As Filed with the Securities and Exchange Commission on November 14, 2001
================================================================================
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 SEPTEMBER 30, 2001
COMMISSION FILE NO. 000-27589
-----------------------
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 November 13, 2001, the registrant had 15,207,386 shares of common stock,
$.001 par value, issued and outstanding.
Transitional small business disclosure format (check one): Yes No X
--- ---
================================================================================
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
Page No.
--------
Balance Sheet F-1
Statements of Operations F-2
Statement of Stockholders' Equity F-3
Statements of Cash Flows F-5
Notes to Financial Statements F-7
1
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET - SEPTEMBER 30, 2001
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 1,534,376
Licensing revenue receivable 721
Inventory 109,451
Prepaid advertising 33,331
Prepaid expenses 200,432
---------------
Total current assets $ 1,878,311
Property and equipment, net of
accumulated depreciation and amortization 843,953
Other assets:
Software licensing, net of accumulated amortization 11,525
Software development costs, net of accumulated amortization 1,196,521
Deposits 48,302
Trademarks, net of accumulated amortization 150,557
Patents 57,140
---------------
Total other assets 1,464,045
--------------
$ 4,186,309
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities -
accounts payable and accrued expenses $ 467,376
8% convertible note payable, due September 7, 2003 600,000
Less unamortized discount (296,050)
---------------
303,950
8% convertible note payable, due September 28, 2003 500,000
Less unamortized discount (265,350)
---------------
234,650
5% convertible note payable, due October 3, 2003 1,000,000
Less unamortized discount (744,533)
---------------
255,467
Stockholders' equity:
Preferred stock; $.001 par value, 10,000,000 shares
authorized, no shares issued and outstanding -
Common stock; $.001 par value, 50,000,000 shares
authorized, 14,659,651 shares issued and outstanding 14,659
Additional paid-in capital 20,457,564
Deficit accumulated during development stage (17,547,357)
---------------
Total stockholders' equity 2,924,866
--------------
$ 4,186,309
==============
See accompanying notes to unaudited financial statements.
F-1
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine months ended Three months ended From inception on
September 30, September 30, January 1, 1999 to
2001 2000 2001 2000 September 30, 2001
---- ---- ---- ---- ------------------
Net revenues $ 185,678 $ - $ 60,818 $ - $ 262,294
Cost of revenues 25,950 - 1,970 - 139,130
---------------- ---------------- --------------- --------------- ----------------
Gross profit 159,728 - 58,848 - 123,164
General and administrative expenses 6,527,250 5,450,363 2,402,994 2,222,451 17,670,521
---------------- ---------------- --------------- --------------- ----------------
Net loss $ (6,367,522) $ (5,450,363) $ (2,344,146) $ (2,222,451) $ (17,547,357)
================ ================ =============== =============== ================
Net loss per share, basic and diluted $ (0.46) $ (0.44) $ (0.16) $ (0.18)
================ ================ =============== ==============
Weighted average shares outstanding,
basic and diluted 13,723,297 12,338,181 14,582,506 12,671,060
================ ================ =============== ===============
See accompanying notes to unaudited financial statements.
F-2
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Deficit
accumulated
Common stock Additional during Total
------------ paid-in development stockholders'
Shares Amount capital stage equity
------ ------ ------- ----- ------
Balance at January 1, 1999 12,720,000 $ 12,720 $ $ $ 12,720
Net proceeds from issuance of
common stock in connection
with merger 7,000,000 7,000 106,236 113,236
Net proceeds from issuance of
common stock 1,500,000 1,500 2,544,422 2,545,922
Net issuance of common stock in
exchange for services 150,000 150 299,850 300,000
Redemption of common stock (10,000,000) (10,000) (10,000)
Net loss for the year ended
December 31, 1999 (1,782,215) (1,782,215)
-------------- -------------- --------------- --------------- --------------
Balance at December 31, 1999 11,370,000 11,370 2,950,508 (1,782,215) 1,179,663
Net proceeds from issuance of
common stock and warrants 312,500 313 1,779,523 1,779,836
Net proceeds from issuance of
common stock and warrants 988,560 988 12,145,193 12,146,181
Issuance of warrants in exchange
for services 55,000 55,000
Issuance of options in exchange
for services 199,311 199,311
Issuance of warrants in connection
with financing 1,576,309 1,576,309
Net loss for the year ended
December 31, 2000 (9,397,620) (9,397,620)
-------------- -------------- --------------- --------------- --------------
Balance at December 31, 2000 12,671,060 12,671 18,705,844 (11,179,835) 7,538,680
See accompanying notes to unaudited financial statements.
