UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
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Commission File Number 000-51364
DOLCE VENTURES INC.
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(Exact name of small business issuer as specified in its charter)
UTAH 32-0028823
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
118 CHATHAM ROAD
SYRACUSE, NY 13203
(Address of principal executive offices)
(315) 476-5769
(Issuer's telephone number)
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(Former name, former address and former fiscal year
if changed since last report)
Check whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes ( X ) No ( )
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 100,770,140 shares
of Common Stock, $.001 par value, were outstanding as of July 26, 2005.
Transitional Small Business Disclosure Forms (check one):
Yes ( ) No ( X )
DOLCE VENTURES INC.
INDEX TO FORM 10-QSB
JUNE 30, 2005
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets At December 31, 2004 F-1
and June 30, 2005
Consolidated Statements of Income For the Three F-2
Months and Six Months Ended June 30, 2005 and June
30, 2004
Consolidated Statements of Cash Flows For the Six F-3
Months Ended June 30, 2005 and June 30, 2004
Notes to Consolidated Financial Statements F-4
ITEM 2. Managements Discussion and Analysis of Financial 3
Condition and Results of Operation
ITEM 3. Controls and Procedures 10
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings 11
ITEM 2. Changes in Securities and Use of Proceeds 11
ITEM 3. Defaults Upon Senior Securities 11
ITEM 4. Submission of Matters to a Vote of Security Holders 11
ITEM 5. Other Information 11
ITEM 6. Exhibits and Reports on Form 8-K 11
Signatures
2
PART I
ITEM 1. FINANCIAL STATEMENTS
DOLCE VENTURES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2005 2004
----------------- ------------------
Assets:
Cash and Cash Equivalents $ 2 $ 368
Accounts Receivable 3,075 2,316
----------------- ------------------
Total Current Assets 3,077 2,684
----------------- ------------------
Property and Equipment:
Payphone Equipment 12,600 12,600
Less Accumulated Depreciation (9,751) (8,971)
----------------- ------------------
Net Property and Equipment 2,849 3,629
----------------- ------------------
Total Assets $ 5,926 $ 6,313
================= ==================
Liabilities:
Accounts Payable $ 13,669 $ 3,425
Note Payable - Shareholder 298 298
Note Payable 3,401 1,275
----------------- ------------------
Total Liabilities 17,368 4,998
----------------- ------------------
Stockholders' Equity:
Preferred Stock, Par value $0.001, Authorized
100,000,000 shares, Issued 0
at June 30, 2005 and December 31, 2004 - -
Common Stock, Par value $0.001, Authorized
250,000,000 shares, Issued 100,770,140 at
June 30, 2005 and 80,770,140 at December 31, 2004 100,770 80,770
Paid-In Capital 13,628 13,628
Retained Deficit (125,840) (93,083)
----------------- ------------------
Total Stockholders' Equity (11,442) 1,315
----------------- ------------------
Total Liabilities and Stockholders' Equity $ 5,926 $ 6,313
================= ==================
The accompanying notes are an integral part of these financial statements.
F-1
DOLCE VENTURES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------------- ----------------------------------
2005 2004 2005 2004
---------------- ---------------- ---------------- -----------------
Revenues $ 2,982 $ 2,803 $ 4,768 $ 4,876
Costs of Operations 1,436 2,083 3,339 4,279
---------------- ---------------- ---------------- -----------------
Gross Profits 1,546 720 1,429 597
Expenses
General and Administrative 33,546 1,227 34,143 6,032
---------------- ---------------- ---------------- -----------------
Operating Income (Loss) (32,000) (507) (32,714) (5,435)
Other Income (Expense)
Interest, Net (76) (44) (126) (86)
---------------- ---------------- ---------------- -----------------
Net Loss Before Taxes (32,076) (551) (32,840) (5,521)
---------------- ---------------- ---------------- -----------------
Income and Franchise Tax - - 83 (489)
---------------- ---------------- ---------------- -----------------
Net Income (Loss) $ (32,076)$ (551) $ (32,757)$ (6,010)
================ ================ ================ =================
Loss per Share, Basic &
Diluted $ - $ - $ - $ -
================ ================ ================ =================
Weighted Average Shares
Outstanding 94,616,294 80,770,140 87,731,466 80,770,140
================ ================ ================ =================
The accompanying notes are an integral part of these financial statements.
