<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 September 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
---------------------------
(Issuer's telephone number)
(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:
25,464,476 shares of Common Stock as of September 30, 2000
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
VOICE MOBILITY INTERNATIONAL, INC.
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 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 SEPTEMBER 30, DECEMBER 31,
2000 1999
$ $
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents 1,973,509 120,712
Accounts receivable [net of allowance for doubtful debts:
September 30, 2000 - nil; December 31, 1999 - $22,403] -- 16,541
Other receivables 70,021 63,024
Prepaid expenses 117,939 34,100
Inventory 240,374 93,107
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TOTAL CURRENT ASSETS 2,401,843 327,484
Equipment and leasehold improvements [net of accumulated
depreciation and amortization: September 30, 2000 - $481,617;
December 31, 1999 - $195,839] 1,700,344 524,180
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4,102,187 851,664
===================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT
Accounts payable 411,622 318,169
Accrued liabilities 204,300 154,921
Employee related payables 105,366 75,093
Deferred revenue 242,203 93,016
Notes payable -- 812,070
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TOTAL CURRENT LIABILITIES 963,491 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], 18,864,476 and 10,959,420 shares
outstanding respectively 18,865 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 19,538,815 8,677,083
Deferred compensation (414,373) (1,106,656)
Accumulated development stage deficit (16,031,194) (8,221,746)
Other accumulated comprehensive income 26,582 35,502
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TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 3,138,696 (601,605)
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4,102,187 851,664
===================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
VOICE MOBILITY INTERNATIONAL, INC.
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 15, 1993
SEPTEMBER 30, SEPTEMBER 30, TO SEPTEMBER 30,
2000 1999 2000 1999 2000
$ $ $ $ $
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<S> <C> <C> <C> <C> <C>
SALES 85,109 -- 191,178 55,997 1,294,851
Less cost of sales 37,538 11,450 81,659 45,018 775,516
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Gross Profit 47,571 11,450 109,519 10,979 519,335
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OPERATING EXPENSES
Sales and marketing 1,745,364 217,547 2,740,814 904,534 4,353,663
Research and development 752,205 282,029 2,237,286 1,849,994 4,845,649
General and administrative 1,329,636 238,239 3,021,289 1,740,160 6,281,709
Acquisition fee on recapitalization -- -- -- 200,000 200,000
Interest expense (income), net (17,263) 11,431 (80,421) 54,204 79,508
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Loss before extraordinary items 3,762,371 760,696 7,809,449 4,737,913 15,241,194
Extraordinary loss on settlement of
debt -- -- -- 790,000 790,000
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Net loss for the period 3,762,371 760,696 7,809,449 5,527,913 16,031,194
Foreign currency translation gains (losses) 2,241 (30,008) (8,921) (30,090) 26,581
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Comprehensive loss for
the period 3,760,130 790,704 7,818,370 5,558,003 16,004,613
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Loss per common share before
extraordinary loss - basic and diluted (0.15) (0.07) (0.33) (0.29)
Loss per common share - basic and
diluted (0.15) (0.07) (0.33) (0.34)
Weighted average number of common
stock equivalents outstanding 24,722,722 11,824,327 23,373,725 16,472,020
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</TABLE>
SEE ACCOMPANYING NOTES
<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 NINE MONTHS ENDED, 1993 TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000
$ $ $
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<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss for the period (7,809,449) (5,527,913) (16,031,194)
Non-cash items included in net loss
Depreciation and amortization 291,477 59,383 497,074
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 3,454,617 2,566,760 6,365,197
Change in allowance for doubtful accounts (22,403) 18,194 --
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(4,085,758) (1,593,576) (7,878,923)
Change in accounts receivable 28,731 9,739 (8,527)
Change in prepaid expenses (87,306) (6,505) (120,245)
Change in inventory (154,810) (98,636) (245,275)
Change in accounts payable 108,262 151,015 417,402
Change in accrued liabilities 57,328 10,358 209,556
Change in other payables -- -- (61,236)
Change in employee payables 34,246 -- 107,209
Change in deferred revenue 156,772 64,796 247,149
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CASH USED IN OPERATING ACTIVITIES (3,942,535) (1,462,809) (7,332,890)
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INVESTING ACTIVITIES
Purchase of equipment and leasehold improvements (1,488,863) (237,795) (2,232,213)
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CASH USED IN INVESTING ACTIVITIES (1,488,863) (237,795) (2,232,213)
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FINANCING ACTIVITIES
Change in notes payable, net (624,360) -- 448,614
Change in amounts due to Acrex Ventures, Inc. -- 964,273 1,420,667
Cash proceeds on exercise of warrants 442,470 823,333 1,955,803
Cash proceeds on exercise of options 376,249 -- 376,249
Cash proceeds on issuance of common stock
net of share issue costs 7,102,033 -- 7,285,333
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CASH PROVIDED BY FINANCING ACTIVITIES 7,296,392 1,787,606 11,486,666
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Effect of foreign currency on cash (12,197) (30,090) 51,946
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INCREASE IN CASH AND CASH EQUIVALENTS 1,852,797 56,912 1,973,509
Cash and cash equivalents, beginning of period 120,712 37,113 --
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CASH AND CASH EQUIVALENTS, END OF PERIOD 1,973,509 94,205 1,973,509
==================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest 13,393 54,204
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
==================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
VOICE MOBILITY INTERNATIONAL, INC.
