SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report under Section 13 or 15 (d) of the Securities Exchange Act of 1934
For the year ended December 31, 2001
Commission File Number 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) (Zip Code)
(858) 552-4466 (858) 552-4474
-------------- --------------
(Issuer's Telephone Number) (Issuer's Facsimile Number)
Securities registered under Section 12(g) of the Exchange Act:
Common Stock-$.001 Par Value
----------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter periods that the registrant was required to file such reports), and (2)
had been subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10 KSB or any
amendment to this Form 10-KSB.
The issuer's revenues for the year ended December 31, 2001 were $185,934.
The approximate aggregate market value of the voting stock held by non-
affiliates of the issuer as of March 28, 2002, based on the average of the
closing bid and asked prices of one share of the Common Stock of the Company, as
reported on March 28, 2002 was $12,187,056.
As of March 28, 2002, the issuer had 26,716,628 shares of Common Stock, $.001
par value, outstanding.
ITEM 1 DESCRIPTION OF BUSINESS
One Voice Technologies, Inc. ("One Voice" or the "Company") is the industry's
founder of 4th Generation voice solutions for the Telecom, Telematics,
TV/Internet and Interactive Multimedia markets. One Voice's technology allows
people to use everyday speech to send and receive e-mail, instant messages and
SMS (Short Message Service), control devices, access information and purchase
products. The Company's solutions have the opportunity to revolutionize the way
people use phones (wired and wireless), PC's, PDA's, TV's, Internet appliances
and automobiles by making them more mobile, convenient, safer and easier to use.
Located in San Diego, California, the Company has 13 full-time employees and is
traded on the NASDAQ exchange under the symbol "ONEV." One Voice commenced
operations as Conversational Systems, Inc. on January 1, 1999 as a privately
held California corporation, and on July 14, 1999, merged into Dead On, Inc., a
publicly traded company incorporated in Nevada in 1995. On September 9, 1999,
the company officially changed its name to One Voice Technologies, Inc.
One Voice's solutions can be server-based or embedded in devices, each of which
incorporates the most sophisticated 4th Generation Voice Technology in the
market today. Over the past six years, One Voice's engineers have developed
their Intelligent Voice Platform(TM) (IVP) based on patented speech technology.
Designed from the ground up, the system has been optimized for high performance
in any environment and can handle accents, background noise and data
communication limitations that are common in mobile environments around the
world. One Voice's suite of applications offers the only mobile, completely
integrated messaging and Voice Activated Dialing solution. This suite offers
users a comprehensive, voice-based messaging and dialing solution that is
completely hands-free and much faster and easier to use than competitive
products.
Market Opportunity
------------------
The presence of voice technology as an interface in mobile communications is of
paramount importance. Voice interface technology makes portable communications
products mobile, more effective and safer to use. One Voice's development
efforts currently are focused on the Telecom market and more specifically on
mobile communications and mobile messaging. The Messaging market, which has both
business and consumer market applications including: E-mail, Instant Messages,
SMS (Short Message Service), and Paging, is extremely large and is growing at an
astonishing rate. Over six trillion text messages are sent globally every year,
and messaging has also shown the consistent ability to generate significant
revenue. One Voice solutions enable users to send, intelligently route and
receive text messages using voice from any type of phone (wired or wireless)
anywhere in the world.
One Voice's solutions address the entire phone market including analog, digital,
CDMA, TDMA, GSM, iDen and wired phones, allowing telephony carriers and users to
deploy solutions quickly with little additional effort. Given the growing
competition in the wireless markets and the opportunities presented by the
Mobile Internet, One Voice's 4th Generation Voice Technology is well positioned
for commercialization.
