SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Mark One
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 2000
or
|_| Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission file number: 0-22055
TTR TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 11-3223672
(State or other Jurisdiction of I.R.S. Employer Number
Incorporation or Organization)
2 Hanagar Street, Kfar Saba, Israel
(Address of Principal Executive Offices)
011-972-9-766-2393
(Issuer's Telephone Number, Including Area Code)
The Corporation Trust Company
1209 Orange Street, Wilmington, Delaware, 19801 302-658-7581
(Name, address and telephone number of agent for service)
Indicate by check mark whether the registrant: (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes |X| No |_|
The number of shares outstanding of the registrant's Common Stock as of
November 14, 2000, is 16,994,296 shares.
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A Development Stage Company)
Index
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements *
Consolidated Balance Sheets
December 31, 1999 and September 30, 2000
Consolidated Statements of Operations
For the nine and three months ended September 30, 1999 and 2000
Consolidated Statements of Comprehensive Loss
For the nine and three months ended September 30, 1999 and 2000
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1999 and 2000
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon senior securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-k
Exhibit 27 - Financial Data Schedule
Signatures
* The Balance Sheet at December 31, 1999 has been taken from the audited
financial statements at that date. All other financial statements are unaudited
<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
---- ----
<S> <C> <C>
ASSETS (Unaudited)
Current assets
Cash and cash equivalents $ 209,580 $ 9,012,501
Accounts receivable 10,103 1,019
Other current assets 38,630 111,173
------------ ------------
Total current assets 258,313 9,124,693
Property and equipment - net 205,854 222,214
Investment in ComSign, Ltd. -- 1,925,695
Other assets 3,700
------------ ------------
Total assets $ 467,867 $ 11,272,602
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Current liabilities
Current portion of long-term debt $ 7,764 $ --
Accounts payable 409,521 421,607
Accrued expenses 335,772 131,643
------------ ------------
Total current liabilities 753,057 553,250
Long-term debt, less current portion 8,219 --
Accrued severance pay 37,587 149,976
------------ ------------
Total liabilities 798,863 703,226
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock, $.001 par value;
5,000,000 shares authorized; none issued and outstanding -- --
Common stock, $.001 par value;
50,000,000 shares authorized; 10,653,560 and 16,994,296
issued and outstanding, respectively 10,654 16,995
Additional paid-in capital 24,710,602 39,513,361
Other accumulated comprehensive income 56,971 46,902
Deficit accumulated during the development stage (24,830,348) (28,633,863)
Less: deferred compensation (278,875) (374,019)
------------ ------------
Total stockholders' equity (deficit) (330,996) 10,569,376
------------ ------------
Total liabilities and stockholders' equity (deficit) $ 467,867 $ 11,272,602
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From
Inception
Nine Months (July 14, Three Months
Ended 1994) to Ended
September 30, September 30, September 30,
1999 2000 2000 1999 2000
---- ---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue $ 67,341 $ 2,014 $ 125,739 $ 26,848 $ --
Expenses
Research and development (1) 240,504 936,008 3,876,855 41,884 179,286
Sales and marketing (1) 373,733 493,538 3,812,980 104,942 129,443
General and administrative (1) 478,561 1,489,639 4,830,409 39,628 542,762
Stock based compensation 1,381,106 1,202,792 10,025,733 691,351 442,314
----------- ------------ ------------ ----------- ------------
Total expenses 2,473,904 4,121,977 22,545,977 877,805 1,293,805
----------- ------------ ------------ ----------- ------------
Operating loss (2,406,563) (4,119,963) (22,420,238) (850,957) (1,293,805)
Other (income) expense
Legal settlement -- -- 232,500 -- --
Loss on investment -- -- 17,000 -- --
Other income -- -- (75,000) -- --
Company's share in net losses of affiliate -- 74,305 74,305 -- 74,305
Amortization of deferred financing costs 906,564 -- 4,516,775 524,776
Interest income (732) (396,226) (458,221) (188) (155,104)
Interest expense 402,776 5,473 1,906,266 94,769 836
----------- ------------ ------------ ----------- ------------
Total other (income) expenses 1,308,608 (316,448) 6,213,625 619,357 (79,963)
----------- ------------ ------------ ----------- ------------
Net loss $(3,715,171) $ (3,803,515) $(28,633,863) $(1,470,314) $ (1,213,842)
=========== ============ ============ =========== ============
Per share data:
Basic and diluted $ (0.69) $ (0.24) $ (0.26) $ (0.07)
=========== ============ =========== ============