F-2
DOLCE VENTURES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended
June 30,
-----------------------------------
2005 2004
----------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss for the Period $ (32,757) $ (6,010)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and Amortization 780 1,211
Common Stock Issued for Services 20,000 -
Changes in Operating Assets and Liabilities
Decrease (Increase) in Accounts Receivable (759) (168)
Increase (Decrease) in Accounts Payable 10,244 (10,029)
Increase (Decrease) in Accrued Interest 126 177
----------------- ----------------
Net Cash Used in Operating Activities (2,366) (14,819)
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment - -
----------------- ----------------
Net cash provided by Investing Activities - -
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes Payable 2,000 -
Capital Contributed - 15,000
----------------- ----------------
Net Cash Provided by Financing Activities 2,000 15,000
----------------- ----------------
Net (Decrease) Increase in Cash (366) 181
Cash at Beginning of Period 368 313
----------------- ----------------
Cash at End of Period $ 2 494
================= ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ -
Franchise and Income Taxes $ - $ 489
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Stock issued for Services $ 20,000 $ -
The accompanying notes are an integral part of these financial statements.
F-3
DOLCE VENTURES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Dolce Ventures, Inc. and
Subsidiary is presented to assist in understanding the Company's financial
statements. The accounting policies conform to generally accepted accounting
principles and have been consistently applied in the preparation of the
financial statements.
Interim Financial Statements
The unaudited financial statements as of June 30, 2005 and for the
three and six months then ended, reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
fairly state the financial position and results of operations for the three and
six months. Operating results for interim periods are not necessarily indicative
of the results which can be expected for full years.
Nature of Operations and Going Concern
Several conditions and events cast doubt about the Company's ability to
continue as a "going concern". The Company has incurred net losses of
approximately $126,000 for the period from August 19, 1983 (inception) to June
30, 2005, has a liquidity problem, and requires additional financing in order to
finance its business activities on an ongoing basis. The Company is actively
pursuing alternative financing and has had discussions with various third
parties, although no firm commitments have been obtained. In the interim,
shareholders of the Company have committed to meeting its minimal operating
expenses.
The Company's future capital requirements will depend on numerous
factors including, but not limited to, its willingness to continue progress in
developing its products.
These financial statements do not reflect adjustments that would be
necessary if the Company were unable to continue as a "going concern". While
management believes that the actions already taken or planned, will mitigate the
adverse conditions and events which raise doubt about the validity of the "going
concern" assumption used in preparing these financial statements, there can be
no assurance that these actions will be successful.
If the Company were unable to continue as a "going concern", then
substantial adjustments would be necessary to the carrying values of assets, the
reported amounts of its liabilities, the reported expenses, and the balance
sheet classifications used.
F-4
DOLCE VENTURES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Organization and Basis of Presentation
The Company was originally incorporated under the laws of the State of
Utah on August 19, 1983, under the name of Evica Resources, Inc. On April 5,
1984, the Company changes its name to American Arms, Inc. On April 12, 1988, the
Company changes its name to American Industries, Inc. On May 21, 2002, the
Company changed its name to Dolce Ventures, Inc.
On February 19, 2002, Pegasus Tel, Inc., a Delaware company, was formed
as a wholly owned subsidiary of American Industries.
On March 28, 2002, American Industries, Inc. and Pegasus Tel, Inc.
entered into an agreement with Pegasus Communications, Inc., a New York
corporation, to acquire 100% of the outstanding shares of Pegasus
Communications, Inc. in exchange for 72,721,966 shares of common stock of
American Industries, Inc. Pegasus Tel, Inc. continued as the surviving
corporation and Pegasus Communications, Inc. was merged out of existence.
As a result of the merger, American Industries, Inc. changed its name
to Dolce Ventures, Inc.
Nature of Business
The Company is primarily in the business of providing the use of
outdoor payphones.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements.
Principals of Consolidation
The consolidated financial statements include the accounts for Dolce
Ventures, Inc. and its wholly owned subsidiary Pegasus Tel, Inc. The results of
subsidiaries acquired during the year are consolidated from their effective
dates of acquisition. All significant intercompany accounts and transactions
have been eliminated.
F-5
DOLCE VENTURES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income (Loss) per Share
Basic income (loss) per share has been computed by dividing the income
(loss) for the year applicable to the common stockholders by the weighted
average number of common shares outstanding during the years. There were no
common equivalent shares outstanding at June 30, 2005 and 2004.
Reclassifications
Certain reclassifications have been made in the 2004 financial
statements to conform with the 2005 presentation.
Revenue Recognition
Revenue is recognized as services are performed.
Income Taxes
The Company has a net operating loss for income taxes. Due to the
regulatory limitations in utilizing the loss, it is uncertain whether the
Company will be able to realize a benefit from these losses. Therefore, a
deferred tax asset has not been recorded. There are no significant tax
differences requiring deferral.
