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As filed with the Securities and Exchange Commission on March 23, 1998.
REGISTRATION NO. 333-44053
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NUMBER 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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APPLIED VOICE RECOGNITION, INC.
(Exact name of registrant ass specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6770 87-042552
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
4615 POST OAK PLACE, SUITE 111
Houston, Texas 77027
(713) 621-5678
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
TIMOTHY J. CONNOLLY With copies to:
CHIEF EXECUTIVE OFFICER AND ROBERT G. REEDY
CHAIRMAN OF THE BOARD PORTER & HEDGES, L.L.P.
APPLIED VOICE RECOGNITION, INC. 700 LOUISIANA, 35TH FLOOR
4615 POST OAK PLACE, SUITE 111 HOUSTON, TEXAS 77002-2764
HOUSTON, TEXAS 77027 (713) 226-0600
(713) 621-5678
(Name and address, including zip
code, and telephone number,
including area code, of agent
for service)
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with a dividend or
interest reinvestment plan, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED SHARE (1) PRICE (1) FEE (1)
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<S> <C> <C> <C> <C>
Common Stock, par value $.001 per
share(2).......................... 1,687,500 $2.1875 $3,691,406.25 $1,089
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Common Stock, par value $.001 per
share(3).......................... 503,750 $2.1875 $1,101,953.13 $326
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Common Stock, par value $.001 per
share............................. 119,375 $2.1875 $261,132.81 $78
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Common Stock, par value $.001 per
share(4).......................... 2,500,000 $2.1875 $5,468,750.00 $1,614
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TOTAL........................... 4,810,625 $2.1875 $10,523,242.19 $3,107
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</TABLE>
(1) Pursuant to Rule 457(c), the registration fee is calculated based on the
average of the high and low prices for the Common Stock, as reported by the
Nasdaq Over the Counter Bulletin Board on March 17, 1998, of $2.1875 per
share. The Company paid $1,902 of the total fee due on January 9, 1998, and
the balance of $1,205 is paid herewith.
(2) Issuable upon conversion of 312,500 shares of Series A Preferred Stock, par
value $.10 per share (the "Series A Preferred Stock"). For the purpose of
estimating the number of shares of Common Stock to be included in the
Registration Statement of which this Prospectus is a part, the Company
calculated the number of shares of Common stock issuable in connection with
the conversion of the Company's Series A Preferred Stock using the current
conversion rate of the Series A Preferred Stock of 5.40 shares of Common
Stock for each share of Series A Preferred Stock (subject to adjustment).
In addition to the estimated number of shares set forth in the table, the
amount to be registered includes a presently indeterminate number of shares
issuable upon conversion of or otherwise in respect of the Series A
Preferred Stock as such number may be adjusted as a result of stock split,
stock dividend and antidilution provisions (including floating rate
conversion prices) in accordance with Rule 416.
(3) Issuable upon exercise of (i) an option for 168,750 shares at an exercise
price of $1.78 per share, (ii) an option for 150,000 shares at an exercise
price of $2.23125 per share, (iii) an option for 30,000 shares at an
exercise price of $4.00 per share, (iv) an option for 25,000 shares at an
exercise price of $4.25 per share, (v) an option for 30,000 shares at an
exercise price of $4.50 per share, and (vi) a warrant for 100,000 shares at
an exercise price equal to 75% of the average closing sale price of the
Common stock during the 5 trading days immediately prior to the exercise
date of the warrant, which would have resulted in an exercise price of
$1.678125 per share on March 18, 1998. Also includes an indeterminate
number of shares issuable on exercise of each of the options or warrants as
adjusted pursuant to antidilution provisions of the respective options and
warrants in accordance with Rule 416.
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(4) Issuable upon conversion of 3,000 shares of Series B Preferred Stock, par
value $.10 per share (the "Series B Preferred Stock"). The Series B
Preferred Stock has a floating conversion rate calculated by dividing the
$1,000 stated value of the shares being converted by an amount equal to 78%
of the 5 day average closing bid price of the Common Stock. On March 18,
1998, the Series B Preferred Stock would have been convertible into an
aggregate of 1,788,908 shares of Common Stock. For the purpose of
estimating the number of shares of Common Stock to be included in the
Registration Statement of which this Prospectus is a part, the Company has
estimated the maximum number of shares to be issued upon conversion of the
Series B Preferred Stock to be 2,500,000 shares of Common Stock. In
addition to the estimated number of shares set forth in the table, the
amount to be registered includes a presently indeterminate number of shares
issuable upon conversion of or otherwise in respect of the Series B
Preferred Stock as such number may be adjusted as a result of stock split,
stock dividend and antidilution provisions (including floating rate
conversion prices) in accordance with Rule 416.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS APPLIED VOICE RECOGNITION, INC.