Weighted average number
of common shares used in
basic and diluted loss per share 5,394,717 15,695,510 5,646,429 16,934,164
=========== ============ =========== ============
(1) Excludes non-cash, stock based compensation
expense as follows:
Research and development $ 165,660 $ 230,558 $ 456,539 $ -- $ 33,956
Sales and marketing 65,625 59,064 5,024,840 -- 19,668
General and administrative 1,149,821 913,170 4,544,354 691,351 388,690
----------- ------------ ------------ ----------- ------------
$ 1,381,106 $ 1,202,792 $ 10,025,733 $ 691,351 $ 442,314
=========== ============ ============ =========== ============
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
From
Inception
Nine Months (July 14, Three Months
Ended 1994) to Ended
September 30, September 30, September 30,
1999 2000 2000 1999 2000
---- ---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net loss $(3,715,171) $(3,803,515) $(28,633,863) $(1,470,314) $(1,213,842)
Other comprehensive income (loss)
Foreign currency translation adjustments (2,724) (10,069) 46,902 3,125 21,915
----------- ----------- ------------ ----------- -----------
Comprehensive loss $(3,717,895) $(3,813,584) $(28,586,961) $(1,467,189) (1,191,927)
=========== =========== ============ =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From
Inception
Nine Months (July 14,
Ended 1994) to
September 30, September 30,
1999 2000 2000
---- ---- ----
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(3,715,171) $ (3,803,515) $(28,633,863)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 990,794 36,296 4,937,703
Amortization of note discount 204,079 486,463
Translation adjustment -- -- (1,528)
Amortization of deferred compensation 873,243 1,103,326 4,623,550
Beneficial conversion feature of convertible debt -- 572,505
Stock and warrants issued for services and legal settlement 576,160 104,625 5,580,303
Payment of common stock issued with guaranteed selling price -- -- (155,344)
Company's share in net losses of affiliate -- 74,305 74,305
Increase (decrease) in cash attributable
to changes in assets and liabilities
Accounts receivable (41,355) 9,300 (1,322)
Other current assets 12,396 (71,890) (102,776)
Other assets -- 3,700
Accounts payable (374,055) 18,542 223,138
Accrued expenses (56,754) (224,064) 579,850
Accrued severance (19,136) 110,144 168,382
Interest payable 159,143 251,019
----------- ------------ ------------
Net cash used by operating activities (1,390,656) (2,639,231) (11,397,615)
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of fixed assets 2,748 28,637 34,735
Purchases of property and equipment (4,523) (80,222) (762,807)
Investment in ComSign, Ltd. -- (2,000,000) (2,000,000)
Increase in organization costs -- -- (7,680)
----------- ------------ ------------
Net cash provided (used) by investing activities (1,775) (2,051,585) (2,735,752)
----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 291,744 13,496,004 21,160,404
Proceeds from officer loan -- -- --
Stock offering costs -- -- (475,664)
Deferred financing costs (200,090) -- (682,312)
Proceeds from short-term borrowings -- -- 1,356,155
Proceeds from long-term debt -- -- 2,751,825
Proceeds from convertible debentures 1,500,000 -- 2,000,000
Repayment of short-term borrowings (173,374) -- (1,357,082)
Repayments of long-term debt (94,101) (2,458) (1,601,975)
----------- ------------ ------------
Net cash provided by financing activities 1,324,179 13,493,546 23,151,351
----------- ------------ ------------
Effect of exchange rate changes on cash 133 191 (5,483)
----------- ------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS (68,119) 8,802,921 9,012,501
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 74,445 209,580 --
----------- ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,326 $ 9,012,501 $ 9,012,501
=========== ============ ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 9,750 $ 7,289 $ 479,446
=========== ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements of TTR
Technologies, Inc. and its Subsidiary (the "Company") have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the nine
months ended September 30, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Form 10K for the year ended
December 31, 1999 as filed with the Securities and Exchange Commission.
Note 2 - Reclassifications
Certain prior period amounts have been reclassified to conform with the
current period presentation.
Note 3 - Licensing and Investment Agreement
In November 1999, we signed an agreement with Macrovision Corporation
("Macrovision") to jointly develop and market music copy protection
technology for optical based media. In connection with the agreement we
granted to Macrovision an exclusive world-wide, royalty-bearing license to
use our proprietary technology through December 31, 2009. We will be
entitled to a 30% royalty on sales of the products to be jointly
developed, which royalty may be adjusted to 25%, under certain conditions.