Notes to Interim Consolidated Financial Information
September 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 nine-month period ended September 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 $7,809,449 for the nine months ended
September 30, 2000 [September 30, 1999 - $5,527,913]. 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.
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 its unified communications software suite. 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 September 30, 2000 and
1999, and 2 customers for the nine months ended September 30, 2000 and 1999.
3. NOTES PAYABLE
<TABLE>
<CAPTION>
SEPTEMBER 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 in
VMII. The Company considers each Exchangeable Share as equivalent to a share
<PAGE>
of common stock and therefore the Exchangeable Shares are included in the
computation of basic earnings per share.
As at September 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.
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.
On September 13, 2000 the Company recorded the issuance of 200,000 units for net
cash proceeds of Cdn$100,000. Each unit comprises one share of common stock of
the Company and one warrant, entitling the holder to one share of common stock
per warrant, exercisable at $0.50 at any time up to December 29, 2000. The
issuance was pursuant to a subscription agreement dated September 20, 1999. No
proforma earnings per share information has been presented as the effect of the
issuance is anti-dilutive.
In the nine month period ended September 30, 2000 374,200 Series A warrants were
exercised for $130,970, resulting in the issuance of 374,200 common shares,
273,000 Series B to D warrants were exercised for $136,500, resulting in the
issuance of 273,000 common shares, and 500,000 Series E warrants were exercised
for $175,000 resulting in the issuance of 500,000 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
<PAGE>
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 September 30, 2000 were 6,445,423. During
the nine months ended September 30, 2000, 3,973,795 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 $2,585,572 was determined in accordance with "APB 25"
(Accounting Principles Board Opinion Number 25) for options granted to
employees, and $869,045 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 nine months ended
September 30, 2000 456,955 stock options were exercised resulting in net
proceeds of $376,249. During the same period 58,333 employee stock options were
cancelled. As at September 30, 2000, 3,097,622 stock options were available for
grant under the Company's Amended 1999 Stock Option Plan.
[c] WARRANTS
As at September 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 825,800 0.35 December 29, 2000
Series B, C and D warrants 160,000 0.50 December 29, 2000
Series E warrants 101,000 0.35 December 29, 2000
Series F warrants 2,250,000 5.50 February 15, 2005
Series G warrants 1,500,000 5.50 February 15, 2005
Series H warrants 200,000 0.50 December 29, 2000
-------------------------------------------------------------------------------------------------------------------
5,036,800
===================================================================================================================
</TABLE>
[d] LOSS PER SHARE
The following table sets forth the computation of basic and diluted loss per
share for the nine months ended:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
$ $
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Numerator
Loss before extraordinary loss (7,809,449) (4,737,913)
Loss for the period (7,809,449) (5,527,913)
Denominator
Weighted average number of common stock outstanding 16,773,725 9,872,020
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 23,373,725 16,472,020
------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per share before
Extraordinary loss (0.33) (0.29)
Basic and diluted loss per share (0.33) (0.34)
===================================================================================================================
</TABLE>
<PAGE>
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") as amended by SFAS No. 137 and SFAS
No.138, which establish 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 statements also require that changes
in the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. SFAS No. 133, as amended by SFAS No.