F-3
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)
(UNAUDITED)
Deficit
accumulated
Common stock Additional during Total
------------ paid-in development stockholders'
Shares Amount capital stage equity
------ ------ ------- ----- ------
Issuance of stock in exchange
for debt 383,732 384 128,999 129,383
Issuance of options in exchange
for services 7,841 7,841
Issuance of stock in exchange
for debt 515,143 515 86,468 86,983
Net proceeds from issuance of
common stock and warrants 702,350 702 839,318 840,020
Issuance of options in exchange
for services 7,841 7,841
Issuance of stock from conversion
of debt to equity 277,366 277 174,723 175,000
Issuance of warrants in connection
with financing 92,400 92,400
Beneficial conversion feature of
debt to equity related to financing 325,000 325,000
Issuance of common shares for
legal settlement 110,000 110 81,290 81,400
Issuance of options in exchange
for services 7,840 7,840
Net loss for the nine months ended
September 30, 2001 (6,367,522) (6,367,522)
-------------- -------------- --------------- --------------- --------------
Balance at September 30, 2001 14,659,651 $ 14,659 $ 20,457,564 $ (17,547,357) $ 2,924,866
============== ============== =============== =============== ==============
See accompanying notes to unaudited financial statements.
F-4
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
From inception on
Nine months ended Nine months ended January 1, 1999 to
September 30, 2001 September 30, 2000 September 30, 2001
------------------ ------------------ ------------------
Cash flows provided by (used for)
operating activities:
Net loss $ (6,367,522) $ (5,450,363) $ (17,547,357)
-------------- ---------------- ---------------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 958,896 686,570 2,115,141
Amortization of discount on note payable 342,892 - 406,475
Options/shares issued in exchange for services 104,922 160,883 304,233
Warrants issued in exchange for services - - 55,000
Impairment loss related to customer lists 500,000 - 500,000
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Licensing revenue receivable 324,280 - 74,280
Advertising revenue receivable - - (75,000)
Inventory 6,424 (98,038) (109,451)
Prepaid advertising 150,000 (190,556) (33,331)
Prepaid mailing lists - - (750,000)
Prepaid expenses 52,824 (644,651) (200,432)
Deposits (315) (21,085) (48,302)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (331,298) 90,531 467,376
Deferred revenue (56,250) - 250,000
-------------- ---------------- ---------------
Total adjustments 2,052,375 (16,346) 2,955,989
-------------- ---------------- ---------------
Net cash used for operating activities (4,315,147) (5,466,709) (14,591,368)
-------------- ---------------- ---------------
Cash flows used for investing activities:
Purchase of property and equipment (63,694) (1,086,755) (1,387,155)
Software licensing - (667,231) (1,139,309)
Software development costs (262,278) (727,646) (1,560,224)
Trademarks (6,357) (158,325) (214,343)
Patents (1,790) (8,177) (57,140)
Loan fees - - (200,000)
Increase in escrow account 200,000 - -
-------------- ---------------- ---------------
Net cash used for investing activities (134,119) (2,648,134) (4,558,171)
-------------- ---------------- ---------------
Cash flows provided by (used for) financing
activities:
Proceeds from issuance of common stock, net 840,020 13,964,956 17,737,915
Proceeds from convertible note payable 956,000 - 2,956,000
Retirement of common stock, net - - (10,000)
Proceeds from (payments on) loans payable
including officer-stockholders (200,000) (14,500) -
-------------- ---------------- ---------------
Net cash provided by financing activities 1,596,020 13,950,456 20,683,915
-------------- ---------------- ---------------
(Continued)
See accompanying notes to unaudited financial statements.
