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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934
For the transition period from __________ to __________
Commission File No. 1-11476
VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
(Name of small business issuer in its charter)
California 95-3977501
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
15260 Ventura Blvd. Suite 2200 91403
Sherman Oaks, California (Zip Code)
Registrant's telephone number, including area code: (818) 905-0950
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
----- -----
As of May 6, 1996, there were 13,949,072 shares of Voice Powered Technology
International, Inc. Common Stock $.001 par value outstanding
excluding outstanding options and warrants.
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VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I -- FINANCIAL INFORMATION PAGE NUMBER
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<S> <C>
ITEM 1. Financial Statements -- unaudited
Balance Sheet as of March 31, 1996 3
Statements of Income (Loss) for the three
months ended March 31, 1996 and 1995 4
Statements of Cash Flows for the three
months ended March 31, 1996 and 1995 5
Notes to Financial Statements 6
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 7
PART II -- OTHER INFORMATION
ITEM 5. Other Information 9
ITEM 6. Exhibits and Reports on Form 8-K 9
</TABLE>
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
BALANCE SHEET
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
1996
---------
<S> <C>
Current assets
Cash and cash equivalents $ 1,374
Receivables, net of allowance for doubtful accounts 3,281
Inventory 2,246
Prepaid expenses 122
---------
Total current assets 7,023
---------
Property and equipment
Equipment 1,682
Other 141
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1,823
Less accumulated depreciation 1,124
---------
Net property and equipment 699
Patents, net of amortization 163
Deferred costs, net of amortization 963
Other assets 267
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Total assets $ 9,115
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 596
Accrued expenses 1,467
Note payable 883
Loan payable to finance company 1,574
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Total current liabilities 4,520
Stockholders' equity
Preferred stock, $0.001 par value, 10,000,000
shares authorized; none issued -
Common stock, $.001 stated value - shares
authorized, 50,000,000; issued and out-
standing, 13,949,072 14
Additional paid-in capital 27,711
Accumulated deficit (23,130)
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Total stockholders' equity 4,595
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Total liabilities and stockholders' equity $ 9,115
=========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
STATEMENTS OF INCOME (LOSS)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1995 1996
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<S> <C> <C>
Net sales $ 5,704 $ 2,199
Cost of goods sold 2,918 1,361
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Gross profit 2,786 838
Operating costs
Marketing 1,202 435
General and administrative 792 680
Research and development 326 293
Warehouse 306 177
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Total operating costs 2,626 1,585
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Operating income (loss) 160 (747)
Other income (expense), net 35 (33)
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Net income (loss) $ 195 $ (780)
======= ========
Net income (loss) per common share $ .02 $ (.06)
======= ========
Weighted average common
shares outstanding 12,651 13,034
======= ========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1995 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 195 $ (780)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Compensatory stock options 16 12
Depreciation and amortization 147 144
Changes in operating assets and liabilities:
Decrease in receivables 298 1,782
Decrease in inventory 82 716
Decrease in prepaid expenses 23 17
Increase in patents (19) --
Increase in deferred costs (307) (168)
Increase in other assets (59) (105)
Decrease in accounts payable (1,047) (467)
Increase (decrease) in accrued expenses 447 (137)
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Net cash provided by (used in) operating activities (224) 1,014
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Cash flows from investing activities:
Capital expenditures (97) (58)
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Net cash used in investing activities (97) (58)
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Cash flows from financing activities:
Payments on loan payable -- (1,692)
Proceeds from exercise of stock options -- 15
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Net cash used in financing activities (3) (1,677)
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Net decrease in cash and cash equivalents (324) (721)
Cash and cash equivalents at the beginning of the year 4,012 2,095
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Cash and cash equivalents, March 31 $ 3,688 $ 1,374
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SUPPLEMENTAL DISCLOSURE
Interest paid $ 8 $ 54
======= =======
Non-cash financing and investing activities:
Issuance of compensatory stock options to related party $ -- $ 50
Issuance of common stock to vendor -- 1,955
Conversion of accounts payable to note payable -- 883
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been included. For further
information, refer to the financial statements, and footnotes thereto, included
in the Company's Annual Report on Form 10-KSB for the year ended December 31,
1995. Operating results for the three month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996.
NOTE 2 -- During the three months ended March 31, 1996, the Company issued to
its former manufacturer 1,371,966 shares of the Company's common stock at market
value, the proceeds of which were applied to the Company's trade debt to the
manufacturer. The stock issuance was in accordance with a Termination Agreement
which the Company executed with the manufacturer, establishing the terms and
conditions pursuant to which the Company would wind down its relationship with
the manufacturer.