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4,810,625 Shares
Common Stock
This Prospectus relates to 4,810,625 shares of common stock, par value $.001
per share (the "Common Stock"), of Applied Voice Recognition, Inc., a Delaware
Corporation (the "Company"), which shares will be offered for resale from time
to time by certain stockholders of the Company (the "Selling Stockholders"). Of
these shares, 4,545,625 relate to the Company's private placement of its Series
A Preferred Stock, par value $.10 per share (the "Series A Preferred Stock"),
that was completed on August 1 and August 11, 1997 (collectively, the "Series A
Private Placement"), and the private placement of its Series B Preferred Stock,
par value $.10 per share (the "Series B Preferred Stock"), that was completed on
March 11, 1998 (the "Series B Private Placement"). The Series A and Series B
Private Placements are herein collectively referred to as the "Private
Placements." The 312,500 shares of Series A Preferred Stock sold in the Series
A Private Placement are currently convertible into an aggregate of 1,687,500
shares of Common Stock (subject to adjustment) (the "Series A Conversion
Shares"), and the 3,000 shares of Series B Preferred Stock sold in the Series B
Private Placement, which have a floating conversion rate, were convertible into
an aggregate of 1,788,908 shares of Common Stock (subject to adjustment) (the
"Series B Conversion Shares") as of March 18, 1998. The Company has estimated
the maximum number of Series B Conversion Shares to be issued to be 2,500,000
shares of Common Stock and has registered that number of shares herein. The
Series A and Series B Conversion Shares are herein collectively referred to as
the "Conversion Shares." In addition, the placement agent in the Series A
Private Placement (the "Series A Placement Agent") received 89,375 shares of
Common Stock, options to acquire another 168,750 shares of Common Stock (the
"Series A Placement Agent Options"), and warrants to acquire another 100,000
shares of Common Stock (the "Series A Placement Agent Warrants"). The 358,125
shares of Common Stock issued to the Series A Placement Agent and issuable on
exercise of the Series A Placement Agent Options and the Series A Placement
Agent Warrants are herein collectively referred to as the "Series A Placement
Agent Shares." The remaining 265,000 shares registered hereby (the "Service
Shares") are comprised of 30,000 shares and 235,000 shares of Common Stock
issuable upon exercise of options to purchase that number of shares (the
"Services Options") issued to certain Selling Stockholders in exchange for
services rendered to the Company (the "Services"). In connection with the
Private Placements and the Services, the Company agreed to register the resale
of the Conversion Shares, the Series A Placement Agent Shares and the Services
Shares (herein collectively referred to as the "Shares").
Pursuant to this Prospectus, the Shares may be offered by the Selling
Stockholders, or by certain pledgees, donees, transferees or other successors in
interest to the Selling Stockholders, from time to time in transactions on the
Nasdaq Over-the-Counter Bulletin Board ("OTCBB") or such other exchange or
market as the Common Stock may be listed from time to time, in privately
negotiated transactions, or by a combination of such methods of sale, at fixed
prices that may be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Selling Stockholders may effect such transactions by selling the Shares to or
through broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Stockholders or
the purchasers of the Shares for whom such broker-dealers may act as agent or to
whom they sell as principal or both (which compensation to a particular broker-
dealer might be in excess of customary commissions). See "Selling Stockholders"
and "Plan of Distribution."
Other methods by which the Shares may be sold include, without limitation:
(i) transactions which involve cross or block trades or any other transaction
permitted by the OTCBB or other trading markets, (ii) "at the market" to or
through market makers or into an existing market for the Common Stock, (iii) in
other ways not involving market makers or established trading markets, including
direct sales to purchasers or sales effected through agents, (iv) through
transactions in options or swaps or other derivatives (whether exchange-listed
or otherwise), (v) through short sales, or (vi) any combination of any such
methods of sale. The Selling Stockholders may also enter into option or other
transactions with broker-dealers which require the delivery to such broker
dealers of the Common Stock offered hereby, which Common Stock such broker-
dealers may resell pursuant to this Prospectus.
None of the proceeds from the sale of the Shares by the Selling Stockholders
will be received by the Company. However, the Company will receive
approximately $1,164,125 upon the exercise of the Series A Placement Agent
Options, Series A Placement Agent Warrants and the Services Options. The
Company has agreed to bear certain expenses (other than any underwriting
discounts and selling commissions and any fees and disbursements of counsel for
the Selling Stockholders not specifically provided for by the parties),
estimated to be approximately $20,607, in connection with the registration and
sale of the Shares being offered by the Selling Stockholders. Pursuant to a
Registration Rights Agreements with certain Selling Stockholders, the Company
has agreed to indemnify certain of the Selling Stockholders and each underwriter
against certain liabilities, including certain liabilities under the Securities
Act of 1933, as amended, or will contribute to payments such Selling
Stockholders or underwriters may be required to make in respect of certain
losses, claims, damages or liabilities.
The shares of Common Stock are quoted on the OTCBB under the symbol "AVRI."
On March 20, 1998, the last reported sale price of the Common Stock was $2.50
per share.
SEE "RISK FACTORS" ON PAGES 3-7 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is March 23, 1998.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. and at the Commission's regional offices at the
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511 and 7 World Trade Center, Suite 1300, New York, 10048. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, the Commission maintains a World Wide Web
site at http://www.sec.gov that contains reports, proxy and information
statements, and other information regarding registrants that file electronically
with the Commission.
The Company has filed with the Commission a Registration Statement on Form
S-3 (including any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
shares of Common Stock offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock, reference is made to the Registration Statement and the exhibits
and schedules thereto. Statements made in this Prospectus regarding the
contents of any contract or document filed as an exhibit to the Registration
Statement are not necessarily complete and, in each instance, reference is
hereby made to the copy of such contract or document so filed. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following are hereby incorporated by reference in this Prospectus:
(1) The Company's Annual Report on Form 10-K SB for the fiscal year ended
December 31, 1996;
(2) The Company's Forms 10-QSB for the periods ended March 31, June 30 and
September 30, 1997;
(3) The Company's Current Reports on Form 8-K dated January 30, 1997 (which
amended the Company's Form 8-K filed December 24, 1996), and January 20,
1998; and
(4) The description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A effective January 9, 1998 (Commission
File No. 000-23607), including any amendments or reports filed for the
purpose of updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the offering covered hereby will be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference in this Prospectus shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any other subsequently filed document that
also is or is deemed to be incorporated by reference modifies or replaces such
statement.
