VOTAN CORP, S-1/A, 1996-09-24

VOTAN CORP
S-1/A, 1996-09-24
PREPACKAGED SOFTWARE

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 23, 1996
REGISTRATION NO. 333-7137

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED

Votan Corporation
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 7372 94-3246202
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code) Identification Number)
</TABLE>
7020 KOLL CENTER PARKWAY, PLEASANTON, CALIFORNIA 94566
(510) 426-5600
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)

JOHN A. WHITE
CHIEF EXECUTIVE OFFICER
VOTAN CORPORATION
7020 KOLL CENTER PARKWAY, PLEASANTON, CALIFORNIA 94566
(510) 426-5600
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)

COPIES OF ALL COMMUNICATIONS TO:
RICHARD R. PLUMRIDGE, ESQ. RICHARD H. GILDEN, ESQ.
BABAK YAGHMAIE, ESQ. FULBRIGHT & JAWORSKI L.L.P.
BROBECK, PHLEGER & HARRISON LLP 666 FIFTH AVENUE
1301 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10103
NEW YORK, NEW YORK 10019 (212) 318-3000
(212) 581-1600

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, as amended, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, as amended, 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, as amended, 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
under the Securities Act of 1933, as amended, please check the following
box. [ ]

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, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(A), MAY DETERMINE.

<PAGE>

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.

SUBJECT TO COMPLETION, DATED SEPTEMBER 23, 1996

PROSPECTUS

2,850,000 SHARES

[VOTAN LOGO]

VOTAN CORPORATION

COMMON STOCK

Of the 2,850,000 shares of Common Stock offered hereby, 2,000,000 shares
are being sold by Votan Corporation ("Votan" or the "Company") and 850,000
shares are being sold by MOSCOM Corporation ("MOSCOM" or the "Selling
Stockholder"), the sole stockholder of the Company prior to this offering.
The Company will not receive any of the proceeds from the sale of shares by
the Selling Stockholder. Following the offering, MOSCOM will own
approximately 62% of the outstanding shares of Common Stock (assuming no
exercise of the Underwriters' over-allotment option). See "Principal and
Selling Stockholders."

Prior to this offering, there has been no public market for the Common
Stock of the Company and there can be no assurance that a trading market will
develop after the sale of the shares offered hereby. It is currently
anticipated that the initial public offering price will be between $10.00 and
$12.00 per share. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The Company has
applied for quotation of the Common Stock on the Nasdaq National Market under
the symbol "VOTN."

SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- -----------------------------------------------------------------------------

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDER
<S> <C> <C> <C> <C>
Per Share .... $ $ $ $
Total(3) ..... $ $ $ $
</TABLE>

- -----------------------------------------------------------------------------

(1) For information regarding indemnification of the Underwriters by the
Company and certain compensation payable to the Representatives of the
Underwriters, see "Underwriting."

(2) Before deducting expenses of this offering, estimated at approximately
$890,000, all of which will be paid by the Company.

(3) The Selling Stockholder has granted to the Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to
427,500 additional shares of Common Stock solely to cover
over-allotments, if any, on the same terms and conditions as the shares
offered hereby. If such option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions, and Proceeds to Selling
Stockholder will be $ , $ and $ , respectively. See
"Underwriting."

The shares of Common Stock are being offered by the several Underwriters
when, as and if delivered to and accepted by the Underwriters, subject to
their right to reject any order in whole or in part and to certain other
conditions. It is expected that delivery of the certificates representing the
shares of Common Stock will be made on or about , 1996 at the
offices of Ladenburg, Thalmann & Co. Inc., New York, New York.

LADENBURG, THALMANN & CO. INC. KAUFMAN BROS., L.P.
The date of this Prospectus is , 1996

<PAGE>

Security...
as sound as your voice

1. Text accompanying photo - Spectral VOICEPRINTS of two speakers saying
"one. two. three. four. five." - description of photo: Spectral voice
patterns.

2. Text accompanying photo - Votan's voice board incorporates its VOICE
VERIFICATION AND SPEECH RECOGNITION technologies. - description of
photo: Rectangular personal computer board with components.

3. Text accompanying photo - MOSCOM's MVM for Windows is a VOICE CONTROLLED
voice mail system based on Votan's voice verification and speech recognition
technologies. - description of photo: Operator sitting at a PC workstation
with Windows menu on screen.

4. Text accompanying photo - TeleVoice applies Votan's speech recognition
technologies to VOICE ACTIVATED information systems used in a variety of
industries. - description of photo: Woman holding telephone handset
and travel brochure.

5. Text accompanying photo - Votan's voice verification system as
used in Chase Manhattan Bank's "XTRA SECURE"[sm] pilot program.
- description of photo: Bank lobby showing series of verification systems
in front of teller windows.

6. Text accompanying photo - description of photo: Closeup of verification
card reader device including printer, keypad, telephone handset and Chase
Manhattan Bank's "Xtra Secure[sm]" promotional display

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER THE COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.

The Company intends to furnish to its stockholders annual reports
containing financial statements audited by an independent accounting firm and
quarterly reports for the first three quarters of each fiscal year containing
unaudited financial information.

Votan(Registered Trademark) is a registered trademark of the Company and
VoiceLock, TeleVoice and VoiceBuilder for Windows are trademarks of the
Company. This Prospectus also includes references to trademarks and trade
names of companies other than the Company.

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements of the Company, including the notes
thereto, contained elsewhere in this Prospectus. This Prospectus contains
certain statements of a forward-looking nature relating to future events or
the future financial performance of the Company. Prospective investors are
cautioned that such statements are only predictions and that actual events or
results may differ materially. In evaluating such statements, prospective
investors should specifically consider the various factors identified in this
Prospectus, including the matters set forth under the caption "Risk Factors,"
which could cause actual results to differ materially from those indicated by
such forward-looking statements. Unless otherwise indicated, the information
included in this Prospectus does not give effect to the exercise of the
Underwriters' over-allotment option. See "Under writing." Unless otherwise
indicated, all information included in this Prospectus reflects a 5,500-to-1
stock split of the Common Stock.

THE COMPANY

Votan Corporation is a leading developer of advanced speech technologies
utilized in voice verification and speech recognition applications. The
Company's primary focus is the development of commercially feasible voice
verification applications that address the growing demand for enhanced
security of financial transactions, electronic databases and physical
facilities. The Company's products are designed to verify the user's identity
without the need for cumbersome or invasive procedures. Votan offers its
customers either a standard or customized single vendor solution and
integrates its voice verification and speech recognition software technology
on a single proprietary board.

The Company's voice verification technologies and products may be used in
a variety of applications to authenticate the identity of a speaker by
establishing a match between the speaker's speech patterns and previously
stored templates. The Company's technologies consist of proprietary
algorithms and patented methods that are highly resistant to extraneous noise
interference such as the electronic static of a telephone line, the clamor of
a public area (such as a bank lobby or retail store) or unintended non-speech
sounds made by the speaker. The ability of Votan's speech technologies to
distinguish and ultimately ignore extraneous noises enables the Company's
products to perform more accurately in noisy, uncontrolled environments and
makes its products particularly suitable for a variety of real-world
applications. In addition to its voice verification technologies, Votan has
developed speech recognition technologies that have been utilized in a number
of products for the telecommunications market. These speech recognition
technologies complement the Company's voice verification products and
applications.

Votan's initial focus will be to market its voice verification
technologies and products directly to banks and other financial institutions
for use in a variety of applications, including bank teller verification,
home banking, wire transfers, credit cards, smart cards and automatic teller
machines ("ATMs"). The Company's voice verification technologies and products
are designed to enhance the security of financial transactions and improve
productivity by reducing the amount of time required to process a
transaction. Votan's voice verification products have been developed and
tested for a variety of applications but are still in early stages of
commercialization. Currently, the Company is working with The Chase Manhattan
Bank, N.A. to analyze the results of a pilot program which utilized the
Company's voice verification products to authenticate the identity of
customers prior to a teller transaction. Over 9,000 Chase customers were
enrolled in the program. The Company also intends to actively market its
voice verification technologies and products for computer network, electronic
commerce, Internet and physical access applications.

The Company's voice verification and speech recognition technologies have
to date been incorporated into various products sold by MOSCOM, the sole
stockholder of the Company, to numerous leading telecommunications systems
providers, including Siemens AG, Lucent Technologies, Inc. (a subsidiary of
AT&T Corp.) and Alcatel SEL AG. These technologies are being used in a
variety of telecommunications applications, particularly in international
markets that do not utilize touch tone telephone systems and,

<PAGE>

therefore, must rely on speech recognition technologies to permit interactive
telephonic services such as voice mail. The Company and MOSCOM have entered
into certain agreements that will enable the Company to continue to market
its products and technologies through MOSCOM's existing channels of
distribution. See "Certain Transactions --MOSCOM Relationship."

The key elements of the Company's strategy are to: (i) exploit its
technological leadership in the voice verification market; (ii) focus on
direct sales of its proprietary technologies and products to banks and other
financial institutions; (iii) actively market its proprietary technologies
and products directly and through original equipment manufacturers ("OEMs"),
value-added resellers ("VARs") and systems integrators for use in other
markets that have a need for the Company's products; and (iv) leverage
MOSCOM's existing relationships with leading telecommunications systems
manufacturers and suppliers in order to market its voice verification and
speech recognition technologies internationally.

Votan's business and operations were acquired by MOSCOM in September 1991
from a predecessor company that had been engaged in voice verification and
speech recognition development since its inception in 1979. The Company has,
until recently, conducted its business and operations as the Votan division
of MOSCOM. In June 1996, MOSCOM transferred substantially all of the voice
verification and speech recognition business, operations (including research
and development), assets and liabilities of the Votan division to the Company
(the "Formation"). After the consummation of this offering, MOSCOM will own
approximately 62% of the outstanding shares of Common Stock of the Company
(56% if the Underwriters' over-allotment option is exercised in full).

Votan was incorporated in Delaware in June 1996. The Company's executive
offices are located at 7020 Koll Center Parkway, Pleasanton, California
94566, and its telephone number is (510) 426-5600.

THE OFFERING

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<S> <C>
Common Stock offered by:
The Company ............................................. 2,000,000 shares
The Selling Stockholder(1) .............................. 850,000 shares
Common Stock to be outstanding after this offering(2) .... 7,500,000 shares
Use of Proceeds ........................................... For expansion of sales and marketing
activities; research and
development; reimbursement of MOSCOM
for certain expenses; and general
corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol .................... VOTN
</TABLE>

- -----------

(1) Does not include 427,500 shares of Common Stock subject to the
Underwriters' over-allotment option from the Selling Stockholder. See
"Underwriting."

(2) Excludes 825,000 shares issuable under the Company's Stock Option Plan
adopted in June 1996 and 285,000 shares reserved for issuance upon the
exercise of warrants to be granted to the Representatives of the
Underwriters and their designees, exercisable at 120% of the initial
public offering price (the "Representatives' Warrants"). See
"Management --Stock Option Plans," "Description of Capital Stock" and
"Underwriting."

<PAGE>

SUMMARY FINANCIAL DATA

The summary financial data presented below for each of the three years
ended December 31, 1995 have been derived from the Financial Statements of
the Company. The summary statement of operations data for the six months
ended June 30, 1995 and 1996 and the summary balance sheet data as of June
30, 1996 have been derived from unaudited financial statements of the Company
that, in the opinion of management, include all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of the
results of operations for these periods in accordance with generally accepted
accounting principles. The results for interim periods are not necessarily
indicative of the results for the full year. The summary information set
forth below should be read in conjunction with the Financial Statements and
the Notes contained in this Prospectus. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

The historical financial information may not be indicative of the
Company's future performance and does not necessarily reflect what the
financial position and results of operations of the Company would have been
had the Company operated as a separate, stand-alone entity during the periods
covered. See "Risk Factors --Recent Organization; Absence of Operating
History as an Independent Business; Limited Relevance of Historical Financial
Information."

SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

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<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
-------- ---------- ---------

<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales .................................... $ 517 $ 593 $ 572
Gross profit ............................. 210 288 243
Engineering and software development, net 342 579 424
Net loss ................................. $(846) $(1,003) $ (891)
Net loss per share (1) ................... $(0.16)
Weighted average shares outstanding (2) . 5,500
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1995 1996
-------- ---------
(UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales .................................... $ 225 $ 183
Gross profit ............................. 47 46
Engineering and software development, net 212 227
Net loss ................................. $(500) $ (562)
Net loss per share (1) ................... $(0.10)
Weighted average shares outstanding (2) . 5,500
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------
AS ADJUSTED
ACTUAL (3)
-------- ------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit) $(89) $19,426
Total assets .............. 678 19,853
Total liabilities ......... 461 121
Total stockholder's equity 217 19,732
</TABLE>

- ------------

(1) Pursuant to Securities and Exchange Commission requirements, net loss
per share of the Company is presented on a pro forma basis for the most
recent year presented and the most recent interim period presented. See
Note 2 of the Notes to Financial Statements.

(2) Gives retroactive effect to the capitalization of the Company and
reflects the 5,500-to-1 stock split of the Common Stock.

(3) Adjusted to give effect to the sale of 2,000,000 shares of Common Stock
offered by the Company at an assumed initial public offering price of
$11.00 per share (after deducting the estimated underwriting discounts
and estimated offering expenses) and the application of the estimated net
proceeds therefrom. See "Use of Proceeds."

<PAGE>

RISK FACTORS

In addition to other information contained in this Prospectus, prospective
investors should carefully consider the following specific factors relating
to the Company and its business before deciding to invest in the Common Stock
offered hereby.

RECENT ORGANIZATION; ABSENCE OF OPERATING HISTORY AS AN INDEPENDENT BUSINESS;
LIMITED RELEVANCE OF HISTORICAL FINANCIAL INFORMATION

The Company is a wholly owned subsidiary of MOSCOM and, until recently,
conducted its business and operations as the Votan division of MOSCOM. In
June 1996, MOSCOM transferred substantially all of the voice verification and
speech recognition business, operations (including research and development),
assets and associated liabilities of its Votan division to the Company.
Accordingly, the Company has no independent operating history upon which an
evaluation of the Company and its prospects can be based. After this
offering, the Company will continue to be a subsidiary of MOSCOM but will
operate as a separate, stand-alone business. The Company's management has no
experience, as a group, operating the Company as a stand-alone business unit,
separate and apart from MOSCOM. Except as otherwise described in this
Prospectus, MOSCOM has no obligation to provide financial or management
assistance to the Company and has no plans to do so. See "Certain
Transactions --MOSCOM Relationship." The inability of the Company to operate
successfully as a separate entity would have a material adverse effect on the
Company's business, financial condition and results of operations.

PAST AND ANTICIPATED OPERATING LOSSES; UNCERTAINTY OF FUTURE RESULTS

Since its acquisition by MOSCOM through the Formation, the Votan division had
accumulated net losses from operations in an amount equal to approximately
$4.1 million and had incurred negative cash flows, each of which have been
funded by MOSCOM. Sales have been generated from a limited number of products
and research and development expenses have substantially contributed to these
operating losses. The Company expects to generate additional losses at least
through 1996, as it continues to expend substantial resources in establishing
and expanding its sales and marketing activities, research and development
and building its separate corporate infrastructure. There can be no assurance
that significant revenues or profitability will ever be achieved. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

NEW MANAGEMENT TEAM; DEVELOPMENT OF A SALES AND MARKETING ORGANIZATION

The Company has recently hired a Chief Executive Officer, a Vice
President, Sales and Marketing and a Chief Financial Officer. The new
management team is in the early stages of being integrated into the Company,
and there can be no assurance that the management team will be successfully
integrated and will develop into an effective group. The Company has entered
into an employment agreement with John A. White, the Company's President and
Chief Executive Officer. See "Management -- Employment Agreements." The
Company has not entered into employment agreements with any other employees.

The Company currently has a small marketing and sales support
organization. Votan's previous revenues largely resulted from indirect sales
through MOSCOM or from direct sales of certain applications developed to meet
the needs of particular customers. The Company intends to increase
substantially its direct sales and marketing force, with an initial emphasis
on meeting the needs of banks and other financial institutions. There can be
no assurance that the Company will be successful in expanding its marketing
and sales support organization or that such an organization will be able to

<PAGE>

generate increased sales or compete effectively against the more extensive
and well-funded sales and marketing organizations of the Company's current or
potential competitors. If the Company is unable to successfully expand its
sales and marketing organization, the Company's business, operating results
and financial condition would be materially adversely affected.

DEPENDENCE ON LIMITED NUMBER OF CUSTOMERS; CHANGE OF PRODUCT STRATEGY

Historically, the Company's products have been sold to a limited number of
customers. In the years ended December 31, 1993, 1994 and 1995 and the
six-month period ended June 30, 1996, the Company made significant sales to
only six, four, six and three customers, representing 63%, 38%, 84% and 93%
of the Company's sales, respectively. See "Business --Sales and Marketing."
In most cases, the customers are not recurring customers that are expected to
purchase substantial quantities of the Company's products in the future.
Accordingly, the Company currently does not have a substantial customer base
of its own to which it can market its new products. The inability of the
Company to develop a broad or substantial customer base in the future would
have a material adverse effect on its business, financial condition and
results of operations.

The Company's product sales have consisted mostly of the sale of computer
boards to third parties that have added application software to meet their
requirements or those of the ultimate end-user. The Company plans to shift
its strategy to place greater emphasis on the delivery of complete end-user
solutions. Delivery of complete solutions to end users is expected to be more
complex, time consuming and require additional and more sophisticated sales
and service personnel. This strategy is also expected to result in higher
sales per transaction, the timing of which would have a material effect on
the reported results of operations from period to period. Moreover, the
inability of the Company to successfully implement this new strategy would
have a material adverse effect on the business, results of operations and
financial condition of the Company.

In the event that the Company's pilot program with The Chase Manhattan
Bank, N.A. is not successful or does not result in a substantial sale of the
Company's products and technologies, the Company's business, financial
condition and results of operations would be materially adversely affected.
Moreover, any delay in the successful completion of the pilot program, or
broader implementation of the program, could materially delay growth in the
Company's revenues and acceptance of the Company's products and technologies
by other banks and financial institutions.

ABILITY TO MANAGE GROWTH; MANAGEMENT OF EXPANDING OPERATIONS

The Company's ability to expand and grow will depend on a number of
factors, including the successful commercialization of its voice verification
and speech recognition technologies, the availability of working capital to
support such growth, existing and emerging competition, the Company's ability
to generate sufficient operating revenue, the Company's ability to adapt its
infrastructure and systems to accommodate growth and the Company's ability to
recruit and train additional qualified personnel to manage such growth. The
Company anticipates rapid expansion of its operations, which will place a
significant strain on its administrative, operational, financial and
management systems and resources. The management of the Company's growth will
require continued expansion and improvement of the Company's systems and
controls, as well as a significant increase in the Company's sales and
marketing operations and research and development activities. There can be no
assurance that the Company will not encounter difficulties as it integrates
these functions into its operations or that the Company's systems, procedures
and controls will be adequate to support the Company's expanding operations.

The Company's planned growth will impose significant added
responsibilities on members of senior management, including the need to
identify, recruit and integrate new senior level managers and executives into
the Company. The Company expects to expand its management, research and
development, testing, quality control, marketing, sales, customer service and
support operations, as well as financial and accounting controls, which could
place a significant strain on the Company. Failure to integrate new personnel
on a timely basis could have an adverse effect on the Company's operations.
Furthermore, the expenses associated with expanding the Company's management
team and hiring new

<PAGE>

employees may be incurred prior to the generation of any associated revenues.
The Company's executive management team has no experience working together as
a group. No assurance can be given that the executive management team will be
able to work effectively together and efficiently manage the operations and
growth of the Company. There can be no assurance that such management
expansion can be readily or successfully implemented. If the Company's
management is unable to manage growth effectively, the quality of the
Company's products, its ability to retain key personnel and its business,
financial condition or results of operations could be materially adversely
affected.

CONTROL BY MOSCOM; POTENTIAL CONFLICTS OF INTEREST

The Company is currently a wholly owned subsidiary of MOSCOM. Immediately
following this offering, MOSCOM will own approximately 62% of the outstanding
shares of Common Stock (56% if the Underwriters' over-allotment option is
exercised in full). As a result, MOSCOM will retain the voting power required
to elect all directors and to approve other matters required to be voted upon
by the stockholders of the Company. The concentration of ownership and
MOSCOM's voting control may have the effect of delaying or preventing a
change in control of the Company, or causing a change in control of the
Company that may not be favored by the Company's other stockholders. There
can be no assurance that MOSCOM's ability to prevent or cause a change in
control of the Company will not have a material adverse effect on the price
of the Common Stock. See "Principal and Selling Stockholders" and
"Description of Capital Stock." Prior to the Formation, the Votan division
had a limited number of employees and depended upon MOSCOM for most
administrative, sales and marketing functions. After this offering, these
functions will be undertaken by the Company, and there can be no assurance
that the Company will be successful in taking control of these functions from
MOSCOM. Furthermore, the Company has entered into certain agreements with
MOSCOM which govern certain aspects of the parties' relationship after the
Formation, including the licensing of certain technologies, the provision of
certain administrative, quality assurance testing and other services and
physical facilities. See "Certain Transactions --MOSCOM Relationship." There
can be no assurance that conflicts of interest between MOSCOM and the Company
will not arise with respect to the contractual arrangements, any services
which might be provided by MOSCOM in the future, or other matters. Any
adverse change in the Company's relationship with MOSCOM would have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company's Bylaws provide that the independent
members of the Company's Board of Directors shall decide all matters before
the Board relating to MOSCOM and the Company. See "Certain Transactions --
MOSCOM Relationship."

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS

The Company's future revenues and operating results are uncertain and may
fluctuate from quarter to quarter and from year to year due to a combination
of factors, including the timing of capital expenditures, demand for the
Company's products, the volume and timing of orders and the ability to
fulfill orders, the level of product and price competition, the expansion of
the Company's sales and marketing organization, the Company's ability to
develop new and enhanced products, the type of distribution channels through
which products are sold, the mix of products and services sold and general
economic factors.