F-6
DOLCE VENTURES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Depreciation
Fixed assets are stated at cost. Deprecation expense for the six months
ended June 30, 2005 and 2004 was $780 and $1,211. Depreciation and amortization
are computed using the straight-line and accelerated methods over the estimated
economic useful lives of the related assets as follows:
Asset Rate
- ------------------------------------------------ -----------------
Payphone Equipment 5 years
Upon sale or other disposition of property and equipment, the cost and
related accumulated depreciation or amortization are removed from the accounts
and any gain or loss is included in the determination of income or loss.
Expenditures for maintenance and repairs are charged to expense as
incurred. Major overhauls and betterments are capitalized and depreciated over
their estimated economic useful lives.
NOTE 3 - COMMITMENTS
As of June 30, 2005, all activities of the Company have been conducted
by corporate officers from either their homes or business offices. Currently,
there are no outstanding debts owed by the company for the use of these
facilities and there are no commitments for future use of the facilities.
NOTE 4 - NOTE PAYABLE - SHAREHOLDER
Shareholders of the Company have advanced the Company money in order to
pay general and administrative expenses. As of June 30, 2005 and December 31,
2004, the Company owed $298 and $298, respectively, relating to this note.
NOTE 5 - NOTE PAYABLE
On December 15, 2001, Dolce Ventures, Inc. purchased ten telephones
from American Telepath International, Inc. in the amount of $1,000 with interest
at the rate of 8 percent per annum. The note was payable in a lump sum December
15, 2004. The balance due on this note is $1,326 and $1,275 as of June 30, 2005
and December 31, 2004.
F-7
DOLCE VENTURES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 5 - NOTE PAYABLE (Continued)
On February 15, 2005, Dolce Ventures, Inc. entered into an agreement
with Mary Passalaqua in the amount of $2,000 with interest at the rate of 10
percent per annum. The note is payable in a lump sum February 15, 2006. The
balance due on this note is $2,075 as of June 30, 2005 and $0 as of December 31,
2004.
NOTE 6 - COMMON STOCK TRANSACTIONS
On April 28, 2005, the Company issued 20,000,000 shares of common stock
in exchange for services rendered. The cost of $20,000 for services has been
charged to consulting expense.
F-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
FORWARD LOOKING STATEMENTS
The following is a discussion and analysis of the results of operations
of our company and should be read in conjunction with our financial statements
and related notes contained in the Form 10-QSB. This Form 10-QSB contains
forward looking statements that involve risks and uncertainties. You can
identify these statements by the use of forward-looking words such as "may",
"will", "expect", "anticipate", "estimate", "believe", "continue", or other
similar words. You should read statements that contain these words carefully
because they discuss our future expectations, contain projections of our future
results of operation or financial condition or state other "forward-looking"
information. We believe that it is important to communicate our future
expectations to our investors. However, there may be events in the future that
we are unable to accurately predict or control. Those events as well as any
cautionary language in this Quarterly statement provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. You should
be aware that the occurrence of the events described in this Form 10-QSB could
have a material adverse effect on our business, operating results and financial
condition. Actual results differ materially from current expectations. Among the
factors that could effect our actual results and could cause results to differ
from those contained in the forward-looking statements contained herein is our
ability to expand our customer base, which will be dependent on business,
financial and other factors beyond our control, including , among others,
seasonal aspects such as the winter months that tend to reduce the frequency of
outdoor payphone use on the east coast, ability to increase our size and
marketing area by purchasing payphones and locations from independent telephone
companies, and whether the public uses our payphones, together with all the
risks inherent in the establishment of a new enterprise and marketing of new
products.
BASIS OF PRESENTATION
The unaudited consolidated financial statements of Dolce Ventures Inc.
("Dolce", the "Company", "our", or "we"), include the accounts of Dolce Ventures
Inc. and it's wholly owned subsidiary: Pegasus Tel Inc. All significant
inter-company amounts have been eliminated. The unaudited consolidated financial
statements of Dolce present herein, should be read in conjunction with the
audited consolidated financial statements of Dolce as of and for the year ended
December 31, 2004. In the opinion of management, the unaudited consolidated
financial statements presented herein reflect all adjustments (consisting only
of normal recurring adjustments) necessary for fair presentation. Interim
results are not necessary indicative of results to be expected for the entire
year.
We prepare our consolidated financial statements in accordance with
generally accepted accounting principles, which require that management make
estimates and assumptions that affect reported amounts. Actual results could
differ from these estimates.
