AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 17, 2004
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED MARCH 31, 2004
COMMISSION FILE NO. 0-27589
ONE VOICE TECHNOLOGIES, INC.
(Name of Small Business Issuer in Its Charter)
NEVADA 95-4714338
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6333 GREENWICH DRIVE, STE. 240, SAN DIEGO, CA 92122
(Address of Principal Executive Offices)
(858) 552-4466
(Issuer's Telephone Number)
(858) 552-4474
(Issuer's Facsimile Number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock at the latest practicable date.
As of April 28,2004, the registrant had 162,924,951 shares of common stock,
$.001 par value, issued and outstanding.
Transitional small business disclosure format (check one): Yes ____ No __X__
1
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS. Page No.
--------
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 7
2
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
MARCH 31, 2004 AND DECEMBER 31, 2003
2004 2003
(UNAUDITED) (AUDITED)
----------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 17,456 $ 53,709
Other receivables -- 137,000
Prepaid expenses 38,277 37,698
------------- -------------
Total current assets 55,733 228,407
PROPERTY AND EQUIPMENT, net 190,621 214,351
OTHER ASSETS:
Software licensing, net 2,339 2,839
Software development costs, net 302,546 393,857
Deposits 1,957 9,926
Trademarks, net 32,911 47,668
Patents 77,531 78,186
Total assets $ 663,638 $ 975,234
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,179,996 $ 910,029
LONG-TERM DEBT:
6.00% CONVERTIBLE NOTES PAYABLE 38,761 70,955
7.75% CONVERTIBLE NOTES PAYABLE 33,224 6,957
8.00% NOTE PAYABLE 104,000 104,000
------------- -------------
Total liabilities 1,355,981 1,091,941
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock; $.001 par value, 10,000,000 shares
authorized, no shares issued and outstanding -- --
Common stock; $.001 par value, 250,000,000 shares
authorized, 135,366,403 and 107,130,615 shares
issued and outstanding in 2004 and 2003, respectively 135,366 107,131
Additional paid-in capital 32,873,733 32,235,170
Deficit accumulated during development stage (33,701,442) (32,459,008)
------------- -------------
Total stockholders' equity (deficit) (692,343) (116,707)
------------- -------------
Total liabilities and stockholders' equity (deficit) $ 663,638 $ 975,234
============= =============
See accompanying notes.
3
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(UNAUDITED)
January 1, 1999
For the Three Months Ended (Inception) to
March 31, March 31,
2004 2003 2004
-------------- -------------- --------------
NET REVENUES $ -- $ -- $ 700,321
COST OF REVENUES -- -- 205,675
-------------- -------------- --------------
GROSS PROFIT -- -- 494,646
GENERAL AND ADMINISTRATIVE
EXPENSES 1,242,434 1,431,407 34,196,088
-------------- -------------- --------------
NET LOSS $ (1,242,434) $ (1,431,407) $ (33,701,442)
============== ============== ==============
NET LOSS PER SHARE, basic and diluted $ (.01) $ (0.03)
============== ==============
WEIGHTED AVERAGE SHARES
OUTSTANDING,
basic and diluted 124,527,259 41,632,000
============== ==============
See accompanying notes.
