provide these services for itself.
NOTE 8 - CAPITAL STOCK
Pursuant to Deep Field Technologies' certificate of incorporation, as amended,
the Company is authorized to issue 10,000,000,000 shares of Class A Common
Stock, no par value per share, 50,000,000 shares of Class B Common Stock, par
value $0.01 per share, 20,000,000 shares of
F-27
DEEP FIELD TECHNOLOGIES, INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
Class C Common Stock, par value $0.01 per share, and 1,000,000 shares of
Preferred Stock, par value of $1.00 per share. Below is a description of Deep
Field Technologies' outstanding securities, including Class A Common Stock,
Class B Common Stock, Class C Common Stock, and Preferred Stock.
a) Class A Common Stock
As of March 31, 2005, there are 10,000,000,000 shares of Class A Common
Stock authorized, no par value, and 100 shares were issued and outstanding.
Subsequent to March 31, 2005, upon the registration statement becoming
effective, the Company's proposed 100,500-for-one stock split retroactively
increased the shares to 10,050,000.
Each holder of Class A Common stock is entitled to receive ratably
dividends, if any, as may be declared by the Board of Directors out of funds
legally available for payment of dividends. The Company has never paid any
dividends on its Common Stock and does not contemplate doing so in the
foreseeable future. The Company anticipates that any earnings generated from
operations will be used to finance its growth objectives.
b) Class B Common Stock
As of March 31, 2005, there are 50,000,000 shares of Class B Common Stock
authorized, par value $.01 per share. Each holder of Class B Common Stock has
voting rights equal to 100 shares of Class A Common Stock. A holder of Class B
Common Stock has the right to convert each share of Class B Common Stock into
the number of shares of Class A Common Stock determined by dividing the number
of Class B Common Stock being converted by a 20% discount of the lowest price
that Deep Field Technologies, Inc. had ever issued its Class A Common Stock.
Upon our liquidation, dissolution, or winding-up, holders of Class B Common
Stock will be entitled to receive distributions. As of March 31, 2005, no shares
were issued or outstanding.
c) Class C Common Stock
As of March 31, 2005, there are 20,000,000 shares of Class C Common
Stock authorized, par value $.01 per share. Each holder of Class C Common
Stock is entitled to 1,000 votes for each share held of record. Shares of
Class C Common Stock are not convertible into Class A Common Stock. Upon
liquidation, dissolution or wind-up, the holders of Class C Common Stock are
not entitled to receive our net assets pro rata. As of March 31, 2005, no
shares were issued or outstanding.
d) Preferred Stock
Deep Field Technologies is authorized to issue 1,000,000 shares of
Preferred Stock, par value $1.00 per share. As of March 31, 2005, Deep Field
Technologies has not issued any shares of Preferred Stock.
F-28
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed statements of operations for the
three months ended March 31, 2005, for the years ended December 31, 2004 and
2003 and the unaudited pro forma condensed balance sheet at March 31, 2005 and
December 31, 2004 present the results of operations and financial position of
Deep Field Technologies, Inc., assuming that the transactions contemplated by
the spin-off had been completed as of the beginning of 2003 with respect to
the pro forma consolidated income statements for the three months ended March
31, 2005 and the years ended December 31, 2004 and 2003 and for the three
months ended March 31, 2005 with respect to the pro forma consolidated balance
sheet. The pro forma adjustments give effect of a spin-off transaction whereby
shareholders of the Company's former parent, iVoice, Inc., will receive a
pro-rata distribution of the Company's shares in the form of a taxable
dividend. Under the spin-off transaction, the Company will receive certain
intellectual property and liabilities of the Company's former parent, iVoice,
Inc. In the opinion of management, they include all material adjustments
necessary to reflect, on a pro forma basis, the impact of transactions
contemplated by the spin-off on the historical financial information of Deep
Field Technologies, Inc.
The pro forma financial information is presented for informational purposes
and does not purport to represent what our financial position and our results
of operations actually would have been had the separation and related
transactions occurred on the dates indicated. Actual results might have
differed from pro forma results if Deep Field Technologies had operated
independently. The pro forma financial information should not be relied upon
as being indicative of results Deep Field Technologies would have had or of
future results after the spin-off. The historical selected financial
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the combined
financial statements and notes thereto included elsewhere in this prospectus.
