<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1998.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 from the transition period from ________ to __________.
Commission File Number 0-10385
VOICE CONTROL SYSTEMS, INC.
(Name of small business issuer in its charter)
DELAWARE 75-1707970
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
14140 MIDWAY ROAD
DALLAS, TEXAS 75244
(Address of principal executive (Zip Code)
offices)
Issuer's telephone number,
including area code: (972) 726-1200
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.01 PAR VALUE
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year $ 14,225,691.
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of March 17, 1999, was $17,536,894.
The number of shares of the registrant's Common Stock outstanding as of March
17, 1999 was 13,719,864.
Documents incorporated by reference. None
<PAGE> 2
EXPLANATORY NOTE
Because definitive proxy soliciting material relating to the Annual Meeting of
Stockholders of Voice Control Systems, Inc. (the "Company") will be filed later
than April 30, 1999, the information called for by Items 10, 11,12 and 13 of
Part III of the Company's Form 10-KSB for the year ended December 31, 1998 is
included in this Amendment No. 1 on Form 10-KSB/A to such Form 10-KSB.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The following sets forth information regarding the persons serving as
Directors of the Company:
RONALD H. LARKIN, age 56, has been a Director since November 1998. Mr.
Larkin joined the Company as President and CEO effective November 9, 1998. Prior
to joining the Company, Mr. Larkin was employed by Northpoint Software and
Services, Inc. as President and Chief Operating Officer from January 1997 to
November 1998. From 1987 to 1996, Mr. Larkin was employed by Digital Equipment
Corporation in a variety of positions, serving last as Worldwide Vice President,
Global Business and Chairman, DEC Canada. Ltd.
KENNETH J. BURKHARDT, JR., age 53, has been a director of the Company
since July 1998. Mr. Burkhardt is a co-founder of Dialogic Corporation. Mr.
Burkhardt has been a director of Dialogic Corporation since 1983 and has served
as its Executive Vice President of New Business Development since 1992.
PETER J. FOSTER, age 47, has been a director of the Company since 1994
and served as President and CEO of the Company from August 11, 1994, the
effective date of the merger between VCS Industries, Inc. ("Industries") and
Scott Instruments Corporation (the "Merger") until November 9, 1998. On November
9, 1998, Mr. Foster was appointed President and CEO of Voice Request Corporation
("VRQ"), a wholly owned subsidiary of the Company. Mr. Foster joined Industries
in 1985, and served as President from 1986 through the date of the Merger, CEO
from 1989 through the date of the Merger and Chairman from 1990 through the date
of the Merger. Mr. Foster received his B.E. in Electrical Engineering from
Stevens Institute of Technology.
MELVYN J. GOODMAN, age 56, who has been a director of the Company since
the Merger and was a director of Industries from 1986 until the Merger, is
president of Melgood Investments, Inc. Mr. Goodman was president of Islander
Sportswear, Inc. from March 1989 until January 2, 1996; Islander Sportswear
filed for a voluntary petition under Chapter 11 of the United States Bankruptcy
Code on January 2, 1996. Formerly, Mr. Goodman was chairman of ALC
Communications Corporation, the parent company of Allnet Communications
Services, a national long distance telephone company. He is licensed to practice
law in the State of Illinois but is not actively practicing. Mr. Goodman
received his J.D. from DePaul University (Chicago).
SIR JOHN LUCAS-TOOTH, age 66, has been a director of the Company since
1990. Since September 1993, he has served as a director of Rupert Loewenstein
Limited, a private investment company. He is chairman and chief executive
officer of Sixera Asia Ventures Ltd. and a supervisor of Japan Ventures Fund and
Japan Asia Ventures Fund. These three entities concentrate in Southeast Asia
investments. He is also a director of other private companies. Sir John
Lucas-Tooth graduated from Oxford University with a degree in Physics and a
post-graduate degree in Spectroscopy.
NEAL J. ROBINSON, age 54, has been a director of the Company since the
Merger and has served as Chairman since May 1997. Mr. Robinson was a director of
Industries from 1986 until the Merger, and has been president of Neal Robinson
Investments, Inc., a private investment company, since 1984. Mr. Robinson was
Chief Executive Officer of Industries from 1986 through 1989, and was Chairman
of Industries from 1986 through 1990. Mr. Robinson is a partner in the
Williamsburg, Virginia law firm of Spirn, Tarley, Robinson and Tarley. Mr.
