<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[x] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934.
For the quarterly period ended June 30, 2000.
[ ] Transition report under Section 13 or 15 (d) of the Securities
Exchange Act of 1934.
For the transition period from to
Commission File Number: 0-27387
VOICE MOBILITY INTERNATIONAL, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 33-0777819
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
180-13777 Commerce Parkway, Richmond, British Columbia, Canada V6V 2X3
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(Address of principal executive offices)
(604) 482-0000
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(Issuer's telephone number)
<PAGE>
(Not Applicable)
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(Former name, former 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:
23,827,145 shares of Common Stock as of June 30, 2000
Transitional Small Business Disclosure Format: Yes [ ] No [X]
VOICE MOBILITY INTERNATIONAL, INC.
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 2000
INDEX
PART - I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
a) Consolidated Balance Sheets
b) Consolidated Statements of Operations
c) Consolidated Statements of Cash Flows
d) Notes to the Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART - II OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
VOICE MOBILITY INTERNATIONAL, INC.
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED BALANCE SHEETS
(See Note 1 - Nature of Operations and Basis of Presentation)
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
AS AT JUNE 30, DECEMBER 31,
2000 1999
$ $
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<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents 995,034 120,712
Accounts receivable [net of allowance for doubtful debts:
June 30, 2000 - $21,858; December 31, 1999 - $22,403] 24,856 16,541
Other receivables 48,127 63,024
Prepaid expenses 117,137 34,100
Inventory 225,017 93,107
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TOTAL CURRENT ASSETS 1,410,171 327,484
Equipment and leasehold improvements [net of accumulated
depreciation and amortization: June 30, 2000 - $330,426;
December 31, 1999 - $195,839] 1,079,661 524,180
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2,489,832 851,664
====================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT
Accounts payable 505,861 318,169
Accrued liabilities 23,595 154,921
Employee related payables 109,127 75,093
Deferred revenue 246,740 93,016
Notes payable -- 812,070
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TOTAL CURRENT LIABILITIES 885,323 1,453,269
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Commitments and contingencies
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.001 par value, authorized 100,000,000
[1999 - 50,000,000], 17,227,145 and 10,959,420 shares
outstanding respectively 17,228 10,960
Shares to be issued, nil shares and 3,250,901 shares
outstanding respectively -- 3,251
Series A Preferred stock, $0.001 par value, authorized 1,000,000
1 share outstanding respectively 1 1
Additional paid-in capital 14,449,090 8,677,083
Deferred compensation (617,327) (1,106,656)
Accumulated development stage deficit (12,268,823) (8,221,746)
Other accumulated comprehensive income 24,340 35,502
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TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 1,604,509 (601,605)
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2,489,832 851,664
====================================================================================================================================
SEE ACCOMPANYING NOTES
</TABLE>
<PAGE>
VOICE MOBILITY INTERNATIONAL, INC.
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 15, 1993
JUNE 30 JUNE 30 TO JUNE 30
2000 1999 2000 1999 2000
$ $ $ $ $
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<S> <C> <C> <C> <C> <C>
SALES 13,053 28,612 106,069 55,997 1,209,742
Less cost of sales 11,501 4,380 44,121 27,804 737,978
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Gross Profit 1,552 24,232 61,948 28,193 471,764
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OPERATING EXPENSES
Sales and marketing 592,301 522,577 995,450 652,470 2,608,299
Research and development 706,256 1,382,840 1,485,081 1,514,769 4,093,444
General and administrative 926,422 1,298,873 1,691,653 1,420,420 4,952,073
Acquisition fee on recapitalization -- 200,000 -- 200,000 200,000
Interest expense (income), net (14,445) 15,844 (63,158) 37,716 96,771
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Loss before extraordinary items 2,208,982 3,395,902 4,047,078 3,797,182 11,478,823
Extraordinary loss on settlement of
debt -- 790,000 -- 790,000 790,000
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Net loss for the period 2,208,982 4,185,902 4,047,078 4,587,182 12,268,823
Foreign currency translation gains (losses) (13,825) 1,083 (11,162) (17,763) 24,340
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Comprehensive loss for
the period 2,222,807 4,184,819 4,058,240 4,604,945 12,224,483
==================================================================================================================================
Loss per common share before
extraordinary loss - basic and diluted (0.09) (0.28) (0.18) (0.25)
Loss per common share - basic and
diluted (0.09) (0.35) (0.18) (0.30)
Weighted average number of common
stock equivalents 23,374,516 11,973,211 22,691,814 15,415,076
==================================================================================================================================
SEE ACCOMPANYING NOTES
</TABLE>
<PAGE>
VOICE MOBILITY INTERNATIONAL, INC.