Also under certain conditions, the exclusive license may revert to a
non-exclusive license as of the second anniversary of the Commercial
Launch, as defined.
Under the Agreement, in January 2000, Macrovision made a $ 4 million
equity investment in the Company for an 11.4% interest and received an
exclusive license to our proprietary DiscGuard(TM) technology. Also under
the agreement, we have agreed to reimburse Macrovision for up to $1
million of research and development and sales and marketing expenses
incurred within the first year of the joint development
Note 4 - Private Placement
In February 2000, we completed a private placement of 1,800,000 shares of
our Common Stock, par value $0.001 ("Common Stock") and 900,000 Class A
Warrants for an aggregate purchase price of $ 10,000,000. The Class A
Warrants are exercisable for a period of 60 months at an exercise price
per share of $8.84. We may redeem the Class A Warrants for $ 0.10 per
warrant commencing 6 months following issuance if there is an effective
registration statement covering the sale of the underlying Common Stock
and shares of Common Stock have traded at or above 200% of the exercise
price of the Class A Warrants for a period of twenty consecutive trading
days. Upon exercise of the
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<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Class A Warrants, we will issue Class B Warrants for an additional 450,000
shares of Common Stock. The Class B Warrants are exercisable for a period
of 36 months from the date of issuance at an exercise price per share of
$21.22. The Class B Warrants may be redeemed by us if there is an
effective registration statement covering the sale of the underlying
Common Stock and shares of Common Stock have trade at $ 26 or above for a
period of twenty consecutive trading days. We paid a placement agent fee
of $500,000 and issued warrants to purchase 180,000 shares of Common Stock
exercisable at $5.56 per share, 90,000 Class A Warrants exercisable at
$8.84 and upon exercise an additional 45,000 Class B Warrants exercisable
at $21.22. Also in connection with the private placement, we paid $200,000
and issued 275,000 warrants, exercisable at $2.75, as a finder fee.
Note 5 - Stock Option Grants
In January 2000, we issued to our CEO 347,000 options under the 1996 Stock
Option Plan which are exercisable at a price per share of $4.00. Of this
amount, 173,000 were fully vested upon grant and 174,000 will vest over 12
months. In January 2000, we also issued to our Chief Technology Office
70,000 options under the Plan. Of this amount 30,000 were fully vested
upon grant with an exercise price of $4 per share, 20,000 were fully
vested upon grant with an exercise price of $.01 per share and the
remaining 20,000 options with an exercise price of $.01 per share will
vest upon the commercial launch of the audio content protection product
being jointly developed by us and Macrovision.
The exercise prices of the foregoing grants were below the fair value of
the underlying common stock. This resulted in a charge to deferred
compensation in the amount of $628,725 which is being amortized over the
vesting period of the related grants.
Note 6 - Authorized Shares
In July 2000, the Company's stockholders voted to increase the number of
authorized shares of Common Stock to 50,000,000.
Note 7 - Investment in ComSign, Ltd.
On June 4, 2000, the Company and Comda Ltd. ("Comda") jointly established,
ComSign Ltd. ("ComSign") an Israeli company, in Israel to act as
VeriSign's sole principal affiliate in Israel and the Palestinian
Authority. ComSign will market VeriSign's digital authentication
certificates and act as VeriSign's certification authority in Israel and
the Palestinian Authority. Under the provisions of the agreement, we
invested $2.0 million for a 50% equity interest in ComSign. The agreement
further provides that 60% of any dividends up to an accumulated amount of
$2,000,000 will first be distributed to TTR and 40% to Comda. Thereafter,
60% of dividends up to an accumulated amount of $2,000,000 will first be
distributed to Comda and 40% to TTR. Thereafter, all distributions will be
50% to each. The Company applies the equity method of accounting for its
investment in the joint venture.
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<PAGE>
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Consulting Agreements
In May 2000, we granted a total of 250,000, three-year incentive stock
options to a consultant pursuant to a one-year consulting agreement. The
first 100,000 options vest immediately then each of the next 50,000 will
vest when the closing bid price of our Common Stock exceeds $8, $12, and
$16, respectively, for fifteen trading days out of any twenty. The
exercise prices of the warrants are $4.13 per share.