4
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
January 1, 1999
For the Three Months Ended (Inception) to
March 31, March 31,
2004 2003 2004
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,242,434) $ (1,431,407) $(33,701,442)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH USED IN OPERATING ACTIVITIES:
Depreciation and amortization 150,440 183,237 3,987,237
Loss on disposal of assets -- -- 23,340
Amortization of discount on note payable 335,889 446,100 5,992,373
Options issued in exchange for services -- 3,638 459,393
Warrants issued in exchange for services -- -- 221,650
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Accounts receivable 137,000 29,846 --
Prepaid expenses (596) 16,530 (38,277)
Deposits 7,969 -- (1,957)
INCREASE (DECREASE) IN LIABILITIES:
Accounts payable and accrued expenses 269,966 130,102 1,179,996
------------- ------------- -------------
Net cash used in operating activities (341,766) (621,910) (21,877,687)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,777) (7,737) (1,430,797)
Software licensing -- -- (1,145,222)
Software development costs (12,640) (20,292) (1,666,161)
Trademarks -- (262) (242,731)
Patents (5,070) (10,526) (114,847)
Loan fees -- -- (200,000)
------------- ------------- -------------
Net cash used for investing activities (19,487) (38,817) (4,799,858)
------------- ------------- -------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of common stock, net -- -- 18,465,151
Retirement of common stock, net -- -- (10,000)
Proceeds from loans payable, officer-stockholder -- -- (200,000)
Proceeds from loans payable -- -- 304,000
Proceeds from convertible note payable 325,000 -- 8,135,850
------------- ------------- -------------
Net cash provided by financing activities 325,000 -- 26,695,001
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH (36,253) (660,727) 17,456
CASH AND CASH EQUIVALENTS, beginning of period 53,709 745,155 --
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 17,456 $ 84,428 $ 17,456
============= ============= =============
5
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
January 1, 1999
For the Three Months Ended (Inception) to
March 31, March 31,
2004 2003 2004
--------------- --------------- ---------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ - $ - $ 59,654
=============== =============== ===============
Income taxes paid $ 804 $ 800 $ 7,491
=============== =============== ===============
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
ACTIVITIES:
Options issued in exchange for services $ - $ 3,638 $ 377,993
=============== =============== ===============
Shares Issued for re-pricing of conversion rate $ - $ - $ 175,000
=============== =============== ===============
Common shares and warrants issued for
settlement $ - $ - $ 303,050
=============== =============== ===============
Warrants issued in connection with financing $ - $ - $ 4,290,153
=============== =============== ===============
Beneficial conversion feature of convertible debt $ - $ - $ 3,657,750
=============== =============== ===============
Common stock issued in exchange for debt $ 341,798 $ 495,000 $ 7,075,314
=============== =============== ===============
See accompanying notes.
6
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION:
One Voice Technologies, Inc. (the "Company") (formerly Conversational
Systems, Inc.), a California corporation, was incorporated on April 8,
1999. The operations of the Company began in 1999.
On June 22, 1999 pursuant to a Merger Agreement and Plan of
Reorganization Dead On, Inc. exchanged 7,000,000 shares of common stock
for 100% of the outstanding shares of common stock of Conversational
Systems, Inc. The exchange has been accounted for as a reverse merger,
under the purchase method of accounting. In July 1999, in contemplation
of the merger between Dead On, Inc. and Conversational Systems, Inc.,
the Company repurchased and retired 10,000,000 shares of common stock.
The combination and retirement of the common stock has been recorded as
a recapitalization of stockholders' equity. Conversational Systems,
Inc. was liquidated and Dead On, Inc changed its legal name to One
Voice Technologies, Inc.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INTERIM FINANCIAL STATEMENTS:
The accompanying financial statements include all adjustments
(consisting of only normal recurring accruals) which are, in the
opinion of management, necessary for a fair presentation of the results
of operations for the periods presented. Interim results are not
necessarily indicative of the results to be expected for the full year
ending December 31, 2004. The financial statements should be read in
conjunction with the financial statements included in the annual report
of One Voice Technologies, Inc. (the "Company") on Form 10-KSB for the
year ended December 31, 2003.
GOING CONCERN:
The Company's financial statements have been presented on the basis
that the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the
normal course of business. The Company incurred a net loss of
$1,242,434 during the three months ended March 31, 2004 and had an
accumulated deficit of $33,701,442.The Company had negative working
capital of $1,124,263 at March 31, 2004. Cash flows used for operations
amounted to $341,766 for the three months ended March 31, 2004. These
factors raise substantial doubt about the Company's ability to continue
as a going concern unless the Company enters into a significant
revenue-bearing contract. Management is currently seeking additional
equity or debt financing. Additionally, management is currently
pursuing revenue-bearing contracts utilizing various applications of
its technology including wireless technology. The financial statements
do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
BUSINESS ACTIVITY:
The Company develops and markets computer software using Intelligent
Voice Interactive Technology (IVIT(TM)) to website owners in the United
States and other countries.
7
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
REVENUE RECOGNITION:
The Company recognizes revenues when earned in the period in which the
service is provided or product shipped. Service and license fees are
deferred and recognized over the life of the agreement.