UNCERTAINTIES REGARDING FUTURE CAPITAL REQUIREMENTS; ABSENCE OF MOSCOM
FUNDING

For at least the last three years, the Company has operated, and is
currently operating, at a loss. The Company's working capital requirements
and cash flow provided by its operating activities are likely to vary greatly
from quarter to quarter, depending on the volume of production, the timing of
deliveries, the buildup of inventories and the payment terms offered to
customers. In the past, the Company's working capital needs have been met by
MOSCOM. However, MOSCOM will no longer be providing funds to finance the
Company's operations after the earlier of March 31, 1997 or the consummation
of a debt or equity financing by the Company of at least $10 million. The
Company expects that its existing capital resources, together with the net
proceeds of this offering and the interest earned thereon, will be adequate
to fund the Company's operations for at least the next two years. No
assurance can be given that the

<PAGE>

Company would not consume an unexpected and significant amount of its
available resources. The Company's future capital requirements and the
adequacy of available funds will depend on numerous factors, including the
successful commercialization of its voice verification and speech recognition
technologies, progress in its product development efforts, the magnitude and
scope of such efforts, the development of effective sales and marketing
activities, the cost of filing, prosecuting, defending and enforcing patent
claims and other intellectual property rights, competing technological and
market developments and the development of strategic alliances for the
marketing of its applications. To the extent that funds generated from the
Company's operations, together with its existing capital resources and the
net proceeds of this offering and the interest earned thereon, are
insufficient to meet current or planned operating requirements, the Company
will be required to obtain additional funds through equity or debt financing,
strategic alliances with corporate partners and others or through other
sources. If additional funds are raised through the issuance of equity
securities, the net tangible book value per share of the Common Stock may
decrease, the percentage ownership of then current shareholders of the
Company may be diluted and such equity securities may have rights,
preferences or privileges senior to those of the holders of Common Stock. The
Company does not have any committed sources of additional financing, and
there can be no assurance that additional funding, if necessary, will be
available on commercially reasonable terms, if at all. If adequate funds are
not available on terms acceptable to the Company, the Company may be required
to delay, scale back or eliminate certain aspects of its operations or
attempt to obtain funds through arrangements with collaborative partners or
others that may require the Company to relinquish rights to certain of its
technologies, products or potential markets. If adequate funds are not
available, the Company's business, financial condition and results of
operations would be materially and adversely affected. See "Use of Proceeds"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations --Liquidity and Capital Resources."

NO ASSURANCE OF COMMERCIALIZATION OF PRODUCTS UNDER DEVELOPMENT

The Company's business strategy is initially dependent upon the continued
development and commercialization of voice verification products,
particularly for banks and other financial institutions. The Company is
involved in development efforts with regard to a number of potential
products. There are a number of technological challenges that the Company
must successfully address to complete its development efforts. Product
development involves a high degree of risk, and returns on the Company's
investment are dependent upon successful development and commercialization of
such products. Some of the Company's products based on the Company's voice
verification and speech recognition technologies will require significant
additional research and development. There can be no assurance that any of
the products currently being developed by the Company, or those to be
developed in the future by the Company, will be technologically feasible,
commercially viable or will gain market acceptance or that such development
will be completed at all.

The development of the Company's technologies and the applications of such
technologies by its customers have required, and will continue to require,
significant technical innovations. In many cases, the Company must adapt its
products to meet the specific requirements of the customers' hardware or
software in which it is to be integrated. The adaptation process can be
time-consuming and costly to both the Company and its customers, and the
quality and resulting market acceptance of the end product will depend, to a
substantial extent, upon the success of such adaptation. There can be no
assurance that the Company will be successful in developing new products or
enhancing the performance of its existing products on a timely basis or
within budget, if at all. Any such failure could materially and adversely
affect the Company's business, financial condition and results of operations.

EARLY STAGE OF MARKET DEVELOPMENT; UNCERTAINTY OF MARKET ACCEPTANCE

The market for voice verification and speech recognition products is
relatively new and at an early stage of development. To date, the Company's
voice verification and speech recognition technologies have only been
incorporated in commercially available products on a limited basis, primarily
in applications relating to telecommunications. Acceptance of these
technologies on a commercial basis (other than telecommunications
applications) will be dependent upon the development of the voice
verification and

<PAGE>

speech recognition markets, the performance and price of the Company's and
its customers' products and customer reaction to these products. The
development of the voice verification and speech recognition market will be
dependent in part upon the growth of third-party applications incorporating
voice verification and speech recognition technologies and demand for new
applications, the ability of speech technology to meet and adapt to these
needs, and the continuing price and performance improvements in hardware and
software technologies that will reduce the cost and increase the performance
of products incorporating voice verification and speech recognition
technologies. There can be no assurance that the voice verification and
speech recognition market will develop further. The Company's success depends
upon the widespread acceptance of biometrics (the measurement of human
physical characteristics to confirm identity) as a useful and cost-effective
method to supplement conventional methods of transactional, data and physical
access security. There can be no assurance that the business community will
accept the use of biometrics. Furthermore, the Company's growth and success
will depend upon market acceptance of the Company's voice verification and
speech recognition technologies as useful and cost-effective alternatives to
other biometric security methods such as fingerprinting or retina scanning.
Failure of the Company's voice verification and/or speech recognition
technologies to achieve market acceptance would have a material adverse
effect on the Company's business, financial condition and results of
operations.

PRODUCT RELIABILITY

Most customer applications incorporating the Company's technologies are
being developed or have only been introduced to the market over the past
three years. As a result of the limited period of use and the controlled
environment in which many of the Company's technologies have been tested and
used to date, there can be no assurance that they will meet their performance
specifications under all conditions or for all applications. If any of the
Company's technologies fails to meet such expectations, the Company may be
required to enhance or improve that technology, and there can be no assurance
that the Company would be able to do so on a timely basis, if at all.
Introduction by the Company of products with reliability, quality or
compatibility problems could result in reduced orders, uncollectible accounts
receivable, delays in collecting accounts receivable and additional costs.
There can be no assurance that, despite testing by the Company or by its
customers, errors will not be found in the Company's products after
commencement of commercial deployment, resulting in product redevelopment
costs and loss of, or delay in, market acceptance. In addition, there can be
no assurance that the Company will not experience in the future significant
product returns or that the Company will not be required to upgrade customer
equipment in order to accommodate the Company's products. Any product defects
could subject the Company to warranty or product liability claims. Any such
event could have a material adverse effect on the Company's business,
financial condition or results of operations.

RELIANCE ON SALES OF VOICE VERIFICATION PRODUCTS

To date, the Company's revenues from voice verification products have been
limited. Sales of the Company's voice verification products are expected to
account for a substantial portion of the Company's revenues for the
foreseeable future. The balance of the revenues is likely to be derived from
license fees earned as a result of the sale by MOSCOM of speech recognition
products into the telecommunications marketplace. Accordingly, the Company's
business and results of operations are dependent on sales of voice
verification products, and the failure to generate or any decrease in sales
of voice verification products would have a material adverse effect on the
Company. The Company's future performance will depend in significant part on
the successful development, introduction, marketing and customer acceptance
of voice verification products. See "Business --The Votan Solution."

COMPETITION; ALTERNATIVE TECHNOLOGIES

<PAGE>

Inc., Microsoft Corporation, NEC Corp., Nuance Communications, Siemens AG,
Speech Systems, Inc., Texas Instruments Corporation ("Texas Instruments"),
T-Netix, Inc. ("T-Netix"), Veritel Corporation ("Veritel"), Voice Control
Systems, Inc. ("Voice Control Systems") and Voice Processing Corporation. While
all of the foregoing competitors participate in the speech recognition market,
currently only ITT, Texas Instruments, T-Netix, Veritel, Voice Control Systems
and Voice Processing Corporation compete with the Company in the voice
verification market. In addition, the Company is likely to become subject to
competition in the verification marketplace from companies which produce or are
developing biometric identification products, such as fingerprint matching,
retina pattern matching and signature analysis, as well as companies which
market or develop traditional key, card and surveillance systems. Existing and
potential competitors may be able to develop technologies that are as
effective as, or more effective or easier to use than those offered by the
Company, which would render the Company's technologies noncompetitive or
obsolete. Moreover, many of the Company's existing and potential competitors
have substantially greater financial, marketing, sales, distribution and
technological resources than the Company. Such existing and potential
competitors may also enjoy substantial advantages over the Company in terms
of research and development expertise, manufacturing efficiency, name
recognition, sales and marketing expertise and distribution channels. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase
the abilities of their speech technology products to address the needs of the
Company's prospective customers. Accordingly, it is possible that new
competitors may emerge and rapidly acquire significant market share. There
can be no assurance that the Company will be able to compete successfully
against current or future competitors or that competition will not have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business --Competition."

RAPID TECHNOLOGICAL CHANGES MAY ADVERSELY AFFECT THE COMPANY

The voice verification and speech recognition market in which the Company
operates is characterized by rapid technological change. The development of
new technology by the Company's competitors may render the Company's
technologies obsolete. Competition in the field of voice verification and
speech recognition is based largely on technological superiority.
Accordingly, the success of the Company will depend upon its ability to
continually enhance its current technologies, to develop and introduce new
products that keep pace with technological developments and to timely address
the changing needs of the marketplace. There can be no assurance that the
Company's research and development activities will result in the successful
development of new technologies and products or the enhancement of existing
technologies and products. In addition, there can be no assurance that the
introduction of products, services or technological developments by others
will not have a material adverse effect on the Company's operations. See
"Business --Industry Background" and "--Products and Development."

DEPENDENCE ON SALES BY THIRD PARTIES; DEVELOPMENT OF MARKETING AND SALES
ORGANIZATION

The Company has limited experience in marketing its products and
technologies directly to end-users. Although the Company's initial focus is
on direct sales of its voice verification products, a significant portion of
the Company's revenues may be dependent upon the ability of systems
integrators, VARs and OEMs to develop and sell systems that utilize the
Company's technologies. Factors that adversely affect the revenues of the
Company's systems integrator, VAR and OEM customers, such as economic
conditions, patent positions, their technology and other marketing
restrictions, may have a substantial impact upon the Company's financial
results. No assurance can be given that any systems integrator, VAR or OEM
customer will use the Company as a supplier of voice verification and speech
recognition technologies, that they will give the sale of the Company's
products or other products utilizing the Company's technologies adequate
priority or that customers of the Company will not experience financial or
other difficulties that could adversely affect their revenues and, in turn,
the business, results of operations and financial condition of the Company.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business --Sales and Marketing."

DEPENDENCE ON THIRD-PARTY MANUFACTURERS

The Company does not own or control any manufacturing facilities, does not
manufacture component parts for its products and has no current plans to
acquire such facilities or produce such

<PAGE>

components. The Company contracts with third-party suppliers to manufacture
its products and will continue to depend upon such manufacturers in the
future. The Company generally does not have long-term contracts with
suppliers for the purchase and delivery of component parts or contractors for
the assembly of its products.

Certain key components of the Company's voice verification and speech
recognition products are currently manufactured for the Company by various
third-party contract manufacturers. In the event that the Company is unable
to obtain sufficient quantities of such components on commercially reasonable
terms, or in a timely manner, the Company will not be able to manufacture its
products on a timely and cost-competitive basis, which would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business --Manufacturing." The loss of any one supplier or
an inability of suppliers to provide the Company with the required quantity
or quality of products could have a material adverse effect on the Company's
business, financial condition and results of operations, until such time as
an alternate source of supply for such products is found. Although the
Company believes that it can obtain contracts with suppliers that will
satisfy the Company's quality requirements and production schedules at a
price that is acceptable to the Company, no assurance can be given that it
will be successful in obtaining acceptable contracts. See "Business
- --Manufacturing."

All quality assurance and testing of the Company's products will, for the
foreseeable future, be conducted by MOSCOM. MOSCOM will also handle the final
packaging and shipping of products. See "Certain Transactions --MOSCOM
Relationship." Accordingly, the Company will be dependent upon MOSCOM to
cost-effectively and efficiently handle its production needs until such time
as the Company can develop its own operations or identify other third-party
service providers. The failure of MOSCOM to provide its services to the
Company in an efficient and cost-effective manner would have a material
adverse effect upon the Company's business, results of operations and
financial condition.

UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS

The Company's success will depend in part on its ability to obtain and
maintain patent protection for its technologies, products and processes,
preserve its trade secrets and operate without infringing the proprietary
rights of other parties. Because of the substantial length of time and
expense associated with bringing new products through development to the
marketplace, the voice verification and speech recognition industry places
considerable importance on obtaining and maintaining patent and trade secret
protection for new technologies, products and processes. While the Company
holds two patents for methods relating to its proprietary algorithms, the
Company relies primarily upon a combination of trademark, copyright, know-how
and trade secrets and contractual restrictions to protect its intellectual
property rights. The Company believes that such measures afford only limited
protection and, accordingly, there can be no assurance that the steps taken
by the Company to protect these proprietary rights will be adequate to
prevent misappropriation of the technology or the independent development of
similar technology by others. Despite the Company's efforts to protect its
proprietary rights, unauthorized parties may attempt to copy aspects of the
Company's products or to obtain and use information that the Company regards
as proprietary. There can be no assurance that any patents issued or licensed
to the Company will not be challenged and held to be invalid, or that present
or future patents will provide commercially significant protection to the
Company's present or future technologies, products or processes. In addition,
there can be no assurance that others will not independently develop
substantially equivalent proprietary information not covered by patents to
which the Company owns rights or obtain access to the Company's know-how or
that others will not be issued patents that may prevent the sale of one or
more of the Company's technologies, or require licensing and the payment of
significant fees or royalties by the Company to third parties in order to
enable the Company to conduct its business. There can be no assurance that
such licenses would be available or, if available, would be on terms
acceptable to the Company or that the Company would be successful in any
attempt to redesign its technologies, products or processes to avoid
infringement. The Company's failure to obtain these licenses or to redesign
its technologies, products or processes would have a material adverse effect
on the Company's business, financial condition and results of operations.

<PAGE>

No assurance can be given as to the degree of protection afforded by any
patents issued to or licensed by the Company or that such patents will not be
infringed by the products of others. The Company has received a notice from a
third party claiming broad patent protection in the voice processing area and
alleging that certain of the Company's voice mail and voice processing
products may infringe upon its patent. Based on advice of its patent counsel,
the Company does not believe that any of its products infringes upon the
cited third-party patent, and if necessary, the Company intends to vigorously
defend its position. However, the Company may not be able to successfully
defend against the claimed infringement. There can be no assurance that the
Company will not be subject to other claims that its technologies or products
infringe upon the patents or proprietary rights of third parties. Defense and
prosecution of patent claims can be expensive and time-consuming, regardless
of whether the outcome is favorable to the Company, and can result in the
diversion of substantial financial, management and other resources from the
Company's other activities. An adverse outcome could subject the Company to
significant liability to third parties, require the Company to obtain
licenses from third parties or require the Company to cease any related
research and development activities or product sales. In addition, the laws
of certain countries may not protect the Company's intellectual property
rights to the same extent that such rights are protected in the United
States.

The Company's success is also dependent upon the skill, knowledge and
experience of its scientific and technical personnel. To help protect its
rights, the Company requires all employees, consultants, advisors and
collaborators to enter into confidentiality agreements that prohibit the
disclosure of confidential information to anyone outside the Company, and in
most cases, assignment to the Company of their ideas, developments,
discoveries and inventions. There can be no assurance, however, that these
agreements will provide adequate protection for the Company's trade secrets,
know-how or other proprietary information in the event of any unauthorized
use or disclosure. See "Business --Proprietary Rights."

INTERNATIONAL SALES AND OPERATIONS RISKS

The Company plans to sell applications based on its voice verification and
speech recognition technologies to customers both in the United States and
internationally. International sales and operations may be limited or
disrupted by the imposition of government controls, the need for government
certification of products connecting to telephone networks, political
instability, trade restrictions, changes in tariffs or difficulties in
staffing and managing international operations. Additionally, the Company's
business, financial condition and results of operations may be adversely
affected by fluctuations in currency exchange rates as well as increases in
duty rates and difficulties in obtaining required licenses and permits. To
date, the Company has not engaged in exchange rate hedging activities to
reduce the risks of such fluctuations. In addition to the usual risks
associated with foreign sales (such as currency fluctuations and
restrictions, inflation, export-import regulations, customs matters, foreign
collection problems, and military, political and transportation risks), the
sale of voice technologies in foreign countries involves additional
governmental regulation, necessary product adaptations to local languages and
switching systems and uncertainties arising from local business practices and
cultural considerations. There can be no assurance that the Company will be
able to successfully commercialize its voice verification and speech
recognition technologies or any future applications in any foreign market.
See "Business --Sales and Marketing."

NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for the Common
Stock. There can be no assurance that an active public market for the Common
Stock will develop or be sustained after this offering or that the market
price for the Common Stock will not drop below the initial public offering
price. The initial public offering price will be determined by negotiations
among the Company, the Selling Stockholder and the Underwriters and is not
necessarily indicative of the market price at which the Common Stock of the
Company will trade after this offering. See "Underwriting." The market price
of the shares of Common Stock, like that of the common stock of many of the
Company's competitors, is likely to be highly volatile. Factors such as
announcements of technological innovations or new products by the Company or
its competitors, developments or disputes concerning patent or other
proprietary

<PAGE>

rights of the Company or its competitors, litigation, fluctuations in the
Company's operating results, changes in analysts' earnings estimates,
developments in the financial markets and market conditions for voice
verification and/or speech recognition stocks in general could have a
significant impact on the future price of the Common Stock. In addition, the
stock market, especially with regard to technology issues, has experienced
from time to time extreme price and volume fluctuations that may be unrelated
to the operating performance of particular companies.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of the Company's Common Stock after this
offering or the prospect of such sales could adversely affect the market
price of the Common Stock and the Company's ability to raise any necessary
capital to fund its future operations. The number of shares of Common Stock
available for sale in the public market is limited by restrictions under the
Securities Act of 1933, as amended (the "Securities Act"), and a lockup
agreement (the "Lockup") under which the Company and MOSCOM have agreed for a
period of one year after the date of this Prospectus not to, without the
prior written consent of Ladenburg, Thalmann & Co. Inc., on behalf of the
Representatives, directly or indirectly, offer, pledge, sell, contract to
sell, transfer or otherwise dispose of any shares of Common Stock or any
securities convertible into, or exchangeable or exercisable for, shares of
Common Stock. In their sole discretion and at any time without notice, the
Representatives may release all or any portion of the shares subject to the
Lockup. Of the 7,500,000 shares of Common Stock that will be outstanding
after this offering, the 2,850,000 shares sold in this offering will be
freely tradeable without restriction or further registration under the
Securities Act. In addition, subject to the Lockup, shares owned by
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act ("Affiliates"), may generally be sold in compliance with the
applicable provisions of Rule 144. The Company intends to register all the
shares of Common Stock reserved for issuance under the Company's Stock Option
Plan following the date of this Prospectus. The Company has reserved 825,000
shares of Common Stock for issuance under the Company's Stock Option Plan.

Upon completion of this offering, the Company has agreed to issue to the
Representatives warrants covering an aggregate of 285,000 shares of Common
Stock exercisable for a four-year period commencing one year from the date of
this offering, at an exercise price equal to 120% of the public offering
price. The Company has agreed to grant certain demand and piggyback
registration rights to the holders of these warrants. The existence or
exercise of these warrants could adversely affect the Company's ability to
raise additional financing at a time when it may be advantageous to do so.
See "Shares Eligible for Future Sale" and "Underwriting."

ANTITAKEOVER CONSIDERATIONS

The Company's Board of Directors has the authority, without further action
by the stockholders, to issue from time to time, up to 1,000,000 shares of
Preferred Stock in one or more classes or series, and to fix the rights and
preferences of such Preferred Stock. The Company is subject to provisions of
Delaware corporate law that, subject to certain exceptions, will prohibit the
Company from engaging in any "business combination" with a person who,
together with affiliates and associates, owns 15% or more of the Company's
Common Stock (an "Interested Stockholder") for a period of three years
following the date that such person became an Interested Stockholder, unless
the business combination is approved in a prescribed manner. These provisions
of Delaware law and of the Company's Certificate of Incorporation, as well as
MOSCOM's majority ownership of the Company, may have the effect of delaying,
deterring or preventing a change in the control of the Company and may
discourage bids for the Common Stock at a premium over market price, and may
adversely affect the market price and the voting and other rights of the
holders of the Common Stock. See "Description of Capital Stock."

NO SPECIFIC USE OF PROCEEDS

As of the date of this Prospectus, the Company has no specific plans to
use the net proceeds from this offering other than for expansion of sales and
marketing activities, research and development, reimbursement of MOSCOM for
certain expenses and general corporate purposes. Accordingly, the

<PAGE>

Company's management will retain broad discretion as to the allocation of a
substantial portion of the net proceeds from this offering. Pending
application, the Company intends to invest the net proceeds in investment
grade, interest-bearing securities. See "Use of Proceeds."

IMMEDIATE AND SUBSTANTIAL DILUTION

Purchasers of shares of Common Stock in this offering will incur immediate
and substantial dilution in the pro forma net tangible book value per share
from the initial public offering price. In addition, investors purchasing
shares in this offering will incur additional dilution to the extent that
stock options (whether currently outstanding or subsequently issued or
granted) are exercised. See "Dilution."

LACK OF DIVIDENDS

The Company currently intends to retain all earnings, if any, for future
growth and, therefore, does not intend to pay cash dividends on its Common
Stock in the foreseeable future. See "Dividend Policy."

<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company are estimated to be approximately $19.5
million based upon an assumed initial public offering price of $11.00 per
share of Common Stock and after deducting the estimated underwriting discount
and estimated offering expenses payable by the Company.

The primary purposes of this offering are to create a public market for
the Common Stock, to facilitate future access to the public market and to
obtain equity capital. The Company expects to use the net proceeds for
expansion of sales and marketing activities, research and development and
general corporate purposes. The Company has also agreed to reimburse MOSCOM
for certain expenses related to the formation of the Company and related
matters in an amount not to exceed $200,000. See "Certain Transactions
- --MOSCOM Relationship." Management of the Company will have broad discretion
over the application of such net proceeds. Although it is possible that the
Company might acquire complementary businesses or technologies, the Company
has no current plans for any acquisitions and no such acquisitions are being
negotiated as of the date of this Prospectus. The Company expects that its
existing capital resources, together with the net proceeds from this offering
and the interest earned thereon, will be adequate to fund its capital
requirements for at least the next two years. Pending application, the
Company intends to invest the net proceeds from this offering in investment
grade, interest-bearing instruments. See "Risk Factors --Uncertainties
Regarding Future Capital Requirements; Absence of MOSCOM Funding" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations --Liquidity and Capital Resources."

DIVIDEND POLICY

The Board of Directors intends to retain any earnings of the Company to
support operations and does not anticipate declaring or paying cash or other
dividends on its Common Stock in the foreseeable future. The declaration of
dividends, cash or otherwise, is subject to the discretion of the Company's
Board of Directors and will depend on a number of factors, including the cash
position, earnings, financial position and anticipated financial requirements
of the Company and other factors deemed relevant by the Board of Directors.

<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
June 30, 1996 (i) to reflect the 5,500-to-1 stock split of the Common Stock
and to reflect a change in the authorized capital stock of the Company and (ii)
as adjusted to give effect to the sale of the Common Stock offered hereby at an
assumed initial public offering price of $11.00 per share, and the application
of the estimated net proceeds therefrom.

<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------
ACTUAL AS ADJUSTED
---------- ------------
<S> <C> <C>
Stockholders' Equity:
Preferred stock, $0.01 par value, 1,000,000 shares
authorized,
none issued and outstanding ................................ -- --
Common stock, $0.01 par value, 20,000,000 shares authorized,
5,500,000 shares issued and outstanding, and 7,500,000
shares issued and outstanding, as adjusted (1) .............$ 55,000 $ 75,000
Additional paid-in capital .................................. 162,000 19,657,000
---------- ------------
Total .......................................................$ 217,000 $19,732,000
========== ============
</TABLE>

- ------------

(1) Excludes 825,000 shares issuable under the Company's Stock Option
Plan adopted in June 1996 and 285,000 shares reserved for issuance upon
the exercise of the Representatives' Warrants. See "Management --Stock
Option Plan," "Description of Capital Stock" and "Underwriting."