NOTE 3 -- During the three months ended March 31, 1996, the Company entered into
an agreement with a related party, the inventor of an integral part of the voice
recognition technology, which resulted in the Company obtaining unrestricted
exclusive ownership rights to the technology. In accordance with this agreement,
the Company agreed to pay $100,000 in cash, $50,000 of which has already been
paid, and granted stock options which were cumulatively $50,000 lower than
market value to the related party. The cost of the technology acquired is
included in other assets in the accompanying balance sheet.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The results of the Company's first quarter performance as compared to a
year ago continues to reflect the weak performance of the consumer electronics
sector during the fourth quarter of 1995, which in turn adversely affected the
Company's sales, resulting in higher year end inventories at retail stores, and
lower sales volumes for the first quarter. To accelerate sales, and facilitate
the introduction of new, lower costing products planned for the second half of
1996, the Company has reduced the pricing of its product line, which resulted in
lower gross profit margins and higher expenses as a percentage of sales.
RESULTS OF OPERATIONS
For the three months ended March 31, 1996, the Company
reported an operating loss of $747,000, as compared to operating income of
$160,000 for the three months ended March 31, 1995. After adding other income
and expense, the Company reported a net loss of $780,000, or $.06 per share, for
the three months ended March 31, 1996, and net income of $195,000, or $.02 per
share, for the three months ended March 31, 1995.
Net sales and gross profit for the three months ended March
31, 1996 were $2,199,000 and $838,000, as compared to $5,704,000 and $2,786,000
for the three months ended March 31, 1995. Gross profit percentage decreased to
38% from 49%. The decrease in sales and gross profit, as stated above, resulted
from slower sales of the Company's products, due in part to the weak performance
of the consumer electronics sector during the fourth quarter of 1995. The
decrease in gross profit percentage reflects the price reductions effected by
the Company.
Total operating expenses for the three months ended March 31,
1996 and 1995 were $1,585,000 and $2,626,000, respectively. The decrease in
expenses is a result of the Company's decreased sales which resulted in lower
variable costs, primarily marketing and warehousing (distribution) expenses,
combined with the Company's efforts to decrease its fixed costs in all areas of
operations.
Marketing expenses for the three months ended March 31, 1996
and 1995 were $435,000 and $1,202,000, respectively. The decrease in marketing
expenses is associated with both the lower volume of sales and the related lower
distribution costs such as sales commission, advertising allowances for retail
distributors, international sales expenses, and targeted direct response print
advertising expenses, as well as decreased fixed costs including salaries and
consulting fees.
General and administrative expenses decreased to $680,000 for
the three months ended March 31, 1996 from $792,000 for the three months ended
March 31, 1995. The decrease is primarily the result of decreased fixed costs
including decreases in salaries and consulting fees.
Research and development expenses decreased slightly to
$293,000 for the three months ended March 31, 1996 from $326,000 for the three
months ended March 31, 1995. The decrease is primarily the result of decreased
consulting fees, while the Company continues to develop new products as well
enhance its proprietary technology.
Warehouse and distribution expenses decreased to $177,000 for
the three months ended March 31, 1996 from $306,000 for the three months ended
March 31, 1995. The decrease is the result of the decreased sales and related
decrease in shipping costs, as well as a decrease in salaries.
Other expense was $33,000 for the three months ended 1996,
primarily relating to interest expense associated with the Company's loan
payable, offset by interest income. Other income for the three months ended 1995
was $35,000 primarily relating to interest income.
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LIQUIDITY
At March 31, 1996, the Company had working capital of
$2,503,000. During the first quarter of 1996, the Company entered into an
amendment to its working capital line of credit agreement. Under this amendment,
the lender agreed to waive certain requirements regarding financial covenants as
of December 31, 1995 and to amend the required financial covenants through the
expiration of the agreement on July 31, 1996, and the Company agreed to a
reduction in the aggregate amount of the line of credit from $4,000,000 to
$2,000,000. Net payments on this line were $1,692,000 in the first quarter of
1996. In addition, the Company has secured a commitment from a new lender for a
$3,000,000 accounts receivable financing agreement which the Company intends to
use to replace the working capital line of credit.
Also in the first quarter of 1996, the Company executed an
agreement with its prior contract manufacturer which establishes the terms and
conditions pursuant to which the Company is winding down its affairs with this
manufacturer. The terms of this agreement included the issuance to the
manufacturer of 1,372,000 shares of the Company's common stock at market value,
the proceeds of which, $1,955,000 were applied to the Company's outstanding debt
to the manufacturer.