F-5
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
From inception on
Nine months ended Nine months ended January 1, 1999 to
September 30, 2001 September 30, 2000 September 30, 2001
------------------ ------------------ ------------------
Net increase (decrease) in cash (2,853,246) 5,835,613 1,534,376
Cash and cash equivalents, beginning of year 4,387,622 904,485 -
-------------- ---------------- ---------------
Cash and cash equivalents, end of year $ 1,534,376 $ 6,740,098 $ 1,534,376
============== ================ ===============
Supplemental disclosure of cash flow information:
Interest paid $ 1,266 $ 66 $ 20,343
============== ================ ===============
Income taxes paid $ - $ 1,600 $ 4,223
============== ================ ===============
Supplemental disclosure of non-cash financing
activities:
Warrants issued in exchange for services $ - $ - $ 55,000
============== ================ ===============
Options issued in exchange for services $ 23,522 $ - $ 222,833
============== ================ ===============
Common stock issued in exchange for debt $ 391,365 $ - $ 391,365
============== ================ ===============
Warrants issued in connection with financing $ 394,400 $ - $ 1,970,709
============== ================ ===============
Beneficial conversion feature of debt to equity $ 325,000 $ - $ 325,000
============== ================ ===============
Common shares issued for settlement $ 81,400 $ - $ 81,400
============== ================ ===============
See accompanying notes to unaudited financial statements.
F-6
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2001
(1) Organization:
Conversational Systems, Inc. was incorporated under the laws of
the State of California on April 8, 1991. The Company commenced
operations in 1999.
Effective June 22, 1999, pursuant to a Merger Agreement and Plan
of Reorganization between Dead On, Inc. ("acquiree") and
Conversational Systems, Inc. a California corporation ("acquiror"
or the "Company"), Dead On, Inc. has been reversed merged into
Conversational Systems, Inc. The Company accounted for the
acquisition of Dead On, Inc. using the purchase method of
accounting. The shares of Conversational Systems were exchanged
for 7,000,000 newly issued shares of Dead On, Inc. Because the
former shareholders of Conversational Systems, Inc. then became
the majority shareholders of Dead On, Inc., Conversational
Systems was treated as the acquiror under APB Opinion No. 16,
"Business Combinations."
In July 1999, the Company repurchased and retired 10,000,000
shares of its common stock, $.001 par value per share. Due to the
retirement of shares, the former shareholders of Conversational
Systems, Inc. have significant control in Dead On, Inc.
Due to the contemplation and timing of the merger between Dead
On, Inc. and Conversational Systems, Inc. and the retirement of
10,000,000 shares of the Company's common stock, these events
were accounted for as a single transaction.
Conversational Systems, Inc. was liquidated with and into Dead
On, Inc., which then 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
a full year. 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, 2000.
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.
F-7
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 2001
(2) Summary of Significant Accounting Policies, Continued:
Revenue Recognition:
The Company recognizes revenues when earned in the period in
which the service is provided. Service fees are deferred and
recognized over the life of the service agreement. Initial
distribution fees are recognized when the software is delivered.
(3) Convertible Notes Payable:
5% Convertible Note Payable
---------------------------
For the three quarterly periods ended September 30, 2001, listed below
are the principal balances that were converted from debt to equity. The
original debt securities were issued in 2000.
Month of Conversion Principal Converted Shares Converted To Avg. rate per share
------------------- ------------------- ------------------- -------------------
March 2001 $500,000 383,732 $ 1.30
May 2001 40,000 61,471 0.65
May 2001 135,000 215,639 0.63
May 2001 100,000 158,541 0.63
June 2001 50,000 79,492 0.63
July 2001 175,000 277,366 0.63
8% Convertible Note Payable
---------------------------
On September 7, 2001, the Company entered into a subscription agreement
with Laurus Master Fund, Ltd., a Cayman Island corporation for the sale
of (i) a $600,000 convertible note and (ii) warrants to purchase
100,000 shares of the Company's common stock. The Company recorded net
proceeds of $511,750.
The note bears interest at 8% and is convertible into common stock at
the lesser of:
a) $0.51; or
b) 80% of the average of the three lowest closing prices of the
common stock for the thirty trading days immediately prior
to the conversion date.
The unconverted portion of the note is due September 7, 2003.
The warrants have an exercise price of:
a) $0.82; or
b) 120% of the three lowest closing price of the common stock
for the ten trading days prior to the exercise of the
warrant.
F-8
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 2001
(3) Convertible Notes Payable, Continued:
Using the Black Scholes Option Pricing Model, the fair value of the
warrant amounted to $0.578 per share or total consideration of $57,800.
This amount has been recorded as a discount against the face value of
the note payable. In addition, since this debt is convertible into
equity at the option of the note holder at conversion rates mentioned
above, a beneficial conversion feature of $175,000 has been recorded as
a debt discount and is being amortized using the effective interest
rate over the life of the debt in accordance with EITF 00-27.