The Company's revenue recognition policies are in compliance with all
applicable accounting regulations, including American Institute of
Certified Public Accountants ("AICPA") Statement of Position ("SOP")
97-2, Software Revenue Recognition, as amended by SOP 98-4 and SOP
98-9. Any revenues from software arrangements with multiple elements
are allocated to each element of the arrangement based on the relative
fair values using specific objective evidence as defined in the SOPs.
If no such objective evidence exists, revenues from the arrangements
are not recognized until the entire arrangement is completed and
accepted by the customer. Once the amount of the revenue for each
element is determined, the Company recognizes revenues as each element
is completed and accepted by the customer. For arrangements that
require significant production, modification or customization of
software, the entire arrangement is accounted for by the percentage of
completion method, in conformity with Accounting Research Bulletin
("ARB") No. 45 and SOP 81-1.
(3) NOTES PAYABLE:
CONVERTIBLE NOTES PAYABLE:
--------------------------
Conversion of Debt
------------------
During the three months ended March 31, 2004, approximately $342,000 of
notes payable was converted into approximately 27,927,000 shares of the
Company's common stock at an average conversion price of $0.023 per
share.
A summary of convertible notes payable is as follows:
Due Principal Unamortized Net
Date Amount Discount Balance
----------------- ------------------ ---------------- ----------------
Alpha Capital
Akteingesellschaft November 10, 2006 $ 100,000 $ (61,239) $ 38,761
La Jolla Cove
Investors, Inc. December 12, 2005 217,500 (184,276) 33,224
------------------ ---------------- ---------------
$ 317,500 $ (245,515) $ 71,985
================== ================ ===============
8
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE PAYABLE:
-------------
On August 8, 2003 the Company entered into a note payable in the amount
of $100,000, with interest at 8.0% per annum, due on August 8, 2008. At
March 31, 2004 and December 31, 2003 the balance on the note payable
was $104,000, including a lending fee of 4% which is being amortized to
interest expense over the term of the note.
(4) COMMON STOCK:
During the quarter ended March 31, 2004, $153,273 of the Alpha Capital
Akteingesellschaft convertible note payable was converted at an average
conversion price of $0.023 into 6,633,995 shares of the Company's
common stock.
During the quarter ended March 31, 2004, $55,000 of the Ellis
Enterprise Limited convertible note payable was converted at an average
conversion price of $0.023 into 2,364,575 of the Company's common
stock.
During the quarter ended March 31, 2004, $101,025 of the Bristol
Investments Fund, Limited convertible note payable and related interest
was converted at an average conversion price of $0.023 into 4,317,308
common shares.
During the quarter ended March 31, 2004, La Jolla Cove Investors, Inc.
exercised warrants to purchase 325,000 shares of common stock for cash
in the amount of $325,000 and converted $32,500 of the 7.75%
convertible note into 14,610,910 shares of common stock at an average
exercise and conversion price of $0.024 per share.
(5) INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN:
Pro forma information regarding the effect on operations is required by
SFAS 123 and SFAS 148, has been determined as if the Company had
accounted for its employee stock options under the fair value method of
that statement. Pro forma information using the Black-Scholes method at
the date of grant based on the following assumptions:
Expected life 3 Years
Risk-free interest rate 5.0%
Dividend yield -
Volatility 100%
This option valuation model requires input of highly subjective
assumptions. Because the Company's employee stock options have
characteristics significantly different from those of traded options,
and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing
model does not necessarily provide a reliable single measure of fair
value of its employee stock options.
9
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For purposes of SFAS 123 pro forma disclosures, the estimated fair
value of the options is amortized to expense over the option's vesting
period. The Company's proforma information is as follows:
For the Three Months Ended
March 31,
2004 2003
--------------- ---------------
Net loss, as reported $ (1,242,434) $ (1,431,407)
Stock compensation (21,663) (120,000)
---------------- ----------------
Pro forma net loss $ (1,264,097) $ (1,551,407)
================ ================
Basic and diluted historical loss per share $ (0.01) $ (0.03)
Pro forma basic and diluted loss per share $ (0.01) $ (0.04)
(6) SUBSEQUENT EVENTS:
During April 2004, Alpha Capital Akteingesellschaft converted notes
payable in the amount of $51,825 at an average conversion price of
$0.0088 into 5,889,165 common shares.
During April 2004, La Jolla Cove Investors, Inc. exercised warrants
to purchase 325,000 shares of common stock for cash in the amount of
$325,000 and converted $27,500 of the 7.75% convertible note at an
average conversion price of $0.011 into 26,661,288 common shares.