F-29
CONDENSED UNAUDITED PRO FORMA BALANCE SHEET
(UNAUDITED)
AS OF DECEMBER 31, 2004
As Pro Forma
Reported Adjustments Pro Forma
-------- ----------- ---------
Current Assets
Cash $ 299,566 $ -- $ 299,566
Accounts Receivable 3,000 -- 3,000
Inventory 317 -- 317
--------- --------- ---------
Total Current Assets 302,883 -- 302,883
--------- --------- ---------
Total Assets $ 302,883 $ -- $ 302,883
========= ========= =========
Current Liabilities
Accounts payable and accrued
liabilities: 47,513 -- 47,513
Due to related party -- 190,000 190,000
Convertible debentures 400,000 -- 400,000
Deferred maint contracts 112 -- 112
--------- --------- ---------
Total current liabilities 447,625 190,000 637,625
Stockholder's deficit (144,742) (190,000) (334,742)
--------- --------- ---------
Total Liabilities and Stockholder's Deficit $ 302,883 $ -- $ 302,883
========= ========= =========
See accompanying Notes to Condensed Unaudited Pro Forma Financial Information.
F-30
CONDENSED UNAUDITED PRO FORMA BALANCE SHEET
(UNAUDITED)
AS OF MARCH 31, 2005
As Pro Forma
Reported Adjustments Pro Forma
-------- ----------- ---------
Current Assets
Cash $ 375,250 $ -- $ 375,250
Accounts Receivable 3,000 -- 3,000
Inventory 317 -- 317
--------- --------- ---------
Total Current Assets 378,567 -- 378,567
--------- --------- ---------
Total Assets $ 378,567 $ -- $ 378,567
========= ========= =========
Liabilities and Stockholder's Deficit
Current Liabilities
Accounts payable and accrued liabilities 100,706 -- 100,706
Due to related party -- 190,000 190,000
Convertible debentures 500,000 -- 500,000
--------- --------- ---------
Total current liabilities 600,706 190,000 790,706
--------- --------- ---------
Stockholder's deficit (222,139) (190,000) (412,139)
--------- --------- ---------
Total Liabilities and Stockholder's Deficit $ 378,567 $ -- $ 378,567
========= ========= =========
See accompanying Notes to Condensed Unaudited Pro Forma Financial Information.
F-31
PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
YEAR ENDED DECEMBER 31, 2004
As Pro Forma
Reported Adjustments Pro Forma
-------- ----------- ---------
Sales, net $ 7,344 $ -- $ 7,344
Cost of Sales 2,352 -- 2,352
--------- --------- ---------
Gross Profit 4,992 -- 4,992
Selling General and Administrative
Expenses 125,738 35,000 160,738
--------- --------- ---------
Loss from Operations (120,746) (35,000) (155,746)
Other Income (Expense) (73,515) (12,350) (85,865)
--------- --------- ---------
Loss before Income Taxes (194,261) (47,350) (241,611)
Provision for Income Taxes -- -- --
--------- --------- ---------
Net Loss $(194,261) $ (47,350) $(241,611)
========= ========= =========
Net Loss Per Common Share:
Basic $ (0.02)
=========
Diluted $ (0.02)
=========
See accompanying Notes to Condensed Unaudited Pro Forma Financial Information.
F-32
PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
YEAR ENDED DECEMBER 31, 2003
As Pro Forma
Reported Adjustments Pro Forma
-------- ----------- ---------
Sales, net $ 8,505 $ 8,505
Cost of Sales 3,447 -- 3,447
--------- --------- ---------
Gross Profit 5,058 -- 5,058
Selling General and Administrative Expenses 24,288 60,000 84,288
--------- --------- ---------
Income (Loss) from Operations (19,230) (60,000) (79,230)
Other Income (Expense) (9,708) (12,350) (22,058)
--------- --------- ---------
Loss before Income Taxes (28,938) (72,350) (101,288)
Provision for Income Taxes -- -- --
--------- --------- ---------
Net Loss $ (28,938) $ (72,350) $(101,288)
========= ========= =========
Net Loss Per Common Share:
Basic $ (0.01)
=========
Diluted $ (0.01)
=========
See accompanying Notes to Condensed Unaudited Pro Forma Financial Information.
