FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1996
Commission File Number: 0-7796
VOICE IT WORLDWIDE, INC.
(Exact Name of Registrant as Specified in its Charter)
Colorado 83-0203787
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identificaion Number)
2643 Midpoint Drive, Suite A
Fort Collins, Colorado 80525
(Address of principal (Zip Code)
executive offices)
(970) 221-1705
(Registrant's Telephone Number, Including Area Code)
Check whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and
(2) has been subject to such filing reqirements for the past 90
days.
Yes X No
Number of shares outstanding of the Issuer's Common Stock,
as of March 31, 1996 was 5,054,802 shares of the Registrant's
common stock $.10 par value.
Part I-Financial Information
Item 1. Financial Statements
<TABLE>
VOICE IT WORLDWIDE, INC.
Balance Sheets
<CAPTION>
(Unaudited)
December 31, March 31,
1995 1996
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $251,321 $376,724
Accounts receivable, net of
allowance $173,165 (1995) and $188,654
(1996) (Note 5) 4,959,919 3,031,821
Other receivables 115,299 3,274
Inventories (Note 3) 3,512,245 3,383,772
Prepaid expenses and other current assets 115,612 119,958
Deferred offering costs - -
8,954,396 6,915,549
Tooling, furniture and equipment, net
of accumulated depreciation (Note 3) 254,677 306,752
Other assets (Note 3) 463,327 511,705
Total assets $9,672,400 $7,734,006
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $2,199,876 $956,665
Accrued liabilities (Note 3) 720,721 702,639
2,920,597 1,659,304
Long-term debt (Notes 2 and 5) 3,060,701 2,455,649
Stockholders' equity (Note 7)
Common stock; $.10 par; 10,000,000
shares authorized; 5,054,802 issued
and outstanding (1995), and (1996) 505,480 505,480
Additional paid-in capital 5,364,910 5,364,910
Accumulated deficit (2,179,288) (2,251,337)
3,691,102 3,619,053
Total liabilities and stockholders'
equity $9,672,400 $7,734,006
</TABLE>
<TABLE>
VOICE IT WORLDWIDE, INC.
Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1995 1996
<S> <C> <C>
Sales - net $3,798,756 $2,761,927
Cost of sales 2,180,723 1,702,269
Gross profit 1,618,033 1,059,658
Operating expenses
Administrative and general 243,491 282,096
Selling and marketing 988,315 592,270
Research and development 225,760 180,930
Total operating expenses 1,457,566 1,055,296
Net operating profit 160,467 4,362
Other income (expense)
Interest expense (3,241) (77,015)
Interest income 34,273 604
Net income (loss) before income tax 191,499 (72,049)
Income tax (Note 4) 19,150 -
Net income (loss) $172,349 $(72,049)
Net income (loss) per common share
(Note 8) $.04 $(.01)
Weighted average number of shares
outstanding 4,491,058 5,054,802
</TABLE>
<TABLE>
VOICE IT WORLDWIDE, INC.
Statement of Stockholders; Equity
(Unaudited)
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C>
Balance,
December 31,
1995 5,054,802 505,480 5,364,910 (2,179,288) 3,691,102
Net (loss) for
the three
months ended
March 31,
1996 - - - (72,049) (72,049)
Balance, March
31, 1996 5,054,802 505,480 5,364,910 (2,251,337) 3,619,053
</TABLE>
<TABLE>
VOICE IT WORLDWIDE, INC.
Statements of Cash Flow
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1995 1996
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $172,349 $(72,049)
Adjustments to reconcile net income
(loss) to net cash used in operating
activities
Allowance for discounts and bad debts 25,989 15,489
Depreciation and amortization 23,043 51,291
Amortization of deferred loan costs - 6,360
Changes in current assets and
liabilities
Receivables (329,784) 2,024,634
Prepaid expenses (51,574) (4,346)
Inventories (1,165,449) 128,473
Accounts payable 1,158,515 (1,243,211)
Accrued liabilities 279,610 (18,082)
Cash (used in) provided by
operating activities 112,699 888,559
Cash flows from investing activities
Other assets (28,089) (74,423)
Acquisition of tooling, furniture
and equipment (94,880) (83,681)
Cash used in investing activities (122,969) (158,104)
Cash flows from financing activities
Payments on line-of-credit - net - (605,052)
Payment of stockholder appraisal rights (4,213) -
Increase in deferred offering costs (128,372) -
Cash used in financing activities (132,585) (605,052)
Net increase (decrease) in cash (142,855) 125,403
Cash - beginning of period 2,002,981 251,321
Cash - end of period $1,860,126 $376,724
VOICE IT WORLDWIDE, INC.