Certain of the statements contained below are forward-looking
statements (rather than historical facts) that are subject to risks and
uncertainties that could cause actual results to differ materially from those
describe in the forward-looking statements.
DESCRIPTION OF BUSINESS
Dolce was incorporated under the laws of the State of Utah on August
19, 1983 as Evica Resources, Inc. On April 5, 1984 the Articles of Incorporation
were amended and the name of the Company was changed to American Arms, Inc.
American Arms Inc. commenced the manufacture and sale of weapons and laser
sights. On December 31, 1984, the Company's Certificate of Incorporation was
suspended for failure to file an annual report. The Company's Certificate of
Incorporation was reinstated on December 19, 1985 by the Utah Department of
Commerce, Division of Corporations. On October 1, 1984, the Company's
Certificate of Incorporation was suspended a second time for failure to file its
annual report. The Company's Certificate of Incorporation was reinstated on
November 21, 1986 again by the State of Utah, Department of Commerce, Division
of Corporations.
3
On April 12, 1988, the Company amended its Articles of Incorporation
and the name was changed to American Industries, Inc. as the company was no
longer engaged in the manufacturing and sale of weapons and laser sights.
American Industries Inc. was in the business of providing room safes for hotel
rooms.
On February 19, 2002, the Company formed a subsidiary corporation,
named Pegasus Tel, Inc., under the laws of the State of Delaware, to enter into
the telecommunications business. On March 28, 2002, Pegasus Tel, Inc. and the
Company entered into a merger agreement with Pegasus Communications, Inc., a New
York corporation. On May 21, 2002, the Certificate of merger was duly filed with
Pegasus Tel, Inc. as the surviving entity. On January 14, 2002 we purchased
payphone assets, 29 payphones, and associated equipment from the Margaretville
Telephone Company for $11,600.00. On May 21, 2002, the Articles of Incorporation
of the Company were amended, and the name was changed to Dolce Ventures, Inc.
We own, operate and manage privately owned public payphones in the
County of Delaware, State of New York. We may pay site owners a commission based
on a flat monthly rate or on a percentage of sales. Some of the businesses
include but are not limited to retail stores, convenience stores, bars,
restaurants, gas stations, colleges and hospitals. In the alternative, the
agreement with the business owner is to provide the telecommunications services
without the payment of any commissions.
SEASONALITY
The Company's revenues from payphone operation are affected by seasonal
variations, geographic distribution of payphones and type of location. Because
the Company operates in the northeastern part of the country with many of the
payphones located outdoor, weather patterns affect our revenue streams. Revenues
drop off significantly during winter and conversely show an increase in the
spring and summer. Revenues are generally lowest in the first quarter and
highest in the third quarter.
Our installed payphone base generates revenue from three principle
sources: coin-calls and non-coin calls, sales and service of payphones.
1. COMMISSION INCOME.
Commission income includes commissions from operator service
telecommunications companies and commissions for toll free calls from all
payphones. The commissions for operator services are paid 45 days in arrears.
Dial Around compensation is billed quarterly and received three and one half
months behind the billed quarter.
2. COIN CALLS.
Coin calls represent calls paid for by customers who deposit coins into
the payphones. Coin call revenue is recorded as the actual amount of coins
collected from the payphones.
3. PAYPHONE SALES, REPAIRS AND PRE-PAID PHONE CARD SALES.
We derive income from the sale and repair of a payphone. We can
negotiate the sale, of a payphone to a site owner when it becomes cost
prohibitive to maintain or if a customer offers to buy the phone at a price that
is favorable to our company. The new owner or lessee becomes responsible for the
maintenance and operational costs of the payphone. We sell pre-paid phone cards
at some of our payphone locations. Sales and repairs of payphones are not
subject to the same collection delays as the other types of operating income.
4
COSTS RELATED TO OUR OPERATION.
The principle costs related to the ongoing operation of the Company's
payphones include telephone charges, commissions, service, maintenance and
network costs. Telephone charges consist of payments made by the Company to LEC
or competitive local exchange carriers and long distance carrier for access to
and use of their telecommunications networks. Commission expense represents
payments to owners or operators of the premises at which a payphone is located.
Service, maintenance and network cost represent the cost of servicing and
maintaining the payphones on an ongoing basis.
THREE MONTHS ENDED JUNE 30, 2005 COMPARED TO THREE MONTHS ENDED JUNE 30, 2004
REVENUES
Our total revenue increased by $179 or approximately 6.36%, from $2,803
in the three months ended June 30, 2004 to $2,982 in the three months ended June
30, 2005. This increase was primarily attributable to seasonal affects on our
revenue streams. The Company operates in the northeastern part of the country
with many of the payphones located outdoor. Our revenues show an increase in the
spring and summer.