<PAGE>

DILUTION

The net tangible book value of the Company as of June 30, 1996 was
approximately $(35,000) or approximately $(0.01) per share. After giving
effect to the sale by the Company of the 2,000,000 shares of Common Stock
offered hereby (assuming an initial public offering price of $11.00 per
share) and the application of the estimated net proceeds therefrom, as set
forth in "Use of Proceeds," the as adjusted net tangible book value of the
Company as of June 30, 1996 would have been approximately $19.5 million, or
approximately $2.60 per share. This represents an immediate increase in net
tangible book value of $2.61 per share to existing stockholders and an
immediate dilution of $8.40 per share to new investors purchasing shares in
this offering. The following table illustrates the dilution on a per share
basis:

<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share (1) ..................... $11.00
Net tangible book value before this offering (2) ....................... (0.01)
Increase attributable to the sale of shares to new investors (3) ...... 2.61
--------
Pro forma net tangible book value after this offering (3) .............. 2.60
--------
Dilution in net tangible book value of Common Stock to new investors (3) $ 8.40
========
</TABLE>

- ------------

(1) Before deduction of underwriting discounts and commissions and
estimated offering expenses payable by the Company.

(2) Net tangible book value per share is determined by dividing the net
tangible book value of the Company (tangible assets less liabilities)
by the number of shares of Common Stock outstanding.

(3) After deduction of underwriting discounts and commissions and
estimated offering expenses payable by the Company.

The following table sets forth (i) the number of shares of Common Stock
purchased from the Company, (ii) the total consideration and the average
price per share contributed by the existing stockholder, based on the
Company's book value at June 30, 1996, and (iii) the total consideration and
the average price per share paid by new investors. The following computations
do not reflect the sale of shares of Common Stock by the Selling Stockholder.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
---------------------- ------------------------ PER SHARE
NUMBER PERCENT AMOUNT PERCENT
----------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholder (1) 5,500,000 73.3% $ 217,000(2) 1.0% $ 0.04
New investors ............ 2,000,000 26.7 22,000,000 99.0 $11.00
----------- --------- ------------- ---------
Total ................ 7,500,000 100.0% $22,217,000 100.0%
=========== ========= ============= =========
</TABLE>
[FN]
- ------------

(1) Sales by the Selling Stockholder in this offering will reduce the
number of shares held by the existing stockholder to 4,650,000 or 62.0%
of the total number of shares of Common Stock outstanding after this
offering, and will increase the number of shares to be purchased by the
new public investors to 2,850,000 or 38.0% of the total number of
shares of Common Stock outstanding after the offering. See "Principal
and Selling Stockholders."

(2) Does not include accumulated net losses from operations of the Votan
division through the Formation in an amount equal to approximately $4.1
million and negative cash flows, each of which had been funded by
MOSCOM.

<PAGE>

SELECTED FINANCIAL DATA

The selected financial data presented below for each of the three years
ended December 31, 1995 have been derived from the Financial Statements of
the Company, which have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report included elsewhere in this
Prospectus. The selected financial data as of and for the year ended December
31, 1992 and as of and for the period ended December 31, 1991 have been
derived from unaudited financial statements of the Company not included in
this Prospectus. The selected statement of operations data for the six months
ended June 30, 1995 and 1996 and the selected balance sheet data as of June
30, 1996 have been derived from unaudited financial statements of the Company
that, in the opinion of management, include all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of the
results of operations for these periods in accordance with generally accepted
accounting principles. The results for interim periods are not indicative of
the results for the full year. The selected financial data set forth below
should be read in conjunction with the Financial Statements and related Notes
thereto and with Management's Discussion and Analysis of Financial Condition
and Results of Operations appearing elsewhere in this Prospectus.

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
------------------ ------------------------------- -------------------
1991 (1) 1992 1993 1994 1995 1995 1996
-------- -------- -------- ---------- --------- -------- ---------
(UNAUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales ........................... $506 $ 483 $ 517 $ 593 $ 572 $ 225 $ 183
Cost of sales ................... 192 204 307 305 329 178 137
-------- -------- -------- ---------- --------- -------- ---------
Gross profit .................... 314 279 210 288 243 47 46
Operating expenses:
Engineering and software
development, net .............. 93 265 342 579 424 212 227
Selling and marketing .......... 108 239 223 293 323 148 91
General and administrative ..... 130 510 490 418 386 187 290
-------- -------- -------- ---------- --------- -------- ---------
Total operating expenses ........ 331 1,014 1,055 1,290 1,133 547 608
-------- -------- -------- ---------- --------- -------- ---------
Loss from operations ............ (17) (735) (845) (1,002) (890) (500) (562)
Provision for taxes ............. -- -- 1 1 1 -- --
-------- -------- -------- ---------- --------- -------- ---------
Net loss ........................ $(17) $ (735) $ (846) $(1,003) $ (891) $(500) $ (562)
======== ======== ======== ========== ========= ======== =========
Net loss per share (2) .......... $(0.16) $(0.10)
========= =========
Weighted average shares
outstanding (3) ................ 5,500 5,500
========= =========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
---------------- --------------------------- JUNE 30,
1991 1992 1993 1994 1995 1996
------ -------- -------- ------- -------- -----------
(UNAUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit) $127 $(133) $(114) $(94) $(214) $(89)
Total assets ............. 555 458 704 613 342 678
Total liabilities ........ 160 196 209 205 224 461
Total equity ............. 395 262 495 408 118 217
</TABLE>

- ------------

(1) Prior to September 1, 1991, the business of the Company was owned by a
predecessor private company. Accordingly, Statement of Operations Data
for the eight-month period ended August 31, 1991 is not available and
not presented. Statement of Operations Data includes the operations of
the Company from September 1, 1991, the date of acquisition by MOSCOM,
to December 31, 1991.

(2) Pursuant to Securities and Exchange Commission requirements, net loss
per share of the Company is presented on a pro forma basis for the most
recent year presented and the most recent interim period presented.

(3) Gives retroactive effect to the capitalization of the Company and
reflects the 5,500-to-1 stock split of the Common Stock.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company's business and operations were acquired by MOSCOM in 1991 from
a predecessor company that had been engaged in voice verification and speech
recognition research and development since its inception in 1979. The Company
has, until recently, conducted its business and operations as the Votan
division of MOSCOM and is currently a wholly owned subsidiary of MOSCOM. In
June 1996, MOSCOM transferred substantially all of the voice verification and
speech recognition business, operations (including research and development),
assets and associated liabilities of its Votan division to the Company.
Accordingly, the Company has no independent operating history upon which an
evaluation of the Company and its prospects can be based. After this
offering, the Company will continue to be a subsidiary of MOSCOM, but will
operate as a separate, stand-alone business. See "Certain Transactions
- --MOSCOM Relationship."

Since its acquisition by MOSCOM through the Formation, the Votan division
had accumulated net losses from operations in an amount equal to approximately
$4.1 million and has incurred negative cash flows, each of which have been
funded by MOSCOM. Sales have been generated from a limited number of products
and research and development expenses have substantially contributed to these
operating losses. The Company expects to generate additional losses at least
through 1996, as it continues to expend substantial resources in establishing
and expanding its sales and marketing activities, research and development
and building its separate corporate infrastructure. There can be no assurance
that significant revenues or profitability will ever be achieved.

The Company's future revenues and operating results are uncertain and may
fluctuate from quarter to quarter and from year to year due to a combination
of factors, including the timing of capital expenditures, demand for the
Company's products, the volume and timing of orders and the ability to
fulfill orders, the level of product and price competition, promotional
discounts, the expansion of the Company's sales and marketing organization,
its ability to develop new and enhanced products, the type of distribution
channels through which products are sold, the mix of products and services
sold, and general economic factors.

The Company's working capital requirements and cash flow provided by its
operating activities are likely to vary greatly from quarter to quarter,
depending on the volume of production, the timing of deliveries and the
payment terms offered to customers. In the past, the Company's working
capital needs have been met by MOSCOM. However, MOSCOM will no longer be
providing funds to finance the Company's operations, and except as otherwise
described in this Prospectus, MOSCOM has no obligation to provide financial
or management assistance to the Company and has no plans to do so. The
Company and MOSCOM have entered into certain agreements providing for the
Formation and governing various interim and ongoing relationships between and
among the two companies. See "Certain Transactions --MOSCOM Relationship."

The financial information included herein does not necessarily reflect the
results of operations, financial position and cash flows of the Company in
the future or what the results of operations, financial position and cash
flows would have been had the Company been a separate, stand-alone entity
during the periods presented. The financial information included herein does
not reflect the many significant changes that will occur in the funding and
future operations of the Company as a result of the Formation and this
offering. The financial information contained herein does not reflect the
sales of the Company's products as part of products and systems sold by
MOSCOM. In the future, the sale of the Company's products by MOSCOM will
result in royalties payable by MOSCOM to Votan pursuant to the terms of the
agreements governing the ongoing relationship between the two companies. See
"Certain Transactions --MOSCOM Relationship." The financial information
contained herein does not reflect any revenues resulting from such royalties.

Historically, the Company's products have been sold to a limited number of
customers. In the years ended December 31, 1993, 1994 and 1995 and the
six-month period ended June 30, 1996, the Company

<PAGE>

made significant sales to only six, four, six and three customers, accounting
for 63%, 38%, 84% and 93% of the Company's sales, respectively. In most
cases, the customers are not recurring customers which are expected to
purchase substantial quantities of the Company's products in the future.
Accordingly, the Company does not have a substantial customer base of its own
to which it can market its new products. The inability of the Company to
develop a broad or substantial customer base in the future would have a
material adverse effect on its business, financial condition and results of
operations.

The Company's product sales have consisted mostly of the sale of computer
boards to third parties that have added application software to meet their
requirements or those of the ultimate end-user. The Company plans to shift
its strategy to place greater emphasis on the delivery of complete end-user
solutions. This is expected to result in larger per transaction sales, the
timing of which would have a material effect on the reported results of
operations from period to period. Moreover, the inability of the Company to
successfully implement this new strategy would have a material adverse effect
on the business, results of operations and financial condition of the
Company.

In the past, the Company's sales have resulted primarily from sales of the
Company's boards, as stand-alone products, to systems integrators, VARs and
OEMs. After the consummation of this offering, the Company intends to
substantially expand its sales and marketing organization in order to
increase the direct sales of its products as a fully integrated systems
solution. This shift in the Company's marketing strategy is likely to result
in greater fluctuations in quarterly sales due to a number of factors,
including greater expenditures in its sales and marketing efforts, higher
pricing on systems (as opposed to stand-alone boards), additional expenses
associated with a more expansive direct sales and marketing organization, as
well as higher general and administrative expenses attendant to the foregoing
and resulting from it being a publicly traded Company.

In addition, the Company intends to continue to expend substantial
resources on its engineering and software development efforts in order to
continue the improvement and enhancement of its core technologies, as well as
the development of its next generation auditory-based technologies. These
expenditures are likely to materially differ from previous levels of spending
reflected in the historical financial information included herein. Moreover,
such expenditures are likely to contribute significantly to greater
fluctuations in the Company's quarterly results of operations.

This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Prospective investors are cautioned that such statements are only predictions
and that actual events or results may differ materially. In evaluating such
statements, prospective investors should specifically consider the various
factors identified in this Prospectus, including the matters set forth under
the caption "Risk Factors," which could cause actual results to differ
materially from those indicated by such forward-looking statements.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1996 AND 1995

Sales decreased from $225,000 for the six months ended June 30, 1995 to
$183,000 for the six months ended June 30, 1996. The decrease was primarily
due to the absence of international sales for the six months ended June 30,
1996, resulting from the Company's emphasis on the sale of its products
domestically, as opposed to $154,000 of international sales for the six months
ended June 30, 1995. This shortfall was partially offset by an increase in
domestic sales from $71,000 for the six months ended June 30, 1995 to $183,000
for the six months ended June 30, 1996. Sales for the six months ended June 30,
1996 also included $48,000 attributable to the pilot program with The Chase
Manhattan Bank, N.A.

Gross profit decreased from $47,000 for the six months ended June 30, 1995
to $46,000 for the six months ended June 30, 1996. The decrease in gross
profit was primarily due to lower sales partially offset by lower
amortization of software development costs relating to the Company's
VoiceLock product which was fully amortized as of June 30, 1995.

Engineering and software development expenses, net, increased from
$212,000 for the six months ended June 30, 1995 to $227,000 for the six
months ended June 30, 1996, net of amount capitalized of

<PAGE>

$53,000 for the six months ended June 30, 1996. The capitalized amount for
the six months ended June 30, 1996 related to enhancements to the Company's
new generation four port board.

Selling and marketing expenses decreased from $148,000 for the six months
ended June 30, 1995 to $91,000 for the six months ended June 30, 1996
primarily due to the absence of sales commissions resulting from the shift
from international sales to domestic sales.

General and administrative expenses increased from $187,000 for the six
months ended June 30, 1995 to $290,000 for the six months ended June 30,
1996. This increase was primarily due to the recruitment and hiring of the
Company's Chief Executive Officer.

YEARS ENDED DECEMBER 31, 1995 AND 1994

Sales decreased from $593,000 for the year ended December 31, 1994 to
$572,000 for the year ended December 31, 1995. This decrease was primarily
due to a substantial decrease in sales of the Company's speech recognition
boards, partially offset by a one-time sale in the aggregate amount of
$320,000 of the Company's Call Router systems to Siemens AG for a major
department store customer in Germany. The decrease in the sale of the
Company's speech recognition boards resulted primarily from a decrease in
sales of boards sold directly by Votan in 1994, but in 1995 were incorporated
into a MOSCOM application sold by MOSCOM to Siemens AG.

Gross profit decreased from $288,000 for the year ended December 31, 1994
to $243,000 for the year ended December 31, 1995. The decrease in gross
profit resulted primarily from lower sales (as discussed above) and higher
amortization expenses incurred during the year ended December 31, 1995
related to the introduction of the Company's new generation board which was
released in the third quarter of 1994.

Engineering and software development expenses, net, decreased from
$579,000 for the year ended December 31, 1994 to $424,000 for the year ended
December 31, 1995, net of amounts capitalized of $104,000 and $51,000, for
the years ended December 31, 1994 and 1995, respectively. This decrease was
primarily due to the fact that in 1995, following the release of its new
generation boards, the Company shifted its emphasis from engineering and
software development to product support and maintenance, while the
development of applications utilizing the Company's technologies was
undertaken by MOSCOM. Upon the consummation of this offering, Votan will
undertake its own application development efforts.

Selling and marketing expenses increased from $293,000 for the year ended
December 31, 1994 to $323,000 for the year ended December 31, 1995. The
increase was primarily due to greater selling expenses resulting from
commissions due to MOSCOM's German subsidiary for sales and support services
in connection with the sale of certain products, including the Company's Call
Router systems to Siemens AG.

General and administrative expenses decreased from $418,000 for the year
ended December 31, 1994 to $386,000 for the year ended December 31, 1995.
This decrease was primarily due to a reduction in the Company's facility
costs resulting from the relocation of the Company's headquarters to a
smaller and more cost-effective facility.

YEARS ENDED DECEMBER 31, 1994 AND 1993

Sales increased from $517,000 for the year ended December 31, 1993 to
$593,000 for the year ended December 31, 1994. This increase was primarily
due to the sales of the Company's new generation board, released during the
third quarter of 1994.

Gross profit increased from $210,000 for the year ended December 31, 1993
to $288,000 for the year ended December 31, 1994. The increase in gross
profit resulted from a combination of higher sales and lower manufacturing
costs due to the utilization of various third-party contract manufacturers
for the production of certain key components and assembly functions of the
Company's newer version boards. These improvements were partially offset by
higher amortization expenses related to the release of the Company's new
generation board.

<PAGE>

Engineering and software development expenses, net, increased from
$342,000 for the year ended December 31, 1993 to $579,000 for the year ended
December 31, 1994, net of amounts capitalized of $308,000 and $104,000 for
the years ended December 31, 1993 and 1994, respectively. This increase
occurred during the first half of 1994 and was primarily due to the final
development of the Company's new generation board and to a lesser extent the
final development of the Company's VoiceBuilder for Windows products.

Selling and marketing expenses increased from $223,000 for the year ended
December 31, 1993 to $293,000 for the year ended December 31, 1994. The
increase was primarily due to higher commissions due to higher sales levels
of the Company's products and a shift in the mix of sales into international
markets.

General and administrative expenses decreased from $490,000 for the year
ended December 31, 1993 to $418,000 for the year ended December 31, 1994.
This decrease was primarily due to a decline in facility costs and travel
expenses.

LIQUIDITY AND CAPITAL RESOURCES

To date, the Company's capital resources have been met by capital
infusions by MOSCOM. Net contributions from MOSCOM amounted to $1.1 million,
$916,000, $601,000 and $661,000 for the years ended December 31, 1993, 1994
and 1995 and the six months ended June 30, 1996, respectively.

MOSCOM has committed to continue to meet Votan's capital requirements
until the earlier of March 31, 1997 or the completion of debt or equity
financing by the Company of at least $10 million. MOSCOM has no further
obligation to provide the Company with additional capital resources beyond
such time. See "Certain Transactions --MOSCOM Relationship."

The Company's anticipated cash requirements for capital or other material
non-operating expenditures for the six-month period ended December 31, 1996
is approximately $190,000. Votan believes that the net proceeds from this
offering plus the Company's existing capital resources, together with the
interest income thereon, will be sufficient to fund its operations for at
least the next two years. The Company may attempt to establish a bank credit
facility and equipment lease line to finance a portion of its working capital
requirements and capital expenditures, however, the Company does not have any
commitments or understandings pertaining to the foregoing at this time. The
Company's future liquidity and capital requirements will depend upon the
progress of the Company's engineering and software development programs and
the expansion of its sales and marketing efforts. In addition, the Company's
capital requirements will depend on, among other factors, the timely
establishment of effective sales channels in the United States and
internationally and the extent to which the Company's products gain market
acceptance. Therefore, the Company cannot provide any assurances that it will
not require additional financing during this time frame. If additional
financing is necessary, the Company will seek to raise these funds through
bank facilities or debt or equity offerings. There can be no assurance that
such funds would be available on terms acceptable to the Company.

ACCOUNTING PRONOUNCEMENTS

Effective on January 1, 1996, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of." This standard requires the Company to review long-lived
assets and certain identifiable intangibles held and used for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The adoption of this standard did not
have a material impact on the Company's results of operations, financial
condition or cash flows.

In 1996, SFAS No. 123, "Accounting for Stock-Based Compensation," will be
adopted by the Company. This standard establishes a fair value method for
accounting for or disclosing stock-based compensation plans. This standard
will be adopted in 1996 by disclosing the pro forma net income and earnings
per share amounts assuming the fair value method was effective on January 1,
1995. The adoption of this standard will not affect the Company's results of
operations, financial position or cash flows.

<PAGE>

BUSINESS

OVERVIEW

Votan's initial focus will be to market its voice verification
technologies and products directly to banks and other financial institutions
for use in a variety of applications, including bank teller verification,
home banking, wire transfers, credit cards, smart cards and ATMs. The
Company's voice verification technologies and products are designed to
enhance the security of financial transactions and improve productivity by
reducing the amount of time required to process a transaction. Votan's voice
verification products have been developed and tested for a variety of
applications but are still in early stages of commercialization. Currently,
the Company is working with The Chase Manhattan Bank, N.A. to analyze the
results of a pilot program which utilized the Company's voice verification
products to authenticate the identity of customers prior to a teller
transaction. Over 9,000 Chase customers were enrolled in the program. The
Company also intends to actively market its voice verification technologies
and products for computer network, electronic commerce, Internet and physical
access applications.

The Company's voice verification and speech recognition technologies have
to date been incorporated into various products sold by MOSCOM Corporation,
the sole stockholder of the Company, to numerous leading telecommunications
systems providers, including Siemens AG, Lucent Technologies, Inc. (a
subsidiary of AT&T) and Alcatel SEL AG. These technologies are being used in
a variety of telecommunications applications, particularly in international
markets that do not utilize touch tone telephone systems and, therefore, must
rely on speech recognition technologies to permit interactive telephonic
services such as voice mail. The Company and MOSCOM have entered into certain
agreements that will enable the Company to continue to market its products
and technologies through MOSCOM's existing channels of distribution. See
"Certain Transactions --MOSCOM Relationship."

INDUSTRY BACKGROUND

Speech is typically the most natural and convenient means of human
communication. Due to the significant decrease in the cost of computer
processing hardware, many businesses are utilizing advanced speech
technologies to create a more efficient and user-friendly interface with
their customers.

Voice verification and speech recognition technologies convert speech into
digital electronic signals or voiceprint patterns. These patterns are
compared by a computer processor to previously stored speech patterns to
determine if a match exists and to recognize the utterance or, in the case of
voice verification technologies, to ultimately verify the speaker's identity.

<PAGE>

While every voice verification and speech recognition system uses sample
voiceprints derived from spectral input, there are major differences in how
this information is processed. Some systems match "phonemes," which are
fundamental sound elements that characterize speech. Spoken words may be
represented by a sequence of phonemes, much as a written word is represented
by a sequence of letters of the alphabet. The advantage of using phonemes is
that large vocabularies may be constructed with a small number of phonemes.
However, the disadvantage of using phonemes is that the recognition system
for each language must also address the co-articulation effects or blending
of the language's phonemes as they occur. An alternative to the use of
phonemes is to pre-store "templates," which are voiceprint patterns for an
entire word or phrase, on the recognition and verification system. The
advantage of using word templates is that recognition accuracy is greatly
improved and there is no language dependency. The entire word is learned as a
single template, which automatically includes all internal co-articulation
effects that modify the sound of phonemes.

Speech recognition applications are generally divided into two major
categories: speaker-dependent applications and speaker-independent
applications. Speaker-dependent applications are designed to function with
known speakers who have "trained" the device to recognize a particular set of
commands by having recorded a voiceprint, or spectrogram, for the system.
Speaker-dependent technologies or devices can accommodate a larger
pre-recorded vocabulary with a greater degree of exactitude with respect to
both the nature of the command and the identity of the speaker.
Speaker-independent technologies recognize speech from any source since the
technology is designed to recognize an utterance that "matches" the
voiceprint template derived from a large and diverse sample of voiceprints
(as opposed to speaker-dependent applications that utilize a particular
individual's voiceprint). While speaker-independent technologies may be
utilized in a wider variety of applications, they are typically limited to a
small and fixed recognizable vocabulary and, more importantly, are not well
suited for voice verification applications designed to authenticate a
speaker's identity.

Although both voice verification and speech recognition technologies use
voiceprints to, respectively, recognize and identify spoken commands, the
technical demands of each technology are fundamentally different. Generally,
speaker-independent recognition systems are designed to accept and
differentiate among a pre-defined set of spoken commands without regard to
the identity of the speaker. On the other hand, speaker-dependent recognition
and voice verification systems are designed to compare an oral utterance to a
specific pre-recorded and stored utterance in order to authenticate the
speaker's identity. Speaker-independent technologies are poorly suited for
voice verification applications because they are based on algorithms which
blend the spectral differences within a large pool of speakers in order to
understand words spoken by a universal population. Consequently,
speaker-dependent technologies are better suited for voice verification
applications because the algorithms utilized in voice verification
technologies are designed to focus on the unique characteristics of the
speaker's voiceprint and to establish a match in order to verify the
speaker's identity.