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
Unaudited
<TABLE>
<CAPTION>
SEPTEMBER 15,
FOR THE SIX MONTHS ENDED, 1993 TO
JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000
$ $ $
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<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss for the period (4,047,078) (4,587,182) (12,268,823)
Non-cash items included in net loss
Depreciation and amortization 124,828 34,154 330,425
Stock issued on settlement of amounts due to
Maritime Tel & Tel -- 500,000 500,000
Extraordinary loss on settlement of
Ibex Investment Inc. notes payable -- 790,000 790,000
Stock option compensation 1,501,548 2,264,419 4,412,128
Change in allowance for doubtful accounts -- -- 22,984
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(2,420,702) (998,609) (6,213,287)
Change in accounts receivable (8,792) 20,936 (46,631)
Change in prepaid expenses (84,581) 3,154 (117,519)
Change in inventory (135,325) (52,552) (225,790)
Change in accounts payable 218,860 53,441 528,000
Change in accrued liabilities (128,587) (5,293) 23,641
Change in other payables (8,270) (14,826) (69,506)
Change in employee payables 36,171 26,752 109,134
Change in deferred revenue 157,325 26,146 247,702
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CASH USED IN OPERATING ACTIVITIES (2,373,901) (940,851) (5,764,256)
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INVESTING ACTIVITIES
Purchase of equipment and leasehold improvements (697,942) (106,254) (1,441,292)
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CASH USED IN INVESTING ACTIVITIES (697,942) (106,254) (1,441,292)
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FINANCING ACTIVITIES
Change in notes payable, net (624,360) -- 454,240
Change in amounts due to Acrex Ventures, Inc. -- 844,852 1,420,667
Change in amounts due from shareholders -- -- --
Cash proceeds on exercise of warrants 185,393 133,333 1,698,726
Cash proceeds on exercise of options 145,080 -- 145,080
Cash proceeds on issuance of common stock
net of share issue costs 4,249,033 -- 4,432,333
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CASH PROVIDED BY FINANCING ACTIVITIES 3,955,146 978,185 8,151,046
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Effect of foreign currency on cash (8,981) 6,857 49,536
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INCREASE IN CASH AND CASH EQUIVALENTS 874,322 (62,063) 995,034
Cash and cash equivalents, beginning of period 120,712 37,113 --
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CASH AND CASH EQUIVALENTS, END OF PERIOD 995,034 (24,950) 995,034
====================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest 13,393 21,872
SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING
AND FINANCING ACTIVITIES
Stock issued on conversion of shareholder debt 250,000 250,000
Warrants issued on settlement of Ibex
Investment Inc. notes payable -- 167,000 167,000
Warrants issued on settlement of Ernest Gardiner notes payable -- 33,000 33,000
Stock and warrants issued to Acrex Ventures Inc. investors 1,220,667 1,220,667
Stock issued on settlement of amounts due to Maritime Tel & Tel -- 500,000 500,000
====================================================================================================================================
SEE ACCOMPANYING NOTES
</TABLE>
<PAGE>
VOICE MOBILITY INTERNATIONAL, INC.
Notes to Interim Consolidated Financial Information
June 30, 2000
Unaudited
Note 1 - Nature of Operations and Basis of Presentation
Voice Mobility International, Inc., (the `Company') is a Nevada corporation
engaged in the development of unified voice messaging software through its
wholly owned subsidiary, Voice Mobility Inc. The Company is in its development
stage.
The accompanying unaudited interim consolidated financial statements have been
prepared by management in accordance with accounting principles generally
accepted in the United States for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six-month period ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2000.