Further, in the first quarter of 1996, the Company entered
into an agreement with a related party, the inventor of an integral part of the
voice recognition technology, which resulted in the Company obtaining
unrestricted exclusive ownership rights to the technology. In accordance with
this agreement, the Company agreed to pay $100,000 in cash, $50,000 of which has
already been paid, and granted stock options which were cumulatively $50,000
lower than market value to the related party. The cost of the technology
acquired is included in other assets in the accompanying balance sheet
Management believes that its current funds, along with cash
flows from projected sales of products, liquidation of discontinued inventory,
and availability under the $3,000,000 accounts receivable financing agreement,
will satisfy the Company's cash requirements in the ordinary course of business
during 1996. The Company's cash flows are largely dependent on the sale of its
products. Should anticipated sales levels not be generated, additional funding
may be required.
The decrease in accounts receivable is attributable mainly to
collections on customer receivables which existed at December 31, 1995. Such
decrease was offset partially by new receivables from customers from sales made
in the first quarter of 1996.
The net decrease in accounts payable and accrued expenses of
$600,000 as of March 31, 1996 is mainly attributable to payments made to the
Company's prior contract manufacturer.
-8-
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PART II. OTHER INFORMATION
The Company was not required to report any matters or changes for any items of
Part II except as disclosed below.
ITEM 5. OTHER INFORMATION
In February 1996, Mr. H. Ben Taub, a director since 1994,
resigned in order to dedicate greater time to his personal business affairs.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11 -- Calculations of Earnings Per Share
(b) The Company filed a Current Report on Form 8-K, dated
March 15, 1996, with the Commission, reporting information under Item 5 of said
Form.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
Date: May 13, 1996 By: /s/ Edward M. Krakauer
----------------------
Edward M. Krakauer, President and
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Edward M. Krakauer
- - --------------------------
Edward M. Krakauer President and Chief Executive
Officer May 13, 1996
/s/ Mitchell B. Rubin
- - --------------------------
Mitchell B. Rubin Vice President-Finance and Operations,
Chief Financial Officer, Chief Accounting
Officer, Secretary May 13, 1996
</TABLE>
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EXHIBIT 11
VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
3/31/95 3/31/96
--------------------------------------
<S> <C> <C>
ENDING MARKET PRICE PER SHARE $ 2.25 $ 1.56
----------- ------------
AVERAGE MARKET PRICE PER SHARE $ 2.19 $ 1.66
----------- ------------
EARNINGS:
Net income applicable
to common stock $ 194,600 $ (780,400)
=========== ============
PRIMARY EARNINGS PER SHARE:
Weighted average number of common
shares outstanding 12,532,606 13,034,429
Incremental shares assuming all dilutive
options and warrants exercised and proceeds
used to purchase shares in the market at the
average stock price during the period 118,425 0
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Total 12,651,031 13,034,429
=========== ============
Primary earnings (loss) per share $ .02 $ (.06)
=========== ============
FULLY DILUTED EARNINGS (LOSS) PER SHARE:
Weighted average number of common
shares outstanding 12,532,606 13,034,429
Incremental shares assuming all dilutive
options and warrants exercised and proceeds
used to purchase shares in the market at the
average stock price during the period, or the
stock price at the end of the period, whichever
is higher 127,689 0
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Total 12,660,295 13,034,429
=========== ============
Fully diluted earnings (loss) per share $ .02 $ (.06)
=========== ============
</TABLE>
Note: Common stock equivalents for 1996 have not been considered as their
effect would be anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) BALANCE
SHEET, STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
(B) FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,374
<SECURITIES> 0
<RECEIVABLES> 3,281
<ALLOWANCES> 0
<INVENTORY> 2,246
<CURRENT-ASSETS> 7,023
<PP&E> 1,823
<DEPRECIATION> 1,124
<TOTAL-ASSETS> 9,115
<CURRENT-LIABILITIES> 4,520
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 4,581
<TOTAL-LIABILITY-AND-EQUITY> 9,115
<SALES> 2,199
<TOTAL-REVENUES> 2,199
<CGS> 1,361
<TOTAL-COSTS> 1,361
<OTHER-EXPENSES> 1,585
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33
<INCOME-PRETAX> (780)
<INCOME-TAX> 0
<INCOME-CONTINUING> (780)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (780)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