F-33
PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2005
As Pro Forma
Reported Adjustments Pro Forma
-------- ----------- ---------
Sales, net $ 112 $ -- $ 112
Cost of Sales -- -- --
-------- -------- --------
Gross Profit 112 -- 112
Selling General and Administrative Expenses 62,876 -- 62,876
-------- -------- --------
Loss from Operations (62,764) -- (62,764)
Other Income (Expense) (14,633) (3,088) (17,721)
-------- -------- --------
Loss before Income Taxes (77,397) (3,088) (80,485)
Provision for Income Taxes -- -- --
-------- -------- --------
Net Loss $(77,397) $ (3,088) $(80,485)
======== ======== ========
Net Loss Per Common Share:
Basic
$ (0.01)
========
Diluted $ (0.01)
========
NOTES TO CONDENSED UNAUDITED PRO FORMA FINANCIAL INFORMATION
F-34
NOTES TO CONDENSED UNAUDITED PRO FORMA FINANCIAL INFORMATION
NOTE 1.
The historical financial statements of Deep Field Technologies, Inc. reflect
periods during which Deep Field Technologies did not operate as a separate,
independent public company. Certain estimates, assumptions and allocations
were made in preparing such financial statements. Therefore, the historical
financial statements do not necessarily reflect the results of operations or
financial position that would have occurred had Deep Field Technologies been a
separate, independent public company during the periods presented, nor are
they indicative of future performance.
Management believes that the estimates, assumptions and allocations made in
preparing the historical financial statements are reasonable.
NOTE 2.
The pro forma unaudited balance sheet for the year ended December 31, 2004 was
prepared assuming the distribution occurred on December 31, 2004 and includes
"Pro Forma Adjustments" for transactions that occurred subsequent to December
31, 2003 as follows:
a) The Company is assuming an outstanding promissory note in the
amount of $190,000 payable to Jerry Mahoney, President and
Chief Executive Officer of iVoice. The note will bear interest
at the rate of prime plus 2.0% per annum on the unpaid balance
until paid or until default. Under the terms of the Promissory
Note, at the option of the Note holder, principal and interest
can be converted into either (i) one Class B common stock share
of Deep Field Technologies, Inc., par value $.01, for each
dollar owed, (ii) the number of Class A common stock shares of
Deep Field Technologies, Inc. calculated by dividing (x) the
sum of the principal and interest that the Note holder has
requested to have prepaid by (y) eighty percent (80%) of the
lowest issue price of Class A common stock since the first
advance of funds under this Note, or (iii) payment of the
principal of this Note, before any repayment of interest.
The pro forma unaudited balance sheet for the three months ended March 31,
2005 was prepared assuming the distribution occurred on March 31, 2005 and
includes "Pro Forma Adjustments" for transactions that occurred subsequent to
December 31, 2003 as follows:
a) The Company is assuming an outstanding promissory note in the
amount of $190,000 payable to Jerry Mahoney, President and
Chief Executive Officer of iVoice. The note will bear interest
at the rate of prime plus 2.0% per annum on the unpaid balance
until paid or until default. Under the terms of the Promissory
Note, at the option of the Note holder, principal and interest
can be converted into either (i) one Class B common stock share
of Deep Field, Inc., par value $.01, for each dollar owed, (ii)
the number of Class A common stock shares of Deep Field, Inc.
calculated by dividing (x) the sum of the principal and
interest that the Note holder has requested to have prepaid by
(y) eighty percent (80%) of the lowest issue price of Class A
common stock since the first advance of funds under this
F-35
Note, or (iii) payment of the principal of this Note, before
any repayment of interest.
NOTE 3.
