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, 2000
Commission File Number 333-12979
VOICENET, INC.
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(Exact name of small business issuer as specified in charter)
Delaware
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(State of either jurisdiction of incorporation or organization)
13-3896031
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(IRS Employer Identification No.)
1040 First Avenue
New York, New York
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(Address of principal executive offices)
212-572-4861
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(Issuer's telephone number)
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(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
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State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: November 15, 2000 - 9,903,022 shares
outstanding
<PAGE>
VOICENET, INC.
(a development stage company)
INDEX
Part I - Financial Statements
Balance Sheets as of September 30, 2000 and December 31, 1999 3
Statements of Operations for the Nine Months Ended
September 30, 2000 and 1999 4
Statements of Operations for the Three Months Ended
September 30, 2000 and 1999 5
Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and 1999 6
Notes to Unaudited Financial Statements 7
Management's Discussion and Analysis 8-9
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<TABLE>
VOICENET, INC.
(a development stage company)
BALANCE SHEETS
<CAPTION>
ASSETS
September 30, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents ............................................ $ 2,824,485 $ 2,916,531
Licensing fees receivable ....................................... 43,169 --
Prepaid expense ................................................. 54,900 --
------------ ------------
Total current assets ................................ 2,922,554 2,916,531
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Other assets:
Technology rights ............................................... 3,380,400 3,905,000
Security deposits and other ..................................... 13,684 12,891
------------ ------------
Total other assets .................................. 3,394,084 3,917,891
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Total assets ........................................ $ 6,316,638 $ 6,834,422
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ........................... $ 114,173 $ 186,753
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Total current liabilities ........................... 114,173 186,753
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Stockholders' equity:
Common stock, $.01 par value
50,000,000 shares authorized
10,343,022 shares issued, 9,903,022 shares outstanding in 2000
9,831,022 shares issued, 9,391,022 shares outstanding in 1999 103,430 98,310
Additional paid-in capital ...................................... 11,001,596 10,338,716
Accumulated deficit ............................................. (4,550,361) (3,787,157)
Treasury stock, 440,000 shares, at cost ......................... (2,200) (2,200)
Subscription receivable ......................................... (350,000) --
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Total stockholders' equity .......................... 6,202,465 6,647,669
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Total liabilities and stockholders' equity .......... $ 6,316,638 $ 6,834,422
============ ============
</TABLE>
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<TABLE>
VOICENET, INC.
(a development stage company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
April 2, 1996
Nine-month period ended (inception)
September 30, through
------------------------------ September 30,
2000 1999 2000
----------- ----------- -------------
<S> <C> <C> <C>
Revenue ........................... $ 43,169 $ -- $ 92,069
----------- ----------- -----------
Costs and expenses:
Cost of sales .................. -- -- 25,958
Selling and administrative ..... 381,831 27,786 1,927,964
Stock-based compensation ....... -- -- 1,756,500
Amortization ................... 524,600 165,400 1,121,600
----------- ----------- -----------
906,431 193,186 4,832,022
----------- ----------- -----------
Operating loss .................... (863,262) (193,186) (4,739,953)
----------- ----------- -----------
Other income:
Interest ....................... 100,059 80 186,454
Gain on sale of securities ..... -- -- 3,138
----------- ----------- -----------
100,059 80 189,592
----------- ----------- -----------
Net loss .......................... $ (763,203) $ (193,106) $(4,550,361)
=========== =========== ===========
Loss per share .................... $ (0.08) $ (0.03)
=========== ===========
Weighted average shares outstanding 9,750,829 6,677,300
=========== ===========
</TABLE>
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<PAGE>
VOICENET, INC.
(a development stage company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three-month period ended
September 30,
------------------------------
2000 1999
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Revenue ........................... $ 43,169 $ --
----------- -----------
Costs and expenses:
Selling and administrative ..... 186,599 6,576
Amortization ................... 169,600 75,000
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356,199 81,576
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Operating loss .................... (313,030) (81,576)
Interest income ................... 32,188 --
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Net loss .......................... $ (280,842) $ (81,576)
=========== ===========
Loss per share .................... $ (0.03) $ (0.01)
=========== ===========
Weighted average shares outstanding 9,890,815 6,677,300
=========== ===========
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<PAGE>
<TABLE>
VOICENET, INC.