MARKET NEED FOR SPEECH RECOGNITION APPLICATIONS

As a result of the decreased cost of computer processing hardware, the
development of more advanced computer/telecommunications integration ("CTI")
technologies and increased public familiarity with computer automated
devices, speech recognition has become an accepted feature of many
telecommunications applications. The telecommunications industry continues to
seek advanced speech recognition technologies that enhance product
functionality in a seamless and cost-effective manner. Recent applications of
speech recognition technologies have included transaction processing through
interactive voice response ("IVR") systems, command and control of personal
computers and hands-free dialing of car phones. The Company believes that
speech recognition technologies will continue to be incorporated in an
increasing variety of applications as speech recognition becomes easier to
use, more natural and more affordable, particularly in international markets
that do not utilize touch tone telephone systems and, therefore, must rely on
speech recognition technologies to permit interactive telephonic services.

MARKET NEED FOR VOICE VERIFICATION APPLICATIONS

Advances in telecommunications and computer technology have enabled
end-users to access and transfer information with unprecedented ease. The
ability of an enterprise to reap the full benefits of these

<PAGE>

technological advances is becoming increasingly important in today's
competitive marketplace. Unfortunately, the full utilization of these
technologies has been severely constrained by concerns regarding unauthorized
access and use, and the prevailing market perception that such systems are
particularly susceptible to fraud.

The Company believes that many of the existing verification alternatives
fail to meet the market's need for commercially feasible solutions that
enhance security. Traditional number-based identification security systems
("PINs") can easily be used with a touch tone telephone, however, the ease
with which PIN numbers can be improperly obtained or randomly developed by
unauthorized users greatly diminishes the utility of such systems. Magnetic
systems use keys or cards which must be physically carried for use and can be
lost, stolen or loaned to unauthorized users. Moreover, these systems are
relatively expensive and are not well suited for remote-access applications.
Remote access callback systems are popular for many office applications but
create a particular set of cumbersome obstacles to the mobile remote-access
user who needs connectivity but is not always at the callback telephone
number.

Biometric technologies, such as fingerprint matching, retina pattern
matching and signature analysis, have also been proposed as more secure
alternatives. However, each of these technologies has been subject to a
variety of criticisms, which has limited the widespread acceptance and
application of such technologies. Fingerprint matching is often associated
with an invasion of privacy or compromise of civil liberty. Retina pattern
matching is perceived as too physically invasive. Signature analysis has not
proven to be sufficiently reliable for sensitive applications. Moreover, none
of these technologies can presently be utilized in a commercially feasible
manner from remote locations for applications such as home banking, access to
confidential databases, wire transfers and electronic commerce.

The limitations of these existing security measures and their failure to
adequately address the market's needs have resulted in an increasing demand
for an alternative solution. The Company believes that its voice verification
technologies can provide the market with a practical and commercially
feasible solution.

THE VOTAN SOLUTION

Votan offers a single vendor solution developed to the user's
specification or customized from a standard Votan application. The Company
can also integrate its boards, voice verification and speech recognition
technologies and application software into a third-party system or supply the
complete system on a turnkey basis. The Company addresses the market need for
commercially feasible solutions with technologies and products which have the
following characteristics:

EFFECTIVE IN NOISY, REAL-WORLD ENVIRONMENTS. Voice verification and speech
recognition systems utilizing voiceprints are inherently dependent upon the
quality and reliability of the spectral information and are particularly
vulnerable to the hiss, pops and clicks frequently found on telephone
transmission lines, as well as background noise, unintended non-speech sounds
made by the speaker and variations in handset microphones. Votan's voice
verification and speech recognition technologies utilize the Company's
proprietary, noise resistant algorithms, which maintain separate records of
sound throughout the recognition and verification process in order to
distinguish, evaluate and ultimately ignore extraneous noises. This is
accomplished by constructing a direct representation of the voiceprint
whereby the spectral range is divided into a number of bands, and the speech
energy in each of those bands is sampled at discrete time intervals. The
system identifies suspected "noisy" data, which is in turn handled separately
during the pattern matching process. The ability of Votan's technologies to
operate in noisy environments without compromising performance makes its
products particularly suitable for use in real-world environments such as
wireline or wireless telephone systems, the noisy lobby of a bank or the
point of sale at a retail store.

EASY TO USE. The Company's voice verification and speech recognition
technologies may be used with both speaker-dependent and speaker-independent
applications. The Company's Continuous Speaker Dependent Recognition ("CSDR")
technology, utilizing proprietary algorithms, provides greater flexibility in
recognizing and verifying speech at various spoken rates. The speaker need
not pause briefly between each utterance, nor must the speaker use any
specific speed during his or her speech, in order

<PAGE>

for the Company's technologies to accurately recognize and verify the speech
by comparing it to previously stored templates. As a result, the Company's
CSDR technology requires significantly fewer training trials per word than
competing speaker-independent technologies and, therefore, facilitates the
quicker, easier and less costly implementation of various applications.
Moreover, the Company's proprietary Virtual Speaker Independent Recognition
technology enables pre-training of a system application with a set of oral
commands, thus precluding the need for each user to train the system. The
recognizable vocabulary is generated more efficiently than other
speaker-independent applications by utilizing the Company's approach of
basing the recognition voiceprint on a sample comprised of only 15 to 20
voiceprints.

DIFFICULT TO BREACH. The Company's voice verification technologies are
designed to minimize the risk that the system is breached by an unauthorized
person using a pre-recorded pass phrase. Tape recorder microphones invariably
pick up different sounds than those exhibited by an authentic voiceprint due
to a number of factors, including echoes, background noise and separation
from handset microphone. Therefore, tape recordings of the speaker's pass
phrase do not pose a threat to the viability of the Company's voice
verification products.

MORE ACCURATE AND LANGUAGE INDEPENDENT. The Company's technologies utilize
a template-based approach to voice verification and speech recognition that
not only results in greater accuracy, but also is language independent. Many
competing technologies utilize phonemes, which are fundamental sound elements
that characterize speech. The disadvantage of phoneme-based technologies is
that the system must address the co-articulation effects of the language's
phonemes. Because template-based technologies utilize a voiceprint for an
entire word or phrase, the system's ability to accurately recognize and
verify an utterance is greatly improved. Moreover, due to the fact that the
template automatically includes all internal co-articulation effects that
modify the sound of phonemes, the Company's template-based technologies are
language independent and may be trained for any language.

FULLY INTEGRATED SOLUTION. The Company believes that its voice boards are
unique in the industry in their ability to simultaneously support
speaker-independent recognition, speaker-dependent recognition and voice
verification applications. Accordingly, products utilizing the Company's
voice boards provide the end-user with a fully integrated solution by
enabling the product to simultaneously utilize two or three of these
technologies and switch from one to another as the application requires. The
Company supplies this capability in a single board occupying a single slot in
an IBM-compatible personal computer, as opposed to most competing vendors
that sell two or more boards occupying multiple slots for the same
application. Moreover, software enhancements or modifications to the
Company's voice verification and speech recognition technologies can be
downloaded to installed boards via modem.

STRATEGY

Key elements of the Company's strategy are as follows:

EXPLOIT TECHNOLOGICAL LEADERSHIP IN VOICE VERIFICATION MARKET. The Company
believes it currently has the most advanced voice verification technologies
for use in noisy, real-world environments. The Company's primary strategy is
to utilize its technological leadership to develop and market products and
applications that can be used in the growing market for voice verification
and speech recognition technologies. The Company's proprietary algorithms
make the Company's products highly resistant to extraneous noise
interferences and particularly suitable for a variety of real-world
applications. The Company plans to take advantage of its technologies to meet
the growing demand for products and applications that provide increased
security for transactions or communications.

FOCUS DIRECT SALES ON FINANCIAL INSTITUTIONS. The Company believes that
its products and technologies are particularly suitable for use by financial
institutions. The Company is building a sales and marketing organization in
order to expand the direct sales of its products to banks and other financial
institutions for a variety of applications, including bank teller
verification, home banking, wire transfers, credit cards, smart cards and
ATMs. The Company believes that the use of its voice verification
technologies will benefit banks and other financial institutions by providing
increased security for systems and transactions on a more cost-effective
basis.

<PAGE>

MARKET PRODUCTS AND TECHNOLOGIES FOR COMPUTER NETWORKS, ELECTRONIC
COMMERCE, THE INTERNET AND PHYSICAL ACCESS APPLICATIONS. The Company also
intends to actively market its technologies both directly and through OEMs,
VARs and systems integrators for use in securing computer networks,
electronic commerce, Internet applications and physical facilities. The
Company believes that such applications represent a significant potential
market for the Company's voice verification and speech recognition
technologies.

LEVERAGE MOSCOM'S EXISTING DISTRIBUTION CHANNELS. The Company intends to
leverage MOSCOM's established distribution relationships in order to license
its technologies for use in telecommunications applications. MOSCOM has
existing distribution relationships with many of the leading global
manufacturers and suppliers of telecommunications systems, including Lucent
Technologies, Inc., Siemens AG, Alcatel SEL AG, Philips Kommunikations
Industrie AG and Nortel Ltd. MOSCOM's MVM for Windows voice mail system is
currently being sold by Lucent Technologies, Inc. and Siemens AG, and the
TeleVoice platform for IVR applications is now being sold by Siemens AG and
Alcatel SEL AG. Both of these products utilize the Company's speech
recognition technologies.

ACCELERATE DEVELOPMENT OF NEXT GENERATION AUDITORY MODEL. Currently, voice
verification and speech recognition technologies are based on spectral data
analysis. The Company is in the process of developing next generation
auditory-based technologies. The Company believes that its next generation
auditory-based technologies, which are based on mathematical modeling of the
human auditory system, will significantly enhance the accuracy and
performance of speaker-dependent and speaker-independent speech recognition
and voice verification applications by improving resistance to extraneous
noises, tolerance of spectral distortion and sound discrimination. The
Company intends to accelerate the development and commercialization of its
auditory model technology. The successful completion of the Company's
auditory-based research and development efforts will require significant
additional effort by the Company. See "Business --Technology and Research and
Development."

VERTICAL MARKETS AND APPLICATIONS

The Company has identified the following markets for its technologies:

FINANCIAL INSTITUTIONS. Businesses in the financial marketplace are
seeking to minimize their exposure to losses resulting from the fraudulent
use of credit cards, ATM cards and checks, as well as fraudulent withdrawals
from bank accounts. The Company believes that the current system of using
private PIN numbers alone does not provide an adequate level of security for
such transactions. In addition, the use of PIN numbers with signature
verification is both time-consuming and inefficient. The Company believes
that its voice verification technologies are particularly suitable to meet
the needs of financial institutions for the following applications:

Bank Teller Verification. The Company believes that its voice
verification technologies and products can provide immediate benefits to
banks and financial institutions by (i) reducing the costs associated with
teller-related verification, (ii) reducing losses due to fraud and expenses
due to fraud prevention measures and (iii) enhancing customer satisfaction by
providing an extra measure of security. The Company's voice verification
products have been utilized by The Chase Manhattan Bank, N.A. in a pilot
program called "XtraSecure." Over 9,000 Chase customers were enrolled in the
program. The results of the program are currently being analyzed by the
Company and The Chase Manhattan Bank, N.A. Prior to using the system, the
customer is "enrolled" either at the branch or over the telephone. The
enrollment process typically takes a little over one minute. The customer
enters a bank debit or ATM card number using the magnetic card reader at the
branch or from a remote location or home using the touch tone key pad on a
telephone. The customer is then prompted to say a pass phrase. The resulting
voiceprint is stored for use in later verification of the same customer. When
the customer visits the branch, his or her identification number is entered
into the system by sliding the debit or ATM card through the card reader. The
customer then picks up the telephone handset and says his or her pass phrase.
Upon successful identification, the verification station notifies the teller
to process the transactions. If unsuccessful, the customer is directed to
proceed to the customer service counter.

<PAGE>

Home Banking. Home banking transactions are significantly less costly
to a bank than a branch transaction with a human teller. The Company believes
that a voice verification system for home banking using telephone touch tones
or the Company's magnetic strip voice verification systems will enable a bank
not only to enhance its product offerings in a secure environment, but also
to significantly reduce its teller-related costs.

Wire Transfers. Banks and other financial institutions rely
extensively on electronic wire transfers for many transactions. Electronic
transfers are both faster and less expensive than physical delivery of checks
and certificates. In addition, wire transfers are typically requested
telephonically and entail large amounts of money. The Company believes that
its voice verification technologies can greatly enhance the security of wire
transfer transactions in an easy and cost-efficient manner.

Credit Card Issuers. Use of credit cards by unauthorized individuals
results in claims and uncollectible revenues that adversely affect both
retail and credit organizations. The Company believes that point-of-sale
terminals (e.g., at department stores) using the Company's voice verification
technologies can validate the user's identity while obtaining authorization
from the credit card issuer.

Smart Card Issuers. A potential market for voice verification is the
smart card. The smart card is used instead of cash in purchasing goods and
services. The voiceprint of the customer's pass phrase can be stored on the
smart card to enable secured reloading of funds onto the smart card. Smart
card technologies are widely used in certain European countries. The Company,
in conjunction with a European smart card developer, has developed a
prototype smart card verification system which stores a voiceprint on a smart
card and retrieves the stored voiceprint via a commercial smart card reader.

Automatic Teller Machines. ATM cards are relatively easy to
counterfeit and the current PIN-based security systems which secure ATM
transactions are particularly vulnerable to theft or misappropriation. The
Company believes that using the Company's voice verification technologies
will greatly enhance the security of ATM transactions.

INTERNET AND WORLD WIDE WEB. The utility of the Internet as a means of
conducting commercial and confidential transactions has to date been impaired
by widespread concerns regarding the security of such transactions. Votan's
technologies and products may be used to provide enhanced security for World
Wide Web servers on the Internet. High security for access to Web sites is a
valuable tool to many customers. It will allow confidential data to be more
readily accessible via the Internet. It can also be used to ensure the
security of financial transactions consummated over the Internet. The Company
is currently working with a VAR which has developed and demonstrated a
prototype voice verification product that blocks Web site access to
unauthorized users.

TELEPHONE COMMUNICATIONS. Telephone toll fraud is a national problem.
Fraudulent use of telephone credit card numbers, Direct Inward System Access
(DISA) lines, private networks and voice mail call-out features is estimated
to exceed $1 billion annually. The rapidly growing cellular telephone market
has also been plagued by theft and unauthorized use estimated to exceed $400
million in 1995. The Company believes that Votan's voice verification
technologies and applications may be utilized to secure the desirable
features and functions of everyday telephone service. For example, a voice
verification device could be used to authenticate the identity of the user as
the owner of a telephone credit card or cellular telephone prior to
connecting any calls. Moreover, Votan's proprietary algorithms render its
speech recognition and voice verification technologies particularly suitable
for use over the narrow bandwidth of noisy telephone networks and the
inherently distorted cellular telephone environment. The Company's speech
recognition technologies are currently being used in MOSCOM's MVM for Windows
voice mail system and the Company's TeleVoice platform for IVR applications.
MOSCOM's MVM for Windows voice mail system is currently being sold by Lucent
Technologies, Inc. and Siemens AG. TeleVoice is currently being sold by
Siemens AG and Alcatel SEL AG.

REMOTE AND NETWORK ACCESS TO GOVERNMENT AND COMMERCIAL DATABASES. There is
a growing need for security of access to information contained in
confidential government and commercial databases. The Company's voice
verification technologies may be used to authenticate the user's identity and
to permit remote and network access to confidential databases without
compromising the system's integrity. The

<PAGE>

Company has developed a VoiceLock product which limits unauthorized access to
a telephone system or computer network utilizing voice verification
technologies. VoiceLock was developed for the Company's single port voice
verification board. Additional software development will be required to
enable VoiceLock to run on the Company's new generation four port boards.

PHYSICAL ACCESS. Voice verification technologies can also be used to
authorize access to secured areas. One of the Company's VARs has installed
various systems in a number of commercial and industrial locations and
government facilities which are designed to secure access to physical spaces.

PRODUCTS

Votan's proprietary boards serve as a platform for the Company's voice
verification and speech recognition products and applications. These boards
may also be sold as stand-alone products to VARs, OEMs and systems
integrators. The Company designs and markets the following boards:

SPEECH RECOGNITION BOARDS. Votan's Speech Recognition Boards contain voice
recognition, record and playback capabilities and input/output signal
interfaces and are installed in a single slot of an IBM-compatible personal
computer. They utilize a commercially available digital signal processing
integrated circuit plus a proprietary pattern matching integrated circuit
that contains patented Votan voice technology methods. These boards serve as
platforms that may easily accommodate upgrades and improvements. The
Company's Speech Recognition Boards may be operated in the Microsoft Windows
environment using the Company's proprietary programming language,
VoiceBuilder for Windows. The Company's Speech Recognition Boards may be used
for both telephonic and microphone applications.

VOICE VERIFICATION BOARDS. The Company's voice verification technology is
available on a separate family of Voice Verification Boards. These boards
contain all of the technologies of the Company's Speech Recognition Boards
and are enhanced by Votan's voice verification technologies. The Company's
Voice Verification Boards may also be used for both telephonic and microphone
applications. Moreover, the voice verification and speech recognition
technologies available on the Company's Voice Verification Boards may be used
together in many typical applications. For example, speaker-independent
recognition may be used to gain entry into an application (e.g., voice mail)
over telephone lines, then voice verification may be used to authenticate the
user's identity, and finally speaker-dependent recognition may be used to
provide for accurate control of the application in the language and
vocabulary specific to the user.

Prior to 1994, the platform for the Company's products was a single port
board. In the third quarter of 1994, the Company introduced its new
generation four port board which enabled simultaneous access by four users
and resulted in a reduction in the price per port.

Since 1993, over 1,000 of the Company's voice verification and speech
recognition boards have been sold by the Company and MOSCOM, including sales
of 193, 309 and 111 units of the new generation four port board in each of
the years ended December 31, 1994 and 1995 and the six-month period ended
June 30, 1996, respectively.

The Company has developed the following applications utilizing its voice
verification and speech recognition boards:

VOICE VERIFICATION SYSTEMS. The Company's Voice Verification Systems
verify the identity of a user. These systems utilize magnetic strip cards,
smart cards or bar-code cards. The cards are used to convey the cardholder's
identity and to retrieve the individual's previously stored voiceprints for
comparison. The Company's Voice Verification Systems can be used either
locally or from remote locations.

VOICE VERIFICATION ENROLLMENT SYSTEMS. The Company's Voice Verification
Enrollment Systems enroll users locally or from remote locations by making
templates of the user's voice. The system performs real-time tests of the
samples' amplitude and consistency and prompts the speaker to repeat the
utterance until a consistent, high quality enrollment template is created.

GATEKEEPER. The Gatekeeper is a single step module that answers the
telephone, verifies a caller's identity and then transfers the caller to a
requested destination. It consists of a verification voice card plus
application software.

<PAGE>

TELEVOICE. TeleVoice is a telephone-based information system that utilizes
speech recognition technologies to present callers with a choice of various
recorded announcements. Callers ask for an announced topic of interest and
control the menu of announcements with simple spoken commands such as "next,"
"repeat" and "start over." The Company's TeleVoice system, which is sold by
MOSCOM through Siemens AG, is currently being used in Germany and Austria by
travel agencies, auto dealers, real estate firms and government transport
agencies. The system is designed to enhance customer satisfaction by
permitting callers to control and interact with the system and to receive
updated information at any time. The system operates by presenting the caller
with a menu of information. The caller can then choose categories of interest
by orally responding to the menu.

CALL ROUTER. Call Router is a voice activated auto attendant for use with
a business telephone or PBX system. In 1995, a sale of multiple Call Router
systems was made by the Company through Siemens AG to a large German
department store chain.

VOICEBUILDER FOR WINDOWS DEVELOPER'S KIT. The VoiceBuilder for Windows
Developer's Kit is used to develop customized applications by end-users. The
Kit may also be used by end-users that wish to assume maintenance of custom
applications developed for them by Votan. The Kit includes a one-week
training course, a voice recognition board, programming manuals and Windows
user interface development software, sound editing kit with sound board and
sound editing software.

MOSCOM has developed another application, MVM for Windows, utilizing the
Company's proprietary technologies:

MVM FOR WINDOWS. MVM for Windows is a voice activated voice mail system
with IVR and automatic call distribution features. By utilizing the Company's
voice verification technologies, MVM for Windows ensures the security and
privacy of voice mail systems. MVM for Windows is currently being sold by
Lucent Technologies, Inc. and Siemens AG and is available in British English,
American English, German, Spanish, Portuguese, Italian and Czech. All rights
to MVM for Windows are owned by MOSCOM, subject to certain royalty fees
payable to Votan for the underlying board technologies. See "Certain
Transactions --MOSCOM Relationship."

SALES AND MARKETING

To date, the Company's principal sales and marketing activities have
included participation in industry trade shows and seminars, advertising in
selected trade publications, public relations activities with trade and
business press, publication of technical articles and case studies and
distribution of sales literature. The Company currently markets its
technologies and products primarily through VARs, OEMs, systems integrators
and component manufacturers. MOSCOM, the Company's sole stockholder, has been
and is expected to remain an OEM and VAR of the Company's products in the
telecommunications market, particularly outside the United States. See
"Certain Transactions --MOSCOM Relationship." MOSCOM has distribution
relationships with several of the world's leading telecommunications systems
manufacturers and suppliers, including Siemens AG, Lucent Technologies, Inc.,
Nortel Ltd., Philips Kommunikations Industrie AG and Alcatel SEL AG.

The Company has entered into a License Agreement with MOSCOM under which
the Company has licensed to MOSCOM certain of the Company's existing
technologies. The License Agreement provides that the Company will receive a
royalty from MOSCOM on the sale of boards containing the Company's
proprietary algorithms. Although sublicenses to distributors are permitted,
VAR sublicenses will require specific approval of the Company as well as the
negotiation of a separate royalty arrangement. Cross-licensing of
enhancements of the technologies by either Votan or MOSCOM is required on a
royalty-free basis under the License Agreement. The Company has also entered
into a VAR Agreement pursuant to which the Company has granted MOSCOM a
non-exclusive license to market the Company's bank teller verification
products outside the United States. See "Certain Transactions --MOSCOM
Relationship."

As of August 31, 1996, the Company employed five persons in sales and
marketing. The Company is increasing its sales, marketing, customer service
and installation staff and intends to initially market its products and
technologies directly through its own sales force to banks and other
financial institutions for

<PAGE>

a variety of applications. The Company's primary focus will be on markets for
voice verification products. This focus will allow the Company to establish a
base of customers in the financial institution marketplace that it can
leverage for expansion into other distribution channels and vertical markets.
The Company also intends to actively market its technologies both directly
and through OEMs, VARs and systems integrators for use in securing computer
networks, electronic commerce, Internet applications and physical facilities.