The pro forma unaudited statement of operations for the year ended December
31, 2004 was prepared assuming the distribution occurred on January 1, 2003
and includes "Pro Forma Adjustments" for transactions that would have occurred
subsequent to January 1, 2003 as follows:
a) $35,000 in administrative services provided by iVoice, Inc.
pursuant to an administrative service agreement between Deep
Field Technologies and iVoice, Inc.
b) $12,350 in interest at 6.5% per annum on $190,000 in
outstanding amounts due to a related party being assumed by
Deep Field Technologies.
The pro forma unaudited statement of operations for the year ended
December 31, 2003 was prepared assuming the distribution occurred on January
1, 2003 and includes "Pro Forma Adjustments" for transactions that would have
occurred subsequent to January 1, 2003 as follows:
a) $60,000 in administrative services provided by iVoice, Inc.
pursuant to an administrative service agreement between Deep
Field Technologies and iVoice, Inc. The administrative services
agreement sets forth charges generally intended to allow the
providing company to fully recover the allocated direct costs
of providing the services, plus all out-of-pocket costs and
expenses. In conjunction with the spin-off, Deep Field
Technologies has entered into a temporary administrative
service agreement with iVoice. The administrative services
agreement will continue on a month to month basis until Deep
Field Technologies has found replacement services for those
services being provided by iVoice or can provide these services
for itself.
b) $12,350 in interest at 6.5% per annum on $190,000 in
outstanding amounts due to a related party being assumed by
Deep Field Technologies.
The pro forma unaudited statement of operations for the three months ended
March 31, 2005 was prepared assuming the distribution occurred on January 1,
2003 and includes "Pro Forma Adjustments" for transactions that would have
occurred subsequent to January 1, 2003 as follows:
a) $3,088 in interest at 6.5% per annum on $190,000 in outstanding
amounts due to a related party being assumed by Deep Field
Technologies.
F-36
NOTE 4.
The average number of shares of Deep Field Technologies common stock used in
the computation of basic and diluted net income per share was 10,050,000 for
the three months ended March 31, 2005 and years ended December 31, 2004 and
2003, based on a distribution ratio of one share of Deep Field Technologies
Class A common stock for every 988 shares of iVoice common stock. Since the
Company is in a net loss position, all common stock equivalents are considered
anti-dilutive and are therefore not included in the calculation of earnings
per share.
F-37
- -------------------------------------------------------------------------------
Until ___, all dealers that
effect transactions in these
securities, whether or not
participating in this offering may
be required to deliver a prospectus.
This is in addition to the dealers'
obligation to deliver a prospectus
when acting as underwriters and
with respect to their unsold
allotments or subscription. The
information contained in this Deep Field Technologies, Inc.
prospectus is current only as of
its date.
10,050,000 Shares of
____________________ Class A Common Stock
TABLE OF CONTENTS
Page ____________________
----
Prospectus Summary...............
Summary of the Distribution......
Summary Condensed Financial
Information.................... [LOGO]
Potential Dilution Due to
Conversion at Below Market
Price..........................
Risk Factors.....................
Cautionary Statement Regarding ____________________
Forward-Looking Statements.....
Use of Proceeds..................
Management's Discussion and
Analysis of Financial
Condition and Results of Date: ________, 2005
Operations.....................
Our Business.....................
Deep Field Technologies'
Management.....................
Certain Relationships and
Related Transactions...........
Principal Stockholders...........
Description of Securities .......
The Distribution.................
Federal Income Tax Consequences
of the Distribution............
Change in Accountants............
Reasons for Furnishing this
Document.......................
Relationship between iVoice
and Deep Field Technologies
following the Distribution.....
Where You Can Find More
Information....................
Index to Financial Statements....