8% Convertible Note Payable
---------------------------
On September 28, 2001, the Company entered into a subscription
agreement with Stonestreet Limited Partnership, an Ontario limited
partnership, for the sale of (i) a $500,000 convertible note and (ii)
warrants to purchase 83,333 shares of the Company's common stock. The
Company recorded net proceeds of $444,250.
The note bears interest at 8% and is convertible into common stock at
the lesser of:
a) $0.34; or
b) 80% of the average of the three lowest closing prices of the
common stock for the thirty trading days immediately prior
to the conversion date.
The unconverted portion of the note is due September 28, 2003.
The warrants have an exercise price of:
c) $0.515; or
d) 120% of the three lowest closing prices of the common stock
for the ten trading days prior to the exercise of the
warrant.
Using the Black Scholes Option Pricing Model, the fair value of the
warrant amounted to $0.415 per share or total consideration of $34,600.
This amount has been recorded as a discount against the face value of
the note payable. In addition, since this debt is convertible into
equity at the option of the note holder at conversion rates mentioned
above, a beneficial conversion feature of $150,000 has been recorded as
a debt discount and is being amortized using the effective interest
rate over the life of the debt in accordance with EITF 00-27.
(4) Common Stock:
In June 2001, the Company raised proceeds of approximately $840,000,
which is net of offering costs of approximately $73,000, from the
issuance of 702,350 shares through a private placement offering of its
restricted stock. The offering price was $1.30 per share. The Company
also issued 702,350 warrants (valued using the Black-Scholes method at
the date of grant) to the investors, which have an exercise price of
$0.86 per share and expire on June 30, 2002.
F-9
Item 2. Management's Plan of Operations.
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These statements are often, but not always, made through the use of
words or phrases such as "will," "will likely result," "expect," "anticipate,"
"estimate," and "believe." Accordingly, these statements involve estimates,
assumptions and uncertainties which could cause actual results to differ
materially from those expressed in such statements. Actual results could differ
materially from those projected in the forward-looking statements as a result of
the risk factors set forth in this report, our Annual Report on Form 10-KSB and
other reports and documents that we file with the Securities and Exchange
Commission.
Overview
--------
We are an early growth stage company and plan to be a leading provider of voice
recognition applications for messaging, access to content and mobile commerce on
wireless devices.
We are a developer of fourth generation voice solutions for the telecom,
telematics, television, Internet appliance, and personal computer markets. Our
Intelligent Voice(TM) solutions employ patent-pending technology that allows
people to use their voice to compose, send and receive messages, purchase
products, access information, and control devices.
Our development efforts are focused on MobileVoice Messaging in the wireless
market. This sector has both business and consumer market applications. The
MobileVoice Messaging solution gives wireless phone users the ability to
address, compose and send e-mail, phone to phone and paging messages using only
their voice.
Our initial product is the first in our line of intelligent voice interactive
solutions. Our software is based on artificial intelligence that allows people
to talk with their computers and wireless devices through everyday common
speech. We believe that our artificial intelligence technology is so advanced
that it understands not only simple phrases, but advanced linguistic concepts
such as topic, subject and synonym relationships. By asking the user relevant
questions, our system can help clarify and learn from the user's requests.
Our software will be licensed to other businesses such as local, long distance
and wireless carriers, e-mail and Internet service providers and large
corporations wanting to provide their customers with access to e-mail, SMS, and
Instant Messaging from mobile devices. It will also be licensed to corporations
wanting to provide mobile access to enterprise information. Our solutions are
highly customizable for a variety of different applications, depending on
customer needs. These solutions are very unique in the market and have an
opportunity to provide important new ways for people to communicate and do
business anytime, anywhere.
Management's Discussion and Analysis
------------------------------------
As planned, we launched and began testing our MobileVoice Messaging system with
several major wireless carriers in August 2001. This testing process allows for
carriers to provide feedback on product usability and performance. We are
continuing to work closely with these carriers to develop features and product
characteristics that meet the market needs. This product refinement process will
continue over the course of the next few months with a goal for a market trial
and a subsequent nationwide rollout in 2002.
In the last quarter, our company's Mobile Voice Platform has been selected
to be featured in Ericsson's CDMA Solutions Center. This new facility has
attracted top wireless carriers from around the world to experience the latest
in wireless technology. Our company's voice-enabled mobile applications will
continue to be showcased in demonstrations at this new state of the art
facility.