Our coin call revenues increased by $319 or approximately 19%, from
$1,675 in the three months ended June 30, 2004 to $1,994 in the three months
ended June 30, 2005. The increase in coin call revenue was primarily
attributable to the location of our payphones and the seasonality of our revenue
streams. Our non-coin call revenue, which is comprised primarily of dial-around
revenue and operator service revenue decreased $140 or approximately 28% from
$498 in the three months ended June 30, 2004 to $358 in the three months ended
June 30, 2005. Our service & repair revenues remained the same when compared to
the same period in 2004.
COSTS OF SALES
Our overall cost of sales decreased for the three months ending June
30, 2005 by $647 or approximately 31.05% when compared to the three months
ending June 30, 2004. Our telecommunication costs decreased by $301 due to
reducing our network of payphones by 20.35%. Once a low revenue payphone is
identified, we offer the site owner an opportunity to purchase the equipment. If
the site owner does not purchase the payphone, we remove it from the site. Our
commissions' payable increased by $83 when compared to the same period in 2004.
Depreciation expense decreased by $429 when compared to the same period in 2004.
We own telephone equipment which provides a service for a number of years. The
term of service is commonly referred to as the "useful life" of the asset.
Because an asset such as telephone equipment or motor vehicle is expected to
provide service for many years, it is recorded as an asset, rather than an
expense, in the year acquired. A portion of the cost of the long-lived asset is
reported as an expense each year over its useful life and the amount of the
expense in each year is determined in a rational and systematic manner.
OPERATION AND ADMINISTRATIVE EXPENSES
Operating expenses increased by $32,319 over the same period in 2004.
On April 28, 2005, the Company issued 20,000,000 shares of common stock in
exchange for services rendered. The cost of $20,000 for services has been
charged to consulting expense. Professional fees increased by $5,820 over 2004.
These are fees we pay to accountants and attorneys throughout the year for
performing various tasks. Expenses for outside services increased by $6,462 over
2004. These are fees the Company pays to an outside company to collect and
maintain our network of payphones and to our stock transfer company. Our office,
and travel & entertainment expenses, together account for an increase of $37
when compared to the same period ending June 30, 2004.
5
SIX MONTHS ENDED JUNE 30, 2005 COMPARED TO SIX MONTHS ENDED JUNE 30, 2004
REVENUES
Our total revenue decreased by $108 or approximately 2.2%, from $4,876
in the six months ended June 30, 2004 to $4,768 in the six months ended June 30,
2005. This decrease was primarily attributable to removal of unprofitable
payphone locations and lower call volumes on our payphones resulting from the
growth in wireless communications.
Our coin call revenues increased by $208 or approximately 7.42%, from
$2,794 in the six months ended June 30, 2004 to $3,002 in the six months ended
June 30, 2005. This increase was primarily attributable to seasonal affects on
our revenue streams. The Company operates in the northeastern part of the
country with many of the payphones located outdoor. Our revenues show an
increase in the spring and summer. Our non-coin call revenue, which is comprised
primarily of dial-around revenue and operator service revenue decreased $316 or
approximately 38.4% from $822 in the six months ended June 30, 2004 to $506 in
the six months ended June 30, 2005. Our service & repair revenues remained the
same when compared to the same period in 2004.
COSTS OF SALES
Our overall cost of sales decreased for the six months ending June 30,
2005 by $940 or approximately 21.95% when compared to the six months ending June
30, 2004. Our telecommunication costs decreased by $593 due to reducing our
network of payphones by 20.35%. Once a low revenue payphone is identified, we
offer the site owner an opportunity to purchase the equipment. If the site owner
does not purchase the payphone, we remove it from the site. Our commissions'
payable increased by $83 when compared to the same period in 2004. Depreciation
expense decreased by $430 when compared to the same period in 2004. We own
telephone equipment which provides a service for a number of years. The term of
service is commonly referred to as the "useful life" of the asset. Because an
asset such as telephone equipment or motor vehicle is expected to provide
service for many years, it is recorded as an asset, rather than an expense, in
the year acquired. A portion of the cost of the long-lived asset is reported as
an expense each year over its useful life and the amount of the expense in each
year is determined in a rational and systematic manner.
OPERATION AND ADMINISTRATIVE EXPENSES
Operating expenses increased by $28,111 over the same period in 2004.