Robinson received a B.B.A. in Accounting from Spencerian College, an M.B.A. from
the University of Dallas and a J.D. from the Marshall-Wythe School of Law of the
College of William & Mary in 1992. Mr. Robinson is an attorney-at-law (Virginia)
and a Certified Public Accountant (Texas).
JOHN B. TORKELSEN, age 55, has been a director of the Company since
1986. Mr. Torkelsen is the founder, and has been the president, of Princeton
Venture Research, Inc. ("PVR"), an investment banking and consulting firm in
Princeton, New Jersey, since November 1984. Since 1985, Mr. Torkelsen has been a
director of Mikros Systems Corporation of Princeton, New Jersey, a company which
develops and manufactures specialty military microprocessors. Mr. Torkelsen has
been president of PVR Securities, Inc., a private investment banking
1
<PAGE> 3
firm located in Princeton, New Jersey, since 1987. Mr. Torkelsen received a B.S.
degree in Chemical Engineering from Princeton University and an M.B.A. from
Harvard University.
The Company is not aware of any "family relationships" (as defined in Item 401
(d) of Regulation S-K promulgated by the Securities and Exchange Commission)
between any of the nominees and/or any of the executive officers.
The Company's Board of Directors normally meet on a quarterly basis.
Non-employee Directors are paid cash compensation of $5,000 per year. In
addition, non-employee Directors receive $1,000 plus a $1,750 expense allowance
for each Board meeting attended in person. In lieu of the $1,750 expense
allowance, Directors who reside in Europe will receive a roundtrip business
class airline ticket and a $1,000 expense allowance. Board members receive $500
per telephonic Board meeting attended and $500 per committee meeting attended.
At the conclusion of the first year of service as a Director, each non-employee
Director is issued the right to purchase 10,000 warrants at a price of $.01 per
warrant. Each non-employee Director receives the right to purchase an additional
5,000 warrants for each subsequent year of service. Each warrant entitles the
Director to purchase one share of Common Stock at the then-current market price.
2
<PAGE> 4
EXECUTIVE OFFICERS
The following table identifies the executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE CAPACITIES IN WHICH SERVED
- ---- --- --------------------------
<S> <C> <C>
Ronald H. Larkin (1) 56 President, CEO and Director
Peter J. Foster (2) 47 President & CEO-VRQ, Director
Thomas B. Schalk (3) 47 Chief Technical Officer
Kim S. Terry (4) 41 Vice President Finance and Corporate Secretary
</TABLE>
(1) Ronald Larkin joined the Company as President and CEO effective November
9, 1998. Prior to joining the Company, Mr. Larkin was employed by
Northpoint Software and Services, Inc. as President and Chief Operating
Officer from January 1997 to November 1998. From 1987 to 1996, Mr. Larkin
was employed by Digital Equipment Corporation in a variety of positions,
serving last as Worldwide Vice President, Global Business and Chairman,
DEC Canada. Ltd.
(2) Peter Foster joined Industries in 1985 and became President and CEO of
the Company effective August 11, 1994. Mr. Foster became CEO of Voice
Request Corporation, a wholly-owned subsidiary of the Company effective
November 9, 1998.
(3) Tom Schalk joined Industries in 1983 and became Chief Technical Officer
of the Company effective August 11, 1994. Prior to joining Industries,
Dr. Schalk was employed by Texas Instruments Incorporated where he
conducted speech research. Dr. Schalk received a Bachelor of Science with
high honors in Electrical Engineering from the George Washington
University and Ph.D. in Biomedical Engineering from the Johns Hopkins
University.
(4) Kim Terry joined Industries in 1983 and became Vice President-Finance and
Corporate Secretary of the Company effective August 11, 1994. Prior to
joining Industries Ms. Terry worked in public accounting in Texas and
California. Ms. Terry received a Bachelor of Business Administration
degree from the University of Texas at Austin.