The Company will provide, without charge and on oral or written request, to
each person to whom this Prospectus is delivered, a copy of any or all of the
documents incorporated by reference in this Prospectus other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into the information that this Prospectus incorporates. In addition, a copy of
the Company's most recent annual report to stockholders will be promptly
furnished, without charge and on oral or written request, to such persons. All
such requests should be directed to Applied Voice Recognition, Inc., 4615 Post
Oak Place, Suite 111, Houston, Texas 77027, Attention: William T. Kennedy, Chief
Financial Officer (telephone (713) 621-5678).
THE COMPANY
Applied Voice Recognition, Inc., a Delaware corporation (the "Company"),
develops, markets and supports original applications for automated speech
recognition systems used to create documents and interact with computers by
voice commands. The Company's principal executive offices are located at 4615
Post Oak Place, Suite 111, Houston, Texas 77027, and its telephone number is
(713) 621-5678.
RECENT DEVELOPMENTS.
On March 18, 1998, the Company signed a letter of intent to merge with Voice
It Worldwide, Inc. ("Voice It"). Pursuant to the merger, Voice It shareholders
will receive six-tenths (.6) of a share of the Company's Common Stock for each
share of Voice It common stock outstanding. The Company will be the surviving
entity. The closing is subject to negotiation of a definitive merger agreement
by March 31, 1998, approval by the respective shareholders of the Company and
Voice It and certain other conditions. The transaction is anticipated to close
during the third quarter of 1998.
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RISK FACTORS
In evaluating the Company and its business, prospective investors should
carefully consider all of the information set forth in this Prospectus and
should give particular attention to the following risk factors.
LIMITED OPERATING HISTORY; ANTICIPATION OF CONTINUED LOSSES.
The predecessor of the Company was founded in November 1994 and for the nine
months ended September 30, 1997 generated sales of only $785,327. The Company
has also incurred significant net losses since inception and expects to continue
to incur significant losses on a quarterly and annual basis for the foreseeable
future. As of September 30, 1997, the Company had an accumulated deficit of
$2,802,307. Accordingly, the Company has a limited operating history upon which
an evaluation of the Company and its prospects can be based. The Company and
its prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets. To
address these risks, the Company must, among other things, respond to
competitive developments, continue to attract, retain and motivate qualified
persons, successfully implement its advertising program and continue to upgrade
its technologies and commercialize products and services incorporating such
technologies. There can be no assurance that the Company will be successful in
addressing such risks. The Company has achieved only limited revenues to date,
and its ability to generate significant revenues is subject to substantial
uncertainty. The limited operating history of the Company makes the prediction
of future results of operations difficult or impossible, and therefore, there
can be no assurance that the Company will sustain revenue growth or achieve
profitability.
DEVELOPING MARKET; UNPROVEN ACCEPTANCE OF THE COMPANY'S PRODUCTS AND SERVICES.
The market for the Company's products and services, the automated speech
recognition ("ASR") market, has only recently begun to develop, is characterized
by rapidly changing technology, evolving industry standards and customer
demands, and frequent new product introductions and enhancements. The ASR
market is highly dependent upon the increased use of speech recognition
technology and continued price and performance improvements in personal
computers, as new generations of microprocessors are developed and introduced.
The Company's future operating results will depend upon the emergence of ASR
technology, the Company's ability to develop and improve its technology and the
successful implementation of the Company's marketing plan. There can be no
assurance, however, that the ASR market will develop, that the Company will
achieve market acceptance of its products and services or that the Company will
be able to execute its business plan successfully. As is typical in the case of
a new and rapidly evolving industry, demand and market acceptance for recently
introduced products and services are subject to a high level of uncertainty.
The industry is young and has few proven products. If widespread use of ASR
technology does not develop, the Company's business, results of operations and
financial condition will be materially adversely affected. Because the market
for the Company's products and services is new and evolving, it is difficult to
predict the size of this market and growth rate, if any. There can be no
assurance that the market for the Company's products and services will develop
or that demand for the Company's products or services will emerge or become
sustainable. If the market fails to develop, develops more slowly than expected
or becomes saturated with competitors, or if the Company's products and services
do not achieve or sustain market acceptance, the Company's business, results of
operations and financial condition will be materially adversely affected.
DEPENDENCE ON PRINCIPAL PRODUCT.
To date, the Company has had limited revenues from sales of its
VOICECOMMANDER(TM) line of products, however, the Company expects that in the
foreseeable future it will derive substantially all of its revenues from sales
of the VOICECOMMANDER(TM) line and related products and from fees for related
services. As a result, any factors adversely affecting the sales of the
VOICECOMMANDER(TM) line, such as increased price competition or the introduction
of technologically superior products, could have a material adverse effect on
the Company. The Company's future financial performance will depend in
significant part on its ability to develop and introduce new releases of
VOICECOMMANDER(TM) with enhanced features and functionalities and related
products. There can be no assurance that any such new releases or products will
be successfully developed or achieve market acceptance. VOICECOMMANDER(TM) is a
full featured, speech-driven office suite, that enables users to operate their
computers by voice commands designed for businesses and high-powered computer
users. In addition, the Company has recently introduced a reduced functionality
version of VOICECOMMANDER(TM) called SPEECHCOMMANDER(TM). SPEECHCOMMANDER(TM) is
intended to be a mass market product designed for personal use. The Company is
also developing a series of solutions based upon VOICECOMMANDER(TM) for the
healthcare market. There can be no assurance that the Company will be successful
in developing these or other products or services or that such products and
services will meet with market acceptance. In addition, new product releases by
the Company, whether improved versions of its current ASR products or
introductions of other new products may contain undetected errors that require
significant design modifications, resulting in a loss of customer confidence and
viewer support and adversely affecting the use of the Company's product(s), and
services and, consequently, the Company's business, results of operations or
financial condition. The Company's future success will depend in significant
part on its ability to develop new product releases and to continually improve
the performance, features
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and reliability of its current ASR products in response to both evolving demands
of the marketplace and competitive product offerings, and there can be no
assurance that the Company will be successful in doing so.