The interim consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the discharge of
liabilities in the normal course of business for the foreseeable future.
The Company incurred an operating loss of $4,047,078 for the six months ended
June 30, 2000 [June 30, 1999 - $4,587,182]. Management expects to raise adequate
capital to fund its research, product development and administrative expenses.
The ability of the Company to continue as a going concern is dependent upon
achieving a profitable level of operations and, if necessary, on the ability of
the Company to obtain necessary financing to complete its research and
development. Subsequent to June 30, 2000 the Company completed an equity
financing and issued 500,000 units at $5.50 per unit, and received net proceeds
of $2,750,000 providing the Company with additional working capital (See Note
6).
These interim consolidated financial statements do not give effect to any
adjustments which would be necessary should the Company be unable to continue as
a going concern and therefore be required to realize its assets and discharge
its liabilities in other than the normal course of business and at amounts
different from those reflected in the accompanying consolidated financial
statements.
The interim consolidated financial statements should be read in conjunction with
the Company's Form 10-KSB for the year ended December 31, 1999.
<PAGE>
2. MAJOR CUSTOMERS AND SEGMENTED INFORMATION
The Company operates in one major line of business, the development, manufacture
and marketing of unified voice messaging systems. The Company carried out its
operations and has all its assets in Canada. Sales to one customer comprise 100%
of revenues for the three months ended June 30, 2000 and 1999, and 2 customers
for the six months ended June 30, 2000 and 1999.
3. NOTES PAYABLE
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
$ $
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<S> <C> <C>
Note payable to Ibex Investment Ltd. ("Ibex") -
Interest at 10% per annum, due the earlier of
December 31, 2000 or the next equity financing of
VMII. The loan is denominated in Canadian dollars
and is collateralized by a general security
agreement over the assets of the Company. -- 628,770
Other advances are unsecured, non interest bearing
with no fixed repayment terms -- 183,300
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812,070
Less: current portion -- 812,070
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-- --
================================================================================
</TABLE>
In March 2000, the Company repaid in full its note payable to Ibex Investments
Ltd. As discussed in note 4(a), the Company issued 91,650 shares of common stock
pursuant to its February 15, 2000 equity financing in settlement of the
unsecured advances received in December 1999.
4. SHARE CAPITAL
[a] AUTHORIZED
The Company is authorized to issue up to 100,000,000 shares of common stock, par
value $.001 per share, and 1,000,000 shares of preferred stock, par value $.001
per share. At the Company's Annual Shareholders Meeting held on June 9, 2000 the
stockholders approved to increase the total amount of the Company's authorized
common stock from 50,000,000 to 100,000,000.
In connection with the recapitalization of Voice Mobility Inc. (VMI), Voice
Mobility Canada Limited (VM Canada) issued 6,600,000 VM Canada Exchangeable
Shares. VM Canada is a wholly owned subsidiary of VMII. Each VM Canada
Exchangeable Share is exchangeable for one VMII common share at any time at the
option of the shareholder, and will be exchanged no later than July 1, 2009, and
has essentially the same voting, dividend and other rights as one VMII common
share. A share of Series A preferred voting stock, which was issued to a trustee
in trust for the holders of the VM Canada Exchangeable Shares, provides the
mechanism for holders of the VM Canada Exchangeable Shares to voting rights
<PAGE>
in VMII. The Company considers each Exchangeable Share as equivalent to a share
of its common stock and therefore the Exchangeable Shares are included in the
computation of basic earnings per share.
As at June 30, 2000 the holders of the Exchangeable Shares are entitled to
6,600,000 individual votes in all matters of Voice Mobility International, Inc.
As the Exchangeable Shares are converted into common stock of the Company, the
voting rights attached to the share of Series A preferred voting stock are
proportionately reduced.
