U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1999
Commission File Number 313-12979
VOICENET, INC.
(Exact name of small business issuer as specified in charter)
Delaware 13-3896031
(State of either jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1040 First Avenue
New York, New York
(Address of principal executive offices)
212-572-4861
(Issuer's telephone number)
-----------------------------------------------------------------------
(former name, address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
-- --
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: 3,261,550
<PAGE>
VOICENET, INC.
INDEX
Part I - Financial Statements
Balance Sheets -September 30, 1999 and December 31, 1998
Statements of Operations - For the Three Months Ended September 30,
1999 and September 30, 1998
Statements of Operations - For the Nine Months Ended September 30, 1999
and September 30, 1998
Statements of Cash Flows for the Nine Months Ended September 30, 1999
and September 30, 1998
Notes to Unaudited Financial Statements
Management's Discussion and Analysis
-2-
<PAGE>
VOICENET, INC.
BALANCE SHEET
ASSETS: Sept 30, 1999 Dec. 31, 1998
(unaudited) (audited)
----------- ---------
Current Assets:
Cash and Cash Equivalents $2,979,182 $34,610
Investments - 12,246
Accounts Receivables 824 44,500
Due from VNA - 45,015
Total current assets 2,980,006 136,371
Organization costs, net - 900
Intangible Assets, net 4,074,600 4,410,000
Security Deposits 12,891 12,475
Deferred Compensation - 26,450
Total Other Assets 4,087,491 4,449,825
Total Assets 7,067,497 4,586,196
CURRENT LIABILITIES
Accounts Payable 118,029 217,249
Total current liabilities 118,029 217,249
Advances from Parent 3,078,485 -
Stockholders' Equity
Preferred Stock, $.01 par value,
1,000,000 shares authorized, no shares
outstanding Common Stock, $.01 par value,
10,000,000 shares authorized 3,261,550
shares
issued and outstanding 33,387 33,387
Additional Paid in Capital 6,168,700 6,168,700
Stock Options Outstanding 916,500 916,500
Other non-owner changes in equity - (15,719)
Retained Deficit (3,247,604) (2,733,921)
Total stockholders' equity 3,870,983 4,368,947
Total liabilities and stockholders' equity 7,067,497 4,586,196
-3-
<PAGE>
VOICENET, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1999 1998
------ ------
Revenues - 45,500
Interest Income - 3,608
Costs and Expenses
Cost of Sales - 7,958
General and Administrative Expenses 48,000 99,642
Depreciation and Amortization 170,000 -
Total Costs 218,000 107,600
Net Loss (218,000) (58,492)
Net loss per Common Share ($.07) ($.02)
Weighted Average number of
shares outstanding during the period 3,261,550 3,261,550
-4-
<PAGE>
VOICENET, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1999 1998
------ ------
Revenues - 45,500
Interest Income - 8,533
Costs and Expenses
Cost of Sales - 7,958
General and Administrative Expenses 178,283 433,409
Depreciation and Amortization 335,400 -
Total Costs 513,683 441,367
Net Loss (513,683) (387,334)
Net loss per Common Share ($.16) ($.12)
Weighted Average number of
shares outstanding during the period 3,261,550 3,261,550
-5-
<PAGE>
VOICENET, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
------ ------
Net loss (513,683) (387,334)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Amorization Expense 336,300 -
Increase (Decrease) in accounts receivable 38,876 (45,500)
Increase (Decrease) in other receivables 4,800 -
(Increase) in security deposits (416) -
(Decrease) in deferred compensation (26,450) -
(Increase) Decrease in accounts payable 99,220 (64,260)
Advances from Parent (45,015) (320,769)
Total (106,368) (817,863)
Financing Activities
Purchase of investments - (27,965)
Sale of Investments (27,965) -
Advances from Parent 3,078,905 -
Total 3,050,940 (27,965)
Net increase (decrease) in cash 2,944,572 (845,828)
Cash, beginnning of period 34,610 909,217
Cash, end of period 2,979,182 63,389
-6-
<PAGE>
VOICENET, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Basis of Presentation
The financial statements have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
and reflect all adjustments which are, in the opinion of management, nescessary
to present fairly the information required herein. Certain information and
footnote disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations, although management believes that the
disclosures are adequate to make the information presented not misleading. The
results of operations for the nine months ended September 30, 1999 and 1998 are
not nescessarily indicative of the results of operations to be expected for the
full year.
Note 2 - Nature of Business
Voicenet, Inc. (the " Company"), a Delaware corporation, was incorporated on
April 2, 1996. The Company was established for the marketing and distribution of
continuous speech and voice recognition systems. The Company has had minimal
sales and, has incurred losses since inception. The Company is majority owned by
Voicenet (Aust.) Ltd. ("VNA") an Australian company.