On April 28, 2005, the Company issued 20,000,000 shares of common stock in
exchange for services rendered. The cost of $20,000 for services was charged to
consulting expense. Professional fees increased by $4,930 over 2004. These are
fees we pay to accountants and attorneys throughout the year for performing
various tasks. Expenses for outside services increased by $3,646 over 2004.
These are fees the Company pays to an outside company to collect and maintain
our network of payphones and to our stock transfer company. Our office, and
travel & entertainment expenses, together account for a decrease of $465 when
compared to the same period ending June 30, 2004.
GOING CONCERN QUALIFICATION
In their Independent Auditor's Report for the fiscal year ending
December 31, 2004, Robison, Hill & Co. states that we have incurred annual
losses since inception raising substantial doubt about our ability to continue
as a going concern.
6
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
Our primary sources of liquidity have been cash from operations and
borrowing from various sources. As of June 30, 2005, we have a note payable to
American Telepath International in the amount of $1,326 and a note payable to
Mary Passalaqua in the amount of $2,075.
COMMON STOCK
We are authorized to issue 250,000,000 shares of Common Stock, with a
par value of $0.001. There are 100,770,140 shares of Common Stock issued and
outstanding as of the date of this form 10-QSB. All shares of common stock have
one vote per share on all matters including election of directors, without
provision for cumulative voting. The common stock is not redeemable and has no
conversion or preemptive rights. The common stock currently outstanding is
validly issued, fully paid and non- assessable. In the event of liquidation of
the company, the holders of common stock will share equally in any balance of
the company's assets available for distribution to them after satisfaction of
creditors and preferred shareholders, if any. The holders of common stock of the
company are entitled to equal dividends and distributions per share with respect
to the common stock when, as and if, declared by the board of directors from
funds legally available.
PREFERRED STOCK
In addition to the 250,000,000 shares of Common Stock, the Company is
authorized to issue 100,000,000 shares of preferred stock, with a par value of
$0.001. Shares of the Preferred Stock of the corporation may be issued from time
to time in one or more classes or series, each of which class or series shall
have such distinctive designation or title as shall be fixed by the Board of
Directors prior to the issuance any shares thereof. At this time no shares of
Preferred Stock have been issued by the Company.
Except as set forth below, no transactions have occurred since the
beginning of the Company's last fiscal year or are proposed with respect to
which a director, executive officer, security holder owning of record or
beneficially more than 5 % of any class of the Company's securities or any
member of the immediate families of the foregoing persons had or will have a
direct or indirect material interest:
We issued 8,000,000 common shares each to Mr. Carl Worboys and Mr. John
Passalaqua at a deemed price of $0.001 per share on April 28, 2005. These shares
were issued to Mr. Worboys and Mr. Passalaqua in consideration for their
services in organizing our company, acting as officers and building our business
plan.
On April 28, 2005, we issued 2,000,000 common shares at a deemed price
of $0.001 per share to Mr. David Stever in consideration for his services as
director and building our business plan.
RISKS ASSOCIATED WITH OUR BUSINESS
In addition to the other information in this report, the following
risks should be considered carefully in evaluating our business and prospects:
UNLESS WE CAN REVERSE OUR HISTORY OF LOSSES, WE MAY HAVE TO DISCONTINUE
OPERATIONS.
If we are unable to achieve or sustain profitability, or if operating
losses increase in the future, we may not be able to remain a viable company and
7
may have to discontinue operations. Our expenses have historically exceeded our
revenues and we have had losses in all fiscal years of operation, including
those in fiscal years 2003 through 2004, and the losses are projected to
continue in 2005. Our net losses were $16,810 and $8,856 for fiscal years ended
2003, 2004 respectively. We have been concentrating on the development of our
products, services and business plan. Our management believes that we can be
profitable and that our business plan will be successful; however, there is no
assurance that we will be successful in implementing our business plan or that
we will be profitable now or in the future.
WE WILL NEED ADDITIONAL CAPITAL FINANCING IN THE FUTURE.
We may be required to seek additional financing in the future to
respond to increased expenses or shortfalls in anticipated revenues, accelerate
product development and deployment, respond to competitive pressures, develop
new or enhanced products, or take advantage of unanticipated acquisition
opportunities. We cannot be certain we will be able to find such additional
financing on reasonable terms, or at all. If we are unable to obtain additional
financing when needed, we could be required to modify our business plan in
accordance with the extent of available financing.