(a development stage company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
April 2, 1996
Nine-month period ended (inception)
September 30, through
------------------------------ September 30,
2000 1999 2000
----------- ----------- -------------
<S> <C> <C> <C>
Net loss ................................................. $ (763,203) $ (193,106) $(4,550,361)
----------- ----------- -----------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization ....................................... 524,600 165,400 1,121,600
Stock issued for consulting services ............... -- -- 600,000
Stock option compensation costs .................... -- -- 1,156,500
Gain on sale of marketable securities .............. -- -- (3,138)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ...... -- 32,076 --
(Increase) decrease in other receivables ........ (43,169) -- (45,369)
(Increase) decrease in prepaid expenses ......... (54,900) (7,382) (54,900)
(Increase) decrease in security deposits ........ (793) 333 (13,684)
(Increase) decrease in deferred compensation .... -- 26,450 --
Increase (decrease) in accounts payable ........ (72,581) (33,216) 114,172
----------- ----------- -----------
Total adjustments ......................... 353,157 183,661 2,875,181
----------- ----------- -----------
Net cash used in operating activities ..... (410,046) (9,445) (1,675,180)
----------- ----------- -----------
Cash flows from investing activities:
Payments for organization costs ....................... -- -- (2,000)
Purchases of investment ............................... -- -- (27,965)
Proceeds from sale of investment ...................... -- 12,246 31,103
----------- ----------- -----------
Net cash provided by investing activities . -- 12,246 1,138
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of stock ....................... 318,000 -- 4,611,181
Payments of offering costs ............................ -- -- (112,654)
Advances (to) from Voicenet (Aust) Ltd. ............... -- 45,105 --
----------- ----------- -----------
Net cash provided by financing activities . 318,000 45,015 4,498,527
----------- ----------- -----------
Net increase in cash and equivalents ...... (92,046) 47,816 2,824,485
Cash and equivalents at beginning of period 2,916,531 34,610 --
----------- ----------- -----------
Cash and equivalents at end of period ..... $ 2,824,485 $ 82,426 $ 2,824,485
=========== =========== ===========
</TABLE>
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<PAGE>
VOICENET, INC.
(a development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
September 30, 2000
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, necessary 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-month periods ended September 30, 2000 and 1999 are not
necessarily indicative of the results of operations to be expected for the
full year.
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.
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 presented. The effect
of stock options and warrants on the net loss per share was anti-dilutive
for the periods presented.
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.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS:
The Company had minimal revenues from continuing operations through the nine
months ended September 30, 2000. The Company has incurred losses since its
inception in 1996. The Company's losses incurred since inception have resulted
principally from professional, marketing and travel expenditures incurred in
connection with its capital raising activities and from amortization of
intangibles and stock-based compensation. The Company expects to incur operating
costs and possible losses therefrom due primarily to expanded sales and
marketing efforts 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
sufficient revenue or become profitable on a sustained basis, if at all.
Although the Company anticipates increases in direct sales and licensing
revenues, 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, 2000; AS COMPARED WITH
SEPTEMBER 30, 1999
Net loss for the nine-month period ended September 30, 2000 was $763,203 as
compared to $193,106 for the nine-month period ended September 30, 1999. During
the nine-month period ended September 30, 2000, the Company generated $43,169 in
royalty revenue as a result of its licensing agreement with RimpexChile, S.A.
There were no revenues for the nine-month period ended September 30, 1999. As
noted in its Form 8K filing dated May 16, 2000, the Company entered into a
sales, licensing and marketing agreement with RimpexChile, S.A. on April 26,
2000 with respect to the licensing of its technology. The agreement requires
Rimpex to pay the Company a 20% royalty, as defined, with respect to all gross
revenues of the products, as defined, in the territory. Total selling and
administrative expenses were $381,831 for 2000 as compared to $27,786 for the
nine-month period ended September 30, 1999.
In the fourth quarter of 1998, the Company commenced amortizing its technology
rights over a twenty-five year useful life. In the third quarter of 1999, the
Company revised the estimated life of the technology rights to seven years.
Amortization expense for the nine-month period ended September 30, 2000 was
$524,600 as compared to $165,400 for the nine-month period ended September 30,
1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $2,729,778 as of December 31, 1999, in
comparison to working capital of $2,808,381 as of September 30, 2000. The
additional working capital was primarily due to the exercise of certain stock
options and warrants. The increase in the accumulated deficit is primarily
related to continuing operating costs and to amortization expense with minimal
operating and / or investment income. For the nine-month period ended September
30, 2000, the Company's cash requirements were satisfied from the cash reserves
in its operating and investment accounts and from proceeds received from the
exercise of stock options and warrants.
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<PAGE>
The Company believes that its existing cash and cash equivalents, 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
marketing activities (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
NONE
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SIGNATURE
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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, 2000
VOICENET, INC.
By: /s/ Alan Dawson
Name: Alan Dawson
Title: Chief Executive Officer