Executive officers are elected by the Board at its annual meeting and serve at
the discretion of the Board. Except as provided above, executive officers hold
office until the next annual meeting or until their successors are elected.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the 1934 Act requires the Company's officers and directors and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the Commission and NASDAQ. Officers, directors and greater
than ten percent shareholders are also required by SEC regulation to furnish the
Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has received
and written representations from certain reporting persons that they were not
required to file Form 5s for specified fiscal years, the Company believes that
all its officers, directors, and greater than ten percent shareholders complied
with all filing requirements applicable to them with respect to transactions
during 1998 with the following exceptions: Form 4 for stock sold by Tom Schalk
and Form 4 for a stock option exercise for Peter Foster were filed late. The
failure to report transactions on a timely basis were inadvertent. The
transactions were reported promptly after the failure to report was discovered.
3
<PAGE> 5
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation for the
Company's Chief Executive Officer, other executive officers, and two additional
employees who are not executive officers, earning in excess of $100,000 ("Named
Executives") during 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Long Term
Annual Compensation Compensation
- -------------------------------------------------------------------------------------------------------------------------
Other Annual Awards All
Name/Principal Position Salary Bonus Compensation Options Other
Year ($) ($) ($) (# of Shares) Compensation (1)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 -- -- -- -- --
Ronald Larkin 1997 -- -- --
President and CEO 1998 (2) 28,924 50,000 -- 400,000
- -------------------------------------------------------------------------------------------------------------------------
1996 185,223 57,500 -- -- 781
Peter J. Foster 1997 176,189 27,500 -- 50,000 4,583
President & CEO-VRQ 1998 209,120 309,167 -- 100,000 10,000
- -------------------------------------------------------------------------------------------------------------------------
1996 -- -- -- -- --
Richard Lane (3) 1997 69,132 10,000 -- -- --
Chief Operating Officer 1998 89,879 672,972 -- 100,000 7,495
- -------------------------------------------------------------------------------------------------------------------------
1996 152,390 15,250 -- -- 2,375
Thomas B. Schalk 1997 162,356 14,188 -- 70,000 4,750
Chief Technical Officer 1998 165,620 20,125 -- -- 10,000
- -------------------------------------------------------------------------------------------------------------------------
1996 29,667 --
Carol Mazuy (4) 1997 130,000 3,000 --
VP Sales and Marketing 1998 134,893 134,500 -- 90,000 10,000
- -------------------------------------------------------------------------------------------------------------------------
1996 --
Rene Thibault (5) 1997 119,208 87,996 --
VP Sales & Marketing-VRQ 1998 130,546 179,486 -- 90,000 7,660
- -------------------------------------------------------------------------------------------------------------------------
1996
Ed Gregory 1997 63,904 20,000 -- 200,00 2,517
VP Sales 1998 112,138 48,875 -- -- 10,000
- -------------------------------------------------------------------------------------------------------------------------
1996 120,716 20,000 -- -- 2,111
Kim S. Terry 1997 120,689 -- -- 61,000 3,621
Vice President Finance 1998 133,955 56,750 -- 28,000 10,000
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annual contributions to 401(k) plan.
(2) Mr. Larkin joined the Company November 9, 1998.
(3) Richard Lane joined the Company on April 14, 1998 as a result of the
Company's acquisition of PureSpeech and was elected Chief Operating
Officer by the Board of Directors. Mr. Lane was chief executive officer
of PureSpeech from July 1997 until April 14, 1998. Mr. Lane resigned
from the Company on July 16, 1998. The amounts listed for 1997 were
paid by PureSpeech. The amounts listed for 1998 include amounts paid by
PureSpeech prior to the acquisition and paid by the Company after the
acquisition. A major portion of the bonus amount paid in 1998 was an
obligation resulting from the PureSpeech acquisition.
(4) Carol Mazuy joined the Company on April 14, 1998 as a result of the
Company's acquisition of PureSpeech. Ms. Mazuy was VP of Marketing for
PureSpeech from 1996 until April 14, 1998. Ms. Mazuy resigned from the
Company effective December 31, 1998. The amounts listed for 1996 and
1997 were paid by PureSpeech. The amounts listed for 1998 include
amounts paid by PureSpeech prior to the acquisition and paid by the
Company after the acquisition. A major portion of the bonus amount paid
in 1998 was an obligation resulting from the PureSpeech acquisition.