One Voice is focused on communications solutions that are mobile, not just
portable. Devices like PDAs, Laptops and Cell Phones are highly portable because
they are easily transported from location to location, but they are not
necessarily mobile (i.e. easy to use while one is moving). Mobile solutions are
not only portable, but they are easy and safe to operate while moving. Portable
solutions such as cell phones, PDAs and laptops are not easy to operate safely
while operating motor vehicles, especially in crowded and intense traffic. Case
in point, New York has passed legislation requiring hands-free use of cell
phones and any other communication device during the operation of an automobile
citing safety concerns. Currently 42 other states are considering similar
legislation. Additional legislation could significantly increase the immediate
demand for a completely integrated and voice activated mobile communication
solution. One Voice's technology supports hands-free operation and will bring
mobile phones and other devices into compliance with the newly adopted
legislation.
One Voice Services
------------------
The MobileVoice Platform was designed based on patented voice technology and
years of research and development. The platform is server-based, so it is easy
to deploy and maintain and because it does not require a mobile device upgrade,
it works with 100% of a carrier's subscriber base. Optimized for mobile
environments, the system uses a modular architecture that is highly reliable,
scalable and redundant and delivers unparalleled performance in terms of
accuracy and functionality.
MobileVoice Activated Dialing(TM)
Designed from the ground up to meet the unique needs of wireless carriers,
MobileVoice Activated Dialing is server-based and delivers higher levels of
accuracy and reliability than any solution on the market today. It has higher
capacity for contact lists, more functionality and requires less setup time than
other solutions. It is designed to meet the challenges of mobile environments
with high accuracy for native and non-native speaking individuals.
MobileVoice Email(TM)
The Telecom industry's only Voice-to-Text Email solution let's subscribers send
free-form email messages while on the road. Designed for high levels of accuracy
in a mobile environment, MobileVoice Email sets the standard for mobile
communications.
MobileVoice SMS(TM)
Short Message Service (SMS) has gained wide popularity in Europe and is now
hitting the streets in North America. MobileVoice SMS is the Telecom industry's
only Voice-to-Text SMS solution that let's subscribers send free-form messages
from phone-to-phone with only their voice. No need to Tap or WAP, MobileVoice
SMS truly enables mobility and communications to a 100% addressable phone
market. With MobileVoice SMS subscribers can send messages within network or
even to subscribers on other networks. Now, voice based inter-carrier SMS is
available today with MobileVoice SMS.
MobileVoice Instant Messaging(TM)
Instant Messaging has long been a popular way for friends and colleagues to
communicate on their computers. MobileVoice Instant Messaging now takes Instant
Messaging mobile, letting people chat and send quick messages with only their
voice. Targeted at subscribers and enterprise customers, MobileVoice Instant
Messaging sets the standard for voice based instant communications, anytime,
anywhere.
MobileVoice Voice Mail(TM)
A popular way to leave messages, MobileVoice Voice Mail let's subscribers record
and send messages in their own voice. The voice recording of your message will
be sent as an Email attachment to the recipient or group of recipients for quick
retrieval from any computer or any phone.
MobileVoice Email Reader(TM)
We have designed MobileVoice Email Reader to be the most powerful and versatile
solution on the market. With MobileVoice Email Reader, subscribers take full
control of their Email accounts from any phone. Subscribers can easily find
important messages and respond to one person or many in seconds. Need to forward
a message on to others? No problem! MobileVoice Email Reader offers full Reply
and Forward capabilities. Need access to your home and work Email accounts?
MobileVoice Email Reader delivers - giving users access to personal and
corporate Email accounts from any phone.
Technology Overview
-------------------
To date, widespread applications of voice technology for use in mobile
communication have been very basic, recognizing a limited number of words and
using rigid menu systems delivering a constrained amount of content. One Voice's
technology positions itself uniquely in the Voice Market. The Company's
Intelligent Voice Platform(TM) (IVP) uses patented Artificial Intelligence and
Natural Language Processing, which is highly intelligent, with the ability to
identify individual users, tap into a database of user specific information, and
dynamically learn and leverage a vocabulary of over 300,000 words. The
technology employs a flexible architecture, allowing it to reside and operate on
a device itself, in a server-based architecture or a mix of both, making it
extremely adaptable to different usage models. The IVP also provides
anytime/anywhere access to information, reduces training time and lowers costs
for both consumers and businesses. The technology is functionally superior and
extremely easy to use. Users can simply download information into the One Voice
server from e-mail applications directly, and the Voice Activated Dialing (VAD)
system is operational with no voice training needed.