DEPENDENCE ON PROPRIETARY RIGHTS; RELATIONSHIP WITH IBM.
All of the Company's current products utilize the ViaVoice(TM) speech
recognition technology from IBM. The Company has a non-exclusive OEM
Distribution Agreement with IBM that entitles the Company to embed and utilize
IBM's ViaVoice(TM) technology in its products. For each unit of the Company's
product that it licenses (sells) it pays IBM a license fee. No assurance can be
given that IBM will continue to manufacture and support ViaVoice(TM) or that the
Company's arrangement with IBM will not be terminated. The agreement with IBM
expires on December 17, 1998, unless renewed, and may be terminated by IBM at
any time prior to its expiration for acts or omissions that are considered to be
so serious as to warrant termination. The Company believes that if IBM
discontinued or was unable to manufacture or support ViaVoice(TM) or terminated
its agreement with the Company that, with adequate time, the Company could
develop its products to utilize speech technology from companies in addition to
IBM, and the Company is currently in the process of developing products for this
alternative technology. However, there can be no assurances that the Company
will ever be able to successfully develop such products. If the Company is
unable to utilize the ViaVoice(TM) technology, for any reason, and is unable to
develop products capable of utilizing alternative technology, the Company's
business, results of operations and financial condition would be materially
adversely affected.
COMPETITION.
The market for ASR products and services is highly competitive. There are no
substantial barriers to entry, and the Company expects that competition will
continue to intensify. Although the Company believes that the diverse segments
of the ASR technology market will provide opportunities for more than one
supplier of products and services similar to those of the Company, it is
possible that a single supplier may dominate one or more market segments. The
Company believes that the principal competitive factors in this market are name
recognition, performance, ease of use, variety of value-added services,
functionality and features and quality of support. A number of companies offer
competitive products addressing certain of the Company's target markets. The
primary competitors of the Company's products and services are Norcom,
VoicePilot, KOLVOX and Digital Dictate. In the future, the Company may
encounter competition from new input/control devices as yet undeveloped. Many
of the Company's existing competitors, as well as a number of potential new
competitors, have significantly greater financial, technical and marketing
resources than the Company. The Company may also be adversely affected by
competition from licensees of its products and technology. There can be no
assurance that the Company's competitors will not develop ASR products and
services that are superior to those of the Company or that achieve greater
market acceptance than the Company's offerings. Moreover, a number of the
Company's current customers have also established relationships with certain of
the Company's competitors and future customers may establish similar
relationships. There can be no assurance that the Company will be able to
compete successfully against its current or future competitors or that
competition will not have a material adverse effect on the Company's business,
results of operations and financial condition.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING.
The Company expects to incur additional substantial losses for the
foreseeable future, and may require substantial additional capital for it to
achieve profitability. The Company's long-term capital requirements will depend
on many factors, including, but not limited to, revenue from operations, working
capital requirements, product development expenses and capital expenditures.
Historically, the Company has relied upon the sale of equity securities and
short-term loans as sources of funding. To the extent that existing resources
are insufficient to fund the Company's activities in the short or long term, the
Company will need to raise additional funds through public or private
financings. It is anticipated that the Company will require additional funds
within the next twelve months in order to achieve its business plan.
Specifically, the Company anticipates that it will incur significant marketing
and development costs in 1998 and beyond relating to the commercialization of
its VOICECOMMANDER(TM) and SPEECHCOMMANDER(TM) products. No assurance can be
given that additional financing will be available or that, if available at all,
the terms of such financing will be favorable to the Company or to its
shareholders without substantial dilution of their ownership and rights. If
adequate funds are not available to satisfy either short- or long-term
requirements, the Company may be required to curtail its operations
significantly, forego market opportunities or obtain funds through arrangements
with strategic partners or others that may require the Company to relinquish
material rights to certain of its technologies or potential markets.
MANAGEMENT OF GROWTH; NEED TO ESTABLISH INFRASTRUCTURE; ADDITIONAL PERSONNEL.
The rapid execution necessary for the Company to successfully offer its
products and services and implement its business plan in a rapidly evolving
market requires an effective planning and management process. The Company's
rapid growth has placed, and is expected to continue to place, a significant
strain on the Company's managerial, operational and financial resources. To
manage its growth, the Company must continue to implement and improve its
operational and financial systems and to expand, train and manage its employee
base. There can be no assurance that the Company has made
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adequate allowances for the costs and risks associated with this expansion, that
the Company's systems, procedures or controls will be adequate to support the
Company's operations or that the Company's management will be able to achieve
the rapid execution necessary to successfully offer the Company's products and
services and implement its business plan. The Company's future operating results
will also depend on its ability to expand its sales and expand its support
organization commensurate with the growth of its business. Any failure by the
Company's management to effectively anticipate, implement and manage the changes
required to sustain the Company's growth would have a material adverse effect on
the Company's business, financial condition and results of operations. There can
be no assurance that the Company will be able to effectively manage such change.
INTELLECTUAL PROPERTY AND PROPERTY RIGHTS.
The Company's success is heavily dependent upon a combination of proprietary
software technology and hardware purchased and licensed from third parties. The
Company does not have any issued patents and currently relies on a combination
of trade secret, copyright and trademark laws, non-disclosure agreements and
contractual provisions to protect its proprietary rights in its software and
technology. However, there can be no assurance that the steps taken by the
Company will prevent misappropriation of this technology. Moreover, third
parties could independently develop competing technologies that are
substantially equivalent or superior to the Company's technologies. Although
the Company believes that its services and products and the proprietary rights
developed or licensed by it do not infringe patents and proprietary rights of
other parties, there can be no assurance that infringement claims, regardless of
merit, will not be asserted against the Company in the future. In addition, the
Company has applied for twelve federal service mark and trademark registrations
for certain of the marks it uses, including "VOICECOMMANDER(TM)" and
"SPEECHCOMMANDER(TM)." There can be no assurance that the Company will receive
such service mark or trademark protection or that such protection will be
adequate to protect the Company's marks.