- -------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Deep Field Technologies' bylaws provide that it will indemnify a person
who was or is a party, or is threatened to be made a party, to any proceeding
(other than an action by or in the right of Deep Field Technologies) by reason
of the fact that such person is or was a director or an officer of Deep Field
Technologies against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with such proceeding if that
person acted in good faith and in a manner that that person reasonably believed
to be in the best interests of Deep Field Technologies and, in the case of a
criminal proceeding, had no reasonable cause to believe the conduct of that
person was unlawful. Deep Field Technologies' bylaws also provide that it will
indemnify a person who was or is a party, or is threatened to be made a party,
to any threatened, pending or completed action by or in the right of Deep Field
Technologies to procure a judgment in its favor by reason of the fact that said
person is or was a director or an officer of Deep Field Technologies against
expenses actually and reasonably incurred in connection with the defense or
settlement of that action if that person acted in good faith, in a manner that
that person reasonably believed to be in the best interests of Deep Field
Technologies and with such care, including reasonable inquiry, that such action
would not be deemed grossly negligent on the part of such person.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth estimated expenses expected to be
incurred in connection with the issuance and distribution of the securities
being registered. Deep Field Technologies will pay all expenses in
connection with this offering.
Securities and Exchange Commission
Registration Fee $32
Printing and Engraving Expenses $25,000
Accounting Fees and Expenses $8,000
Legal Fees and Expenses $150,000
Miscellaneous $30,000
--------
TOTAL $213,032
--------
Item 26. Recent Sales of Unregistered Securities
In August 2004, the Company entered into an agreement with Sloan
Securities Corporation to act as an agent for the private placement of
secured convertible debentures to Cornell Capital Partners, L.P. Under the
placement agent agreement, the Company agreed to issue to Sloan on or about
the date of effectiveness of the registration statement of which this
prospectus is a part a number of shares of Class A Common Stock equal to
$10,000 divided by the closing bid price of the Class A Common Stock on the
date of effectiveness of the registration statement of which this prospectus
is a part. On August 12 and November 19, 2004, Deep Field Technologies
issued an aggregate of $400,000 in secured convertible debentures,
II-1
with interest payable at 5% per annum, to Cornell Capital Partners. The
debentures are convertible at the option of the holder only after the Company's
Class A Common Stock has commenced trading on the Over-the-Counter Bulletin
Board. Each of the debentures were convertible into shares of Class A Common
Stock at a price equal to the lesser of (a) an amount equal to one hundred
twenty percent (120%) of the initial bid price of the Class A Common Stock on
the date of effectiveness of the registration statement of which this prospectus
is a part or (b) an amount equal to eighty percent (80%) of the lowest closing
bid price of the Class A Common Stock for the five trading days immediately
preceding the conversion date. The secured convertible debentures had a term of
two years with all accrued interest due at the expiration of the term. At our
option, these debentures could be redeemed at a 20% premium prior to August 12,
2006. The secured convertible debentures were secured by a first priority
security interest in substantially all of the assets of Deep Field Technologies.
On February 28, 2005, the secured debentures were terminated and replaced with a
promissory note in the amount of $500,000 ($400,000 representing replacement
notes and $100,000 representing new financing).
Effective August 12, 2004, Deep Field Technologies entered into a
Standby Equity Distribution Agreement with Cornell Capital Partners to obtain
an equity line of credit. On February 28, 2005, Deep Field Technologies
entered into a Termination Agreement with Cornell Capital Partners, pursuant
to which the equity line transaction was terminated. On March 9, 2005, Deep
Field Technologies received a non-binding letter of intent from Cornell
Capital whereby Cornell Capital agreed has offered, subject to satisfaction
of certain conditions, to purchase shares of Deep Field Technologies' common
stock upon the terms set forth in the non-binding letter of intent and the
definitive documentation to be executed after satisfaction of those closing
conditions. Pursuant to the terms of the non-binding letter of intent, if
the definitive documentation is executed, Deep Field Technologies, subject to
satisfaction of conditions, may issue and sell to Cornell Capital Partners
Class A Common Stock for a total purchase price of up to $10.0 million. The
purchase price for the shares would be equal to 95% of the market price,
which is defined as the lowest closing bid price of the Class A Common Stock
during the five trading days following the date that Deep Field Technologies
delivers to Cornell Capital Partners a notice requiring it to advance funds
to us. A cash fee equal to six percent (6%) of the cash proceeds of the draw
down would also be payable at the time of funding. In addition, Cornell
Capital Partners would receive, as additional compensation, the number of
shares of Class A Common Stock equal to one and one half percent (1.5%) of
the number of shares of Class A Common Stock outstanding on the date that the
registration statement in respect of the shares to be distributed pursuant to
the equity line of credit becomes effective.