Notes to Financial Statements
(unaudited)
Note 1 - Summary of Significant Accounting Policies
The summary of the Company's significant accounting policies
are incorporated by reference to the Voice It Worldwide, Inc.
Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995.
The statements of operations, balance sheets, stockholders'
equity and cash flows have not been audited by independent
accountants, but in the opinion of the management, reflect all
normal recurring adjustments and entries necessary for the
fair presentation of the operations of the Company. The
results of operations for any quarter, and quarter-to-quarter
trends, are not necessarily indicative of the results to be
expected for any future period.
Note 2 - Letter of Credit
The Company has an irrevocable standby letter of credit in the
amount of $360,000. This letter of credit is required by a
major supplier and has an expiration date of April 30,1996.
This letter of credit is secured by the Company's line of
credit (Notes 5 and 6).
Note 3 - Selected Balance Sheet Information
</TABLE>
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
<S> <C> <C>
Inventories
Raw materials $1,194,821 $952,423
Finished goods 2,317,424 2,431,349
$3,512,245 $3,383,772
Tooling, furniture and equipment
Office furniture and equipment $111,797 $144,432
Tooling and manufacturing
equipment 321,169 372,215
432,966 516,647
Less accumulated depreciation (178,289) (209,895)
$254,677 $306,752
Other assets
Deferred loan costs - net of
accumulated amortization of
$2,119 in 1995 and $8,479 in 1996 $181,274 $174,914
Product software development
costs - net of accumulated amortization
of $12,236 in 1996 and $0 in 1995 146,838 183,809
Patent costs - net of accumulated
amortization of $24,350 in 1995
and $31,212 in 1996 113,446 131,213
Other 21,769 21,769
$463,327 $511,705
</TABLE>
VOICE IT WORLDWIDE, INC.
Notes to Financial Statements
(unaudited)
Note 3 - Selected Balance Sheet Information (continued)
Accrued liabilities
<TABLE>
<CAPTION>
<S> <C> <C>
Payroll taxes $17,430 $0
Vacation 24,751 23,872
Advertising 533,055 542,223
Warranty 88,707 91,427
Commissions 47,836 24,653
Other 8,942 20,464
$720,721 $702,639
</TABLE>
Note 4 - Income Taxes
The Company reports income taxes for interim periods based on
annualized estimates of earnings, tax credits and book/tax
differences at the estimated annual effective tax rate. For
federal and state income tax purposes, at December 31, 1995,
the Company had net operating loss carry forwards of
approximately $2,034,000 which substantially expire in fiscal
years 2009.
Note 5 - Long-Term Debt
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
<S> <C> <C>
$4,000,000 line of credit to a bank,
interest at their "Base Rate" plus 3%,
totaling 11.25 % at March 31, 1996,
payable monthly, principal due on
or before March 31, 1997. Borrowings
are collateralized by, and limited to
a percentage of eligible accounts
receivables, finished goods
inventories and letters of credit as
additional collateral (Note 6). $610,701 $5,649
</TABLE>
VOICE IT WORLDWIDE, INC.
Notes to Financial Statements
(unaudited)
Note 5 - Long-Term Debt (continued)
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
<S> <C> <C>
8% convertible debenture, interest
payable monthly, convertible into
one share of common stock for
each $2.625 of principal converted.
Principal due November 1, 2002.
Loan costs associated with this
debenture were approximately $180,000,
and are amortized over the life of
the agreement resulting in an
effective interest rate of 9%.
