<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of
Securities Exchange Act of 1934
For Period ended March 31, 2000
Commission File Number 0-27589
ONE VOICE TECHNOLOGIES, INC.
-------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
NEVADA 95-4714338
------ ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
6333 Greenwich Drive, Ste 240, San Diego CA 92122
- ------------------------------------------- ---------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(858) 552-4466 (858) 552-4475
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(ISSUER'S TELEPHONE NUMBER) (ISSUER'S FACSIMILE NUMBER)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock at the latest practicable date.
As of March 31, 2000, the registrant had 11,682,500 shares of common stock,
$.001 par value, issued and outstanding.
<PAGE> 2
PART 1 FINANCIAL INFORMATION
ITEM 1 Financial Statements
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET - MARCH 31, 2000
(UNAUDITED)
ASSETS
<TABLE>
<S> <C> <C>
CURRENT ASSETS:
Cash $ 565,174
Cash - restricted 200,000
Inventory 95,612
Prepaid expenses 522,707
---------------
Total current assets $ 1,383,493
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and amortization 588,865
OTHER ASSETS:
Software licensing 234,674
Software development costs 319,313
Deposits 20,735
Patent 33,956
---------------
Total other assets 608,678
--------------
$ 2,581,036
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 499,925
Loan payable 200,000
Loan payable, officer 10,000
Loan payable, officer-stockholder 4,500
---------------
Total current liabilities $ 714,425
STOCKHOLDERS' EQUITY:
Preferred stock; $.001 par value, 10,000,000 shares
authorized, no shares issued and outstanding -
Common stock; $.001 par value, 50,000,000 shares
authorized, 11,682,500 shares issued and outstanding 11,683
Additional paid-in capital 4,730,031
Deficit accumulated during development stage (2,875,103)
---------------
Total stockholders' equity 1,866,611
--------------
$ 2,581,036
==============
</TABLE>
See accompanying notes to financial statements.
F-1
<PAGE> 3
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
From inception on
Three months ended January 1, 1999 to
March 31, 2000 March 31, 2000
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<S> <C> <C>
NET REVENUES $ -- $ 25,423
COST OF REVENUES -- 2,790
------------ -----------
GROSS PROFIT -- 22,633
GENERAL AND ADMINISTRATIVE EXPENSES 1,092,888 2,897,736
------------ -----------
NET LOSS $ (1,092,888) $(2,875,103)
============ ===========
NET LOSS PER SHARE, basic and diluted $ (0.09)
============
WEIGHTED AVERAGE SHARES OUTSTANDING,
basic and diluted 11,679,075
============
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 4
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
<TABLE>
<CAPTION>
Common stock Additional Total
-------------------------- paid-in Accumulated stockholders'
Shares Amount capital deficit equity
----------- -------- ---------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1999 12,720,000 $ 12,720 $ 12,720
Issuance of common stock in
connection with merger 7,000,000 7,000 $ 106,236 113,236
Net proceeds from issuance of
common stock 1,500,000 1,500 2,544,422 2,545,922
Net issuance of common stock in
exchange for services 150,000 150 299,850 300,000
Redemption of common stock (10,000,000) (10,000) (10,000)
Net loss for the year
ended December 31, 1999 $ (1,782,215) (1,782,215)
Net proceeds from issuance of
common stock 312,500 313 1,779,523 1,779,836
Net loss for the three months
ended March 31, 2000 (1,092,888) (1,092,888)
----------- -------- ---------- ---------------- -----------
Balance at March 31, 2000 11,682,500 $ 11,683 $4,730,031 $ (2,875,103) $ 1,866,611
=========== ======== ========== ================ ===========
</TABLE>
F-3
<PAGE> 5
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
From inception on
Three months ended January 1, 1999 to
March 31, 2000 March 31, 2000
----------- -----------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net loss $(1,092,888) $(2,987,103)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES -
depreciation and amortization 156,570 282,825
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Inventory (95,612) (95,612)
Prepaid expenses (522,707) (522,707)
Deposits (13,839) (20,735)
INCREASE (DECREASE) IN LIABILITIES -
accounts payable and accrued expenses 93,031 499,925
----------- -----------
Net cash used for operating activities (1,475,445) (2,843,407)
----------- -----------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchase of property and equipment (475,338) (629,300)
Software licensing (1,384) (461,379)
Software development (166,980) (222,998)
Increase in escrow account -- (200,000)
Patents -- (33,956)
----------- -----------
Net cash used for investing activities (643,702) (1,547,633)
----------- -----------
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 1,779,836 4,751,714
Retirement of common stock, net -- (10,000)
Proceeds from loan payable, officer-stockholder -- 4,500
Proceeds from loan payable, officer -- 10,000
Proceeds from loans payable -- 200,000
----------- -----------
Net cash provided by financing activities 1,779,836 4,956,214
----------- -----------
NET INCREASE (DECREASE) IN CASH (339,311) 565,174
CASH, beginning of period 904,485 --
----------- -----------
CASH, end of period $ 565,174 $ 565,174
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 17 $ 17,141
=========== ===========
Income taxes paid $ 1,600 $ 3,423
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 6
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
(1) ORGANIZATION:
Conversational Systems, Inc. was incorporated under the laws of the
State of California on April 8, 1991. The Company commenced
operations in 1999.