Note 3 - Net Loss per Common Share
Net loss per common share is computed based on the weighted average number of
shares of common stock outstanding for the periods pressented. The effect of the
stock options and warrants on the net loss per share was anti-diutive for the
periods presented.
Note 4 - Purchase of Technology
On August 1, 1996, the Company entered into a Technology and Sales Agreement (
the "technology agreement" ) with VNA to acquire certain exclusive rights and
ownership with respect to the development, use, marketing, sales and
distribution of a continuous computer based digital voice compression.
recognition and recording technology. The term of the agreement is for the
longer of 25 years or the life of any patents and extensions granted under the
patent applications.
-7-
<PAGE>
Note 5 - Due to Parent Company
The Company was advanced monies by VNA for completion of its marketing and
development of technology. In October 1999, advances aggregating $3,000,000 were
credited for the purchase of newly issued convertible preferred stock.
On October 16 , 1999, VNA elected its conversion option and 1,576,861 shares of
common stock were issued to VNA.
Management's Discussion and Analysis of Financial Condition and Results of
Operations:
The Company had no revenues from continuing operations through the nine months
ended September 30,1999. Revenues aggregating $45,500 occured in the third
quarter of 1998. The Company has incurred losses since its inception in 1996.
The Company's losses have related principally from legal, accounting, printing,
marketing and travel expenditures. The Company expects to incur operating costs
and possible losses therefrom over the next several years due primarily to
expanded sales and marketing efforts, including the establishment of product
sales office, the staffing of such office and other marketing activities and
costs to be incurred as they seek potential customers for the Company's
products.
There can be no assurance of when and whether the Company will generate revenue
or become profitable on a sustained basis, if at all. Although the Company
anticipates sales to commence shortly, results of operations may vary
significantly from quarter to quarter due to timing of payments and other
factors. The timing of revenues, if any, may not match the timing of associated
product development and other expenses.
RESULTS OF OPERATIONS FOR THE PERIODS ENDED SEPTEMBER 30,1999; AS COMPARES WITH
SEPTEMBER 30, 1998
Net losses for the nine month period ended September 30, 1999 were $513,683 as
compared to $387,334 for the nine months ended September 30, 1998. There were no
revenues for the period ended September 30, 1999 as compared to revenues of
$45,500 for the nine months ended September 30, 1998. Total general and
administrative expenses were $178,283 for 1999 as compared to $433,409 for the
nine months ended September 30, 1999.
In the fourth quarter of 1998, the Company commenced amortizing its intangible
asset over a twenty five year useful life. In the third quarter of 1999, the
Company reviewed the estimated life of the intangible asset and reduced the life
of the useful asset to seven years. Amortization expense for the nine months
ended September 30, 1999 aggregated $335,400.
-8-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficit as of December 31,1998 of $80,878 in
comparison to working capital of $2,861,977 as of September 30, 1999. The
additional working capital was primarily due to the advances (and subsequent
conversion into permanent capital) made by VNA. The increase in the accumulated
deficit is primarily related to continuing operating costs with minimal
operating income. For the three months ended September 30,1999 the Company's
cash requirements were satisfied from the cash reserves in its operating and
investment accounts.
The Company believes that its existing cash and cash equivalents, (based upon
the recent $3,000,000 capital injection obtained from VNA) , are sufficient to
meet its operating expense and capital expenditures for at least the next twelve
months. The Company's future capital requirements, however, will depend on
numerous factors including (i) the effectiveness of product commercialization
and marketing activities, including the creation and progress of its sales and
marketingactivities (ii) the effect of competing technological and marketing
developments, from competitors that have greater resources than the Company.
However, if operating expenses are higher than expected or if cash flows from
operations are lower than anticipated, there can be no assurance that the
Company will have sufficient resources available to it on terms that are
satisfactory to the Company.
OTHER MATTERS
Filings Submitted on Form 8-K
During the quarter ended September 30, 1998 the Company submitted one Report on
Form 8-K dated September 21, 1999 relating to the changing of accountants.
-9-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
November 15, 1999
VOICENET, INC.
By: /s/ Howard J. Messer
Name: Howard J. Messer
Title: Chief Financial Officer
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial data extracted from the consolidated
balance sheet and the consolidated statements of operations and is qualified in
its entirety by reference to such statements.
</LEGEND>
<CIK> 0001023745
<NAME> Voicenet, Inc.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,979,182
<SECURITIES> 0
<RECEIVABLES> 824
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,980,006
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,067,497
<CURRENT-LIABILITIES> 118,029
<BONDS> 0
0
0
<COMMON> 33,387
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,067,497
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 218,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 218,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 218,000
<EPS-BASIC> (.07)
<EPS-DILUTED> 0
</TABLE>