137 and SFAS No. 138, is effective for fiscal years beginning after June 15,
2000. Management has not determined the impact, if any, that the adoption of the
new statement will have on the consolidated results of operations or financial
position of the Company.
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.
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
capital, unexpected costs, lower revenues, net income and forecasts, the
possibility of fluctuation and volatility of our operating results and financial
<PAGE>
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 messaging
company focused on emergent technologies for telecommunications providers. We
are engaged in the development of unified voice messaging software and
introduced our first retail unified communications product 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 September 30, 2000 and
September 30, 1999:
--------------------------------------------------------------------------------
Sales - Sales for the three-month period ended September 30, 2000 were
$85,109 compared to nil for the three-month period ended September 30, 1999.
Sales for the three-month period ended September 30, 2000 were for the sale of
third party computer hardware and software. Sales for the three-month period
ended September 30, 1999 previously reported as $15,553 on our Form 10-QSB/A
filed on February 14, 2000 have now been retroactively adjusted to nil as a
result of 1999 annual audit adjustments.
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 $37,538 and $11,450 for the three-month periods ended September 30,
2000 and 1999 respectively representing a 228% 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 $1,745,364 and $217,547 for the three month
periods ended September 30, 2000 and 1999 respectively representing an increase
of 702%. These costs reflect employee stock option compensation cost of
$1,102,642 and $91,623 for the three month periods ended September 30, 2000 and
1999 respectively.
The additional increase of $516,798 (net of stock based compensation) in
sales and marketing expense between the three-month periods ended September 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.
Sales and marketing costs for the three-month period ended September 30,
1999 previously reported as $125,924 on our Form 10-QSB/A filed on February 14,
<PAGE>
2000 have now been retroactively adjusted to $217,547 as a result 1999 annual
audit adjustments for stock based compensation costs.
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 $752,205 and $282,029 for the three month
periods ended September 30, 2000 and 1999 respectively representing an increase
of 167%. These costs reflect employee stock option compensation cost of $261,676
and $143,927 for the three month periods ended September 30, 2000 and 1999
respectively.
The additional increase of $352,427 (net of stock based compensation) in
research and development expense between the three-month periods ended September
30, 2000 and 1999, is a result of an increase in research and development
personnel costs, leased office space and utility costs, data and voice
transmission costs, and general research and development costs.
Research and development costs for the three-month period ended September
30, 1999 previously reported as $423,002 on our Form 10-QSB/A filed on February
14, 2000 have now been retroactively adjusted to $282,029 as a result of 1999
annual audit adjustments for stock based compensation costs.
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 $1,329,636 and $238,239 for the three-month periods ended September 30,
2000 and 1999 respectively, representing an increase of 458%. These costs
reflect employee stock option compensation cost of $115,378 and $66,792 for the
three month periods ended September 30, 2000 and 1999 respectively. A further
$473,373 of stock option compensation cost were recorded for the three months
ended September 30, 2000 for stock option grants awarded to non-employees in
exchange for consulting services.
The additional increase of $569,438 (net of stock based compensation) in
general and administrative costs between the three-month periods ended September
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 other 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.
General and administrative costs for the three-month period ended September
30, 1999 previously reported as $316,947 on our Form 10-QSB/A filed on February
14, 2000 have now been retroactively adjusted to $238,239 as a result of 1999
annual audit adjustments for stock based compensation costs.
Interest Expense (Income), Net - Our interest expense is primarily related
to short-term debt. Interest expense (income), net was ($17,263) and $11,431 for
the three month periods ended September 30, 2000 and 1999 respectively.
Results of Operations for the nine months ended September 30, 2000 and September
30, 1999:
--------------------------------------------------------------------------------
<PAGE>
Sales - Sales for the nine-month period ended September 30, 2000 were
$191,178 compared to $55,997 for the nine-month period ended September 30, 1999,
representing a 241% increase. $93,016 of sales for the nine-month period ended
September 30, 2000 is recognition of deferred revenue from 1999. All sales for
the nine-month period ended September 30, 1999 were from the sale of a trial
software license and third party hardware and software.