Monthly principal redemption
of one percent of the then
outstanding balance begins in
November, 1998. 2,450,000 2,450,000
Less current portion - -
Total long-term debt $3,060,701 $2,455,649
</TABLE>
Note 6 - Related Party Transactions
As additional collateral for the line-of-credit (Note 5), the
Company uses a letter-of-credit issued from an individual with
the Company as beneficiary. The letter-of-credit can be drawn
upon by the Company's bank if the Company is in default of the
Credit and Security Agreement between the bank and the Company.
The Company pays interest quarterly at the rate of 10% of
the face amount of the letter-of-credit with a 5% premium
on any amount that is drawn upon by the bank.
VOICE IT WORLDWIDE, INC.
Notes to Financial Statements
(unaudited)
Note 7 - Stockholders' Equity
Stock Options
The Company has reserved a total of 860,243 of its authorized
but unissued common stock for stock option plans (the
"Plans") pursuant to which officers, directors, employees
and nonemployees of the Company are eligible to receive
incentive and/or non-qualified stock options. Under the
terms of the Plans, options are exercisable based on
various vesting schedules with an exercise price which
equals the market price of the common stock on the date of
grant. Through March 31, 1996, the Company had granted
457,443 options with various vesting periods and an exercise
price of between $1.56 and $3.00 per share. As of March 31,
1996, 241,110 granted options are vested with exercise prices
ranging from $1.56 to $3.00. However, no options have
been exercised.
Warrants
During 1995, the Company completed the sale of 648,880 units
of its common stock. Each Unit consists of one unregistered
share of its $.10 par value common stock and one-half of a
detachable unregistered common stock purchase warrant (the
"Warrant"). One Warrant entitles the holder thereof to
purchase, at a price of $2.50, one share of unregistered
Common Stock at any time until December 31, 1996 unless
extended by the Company's Board of Directors. There were
324,440 warrants issued as part of the offering.
In connection with the $2,450,000 convertible debenture (Note
4), the Company issued 915,000 warrants (the "Debenture
Warrants") to buy unregistered shares of the Company's common
stock at an exercise price of $2.75 per share. These
Debenture Warrants have a three year life and may be
redeemed, after October 27, 1996, by the Company for $.05
per Debenture Warrant if the Company's common stock price
reaches a $6.00 bid price for 20 consecutive trading days.
In the first quarter, 1996, the Company also issued an
additional 25,000 warrants to the debenture holder in
exchange for a waiver of certain financial covenants. These
additional warrants have basically the same terms and
conditions as the Debenture Warrants.
VOICE IT WORLDWIDE, INC.
Notes to Financial Statements
(unaudited)
Note 7 - Stockholders' Equity (continued)
Warrants (continued)
In connection with the above private placement of common
stock and the issuance of convertible debt, the Company
issued an aggregate total of 38,131 warrants to the placement
agents. Each warrant entitles the holder to purchase one
unregistered share of common stock at any time from June, 1996
through June, 1999 at an exercise price of $2.75 per share
Note 8 - Earnings Per Share
Net income per common share is based on the weighted
average number of common shares outstanding, inclusive of
common stock equivalents computed using the modified treasury
stock method. Common stock equivalents were not used in
computing the loss per share for the first quarter of 1996,
as their inclusion would have been anti-dilutive.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Overview
Voice It Worldwide, Inc. ("Voice It") designs, develops
and markets personal consumer electronics products which allow
people to verbalize reminders and short messages for
themselves and others without the need for pen and paper.
Voice It products utilize computer chip technology to
capture ideas, thoughts, reminders and messages,
incorporating high quality recording with patent pending
message management features.
The Company's first product, the Voice It7 Personal
Note Recorder, with a 75 second capacity was introduced in the
market in November of 1993. Since then, the product line has
expanded to six models with recording capacities from 40
seconds to 4 minutes. Voice It Personal Note Recorders are
about the size of a credit card and approximately 1/3 inch
thick. Their compact size, portability and ease of use
make them a convenient replacement for handwritten sticky
notes, particularly at times and in places where
handwriting is impractical. Unique, patent pending message
management features make it easy to record multiple
messages, play them and erase them when no longer needed.