One Voice has also developed several other technologies that enhance the
offerings of the IVP. MultiSite(TM) is a proprietary context-based searching
technology that finds multiple websites for any category and retrieves them
simultaneously. It is particularly helpful when performing Internet searching on
devices such as mobile phones. VoiceSite(TM) is a proprietary technology that
makes websites voice interactive. It allows companies to voice enable their
sites quickly and easily, as well as suggestively create a customized experience
for visitors.
Competitive Landscape
---------------------
One Voice is the industry's first and only provider of 4th Generation voice
technology. The evolution of speech technology can be broken into four
generations as follows:
Generation 1 systems require minimal processing power and storage and are often
used in embedded devices. These solutions can typically recognize 20-30 words or
less and are usually founded embedded in electronic devices such as phones,
toys, etc. Due to its limitations, this technology is typically used for limited
command & control functions or applications. Companies focused in this space
include Conversay and IBM among others.
Generation 2 systems expand the recognition capabilities seen in Generation 1
increasing the vocabulary to potentially hundreds of words. These systems
frequently use menus to support the delivery of content as seen in Interactive
Voice Response (IVR) systems for airline reservations, banking and Voice
Portals. Due to the use of menus, these systems can typically deliver a maximum
of 6-8 areas of content horizontally and 3-4 layers down in the menu trees
before running the risk of "user overload." Companies focused in this space
include Speechworks International, Nuance Communications, i3 Mobile, Preferred
Voice, HeyAnita, Bevocal and TellMe among others.
Generation 3 systems expand the recognition capabilities significantly to
hundreds of thousands of words. The systems can support continuous, free-form
transcription of voice into text. These systems are typically used for desktop
dictation applications running on PC's in the sectors of word processing,
medical and legal transcription. Companies focused in this space include IBM,
ScanSoft and Philips.
Generation 4 systems take the capabilities of all the previous generations and
adds powerful expert systems and Artificial Intelligence capabilities to allow
the solutions to not only recognize words, but also understand their meaning.
This opens the doors to higher degrees of personalization, more robust system
interaction and more advanced applications such as Voice-to-Text Messaging on a
phone and full Internet searching. One Voice is currently the only company in
the voice technology sector that offers 4th Generation voice technology.
Major Market Advantages
-----------------------
Wireless Carriers looking to drive incremental revenue could utilize One Voice's
technology to expand mobile messaging offerings. One Voice services apply to
100% of the addressable market, where extensive research clearly indicates
strong demand. One Voice can add significant fundamental value by creating
revenue opportunities through: 1) mobile use minutes, 2) recurring fees for
subscription services, 3) m-commerce transactions and 4) license fees for
voice-enabling content. One Voice's solutions can also play a key role in
helping wireless carriers differentiate their brand and service offerings,
attracting new users and reducing churn. Additionally, the interoperability of
One Voice's technology gives it the ability to link multiple wireless carrier
networks, creating greater flexibility and driving consumer demand.
Instant and Unified Messaging: Operators of Instant Messaging and Unified
Messaging systems could significantly expand market share and drive revenues
through integration of the Company's technology with its messaging capabilities.
With One Voice, a mobile phone can be used to send instant messages, similar to
a PC or PDA. This ability provides a differentiation for the service and thus
drives additional revenue from other channels, such as Internet and e-mail
services.
Infrastructure Providers: Many of the leading mobile device hardware
manufacturers also provide infrastructure services to wireless carriers. One
Voice's technology provides a point of differentiation which could be bundled
with infrastructure. Wireless carriers could then offer the technology to their
subscribers, driving mobile phone minutes and increasing revenues.