The Company has four patent applications pending, including a "voice
activated kiosk," a "voice activated in-flight ordering and inventory system," a
"voice response expense recording system" and a "visual voice editing device."
There can be no assurance that any patent applications now pending or filed in
the future will result in patents being issued or, if patents are issued, that
the claims allowed will be sufficiently broad to protect what the Company
believes to be its proprietary rights. In addition, there can be no assurance
that pending applications or any patents licensed to the Company or issued or
licensed to the Company in the future will afford any competitive advantages to
the Company or will not be challenged by third parties or circumvented or
designed around by others. The cost of litigation to uphold the validity and
prevent infringement of patents and to enforce licensing rights can be
substantial. Furthermore, there can be no assurance that others will not
independently develop similar technologies or duplicate the technology owned by
or licensed to the Company or design around the patented aspects of such
technology. There can be no assurance that the services and products the
Company markets or will seek to market do not or will not infringe patents or
other rights owned by others, licenses for which may not be available to the
Company.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS.
As a result of the Company's limited operating history, the Company does not
have historical financial data for any significant period of time on which to
base planned operating expenses. The Company's expense levels are based in part
on its expectations as to future revenues and to a large extent are fixed.
Quarterly sales and operating results are generally difficult to forecast. The
Company may not be able to adjust spending in a timely manner to compensate for
any unexpected revenue shortfall. Accordingly, any significant shortfall in
relation to the Company's expectations would have an immediate adverse impact on
the Company's business, results of operations and financial condition. In
addition, the Company plans to significantly increase its operating expenses to
fund greater levels of research and development, increase its sales and
marketing operations, develop new distribution channels, broaden its customer
support capabilities and establish brand identity and strategic alliances. To
the extent that such expenses precede or are not subsequently followed by
increased revenues, the Company's business, results of operations and financial
condition will be materially adversely affected.
The Company's operating results may fluctuate significantly in the future as
a result of a variety of factors, some of which are outside of the Company's
control. These factors include general economic conditions, specific economic
conditions in the ASR industry, usage of ASR technology, seasonal trends in
sales, capital expenditures and other costs relating to the expansion of
operations, the introduction of new products or services by the Company or its
competitors, the mix of the services sold and the channels through which those
services are sold and pricing changes. As a strategic response to a changing
competitive environment, the Company may elect from time to time to make certain
pricing, service or marketing decisions or acquisitions that could have a
material adverse effect on the Company's business, results of operations and
financial condition. The Company believes that period to period comparisons of
its operating results are not meaningful and should not be relied upon for an
indication of future performance. Due to all of the foregoing factors, it is
likely that in some future quarter, the Company's operating results may be below
the expectations of public market analysts and investors. In such event, the
price of the Company's Common Stock would likely be materially adversely
affected.
5
<PAGE>
DEPENDENCE ON KEY PERSONNEL.
The Company's performance is substantially dependent on the performance of
its executive officers and key employees all of whom have worked together for a
relatively short period of time. In particular, the services of Timothy (TM).
Connolly or H. Russell Douglas would be difficult to replace. The Company has
entered into employment agreements with Messrs. Connolly and Douglas. The
Company has a $1,000,000 key person life insurance policy on the life of Mr.
Connolly; however, $1,000,000 may not be sufficient to compensate the Company
for the loss of Mr. Connolly's services. The Company does not have such
policies in place on any of its other employees. The loss of the services of
any of its executive officers or other key employees could have a material
adverse effect on the business, results of operations or financial condition of
the Company. The Company is heavily dependent upon its ability to attract,
retain and motivate skilled technical and managerial personnel. The Company's
future success also depends on its continuing ability to identify, hire, train
and retain other highly qualified technical and managerial personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company will be able to attract, assimilate or retain other highly qualified
technical and managerial personnel in the future. The inability to attract,
hire or retain the necessary technical and managerial personnel could have a
material adverse effect upon the Company's business, results of operations or
financial condition.
CONCENTRATION OF STOCK OWNERSHIP.
The Company's officers, directors and holders of more than 5% of the
outstanding securities of the Company directly or indirectly beneficially own or
have voting control over shares representing approximately 80.59% of the votes.
Accordingly, these shareholders will have substantial influence over the
policies and management of the Company, and if these shareholders act as a
group, they will be able to elect substantially all of the Company's
directors.
CERTAIN ANTI-TAKEOVER PROVISIONS AFFECTING STOCKHOLDERS.
The Company's Certificate of Incorporation and Bylaws contain provisions that
might diminish the likelihood that a potential acquiror would make an offer for
the Common Stock, impede a transaction favorable to the interest of the
stockholders or increase the difficulty of removing incumbent Board of Directors
or management. Currently, the Company's Board of Directors has the authority,
without further stockholder approval, to issue up to 2,000,000 shares of
Preferred Stock in one or more series and to determine the price, rights,
preferences and privileges of those shares. The Company currently has 312,500
shares of the Series A Preferred Stock and 3,000 shares of Series B Preferred
Stock outstanding. The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any Preferred
Stock that is currently issued or may be issued in the future. The issuance of
additional shares of Preferred Stock, while potentially providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company. The Company
anticipates that it may issue additional shares of Preferred Stock through one
or more private placements during 1998. In addition, certain provisions of the
Company's Certificate of Incorporation, including provisions that provide for
the Board of Directors to be divided into three classes to serve for staggered
three-year terms, may have the effect of delaying or preventing a change of
control of the Company, which could adversely affect the market price of the
Company's Common Stock.