On February 15, 2000 the Company issued 2,250,000 units, at $2 per unit for
gross cash proceeds of $4,500,000. Each unit comprises one common share of the
Company and one warrant, entitling the holder to one common share, exercisable
at $5.50 at any time up to February 15, 2005. The Company paid finders fees of
$75,000 to Pacific Western Mortgage Corporation, a shareholder of the Company
and issued 100,000 common shares of the Company to a third party. Net cash
proceeds of $4,241,700 were received from the issuance of the units, net of
$183,300 in unsecured advances received in December 1999. No proforma earnings
per share information has been presented as the effect of the issuance is
anti-dilutive.
In the first quarter of 2000, 45,000 Series A warrants were exercised for
$15,750, resulting in the issuance of 45,000 common shares. In the second
quarter of 2000, 237,550 Series A warrants were exercised for $83,143, resulting
in the issuance of 237,550 common shares, and 173,000 Series B to D warrants
were exercised for $86,500, resulting in the issuance of 173,000 common shares.
[b] STOCK OPTIONS
On June 29, 1999, a stock option plan was adopted by the Company authorizing an
aggregate amount of 5,000,000 common shares to be purchased pursuant to the
exercise of options.
The Stock Option Plan provides for the granting of options which either qualify
for treatment as incentive stock options or non-statutory stock options and
entitles directors, employees and consultants to purchase common shares of the
Company. Options granted are subject to approval of the Board of Directors or
the Stock Option Committee.
In March 2000 the Company authorized amendments to the 1999 Stock Option Plan,
which increased the total number of shares authorized under such plan from
5,000,000 shares of common stock to 10,000,000 shares of common stock, and
expands the range of grants to include stock appreciation rights, stock purchase
warrants, restricted shares, performance units and other share based incentive
awards.
The Company's 1999 Stock Option Plan and Amended 1999 Stock Option Plan were
approved and adopted by the stockholders at the Annual Shareholders Meeting on
June 9, 2000.
The total options outstanding as at June 30, 2000 were 5,924,729. During the six
months ended June 30, 2000 3,191,795 options were granted at exercises prices
ranging from $0.75 to $9.50 per share. Certain of the options were granted to
employees at exercise prices less than the prevailing market price on the date
of grant, and certain of the options were granted to non-employees for
professional services. Accordingly, a stock option compensation expense of
<PAGE>
$1,105,877 was determined in accordance with "APB 25" (Accounting Principles
Board Opinion Number 25) for options granted to employees, and $395,671 in stock
option compensation expense was determined in accordance with "SFAS 123"
(Statement of Financial Accounting Standards Number 123) for options granted to
non-employees. During the six months ended June 30, 2000 211,274 stock options
were exercised resulting in net proceeds of $145,080. During the same period
42,708 employee stock options were cancelled As at June 30, 2000 3,863,997 stock
options were available for grant under the Company's Amended 1999 Stock Option
Plan.
[c] WARRANTS
As at June 30, 2000, the Company has the following common stock warrants
outstanding:
<TABLE>
<CAPTION>
NUMBER OF COMMON EXERCISE PRICE
SHARES ISSUABLE $ DATE OF EXPIRY
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series A warrants 917,450 0.35 December 29, 2000
Series B, C and D warrants 260,000 0.50 December 29, 2000
Series E warrants 601,000 0.35 December 29, 2000
Series F warrants 2,250,000 5.50 February 15, 2005
-------------------------------------------------------------------------------------------------------------
4,028,450
=============================================================================================================
</TABLE>
[d] LOSS PER SHARE
The following table sets forth the computation of basic and diluted loss per
share for the six months ended:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
$ $
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Numerator
Loss before extraordinary loss (4,047,079) (3,797,182)
Loss for the period (4,047,079) (4,587,182)
Denominator
Weighted average number of common stock outstanding 16,091,814 8,815,076
Weighted average number of common stock issuable on
exercise of exchangeable shares 6,600,000 6,600,000
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Average number of common stock
equivalents outstanding 22,691,814 15,415,076
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Basic and diluted loss per share before
Extraordinary loss (0.18) (0.25)
Basic and diluted loss per share (0.18) (0.30)
-----------------------------------------------------------------------------------------------------
</TABLE>
5. RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Investments
and Hedging Activities" ("SFAS No. 133") which establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
The statement also requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. SFAS No. 133 is effective for fiscal years beginning after June 15, 2000.