For each of the years ended December 31, 1993, 1994 and 1995, sales to
four, two and three customers, respectively, accounted for 57% of sales (JBM
Electronics (28%), Voiceprint Security Systems, Inc. (12%), and Votek
Systems, Inc. (11%)), 30% of sales (Voiceprint Security Systems, Inc. (21%)),
and 74% of sales (Quelle Department Stores A.G. (56%) and JBM Electronics
(12%)). For the six months ended June 30, 1996, sales to three customers
accounted for 93% of sales (DHI Computing Services, Inc. (39%), The Chase
Manhattan Bank, N.A. (27%) and MAXM Systems Corporation (27%)).

TECHNOLOGY AND RESEARCH AND DEVELOPMENT

The Company believes that enhancements of and improvements to its existing
technologies are critical to its future success. The Company has made
substantial investments in research and development in each of the last three
years. The Company spent $650,000, $683,000, $475,000 and $280,000 on
research and development, consisting of engineering and software development
expenses and capitalized software expenditures during each of the years ended
December 31, 1993, 1994 and 1995 and the six-month period ended June 30,
1996, respectively. Currently, the Company employs eight people in research
and development.

The Company and its predecessor have been engaged in the research and
development of speech recognition and voice verification technologies over
the past 17 years. The Company's extensive research and development efforts
have enabled the Company to develop certain proprietary algorithms which
enhance the functionality of speech recognition and voice verification
technologies due to their ability to distinguish and ignore extraneous
noises. The Company's technologies utilize these proprietary algorithms to
construct a direct representation of the voiceprint using a fast Fourier
transform, whereby the spectral range of spoken utterances is divided into a
number of bands and the speech energy in each band is sampled at discrete
time intervals in order to distinguish, evaluate and ultimately ignore
extraneous noises.

The Company's technology development activities are directed at continued
improvements to its existing core technologies, enhancements to these
technologies, and improved implementations of the technologies. Votan is
currently engaged in a major research and development program to advance the
state of the art of voice verification and speech recognition by
incorporating a mathematical model of the human auditory system into its
proprietary algorithms. The Company believes that there are substantial
differences in performance between state-of-the-art technologies that
recognize speech and human organs that perform the same function. For
example, dramatic changes in spectral shape (e.g., as caused by tone controls
or equalizers in stereo receivers) do not significantly change human
recognition of speech, whereas the performance of all current speech
recognition technologies, which use spectral pattern matching, is strongly
degraded. The human auditory system is a biological mechanism with
specialized functions that are performed with complex mechanical,
electrochemical and neurophysiological components. Signal processing, feature
extraction and pattern matching processes performed by these biological
structures are considerably different from the engineering and mathematical
processes used in state-of-the-art voice verification and speech recognition
technologies.

Development of the Company's auditory model has been continuing for
approximately ten years. The auditory model consists of three elements:
signal processing; feature extraction; and pattern matching. To date, the
Company has obtained a patent on portions of the signal processing and
feature extraction elements of the model and has implemented these elements
on a laboratory workstation. The Company anticipates that the completion of
these two phases of the auditory model will take at least an additional 18
months. After completion of the development of the first two elements, the
Company expects to engage an industry partner in connection with the
development of the final element of its auditory model, i.e., the pattern
matching element. No assurance can be given that the Company will find

<PAGE>

an appropriate industry partner or that the Company will successfully
complete the auditory model or develop commercially feasible products based
upon the auditory model.

The Company believes that the timely development and enhancement of its
technologies are necessary to remain competitive in the industry. Delays or
inabilities to develop new technology features, enhancements or products
could have a material adverse effect on the Company's business, financial
condition and results of operations.

PROPRIETARY RIGHTS

The Company's success will depend in part on its ability to obtain and
maintain patent protection for its technologies, products and processes,
preserve its trade secrets and operate without infringing upon the
proprietary rights of other parties. Because of the substantial length of
time and expense associated with bringing new products through development to
the marketplace, the voice verification and speech recognition industry
places considerable importance on obtaining and maintaining patent and trade
secret protection for new technologies, products and processes. While the
Company holds two patents for methods relating to its proprietary algorithms,
the Company relies primarily upon a combination of trademark, copyright,
know-how and trade secrets and contractual restrictions to protect its
intellectual property rights. The Company believes that such measures afford
only limited protection and, accordingly, there can be no assurance that the
steps taken by the Company to protect these proprietary rights will be
adequate to prevent misappropriation of the technology or the independent
development of similar technology by others. Despite the Company's efforts to
protect its proprietary rights, unauthorized parties may attempt to copy
aspects of the Company's products or to obtain and use information that the
Company regards as proprietary. There can be no assurance that any patents
issued or licensed to the Company will not be challenged and held to be
invalid, or that present or future patents will provide commercially
significant protection to the Company's present or future technologies,
products or processes. In addition, there can be no assurance that others
will not independently develop substantially equivalent proprietary
information not covered by patents to which the Company owns rights or obtain
access to the Company's know-how or that others will not be issued patents
that may prevent the sale of one or more of the Company's technologies, or
require licensing and the payment of significant fees or royalties by the
Company to third parties in order to enable the Company to conduct its
business. There can be no assurance that such licenses would be available or,
if available, would be on terms acceptable to the Company or that the Company
would be successful in any attempt to redesign its technologies, products or
processes to avoid infringement. The Company's failure to obtain these
licenses or to redesign its technologies, products or processes would have a
material adverse effect on the Company's business, financial condition and
results of operations.

No assurance can be given as to the degree of protection afforded by any
patents issued to or licensed by the Company or that such patents will not be
infringed upon by the products of others. The Company has received a notice
from a third party claiming broad patent protection in the voice processing
area and alleging that certain of the Company's voice mail and voice
processing products may infringe upon its patent. Based on advice of its
patent counsel, the Company does not believe that any of its products
infringes upon the cited third-party patent, and if necessary, the Company
intends to vigorously defend its position. However, the Company may not be
able to successfully defend against the claimed infringement. There can be no
assurance that the Company will not be subject to other claims that its
technologies or products infringe the patents or proprietary rights of third
parties. Defense and prosecution of patent claims can be expensive and
time-consuming, regardless of whether the outcome is favorable to the
Company, and can result in the diversion of substantial financial, management
and other resources from the Company's other activities. An adverse outcome
could subject the Company to significant liability to third parties, require
the Company to obtain licenses from third parties or require the Company to
cease any related research and development activities or product sales. In
addition, the laws of certain countries may not protect the Company's
intellectual property rights to the same extent that such rights are
protected in the United States.

<PAGE>

advisors and collaborators to enter into confidentiality agreements that
prohibit the disclosure of confidential information to anyone outside the
Company, and in most cases, assignment to the Company of their ideas,
developments, discoveries and inventions. There can be no assurance, however,
that these agreements will provide adequate protection for the Company's
trade secrets, know-how or other proprietary information in the event of any
unauthorized use or disclosure. See "Business --Proprietary Rights."

COMPETITION

The voice verification and speech recognition industry is subject to
intense competition. The Company's competitors and potential competitors in
the United States and abroad are numerous and include, among others, Apple
Computer, Inc., AT&T, Berkley Speech Technologies Inc., Dragon Systems, Inc.,
the DSP Group, IBM, ITT, Lernout & Hauspie Speech Products N.V., Lucent
Technologies, Inc., Microsoft Corporation, NEC Corp., Nuance Communications,
Siemens AG, Speech Systems, Inc., Texas Instruments, T-Netix, Veritel, Voice
Control Systems and Voice Processing Corporation. While all of the foregoing
competitors participate in the speech recognition market, currently only ITT,
Texas Instruments, T-Netix, Veritel, Voice Control Systems and Voice Processing
Corporation compete with the Company in the voice verification market. In
addition, the Company is likely to become subject to competition in the
verification marketplace from companies which produce or are developing
biometric identification products, such as fingerprint matching, retina
pattern matching and signature analysis, as well as companies which market or
develop traditional key, card and surveillance systems. Existing and
potential competitors may be able to develop technologies that are as
effective as, or more effective or easier to use than those offered by the
Company, which would render the Company's technologies noncompetitive or
obsolete. Moreover, many of the Company's existing and potential competitors
have substantially greater financial, marketing, sales, distribution and
technological resources than the Company. Such existing and potential
competitors may also enjoy substantial advantages over the Company in terms
of research and development expertise, manufacturing efficiency, name
recognition, sales and marketing expertise and distribution channels. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase
the abilities of their speech technology products to address the needs of the
Company's prospective customers. Accordingly, it is possible that new
competitors may emerge and rapidly acquire significant market share. There
can be no assurance that the Company will be able to compete successfully
against current or future competitors or that competition will not have a
material adverse effect on the Company's business, financial condition and
results of operations.

The Company believes that competition in the voice verification and speech
recognition markets is primarily based upon accuracy, functionality, ease of
use, versatility, cost and time required for application development and
platform integration (including the number of languages offered), price,
processing and memory requirements, and customer support. While certain of
the Company's competitors have developed advanced speech technology products
that are comparable in performance to one or more of the Company's products,
the Company believes that its competitive advantage is based upon (i) the
accuracy of its voice verification technology, (ii) the utilization of the
Company's noise resistant algorithms, (iii) the ease of use and
implementation of the Company's technologies, (iv) the language independent
nature of the Company's technologies, and (v) the Company's single vendor,
fully integrated approach to the implementation of its products.
Notwithstanding these advantages, there can be no assurance that the Company
will be able to compete effectively.

MANUFACTURING

The Company currently does not engage in any manufacturing operations and
does not plan to do so in the foreseeable future. The Company's proprietary
products are manufactured by contract computer board manufacturers. The
Company believes that there are many suitable vendors, in the United States
and elsewhere, that the Company can use to meet its manufacturing needs at
competitive prices. These products are manufactured to the Company's
specifications and quality standards. Certain product testing, packaging and
shipping functions are currently being conducted by MOSCOM on behalf of the
Company. MOSCOM is expected to continue to perform such functions for the
foreseeable future. See "Certain Transactions --MOSCOM Relationship."

<PAGE>

EMPLOYEES

As of August 31, 1996, the Company employed 16 persons, including eight in
engineering and software development, five in sales and marketing and three
in accounting, finance and administration. The Company is not subject to any
collective bargaining agreements and believes that its relationship with its
employees is good.

FACILITIES

The Company's executive office and research and development facility is
located in Pleasanton, California. The Company currently occupies a
4,450-square-foot facility pursuant to leases which will terminate on
December 1, 1996. On July 8, 1996 the Company entered into a lease for a
12,587 square-foot facility at the same location which will commence December
1, 1996. This lease will terminate on November 30, 2001. The Company
anticipates that the newly leased premises will satisfy its principal
facilities requirements for the foreseeable future.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings and is not
aware of any threatened litigation that could have a material adverse effect
upon the Company's business, financial condition and results of operations.

<PAGE>

MANAGEMENT

DIRECTORS AND OFFICERS

The following table sets forth certain information with respect to each of
the directors and executive officers of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- -------- ---------------------------------------------------
<S> <C> <C>
Albert J. Montevecchio (1)(2) .... 60 Chairman of the Board of Directors
John A. White (2) ................. 58 President, Chief Executive Officer and Director
Richard C. Vail (1) ............... 65 Executive Vice President and Director
William E. O'Connor ............... 57 Chief Financial Officer, Treasurer and Secretary
Ronald L. Rutherford .............. 48 Vice President of Sales and Marketing
Donald G. Heitt (3) ............... 61 Director --designee

</TABLE>

- ------------

(1) Member of the Audit Committee

(2) Member of the Compensation Committee

(3) Mr. Heitt has agreed to join the Board of Directors upon the
consummation of the offering.

Albert J. Montevecchio was elected as Chairman of the Board of Directors
in June 1996. Mr. Montevecchio has been the President, Chief Executive
Officer and a director of MOSCOM since its incorporation in January 1983 and
has served as MOSCOM's Chairman of the Board of Directors since his election
in February 1985.

John A. White joined the Company as President, Chief Executive Officer and
a director in June 1996. From November 1984 to June 1996, Mr. White served in
various capacities with Siemens, ROLM Communications, a telecommunications
company, including Vice President/General Manager, Northeast Area and most
recently as Vice President, Special Product Sales. Prior to joining Siemens,
ROLM, Mr. White was Vice President of Worldwide Sales and Marketing of
Columbia Data Products, a personal computer manufacturing company, and held
various positions at Xerox Corporation, an office products company.

Richard C. Vail has served as Executive Vice President and a director of
the Company since June 1996. From October 1984 to June 1996, Mr. Vail held
various senior management positions with MOSCOM and has served as Vice
President and General Manager of the Votan division of MOSCOM since 1991.
From 1974 to October 1984, Mr. Vail held various senior management positions
with Taylor Instrument Company, a process control company.

William E. O'Connor has served as Chief Financial Officer, Treasurer and
Secretary of the Company since July 1996. From July 1995 until joining the
Company, Mr. O'Connor was Chairman and Chief Financial Officer of Interware
Development Corporation, a multimedia software development company. From
August 1994 until July 1995, Mr. O'Connor was Chief Financial Officer of
Catalina Marketing Corporation, an electronic marketing and software
development company. From October 1987 until August 1994, Mr. O'Connor was a
partner in Keystone Partners, a management consulting firm. From March 1976
to October 1987, Mr. O'Connor held top divisional general management and
financial positions with SmithKline Beecham, PLC, a consumer products and
pharmaceuticals firm. Mr. O'Connor is a certified public accountant.

Ronald L. Rutherford has served as Vice President of Sales and Marketing
of the Company since July 1996. From April 1995 until July 1996, Mr.
Rutherford was Regional Manager and Vice President of Sales for Netrix, Inc.,
a manufacturer of products for wide area networks. From October 1992 to March
1995, Mr. Rutherford was Director of Sales and Marketing for Western
Telecommunication Consulting, Inc., a provider of telecommunications
consulting services. Prior to that time, Mr. Rutherford had held various
senior management positions with Siemens Tel Plus, a provider of
telecommunications systems, from September 1987 to September 1992, Intecom,
Inc., a manufacturer of large communications systems, from January 1982 to
January 1987, and National Data Corporation, a financial and credit card
management transactions company, from January 1979 to January 1982.

<PAGE>

Donald G. Heitt has agreed to join the Board of Directors upon
consummation of the offering. Mr. Heitt has been the Chairman of the Board of
Voysys Corporation, a telecommunications company, since January 1996. From
April 1990 to January 1996, Mr. Heitt served as President and Chief Operating
Officer of Voysys Corporation. From September 1987 to November 1989, Mr. Heitt
was Senior Vice President of Telebit Corporation, a telecommunications
company. From January 1986 to September 1987, Mr. Heitt was a managing
partner and co-founder of Resource Partners, Inc., a sales and marketing
distributor and consulting company. From May 1982 until December 1985, Mr.
Heitt served first as Vice President of Sales and Marketing, and later as
President of the computer division of General Automation Inc., a
mini-computer manufacturing and distribution company. Prior to 1982, Mr.
Heitt was Vice President of Honeywell Information Systems, Inc., a industrial
automation and control company.

KEY EMPLOYEES

The following table sets forth certain information with respect to certain
key employees of the Company:

NAME AGE POSITION
- -------------------- -------- -------------------------------
PRINCIPAL RESEARCH
Steven D. Love ...... 41 Engineer
Stephen P. Gill .... 58 Chief Scientist
Graeme R. Kinsey ... 50 Senior Product Manager

Steven D. Love has served as Principal Research Engineer of the Company
since June 1996. From 1982 to June 1996, Mr. Love served as Principal
Research Engineer first with Votan (the predecessor entity) and later with
MOSCOM, following MOSCOM's acquisition of the business and assets of Votan
(the predecessor entity) in 1991. Mr. Love's primary responsibilities have
consisted of the development and implementation of algorithms for automatic
recognition and compression of speech, and algorithms for automatic
recognition and generation telephony signals. His work involves the
implementation of software models of the biological auditory system,
including investigation of neural networks as they relate to speech
recognition. Prior to joining Votan (the predecessor entity), Mr. Love served
in various capacities with the Fairchild Research and Development laboratory,
a semiconductor manufacturing company. Mr. Love received a B.S. in Electrical
Engineering, specializing in analog and integrated circuit design, and an
M.S. in Electrical Engineering, specializing in speech processing, each from
the University of California at Berkeley.

Stephen P. Gill has served as Chief Scientist of the Company on a
part-time basis since June 1996. Dr. Gill is also employed by Magnetic Pulse,
Inc., an oil field service provider. From 1979 to June 1996, Dr. Gill served,
part time, as Chief Scientist first with Votan (the predecessor entity) and
later with MOSCOM, following MOSCOM's acquisition of the business and assets
of Votan (the predecessor entity) in 1991. Dr. Gill has developed a new class
of spectral transforms for voice signal processing and has developed voice
spectral data encoding techniques for both voice verification and speech
recognition research in psychoacoustic grading of voice data and in human
factors affecting perceived performance of voice products. Further, Dr. Gill
has performed research and managed programs in all aspects of voice
technology, including speech recognition, voice store and forward, voice
verification and identification, continuous speech and real-time digital
voice encoding. Dr. Gill received a B.S. in Physics from the Massachusetts
Institute of Technology and he received his M.S. and Ph.D. in Applied Physics
from Harvard University.

Graeme R. Kinsey has served as Senior Product Manager of the Company since
June 1996. From September 1991 to June 1996, Mr. Kinsey served as Senior
Product Manager-Voice Technologies for MOSCOM. From 1988 to September 1991,
Mr. Kinsey served as Senior Product Manager of Votan (the predecessor
entity). From 1985 to 1988, Mr. Kinsey was Project Manager for Applied
Robotic Technologies, Inc., a robotically-controlled hard disk testing work
cell manufacturer. From 1969 to 1985, Mr. Kinsey held various positions with
Zehntel, Inc., an automatic in-circuit printed board test company, including
Manager-System Integration Group. Mr. Kinsey received a B.S. degree in
electrical engineering from the University of California at Berkeley.

<PAGE>

BOARD OF DIRECTORS

The Audit Committee of the Board of Directors was established in June 1996
and reviews, acts on and reports to the Board of Directors with respect to
various auditing and accounting matters, including the selection of the
Company's auditors, the scope of the annual audits, fees to be paid to the
auditor, the performance of the Company's independent auditors and the
accounting practices of the Company.

The Compensation Committee of the Board of Directors was established in
June 1996 and determines the salaries and incentive compensation of the
officers of the Company and provides recommendations for the salaries and
incentive compensation of the other employees and the consultants of the
Company. The Compensation Committee also administers various incentive
compensation, stock and benefit plans.

Mr. White has been appointed to serve on the Board of Directors of the
Company pursuant to his employment agreement with the Company. Following this
offering, Mr. White shall continue to serve on the Board of Directors
pursuant to the terms of his agreement.

Mr. Heitt has agreed to serve as an independent member of the Board of
Directors upon consummation of the offering. As soon as possible after the
date of this Prospectus, the Company intends to appoint an additional
independent member to the Board of Directors. The Company anticipates that
such independent directors will serve on the Audit Committee and the
Compensation Committee.

DIRECTOR COMPENSATION

Directors do not currently receive a fee for attending Board of Directors
or committee meetings, but are reimbursed for expenses incurred in connection
with performing their respective duties as directors of the Company. However,
the Board of Directors may in the future establish a policy of compensating
directors for attending Board of Directors' or committee meetings.
Additionally, non-employee directors are entitled to be granted options under
the Company's 1996 Stock Option Plan. See "--1996 Stock Option Plan."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Compensation Committee currently consists of Mr.
Montevecchio and Mr. White. The Compensation Committee determines the
salaries and incentive compensation of the officers of the Company and
provides recommendations for the salaries and incentive compensation of the
other employees and the consultants of the Company. The Compensation
Committee also administers various incentive compensation, stock and benefit
plans. Mr. White is the President and Chief Executive Officer of the Company.
Mr. Montevecchio is the Chairman of the Board of Directors, President and
Chief Executive Officer of MOSCOM. MOSCOM is a party to various transactions
with the Company. See "Certain Transactions --MOSCOM Relationship."

EXECUTIVE COMPENSATION

The following table sets forth the annual compensation paid to each of the
Company's (i) Chief Executive Officer and (ii) Executive Vice President,
whose total compensation during 1995 based on employment with MOSCOM,
exceeded $100,000 (collectively, the "Named Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
OTHER
ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1)
- ------------------------------------- ------ --------- -------- -------------------
<S> <C> <C> <C> <C>
John A. White (2)
President and Chief Executive
Officer ............................. 1995 -- -- --
Richard C. Vail
Executive Vice President, formerly
Vice President, General Manager of
the Votan Division of MOSCOM ........ 1995 112,000 5,000 17,111
</TABLE>

<PAGE>

- ------------

(1) Other compensation in the form of perquisites and other personal
benefits has been omitted in those instances where the aggregate amount
of such perquisites and other personal benefits constituted the lesser
of $50,000 or 10% of the total annual salary and bonus for the Named
Executive Officer for the year. Includes (i) personal use of a MOSCOM
company car, (ii) life insurance premiums paid by MOSCOM, (iii) MOSCOM
contributions to MOSCOM 401(k) Plan and (iv) medical expenses
reimbursed by MOSCOM.

(2) Mr. White began serving as the Company's President and Chief Executive
Officer in June 1996, and therefore, received no compensation from the
Company or MOSCOM prior to the date thereof. In the future, Mr. White
will receive compensation to be paid by the Company in accordance with
his employment agreement. See "--Employment Agreements."

STOCK OPTION INFORMATION

No MOSCOM stock options were granted to the Named Executive Officers in
1995. The following table sets forth certain information with respect to the
Named Executive Officers regarding stock option values in respect of shares
of MOSCOM Common Stock under the MOSCOM Stock Option Plan as of December 31,
1995.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT
YEAR END FISCAL YEAR END
SHARES VALUE
(# OF SHARES) ($)(1)
ACQUIRED ON REALIZED ------------------------------ ------------------------------
NAME EXERCISE (#) $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------- ------------- ---------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
John A. White . -- -- -- -- -- --
Richard C. Vail 21,500 183,125 15,000 -- 87,800 --
</TABLE>

- ------------

(1) Amounts calculated by subtracting the exercise price of the options
from the market value of the underlying MOSCOM Common Stock using the
closing price of the MOSCOM Common Stock on the Nasdaq National Market
of $8.12 per share of MOSCOM Common Stock on December 29, 1995.

1996 STOCK OPTION PLAN

Pursuant to the terms of the Formation, stock options previously granted
to the Votan employees pursuant to the MOSCOM stock option plan will continue
to be held by such employees pursuant to the terms of the MOSCOM stock option
plan. The Company's 1996 Stock Option Plan was adopted by the Board of
Directors and approved by the Company's stockholders in June 1996 (the "1996
Plan"). Up to 825,000 shares of Common Stock have been initially authorized
for issuance under the 1996 Plan. This share reserve will increase on the
first trading day of each calendar year beginning with the year 2000 by 1% of
the number of shares of Common Stock outstanding on December 31 of the
immediately preceding calendar year. In no event may any one participant in
the 1996 Plan receive option grants for more than 500,000 shares in the
aggregate.