Voice Technology through Platform Independence: A key advantage of the One Voice
technology is that it is platform independent. The technology is adaptable and
highly intelligent allowing it to operate on a device itself, in a server
environment or a combination of the two. This creates expansive market
opportunities including usage in mobile phones, PC's, wired and wireless
handheld devices and other consumer electronics products.
Employees
---------
At December 31, 2001, we employed 13 full-time employees and 4
consultant/part-time employees. None of these employees is subject to a
collective bargaining agreement, and there is no union representation within our
company. We maintain various employee benefit plans and believe our employee
relations are good.
RISK FACTORS
------------
This section summarizes certain risks regarding our business and industry. The
following information should be considered in conjunction with the other
information included and incorporated by reference in this report on Form 10-KSB
before purchasing shares of our stock.
WE HAVE A HISTORY OF LOSSES. WE EXPECT TO CONTINUE TO INCUR LOSSES, AND WE MAY
NEVER ACHIEVE AND SUSTAIN PROFITABILITY.
Since inception, we have incurred significant losses and have negative cash
flows from operations. These factors, among others discussed in Note 1 to the
financial statements, raise substantial doubt about the our ability to continue
as a going concern. We expect to continue to incur net losses until sales
generate sufficient revenues to fund our continuing operations. We may fail to
achieve significant revenues from sales or achieve or sustain profitability.
There can be no assurance of when, if ever, we will be profitable or be able to
maintain profitability.
OUR LIMITED FUNDING MAY RESTRICT OUR OPERATIONS AND OUR ABILITY TO EXECUTE OUR
BUSINESS STRATEGY, AND THE AVAILABILITY OF ADDITIONAL FINANCING IS UNCERTAIN.
We believe that our available short-term assets and investment income will be
sufficient to meet our operating expenses and capital expenditures until May
2002. We do not know if additional financing will be available when needed, or
if it is available, if it will be
available on acceptable terms. Insufficient funds may prevent us from
implementing our business strategy or may require us to delay, scale back or
eliminate certain contracts for the provision of voice recognition Internet
search software.
ANY INABILITY TO ADEQUATELY PROTECT OUR PROPRIETARY TECHNOLOGY COULD HARM OUR
ABILITY TO COMPETE.
Our patent applications may never result in any intellectual property
protection. If patents are granted they may not result in providing any
competitive advantages to us. In addition, our patents may be challenged,
invalidated or circumvented, and we cannot guarantee that the patent laws will
provide effective legal or injunctive remedies to stop any infringements against
our technologies. Our competitors may develop or patent technologies that are
equivalent or superior to our proprietary technologies.
WE HAVE A LIMITED OPERATING HISTORY WHICH MAKES IT DIFFICULT TO EVALUATE OUR
BUSINESS.
Our current corporate entity commenced operations in 1999 and has a limited
operating history upon which an evaluation of our business and prospects could
be based. We have limited financial results which may not be indicative of our
future performance. Our prospects have to be considered in light of the risks,
expenses and difficulties frequently encountered by growing companies in new and
rapidly developing markets, such as voice recognition software, media delivery
systems and electronic commerce. We have recently re-focused our business model
from a consumer-focused direct sales model to a business to business licensing
and revenue-sharing base.
As a result of our limited operating history and the rapidly changing nature of
the markets in which we compete, our quarterly and annual results are likely to
fluctuate from period to period. These fluctuations may be caused by a number of
factors, many of which are beyond our control. These factors include, but are
not limited to, the following:
- Timing and manner of introduction of new products and services and ability to
enhance existing products and services;
- Ability to attract and retain new customers and satisfy existing customers'
demands;
- Demand for voice recognition Internet search software applications;
- Emergence and success of new and existing competition;
- Varying operating costs and capital expenditures related to the expansion of
our business operations and infrastructure, domestically and internationally,
including the hiring of new employees;
- Technical difficulties with our products and/or technology, system downtime,
system failures and/or power or Internet access interruptions;
- Changes in the mix of products and services that we sell or license to our
customers;
- Costs and effects related to the acquisition of businesses or technology and
related integration;
- Potential reduction in wireless carriers which could lead to significant
delays in consummating revenue-bearing contracts;
- Potential de-listing from NASDAQ or public markets which could affect the
liquidity of the stock;
- Limited financial resources and the potential inability to raise additional
capital to sustain our operations;
- Costs of litigation and intellectual property protection.