The Company has not considered the impact of SFAS 133 at this time.
<PAGE>
On March 31, 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No. 25. The interpretation
clarifies guidance for certain issues that arose in the application of APB
Opinion No. 25, Accounting for Stock Issued to Employees. The Interpretation is
applied prospectively to all new awards, modifications to outstanding awards,
and changes in employee status after July 1, 2000 with certain exceptions
requiring earlier adoption. The Company is presently evaluating the impact, if
any, that FIN No. 44 will have on the company's financial position or results of
operations.
On December 3, 1999, the SEC staff released Staff Accounting Bulletin (SAB) No.
101 - Revenue Recognition in Financial Statements, which provides guidance on
the recognition, presentation, and disclosure of revenue in financial
statements. The SAB required adoption for the first fiscal quarter of fiscal
years beginning after December 15, 1999, however, based on requests for
additional time to consider the implications, the SEC has issued SAB 101A and
SAB 101B that further delays the effective date of SAB 101 until no later than
the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The
Company is presently evaluating the impact, if any, that SAB No. 101 will have
on the company's financial position or results of operations.
6. SUBSEQUENT EVENTS
On July 1, 2000 the Company issued 500,000 units, at $5.50 per unit for net cash
proceeds of $2,750,000. Each unit comprises one share of common stock of the
Company and three warrants, entitling the holder to one share of common stock
per warrant, exercisable at $5.50 at any time up to July 1, 2003. No proforma
earnings per share information has been presented as the effect of the issuance
is anti-dilutive.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with Interim
Consolidated Financial Statements and related notes.
Certain statements contained in this section and elsewhere in this
registration statement regarding matters that are not historical facts are
"forward-looking statements" (as defined in the Private Securities Litigation
Reform Act of 1995). Because such forward-looking statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. All statements which address
operating performance, events or developments that our management expects or
anticipates to incur in the future, including statements relating to sales and
earnings growth or statements expressing general optimism about future operating
results, are forward-looking statements. These forward-looking statements are
based on our management's current views and assumptions regarding future events
and operating performance. Many factors could cause actual results to differ
materially from estimates contained in our management's forward-looking
statements. The differences may be caused by a variety of factors, including but
not limited to adverse economic conditions, competitive pressures, inadequate
<PAGE>
capital, unexpected costs, lower revenues, net income and forecasts, the
possibility of fluctuation and volatility of our operating results and financial
condition, inability to carry out marketing and sales plans and loss of key
executives, among other things.
Voice Mobility International, Inc. is a Vancouver-based Unified
Communications company focused on emergent technologies for
telecommunications providers. We are engaged in the development of
Unified Communications software and introduced our first retail "e-go" 4.0
in August 1999.
We market our Unified Communications product both to telephone companies
and Internet service providers. Unified Communications allows subscribers to
use a single electronic mailbox to store and retrieve voicemail, faxes, and
e-mail from many types of devices, including wire-line and wireless phones,
e-mail or Web browsers.
All references to "$" or "dollars" refer to U.S. Dollars.
Results of Operations for the three months ended June 30, 2000 and June 30,
1999:
--------------------------------------------------------------------------------
Sales - Sales for the three-month period ended June 30, 2000 were $13,053,
compared to $28,612 for the three-month period ended June 30, 1999 representing
a 54% decrease. Sales for the three-month period ended June 30, 2000 were for
the sale of third party computer hardware and software. Sales for the
three-month period ended June 30, 1999 were for the sale of a trial software
license and third party telephony hardware.
In April 2000 we entered into a license agreement with Ikano
Communications, Inc. and received $250,000 for the installation and set up of
our unified communication software. The $250,000 was deferred and will be
recognized when the basic criteria for revenue recognition are met.
Cost of sales - Cost of sales is comprised of software licenses, telephony
hardware, data and voice transmission costs, and installation costs. Cost of
sales were $11,501 and $4,380 for the three-month periods ended June 30, 2000
and 1999 respectively representing a 163% increase.