LIMITED MARKET FOR SECURITIES; LACK OF LIQUIDITY.
The Shares offered hereby are not listed on any national securities exchange,
but the Company's Common Stock is traded on the OTCBB. Trading activity in the
Company's Common Stock should be considered sporadic, illiquid and highly
volatile, and no assurance can be given that an active trading market for the
Company's Common Stock will exist in the future. Additionally, even if a market
for the Common Stock offered by this Prospectus continues to exist, there is no
assurance that investors will be able to resell their Shares at or above the
purchase price for which such investors purchased such Shares.
PENNY STOCK.
The Securities and Exchange Commission (the "Commission") has adopted
regulations that generally define a penny stock to be any equity security that
has a market price (as defined in such regulations) of less than $5.00 per
share, subject to certain exceptions. If the Common Stock meets the definition
of a penny stock and is not quoted in the Nasdaq SmallCap Market, it will be
subjected to these regulations which impose additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally institutions with
assets in excess of $5,000,000 and individuals with a net worth in excess of
$1,000,000 or annual income exceeding $200,000 (individually) or $300,000
(jointly with their spouse)). These regulations, if applicable, might affect a
holder's ability to sell any of the Shares offered by this Prospectus.
6
<PAGE>
DIVIDENDS.
The Company cannot give any assurance that the proposed operations of the
Company will result in sufficient revenues to enable the Company to operate at a
profitable level. The Company has not paid any dividends on its Common Stock to
date, and has no plans to pay any dividends on its Common Stock for the
foreseeable future. The Company's Series A Preferred Stock accrues a dividend
of 4% per year, payable in shares of the Company's Common Stock based on a share
price equal to the average closing price of the Company's Common Stock on the
OTCBB for the 30 days prior to the particular dividend date. The Company's
Series B Preferred Stock accrues a dividend of 5% per year, payable in cash or
shares of the Company's Common Stock based on a share price equal to 78% of the
5 day average closing bid price of the Company's Common Stock on the OTCBB upon
the date of each conversion. Dividends on both the Series A Preferred Stock and
the Series B Preferred Stock are cumulative.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS.
This Prospectus contains certain statements that are "Forward Looking
Statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as amended.
Those statements including, among other things, the discussions of the Company's
business strategy and expectations concerning market position, future
operations, margins, profitability, liquidity and capital resources. Forward
Looking Statements are included in this section under "Limited Operating
History; Anticipation of Continued Losses," "Developing Market; Unproven
Acceptance of the Company's Products and Services," "Dependence on Principal
Product," "Dependence on Proprietary Rights; Relationship with IBM,"
"Competition," "Future Capital Needs; Uncertainty of Additional Funding,"
"Management of Growth; Need to Establish Infrastructure; Additional Personnel,"
"Intellectual Property and Property Rights," "Potential Fluctuations in
Quarterly Results," "Dependence on Key Personnel," "Limited Market for
Securities; Lack of Liquidity," and "Dividends." Although the Company believes
that the expectations reflected in Forward Looking Statements are reasonable,
they can give no assurance that such expectations will prove to have been
correct. Generally, these statements relate to business plans or strategies,
projected or anticipated benefits or other consequences of such plans or
strategies, or projections involving anticipated revenues, expenses, earnings,
levels of capital expenditures, liquidity or indebtedness or other aspects of
operating results or financial position. All phases of the operations of the
Company are subject to a number of uncertainties, risks and other influences,
many of which are outside the control of the Company and any one of which, or a
combination of which, could materially affect the results of the Company's
operations and whether the Forward Looking Statements made by the Company
ultimately prove to be accurate. Important factors that could cause actual
results to differ materially from the Company's expectations are disclosed in
this "Risk Factors" Section.
7
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information concerning each Selling
Stockholder. Assuming that the Selling Stockholders offer all of their Shares,
the Selling Stockholders will not have any beneficial ownership. The Shares are
being registered to permit the Selling Stockholders and certain of their
respective pledgees, donees, transferors or other successors in interest to
offer the Shares for resale from time to time. See "Plan of Distribution."
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF
OWNED AND TO BE NUMBER OF SHARES
OWNED PRIOR TO SHARES BEING OWNED AFTER
SELLING STOCKHOLDERS OFFERING (1)(2) OFFERED (2) OFFERING (3)
- -------------------------------------------- ------------------ ---------------- ---------------------
<S> <C> <C> <C>
Entrepreneurial Investors, Ltd. ("EIL") (4). 1,687,500 1,687,500 0
Equity Services, Ltd. ("ESL") (5)........... 358,125 358,125 0
Dominion Capital Fund, Ltd. (6)............. 833,333 833,333 0
Sovereign Partners, LP (6).................. 1,666,667 1,666,667 0
Princeton Research, Inc..................... 115,000 115,000 0
Continental Capital & Equity Corporation.... 150,000 150,000 0
</TABLE>
None of the Selling Stockholders has, or within the past three years had, any
position, office, or other material relationship with the Company or any of its
predecessors and affiliates.
(1) The Selling Stockholders have sole voting and sole investment power with
respect to all Shares owned.
(2) Ownership is determined in accordance with Rule 13d-3 under the Exchange
Act. The actual number of Shares beneficially owned and offered for sale
hereunder is subject to adjustment and could be materially less or more than
the estimated account indicated depending upon factors which cannot be
predicted by the Company at this time.
(3) Assumes the sale of all shares offered hereby to persons who are not
affiliates of the Selling Stockholders.
(4) Calculated using the current conversion rate for the Series A Preferred
Stock of 5.40 shares of Common Stock for each share of Series A Preferred
Stock, subject to adjustment.