IF WE DO NOT SUCCESSFULLY DEVELOP NEW PRODUCTS AND SERVICES IT WILL HARM OUR
BUSINESS.
Our business and operating results would be harmed if we fail to develop
products and services that achieve market acceptance or that fail to generate
significant revenues to offset operating costs. Our management may not timely
and successfully identify, develop and market new product and service
opportunities. When we introduce our new products and services, they may not
attain market acceptance or contribute meaningfully to our revenues or
profitability.
Delays and cost overruns in developing our products could affect our ability to
respond to technological changes, evolving industry standards, competitive
developments or customer requirements. Our products may also contain undetected
errors that could cause increased development costs, loss of revenues, adverse
publicity, reduced market acceptance of the products or lawsuits by customers.
THE GROWTH OF OUR BUSINESS DEPENDS ON THE CONTINUED GROWTH OF THE INTERNET AS A
MEDIUM
FOR COMMUNICATIONS AND ELECTRONIC COMMERCE.
Our business will be harmed if Internet or wireless usage does not continue to
grow, particularly as a source of media information and entertainment and as a
vehicle for commerce in goods and services. Our success also depends on the
efforts of third parties to develop the infrastructure and complementary
products and services necessary to maintain and expand the Internet as a viable
commercial medium.
Patent Protection
-----------------
We own exclusive rights to four pending United States and international patents
on our software. As of the date of filing, three patents are still pending and
we have received notice of allowance on one. These patents define the primary
features and unique procedures that comprise our products and solutions.
Our future success and ability to compete depends in part upon the proprietary
technology and trademarks, which we attempt to protect with a combination of
patent, copyright, trademark and trade secret laws, as well as with our
confidentiality procedures and contractual provisions. These legal protections
afford only limited protection and are time-consuming and expensive to obtain
and/or maintain. Further, despite our efforts, we may be unable to prevent third
parties from infringing upon or misappropriating our intellectual property.
Additionally, there can be no assurances that others will not develop, market
and sell products substantially equivalent to our products or utilize
technologies similar to those used by us. Although we believe that our products
do not infringe on any third-party patents and our patents offer sufficient
protection, there can be no assurance that we will not become involved in
litigation involving patents or proprietary rights. Patent and proprietary
rights litigation entails substantial legal and other costs, and there can be no
assurance that we will have the necessary financial resources to defend or
prosecute our rights in connection with any litigation. Responding to, defending
or bringing claims related to our rights to our intellectual property may
require our management to redirect its resources to address these claims, which
could have a material adverse effect on our business, financial condition and
results of operations.
Future Capital Requirements
---------------------------
We will require and are in the process of negotiating additional funds to
finance our operations. The precise amount and timing of our funding needs
cannot be determined at this time and will largely depend upon a number of
factors, including the market demand for our products and our management of our
cash, accounts payable, inventory and other working capital items. There can be
no assurance that those funds will be available or on terms satisfactory to us.
Any inability to obtain needed funding on satisfactory terms may require us to
reduce planned capital expenditures, to scale back our product offerings or
other operations or to enter into financing agreements on terms which we would
not otherwise accept, and could have a material adverse effect on our business,
financial condition and results of operations.
ITEM 2 DESCRIPTION OF PROPERTY
FACILITIES
----------
The Company leases its facilities under leases that expire at various times
through October 2005. The following is a schedule by years of future
minimum rental payments required under operating leases that have
noncancellable lease terms in excess of one year as of December 31, 2001:
Year ending December 31,
2002 $ 294,849
2003 304,615
2004 313,291
2005 266,053
------------
1,178,808
Less sublease income 370,333
------------
$ 808,475
============
Rent expense, net amounted to $233,974 and $183,231 for the years ended
December 31, 2001 and 2000, respectively.