Deep Field Technologies has agreed to assume from iVoice upon the date
of this prospectus an outstanding promissory note in the amount of $190,000
payable to Jerry Mahoney. This amount is related to funds loaned to iVoice
and unrelated to the operations of Deep Field Technologies. Deep Field
Technologies, for value received, will promise to pay to Mr. Mahoney the
principal sum of $190,000 that will bear interest at the prime rate plus 2%
per annum on the unpaid balance until paid or until default. Interest
payments will be due annually. All accrued interest becomes due on the date
of any payment of the promissory note. At the time of default (if any) the
interest rate shall increase to 20% until the principal balance has been
paid. Under the terms of the promissory note, at the option of the note
holder, principal and interest can be converted into either (i) one share of
Class B Common Stock of Deep Field Technologies,
II-2
par value $0.01, for each dollar owed, (ii) the number of shares of Class A
Common Stock of Deep Field Technologies calculated by dividing (x) the sum of
the principal and interest that the note holder has requested to have prepaid by
(y) eighty percent (80%) of the lowest issue price of Class A Common Stock since
the first advance of funds under this note, or (iii) payment of the principal of
this note, before any repayment of interest. Deep Field Technologies has yet to
record this liability on its financial statements, as the promissory note will
not be assumed by Deep Field Technologies until the effectiveness of the
registration statement.
We relied upon the exemption provided in Section 4(2) of the Securities
Act and/or Rule 506 thereunder, which cover "transactions by an issuer not
involving any public offering," to issue securities discussed above without
registration under the Securities Act of 1933. Deep Field Technologies made
a determination in each case that the person to whom the securities were
issued did not need the protections that registration would afford. The
certificates representing the securities issued displayed a restrictive
legend to prevent transfer except in compliance with applicable laws, and our
transfer agent was instructed not to permit transfers unless directed to do
so by Deep Field Technologies, after approval by our legal counsel. Deep
Field Technologies believes that the investors to whom securities were issued
had such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of the prospective investment.
Deep Field Technologies also believes that the investors had access to the
same type of information as would be contained in a registration statement.
Item 27. Exhibits
No. Description
- --- ---------------------------------------------------------
3.1* Amended and Restated Certificate of Incorporation of Deep
Field Technologies, Inc.
3.2* By-laws of Deep Field Technologies, Inc.
4.1* Form of Deep Field Technologies, Inc. 5% Secured
Convertible Debenture due August 12, 2006 issued to
Cornell Capital Partners, LP
5.1* Opinion of Meritz & Muenz LLP
9* Irrevocable Proxy of Mark Meller, dated June 16, 2005
10.1* Standby Equity Distribution Agreement, dated August 12,
2004, between Cornell Capital Partners, LP and iVoice
Technology 2, Inc.
10.2* Securities Purchase Agreement, dated August 12, 2004,
between iVoice Technology 2, Inc. and Cornell Capital
Partners, LP.
10.3* Escrow Agreement, dated August 12, 2004, between iVoice
Technology 2, Inc., Cornell Capital Partners, LP and
Butler Gonzalez LLP
10.4* Registration Rights Agreement, dated August 12, 2004,
between iVoice
II-3
Technology 2, Inc. and Cornell Capital Partners, LP
10.5* Escrow Agreement, dated August 12, 2004, between iVoice
Technology 2, Inc., Cornell Capital Partners, LP. and
Butler Gonzalez LLP
10.6* Investor Registration Rights Agreement, dated August 12,
2004, between iVoice Technology 2, Inc. and Cornell
Capital Partners, LP.
10.7* Security Agreement, dated August 12, 2004, between iVoice
Technology 2, Inc. and Cornell Capital Partners, LP.
10.8* Placement Agent Agreement, dated August 12, 2004, between
iVoice Technology 2, Inc. and Sloan Securities
Corporation.
10.9* Employment Agreement, dated as of August 3, 2004, between
iVoice Technology 2, Inc. and Jerome Mahoney
10.10* Employment Agreement, dated as of October 1, 2004, between
iVoice Technology 2, Inc. and Mark Meller
10.11* Administrative Services Agreement, dated August 1, 2004,
between iVoice, Inc. and iVoice Technology 2, Inc.