10
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
WITH THE EXCEPTION OF HISTORICAL MATTERS, THE MATTERS DISCUSSED HEREIN ARE
FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. FORWARD LOOKING
STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO STATEMENTS CONCERNING ANTICIPATED
TRENDS IN REVENUES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS
DISCUSSED IN SUCH FORWARD LOOKING STATEMENTS. THERE IS ABSOLUTELY NO ASSURANCE
THAT WE WILL ACHIEVE THE RESULTS EXPRESSED OR IMPLIED IN FORWARD LOOKING
STATEMENTS.
OVERVIEW
One Voice Technologies, Inc. is a voice recognition technology company with over
$30 million invested in Research and Development and deployment of more than 20
million products worldwide in seven languages. To date, our customers include
Golden State Cellular, Warner Brothers and Disney with strong technology and
business partnerships with Philips Electronics and IBM. Based on our patented
technology, One Voice offers voice solutions for the Telecom, Enterprise, PC and
Interactive Multimedia markets. Our solutions allow business and consumer phone
users to Voice Dial, Group Conference Call, Read and Send E-Mail and Instant
Messages all by voice. We offer these solutions through both domestic and
international wireless and wireline carriers along with reseller channels for
corporations with a mobile workforce. We offer PC manufacturers the ability to
bundle a complete voice interactive computer assistant which allows PC users to
talk to their computers to quickly launch applications, websites, read and send
E-mails and dictate letters. We feel we are strongly positioned across these
markets with our patented voice technology.
In the telecom sector, in February, 2004 we hired two sales executives to lead
our telecom sales initiatives. Jack Johnson joined the company as Vice President
of Telephony Sales and Rick Stone as Vice President of Telephony Business
Development, North America. Both Jack and Rick have numerous years of telephony
sales experience and a proven track record in the industry. Additionally, on
April 26, 2004 we announced our first revenue generating wireless carrier
contract with Golden State Cellular. This is a great opportunity for our company
and it demonstrates the market readiness and demand for our MobileVoice(TM)
product. We anticipate closing additional carrier contracts throughout the
remainder of 2004.
In this quarter, we attended the CTIA Wireless 2004 tradeshow and exhibited at
the Rural Cellular Association (RCA) tradeshow. At these shows, the company
showed our industry leadership in voice recognition by demonstrating both our
MobileVoice carrier product along with our Windows XP Media Center Communicator
product and the seamless voice recognition and E-mail integration from both a
mobile phone and from a PC. We displayed our vision of enabling both mobile
phones and digital home entertainment systems with the ability to instantly
communicate with friends, colleagues and family members, all by voice.
In May 2004, we announced that Microsoft demonstrated our soon to be released
Media Center Communicator in their Windows Hardware Showcase at the 2004 Windows
Hardware Engineering Conference (WinHEC). The Windows Hardware Showcase enabled
visitors to see firsthand what the future holds for Windows-based solutions. We
are proud to have been the only voice technology company showcased by Microsoft
at this show.
Our Media Center Communicator, scheduled for release mid-summer 2004, seamlessly
integrates with Windows XP Media Center Edition 2004 by adding a complete
communications package including sending and reading E-mail, SMS Text Messaging
to mobile phones, Instant Messaging, PC-to-Phone calling and a full-featured
voice command user interface.
11
RESULTS OF OPERATIONS
The following table sets forth selected information from the statements of
operations for the three months ended March 31, 2004 and 2003.
SELECTED STATEMENT OF OPERATIONS INFORMATION
For the Three Months Ended
March 31,
2004 2003
--------------- ---------------
Net revenues $ -- $ --
Operating expenses (1,242,434) (1,431,407)
---------------- ----------------
Net loss $ (1,242,434) $ (1,431,407)
================ ================
Discussion of the three months ended March 31, 2004 compared with the three
months ended March 31, 2003.
There were no revenues for the three months ended March 31, 2004. There were no
revenues for the three months ended March 31, 2003.