In June 2000, we granted a total of 350,000 five-year warrants to a
consultant pursuant to a one-year consulting agreement. The warrants
become exercisable when the average weighted bid price of our Common Stock
exceeds $10 per share for twenty consecutive trading days. The exercise
prices of the warrants are $6.50, $7.50 and $8.50 for 125,000, 125,000 and
100,000 respectively.
In August 2000, we granted a total of 200,000 five-year warrants to a
consultant pursuant to a one-year consulting agreement. The first 100,000
warrants vest immediately and the next 100,000 vest ratable over seven
months. The warrants are not exercisable during the first two years from
the date of grant until our Common Stock has traded at or above $10 per
share for fifteen consecutive trading days. The exercise prices of the
warrants are $7.50 per share.
In September 2000, we issued options from the 2000 Equity Incentive Plan
to purchase 50,000 shares of Common Stock for services rendered. This
resulted in a charge to stock based compensation of approximately
$160,000.
Note 9 - Stock Option Plan
In May 2000, our Board of Directors adopted the 2000 Equity Incentive Plan
(the "2000 Incentive Plan"). A total of 1.5 million shares of common stock
have been reserved for issuance under the 2000 Incentive Plan. The 2000
Incentive Plan provides for the grant of incentive stock options,
nonqualified stock options, stock appreciation rights, restricted stock,
bonus stock, awards in lieu of cash obligations, other stock-based awards,
performance units, and also permits cash payments under certain
conditions. In July 2000 the 2000 Incentive Plan was approved by our
Stockholders.
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<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and exposition should be read in conjunction with
the Financial Statements and related Notes contained elsewhere in this Form
10-Q. Certain statements made in this discussion are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements can be identified by terminology such as
"may," "will," "should," "expects," "intends," "anticipates," "believes,"
"estimates," "predicts," or "continue" or the negative of these terms or other
comparable terminology and include, without limitation, the statements below
regarding: our joint venture with Macrovision; ComSign's intended business
plans; our expectations as to sources of revenue; our intentions to develop or
acquire other technologies; and our belief as to the sufficiency of our cash
reserves. Forward-looking statements are speculative and uncertain and not based
on historical facts. Because forward-looking statements involve risks and
uncertainties, there are important factors that could cause actual results to
differ materially from those expressed or implied by these forward-looking
statements. These factors include, but are not limited to, the competitive
environment in the copy protection industry in general and in the Company's
specific market areas; demographic changes; changes in federal, state and/or
local government law and regulations; changes in operating strategy or
development plans; the ability to attract and retain qualified personnel; labor
disturbances; and changes in the Company's acquisition and capital expenditure
plans. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
performance or achievements. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of these forward looking
statements. We are under no duty to update any of the forward-looking statements
after the date of this Quarterly Report to conform such statements to actual
results.
General
We design and develop anti-piracy software technologies that provide copy
protection for electronic content distributed on optical media and over the
Internet. Our proprietary anti-piracy technology, MusicGuard, is a unique
hardware-based technology designed to prevent the unauthorized copying of audio
content distributed on CDs.
As of November 24, 1999, we entered into an agreement with Macrovision
Corporation to jointly design, develop and market a copy protection product
designed to thwart the illegal copying of audio content on CDs, DVDs and other
optical media. Optical media store data which may be retrieved by utilizing a
laser and include compact discs which are commonly referred to as CDs and
digital versatile discs which are commonly referred to as DVDs. The new product
will be based primarily upon our MusicGuard technology, as well as related
Macrovision technology, and will be jointly owned by us and Macrovision. We
expect that the immediate application of the technology we are developing with
Macrovision will be of interest for the music distribution business and
recording studios whose products are customarily distributed on CDs. We granted
to Macrovision an exclusive world-wide royalty bearing license to design,
develop and market the copy protection technology which we are jointly
developing. The license to Macrovision relates to all technologies and products
designed to prevent the illicit duplication of audio programs (including the
audio portion of music videos, movies and other video or audio content)
distributed on optical media (not limited to CDs and DVDs) and technologies for
Internet digital rights management for audio applications. The proposed copy
protection technology we are developing with Macrovision will be transparent to
the legitimate end-user.
Our immediate goal is to establish the proposed audio content protection
technology which we and Macrovision are developing as the leading product in the
target market of audio content copy protection for the high-volume recording
industry. Additionally, we are actively
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<PAGE>
developing other technologies and looking to acquire technologies, which are
synergistic with our current business and will enable us to leverage our
knowledge base and skill.