(5) Rene Thibault joined the Company on April 14, 1998 as a result of the
Company's acquisition of PureSpeech. Mr. Thibault was VP of Sales for
PureSpeech from 1997 until April 14, 1998. From 1990 until joining
PureSpeech, Mr. Thibault held a number of positions with Centigram
serving last as VP of Sales, Service Provider, North America. The
amounts listed for 1997 were paid by PureSpeech. The
4
<PAGE> 6
amounts listed for 1998 include amounts paid by PureSpeech prior to the
acquisition and paid by the Company after the acquisition. A major
portion of the bonus amount paid in 1998 was an obligation resulting
from the PureSpeech acquisition.
5
<PAGE> 7
The following table sets forth certain information concerning options and
warrants granted during 1998 to Named Executives:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
====================================================================================================================
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------------------------------
% of Total
Options Granted Options Granted to Exercise or Base
Name (# of Shares) Employees in Fiscal Price ($/Share) Expiration Date
Year
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ronald H. Larkin (1)
President and CEO 400,000 24% $2.125 11/2008
- --------------------------------------------------------------------------------------------------------------------
Peter J. Foster (2)
President and CEO-VRQ 100,000 6% $5.125 5/2008
- --------------------------------------------------------------------------------------------------------------------
Thomas B. Schalk
Chief Technical Officer -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
Kim S. Terry (3)
Vice President Finance 28,000 2% $5.125 5/2008
====================================================================================================================
</TABLE>
(1) 200,000 of the options granted, vest at a rate of 20% per year
beginning with the first anniversary date. 200,000 of the options vest
upon achievement of performance targets and other objectives to be set
by the Compensation Committee and approved by the Board of Directors.
(2) Options vested December 31, 1998.
(3) Options vest 50% at December 31, 1998 and 50% at July 31, 1999.
6
<PAGE> 8
The following table summarizes options exercised during 1998 and presents the
value of unexercised options held by Named Executives at fiscal year end:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
====================================================================================================================
Number of Unexercised Value of Unexercised
Options at Fiscal Year In-the-Money Options at
End Fiscal Year-End (1)
Shares Value (# of shares) ($)
Acquired on Realized Exercisable (E)/ Exercisable (E)/
Name Exercise (#) ($) Unexercisable (U) Unexercisable (U)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-- (E) $0 (E)
Ronald H. Larkin -- $0 400,000 (U) $0 (U)
- ---------------------------------------------------------------------------------------------------------------------
332,242 (E) $42,147 (E)
Peter J. Foster 19,750 -- 52,500 (U) $0 (U)
- ---------------------------------------------------------------------------------------------------------------------
103,377 (E) $10,978 (E)
Thomas B. Schalk 10,000 $0 56,000 (U) $0 (U)
- ---------------------------------------------------------------------------------------------------------------------
Kim S. Terry -- $0 23,525 (E) $0 (E)
62,800 (U) $0 (U)
====================================================================================================================
</TABLE>
(1) Based upon the closing price of the Company's Common Stock on the
Nasdaq National Market System on December 31, 1998 ($1.75), less the
exercise price, multiplied by the number of shares covered by the
option; options with exercise prices equal to or greater than $1.75
were excluded from the calculation of the value of unexercised options.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement, which expired June 18,
1998, with Peter J. Foster providing that Mr. Foster will serve as President and
Chief Executive Officer. Mr. Foster receives an annual salary of $175,500, plus
an annual bonus of $27,500 and an unaccountable discretionary expense allowance
of $27,600 annually. The agreement contains confidentiality and invention
assignment provisions. The agreement also contains non-solicitation and
non-competition provisions that extend for twenty-four months following the
termination of Mr. Foster's employment; there can be no assurance regarding the
enforceability of such provisions under Texas law. In the event that (i) Mr.
Foster's employment is terminated without cause or he resigns as a result of a
breach of the agreement by the Company, or (ii) Mr. Foster resigns under certain
circumstances following a Change in Control (as defined) of the Company, Mr.