Sales for the nine-month period ended September 30, 1999 previously reported
as $99,725 on our Form 10-QSB/A filed on February 14, 2000 have now been
retroactively adjusted to $55,997 as a result of 1999 annual audit adjustments.
Cost of sales - Cost of sales were $81,659 and $45,018 for the nine-month
period ended September 30, 2000 and 1999 respectively representing an 81%
increase.
Operating Expenses
Sales & Marketing - Total sales and marketing costs increased 203% to
$2,740,814 for the nine month period ended September 30, 2000 compared to
$904,534 for the nine month period ended September 30, 1999. These costs reflect
employee stock option compensation cost of $1,178,966 and $487,384 for the nine
month periods ended September 30, 2000 and 1999 respectively
The additional increase of $1,144,698 (net of stock based compensation)
between the nine-month period ended September 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.
Sales and marketing costs for the nine-month period ended September 30, 1999
previously reported as $1,325,900 on our Form 10-QSB/A filed on February 14,
2000 have now been retroactively adjusted to $904,534 as a result of 1999 annual
audit adjustments for stock based compensation costs.
Research and Development - Total research and development costs were
$2,237,286 and $1,849,994 for the nine month periods ended September 30, 2000
and 1999 respectively representing an increase of 21%. These costs reflect
employee stock option compensation cost of $1,014,032 and $866,741 for the nine
month periods ended September 30, 2000 and 1999 respectively.
The additional decrease of $240,001 (net of stock based compensation)
between the nine-month period ended September 30, 2000 and 1999 is a result of
an increase in research and development personnel costs, leased office space and
utility costs, data and voice transmission costs, and general research and
development costs.
Research and development costs for the nine-month period ended September 30,
1999 previously reported as $2,536,753 on our Form 10-QSB/A filed on February
14, 2000 have now been retroactively adjusted to $1,849,994 as a result of 1999
annual audit adjustments for stock based compensation costs.
General and Administrative - Total general and administrative costs were
$3,021,289 and $1,740,160 for the nine month periods ended September 30, 2000
and 1999 respectively representing a 74% increase. These costs reflect employee
<PAGE>
stock option compensation cost of $392,542 and $1,212,636 for the nine months
periods ended September 30, 2000 and 1999 respectively. A further $869,044 of
stock option compensation cost were recorded for the nine months ended September
30, 2000 for stock option grants awarded to non-employees in exchange for
consulting services.
The additional increase of $1,232,179 (net of stock based compensation)
between the nine-month period ended September 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 other 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.
General and administrative costs for the nine-month period ended September
30, 1999 previously reported as $1,956,213 on our Form 10-QSB/A filed on
February 14, 2000 have now been retroactively adjusted to $1,740,160 as a result
of 1999 annual audit adjustments for stock based compensation costs.
Interest Expense (Income), Net - Our interest expense (income), net was
($80,421) and $54,204 for the nine-month periods ended September 30, 2000 and
1999 respectively. The Company earns interest income on cash through term
deposits and incurs interest expense on notes payable.
Income Taxes - At September 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.
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.
<PAGE>
5. unanticipated delays in product development which could adversely affect
our revenues or results of operations.
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 second quarter of 2001. 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. On July 1, 2000 the Company completed a second equity financing
and raised net proceeds of $2,750,000. Effective October 31, 2000 the Company
terminated its agreement with InTechnologies Inc. to provide the Company with up
to $25,000,000 in equity financing due to InTechnologies failure to fund its
commitments. During the nine months ended September 30, 2000 the Company raised
$442,470 from the exercise of warrants, and $376,249 from the exercise of
Employee stock options.
As at September 30, 2000 we had 5,036,800 warrants outstanding that would,
upon exercise, provide us a total of $21,029,380 in equity financing. If the
outstanding 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.
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.
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
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
1) On September 14, 2000 we filed a report on Form 8-K relating
to a press release issued on September 13, 2000 announcing the
appointment of Randy Buchamer as Chairman of the Board of
Directors.
2) On September 26, 2000 we filed a report on Form 8-K relating
to a press release issued on September 26, 2000 announcing an
agreement with Logic Communications Inc. to provide Voice
Mobility's Unified Communications-TM- software suite to
telephone, internet, and cellular phone users in Bermuda.
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: November 14, 2000