In June 2000, we established a joint venture with Comda Ltd. ("Comda),
ComSign Ltd. ("ComSign") in Israel, to be Verisign's sole principal affiliate in
Israel and the Palestinian Authority, market its digital authentication
certificates and act as the local certifying authority. ComSign intends to
market these products and services to leading e-commerce sites, banks and other
financial institutions, government organizations and a full range of commercial
entities.
We have not had any significant revenues to date. As of September 30, 2000
we had an accumulated deficit of approximately $28.6 million. Our expenses have
related primarily to expenses related to and expenditures on research and
development, marketing, recruiting and retention of personnel, costs of raising
capital and operating expenses.
Revenue Sources
We expect, for the near-term, that our primary source of revenue will be
royalties under our license agreement with Macrovision and distributions from
our joint venture, ComSign. We are currently seeking to develop or acquire other
technologies that will provide other sources of revenue. However, there can be
no assurance that we will develop or acquire other technologies or if we do,
that such technologies will generate any revenue or profits.
Stock Based Compensation
Compensation expense arising from stock grants, and options and warrants
issued at exercise prices below the quoted market price as of the date of grant
is recognized over the period that services are rendered. As more fully
described below in "Results of Operations," we have recorded expense in
connection with stock based compensation during 1999 and 2000.
Results of Operations
Nine months ended September 30, 2000 ("2000 Period") compared to nine months
ended September 30, 1999 ("1999 Period") and the three months ended September
30, 2000 compared to the three months ended September 30, 1999.
Revenues for the 2000 Period and 1999 Period were $2,014 and $ 67,341,
respectively, and were, in each case, derived from licensing fees of our
DiscGuard product. There were no revenues for the three-month period ended
September 30, 2000 as compared to $26,848 for the comparable period in 1999.
Pursuant to our agreement with Macrovision, we have agreed to reimburse
Macrovision for up to $1 million for research and development and sales and
marketing expenses incurred within the first year of the joint development. As
of September 30, 2000, we have reimbursed Macrovision the maximum obligation of
$1,000,000.
Research and development costs for the 2000 Period were $936,008 as
compared to $240,504 for the 1999 Period. Research and development costs for the
three-month period ended September 30, 2000 were $179,286 compared to $41,884
for the comparable period in 1999. This increase is a result of our joint
development efforts with Macrovision on the development of a copy protection
product for audio content.
Sales and marketing expenses for the 2000 Period were $493,538 as compared
to $373,733 for the 1999 Period and $129,443 for the three-month period ended
September 30, 2000 compared to $104,942 for the comparable period in 1999. This
increase is a result of joint sales and marketing efforts with Macrovision .
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<PAGE>
General and administrative expenses for the 2000 Period were $1,489,639 as
compared to $478,561 for the 1999 Period and $542,762 for the quarter ended
September 30, 2000 as compared to $39,628 in the same quarter in 1999. This
increase was due primarily to increased consulting and general operations.
During the quarter ended September 30, 2000, we incurred higher than usual
professional fees associated with the Company's application for its NASDAQ
listing and other corporate matters.
Stock-based compensation for the 2000 Period was $1,202,792 as compared to
$1,381,106 for the 1999 Period and $442,314 for the three-month period ended
September 30, 2000 compared to $691,351 for the same period in 1999.
Our fifty percent owned affiliate, ComSign Ltd., commenced operations in
July 2000. Our share of the net losses for the period ended September 30, 2000,
was $74,305.
Amortization of deferred financing costs for the 1999 Period was $906,564.
This was a result of warrants issued in connection with our 10% Convertible
Debentures.
Interest income for the 2000 Period increased to $396,226 as compared to
$732 for the 1999 Period. Interest income for the three months ended September
30, 2000 was $155,104 as compared to $188 in the comparable period in 1999. The
increase is attributable to the higher cash and cash equivalent balances,
primarily resulting from the February 2000 private placement.
Interest expense for the 2000 Period decreased to $5,473 as compared to
$402,776 for the 1999 Period. Included in interest expense for the 1999 period
is non-cash amortization of note discount of $204,079. Note discounts were
imputed to reflect the equity component of the related financings. Interest
expense for the three months ended September 30, 2000 were $836 as compared to
$94,769 in the comparable period in 1999. The decrease is attributable to the
reduction in debt.