IF WE ENGAGE IN ACQUISITIONS, WE MAY EXPERIENCE SIGNIFICANT COSTS AND DIFFICULTY
ASSIMILATING THE OPERATIONS OR PERSONNEL OF THE ACQUIRED COMPANIES, WHICH COULD
THREATEN OUR FUTURE GROWTH.
If we make any acquisitions, we could have difficulty assimilating the
operations, technologies and products acquired or integrating or retaining
personnel of acquired companies. In addition, acquisitions may involve entering
markets in which we have no or limited direct prior experience. The occurrence
of any one or more of these factors could disrupt our ongoing business, distract
our management and employees and increase our expenses. In addition, pursuing
acquisition opportunities could divert our management's attention from our
ongoing business operations and result in decreased operating performance.
Moreover, our profitability may suffer because of acquisition-related costs or
amortization of acquired goodwill and other intangible assets. Furthermore, we
may have to incur debt or issue equity securities in future acquisitions. The
issuance of equity securities would dilute our existing stockholders.
IF WE CANNOT ATTRACT, RETAIN, MOTIVATE AND INTEGRATE ADDITIONAL SKILLED
PERSONNEL, OUR ABILITY TO COMPETE WILL BE IMPAIRED.
Many of our current and potential competitors have more employees than
we do. Our success depends in large part on our ability to attract, retain and
motivate highly qualified management and technical personnel. We face intense
competition for qualified personnel. The industry in which we compete has a high
level of employee mobility and aggressive recruiting of skilled personnel. If we
are unable to continue to employ our key personnel or to attract and retain
qualified personnel in the future, our ability to successfully execute our
business plan will be jeopardized and our growth will be inhibited.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS OR MAY BE SUED BY
THIRD PARTIES FOR INFRINGEMENT OF THEIR PROPRIETARY RIGHTS.
The telecommunications industry is characterized by the existence of a
large number of patents and frequent litigation based on allegations of trade
secret, copyright or patent infringement. We may inadvertently infringe a patent
of which we are unaware. In addition, because patent applications can take many
years to issue, there may be a patent application now pending of which we are
unaware that will cause us to be infringing when it is issued in the future. If
we make any acquisitions, we could have similar problems in those industries.
Although we are not currently involved in any intellectual property litigation,
we may be a party to litigation in the future to protect our intellectual
property or as a result of our alleged infringement of another's intellectual
property, forcing us to do one or more of the following:
8
o Cease selling, incorporating or using products or services
that incorporate the challenged intellectual property;
o Obtain from the holder of the infringed intellectual property
right a license to sell or use the relevant technology, which
license may not be available on reasonable terms; or
o Redesign those products or services that incorporate such
technology.
A successful claim of infringement against us, and our failure to
license the same or similar technology, could adversely affect our business,
asset value or stock value. Infringement claims, with or without merit, would be
expensive to litigate or settle, and would divert management resources.
Our employees may be bound by confidentiality and other nondisclosure
agreements regarding the trade secrets of their former employers. As a result,
our employees or we could be subject to allegations of trade secret violations
and other similar violations if claims are made that they breached these
agreements.
BECAUSE OUR OFFICERS AND DIRECTORS ARE INDEMNIFIED AGAINST CERTAIN LOSSES, WE
MAY BE EXPOSED TO COSTS ASSOCIATED WITH LITIGATION.
If our directors or officers become exposed to liabilities invoking the
indemnification provisions, we could be exposed to additional unreimbursable
costs, including legal fees. Our articles of incorporation and bylaws provide
that our directors and officers will not be liable to us or to any shareholder
and will be indemnified and held harmless for any consequences of any act or
omission by the directors and officers unless the act or omission constitutes
gross negligence or willful misconduct. Extended or protracted litigation could
have a material adverse effect on our cash flow.
WE WILL DEPEND ON OUTSIDE MANUFACTURING SOURCES AND SUPPLIERS.
We may contract with third party manufacturers to produce our products
and we will depend on third party suppliers to obtain the raw materials
necessary for the production of our products. We do not know what type of
contracts we will have with such third party manufacturers and suppliers. In the
event we outsource the manufacturing of our products, we will have limited
control over the actual production process. Moreover, difficulties encountered
by any one of our third party manufacturers, which result in product defects,
delayed or reduced product shipments, cost overruns or our inability to fill
orders on a timely basis, could have an adverse impact on our business. Even a
short-term disruption in our relationship with third party manufacturers or
suppliers could have a material adverse effect on our operations. We do not
intend to maintain an inventory of sufficient size to protect ourselves for any
significant period of time against supply interruptions, particularly if we are
required to obtain alternative sources of supply.
OUR STOCK PRICE MAY BE VOLATILE.