Foster will be entitled to a lump-sum cash payment equal to 100% or 150%,
respectively, of his annual aggregate compensation and any unused vacation time,
and the period in which he can exercise stock options will be extended for one
year. The Company agreed to indemnify Mr. Foster for losses sustained and
expenses incurred as a result of the discharge of his duties, to the full extent
permitted by law. In February, 1999, the Company and its wholly-owned
subsidiary, Voice Request Corporation entered an agreement regarding severance
with Mr. Foster which provides for Mr. Foster to receive a cash payment in the
amount of $225,000 plus certain educational benefits, should Mr. Foster's
employment be terminated.
The Company has entered into an employment agreement with Dr. Thomas B. Schalk
providing that Dr. Schalk will serve as Chief Technical Officer until June 18,
1998, which agreement shall be extended for one additional one-year period
unless either the Company or Dr. Schalk notifies the other party of an intention
to terminate the agreement 30 days prior to the end of the present term. Dr.
Schalk receives an annual salary of $155,000, plus a performance bonus of up to
$12,500 per calendar quarter based upon Dr. Schalk's exceptional achievements
during the quarter as determined by the Compensation Committee of the Board of
Directors. The agreement contains confidentiality and invention assignment
provisions. The agreement also contains solicitation and non-competition
provisions that extend for twenty-four months following the termination of Dr.
Schalk's employment; there can be no assurance regarding the enforceability of
such provisions under Texas law. In the event that (i) Dr. Schalk's employment
is terminated without cause or he resigns as a result of a breach of the
agreement by the Company, or (ii) Dr. Schalk resigns under certain circumstances
following a Change in Control (as defined) of the Company, Dr. Schalk will be
entitled to a lump-sum cash payment equal to 150% of his annual aggregate
compensation and any unused vacation time, and the period in which he can
exercise stock options will be extended for one year. The Company agreed to
7
<PAGE> 9
indemnify Dr. Schalk for losses sustained and expenses incurred as a result of
the discharge of his duties, to the full extent permitted by law.
REPRICING OF OPTIONS
On November 12, 1997, the Board of Directors authorized granting new employee
stock options to all employees in exchange for previously issued stock options
with exercise prices greater than $6.00. The new options have an exercise price
of $3.75 vest 20% per year beginning November 12, 1998. Peter Foster was issued
50,000 new options to exchange for 50,000 options granted in 1996 with an
exercise price of $6.00. Tom Schalk was issued 70,000 new options in exchange
for 70,000 options granted in 1996 with exercise prices of $6.00-$10.94. Kim
Terry was issued 61,000 new options in exchange for 61,000 options granted in
1996 with exercise prices of $6.00-$10.94.
8
<PAGE> 10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 31, 1999, with respect to
(i) each person known by the Company to be the beneficial owner of more than 5%
of outstanding Common Stock; (ii) shares of Common Stock beneficially owned by
Named Executives and the Nominees, and (iii) each current director and by all
current directors and executive officers of the Company as a group (10 persons
at such date):
<TABLE>
<CAPTION>
Common Stock Ownership
------------------------------------------
<S> <C> <C>
Name of Beneficial Owner Number of Shares Percent of Class
(i) Certain Beneficial Owners
Creative Technology Ltd. 1,020,324 7.45%
67 Ayer Rajah Cresent #03-18
Republic of Singapore 139950
Dialogic Corporation 1,399,715 10.22%
1515 Route 10
Parsippany, NJ 07054
Wellington Management Co., LLP 1,140,000 8.33%
75 State Street
Boston, MA 07054
(ii) Directors and Named Executive Officers:
Kenneth Burkhardt 50,000(1) **
Peter J. Foster 602,286(2) 4.25%
Melvyn J. Goodman 508,720(3) 3.68%
Ronald H. Larkin -- **
John Lucas Tooth 60,000(4) **
Neal J. Robinson 529,997(5) 3.82%
John B. Torkelsen 352,506(6) 2.56%
Thomas B. Schalk 122,890(7) **
Kim S. Terry 118,888(8) **
(iii) All Current Directors and executive
officers as a group (9 persons) 2,345,287(9) 16.08%
</TABLE>
** Represents less than 1%.
(1) Includes 50,000 shares issuable upon exercise of warrants.
(2) Includes 28,007 shares held by Mr. Foster's wife, as to which
beneficial ownership is disclaimed and 11,174 shares held in trust for
Mr. Foster's minor children. Includes 474,120 shares issuable upon
exercise of vested options.
