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 March 31, 2000
Commission File Number 333-12979
VOICENET, INC.
(Exact name of small business issuer as specified in charter)
Delaware
(State of either jurisdiction of incorporation or organization)
13-3896031
(IRS Employer 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: 9,816,022
<PAGE>
VOICENET, INC.
(a development stage company)
INDEX
Part I - Financial Statements
Balance Sheets as of March 31, 2000 and December 31, 1999 3
Statements of Operations for the Three Months Ended
March 31, 2000 and 1999 4
Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999 5
Notes to Unaudited Financial Statements 6
Management's Discussion and Analysis 7
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<PAGE>
VOICENET, INC.
(a development stage company)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents ........................................................ $ 3,017,406 $ 2,916,531
Note receivable ............................................................. 350,000 --
------------ ------------
Total current assets ............................................ 3,367,406 2,916,531
------------ ------------
Other assets:
Technology rights ........................................................... 3,735,400 3,905,000
Security deposits and other ................................................. 12,891 12,891
------------ ------------
Total other assets .............................................. 3,748,291 3,917,891
------------ ------------
Total assets .................................................... $ 7,115,697 $ 6,834,422
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ....................................... $ 141,754 $ 186,753
------------ ------------
Total current liabilities ....................................... 141,754 186,753
------------ ------------
Stockholders' equity:
Common stock, $.01 par value
50,000,000 shares authorized
10,256,022 shares issued, 9,816,022 shares outstanding in 2000
9,831,022 shares issued, 9,391,022 shares outstanding in 1999 ............ 102,560 98,310
Additional paid-in capital .................................................. 10,922,466 10,338,716
Accumulated deficit ......................................................... (4,048,883) (3,787,157)
Treasury stock, 440,000 shares in 1999, at cost ............................. (2,200) (2,200)
------------ ------------
Total stockholders' equity ...................................... 6,973,943 6,647,669
------------ ------------
Total liabilities and stockholders' equity ...................... $ 7,115,697 $ 6,834,422
============ ============
</TABLE>
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<PAGE>
VOICENET, INC.
(a development stage company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
April 2, 1996
Three-month period ended (inception)
March 31, through
-------------------------- March 31,
2000 1999 2000
----------- ----------- -----------
<S> <C> <C> <C>
Revenue ................................................. $ -- $ -- $ 48,900
----------- ----------- -----------
Costs and expenses:
Cost of sales ........................................ -- -- 25,958
Selling and administrative ........................... 116,217 21,210 1,662,349
Stock-based compensation ............................. -- -- 1,756,500
Amortization ......................................... 169,600 90,400 766,600
----------- ----------- -----------
285,817 111,610 4,211,407
----------- ----------- -----------
Operating loss .......................................... (285,817) (111,610) (4,162,507)
----------- ----------- -----------
Other income:
Interest ............................................. 24,091 80 110,486
Gain on sale of securities ........................... -- -- 3,138
----------- ----------- -----------
24,091 80 113,624
----------- ----------- -----------
Net loss ................................................ $ (261,726) $ (111,530) $(4,048,883)
=========== =========== ===========
Loss per share .......................................... $ (0.03) $ (0.02)
=========== ===========
Weighted average shares outstanding ..................... 9,538,714 6,677,300
=========== ===========
</TABLE>
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<PAGE>
VOICENET, INC.
(a development stage company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
April 2, 1996
Three-month period ended (inception)
March 31, through
-------------------------- March 31,
2000 1999 2000
----------- ----------- -----------
<S> <C> <C> <C>
Net loss .................................................................... $ (261,726) $ (111,530) $(4,048,883)
----------- ----------- -----------
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Amortization .......................................................... 169,600 90,400 766,600
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 ........................... -- -- (2,200)
(Increase) decrease in prepaid expenses ............................ -- 37,633 --
(Increase) decrease in security deposits ........................... -- (2,302) (12,891)
Increase (decrease) in accounts payable ............................ (44,999) 24,098 141,753
----------- ----------- -----------
Total adjustments ............................................ 124,601 181,905 2,646,624
----------- ----------- -----------
Net cash provided by (used in) operating ..................... (137,125) 70,375 (1,402,259)
----------- ----------- -----------
activities
Cash flows from investing activities:
Payments for organization costs .......................................... -- -- (2,000)
Purchases of investment .................................................. -- -- (27,965)
Proceeds from sale of investment ......................................... -- -- 31,103
----------- ----------- -----------
Net cash provided by investing activities .................... -- -- 1,138
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of stock .......................................... 238,000 -- 4,531,181
Payments of offering costs ............................................... -- -- (112,654)
----------- ----------- -----------
Net cash provided by financing activities .................... 238,000 -- 4,418,527
----------- ----------- -----------
Net increase (decrease) in cash and equivalents .............. 100,875 70,375 3,017,406
Cash and equivalents at beginning of period .................. 2,916,531 34,610 --
----------- ----------- -----------
Cash and equivalents at end of period ........................ $ 3,017,406 $ 104,985 $ 3,017,406
=========== =========== ===========
</TABLE>
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<PAGE>
VOICENET, INC.
(a development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
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 three-month periods ended
March 31, 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.
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.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS:
The Company had no revenues from continuing operations through the three months
ended March 31, 1999. 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 there from 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 MARCH 31, 2000; AS COMPARES WITH
MARCH 31, 1999
Net losses for the three-month period ended March 31, 2000 was $261,726 as
compared to $111,530 for the three-month period ended March 31, 1999. There were
no revenues for the three-month period ended March 31, 2000 or for the
three-month period ended March 31, 1999. Total general and administrative
expenses were $116,217 for 2000 as compared to $21,210 for the three-month
period ended March 31, 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 revised the estimated life of the intangible asset life of the useful
asset to seven years. Amortization expense for the three-month period ended
March 31, 2000 was $169,600 as compared to $90,400 for the three-month period
ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital of $2,729,778 as of December 31, 1999, in
comparison to working capital of $3,225,652 as of March 31, 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 with minimal operating and / or investment income.
For the three-month period ended March 31, 2000, the Company's cash requirements
were satisfied from the cash reserves in its operating and investment accounts.
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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
During the quarter ended March 31, 2000, the Company submitted Report on Form
8-K dated March 10, 2000, relating to an increase in the number of authorized
shares of common stock of the Company from 10,000,000 shares to 50,000,000
common shares. In addition, the Company declared a two-for-one stock split on
March 6, 2000, to shareholders' of record on March 17, 2000.
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<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.
May 8, 2000
VOICENET, INC.
By: /s/ Howard J. Messer
------------------------------
Name: Howard J. Messer
Title: Chief Financial Officer
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> $3,017,406
<SECURITIES> 0
<RECEIVABLES> 350,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,367,406
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,115,697
<CURRENT-LIABILITIES> 141,754
<BONDS> 0
0
0
<COMMON> 102,560
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,115,697
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 285,817
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (261,726)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (261,726)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