Effective June 22, 1999, pursuant to a Merger Agreement and Plan of
Reorganization between Dead On, Inc. ("acquiree") and
Conversational Systems, Inc. a California corporation ("acquiror"
or the "Company"), Dead On, Inc. has been reversed merged into
Conversational Systems, Inc. The Company accounted for the
acquisition of Dead On, Inc. using the purchase method of
accounting. The shares of Conversational Systems were exchanged for
7,000,000 newly issued shares of Dead On, Inc. Because the former
shareholders of Conversational Systems, Inc. then became the
majority shareholders of Dead On, Inc., Conversational Systems was
treated as the acquiror under APB Opinion No. 16, "Business
Combinations."
In July 1999, the Company repurchased and retired 10,000,000 shares
of its common stock, $.001 par value per share. Due to the
retirement of shares, the former shareholders of Conversational
Systems, Inc. have significant control in Dead On, Inc.
Due to the contemplation and timing of the merger between Dead On,
Inc. and Conversational Systems, Inc. and the retirement of
10,000,000 shares of the Company's common stock, these events were
accounted for as a single transaction.
Conversational Systems, Inc. was liquidated with and into Dead On,
Inc., which then changed its legal name to One Voice Technologies,
Inc.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INTERIM FINANCIAL STATEMENTS:
The accompanying financial statements include all adjustments
(consisting of only normal recurring accruals) which are, in the
opinion of management, necessary for a fair presentation of the
results of operations for the periods presented. Interim results
are not necessarily indicative of the results to be expected for a
full year. The financial statements should be read in conjunction
with the financial statements included in the annual report of One
Voice Technologies, Inc. (the "Company") on Form 10-KSB for the
year ended December 31, 1999.
BUSINESS ACTIVITY:
The Company develops and markets computer software using
Intelligent Voice Interactive Technology (IVIT(TM)) to website
owners in the United States and other countries.
F-5
<PAGE> 7
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 2000
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
REVENUE RECOGNITION:
The Company recognizes revenues when earned in the period in which
the service is provided. Service fees are deferred and recognized
over the life of the service agreement. Initial distribution fees
are recognized when the software is delivered.
(3) COMMON STOCK:
In January 2000, the Company entered into a Subscription Agreement with
an unrelated foreign party providing for the sale of 312,500 shares of
the Company's common stock at $6.40 per share and 156,250 common stock
purchase warrants. Each warrant entitles the holder to purchase one
share of common stock at an exercise price of $8.00. The value of the
warrants amount to $13,750 and is included in additional paid-in
capital. The warrants expire on January 5, 2001. Net proceeds raised
from the shares and warrants total approximately $1,800,000.