The 1996 Plan is divided into two separate components: (i) the
Discretionary Option Grant Program under which employees and consultants may,
at the discretion of the Plan Administrator (as defined in the 1996 plan), be
granted options to purchase shares of Common Stock at an exercise price not
less than 85% of their fair market value on the grant date and (ii) the
Automatic Option Grant Program under which option grants will automatically
be made at periodic intervals to eligible non-employee Board of Directors'
members to purchase shares of Common Stock at an exercise price equal to 100%
of their fair market value on the grant date.

The Discretionary Option Grant Program will be administered by the
Compensation Committee. The Compensation Committee, as Plan Administrator,
will have complete discretion to determine which

<PAGE>

eligible individuals are to receive option grants, the time or times when
such option grants are to be made, the number of shares subject to each such
grant, the status of any granted option as either an incentive stock option
or a non-statutory stock option under the Federal tax laws, the vesting
schedule to be in effect for the option grant and the maximum term for which
any granted option is to remain outstanding. Pursuant to the terms of his
employment agreement, Mr. White will be granted an option under the 1996 Plan
to purchase 120,000 shares of Common Stock. The Company expects to grant Mr.
Vail an option under the 1996 Plan to purchase 50,000 shares of Common Stock.
The Company also expects to grant to each of Mr. O'Connor and Mr. Rutherford an
option under the 1996 Plan to purchase 20,000 shares of Common Stock.

Upon an acquisition of the Company by merger or asset sale, each
outstanding option will be subject to accelerated vesting under certain
circumstances. The Compensation Committee, as Plan Administrator, of the 1996
Plan will have the authority to provide for the accelerated vesting of the
shares of Common Stock subject to outstanding options held by the Chief
Executive Officer and any other executive officer in connection with certain
changes in control of the Company or the subsequent termination of the
officer's employment following the change in control event.

Stock appreciation rights are authorized for issuance under the
Discretionary Option Grant Program which provide the holders with the
election to surrender their outstanding options for an appreciation
distribution from the Company equal to the excess of (x) the fair market
value of the vested shares of Common Stock subject to the surrendered option
over (y) the aggregate exercise price payable for such shares. Such
appreciation distribution may be made in cash or in shares of Common Stock.

The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program in return
for the grant of new options for the same or different number of option
shares with an exercise price per share based upon the fair market value of
the Common Stock on the new grant date.

Under the Automatic Option Grant Program, each individual serving as a
non-employee Board of Directors' member on the date the Underwriting
Agreement for this offering is executed will receive an option grant on such
date for 10,000 shares of Common Stock. Each individual who first becomes a
non-employee Board of Directors' member thereafter will receive a
10,000-share option grant on the date such individual joins the Board of
Directors. In addition, at each Annual Stockholders' Meeting, beginning with
the 1997 Annual Meeting, each individual who is to continue to serve as a
non-employee Board of Directors' member after the meeting will receive an
additional option grant to purchase 5,000 shares of Common Stock, whether or
not such individual has been in the prior employ of the Company. Pursuant to
the Automatic Option Grant Program, Mr. Montevecchio, in his capacity as a
non-employee director of the Company, will receive an option to purchase
10,000 shares of Common Stock at an exercise price equal to the initial
public offering price set forth on the cover page of this Prospectus.

Each automatic grant will have a term of 10 years, subject to earlier
termination following the optionee's cessation of Board of Directors'
service. Each automatic option will be immediately exercisable; however, any
shares purchased upon exercise of the option will be subject to repurchase
should the optionee's service as a non-employee Board of Directors' member
cease prior to vesting in the shares. The initial 10,000-share grant
(including the anticipated grant to Mr. Montevecchio) will vest in four equal
and successive annual installments over the optionee's period of Board of
Directors' service. Each additional 5,000-share grant will vest upon the
optionee's completion of one year of Board of Directors' service measured
from the grant date. However, each outstanding option will immediately vest
upon (i) certain changes in the ownership or control of the Company or (ii)
the death or disability of the optionee while serving as a Board of
Directors' member.

The Board of Directors may amend or modify the 1996 Plan at any time. The
1996 Plan will terminate in June 2006, unless sooner terminated by the Board
of Directors.

EMPLOYMENT AGREEMENTS

On June 19, 1996, the Company entered into an employment agreement with
John A. White, the Company's President and Chief Executive Officer, for a
two-year term. Pursuant to his agreement,

<PAGE>

Mr. White will be entitled to receive a minimum base salary of $180,000 per
year, plus an annual discretionary performance-based bonus in an amount up to
50% of his base salary. Pursuant to his employment agreement, Mr. White also
received a bonus in the amount of $25,000 upon the commencement of his
employment with the Company and is also entitled to receive a guaranteed
bonus in the amount of $25,000 upon the successful completion of an initial
public offering of the Company's Common Stock with gross proceeds to the
Company in excess of $10,000,000. In addition, Mr. White is entitled to
receive a stock option to purchase 120,000 shares of the Company's Common
Stock at an exercise price per share equal to the initial public offering
price in the case of incentive stock options or 85% of the initial public
offering price in the case of non-qualified stock options. Of these options,
60,000 shares become exercisable upon completion of 30 months of service
after the commencement of Mr. White's employment and the remaining 60,000
shares become exercisable upon completion of 60 months after the commencement
of his employment. The options are to have a maximum term of 10 years,
subject to earlier termination upon cessation of Mr. White's employment with
the Company. The agreement requires Mr. White to devote his full time,
attention and energies to the Company's business. The agreement contains
restrictive covenants pursuant to which Mr. White has agreed not to compete
with the Company for a period of one year following termination of his
employment. The agreement also prohibits disclosure of the Company's trade
secrets. There can be no assurance that any of these provisions, if violated,
would be enforceable by the Company. The agreement further provides that, if
Mr. White is terminated without "good cause" (as such term is defined in Mr.
White's employment agreement), then Mr. White will be entitled to receive any
unpaid compensation accrued through the last day of his employment and
certain "severance payments" (as such term is defined in Mr. White's
employment agreement).

KEY-MAN LIFE INSURANCE

The Company intends to maintain and will be the sole beneficiary of a $1
million key-person life insurance policy on the life of Mr. White.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Certificate of Incorporation provides that, except to the
extent prohibited by the Delaware General Corporation Law (the "DGCL"), its
directors shall not be personally liable to the Company or its stockholders
for monetary damages for any breach of fiduciary duty as directors of the
Company. Under Delaware law, the directors have fiduciary duties to the
Company that are not eliminated by this provision of the Certificate of
Incorporation and, in appropriate circumstances, equitable remedies such as
injunctive or other forms of non-monetary relief will remain available. In
addition, each director will continue to be subject to liability under
Delaware law for breach of the director's duty of loyalty to the Company for
acts or omissions that are found by a court of competent jurisdiction to be
not in good faith or involving intentional misconduct, for knowing violations
of law, for actions leading to improper personal benefit to the director and
for payment of dividends or approval of stock repurchases or redemptions that
are prohibited by Delaware law. This provision also does not affect the
director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws. In addition, the
Company maintains liability insurance for its officers and directors.

Section 145 of the DGCL permits the Company to, and the Certificate of
Incorporation provides that the Company may, indemnify each person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was, or has agreed to
become, a director or officer of the Company, or is or was serving, or has
agreed to serve, at the request of the Company, as a director, officer or
trustee of, or in a similar capacity with, another corporation, partnership,
joint venture, trust or other enterprise (including any employee benefit
plan), or by reason of any action alleged to have been taken or omitted in
such capacity, against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
or on his behalf in connection with such action, suit or proceeding and any
appeal therefrom. Such right of indemnification shall inure to such
individuals whether or not the claim asserted is based on matters that
antedate the adoption of the

<PAGE>

Certificate of Incorporation. Such right of indemnification shall continue as
to a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs and personal representatives of such a person. The
indemnification provided by the Certificate of Incorporation shall not be
deemed exclusive of any other rights that may be provided now or in the
future under any provision currently in effect or hereafter adopted by the
Certificate of Incorporation, by any agreement, by vote of stockholders, by
resolution of directors, by provision of law or otherwise. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors of the Company pursuant to the foregoing provision, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.

Section 102(b)(7) of the DGCL permits a corporation to eliminate or limit
the personal liability of a director to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director, provided
that such provision shall not eliminate or limit the liability of a director
(i) for any breach of the director's duty of loyalty to the corporation or
its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL relating to unlawful dividends, stock purchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. Section 102(b)(7) of the DGCL is designed, among
other things, to encourage qualified individuals to serve as directors of
Delaware corporations. The Company believes this provision will assist it in
securing the services of qualified directors who are not employees of the
Company. This provision has no effect on the availability of equitable
remedies, such as injunction or rescission. If equitable remedies are found
not to be available to stockholders in any particular case, stockholders may
not have any effective remedy against actions taken by directors that
constitute negligence or gross negligence.

CERTAIN TRANSACTIONS

MOSCOM RELATIONSHIP

Effective June 26, 1996, MOSCOM transferred substantially all of the voice
verification and speech recognition business, operations (including research
and development), assets and liabilities of the Votan division to the
Company. In connection with the Formation, the Company has entered into the
following agreements with MOSCOM which govern the continuing relationship
between MOSCOM and the Company; (i) a Subsidiary Formation Agreement; (ii) a
License Agreement and (iii) a Service and Supply Agreement.

Pursuant to the Subsidiary Formation Agreement (the "Formation
Agreement"), MOSCOM has transfered all of the assets of its Votan division to
the Company in consideration for the issuance to MOSCOM of 1,000 (does not
give effect to the 5,500-to-1 stock split) fully paid, non-assessable shares of
Common Stock of the Company. The Company has agreed to assume and pay,
perform and discharge all debts, obligations, contracts and liabilities of
MOSCOM related to these assets. In addition, pursuant to the Formation
Agreement, MOSCOM has agreed to meet all of the capital requirements of the
Company until the earlier of March 31, 1997 or upon the consummation of a
debt or equity financing by the Company of at least $10 million. The Company
has also agreed to assume obligations relating to certain pension benefits
afforded to Mr. Vail and to pay MOSCOM for: (i) certain costs incurred by
MOSCOM related to the Formation and the hiring of executive officers of the
Company, including recruiting fees and compensation-related expenses and (ii)
costs and expenses incurred by MOSCOM in connection with the organization and
funding of the Company. Pursuant to the Formation Agreement, the Company's
obligations to reimburse MOSCOM for the costs and expenses referred to in
items (i) and (ii) above shall not exceed $200,000.

Pursuant to the License Agreement (the "License Agreement"), the Company
has granted MOSCOM a non-exclusive, non-transferable worldwide license to
continue selling the TeleVoice System, certain computer board products and
other products incorporating the Company's algorithms. MOSCOM and the Company
have also agreed to promptly disclose and license to each other on a
non-exclusive,

<PAGE>

royalty-free basis, all improvements to the licensed technologies and
products which they make or acquire during the term of the license. MOSCOM
has the right to grant sublicenses to end-users and distributors without
prior consent, but must obtain the Company's prior written consent for
sublicenses to other VARs. MOSCOM is required to pay one, and only one, of
the following royalties to the Company for each sale or license of the
products and technologies covered by the License Agreement: (i) $50 for each
copy of the licensed algorithms sublicensed to an end-user or distributor;
(ii) $50 per sale of a product incorporating a licensed algorithm; (iii) $50
for each functional port on each computer board sold, if such board
incorporates a licensed algorithm and is sold with application software; or
(iv) $50 for each board or other computer board sold, if such board
incorporates a licensed algorithm but is not sold with application software.
The license shall continue in effect until terminated, with the Company
having the right to terminate in the event of MOSCOM's breach or bankruptcy
and MOSCOM having the right to terminate for any reason. The Company may
terminate the license upon 30 days prior written notice to MOSCOM. MOSCOM
must provide the Company with 180 days prior written notice of termination of
the license. If MOSCOM terminates because of a material breach by the
Company, MOSCOM's licenses shall survive such termination and no further
royalties shall be due to the Company.

Pursuant to the Service and Supply Agreement, MOSCOM has agreed to sell to
the Company certain speech recognition and voice verification boards for an
amount equal to 1.25 times MOSCOM's cost for each such board. In addition,
pursuant to the Service and Supply Agreement, MOSCOM has agreed to provide
the Company with certain administrative and accounting services, as the
Company may from time to time require, for a fee equal to four times the
gross hourly salary paid by MOSCOM to any employee who performs such
administrative and accounting services for Votan, multiplied by the actual
number of hours expended by each such employee to perform such services. The
services to be provided to the Company by Mr. Montevecchio as Chairman of the
Board of Directors are excluded from the Service and Supply Agreement and
therefore, the Company will not be obligated to pay any fees to MOSCOM for
Mr. Montevecchio's services in such capacity. See "Management -- Director
Compensation." In the event that MOSCOM, upon Votan's request, pays premiums
on group employee benefit plans for the benefit of Votan employees, Votan has
agreed to reimburse MOSCOM in an amount equal to 105% of such premiums paid
by MOSCOM. Finally, MOSCOM has agreed to provide space at its facilities for
certain Votan employees who will perform services for Votan at such
facilities until their relocation to Votan's facilities in California. Votan
is required to pay 1.25 times MOSCOM's cost of occupancy for that portion of
MOSCOM's facilities allocated to occupancy by such Votan employees.

Pursuant to a Value Added Reseller Agreement (the "VAR Agreement"), the
Company has granted MOSCOM non-exclusive rights to sublicense the Company's
application software for the bank teller verification system (the "Products")
worldwide (except for the United States). MOSCOM may use its own VARs or
subdistributors to sublicense the Products to end-users pursuant to the terms
of the VAR Agreement. MOSCOM is obligated to pay a royalty to the Company for
each end-user sublicensed to use the Products, calculated at a rate based on
either (i) the number of bank branches where the end-user is sublicensed to
use the Products or (ii) the number of personal computers on which the
end-user is licensed to use the Products, whichever results in the greater
aggregate royalty to the Company. The Company has also agreed to provide to
MOSCOM sales, installation, system administration, technical support and
engineering and customization services at specified charges. The term of the
VAR Agreement is two years commencing September, 1996 unless terminated
earlier by either party without cause upon 180 days prior written notice or
by the Company in the event of MOSCOM's material breach upon five business
days prior written notice. All royalty payments payable to MOSCOM pursuant
to the VAR Agreement are supplemental to MOSCOM's payment obligations under
the License Agreement.

The Company believes that all transactions between the Company and MOSCOM
have been and will be on terms no less favorable to the Company than could be
obtained from unaffiliated parties. Pursuant to the Company's Bylaws, all
such future transactions before the Company's Board of Directors will be
approved by a majority of the independent members of the Company's Board of
Directors. These Bylaw provisions shall remain in effect until such time as
MOSCOM holds less than 20% of the Common Stock and may only be amended by a
vote of the stockholders of the Company, excluding MOSCOM.

<PAGE>

After the completion of this offering, MOSCOM will own approximately 62%
of the outstanding shares of common stock of the Company (56% if the
Underwriters' over-allotment option is exercised in full).

VAIL LOAN

MOSCOM has previously extended an employment-related relocation loan to
Mr. Vail in the principal amount of $100,000 (the "Note"). The Note bears
interest at a rate equal to the rate of appreciation of Mr. Vail's home and
is due and payable to MOSCOM on the earlier of March 23, 1997 or the sale of
Mr. Vail's residence. Currently, there is no appreciation in the value of Mr.
Vail's home and, therefore, the Note is not bearing any interest.

For information regarding employment agreements with Named Executive
Officers, see "Management --Employment Agreements." For information regarding
compensation of directors, see "Management --Director Compensation." For
information regarding options granted to executive officers, see "Management
- --1996 Stock Option Plan."

<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of August 31, 1996, as
adjusted to reflect the Company's anticipated 5,500-to-1 stock split of the
Common Stock and the sale of the shares of Common Stock offered hereby, with
respect to (a) each person known by the Company to be the beneficial owner of
5% or more of the outstanding Common Stock, (b) each director of the Company,
(c) each of the Named Executive Officers, (d) the Selling Stockholder and (e)
all directors and executive officers of the Company as a group. Unless
otherwise indicated, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them. See "Certain Transactions --MOSCOM Relationship."

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRIOR TO THIS BENEFICIAL OWNERSHIP
NUMBER OF
OFFERING(1) AFTER THIS OFFERING(1)
---------------------- SHARES BEING ----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------- ----------- --------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
MOSCOM Corporation
3750 Monroe Ave. Pittsford, NY 14534 5,500,000 100% 850,000 4,650,000 62%
Albert J. Montevecchio (2)
3750 Monroe Ave. Pittsford, NY 14534 -- -- -- --
John A. White
7020 Koll Center Parkway,
Pleasanton, California 94566 ........ -- -- -- --
Richard C. Vail
7020 Koll Center Parkway,
Pleasanton, California 94566 ........ -- -- -- --
Donald G. Heitt (3) .................. -- -- -- --
48634 Milmont Drive,
Fremont, California 94538
All executive officers and directors
as a group (6 persons) .............. -- -- -- --
</TABLE>

- ------------

* Less than one percent.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, which attribute beneficial
ownership of securities to persons who possess sole or shared voting
power and/or investment power with respect to these securities.

(2) Does not include shares owned by MOSCOM. Mr. Montevecchio is Chairman
of the Board, President and Chief Executive Officer and a controlling
stockholder of MOSCOM and, as a result, may be deemed to beneficially
own the shares of Common Stock owned by MOSCOM. Mr. Montevecchio
disclaims beneficial ownership of such shares.

(3) Mr. Heitt has agreed to join the Board of Directors upon the consummation
of the offering.

<PAGE>

DESCRIPTION OF CAPITAL STOCK

Upon the consummation of this offering, the Company's authorized capital
stock will consist of 20,000,000 shares of Common Stock, par value $0.01 per
share, and 1,000,000 shares of Preferred Stock, par value $0.01 per share.
All of the issued and outstanding shares of Common Stock will be fully paid
and nonassessable. In addition, upon consummation of this offering there will
be reserved for issuance 285,000 shares of Common Stock issuable upon the
exercise of the Representatives' Warrants.

The following summary description of the Company's capital stock does not
purport to be complete and is qualified in its entirety by this reference to
the Company's Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), and Bylaws, as amended (the "Bylaws"), copies of which have
been filed as exhibits to the Registration Statement of which this Prospectus
forms a part.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on matters to
be voted upon by the stockholders. Immediately following this offering,
MOSCOM will own approximately 62% of the outstanding shares of Common Stock
(56% if the Underwriters' over-allotment is exercised in full). As a result,
MOSCOM will retain the voting power required to elect all directors and
approve other matters required to be voted upon by the stockholders of the
Company. See "Risk Factors --Control by MOSCOM; Potential Conflicts of
Interest" and "Certain Transactions --MOSCOM Relationship." There are no
cumulative voting rights. Holders of Common Stock are entitled to receive
ratable dividends when, as and if declared by the Board of Directors out of
funds legally available therefor. Upon the liquidation, dissolution or
winding up of the Company, holders of Common Stock share ratably in the
assets of the Company available for distribution to its stockholders, subject
to the preferential rights of any then outstanding shares of Preferred Stock.
No shares of Preferred Stock will be outstanding immediately following the
consummation of this offering. Holders of Common Stock have no preemptive,
subscription, redemption or conversion rights. All shares of Common Stock
outstanding upon the effective date of this Prospectus, and the shares
offered hereby will, upon issuance and sale, be fully paid and nonassessable.

PREFERRED STOCK

The Company's Board of Directors has the authority to issue 1,000,000
shares of Preferred Stock in one or more series and to fix the relative
rights, preferences, privileges, qualifications, limitations and restrictions
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and
the number of shares constituting any series or the designation of such
series, without further vote or action by the stockholders. The Board of
Directors could, without the approval of the stockholders, issue Preferred
Stock having voting or conversion rights that could adversely affect the
voting power of the holders of Common Stock, and the issuance of Preferred
Stock could be used, under certain circumstances, to render more difficult or
discourage a hostile takeover of the Company. The Company has no present
plans to issue any shares of Preferred Stock.

REGISTRATION RIGHTS

After this offering, the Representatives and/or their assigns
(collectively, with the Representatives, the "Holders"), will hold certain
warrants pursuant to which they will be entitled to certain rights with
respect to the registration of the shares of Common Stock underlying such
warrants under the Securities Act. Under the terms of such warrants, if the
Company proposes to register any of its securities under the Securities Act,
either for its own account or for the account of other stockholders of the
Company, the Holders are entitled to notice of such registration and are
entitled to include the shares of Common Stock underlying such warrants in
such registration. Further, the Holders may require the Company to file one
registration statement under the Securities Act at the Company's expense with
respect to their shares of Common Stock underlying such warrants. These
rights are subject to certain conditions and limitations, among them the
right of the underwriters of an offering to limit the number of shares
included in such registration. See "Underwriting."

<PAGE>

CERTAIN PROVISIONS OF THE DELAWARE GENERAL CORPORATION LAW

Generally, Section 203 of the DGCL prohibits a publicly held Delaware
corporation from engaging in a broad range of "business combinations" with an
"interested stockholder" (defined generally as a person owning 15% of more of
a corporation's outstanding voting stock) for three years following the date
such person became an interested stockholder unless (i) before the person
becomes an interested stockholder, the transaction resulting in such person
becoming an interested stockholder or the business combination is approved by
the board of directors of the corporation, (ii) upon consummation of the
transaction that resulted in the stockholder becoming an interested
stockholder, the interested stockholder owns at least 85% of the outstanding
voting stock of the corporation (excluding shares owned by directors who are
also officers of the corporation or shares held by employee stock plans that
do not provide employees with the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender offer or
exchange offer), or (iii) on or after such date on which such person became
an interested stockholder the business combination is approved by the board
of directors and authorized at an annual or special meeting, and not by
written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock excluding shares owned by the interested
stockholders. The restrictions of Section 203 do not apply, among other
reasons, if a corporation, by action of its stockholders, adopts an amendment
to its certificate of incorporation or by-laws expressly electing not to be
governed by Section 203, provided that, in addition to any other vote
required by law, such amendment to the certificate of incorporation or
by-laws must be approved by the affirmative vote of a majority of the shares
entitled to vote. Moreover, an amendment so adopted is not effective until
twelve months after its adoption and does not apply to any business
combination between the corporation and any person who became an interested
stockholder of such corporation on or prior to such adoption. The Certificate
of Incorporation and Bylaws do not currently contain any provisions electing
not to be governed by Section 203 of the DGCL.

Section 203 of the DGCL may discourage persons from making a tender offer
for or acquisitions of substantial amounts of the Common Stock. This could
have the effect of inhibiting changes in management and may also prevent
temporary fluctuations in the Common Stock that often result from takeover
attempts.