(5) For so long as EIL owns at least 156,250 shares of the Preferred Stock, the
Company has agreed to use its best efforts to have one member of the Board
of Directors be chosen by ESL. As of the date of this Prospectus, ESL has
not nominated a candidate for director.
(6) Calculated by dividing the $1,000 stated value of each share of Series B
Preferred Stock by the estimated maximum conversion price for the Series B
Preferred Stock of $1.20, which would result in the issuance of 833.33
shares of Common Stock for each share of Series B Preferred Stock converted,
subject to adjustment. As of March 18, 1998, the 3,000 shares of issued and
outstanding Series B Preferred Stock were convertible into an aggregate of
1,788,908 shares of Common Stock.
8
<PAGE>
PLAN OF DISTRIBUTION
Pursuant to this Prospectus, the Selling Stockholders, or by certain
pledgees, donees, transferees or other successors in interest to the Selling
Stockholders, may sell Shares from time to time in transactions on the OTCBB or
such other exchanges or markets as the Common Stock may be listed for trading
from time to time, in privately-negotiated transactions or by a combination of
such methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell as principal, or
both (which compensation to a particular broker-dealer might be in excess of
customary commissions).
Other methods by which the Shares may be sold include, without limitation:
(i) transactions which involve cross or block trades or any other transaction
permitted by the OTCBB or other trading markets, (ii) "at the market" to or
through market makers or into an existing market for the Common Stock, (iii) in
other ways not involving market markers or established trading markets,
including direct sales to purchasers or sales effected through agents, (iv)
through transactions in options or swaps or other derivatives (whether exchange-
listed or otherwise), (v) through short sales, or (vi) any combination of any
such methods of sale. The Selling Stockholders may also enter into option or
other transactions with broker-dealers which require the delivery to such broker
dealers of the Common Stock offered hereby, which Common Stock such broker-
dealers may resell pursuant to this Prospectus.
The Selling Stockholders and any broker-dealers who act in connection with
the sale of Shares hereunder may be deemed to be "underwriters" as that term is
defined in the Securities Act, and any commissions received by them and profit
on any resale of the Shares as principal might be deemed to be underwriting
discounts and commissions under the Securities Act.
Pursuant to certain Registration Rights Agreements with certain Selling
Stockholders, the Company has agreed to indemnify certain of the Selling
Stockholders and each underwriter against certain liabilities, including certain
liabilities under the Securities Act as amended, or will contribute to payments
such Selling Stockholders or underwriters may be required to make in respect of
certain losses, claims, damages or liabilities.
LEGAL MATTERS
The legality of the securities offered hereby will be passed on for the
Company by Porter & Hedges, L.L.P., Houston, Texas.
EXPERTS
The financial statements of the Company as of December 31, 1996 and 1995, and
for each of the years in the three-year period ended December 31, 1996, have
been incorporated by reference herein and in the registration statement in
reliance upon the report of Malone & Bailey, PLLC, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
9
<PAGE>
<TABLE>
<S> <C>
=========================================== ===========================================
NO PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS
IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE APPLIED VOICE RECOGNITION, INC.
ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT 4,810,625 Shares
AS OF ANY TIME SUBSEQUENT TO ITS DATE. of
THIS PROSPECTUS DOES NOT CONSTITUTE AN Common Stock
OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES IN WHICH
IT RELATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
---------- ----------
PROSPECTUS
TABLE OF CONTENTS ----------
Page
-----
Available Information............. 2
Incorporation of Certain
Documents by Reference........... 2 ----------
The Company....................... 2
Risk Factors...................... 3
Selling Stockholders.............. 8
Plan of Distribution.............. 9
Legal Matters..................... 9
Experts........................... 9
March 23, 1998
----------
=========================================== ===========================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by the Company in connection with the offering
of the shares of Common Stock to be registered and offered hereby are as
follows:
<TABLE>
<S> <C>
SEC registration fee.......................................................... $ 3,107
Legal fees and expenses....................................................... 12,500
Blue Sky fees and expenses (including legal expenses)......................... 2,500
Accounting fees and expenses.................................................. 0
Miscellaneous................................................................. 2,500
-------
Total...................................................................... $20,607
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the DGCL permits a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action. In an action brought to obtain a judgment
in the corporation's favor, whether by the corporation itself or derivatively by
a stockholder, the corporation may only indemnify for expenses, including
attorney's fees, actually and reasonably incurred in connection with the defense
or settlement of such action, and the corporation may not indemnify for amounts
paid in satisfaction of a judgment or in settlement of the claim. In any such
action, no indemnification may be paid in respect of any claim, issue or matter
as to which such person shall have been adjudged liable to the corporation
except as otherwise approved by the Delaware Court of Chancery or the court in
which the claim was brought. In any other type of proceeding, the
indemnification may extend to judgments, fines and amounts paid in settlement,
actually and reasonably incurred in connection with such other proceeding, as
well as to expenses.
The statute does not permit indemnification unless the person seeking
indemnification has acted in good faith and in a manner be reasonably believed
to be in, or not opposed to, the best interests of the corporation and, in the
case of criminal actions or proceedings, the person had no reasonable cause to
believe his conduct was unlawful. The statute contains additional limitations
applicable to criminal actions and to actions brought by or in the name of the
corporation. The determination as to whether a person seeking indemnification
has met the required standard of conduct is to be made (1) by a majority vote of
a quorum of disinterested members of the board of directors, (2) by independent
legal counsel in a written opinion, if such a quorum does not exist or if the
disinterested directors so direct, or (3) by the stockholders.
The Certificate of Incorporation and Bylaws of the Company require it to
indemnify its directors to the fullest extent permitted under Delaware law.