10.12* Assignment and Assumption Agreement and Consent, dated
November 11, 2004 between iVoice Technology 2, Inc. and
Deep Field Technologies, Inc.
10.13 [Intentionally omitted.]
10.14 [Intentionally omitted.]
10.15* Waiver dated January 6, 2005 of Jerome Mahoney
10.16* Promissory Note from Deep Field Technologies, Inc. to
Jerome Mahoney (undated)
Amendment to Employment Agreement, dated January 11, 2005,
10.17* between Deep Field Technologies, Inc. and Mark Meller
10.18* Termination Agreement, dated February 28, 2005, between
Cornell Capital Partners, LP and Deep Field Technologies,
Inc., with respect to a Securities Purchase Agreement,
Convertible Debentures, Security Agreement, Investor
Registration Rights Agreement, an Escrow Agreement and
Irrevocable Transfer Agent Instructions, each dated August
13, 2004.
II-4
10.19* Termination Agreement, dated February 28, 2005, between
Cornell Capital Partners, LP and Deep Field Technologies,
Inc., with respect to a Standby Equity Distribution
Agreement, Registration Rights Agreement, Escrow Agreement
and Placement Agent Agreement, each dated August 13, 2004.
10.20* Promissory Note, dated February 28, 2005, from Deep Field
Technologies, Inc. to Cornell Capital Partners, LP
10.21* Security Agreement, dated as of February 28, 2005, by and
between Deep Field Technologies, Inc. and Cornell Capital
Partners, LP
10.22* Guaranty of Promissory Note from Deep Field Technologies,
Inc. to Cornell Capital Partners, LP, made by iVoice, Inc.
in favor of Cornell Capital Partners, LP
10.23* Non-Binding Letter of Intent, dated March 9, 2005, between
Cornell Capital Partners, LP and Deep Field Technologies,
Inc.
10.24* Amendment No. 1 to Employment Agreement, dated April 1,
2005, between Deep Field Technologies, Inc. and Jerome
Mahoney
10.25* Amendment No. 2 to Employment Agreement, dated May 25,
2005, between Deep Field Technologies, Inc. and Jerome
Mahoney
10.26* Amendment No. 2 to Employment Agreement, dated April 1,
2005, between Deep Field Technologies, Inc. and Mark Meller
10.27* Amendment No. 3 to Employment Agreement, dated May 25,
2005, between Deep Field Technologies, Inc. and Mark Meller
10.28* Amendment No. 3 to Employment Agreement, dated July 18,
2005, between Deep Field Technologies, Inc. and Jerome
Mahoney
10.29* Amendment No. 4 to Employment Agreement, dated July 18,
2005, between Deep Field Technologies, Inc. and Mark Meller
16* Letter of Mendlowitz Weitsen, LLP, dated May 27, 2005,
with respect to the change in the Company's principal
accountants
23.1 Consent of Bagell, Josephs & Company, L.L.C.
23.2* Consent of Meritz & Muenz LLP (included in its opinion
filed as Exhibit 5.1 hereto)
* Previously filed.
II-5
Item 28. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Sections 10(a)(3) of the
Securities Act of 1933 (the "Act");
(ii) Reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement;
(iii) Include any additional or changed material information on the
plan of distribution;
(2) That, for the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer 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 small business issuer 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 Act and
will be governed by the final adjudication of such issue.
II-6
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Amendment No. 5
to the registration statement to be signed on our behalf by the undersigned, on
August 3, 2005.
DEEP FIELD TECHNOLOGIES, INC.
By: /s/ Jerome R. Mahoney
----------------------------
Name: Jerome R. Mahoney
Title: Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 5
to the Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
SIGNATURE TITLE DATE
/s/Jerome R. Mahoney Chairman of the Board August 3, 2005
- -------------------
Jerome R. Mahoney
/s/Mark Meller President (Principal August 3, 2005
- -------------
Mark Meller Executive Officer), Chief
Executive Officer and Chief
Financial Officer (Principal
Accounting Officer)
and Director
II-7