Operating expenses decreased to $1,242,000 for the three months ended March 31,
2004 from $1,431,000 for the same period in 2003. The decrease in operating
expenses over the same quarter in 2003 was a direct result of a decrease of all
major expense categories for the period as compared to the year prior. Salary
and wage expense was $277,000 for the three months ended March 31, 2004 as
compared to $327,000 for the same period in 2003. The decrease in 2004 as
compared to 2003 arose primarily from the decreased labor force, which we have
restructured to accommodate our new direction into the telecom, telematics and
TV/Internet appliance initiatives. Legal and consulting expenses of $61,000 for
the three months ended March 31, 2004 remained the same compared to period in
2003. Depreciation and amortization expenses decreased to $150,000 for the three
months ended March 31, 2004 from $196,000 for the same period in the prior year,
primarily due to the retirement of fixed assets. Amortization and Depreciation
expenses consisted of patent and trademarks, computer equipment, consultant
fees, and tradeshow booth. Interest expense decreased to $345,000 in 2004, as
compared to $451,000 in 2003, primarily due to a lack of financings and
subsequent beneficial conversion features during the first quarter of 2004.
We had a net loss of $1,242,434, or basic and diluted net loss per share of
$0.01, for the three months ended March 31, 2004 compared to $1,431,407, or
basic and diluted net loss per share of $0.03, for the same period in 2003.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2004, we had a negative working capital of $1,124,263 as compared
to negative working capital of $428,302 at March 31, 2003.
12
Net cash used in operating activities was $341,766 for the quarter ended March
31, 2004 compared to $621,910 for the quarter ended March 31, 2003. We believe
that our average monthly cash requirements approximate $200,000. From inception
on January 1, 1999 to March 31, 2004, net cash used for operating activities was
$21,877,687.
Net cash used for investing activities was $19,487 for the quarter ended March
31, 2004 compared to $38,817 for the quarter ended March 31, 2003. During the
three months ended March 31, 2004, cash was primarily used for capitalized
software development costs, patents and license. From inception on January 1,
1999 to March 31, 2004, net cash used for investing activities was $4,799,858.
Net cash provided by financing activities was $325,000 for the quarter ended
March 31, 2004 compared to $0 for the quarter ended March 31, 2003. From
inception on January 1, 1999 to March 31, 2004 net cash provided by financing
activities was $26,695,001.
We incurred a net loss of $1,242,434 during the quarter ended March 31, 2004,
and had an accumulated deficit of $33,701,442. Our losses through March 2004
included interest expense, amortization of software licensing agreements and
development costs and operational and promotional expenses. Sales of our equity
securities have allowed us to maintain a positive cash flow balance from
financing activities.
Cash flow from sales began in the first quarter 2002. There has been no material
cash flows from sales during the current quarter.
We anticipate maintaining a cash balance through our financial partner that will
sustain operations up to December 2004. We continue to rely heavily on our
current method of convertible debt and equity funding, which have financed us
since 2001, until we are operationally breakeven. The losses through the year
ended December 31, 2003 were due to minimal revenue and our operating expenses,
with the majority of expenses in the areas of: salaries, legal fees, consulting
fees, as well as amortization expense relating to software development, debt
issue costs and licensing costs. We face considerable risk in completing each of
our business plan steps, including, but not limited to: a lack of funding or
available credit to continue development and undertake product rollout;
potential cost overruns; a lack of interest in its solutions in the market on
the part of wireless carriers or other customers; potential reduction in
wireless carriers which could lead to significant delays in consummating revenue
bearing contracts; and/or a shortfall of funding due to an inability to raise
capital in the securities market. Since further funding is required, and if none
is received, we would be forced to rely on our existing cash in the bank or
secure short-term loans. This may hinder our ability to complete our product
development until such time as necessary funds could be raised. In such a
restricted cash flow scenario, we would delay all cash intensive activities
including certain product development and strategic initiatives described above.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There has been no bankruptcy, receivership or similar proceedings.
There have been no material reclassifications, mergers, consolidations, or
purchase or sale of a significant amount of assets not in the ordinary course of
business.
As of March 31, 2004, the Company has been notified of potential claims
aggregating $311,000. Management believes that it has adequate defense for such
unsubstantiated claims. As of March 15, 2004, the Company has not devoted any
substantial resources to defend these unsubstantiated claims. The aggregate of
potential claims consists of the following: 1) an approximate $211,000.00 claim
by Genuity Inc. that One Voice is responsible for cancellation fees despite
Genuity's failure to deliver the agreed upon service. No lawsuit has been filed
in this matter and no communication from Genuity has been received for
approximately two years; 2) the remaining claims center primarily around
cancellation charges related to trade show events. The only claim that has
resulted in a lawsuit is for $38,000.00. Counsel for the plaintiff in that
matter has not appeared at court hearings and has not answered discovery.