Operating Expenses
Sales & Marketing - Our sales and marketing costs consist primarily of
personnel, advertising, promotions, public relations, trade shows and
business development. Total costs were $592,301 and $522,577 for the three
months periods ended June 30, 2000 and 1999 respectively representing a 13%
increase. These costs reflect employee stock option compensation cost of
$40,781 and $395,761 for the three months periods ended June 30, 2000 and
1999 respectively determined using the intrinsic method in accordance with
APB 25 (Accounting Principles Board Opinion Number 25).
The additional increase of $424,704 (net of stock based compensation) in
sales and marketing expense between the three-month periods ended June 30, 2000
and 1999, is a result of an increase in sales and marketing personnel,
advertising and promotions, travel and participation in industry trade shows,
consulting fees, and general sales and marketing expenses. These costs have been
primarily incurred as result of market development efforts.
Research and Development - Our research and development costs consist
primarily of personnel, data and voice transmission, and related facility costs.
Research and development costs were $706,256 and $1,382,840 for the three months
periods ended June 30, 2000 and 1999 respectively representing a decrease of
49%. These costs reflect employee stock option compensation cost of $291,045 and
$722,814 for the three months periods ended June 30, 2000 and 1999 respectively
determined using the intrinsic method in accordance with APB 25.
The additional decrease of $244,815 (net of stock based compensation) in
research and development expense between the three-month periods ended June 30,
2000 and 1999, is primarily a result $500,000 in research and development costs
recognized in June 1999 as a result of fulfilling the contingent obligation
settlement with MTT in an agreement dated March 26, 1999. As a result of the
acquisition of VMI, we were obligated to issue 1,428,571 shares of our common
stock valued at $500,000.
<PAGE>
General and Administrative - Our general and administrative costs consist
primarily of personnel costs, professional and legal costs, consulting fees,
travel, and the lease of office space. Total general and administrative costs
were $926,422 and $1,298,873 for the three-months periods ended June 30, 2000
and 1999 respectively, representing a decrease of 29%. These costs reflect
employee stock option compensation cost of $33,406 and $1,145,844 for the three
months periods ended June 30, 2000 and 1999 respectively determined using the
intrinsic method in accordance with APB 25, and stock option compensation cost
of $343,828 for the three months ended June 30, 2000 determined in accordance
with SFAS 123.
The additional increase of $396,159 (net of stock based compensation) in
general and administrative costs between the three-month periods ended June 30,
2000 and 1999, is a result of an increase in personnel costs, professional and
legal costs, consulting fees, depreciation and amortization, lease of office
space, and general administrative costs. General and administrative costs as a
percentage of revenue increased between the two periods as a result of increases
in expenses over the same periods. We anticipate that general and administrative
costs will continue to grow in the foreseeable future as we implement our market
growth strategies.
Interest Expense (Income), Net - Our interest expense is primarily related
to short-term debt. Interest expense (income), net was ($14,445) and $15,844
for the three month periods ended June 30, 2000 and 1999 respectively.
Results of Operations for the six months ended June 30, 2000 and June 30, 1999:
--------------------------------------------------------------------------------
Sales - Sales for the six-month period ended June 30, 2000 were $106,069
compared to $55,997 for the six-month period ended June 30, 1999, representing
an 89% increase. $93,016 of Sales for the six-month period ended June 30, 2000
is recognition of deferred revenue from 1999. All sales for the six-month period
ended June 30, 1999 were from the sale of a trial software license and third
party hardware and software.
Cost of sales - Cost of sales were $44,121 and $27,804 for the six-month
period ended June 30, 2000 and 1999 respectively representing a 59% increase.
Operating Expenses
Sales & Marketing - Total sales and marketing costs increased 53% to
$995,450 for the six months period ended June 30, 2000 compared to $652,470 for
the six month period ended June 30, 1999. These costs reflect employee stock
option compensation cost of $76,355 and $395,761 for the six months periods
ended June 30, 2000 and 1999 respectively determined using the intrinsic method
in accordance with APB 25.
The additional increase of $662,386 (net of stock based compensation)
between the six-month period ended June 30, 2000 and
<PAGE>
1999 is a result of an increase in sales and marketing personnel, advertising
and promotions, travel and participation in industry trade shows, consulting
fees, and general sales and marketing expenses. These costs have been
primarily incurred as result of market development efforts.