During the second half of 1995, the Company introduced
its second product line, the Voice ItJ Message Center, a new
product targeted toward interpersonal communications in the
home and small office. Utilizing the same technology as the
Personal Note Recorder, the Message Center has a total capacity
of nearly three minutes of recording time, which can be used
on any one of four channels designated by the user. Family
members can easily leave messages for each other or set up
categories for groceries or "to do" lists.
The Company markets its products in the United States
and internationally in Canada, Europe, Japan and the Middle
East and has rapidly increased its sales from $144,000 in its
first year of operations in 1993 to approximately $15.6
million for the year ended December 31, 1995. The Company
added a significant number of new retail distribution points
during 1995 including Target, May Department Stores, Circuit
City, Best Buy, Dillards and others.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION (continued)
Overview (continued)
Voice It products are now available in approximately
5,000 retail outlets in the United States. The products
are available in a variety of distribution channels
including department stores, mass merchants, office super
stores, catalog showrooms, electronic specialty stores and
direct mail catalogs.
At the start of the third quarter, 1995, the Company
invested in a new pricing strategy on its Personal Note
Recorder line to broaden consumer demand, capture a
significant market share, create a dominant retail shelf
presence and deter low end competition in the marketplace.
The Company lowered prices on its shorter run time units and
introduced two new higher margin note recorders with
capacities of three and four minutes. The Company's product
line now offers consumers products at retail prices ranging
from $29.99 to $89.95 making Voice It the only company to
offer such a broad selection of products and prices. With the
introduction of the two new higher margin models with
recording capacities of three and four minutes, most
retailers that were carrying only one Voice It model have
added at least one additional model to their retail
assortment while many have chosen to carry several models.
Due to the pricing structure, the Company's gross margins as
a percentage of sales declined to 30% during the third quarter
of 1995. However, in conjunction with the price decrease,
the Company implemented an aggressive cost reduction program
designed to achieve improvement in gross margins through 1995
and 1996. Gross margins were 38% in the first quarter of 1996
compared to 30% in the third quarter of 1995 and 36% in the
fourth quarter of 1995. The Company expects continued
improvement of gross margins throughout 1996.
While the pricing strategy directly impacted expenses and
gross margins for 1995, management believes that it was
necessary to achieve its goal of market dominance and to
deter low end competition. Current independent market
research shows that Voice It products have captured the
dominant share of the emerging solid state recorder
market. Voice It also had the highest retail sell-through
in this category during a lackluster holiday season.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION (continued)
Overview (continued)
During 1995, the Company research and development efforts
resulted in the introduction of five new product entries, two
in the first half of the year, and three in the second half of
the year. These new products provided consumers with
features not found on any products in the marketplace.
Research and development is continuing its efforts to
focus on unique, patentable product features which can be
added to the Company's note recorder product lines. The
Company is currently preparing to introduce four new products
during the second half of 1996. These products include two
new note recorders with five and eight minutes of recording
time as well as a new product line of solid state recorders
with capacities of 15 and 30 minutes and enhanced product
features.
Results of Operations
The following table sets forth, for the periods
indicated, items in the Statement of Operations expressed as a
percentage of net sales:
<TABLE>
<CAPTION>
Three Months Ended
December 31, March, 31,
1995 1996
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 57.4 61.6
Gross profit 42.6 38.4
Operating expenses
Administrative and general 6.4 10.2
Selling and marketing 26.0 21.4
Research and development 6.0 6.6
Total operating expenses 38.4 38.2
Operating income 4.2 0.2
Other income (expense), net 0.8 (2.8)
Net income (loss) before
income tax 5.0 (2.6)
Income tax 0.5 0.0
Net income (loss) 4.5% (2.6)%
</TABLE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION (continued)
Results of Operations (continued)
Three Months ended March 31, 1996 compared to Three Months
ended March 31, 1995
Sales for the three months ended March 31, 1996
were $2,761,900 compared to $3,798,700 for the three months
ended March 31, 1995. Although the Company experienced strong
orders from its primary retail accounts during the first
quarter, 1996, sales continue to be affected by the soft
retail market, resulting in lower sales when compared with
the first quarter, 1995. Additionally, the first quarter,
1995 sales benefited from three factors: 1) The Company shipped
unfulfilled customer orders carried over from the fourth
quarter of 1994; 2) as the Company expanded its retail
distribution, there were initial shipments to approximately
1,000 new outlets; and 3) the Company introduced its 90-
second Voice It note recorder into broad based
distribution. Due to a continuation of the current retail
market trend, the Company expects its second quarter sales
will be comparable with first quarter. However,
management expects improvement during the second half of
1996 as seasonality combines with the Company's introduction
of four new products.