ITEM 3 LEGAL PROCEEDINGS
There have 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.
During 2000, the financial consulting firm of Dominick & Dominick LLC, filed a
complaint against us, alleging that we entered into an exclusive financing
agreement in which they agreed to assist us in the placement of common stock
financing. The complaint also alleged that we subsequently consummated a
financing with a third party, which the plaintiff alleged created a duty for us
to compensate them to the extent provided in the financing agreement.
On August 3, 2001, we entered into a settlement agreement with Dominick &
Dominick LLC, to be effective September 1, 2001, pursuant to which we issued
110,000 shares of common stock and 300,000 common stock purchase warrants. We
relied on Section 4(2) of the Act as a basis of exemption from registration. The
Settlement Agreement was entered into in order to settle a dispute regarding a
financial consulting agreement which we had entered into with Dominick &
Dominick LLC as of May 30, 2000. Such shares and warrants were subsequently
transferred to Dominick & Dominick Financial Corp., a Delaware corporation.
ITEM 4 SUBMISSION FOR MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were submitted to a vote and ratified at the company's
annual meeting held in San Diego California on Thursday, December 20, 2001.
(1) Elected a board of four directors to hold office until the 2002 Annual
Meeting of Shareholders and until their successors are elected and qualified;
FOR AGAINST ABSTAIN
Dean Weber 11,363,405 0 4,555
George H. Kaelin, III 11,363,405 0 4,555
Rahoul Sharan 11,363,405 0 4,555
Bradley J. Ammon 11,363,405 0 4,555
(2) Approved our Third Amended and Restated 1999 Stock Option Plan;
FOR AGAINST ABSTAIN
7,582,935 8,050 60,085
(3) Authorized the issuance of a sufficient number of shares of our common stock
to allow us to meet our obligations under a Securities Purchase Agreement with
Nevelle Investors LLC, dated October 3, 2000, pursuant to which we issued
$2,000,000 in debentures convertible into our common stock and warrants to buy
231,884 shares of our common stock;
FOR AGAINST ABSTAIN
7,580,660 8,315 62,095
(4) Authorized the issuance of a sufficient number of shares of our common stock
to allow us to meet our obligations under a Securities Purchase Agreement with
Laurus Master Fund, Ltd., dated September 7, 2001, pursuant to which we issued
$600,000 in notes convertible into our common stock and warrants to buy 100,000
shares of our common stock;
FOR AGAINST ABSTAIN
7,583,125 8,350 59,595
(5) Authorized the issuance of a sufficient number of shares of our common stock
to allow us to meet our obligations under a Securities Purchase Agreement with
Stonestreet Limited Partnership, dated September 28, 2001, pursuant to which we
issued $500,000 in notes convertible into our common stock and warrants to buy
83,333 shares of our common stock;
FOR AGAINST ABSTAIN
7,583,650 8,325 62,095
(6) Approved an amendment to our Articles of Incorporation to increase the
number of our authorized shares from 60,000,000 (50,000,000 of common stock and
10,000,000 of preferred stock) to 110,000,000 (100,000,000 of common stock and
10,000,000 of preferred stock); and
FOR AGAINST ABSTAIN
7,564,230 24,705 62,135
(7) Ratified the selection of Stonefield Josephson, Inc. as our auditors for the
fiscal year ending December 31, 2001.
FOR AGAINST ABSTAIN
11,291,315 6,035 70,610
PART II
-------
ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
Our common stock began trading on the NASDAQ SmallCap Market on October 24,
2000, under the symbol ONEV. Our common stock previously traded on the OTC
Electronic Bulletin Board under the same symbol. The OTC Electronic Bulletin
Board is sponsored by the National Association of Securities Dealers (NASD) and
is a network of security dealers who buy and sell stocks.