(3) Includes 26,120 shares issuable upon exercise of options and 100,000
shares issuable upon exercise of warrants. Includes 188,800 shares
owned by Philgood Investments, Inc., which Mr. Goodman shares voting
power. Includes 5,000 shares held by Mr. Goodman's wife, as to which
Mr. Goodman disclaims beneficial ownership.
(4) Includes 60,000 shares issuable upon exercise of warrants.
(5) Includes 145,753 issuable upon exercise of options and 175,000 issuable
upon exercise of warrants.
(6) Includes 100,000 shares issuable upon exercise of warrants.
(7) Includes 103,377 issuable upon exercise of vested options.
(8) Includes 93,525 issuable upon exercise of vested options and warrants.
(9) Includes 807,895 shares issuable upon exercise of vested options and
520,000 issuable upon exercise of warrants.
9
<PAGE> 11
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ISSUANCE OF OPTIONS AND WARRANTS
In November 1997 John Torkelsen, John Lucas-Tooth, Melvyn Goodman, Neal Robinson
were each granted the right to purchase warrants for $.01 per warrant pursuant
to the Director compensation package adopted in February 1996. The warrants
expire after five years and are exercisable at $3.375 per share.
On November 12, 1997, the Board of Directors authorized granting new employee
stock options to all employees in exchange for previously issued stock options
with exercise prices greater than $6.00. The new options have an exercise price
of $3.75 vest 20% per year beginning November 12, 1998. Peter Foster was issued
50,000 new options to exchange for 50,000 options granted in 1996 with an
exercise price of $6.00. Tom Schalk was issued 70,000 new options in exchange
for 70,000 options granted in 1996 with exercise prices of $6.00-$10.94. Kim
Terry was issued 61,000 new options in exchange for 61,000 options granted in
1996 with exercise prices of $6.00-$10.94.
On April 16, 1998, the Company granted Neal Robinson warrants to purchase 75,000
shares of Common Stock for $.01 per warrant at an exercise price of $6.25. The
warrants expire April 16, 2003.
On May 14, 1998, the Company granted Peter Foster and Kim Terry options to
purchase 100,000, and 28,000 shares, respectively, of Common Stock at an
exercise price of $5.125 per share. In addition, the Board of Directors
authorized the exchange of 28,000 of options held by Ms. Terry for warrants.
On September 10,1998 John Torkelsen, John Lucas-Tooth, Melvyn Goodman, Neal
Robinson were each granted the right to purchase warrants for $.01 per warrant
pursuant to the Director compensation package adopted in February 1996. The
warrants expire after five years and are exercisable at $1.75 per share.
In November 1998, the Company granted Ronald Larkin options to purchase 400,000
shares of Common Stock at an exercise price of $2.125. 200,000 of the options
vest ratably over five years. The remaining 200,000 options vest upon
achievement of performance targets and other objectives to be set by the
Compensation Committee and approved by the Board of Directors.
In December 1998, Neal Robinson, Ken Burkhardt, Mel Goodman, John Lucas-Tooth,
and John Torkelsen were each granted the right to purchase 50,000 warrants for
$.01 per warrant with an exercise price of $2.56 per share.
The warrants expire December 10, 2003.
OTHER TRANSACTIONS
During 1997, Dialogic purchased products and services from the Company at a cost
of $4,215,937. During 1998, Dialogic purchased products and services from the
Company at a cost of $3,305,000.
In March 1997, the Company extended the terms of Dr. Schalk's employment
agreement through June 18, 1998.
In March 1997, $500,000 of prepaid royalty from Creative Technology was
recognized. An additional $200,000 was recognized in Decmeber 1998.
In February 1998, Tom Schalk exercised 10,000 options.
In March and April 1998, Peter Foster exercised a total of 19,750 options.
During 1998, the Company paid Neal Robinson $225,000 for financial consulting
services.
In February 1999, the Company entered an agreement regarding severance with Mr.
Foster. (See Employment Agreements.)
10
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Voice Control Systems, Inc.
Date: April 30, 1999
By: /s/ KIM S. TERRY
-------------------------------------
Kim S. Terry
Vice President Finance and Principal
Accounting Officer
11