Cost of sales for the first quarter ended March 31, 1996
decreased to $1,702,300 or 61.6% of net sales from $2,180,723
or 57.4% of net sales during the first quarter of 1995. The
dollar decrease is due to the corresponding decrease in
unit sales. However, as a percentage of net sales, cost of
sales increased due to the decrease in the average sales
price on the lower recording time models due to the
aggressive pricing structure that was adopted during
the third quarter of 1995. In conjunction with this
pricing structure, the Company also initiated a cost
reduction program to eventually return to lower costs and
higher margins. The cost of sales as a percentage of net
sales has been reduced from a high of 69.7% during the third
quarter, 1995 to 61.6% for the current quarter.
Management expects this trend to continue as the Company
pursues its efforts to reduce costs.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION (continued)
Results of Operations (continued)
General and administrative expenses increased 16% or $38,600
to $282,100 or 10.2% during the first three months of
1996 compared with $243,500 or 6.4% for the same period in
1995. These expenses increased slightly for the quarter
primarily due to salaries, banking charges and increased
amortization and depreciation. As a percentage of
sales, general and administrative expense increased in part
due to the increased expenses, but mostly due to the
decrease in net sales for the quarter.
Sales and marketing expenses for the quarter ended March
31, 1996 decreased 40% or $396,000 to $592,300 or 21.4% of net
sales in 1996 from $988,300 or 26.0% of net sales in
1995. This decrease is due largely to the decrease in sales
volume and the related marketing support of the Voice It
Product lines. While many sales expenses, such as
cooperative advertising and commissions to the manufacturers
representatives, are variable and follow the volume of
sales, some expenses, such as consumer advertising will vary
in intensity and volume toward the fourth quarter gift giving
season.
Research and development costs decreased by $44,800
to $180,900 for the first quarter of 1996 from $225,800 for the
same quarter in 1995. In the fourth quarter of 1995, the
Company made the decision to capitalize product software
development cost in accordance with GAAP. These costs are
then amortized over the estimated useful life of the
product. The net effect of this change in first quarter
of 1996 was to defer approximately $35,000 of research
expenses related to software development. Non-software
development research costs are expensed as incurred and are
in support of existing products as well as the
development of new products. The Company is currently working
on a number of new models and a new product line that it
expects to introduce during the second half of the year.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION (continued)
Results of Operations (continued)
The Company recorded an operating profit for the
three months ended March 31, 1996 of $4,400 compared with an
operating profit of $160,500 for the same quarter of 1995.
A primary reason for the lower operating profit was due
to the lower product margins from the pricing structure
adopted during the third quarter of 1995. The decision the
Company made to lower the sales price in the marketplace last
year has started to pay off as new independent research
shows that Voice It is the category leader in retail
presence and sell though. The Company believes it has the
broadest product line with models ranging from $29 to $89,
the most recognized brand name and the best price/value to
the consumer. As mentioned earlier, the Company also
benefited during the first quarter of 1995 from fourth
quarter, 1994, sales carryover, new distribution and a
new product introduction.
Net interest expense for the first quarter of 1996
of $(76,400) is compared to net interest income during the
same period last year of $31,000. The primary component
of the current interest expense is the current interest on
the $2.4 million convertible debenture the Company entered
into during the fourth quarter of 1995. After interest
expense, the net loss for the first quarter of 1996 was
$(72,049) or $(.01) per share compared to a net profit of
$172,349 or $.04 per share for the first quarter of 1995.