Counsel for One Voice is inquiring whether the matter is still being pursued. No
other potential claim has resulted in a lawsuit.
13
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The securities described below represent our securities sold by us for the
period starting January 1, 2002 and ending March 31, 2004 that were not
registered under the Securities Act of 1933, as amended, all of which were
issued by us pursuant to exemptions under the Securities Act. Underwriters were
involved in none of these transactions.
PRIVATE PLACEMENTS OF COMMON STOCK AND WARRANTS FOR CASH
None.
SALES OF DEBT AND WARRANTS FOR CASH
On December 12, 2003 the Company entered into a securities purchase agreement
with La Jolla Cove Investors, Inc. for the issuance of a 7.75% convertible
debenture in the aggregate amount of $250,000. The note bears interest at 7.75%
(effective interest rate in excess of 100% on the aggregate amount), matures on
December 12, 2005, and are convertible into the Company's common stock, at the
holder' option, at the lower of (i) $0.25 or (ii) eighty percent (80%) of the
average of the three lowest volume weighted average prices during the twenty
(20) trading days prior to holder's election to convert. In addition, the
company issued an aggregate of 2,500,000 warrants to the investors. The warrants
are exercisable until December 12, 2006 at a purchase price of $1.00 per share.
Beginning in the first calendar month after the registration statement is
declared effective; holder shall convert at least 7%, but no more than 15% of
the face value of the debenture per calendar month into common shares of the
company. The 15% monthly maximum amount shall not be applicable if the current
market price of the common stock at anytime during the applicable month is
higher than the current market price of the common stock on the closing date.
Net proceeds will amount to approximately $237,000, net of debt issue cash cost
of $13,000. Pursuant to this offering, the Company has already received $100,000
and received the remaining $137,000 on January 16, 2004. The relative value
(limited to the face amount of the debt) of all the warrants of $18,030 using
Black Scholes option pricing model and the beneficial conversion feature of
approximately $231,970 will be amortized over the life of the debt using the
interest method. Upon conversion of the debt mentioned above, any unamortized
debt issue costs will be charged to expense.
OPTION GRANTS
There were no option grants during the first quarter of 2004.
ISSUANCES OF STOCK FOR SERVICES OR IN SATISFACTION OF OBLIGATIONS
None.
All of the above offerings and sales were deemed to be exempt under Regulation D
and Section 4(2) of the Securities Act. No advertising or general solicitation
was employed in offering the securities. The offerings and sales were made to a
limited number of persons, all of whom were accredited investors, business
associates of One Voice or executive officers of One Voice, and transfer was
restricted by One Voice in accordance with the requirements of the Securities
Act of 1933. In addition to representations by the above-referenced persons, we
have made independent determinations that all of the above-referenced persons
were accredited or sophisticated investors, and that they were capable of
analyzing the merits and risks of their investment, and that they understood the
speculative nature of their investment. Furthermore, all of the above-referenced
persons were provided with access to our Securities and Exchange Commission
filings.
14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON 8-K:
(a) Exhibits.
Exhibit Number Description
-------------- -----------
31.1 Certification of the Chief Executive Officer of One Voice Technologies,
Inc. Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer of One Voice Technologies,
Inc. Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32.1 Certification Chief Executive Officer Pursuant to 18 U.S.C. Section
1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
32.2 Certification Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
(b) No reports on Form 8-K were filed during the quarter ended March
31, 2004.
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SIGNATURES
In accordance with the requirements of the Exchange Act of 1933, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ONE VOICE TECHNOLOGIES, INC., A NEVADA CORPORATION
DATE: MAY 17, 2004 BY: /S/ DEAN WEBER
----------------------------------------------
DEAN WEBER, CHAIRMAN & CHIEF EXECUTIVE OFFICER
DATE: MAY 17, 2004 BY: /S/ RAHOUL SHARAN
----------------------------------------------
RAHOUL SHARAN, CHIEF FINANCIAL OFFICER
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