Section 228 of the DGCL allows any action that is required to be or may be
taken at a special or annual meeting of the stockholders of a corporation to
be taken without a meeting with the written consent of holders of outstanding
stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted, provided that the
certificate of incorporation of such corporation does not contain a provision
to the contrary. The Certificate of Incorporation contains no such provision,
and therefore stockholders holding a majority of the voting power of the
Common Stock will be able to approve a broad range of corporate actions
requiring stockholder approval without the necessity of holding a meeting of
stockholders.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company. American Stock Transfer & Trust Company is located
at 40 Wall Street, New York, New York 10005, and its telephone number is
(212) 936-5100.

<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 7,500,000 shares
of Common Stock outstanding. Of these shares, the 2,850,000 shares sold in
this offering will be freely tradeable without restriction or further
registration under the Securities Act, except that any shares purchased by
"affiliates" of the Company, as that term is defined in Rule 144 ("Rule 144")
under the Securities Act ("Affiliates"), may generally only be sold in
compliance with the limitations of Rule 144 described below. The remaining
4,650,000 shares of Common Stock held by MOSCOM upon consummation of this
offering will be "restricted" securities within the meaning of Rule 144 (the
"Restricted Shares") and may not be sold except in compliance with the
registration requirements of the Securities Act or an applicable exemption
under the Securities Act, including an exemption pursuant to Rule 144.

Prior to this offering, there has been no public market for the Common
Stock of the Company, and no assurance can be given that a significant public
market for the Common Stock can be developed or sustained after this
offering. Future sales of substantial amounts of Common Stock in the public
market could have a material effect on the market price of Common Stock from
time to time.

SALES OF RESTRICTED SHARES

Beginning one year after the date of this Prospectus, 4,650,000 shares of
Common Stock held by MOSCOM and subject to a lockup ("Lockup") agreement
between the Underwriters and MOSCOM will become eligible for sale in the
public market if registered or pursuant to an exemption, from registration
such as Rule 144. Pursuant to the Lockup, MOSCOM has agreed not to, directly
or indirectly, offer, pledge, sell, contract to sell, transfer or otherwise
dispose of any shares of Common Stock or any securities convertible into, or
exchangeable or exercisable for, shares of Common Stock for a period of one
year after the date of this Prospectus without the prior written consent of
Ladenburg, Thalmann & Co. Inc., on behalf of the Representatives. In
addition, MOSCOM has the right to require registration of its shares under
certain circumstances.

In general, under Rule 144 as currently in effect, Affiliates who have
beneficially owned shares for at least two years (including the holding
period of certain prior owners) will be entitled to sell in "brokers'
transactions" or to market makers, within any three-month period commencing
90 days after the Company becomes subject to the reporting requirements of
Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), a number of shares that does not exceed the greater of (i) one percent
of the then outstanding shares of Common Stock or (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks immediately
preceding such sale, subject, generally, to the filing of a Form 144 with
respect to such sales and certain other limitations and restrictions. In
addition, a person (or person whose shares are aggregated) who is not deemed
to have been an Affiliate at any time during the 90 days immediately
preceding the sale and who has beneficially owned the shares proposed to be
sold for at least three years is entitled to sell such shares under Rule
144(k) without regard to the limitations described above. Further, Rule 144A
under the Securities Act as currently in effect permits the immediate sale of
restricted shares to certain qualified institutional buyers without regard to
the volume restrictions described above.

SHARES RESERVED FOR ISSUANCE

Options. As of the date hereof, the Board of Directors and the
stockholders have authorized the issuance of an aggregate of up to 825,000
shares of Common Stock for issuance pursuant to the 1996 Stock Option Plan.
As of August 31, 1996, no options were outstanding under the 1996 Stock
Option Plan, however, the Company intends to grant each of Mr. White, the
Company's Chief Executive Officer, and Mr. Vail, the Company's Executive Vice
President, options to purchase 120,000 and 50,000 shares of Common Stock,
respectively. The Company also intends to grant each of Mr. O'Connor, the
Company's Chief Financial Officer, and Mr. Rutherford, the Company's Vice
President of Sales and Marketing, options to purchase 20,000 shares of
Common Stock, respectively. The Company intends to file one or more
registration statements on Form S-8 under the Securities Act approximately 90
days after the date of this Prospectus to register the 825,000 shares
available for issuance under the 1996 Stock Option Plan. Such

<PAGE>

registration statements are expected to become effective upon filing. After
the effective date of the applicable registration statement, shares of Common
Stock issued under the 1996 Stock Option Plan will be immediately eligible
for sale in the public market, subject to vesting limitations and
restrictions on affiliate sales. See "Management--Stock Option Plan."

Warrants. The Company has 285,000 shares reserved for issuance upon
exercise of the Representatives' Warrants. See "Underwriting."

<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, a copy
of which has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part, the Underwriters named below (the "Underwriters"),
have severally, and not jointly, agreed, through Ladenburg, Thalmann & Co.
Inc. and Kaufman Bros., L.P., the Representatives of the Underwriters (the
"Representatives"), to purchase from the Company and the Selling Stockholder,
and the Company and the Selling Stockholder have agreed to sell to the
Underwriters, the aggregate number of shares set forth opposite their
respective names:

<TABLE>
<CAPTION>
NUMBER OF
NAME OF UNDERWRITER SHARES
- ------------------------------- -----------
<S> <C>
Ladenburg, Thalmann & Co. Inc.
Kaufman Bros., L.P. ............

-----------
Total ....................... 2,850,000
===========
</TABLE>

The Underwriters are committed to take and to pay for all of the shares of
Common Stock offered hereby (other than the shares covered by the
over-allotment option described below), if any are purchased.

The Underwriters have advised the Company that they propose to offer all
or part of the Common Stock offered hereby directly to the public initially
at the price to the public set forth on the cover page of this Prospectus,
that they may offer shares to certain dealers at a price which represents a
concession of not more than $ per share, and that the Underwriters may
allow, and such dealers may reallow, a concession of not more than $ per
share to certain other dealers. After the commencement of this offering, the
price to the public and the concessions may be changed.

The Selling Stockholder has granted to the Underwriters an option,
exercisable within 30 days after the date of this Prospectus, to purchase up
to 427,500 additional shares of Common Stock at the same price per share as
the initial 2,850,000 shares to be purchased by the Underwriters. The
Underwriters may exercise this option only to cover over-allotments, if any.
To the extent the Underwriters exercise this option, each of the Underwriters
will have a firm commitment, subject to certain conditions, to purchase the
same percentage thereof as the percentage of the initial 2,850,000 shares to
be purchased by that Underwriter.

The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including certain liabilities under
the Securities Act of 1933, as amended, and to contribute to payments the
Underwriters may be required to make in respect thereof.

The Company has agreed to issue to the Representatives, for their own
account, warrants (the "Representatives' Warrants") to purchase 285,000
shares of Common Stock, exercisable for a period of four years commencing one
year from the date of this offering, at a price equal to 120% of the initial
public offering price, subject to adjustment in certain events. The
Representatives' Warrants contain customary antidilution provisions and
certain registration rights relating to the securities issuable upon exercise
of the Representatives' Warrants.

Upon consummation of the offering, the Company has agreed to pay an amount
equal to the lesser of (i) 1% of the gross proceeds from this offering
or (ii) $250,000 to Grady & Hatch, Inc., an advisor to MOSCOM and the Company,
for services rendered to the Company.

<PAGE>

The Company and MOSCOM have agreed, pursuant to the Lockup, not to,
directly or indirectly, offer, pledge, sell, contract to sell, transfer or
otherwise dispose of any shares of Common Stock or any securities convertible
into, or exchangeable or exercisable for, shares of Common Stock for a period
of one year after the date of this Prospectus without the prior written
consent of Ladenburg, Thalmann & Co. Inc., on behalf of the Representatives.

Prior to this offering, there has been no public market for the Common
Stock. The proposed initial public offering price has been determined by
negotiations among the Company, the Selling Stockholder and the
Representatives. Among the factors considered in such negotiations were the
Company's results of operations and financial condition, the prospects for
the Company and for the industry in which the Company operates, the Company's
capital structure and the general condition of the securities market. The
estimated offering price set forth on the cover of this Prospectus is subject
to change as a result of market conditions and other factors.

The Representatives have informed the Company that the Underwriters do not
expect sales to discretionary accounts to exceed 5% of the total number of
shares offered hereby and that the Underwriters do not intend to confirm
sales of shares to any account over which they exercise discretionary
authority.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Brobeck, Phleger & Harrison LLP, New
York, New York. Certain legal matters in connection with the sale of the
shares of Common Stock offered hereby will be passed upon for the
Underwriters by Fulbright & Jaworski L.L.P., New York, New York.

EXPERTS

The financial statements included in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports thereon and included in
reliance upon the authority of such firm as experts in giving said reports.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549 (the "Commission") a Registration Statement on Form
S-1 (including all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus, which constitutes part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain parts
of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
Common Stock, reference is hereby made to the Registration Statement,
including exhibits, schedules and reports filed as a part thereof. Statements
contained in this Prospectus as to the contents of any contract or other
document filed as an exhibit to the Registration Statement referred to herein
set forth the material terms of such contract or other document but are not
necessarily complete, and in each instance reference is made to the copy of
such document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. The Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge at the principal office of the Commission in Washington, D.C.
and copies of all or any part of which may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices located at The Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can also be obtained at
prescribed rates by mail from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Registration
Statement, including the exhibits and schedules thereto, can also be accessed
through the EDGAR terminals in the Commission's Public Reference Rooms in
Washington, Chicago and New York or through the World Wide Web at
http://www.sec.gov.

<PAGE>

VOTAN CORPORATION
(FORMERLY A DIVISION OF MOSCOM CORPORATION)
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Public Accountants ....... F-2
Balance Sheets .................................. F-3
Statements of Operations ........................ F-4
Statements of Changes in Stockholder's Equity .. F-5
Statements of Cash Flows ........................ F-6
Notes to Financial Statements ................... F-7
</TABLE>

F-1

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and the Stockholder of Votan Corporation:

We have audited the accompanying balance sheets of Votan Corporation
(formerly a division of MOSCOM Corporation) as of December 31, 1995 and 1994,
and the related statements of operations, changes in stockholder's equity and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of MOSCOM's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 Votan Corporation as of
December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Rochester, N.Y.
June 28, 1996

F-2

<PAGE>

VOTAN CORPORATION
(FORMERLY A DIVISION OF MOSCOM CORPORATION)
BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1994 1995 1996
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash .............................................. $ 2,000 $ 8,000 $ 32,000
Accounts receivable ............................... 108,000 2,000 --
Other assets ...................................... 1,000 -- 340,000
---------- ---------- -----------
Total current assets ............................. 111,000 10,000 372,000
---------- ---------- -----------
PROPERTY AND EQUIPMENT, net ........................ 87,000 63,000 54,000
---------- ---------- -----------
CAPITALIZED SOFTWARE, net of accumulated
amortization of $216,000 and $195,000 in 1994 and
1995, respectively, and $265,000 at June 30, 1996.. 415,000 269,000 252,000
---------- ---------- -----------
Total assets .................................... $613,000 $342,000 $678,000
========== ========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accrued payroll, commissions and related taxes ... $ 16,000 $ 17,000 $ 33,000
Deferred compensation ............................. 189,000 207,000 --
Due to MOSCOM Corporation ......................... -- -- 88,000
Other accrued liability ........................... -- -- 340,000
---------- ---------- -----------
Total current liabilities ........................ 205,000 224,000 461,000
---------- ---------- -----------

COMMITMENTS AND CONTINGENCIES ......................
STOCKHOLDER'S EQUITY:
Preferred stock; 100,000 shares authorized, none
issued and outstanding at June 30, 1996, $.01 par
value ............................................ -- -- --
Common stock; 10,000,000 shares authorized,
5,500,000 shares issued and outstanding at June
30, 1996, $0.01 par value ........................ -- -- 55,000
Additional paid-in capital ........................ -- -- 162,000
Divisional equity ................................. 408,000 118,000 --
---------- ---------- -----------
Total stockholder's equity ....................... 408,000 118,000 217,000
---------- ---------- -----------
Total liabilities and stockholder's equity ..... $613,000 $342,000 $678,000
========== ========== ===========
</TABLE>

The accompanying notes to financial statements are an integral part of these
balance sheets.

F-3

<PAGE>

VOTAN CORPORATION
(FORMERLY A DIVISION OF MOSCOM CORPORATION)
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------------------ --------------------------
1993 1994 1995 1995 1996
------------ -------------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SALES ................................ $ 517,000 $ 593,000 $ 572,000 $ 225,000 $ 183,000
COST OF SALES:
Direct costs ........................ 181,000 122,000 132,000 50,000 67,000
Amortization of software development
costs .............................. 126,000 183,000 197,000 128,000 70,000
------------ -------------- ------------ ------------ ------------
307,000 305,000 329,000 178,000 137,000
------------ -------------- ------------ ------------ ------------
Gross profit ........................ 210,000 288,000 243,000 47,000 46,000
OPERATING EXPENSES:
Engineering and software
development, net ................... 342,000 579,000 424,000 212,000 227,000
Selling and marketing ............... 223,000 293,000 323,000 148,000 91,000
General and administrative .......... 490,000 418,000 386,000 187,000 290,000
------------ -------------- ------------ ------------ ------------
1,055,000 1,290,000 1,133,000 547,000 608,000
------------ -------------- ------------ ------------ ------------
Loss from operations ................ (845,000) (1,002,000) (890,000) (500,000) (562,000)
PROVISION FOR TAXES .................. 1,000 1,000 1,000 -- --
------------ -------------- ------------ ------------ ------------
NET LOSS ............................. $ (846,000) $(1,003,000) $ (891,000) $(500,000) $ (562,000)
============ ============== ============ ============ ============
UNAUDITED PRO FORMA NET LOSS PER
SHARE ............................... $ (0.16) $ (0.10)
============ ============
Weighted average shares outstanding . 5,500,000 5,500,000
============ ============
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.

F-4

<PAGE>

VOTAN CORPORATION
(FORMERLY A DIVISION OF MOSCOM CORPORATION)
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
ADDITIONAL
DIVISIONAL PREFERRED COMMON PAID-IN
EQUITY STOCK STOCK CAPITAL
------------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Balance --January 1, 1993 ......................... $ 262,000 -- -- --
Net loss .......................................... (846,000) -- -- --
Contribution from MOSCOM Corporation .............. 1,079,000 -- -- --
------------- ----------- --------- ------------
Balance -- December 31, 1993 ...................... 495,000 -- -- --
Net loss .......................................... (1,003,000) -- -- --
Contribution from MOSCOM Corporation .............. 916,000 -- -- --
------------- ----------- --------- ------------
Balance -- December 31, 1994 ...................... 408,000 -- -- --
Net loss .......................................... (891,000) -- -- --
Contribution from MOSCOM Corporation .............. 601,000 -- -- --
------------- ----------- --------- ------------
Balance -- December 31, 1995 ...................... 118,000 -- -- --
Net loss (unaudited) .............................. (562,000) -- -- --
Contribution from MOSCOM Corporation (unaudited) . 661,000 -- -- --
Transfer to common stock (unaudited) .............. (55,000) -- 55,000 --
Transfer to additional paid-in capital (unaudited) (162,000) -- -- 162,000
------------- ----------- --------- ------------
Balance -- June 30, 1996 (unaudited) .............. $ -- $-- $55,000 $162,000
============= =========== ========= ============
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.

F-5

<PAGE>

VOTAN CORPORATION
(FORMERLY A DIVISION OF MOSCOM CORPORATION)
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------------------ --------------------------
1993 1994 1995 1995 1996
------------ -------------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .................................. $ (846,000) $(1,003,000) $(891,000) $(500,000) $(562,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation ............................. 22,000 28,000 26,000 14,000 13,000
Amortization of capitalized software ..... 126,000 183,000 197,000 128,000 70,000
Changes in operating assets and
liabilities:
Decrease (increase) in:
Accounts receivable ..................... (26,000) (41,000) 106,000 76,000 2,000
Other assets ............................ (1,000) -- 1,000 1,000 --
Increase (decrease) in:
Accrued payroll, commissions and related
taxes .................................. -- -- 1,000 6,000 16,000
Deferred compensation ................... 13,000 (4,000) 18,000 (16,000) (207,000)
Due to MOSCOM Corporation ............... -- -- -- -- 88,000
------------ -------------- ------------ ------------ ------------
Net cash used in operating activities .. (712,000) (837,000) (542,000) (291,000) (580,000)
------------ -------------- ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment, furniture and
fixtures ................................. (54,000) -- (2,000) (1,000) (4,000)
Capitalized software expenditures ......... (308,000) (104,000) (51,000) -- (53,000)
------------ -------------- ------------ ------------ ------------
Net cash used in investing activities .. (362,000) (104,000) (53,000) (1,000) (57,000)
------------ -------------- ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net contribution from MOSCOM Corporation .. 1,079,000 916,000 601,000 299,000 661,000
------------ -------------- ------------ ------------ ------------
Net cash provided by financing
activities ................................ 1,079,000 916,000 601,000 299,000 661,000
------------ -------------- ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH ............ 5,000 (25,000) 6,000 7,000 24,000
CASH, beginning of period .................. 22,000 27,000 2,000 2,000 8,000
------------ -------------- ------------ ------------ ------------
CASH, end of period ........................ $ 27,000 $ 2,000 $ 8,000 $ 9,000 $ 32,000
============ ============== ============ ============ ============
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.

F-6

<PAGE>

VOTAN CORPORATION
(FORMERLY A DIVISION OF MOSCOM CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

1. ORGANIZATION AND BASIS OF PRESENTATION:

Votan Corporation ("Votan" or the "Company"), formerly a division of
MOSCOM Corporation ("MOSCOM"), a Delaware corporation, was incorporated in
Delaware in June 1996 and is a wholly-owned subsidiary of MOSCOM. Votan's
business and operations were acquired by MOSCOM in September 1991 from a
predecessor company which had been engaged in speech recognition and voice
verification research and development since 1979. As discussed in Note 10,
effective June 26, 1996, MOSCOM transferred substantially all of the voice
verification and speech recognition business, operations (including research
and development), assets and liabilities of its Votan division to the
Company. The financial statements have been prepared on a stand-alone basis
in accordance with generally accepted accounting principles as if the Company
were a separate entity for all periods presented. The net assets for the
Company as of June 30, 1996 have been transferred to common stock and
additional paid-in capital, reflecting MOSCOM's initial capitalization of the
Company. The Company will begin accumulating its retained earnings as of July
1, 1996. Earnings for the period June 26, 1996 through June 30, 1996 were not
significant. Votan's sales in the accompanying financial statements have been
determined based upon existing sales of Votan's Speech Recognition and Voice
Verification Boards and VoiceLock products, certain of which are not
currently being marketed. Hereafter, the "Company" or "Votan" refers to the
Votan division prior to June 26, 1996 and to Votan Corporation on and
subsequent to June 26, 1996.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Description of the Business

Votan is a developer of advanced speech technologies utilized in speech
recognition and voice verification applications used to ensure the security
of financial transactions, databases and physical facilities. The Company's
products are manufactured by contract computer board manufacturers, one of
which, historically, has been MOSCOM.

Interim Financial Information

Unaudited interim financial information as of June 30, 1996 and for the
six month periods ended June 30, 1995 and 1996, have been prepared in
accordance with generally accepted accounting principles for interim
financial information. In the opinion of management, the interim financial
information included herein contains all normal and recurring adjustments
necessary to present fairly the financial position of the Company as of June
30, 1996, and the results of operations and cash flows for the six month
periods ended June 30, 1995 and 1996. Results for interim periods are not
indicative of annual results. The unaudited interim financial statements have
been prepared on a basis consistent with the audited statements as of
December 31, 1995. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission.

Management's Use of Estimates and Judgment

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires disclosure of the fair value
of certain financial instruments. Cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses are reflected at fair value
because of the short-term maturity of these instruments.

F-7

<PAGE>

VOTAN CORPORATION
(FORMERLY A DIVISION OF MOSCOM CORPORATION)
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Cash Equivalents

All highly liquid investments with a remaining maturity of three months or
less at the date of acquisition are classified as cash equivalents.

Inventories

The Company does not maintain inventory. Inventories are manufactured on a
contract basis as required. Cost of sales on Votan products are reflected
herein at MOSCOM's costs. See Note 9 for a further description of related
party transactions.

Other Assets

As of June 30, 1996, the Company has reflected approximately $340,000
(unaudited) as other assets, which represents costs incurred as of that date
relating to the proposed initial public offering of its Common Stock. Upon
successful completion of the initial public offering, these costs will reduce
the net proceeds from the offering and be recorded as a reduction of paid in
capital. Otherwise, these costs will be paid by MOSCOM. These costs have also
been reflected as other accrued liabilities on the accompanying balance sheet
at June 30, 1996.

Property and Equipment

Property and equipment is recorded at cost. Depreciation is computed on a
straight-line basis using the following estimated useful lives:

<TABLE>
<CAPTION>
<S> <C>
Computer hardware and software ....3-5 years
Machinery and equipment ............ 4-7 years
Furniture and fixtures ............. 5-10 years
</TABLE>

Software Development Costs

Software development costs meeting recoverability tests are capitalized
and amortized on a product-by-product basis over their economic lives,
generally three years, or the ratio of current revenues to current and
anticipated revenues from such software, whichever provides the greater
amortization. The Company continually evaluates, based upon cash flow
projections on a product basis and other factors as appropriate, whether
events and circumstances have occurred that indicate that the remaining
estimated useful life of the applicable asset warrants revision or that the
remaining balance of the asset may not be recoverable. Software development
costs and related accumulated amortization are written off when fully
amortized.

Stockholder's Equity

Stockholder's equity represents a summary of all intercompany activity
between Votan and MOSCOM as well as the accumulation of losses. The Company
will begin accumulating retained earnings as of July 1, 1996. The Company's
earnings from June 26, 1996 to June 30, 1996 were not significant.

Revenue Recognition

The Company recognizes revenue from product sales upon shipment to the
customer. The accompanying financial statements do not reflect the sales of
the Company's products as part of products or systems sold by MOSCOM. Upon
completion of the transaction referred to in Note 10, the Company will
receive royalty income relative to such sales.

F-8

<PAGE>

VOTAN CORPORATION
(FORMERLY A DIVISION OF MOSCOM CORPORATION)
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Income Taxes

MOSCOM Corporation files a consolidated federal income tax return in the
United States. Votan is not a separate taxable entity. Its results have been
included in MOSCOM's consolidated federal tax return. Income taxes have been
provided herein as if the Company had filed a separate return. The Company
accounts for income taxes under the liability method. Under this method, any
deferred income taxes recorded are provided for at current statutory rates to
reflect the impact of "temporary" differences between the amounts of assets
and liabilities for financial reporting purposes and such amounts as measured
by tax laws and regulations. Net operating loss tax carryforwards reflected
herein have been utilized by MOSCOM and will not be available for use in
future periods.

Unaudited Pro Forma Net Loss Per Share

Pursuant to Securities and Exchange Commission requirements, losses per
share and share disclosures of the Company are presented on a pro forma basis
for the most recent year presented and the most recent interim period
presented, giving retroactive effect to the capitalization (see Note 10)
of the Company and the 5,499 per share stock dividend on the Common Stock
(see Note 11).