We reported a net loss for the 2000 Period of $3,803,515 or $(.24) per
share on a basic and diluted basis, as compared to a net loss of $3,715,171 or
$(.69) per share for the 1999 period and $1,213,842 or $(.07) per share for the
three-month period ended September 30, 2000 compared to $1,470,314 or ($.26) per
share for the comparable three month period in 1999. Of the net loss for the
2000 Period, $1,000,000 is attributable to our reimbursement commitment to
Macrovision.
Liquidity and Capital Resources
At September 30, 2000, we had cash of approximately $9 million,
representing an increase of approximately $8.8 million over December 31, 1999.
Cash used by operating activities during the 2000 Period was $2.6 million
compared to $1.4 million during the 1999 Period. During the 2000 period we used
$2 million of our cash for our investment in ComSign and we raised approximately
$13.5 million in additional sales of our Common Stock. We believe, that cash
on-hand is sufficient to meet our requirements for the next 12 months.
NASDAQ Smallcap Listing
On October 23, 2000, the Company's Common Stock became listed on the
NASDAQ Smallcap market (stock symbol: ttre). Prior to the NASDAQ Smallcap
listing, the Common Stock traded on the OTC Electronic Bulletin Board.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Market risks relating to changes in interest rates and foreign currency
exchanges rates were reported in Item 7A of the Company's Annual Report on Form
10-K for the year ended December 31, 1999. There has been no material change in
these market risks since the end of the fiscal year 1999.
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<PAGE>
PART II
Item 1. Legal Proceedings
N/A
Item 2. Change in Securities & Use of Proceeds
Sale of Unregistered Securities
Set forth below is certain information concerning issuances by the Company
of unregistered securities during the third quarter of 2000. The issuances by
the Company of the securities sold in the transactions referenced below were not
registered under the Securities Act of 1933, pursuant to the exemption
contemplated by Section 4(2) thereof for transactions not involving a public
offering.
1 In August 2000, TTR issued to a service provider an immediately vested
warrant to purchase 100,000 shares of Common Stock at an exercise price
per share of $7.50 and a warrant to purchase an additional 100,000 shares
of Common Stock at an exercise price per share of $7.50 which vest ratable
over seven months. The warrants are not exercisable during the first two
years from the date of grant until our Common Stock has traded at or above
$10 per share for fifteen consecutive trading days.
Item 3. Default Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on July 11, 2000 and the
stockholders voted as to the following: (i) to elect Marc D. Tokayer, Dr. Baruch
Sollish, Michael Fine and Michael Braunold as directors to serve for a term of
one year or until a successor is duly elected; (ii) to increase the number of
shares of Common Stock that the Company is authorized to issue from time to time
to 50,000,000 shares; (iii) to adopt the Company's 2000 Equity Incentive Plan;
and (iv) to ratify the appointment of Brightman Almagor & Co., a member of
Deloitte Touche Tohmatsu, as auditors for the year ending December 31, 2000. All
matters were approved by the stockholders.
Voting results are as follows:
For Against Abstain
--- ------- -------
1. Directors 10,293,835 -- 24,900
2. Amendment to Certificate of
Incorporation 10,205,305 103,500 10,170
3. 2000 Equity Incentive Plan 5,219,791 310,720 25,743
4. Auditors 10,271,150 33,025 14,650
No other matters were submitted to a vote of stockholders during the three
month period ended September 30, 2000.
Item 5. Other Information
N/A
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<PAGE>
Item 6. Exhibits and Reports on 8-K
a) Reports on 8-K
N/A
b) Exhibits
4.1 Form of Common Stock Purchase Warrant issued to Brean Murray &
Co., Inc.
10.1 Form of TTR's 2000 Equity Incentive Plan.
10.2 Agreement between TTR and Bluestone Capital dated August 23, 2000.
10.3 Agreement among TTR Technologies, Inc., Comda (1985) Ltd. and
ComSign Ltd. dated as of June 4, 2000.
10.4 Agreement between TTR Technologies, Inc. and Brean Murray & Co.,
Inc. dated June 19, 2000.
Exhibit 27 - - Financial Data Schedule
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<PAGE>
SIGNATURES
In accordance with the requirements 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.
TTR TECHNOLOGIES, INC.
Date: November 14, 2000 By /s/ Marc D. Tokayer
Marc D. Tokayer
Chief Executive Officer
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