Pursuant to employment agreements entered into by the Company with its executive
officers and certain other key employees, the Company must indemnify such
officers and employees in the same manner and to the same extent that the
Company is required to indemnify its directors under the Company's Bylaws. The
Certificate of Incorporation limits the personal liability of a director to the
corporation or its stockholders to damages for breach of the director's
fiduciary duty.
The Company maintains officers' and directors' indemnity insurance against
expenses of defending claims or payment of amounts arising out of good-faith
conduct believed by the officer or director to be in or not opposed to the best
interest of the Company.
II-1
<PAGE>
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER IDENTIFICATION OF EXHIBIT
- ----------- ----------------------------------------------------------------------------------------
<C> <S>
5.1 Opinion of Porter & Hedges, L.L.P.
23.1 Consent of Malone & Bailey, PLLC
23.2 Consent of Porter & Hedges, L.L.P. (included in its Opinion filed as Exhibit 5.1 hereto).
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation or Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution nor previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on this 23rd day of March,
1998.
APPLIED VOICE RECOGNITION, INC.
/s/ Timothy J. Connolly
----------------------------------------
Timothy J. Connolly,
Chief Executive Officer,
Chairman of the Board and Director
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated and on this 23rd day of March, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ TIMOTHY J. CONNOLLY
- -------------------------------------------- Chief Executive Officer, Chairman of the
Timothy J. Connolly Board and Director
* /s/ H. RUSSELL DOUGLAS Vice President Research and Development and
- -------------------------------------------- Director
H. Russell Douglas
* /s/ WILLIAM T. KENNEDY Chief Accounting Officer, Chief Financial
- -------------------------------------------- Officer and Assistant Secretary
William T. Kennedy
* /s/ JAN CARSON CONNOLLY Director
- --------------------------------------------
Jan Carson Connolly
* /s/ JESSE R. MARION Director
- --------------------------------------------
Jesse R. Marion
* /s/ NOLAN BEDFORD Director
- --------------------------------------------
Nolan Bedford
* /s/ FREDERICK A. HUTTNER Director
- --------------------------------------------
Frederick A. Huttner
* /s/ G. EDWARD POWELL Director
- --------------------------------------------
G. Edward Powell
* /s/ MICHAEL WILSON Director
- --------------------------------------------
Michael Wilson
* /s/ J. WILLIAM BOYAR Director
- --------------------------------------------
J. William Boyar
* /s/ RAYMOND BETZ Director
- --------------------------------------------
Raymond Betz
*By: /s/ TIMOTHY J. CONNOLLY
--------------------------------------------
Timothy J. Connolly
(Attorney-in-fact for the persons indicated)
</TABLE>
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER IDENTIFICATION OF EXHIBIT PAGE NO.
- ------------ ------------------------- -------------
<C> <S> <C>
5.1 Opinion of Porter & Hedges, L.L.P.
23.1 Consent of Malone & Bailey, PLLC
23.2 Consent of Porter & Hedges, L.L.P. (included in its Opinion filed as
Exhibit 5.1 hereto).
</TABLE>
II-4
<PAGE>
EXHIBIT 5.1
[PORTER & HEDGES, L.L.P. LETTERHEAD]
March 23, 1998
Applied Voice Recognition, Inc.
4615 Post Oak Place, Suite 111
Houston, Texas 77027
Ladies and Gentlemen:
We have acted as counsel to Applied Voice Recognition, Inc., a Utah
corporation (the "Company"), in connection with the preparation and filing of a
Registration Statement on Form S-3 (the "Registration Statement") with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended. The Registration Statement relates to an aggregate of 4,810,625 shares
of the Company's common stock, par value $.001 per share (the "Common Stock"),
which may be offered and sold from time to time by selling security holders (the
"Selling Security Holders") of the Company.
We have examined such corporate records, documents, instruments and
certificates of the Company and have received such representations from the
officers and directors of the Company and have reviewed such questions of law as
we have deemed necessary, relevant or appropriate to enable us to render the
opinion expressed herein. In such examination, we have assumed the genuineness
of all signatures and the authenticity of all documents, instruments, records
and certificates submitted to us as originals.
Based on such examination and review and on representations made to us by
the officers and directors of the Company, we are of the opinion that (i) the
1,687,500 shares of Common Stock to be issued by the Company upon the conversion
of 312,500 of the Company's Series A Preferred Stock and offered pursuant to the
Registration Statement will be, when so issued, validly issued, fully-paid and
nonassessable outstanding shares of Common Stock, (ii) the shares of Common
Stock to be issued by the Company upon the conversion of 3,000 of the Company's
Series B Preferred Stock and offered pursuant to the Registration Statement will
be, when so issued, validly issued, fully-paid and nonassessable outstanding
shares of Common Stock, (iii) the 503,750 shares of Common Stock to be issued by
the Company upon the exercise of certain options and warrants and offered
pursuant to the Registration Statement will be, when so issued, validly issued,
fully-paid and nonassessable outstanding shares of Common Stock, and (iv) the
119,375 shares of Common Stock which may be resold pursuant to the Registration
Statement are validly issued, fully-paid and nonassessable outstanding shares of
Common Stock.
We consent to the use of this opinion as an Exhibit to the Registration
Statement and to the reference to our firm under the heading "Legal Matters" in
the Prospectus included in the Registration Statement.
Very truly yours,
PORTER & HEDGES, L.L.P.
<PAGE>
EXHIBIT 23.1
[Malone & Bailey, PLLC Letterhead]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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We consent to the incorporation by reference in this Registration Statement
of Applied Voice Recognition, Inc. on Form S-3 of our report dated March 12,
1997 appearing in its Annual Report on Form 10-KSB for the two years ended
December 31, 1996, and to the reference to us under the heading "Experts" in
such Registration Statement.
/s/ Malone & Bailey, PLLC
MALONE & BAILEY, PLLC
Houston, Texas
March 19, 1998