In March 2000, the Company commenced an offering (the "Offering") of
approximately 1,000,000 units consisting of 1 share of the company's
common stock and _ common stock purchase warrant for each unit
purchased. Pursuant to the Offering statement, the gross proceeds raised
are held in a non-interest bearing escrow account until the private
placement period has ended. As of May 2, 2000, the Company had raised
gross proceeds totaling approximately $13,049,000 from the issuance of
988,560 shares of common stock and 494,280 common stock purchase
warrants.
F-6
<PAGE> 8
PART 1 FINANCIAL INFORMATION
ITEM 2 Management's Plan of Operations
The Company maintains a cash balance sufficient to sustain corporate operations
until December 31, 2001. The losses through the quarter ended March 31, 2000
were due to operating expenses of the Company. Sales of the Company's equity
securities have allowed the Company to maintain a positive cash flow balance.
During the next twelve months, Management's business plan is for the Company to
take the following steps to market its product: during the second quarter the
Company plans to complete beta testing of the product along with completing
their web site hosting and development efforts. The initial product is scheduled
to be released in the summer of 2000 and will be available from direct download
off the Company's web site as well as ordering a CD mailer to be sent. The
Company will concurrently begin a nationwide advertising campaign to create
public awareness and branding of the product. After initial product launch the
Company plans to release an upgrade product which will add additional features
and capabilities to the initial product. This upgrade product is anticipated to
be released within 60 days from the launch of the initial product. The Company
plans to begin localization efforts of the product for the following languages:
UK English, Spanish, German, French and Italian. These additional language
versions of the product will begin development in third quarter 2000 and
continue on through the first quarter 2001. The initial localized product, UK
English, is anticipated to be released and publicly available in the fourth
quarter 2000.
Cash flow from sales is estimated to begin at the projected product release date
in the summer of 2000. The Company may face considerable risk in completing each
of its business plan steps, such as cost overruns in each step, a lack of
interest in the Company's product in the market on the part of its anticipated
computer manufacturer partners and Internet Service Provider partners, and/or
consumers, and a shortfall of funding due to the Company's inability to raise
capital in the equity securities market. If further funding is required, and no
funding is received during the next twelve months, the Company would be forced
to rely on its existing cash in the bank or short term bridge loans. While
Management believes its current cash balance to be sufficient for the completion
of its product and initial marketing prior to receiving cash flow from sales per
its business plan, the Company may be unable to complete its product development
until such time as necessary funds could be raised in the equity market. In such
a restricted cash flow scenario, the Company would delay all cash intensive
activities.
While the Company plans to spend an additional $750,000 to finish programming of
its existing software product, the Company plans to begin new product research
and development into wireless (cellular telephone) and PDA (personal digital
assistant) devices beginning in the third quarter of 2000. Management has not
determined a budget for new product research and development at this time. There
are no current plans to purchase or sell any significant amount of fixed assets.
The Company's business plan provides for an increase of eight employees during
the next twelve months.
<PAGE> 9
PART II OTHER INFORMATION
ITEM 1 Not applicable.
ITEMS 2-4: Not applicable
ITEM 5: Information required in lieu of Form 8-K: None
ITEM 6: Exhibits and Reports on 8-K:
a) Exhibit # 27.1, "Financial Data Schedule"
b) No reports on Form 8-K were filed during the fiscal
quarter ended March 31, 2000
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
One Voice Technologies, Inc.
Date 5/11/00 By /s/ DEAN WEBER
----------------------------------- -----------------------------------
Dean Weber, CEO, Secretary, Director
Date 5/11/00 By /s/ RAHOUL SHARAN
----------------------------------- -----------------------------------
Rahoul Sharan, CFO, Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERIM
FINANCIAL STATEMENTS FOR FIRST QUARTER 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ONE VOICE TECHNOLOGIES, INC. 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 765,174
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 95,612
<CURRENT-ASSETS> 1,383,493
<PP&E> 871,690
<DEPRECIATION> (282,825)
<TOTAL-ASSETS> 2,581,036
<CURRENT-LIABILITIES> 714,425
<BONDS> 0
0
0
<COMMON> 11,683
<OTHER-SE> 1,854,928
<TOTAL-LIABILITY-AND-EQUITY> 2,581,036
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,092,888
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,092,888)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,092,888)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,092,888)
<EPS-BASIC> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