Deferred Compensation Plan

The Company provides certain management employees with the opportunity to
participate in an unfunded, deferred compensation program. One management
employee was covered under this Plan. Under the Plan, employees can defer a
portion of their salary.

New and Pending Accounting Pronouncements

Effective January 1, 1996, the Company has adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This
statement requires long-lived assets as well as identified intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
the carrying amount of the assets may not be recoverable. The impact of
implementation of this statement was insignificant.

In October 1993, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." Although the statement
encourages entities to adopt the fair value based method of accounting for
stock options, the Company intends to continue to measure compensation for
such plans using the intrinsic value based method of accounting prescribed by
APB Opinion No. 25, "Accounting for Stock Issued to Employees." Adoption of
SFAS No. 123 in 1996 will require the Company to disclose additional
information relative to issued stock options and the Company's pro forma net
income and earnings per share, as if the options granted were expensed at
their estimated fair value at the time of grant.

F-9

<PAGE>

VOTAN CORPORATION
(FORMERLY A DIVISION OF MOSCOM CORPORATION)
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)

3. PROPERTY AND EQUIPMENT:

The major classifications of property and equipment as of December 31,
1994 and 1995 and June 30, 1996 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment .......... $ 16,000 $ 18,000 $ 18,000
Computer hardware and software .. 84,000 84,000 88,000
Furniture and fixture ............ 58,000 58,000 58,000
--------- --------- -----------
Property and equipment, at cost . 158,000 160,000 164,000
Less: Accumulated depreciation .. 71,000 97,000 110,000
--------- --------- -----------
Total property and equipment, net $ 87,000 $ 63,000 $ 54,000
========= ========= ===========
</TABLE>

4. ENGINEERING AND SOFTWARE DEVELOPMENT EXPENDITURES:

Engineering and software development expenditures incurred during the
years ended December 31, 1993, 1994 and 1995 and the six months ended June
30, 1995 and 1996 were recorded as follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Engineering and software development
expense included in the statements of
operations ............................ $342,000 $579,000 $424,000 $212,000 $227,000
Amounts capitalized and included in the
balance sheets ........................ 308,000 104,000 51,000 -- 53,000
---------- ---------- ---------- ---------- ----------
Total expenditures for engineering and
software development ................. $650,000 $683,000 $475,000 $212,000 $280,000
========== ========== ========== ========== ==========
</TABLE>

5. FINANCING:

MOSCOM has utilized a centralized cash management system. As such, cash
had not been allocated on a divisional level. All of the Company's receipts
were collected by MOSCOM and MOSCOM was liable for all of the Company's
purchases. Cash collected or paid on behalf of the Company by MOSCOM was
accounted for as dividends or capital contributions, respectively, against
divisional equity. The Company has not reflected either interest income or
interest expense on centralized cash balances or borrowings.

The Company has been dependent on MOSCOM for its liquidity needs. MOSCOM
has committed to continue to meet the Company's capital requirements until
the earlier of March 31, 1997 or the consummation of debt or equity financing
by the Company of at least $10 million. MOSCOM has no further obligation to
provide the Company with additional capital resources beyond such time.

6. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK:

Sales to three customers were approximately 28%, 12% and 11% of the
Company's total sales in 1993. Sales to one customer was approximately 21% of
the Company's total sales in 1994. Sales to two customers amounted to
approximately 56% and 12% of the Company's total sales in 1995.

F-10

<PAGE>

VOTAN CORPORATION
(FORMERLY A DIVISION OF MOSCOM CORPORATION)
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)

6. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK: (Continued)
Export sales to European companies amounted to $83,000, $359,000 and
$397,000 for the years ended December 31, 1993, 1994 and 1995, respectively.

7. INCOME TAXES:

The accompanying financial statements reflect an effective tax rate of
40%, which reasonably reflects what the Company's tax rate would have been as
a separate taxable entity. No net tax benefit has been reflected in the
accompanying financial statements for losses incurred in the years ended
December 31, 1993, 1994 and 1995, as the tax loss carryforwards generated in
those years by Votan are fully offset by increases in the valuation
allowance.

The income tax provision for the years ending December 31, 1993, 1994 and
1995 includes the following:

<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal ........................ $ -- $ -- $ --
State .......................... 1,000 1,000 1,000
Deferred:
Federal ........................ (277,000) (324,000) (286,000)
State .......................... (30,000) (49,000) (48,000)
--------- ----------- -----------
Increase in valuation allowance $ 307,000 $ 373,000 $ 334,000
</TABLE>

The income tax provision differs from those computed using the statutory
federal rate of 34%, for the years ended December 31, 1993, 1994 and 1995 due
to the following:

<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Tax at statutory rate .................. $(287,000) $(341,000) $(303,000)
State taxes, net of federal tax benefit (20,000) (32,000) (31,000)
Increase in valuation allowance ....... 307,000 373,000 334,000
Other .................................. 1,000 1,000 1,000
------------ ------------ ------------
Total ................................ $ 1,000 $ 1,000 $ 1,000
============ ============ ============
</TABLE>

The deferred income tax asset (liability) recorded in the accompanying
balance sheets results from temporary differences between financial statement
and tax basis of assets and liabilities at December 31, 1994 and 1995 as
follows:

<TABLE>
<CAPTION>
1994 1995
------------ -------------
<S> <C> <C>
Net operating loss carryforwards $1,051,000 $ 1,318,000
Fixed assets .................... (10,000) (9,000)
Capitalized software ............ (166,000) (107,000)
Deferred compensation ........... 78,000 85,000
Valuation allowance ............. (953,000) (1,287,000)
------------ -------------
Deferred asset (liability) .... $ -- $ --
============ =============
</TABLE>

Net operating loss tax carryforwards reflected herein have been utilized
by MOSCOM and will not be available for use in future periods.

F-11

<PAGE>

VOTAN CORPORATION
(FORMERLY A DIVISION OF MOSCOM CORPORATION)
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)

8. COMMITMENTS AND CONTINGENCIES:

Operating Leases

The Company leases its office facilities under an operating lease which
expires in 1998. Rent expense under this operating lease (exclusive of real
estate taxes and other expenses payable under this lease) was $79,000,
$69,000 and $23,000 for the years ended December 31, 1993, 1994 and 1995,
respectively. The future minimum payments under this operating lease for the
years ending December 31 are as follows:

<TABLE>
<CAPTION>
<S> <C>
1996 .......................... $31,000
1997 .......................... 34,000
1998 .......................... 21,000
---------
Total minimum lease payments $86,000
=========
</TABLE>

MOSCOM rent expense allocated to the Company was $9,000, $17,000 and
$13,000 for the years ended December 31, 1993, 1994 and 1995, respectively.
This is included within the allocations discussed in Note 9.

Subsequent to June 30, 1996, the Company entered into a new operating
lease. See Note 11.

Employment Agreements

In June 1996, the Company entered into a two year employment agreement
with one key executive. This agreement entitles the executive to bonuses of
$25,000 upon execution of the employment agreement, $25,000 upon completion
of a successful initial public offering and a salary of $180,000 per annum.
Furthermore, in the event of a successful initial public offering, the
Company intends to grant the executive options to purchase an aggregate
amount of 120,000 shares of the Company's common stock at an exercise price
equal to the initial public offering price in the case of incentive stock
options or 85% of the initial public offering price in the case of
non-qualified stock options under the terms of the 1996 Stock Option Plan. See
Note 10. The options will have a maximum term of 10 years, subject to earlier
termination upon cessation of the employee's employment with the Company.
Pending the successful completion of the initial public offering, the options
will become exercisable in the following fiscal years:

Legal Matters

The Company is subject to litigation from time to time in the ordinary
course of business. Although the amount of any liability with respect to such
litigation cannot be determined, in the opinion of management, such liability
will not have a material adverse effect on the Company's financial condition
or results of operations.

F-12

<PAGE>

VOTAN CORPORATION
(FORMERLY A DIVISION OF MOSCOM CORPORATION)
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)

9. RELATED PARTY TRANSACTIONS:

MOSCOM has provided services to Votan including, but not limited to, cash
management, financial services, management information systems and legal
services, as well as executive administration. MOSCOM has also provided
engineering technical support relative to some of the technology utilized in
Votan's products. These financial statements include an allocation of
MOSCOM's expenses for the years ended December 31, 1993, 1994 and 1995 and
the six months ended June 30, 1995 and 1996 as follows:

<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Engineering and software development ... $161,000 $405,000 $249,000 $131,000 $139,000
Marketing ............................... 63,000 66,000 62,000 25,000 19,000
Selling ................................. 21,000 101,000 135,000 60,000 3,000
Administrative .......................... 125,000 118,000 132,000 57,000 88,000
---------- ---------- ---------- ---------- ----------
Total allocation of operating expenses $370,000 $690,000 $578,000 $273,000 $249,000
========== ========== ========== ========== ==========
</TABLE>

The above charges have been allocated based upon relative sales levels of
Votan products as a percentage of MOSCOM sales, headcount and other methods
as appropriate. Votan division employees are reflected directly in the
accompanying financial statements.

Reflected in the unaudited balance sheet as of June 30, 1996 is $88,000
due to MOSCOM. This amount relates to certain costs reimbursable to MOSCOM
incurred on behalf of Votan in accordance with the Subsidiary Formation
Agreement (the "Formation Agreement") discussed in Note 10. These amounts
will be repaid to MOSCOM upon successful completion of the initial public
offering.

Management believes that the method of allocation is reasonable. The
charges are not necessarily representative of the amounts that would have
been incurred had Votan been an unaffiliated entity. Management estimates
that had Votan been operating as an unaffiliated entity, it would have
incurred total operating expenses of $1.5 million, $2.1 million and $2.2
million for the years ended December 31, 1993, 1994 and 1995, respectively
(unaudited). The Company anticipates that certain of these services will be
outsourced in the future to MOSCOM or some other provider if deemed to be
cost efficient.

10. CAPITALIZATION:

Effective June 26, 1996, MOSCOM transferred substantially all of the voice
verification and speech recognition business, operations (including research
and development), assets and liabilities of the Votan division to the
Company. In connection with the Formation, the Company has entered into
certain agreements with MOSCOM which govern the continuing relationship
between MOSCOM and the Company, including a (i) the Formation Agreement; (ii)
License Agreement and (iii) Service and Supply Agreement.

Reflected in the unaudited balance sheet as of June 30, 1996 is the
transfer of such assets and assumption of such liabilities from MOSCOM in
accordance with the Formation Agreement. The net amount transferred to the
Company from MOSCOM has been accounted for herein as a capital contribution.

Pursuant to the Formation Agreement, MOSCOM has agreed to transfer all of
the assets of its Votan division to the Company in consideration for the
issuance to MOSCOM of 5,500,000 fully paid, non-assessable shares of Common
Stock of the Company. The Company has agreed to assume and pay, perform and
discharge all debts, obligations, contracts and liabilities of MOSCOM related
to these assets. In addition, pursuant to the Formation Agreement, MOSCOM has
agreed to meet all of the capital

F-13

<PAGE>

VOTAN CORPORATION
(FORMERLY A DIVISION OF MOSCOM CORPORATION)
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)

10. CAPITALIZATION: (Continued)
requirements of the Company until the earlier of March 31, 1997 or upon the
consummation of a debt or equity financing by the Company of at least $10
million. The Company has also agreed to assume obligations relating to
certain pension benefits afforded to Mr. Vail and to pay MOSCOM for: (i)
certain costs incurred by MOSCOM related to the Formation and the hiring of
executive officers of the Company, including recruiting fees and
compensation-related expenses and (ii) costs and expenses incurred by MOSCOM
in connection with the organization and funding of the Company. The costs and
expenses referred to in (i) and (ii) above shall not exceed $200,000. In
addition, the Company authorized 100,000 shares of preferred stock and
10,000,000 shares of Common Stock. Subsequent to June 30, 1996 the Company
amended its Certificate of Incorporation in order to increase both the
authorized shares of its Preferred Stock and Common Stock. See Note 11.

Pursuant to the License Agreement, the Company has granted MOSCOM a
non-exclusive, non-transferable worldwide license to continue selling the
TeleVoice System, certain computer board products and other products
incorporating the Company's algorithms. MOSCOM and the Company have also
agreed to promptly disclose and license to each other on a non-exclusive,
royalty-free basis, all improvements to the licensed technologies and
products which they make or acquire during the term of the license. MOSCOM
has the right to grant sublicenses to end-users and distributors without
prior consent, but must obtain the Company's prior written consent for
sublicenses to other VARs. MOSCOM is required to pay one, and only one, of
the following royalties to the Company for each sale or license of the
products and technologies covered by the License Agreement: (i) $50 for each
copy of the licensed algorithms sublicensed to an end-user or distributor;
(ii) $50 per sale of a product incorporating a licensed algorithm; (iii) $50
for each functional port on each computer board sold, if such board
incorporates a licensed algorithm and is sold with application software; or
(iv) $50 for each board or other computer board sold, if such board
incorporates a licensed algorithm but is not sold with application software.
The license shall continue in effect until terminated, with the Company
having the right to terminate in the event of MOSCOM's breach or bankruptcy
and MOSCOM having the right to terminate for any reason. The Company may
terminate the license upon 30 days' prior written notice to MOSCOM. MOSCOM
must provide the Company with 180 days' prior written notice of termination
of the license. If MOSCOM terminates because of a material breach by the
Company, MOSCOM's licenses shall survive such termination and no further
royalties shall be due to the Company.

Pursuant to the Service and Supply Agreement, MOSCOM has agreed to sell to
the Company certain speech recognition and voice verification boards for an
amount equal to 1.25 times MOSCOM's cost for each such board. In addition,
pursuant to the Service and Supply Agreement, MOSCOM has agreed to provide
the Company with certain administrative and accounting services, as the
Company may from time to time require, for a fee equal to four times the
gross hourly salary paid by MOSCOM to any employee who performs such
administrative and accounting services for Votan, multiplied by the actual
number of hours expended by each such employee to perform such services. In
the event that MOSCOM, upon Votan's request, pays premiums on group employee
benefit plans for the benefit of Votan employees, Votan has agreed to
reimburse MOSCOM in an amount equal to 105% of such premiums paid by MOSCOM.
Finally, MOSCOM has agreed to provide space at its facilities for certain
Votan employees who will perform services for Votan at such facilities until
their relocation to Votan's facilities in California. Votan is required to
pay 1.25 times MOSCOM's cost of occupancy for that portion of MOSCOM's
facilities allocated to occupancy by such Votan employees.

The Company, on June 26, 1996, also adopted the 1996 Stock Option Plan.
Under this Plan, up to 825,000 shares of Common Stock have been initially
authorized for issuance. The 1996 Plan includes a Discretionary Option Grant
Program under which employees and consultants may be granted options and

F-14

<PAGE>

VOTAN CORPORATION
(FORMERLY A DIVISION OF MOSCOM CORPORATION)
NOTES TO FINANCIAL STATEMENTS --(CONTINUED)

10. CAPITALIZATION: (Continued)
an Automatic Option Grant Program under which option grants will
automatically be made to eligible non-employee members of the Board of
Directors of the Company. All options under this Plan will be at an exercise
price of not less than 85% of their fair market value at the date of grant.

11. SUBSEQUENT EVENTS (UNAUDITED):

Operating Lease

On July 8, 1996, the Company entered into a new lease for a 12,587 square
foot facility commencing December 1, 1996 and ending November 30, 2001. This
lease superseded the Company's current lease which was to expire in 1998. The
future minimum payments under these operating leases for the years ending
December 31 are as follows:

Stockholder's Equity

On September 6, 1996 the Company amended its Certificate of Incorporation
to increase the total number of authorized shares of its Preferred Stock to
1,000,000 and the total number of authorized shares of its Common Stock to
20,000,000.

On September 20, 1996 the Company declared a dividend on each issued and
outstanding share of Common Stock payable in the form of 5,499 additional
shares of Common Stock. All per share amounts have been retroactively
restated to give effect to the stock dividend.

F-15

<PAGE>

This CHART depicts potential
applications within a bank for
the Company's voice verification
technologies including: bank
teller verification, home
banking and automatic teller
machines.

VOTAN [register mark]

<PAGE>

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ......................... 3
Risk Factors ............................... 6
Use of Proceeds ............................ 16
Dividend Policy ............................ 16
Capitalization ............................. 17
Dilution ................................... 18
Selected Financial Data .................... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................ 20
Business ................................... 24
Management ................................. 36
Certain Transactions ....................... 42
Principal and Selling Stockholders ........ 45
Description of Capital Stock ............... 46
Shares Eligible for Future Sale ............ 48
Underwriting ............................... 50
Legal Matters .............................. 51
Experts .................................... 51
Available Information ...................... 51
Index to Financial Statements .............. F-1
</TABLE>

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

2,850,000 SHARES

[VOTAN LOGO]

VOTAN CORPORATION
COMMON STOCK

PROSPECTUS

LADENBURG, THALMANN & CO. INC.
KAUFMAN BROS., L.P.

, 1996

<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than the
underwriting discount and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates
except the SEC registration fee, the NASD filing fees and the Nasdaq National
Market listing fee.

<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
-----------
<S> <C>
SEC registration fee ................................ $ 13,562
NASD filing fee ..................................... 4,433
Nasdaq National Market listing fee .................. 20,813
Printing and engraving expenses ..................... 100,000
Legal fees and expenses ............................. 275,000
Accounting fees and expenses ........................ 150,000
Blue sky fees and expenses (including counsel fees) 20,000
Transfer agent and registrar fees and expenses ..... 10,000
Financial Advisor Fees .............................. 250,000
Miscellaneous ....................................... 46,192
-----------
Total ............................................. $890,000
===========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law permits the Registrant
to, and Article 9 of the Certificate of Incorporation provides that the
Registrant may, indemnify each person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Registrant, or is or was serving, or has agreed to serve, at
the request of the Registrant, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust
or other enterprise (including any employee benefit plan), or by reason of
any action alleged to have been taken or omitted in such capacity, against
all expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The Registrant has sold and issued the following securities during the
past three years:

On September 20, 1996, the Registrant declared a dividend on each issued
and outstanding share of Common Stock payable in the form of 5,499
additional shares of Common Stock.

On June 26, 1996, the Registrant issued 1,000 shares of Common Stock to
MOSCOM Corporation in connection with the transfer of all of the assets of
the Votan Division of MOSCOM Corporation to the Registrant, which assets
had a book value of $217,000.

The above securities were offered by the Registrant in reliance upon an
exemption from registration under either (i) Section 4(2) of the
Securities Act as transactions not involving any public offering or (ii)
Rule 701 under the Securities Act. No underwriters were involved in
connection with the sales of securities referred to in this Item 15.

II-1

<PAGE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ---------- ----------------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation of the Registrant.
3.2* Amended and Restated Bylaws of the Registrant.
4.1* Specimen certificates for shares of the Registrant's Common Stock.
4.2* Provisions of the Certificate of Incorporation and Bylaws of the Registrant defining rights of
holders of Common Stock of the Registrant (included in Exhibits 3.1 and 3.2 to this
Registration Statement).
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1* Lease dated May 23, 1995 between Bernal Avenue Associates and the Registrant.
10.2* Lease dated July 8, 1996 between Bernal Avenue Associates and the Registrant.
10.3* Subsidiary Formation Agreement dated June 26, 1996 between the Registrant and MOSCOM.
10.4* License Agreement dated June 26, 1996 between the Registrant and MOSCOM.
10.5* Service and Supply Agreement dated June 26, 1996 between the Registrant and MOSCOM.
10.6* Employment Agreement dated June 19, 1996 between the Registrant and Mr. John A. White.
10.7* Form of Representatives' Common Stock Purchase Warrant.
10.8* 1996 Stock Option Plan.
10.9* Value Added Reseller Agreement dated September 6, 1996 between the Registrant and MOSCOM.
10.10* Letter Agreement dated September 4, 1996 between Grady & Hatch, Inc. and MOSCOM.
23.1 Consent of Arthur Andersen LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1 to this Registration
Statement).
23.3* Consent of Donald G. Heitt (Director Designee).
24.1* Powers of Attorney (see Signature page).
27.1* Financial Data Schedule.
</TABLE>

- ------------

* Previously filed.

(b) Financial Statement Schedules

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
Financial Statements or notes thereto.

II-2

<PAGE>

ITEM 17. UNDERTAKINGS

The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware General Corporation Law, the Certificate
of Incorporation of the Registrant, the Underwriting Agreement, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered hereunder, the
Registrant will, unless in the opinion of 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.

The Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424 (b)
(1) or (4), or 497 (h) under the Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
Prospectus 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 initial bona fide offering
thereof.

II-3

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the
City of New York, State of New York, on this 23th day of September, 1996.

VOTAN CORPORATION

By: /s/ John A. White
-------------------------------------
John A. White
President and Chief Executive
Officer

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES INDICATED ON THE 23TH DAY OF SEPTEMBER, 1996:

<TABLE>
<CAPTION>
SIGNATURE TITLE(S)
- -------------------------- ----------------------------------------------------
<S> <C>
By: * Chairman of the Board of Directors
-------------------------
Albert J. Montevecchio

By: /s/ John A. White President, Chief Executive Officer
------------------------- and Director (Principal Executive
John A. White Officer)

By: * Executive Vice President
------------------------- and Director
Richard C. Vail

By: /s/ William E. O'Connor Chief Financial Officer, Treasurer and Secretary
------------------------- (Principal Financial and Accounting Officer)
William E. O'Connor

*By: /s/ John A. White
-------------------------
John A. White as
Attorney-in-Fact
</TABLE>

II-4

<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- --------------- ----------------------------------------------------------------------------- ------------
<S> <C> <C>
1.1* Form of Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation of the Registrant.
3.2* Amended and Restated Bylaws of the Registrant.
4.1* Specimen certificates for shares of the Registrant's Common Stock.
4.2* Provisions of the Certificate of Incorporation and Bylaws of the Registrant defining
rights of holders of Common Stock of the Registrant (included in Exhibits 3.1 and
3.2 to this Registration Statement).
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1* Lease dated May 23, 1995 between Bernal Avenue Associates and the Registrant.
10.2* Lease dated July 8, 1996 between Bernal Avenue Associates and the Registrant.
10.3* Subsidiary Formation Agreement dated June 26, 1996 between the Registrant and MOSCOM.
10.4* License Agreement dated June 26, 1996 between the Registrant and MOSCOM.
10.5* Service and Supply Agreement dated June 26, 1996 between the Registrant and MOSCOM.
10.6* Employment Agreement dated June 19, 1996 between the Registrant and Mr. John A.
White.
10.7* Form of Representatives' Common Stock Purchase Warrant.
10.8* 1996 Stock Option Plan.
10.9* Value Added Reseller Agreement dated September 6, 1996 between the Registrant and
MOSCOM.
10.10* Letter Agreement dated September 4, 1996 between the Registrant and MOSCOM.
23.1 Consent of Arthur Andersen LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1 to this Registration
Statement).
23.3* Consent of Donald G. Heitt (Director Designee).
24.1* Powers of Attorney (see Signature page).
27.1* Financial Data Schedule.
</TABLE>

- ------------

* Previously filed.

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.

ARTHUR ANDERSEN LLP

Rochester, New York,
September 23, 1996