In the telecom sector, we plan to license our technology to wireless carriers to
provide voice-activated services for their subscribers allowing for increased
revenue streams. Although we intend to sell our services primarily through
wireless carriers, we believe there are also significant opportunities to offer
these services to corporations directly. We continue to consider strategic
initiatives in order to achieve our objectives with this goal.
In September 2001, we began working closely with a Unified Messaging/Presence
Management company to develop a wireless voice interface to their Unified
Messaging system. Once completed, this will allow for wide access to the user's
contact list for composing Instant Messages through a wireless phone. Our goal
is to work jointly with this company and to offer this solution to their current
wireless carrier customers.
In October 2001, we entered into a marketing agreement with a third party for
representation of the IVAN Desktop product for the purpose of sourcing various
retail opportunities including QVC, The Home Shopping Network and
10
Q-Direct. Our goal is to work closely with this third party to create wide
exposure to consumers through these various sales channels.
The telematics sector encompasses voice-activated devices, which could be
installed in a motor vehicle to access information on the Internet. Voice
capabilities of these in-car devices are vital since they allow users to remain
focused on driving, therefore supporting new safety initiatives. We plan to
pursue this sector following the launch and acceptance of our MobileVoice
Messaging system.
In September 2001, we entered into a securities purchase agreement with the
Laurus Master Fund, Ltd. for the issuance of a $600,000 8% convertible debenture
and 100,000 common stock purchase warrants in reliance on Section 4(2) of the
Act and Rule 506. Each warrant entitles the holder to purchase one share of
common stock at an exercise price of $.515. The commission for the transaction
was 10% ($60,000). Proceeds amounted to $511,750, which is net of debt issue
costs of $88,250.
In September 2001, we entered into a securities purchase agreement with the
Stonestreet Limited Partnership for the issuance of a $500,000 8% convertible
note and 83,333 common stock purchase warrants in reliance on Section 4(2) of
the Act and Rule 506. Each warrant entitles the holder to purchase one share of
common stock at an exercise price of $.515. The commission for the transaction
was 10% ($50,000). Proceeds amounted to $444,250, which is net of debt issue
costs of $55,750.
We maintain a cash balance that we believe will sustain operations into 2002. We
continue to explore all possibilities in securing financing sufficient to cover
operating expenses until such time the company reaches profitability. The losses
through the quarter ended September 30, 2001 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.
Facilities
----------
Our principal executive office address is 6333 Greenwich Drive, Suite 240, San
Diego, California 92122. We lease our facilities under leases that expire at
various times through November 2005. Our rent expense was $183,231 for the year
ended December 31, 2000. We also sublease certain space to third parties.
The following table sets forth selected information from the statements of
operations for the three months ended September 30, 2001 and 2000.
Selected Statement of Operations Information
Three Months ended September 30,
2001 2000
----------------------- ----------------------
Net Revenues $ 60,818 $ --
Operating expenses 2,402,994 2,222,451
Net loss 2,344,146 2,222,451
11
Discussion of the three months ended September 30, 2001 compared with the three
-------------------------------------------------------------------------------
months ended September 30, 2000.
-------------------------------
Net revenues totaled $60,818 for the quarter ended September 30, 2001, primarily
from barter transactions. No revenue was earned for the quarter ended September
30, 2000. The recognition of revenues resulted primarily from product licensing
in exchange for advertising and sales of our initial Ivan desktop software
product.
Operating expenses increased to $2,402,994 for the quarter ended September 30,
2001 from $2,222,451 for the same quarter in 2000. The increase in operating
expenses was a direct result of inclusion of non-cash expenses totaling
$1,117,866 which covered entries for: depreciation and amortization;
amortization of discount on Note Payable; options/shares issued for services;
and impairment loss related to customer lists. Salary and wage expense was
$437,284 for the third quarter of 2001 compared to $582,758 for the third
quarter in 2000. The decrease reflects our new direction into the telecom,
telematics and TV/Internet appliance initiatives with a restructured work force.
Advertising and promotion expense totaled $92,335 for the three months ended
September 30, 2001 from $195,519 for the same quarter in 2000. The decrease in
advertising and promotion expense results from the limited marketing activities
related to the new products which are in development stage for the telecom,
telematics and TV/Internet appliance markets. Legal and consulting expenses
decreased to $258,638 for the three months ended September 30, 2001 from
$279,601 for the same quarter in 2000. Depreciation and amortization expenses
increased to $303,047 for the quarter ended September 30, 2001 from $291,176 for
the same period in the prior year.