The market price of our common stock will likely fluctuate
significantly in response to the following factors, some of which are beyond our
control:
o Variations in our quarterly operating results;
o Changes in financial estimates of our revenues and operating
results by securities analysts;
o Changes in market valuations of telecommunications equipment
companies;
o Announcements by us of significant contracts, acquisitions,
strategic partnerships, joint ventures or capital commitments;
o Additions or departures of key personnel;
o Future sales of our common stock;
9
o Stock market price and volume fluctuations attributable to
inconsistent trading volume levels of our stock;
o Commencement of or involvement in litigation.
In addition, the equity markets have experienced volatility that has
particularly affected the market prices of equity securities issued by
technology companies and that often has been unrelated or disproportionate to
the operating results of those companies. These broad market fluctuations may
adversely affect the market price of our common stock.
WE DO NOT ANTICIPATE PAYING ANY DIVIDENDS ON OUR COMMON STOCK.
We have not paid any dividends on our Common Stock since inception and
do not anticipate paying any dividends on our Common Stock in the foreseeable
future. Instead, we intend to retain any future earnings for use in the
operation and expansion of our business.
IF WE ARE SUBJECT TO SEC REGULATIONS RELATING TO LOW-PRICED STOCKS, THE MARKET
FOR OUR COMMON STOCK COULD BE ADVERSELY AFFECTED.
The Securities and Exchange Commission has adopted regulations
concerning low-priced (or "penny") stocks. The regulations generally define
"penny stock" to be any equity security that has a market price less than $5.00
per share, subject to certain exceptions. If our shares are offered at a market
price less than $5.00 per share, and do not qualify for any exemption from the
penny stock regulations, our shares may become subject to these additional
regulations relating to low-priced stocks.
The penny stock regulations require that broker-dealers, who recommend
penny stocks to persons other than institutional accredited investors make a
special suitability determination for the purchaser, receive the purchaser's
written agreement to the transaction prior to the sale and provide the purchaser
with risk disclosure documents that identify risks associated with investing in
penny stocks. Furthermore, the broker-dealer must obtain a signed and dated
acknowledgment from the purchaser demonstrating that the purchaser has actually
received the required risk disclosure document before effecting a transaction in
penny stock. These requirements have historically resulted in reducing the level
of trading activity in securities that become subject to the penny stock rules.
The additional burdens imposed upon broker-dealers by these penny stock
requirements may discourage broker-dealers from effecting transactions in the
common stock, which could severely limit the market liquidity of our common
stock and our shareholders' ability to sell our common stock in the secondary
market.
ITEM 3. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer are
responsible for establishing and maintaining disclosure controls and procedures
for the Company.
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Company carried
out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's President, of the
effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Rule 13a-15 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Based upon the
evaluation, the Company's President concluded that, as of the end of
the period, the Company's disclosure controls and procedures were
effective in timely alerting him to material information relating to
the Company required to be included in the reports that the Company
files and submits pursuant to the Exchange Act.
(b) Changes in Internal Controls
10
Based on his evaluation as of June 30, 2005, there were no significant
changes in the Company's internal controls over financial reporting or in any
other areas that could significantly affect the Company's internal controls
subsequent to the date of his most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
PART II OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On April 28, 2005, the Company issued 20,000,000 shares of
common stock in exchange for services rendered. The cost of $20,000 for
services has been charged to consulting expense.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NO. DESCRIPTION
3 Articles of Incorporation
3.1 Amended Articles of Incorporation, dated March 14, 1984
3.2 Amended Articles of Incorporation, dated March 31, 1988
3.3 Amended Articles of Incorporation, dated February 7, 2002
3.4 Amended Articles of Incorporation, dated March 26, 2002
3.5 Agreement of Merger, dated March 28, 2002
4 By-Laws
5 Specimen Share Certificate for Common Shares
31.1 Sarbanes-Oxley Act of 2002 Section 302 Certification for Carl E.
Worboys
31.1 Sarbanes-Oxley Act of 2002 Section 302 Certification for John F.
Passalaqua
32.1 Sarbanes-Oxley Act of 2002 Section 906 Certification for Carl E.
Worboys
32.2 Sarbanes-Oxley Act of 2002 Section 906 Certification for John F.
Passalaqua
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dolce Ventures Inc.
(Registrant)
Dated: July 26, 2005 /s/ CARL E. WORBOYS
-------------------
Carl E. Worboys
President
Dated: July 26, 2005 /s/ JOHN F. PASSALAQUA
----------------------
John F. Passalaqua
Secretary/Treasurer