Research and Development - Total research and development costs were
$1,485,081 and $1,514,769 for the six months periods ended June 30, 2000 and
1999 respectively representing a decrease of 2%. These costs reflect employee
stock option compensation cost of $752,358 and $722,814 for the six months
periods ended June 30, 2000 and 1999 respectively determined using the intrinsic
method in accordance with APB 25.
The additional decrease of $59,232 (net of stock based compensation)
between the six-month period ended June 30, 2000 and 1999 is primarily a result
$500,000 in research and development costs recognized in June 1999 as a result
of fulfilling the contingent obligation settlement with MTT in an agreement
dated March 26, 1999. As a result of the acquisition of VMI, we were obligated
to issue 1,428,571 shares of our common stock valued at $500,000.
General and Administrative - Our general and administrative costs consist
primarily of personnel costs, professional and legal costs, consulting fees,
travel, and the lease of office space. Total general and administrative costs
were $1,691,653 and $1,420,420 for the six months periods ended June 30, 2000
and 1999 respectively representing a 19% increase. These costs reflect employee
stock option compensation cost of $277,164 and $1,145,844 for the six months
periods ended June 30, 2000 and 1999 respectively determined using the intrinsic
method in accordance with APB 25, and stock option compensation cost $395,671
for the six months ended June 30, 2000 determined in accordance with SFAS 123.
The additional increase of $744,242 (net of stock based compensation)
between the six-month period ended June 30, 2000 and 1999 is a result of an
increase in personnel costs, professional and legal costs, consulting fees,
depreciation and amortization, lease of office space, and general administrative
costs. General and administrative costs as a percentage of revenue increased
between the two periods as a result of increases in expenses over the same
periods. We anticipate that general and administrative costs will continue to
grow in the foreseeable future as we implement our market growth strategies.
Interest Expense (Income), Net - Our interest expense (income), net was
($63,158) and $37,716 for the six-month periods ended June 30, 2000 and 1999
respectively. The difference of ($100,874) in interest expense (income), net
primarily resulted from the reversal of a $60,000 interest accrual made in 1999.
Income Taxes - At June 30, 2000 the Company had no US tax net operating
losses. Non capital losses of our operating subsidiary, Voice Mobility Inc., are
restricted by Canadian Income Tax Law and may not be available entirely for use
in future years pursuant to Section 111(4) of the Canadian Income Tax Act. As at
December 31, 1999 the Company has Canadian tax net operating losses of
approximately $3,627,000 that will begin expiring in the year 2000 through to
2006.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. For financial statement
purposes, the Company has recognized a valuation allowance equal to deferred tax
assets for which realization is uncertain.
<PAGE>
Fluctuations in Annual and Quarterly Results
Our annual and quarterly operating results may fluctuate significantly in
the future as a result of numerous factors, including:
1. the amount and timing of expenditures required to develop strategic
relationships to enhance sales and marketing;
2. changes in the growth rate of Internet usage and acceptance by consumers of
unified messaging systems;
3. emergence of new services and technologies in the market in which we
compete; and
4. fluctuations of foreign currency exchange rates.
5. unanticipated delays in product development which could adversely affect
our revenues or results of operations.
<PAGE>
6. the failure or unavailability of third-party technologies and services
could limit our ability to generate revenue.
Liquidity and Capital Resources
The Company has funded its operations for the most part through equity
financing. The Company must currently rely on its ability to raise money through
equity to pursue any business endeavors. The majority of funds raised have been
allocated to the development of our unified voice messaging software and sales
and marketing initiatives. We do not anticipate any significant sales revenue
until the fourth quarter of 2000. We also anticipate significant expenditures in
the next twelve months as we increase our research and development efforts, and
our international sales and marketing efforts. On February 15, 2000 the Company
completed an equity financing and raised net proceeds of $4,241,700, net of
$183,300 in unsecured advances received in December 1999. During the six months
ended June 30, 2000 the Company raised $185,393 from the exercise of warrants,
and $145,080 from the exercise of Employee stock options.