For the periods indicated, the following table sets forth the high and low bid
prices per share of common stock. These prices represent inter-dealer quotations
without retail markup, markdown, or commission and may not necessarily represent
actual transactions.
Low High
--- ----
1999
----
First Quarter .13 .60
Second Quarter .16 5.88
Third Quarter 4.00 10.00
Fourth Quarter 4.00 8.50
2000
----
First Quarter 8.00 27.75
Second Quarter 9.00 24.00
Third Quarter 6.56 17.25
Fourth Quarter 1.13 9.75
2001
----
First Quarter .9375 2.4844
Second Quarter .34 2.75
Third Quarter .45 1.20
Fourth Quarter .20 .82
As of March 1, 2002, our common stock shares were held by 131 stockholders of
record. We believe that the number of beneficial owners is substantially greater
than the number of record holders because a significant portion of our
outstanding common stock is held of record in broker street names for the
benefit of individual investors. The transfer agent of our common stock is
Corporate Stock Transfer, Inc., 3200 Cherry Creek Drive South, Suite 430,
Denver, Colorado 80209.
DIVIDEND POLICY
Our Board of Directors determines any payment of dividends. We do not expect to
authorize the payment of cash dividends in the foreseeable future. Any future
decision with respect to dividends will depend on future earnings, operations,
capital requirements and availability, restrictions in future financing
agreements, and other business and financial considerations.
RECENT SALES OF UNREGISTERED SECURITIES
The securities described below represent our securities sold by us
during the fiscal year ended December 31, 2001 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
In June 2001, we raised proceeds of approximately $840,020, which is
net of offering costs of approximately $73,000, from the issuance of 702,350
shares through a private placement offering of our restricted stock. The
offering price was $1.30 per share. We also issued 702,350 warrants to the
investors, which have an exercise price of $0.86 per share and expire on June
30, 2002.
Sales of Debt and Warrants for Cash
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). Net proceeds amounted to $511,750.
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). and a common stock purchase warrant for
83,333 shares of our stock at an exercise price per share of $.515. Net proceeds
amounted to $444,250.
Option Grants
During 2001, we granted 250,000 stock options exercisable at an average
exercise price of $0.65 to a consultant for professional services provided and
to be provide to us.
Issuances of Stock for Services or in Satisfaction of Obligations
During September 2001, we entered into an agreement with an investment
banking group to settle a dispute regarding a financial consulting agreement
dated May 30, 2000. Pursuant to the settlement, we issued 110,000 shares of
common stock and 300,000 warrants exercisable into 300,000 shares of common
stock, of which, 150,000 warrants are exercisable at $2.00 per share and 150,000
warrants are exercisable at $1.50 per share.
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 and transfer was restricted by us in accordance with
the requirements of the Securities Act.
ITEM 6 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.
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 or through reseller agreements. We
continue to consider strategic initiatives in order to achieve our objectives
with this goal.
As planned, we launched and began initial beta testing of our MobileVoice
Messaging system with several major wireless carriers in August 2001. This beta
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. Beta testing
will continue over the course of the next few months with a goal for a market
trial beginning in 2002 followed by a nationwide rollout.
In September 2001, we began working closely with OZ Communications Inc., 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 jointly to wireless carriers.
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 Q-Direct. Our
goal is to work closely with this third party to create wide exposure to
consumers through these various sales channels.
In November 2001 we launched our second beta of our MobileVoice product. This
"Beta II" release incorporated several enhancements to the original beta release
through feedback from the carriers participating in the testing program.
In December 2001 we partnered with Lawton Technology Group, a leading
China-based technology enterprise specializing in developing network systems and
products for the telecommunications sector in China. The partnership is to
develop and market our MobileVoice Messaging service to wireless carriers in
China. With a population of over 1 billion people and over 130 million wireless
users, China is the industry's largest and one of its fastest growing wireless
markets. Under the terms, Lawton will work with One Voice to develop and
leverage its close ties with wireless operators in China to distribute a
Mandarin version of One Voice's MobileVoice service to the China market.