We had a net loss of $2,344,146 or basic and diluted net loss per share of $0.16
for the three months ended September 30, 2001 compared to $2,222,451 or basic
and diluted net loss per share of $0.18 for the same quarter in 2000.
Discussion of the nine months ended September 30, 2001 compared with the nine
-----------------------------------------------------------------------------
months ended September 30, 2000.
-------------------------------
Net revenues totaled $185,678 for the nine months ended September 30, 2001,
primarily from barter transactions. No revenues were earned for the nine months
ended September 30, 2000. The recognition of revenues resulted primarily from
product licensing in exchange for advertising and sales of our initial Ivan
desktop software product.
Operating expenses increased to $6,527,250 for the nine months ended September
30, 2001 from $5,450,363 for the same period in 2000. The increase in operating
expenses was a direct result of inclusion of non-cash expenses totaling
$1,906,710 for the nine months ended September 30, 2001 as compared to $847,453
for the same period in 2000, which covered entries for: depreciation and
amortization; amortization of discount on Note Payable; options/shares issued
for services; and impairment loss related to customer lists. Salary and wage
expense was $1,677,305 for the nine months ended September 30, 2001 as compared
to $1,383,066 for the same period in 2000. The increase in 2001 as compared to
2000 arose primarily from the increased labor force during the first and second
quarters of 2001, which we have restructured to accommodate our new direction
into the telecom, telematics and TV/Internet appliance initiatives. Advertising
and promotion expense totaled $499,594 for the nine months ended September 30,
2001 as compared to $493,281 for the same period in 2000. Advertising and
promotion expense resulted from the limited marketing activities related to the
new products which are in development stage for the telecom, telematics and
TV/Internet appliance markets. Legal and consulting expenses decreased to
$574,104 for the nine months ended September 30, 2001 from $783,321 for the same
period in 2000. Depreciation and amortization expenses increased to $958,896 for
the nine months ended September 30, 2001 from $686,570 for the same period in
the prior year, primarily due to increased capitalized costs which were
non-existent in 2000.
We had a net loss of $6,367,522 or basic and diluted net loss per share of $0.46
for the nine months ended September 30, 2001 compared to $5,450,363 or basic and
diluted net loss per share of $0.44 for the same period in 2000.
12
Liquidity and Capital Resources
At September 30, 2001 we had working capital of $1,410,935 as compared with
$7,176,033 at September 30, 2000.
Notes payable had a face value of $2,000,000 at December 31, 2000. Notes payable
had a face value of $1,000,000 at September 30, 2001 as a result of a partial
conversion to stock of the notes described below.
Month of Conversion Principal Converted Shares Converted To Avg. rate per share
------------------- ------------------- ------------------- -------------------
March 2001 $500,000 383,732 $ 1.30
May 2001 40,000 61,471 0.65
May 2001 135,000 215,639 0.63
May 2001 100,000 158,541 0.63
June 2001 50,000 79,492 0.63
July 2001 175,000 277,366 0.63
In September 2001, we entered into a securities purchase agreement with the
Laurus Master Fund, Ltd. for the issuance of a $600,000 8% convertible debenture
and 100,000 common stock purchase warrants in reliance on Section 4(2) of the
Act and Rule 506. Each warrant entitles the holder to purchase one share of
common stock at an exercise price of $.515. The commission for the transaction
was 10% ($60,000). Proceeds amounted to $511,750, which is net of debt issue
costs of $88,250.
In September 2001, we entered into a securities purchase agreement with the
Stonestreet Limited Partnership for the issuance of a $500,000 8% convertible
note and 83,333 common stock purchase warrants in reliance on Section 4(2) of
the Act and Rule 506. Each warrant entitles the holder to purchase one share of
common stock at an exercise price of $.515. The commission for the transaction
was 10% ($50,000). Proceeds amounted to $444,250, which is net of debt issue
costs of $55,750.
13
PART II
OTHER INFORMATION
Item 1. Not applicable.
Items 2-5. Not applicable.
Item 6. Exhibits and Reports on 8-K:
(a) None.
(b) No reports on Form 8-K were filed during the fiscal
quarter ended September 30, 2001.
14
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: November 14, 2001 By: /s/ Dean Weber
-----------------------------------------------
DEAN WEBER, Chairman & Chief Executive Officer
Date: November 14, 2001 By: /s/ Rahoul Sharan
-----------------------------------------------
RAHOUL SHARAN, Chief Financial Officer
15