As at June 30, 2000 we had 4,028,450 warrants outstanding that would, upon
exercise, provide us a total of $13,036,458 in equity financing. If the
remaining 4,028,450 warrants are exercised the related funds would be sufficient
to provide us with the liquidity necessary to fund our anticipated working
capital and capital requirements for the next twelve months. However, there can
be no assurance that the remaining warrants will be exercised.
Subsequent to June 30, 2000 the Company issued 500,000 units at $5.50 per
unit and received net cash proceeds of $2,750,000. Each unit comprises one share
of common stock of the Company and three Class G warrants, entitling the holder
to purchase one share of common stock per warrant, exercisable at $5.50 per
share at any time on or before July 1, 2003. If exercised, the newly issued
1,500,000 Class G warrants would provide the Company $8,250,000 in equity
financing. However, there can be no assurance that the Class G warrants will be
exercised.
We currently anticipate that cash flow from operations will increase in the
long-term as we increase our sales and marketing activities and introduce new
versions of our software that are technologically feasible. However, we also
anticipate our operating expenses will also increase in the long-term as a
result of the increase in sales and marketing activities, research and
development activities, as well as general and administrative activities. To the
extent that available funds from operations are insufficient to fund our
activities, we may need to raise additional funds through public and private
financing. Based on the Company's current plans and projections, Management
believes that the Company has sufficient funds on hand, and has the ability to
raise additional funds through equity financings to meet its current and future
financial commitments until it achieves positive cash flows from operations.
However, our liquidity over the next 12 months is contingent on our ability to
raise such additional funds to meet our current and future commitments.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not a party to any litigation which would be required to
be disclosed under Item 103 of regulation S-B as at the date of this Filing.
Item 2. Changes in Securities
On July 1, 2000 the Company issued 500,000 units to accredited investors
located outside the United States at $5.50 per unit for cash proceeds of
$2,750,000. Each unit comprises one share of common stock of the Company and
three warrants, entitling the holder to purchase one share of common stock per
warrant, exercisable at $5.50 per share at any time on or before July 1, 2003.
No underwriters were involved in such sale. To the extent that U.S. securities
laws were applicable to the issuance, the issuance was made in reliance of
Section 4(2) of the Securities Act of 1933 and Regulation S thereunder.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
a) The Company held its annual general meeting of shareholders on June 9,
2000 in Vancouver, Canada.
b) Four proposals were adopted at the annual general meeting by the
margins indicated.
1) To amend the Company's Articles of Incorporation to increase the
total amount of the Company's authorized common stock from
50,000,000 to 100,000,000 shares. Votes were 14,487,067 For,
6,161 Against, and 63 Abstaining.
2) The adoption of the Amended and Restated Bylaws as the Bylaws of
the Company. Votes were 14,207,631 For, 550 Against, and 100
Abstaining.
3) Mr. Thomas G. O'Flaherty, James J. Hutton, William E. Krebs,
Randy G. Buchamer, Colin Corey, Morgan Sturdy and David Scott
were elected as directors of the Company. Votes for the directors
were 14,493,191 For, and 100 Abstaining.
4) An amendment to the Company's 1999 Stock Option Plan to increase
the number of shares available under such plan to 10,000,000.
Votes were 14,198,757 For, 7,861 Against, and 2,263 Abstaining.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
2) On May 15, 2000, we filed a report on Form 8-K relating to a
press release issued on April 17, 2000 announcing the appointment
of David Scott and Morgan Sturdy to our Board of Directors, and a
press release issued on May 9, 2000 announcing the resignation of
Mrs. Edith M. Both as a Director of the Company.
3) On May 17, 2000, we filed a report on Form 8-K relating to a
press release issued on May 15, 2000 announcing the appointment
of James Hewett as Chief Financial Officer.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VOICE MOBILITY INTERNATIONAL, INC.
(Registrant)
By: /s/ Thomas G. O'Flaherty
------------------
Thomas G. O'Flaherty,
President and Director
By: /s/ James Hewett
--------------------
James Hewett,
Chief Financial Officer and
Principal Accounting Officer
Dated: August 14,2000