Liquidity and Capital Resources
The Company has financed its growth to date primarily
from the private sale of Common Stock and Warrants, the
merger with Lander Energy Co. and the issuance of $2,450,000
in convertible debentures. The Company also uses bank
financings for short term working capital needs as well as to
guarantee letters of credit issued to a major supplier. At
March 31, 1996, the Company had cash and cash equivalents of
approximately $376,700 and working capital of approximately
$5,256,200.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION (continued)
Liquidity and Capital Resources (continued)
Cash generated by the Company during the three months
ended March 31, 1996 was approximately $125,400. The primary
uses of cash for the period were to fund the net loss of
approximately $72,000 (less approximately $73,100 of non-cash
items such as depreciation, bad debts and discounts and
amortization of loan costs) as well as decreases in
accounts payable and accrued liabilities by approximately
$1,243,200 and $18,100 respectively. The decrease in accounts
payable is attributable to paying for the inventories that
were purchased during the last quarter of 1996. Sources of
cash for the period included decreases in the Company's
accounts receivable and inventories of approximately
$2,024,600 and $128,500 respectively. The accounts
receivable decrease is due to the collection of the increased
sales during the fourth quarter holiday season. Additional
uses of cash included $83,700 for the acquisition of
tooling, property and equipment as the Company increases its
manufacturing capacity for new products, and $74,400 in
acquiring other assets. During the three months ended March
31, 1996, the Company used approximately $605,100 to repay the
line of credit with its bank.
During March, 1995, the Company obtained a $4
million revolving line of credit from a bank. The amount the
Company may borrow from this line of credit is limited by the
level of its eligible accounts receivable and, to a
lesser extent, the Company's finished goods inventory and
other collateral.
The line of credit contains customary financial covenants
and bears interest at 3% above the bank's "Base Rate".
On September 15, 1995, the Company completed a sale of
its common stock and purchase warrants pursuant to the June 12,
1995 Private Placement Memorandum for 560,880 Units at $2.20
per unit. Each Unit consists of one share of the Company's
$.10 par value unregistered common stock and one-half
of a detachable unregistered common stock purchase warrant
(the "Warrant").
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION (continued)
Liquidity and Capital Resources (continued)
One Warrant entitles the holder to purchase, at a price of
$2.50, one share of Common Stock at any time until December
31, 1996 unless extended by the Company's Board of Directors.
The Company also issued an additional Private Placement
Memorandum with substantially the same terms and conditions as
the June 12, 1995 Memorandum. Under this new Memorandum,
the Company sold an additional 88,000 Units for an
additional $193,600.
On October 27, 1995, the Company issued a
convertible debenture for $2,450,000 to Renaissance Capital
Growth & Income Fund III, Inc. ("Renaissance"). This debt
was issued for seven years with an interest rate of 8% per
annum. In addition to various financial covenants and
redemption provisions, Renaissance has the right to
convert its debt position into equity at the rate of one
share of common stock for every $2.625 of principal.
Additionally, for a value of $50,000, the Company issued
Renaissance 915,000 warrants to buy the Company's common stock
at an exercise price of $2.75 per share. These warrants are
for a three year period, and may be redeemed by the Company
any time after October 27, 1996 for $0.05 per warrant if
the Company's common stock price reaches an average bid
price of $6.00 per share for 20 prior consecutive trading
days.
Management believes that the net proceeds of these
equity and debt offerings should be sufficient to finance the
Company's growth through this year's Holiday season. If the
outstanding common stock purchase warrants are exercised,
there would be additional working capital.
Seasonality
The Company anticipates that its business will be
seasonal, with at least 40% of its sales occurring during
the fourth quarter of the year in time for the holiday gift
giving season.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION (continued)
Foreign Exchange
The Company's products are principally purchased from
suppliers in the Far East with its prices negotiated on an
annual basis in U.S. dollars at exchange rates reset annually.
Exchange rate fluctuations between the U.S. Dollar and the
Singapore or Hong Kong dollar could have an adverse effect on
the Company's costs of sales and gross margins. In the
event of extreme exchange rate fluctuations, it may become
uneconomical for the relationship between the Company and its
suppliers to continue.
Inflation
Management believes that inflation has not and will not
have a significant impact on its business.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. None
Item 3. Defaults upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security
Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K. None
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
VOICE IT WORLDWIDE, INC.
Registrant
Date: 5/14/96
Michelle L. Morgan
President, CEO
Date: 5/14/96
John H. Ellerby
Chief Accounting Officer
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