In December 2001 we completed development and launched our MobileVoice Activated
Dialing service for wireless carriers. This service will allow subscribers to
call people by name or by number - using only their voice. Completely integrated
into our MobileVoice Platform, voice-activated dialing, or VAD, has the
opportunity to greatly impact the way people use mobile and landline phones by
making them easier to use and truly hands-free.
In the 3rd quarter of 2001, our company's MobileVoice Platform was selected and
featured in Ericsson's CDMA Solutions Center in San Diego, California. This new
facility has attracted top wireless carriers from around the world to experience
the latest in wireless technology.
We maintain a cash balance which management believes to be sufficient to sustain
operations until May 2002. Management is currently negotiating additional rounds
of financing from current investors. If such financing does not come to
fruition, management will take the appropriate steps to further reduce overhead
and expenses to extend operations past May 2002. It has been management's
position to raise additional working capital on an as-needed basis and not to
exceed 6 months of working capital. We feel this philosophy is most advantageous
to our shareholders as it minimizes dilution to our current shareholders. We
incurred a net loss of $8,778,279 during the year ended December 31, 2001, and
had an accumulated deficit of $19,958,114. Our losses through December 2001
included 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.
The following table sets forth selected information from the statements of
operations for the twelve months ended December 31, 2001 and 2000.
Selected Statement Of Operations Information
--------------------------------------------
Year Ended Year Ended
----------------------------------------------------------------------
Dec. 31, 2001 Dec. 31, 2000
----------------------------------------------------------------------
------------------- ------------------
----------------------------------------------------------------------
Net Revenues $ 185,934 $ 51,193
----------------------------------------------------------------------
Operating expenses $ 8,938,203 $ 9,338,423
----------------------------------------------------------------------
Net loss $(8,778,279) $(9,397,620)
----------------------------------------------------------------------
Discussion of twelve months ended December 31, 2001 compared with the twelve
months ended December 31, 2000.
Net revenues totaled $185,934 for the twelve months ended December 31, 2001,
primarily from barter transactions. Net revenues of $51,193 were earned for the
twelve months ended December 31, 2000. The recognition of revenues resulted
primarily from product licensing in exchange for advertising.
Operating expenses decreased to $8,938,203 for the twelve months ended December
31, 2001 from $9,338,423 for the same period in 2000. The decrease in operating
expense was a direct result of a decrease in salaries and wages, managements
efforts to cut costs primarily from reduced promotional activities such as
tradeshows and a reduction in costly outside services including consultant
activities. Salary and wage expense was $2,109,488 for the twelve months ended
December 31, 2001 as compared to $2,242,508 for the same period in 2000. The
decrease in 2001 as compared to 2000 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. Advertising and
promotion expense totaled $387,844 for the twelve months ended December 31, 2001
as compared to $689,973 for the same period in 2000. Advertising and promotion
expense reduction 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
$805,929 for the twelve months ended December 31, 2001 from $974,601 for the
same period in 2000. Depreciation and amortization expenses increased to
$1,168,084 for the twelve months ended December 31, 2001 from $1,029,990 for the
same period in the prior year, primarily due to amortization of patent and
trademarks, computer equipment, consultant fees, and tradeshow booth.
We had a net loss of $8,778,279 or basic and diluted net loss per share of $0.59
for the twelve months ended December 31, 2001 compared to $9,397,620 or basic
and diluted net loss per share of $0.76 for the same period in 2000.
Liquidity And Capital Resources
At December 31, 2001 we had working capital of $225,679 as compared with
$4,910,160 at December 31, 2000.
Net cash used for operating activities was $5,079,807 for the year ended
December 31, 2001 compared to $9,020,259 for the year ended December 31, 2000.
From inception on January 1, 1999 to December 31, 2001, net cash used for
operating activities was $15,356,028.
Net cash used for investing activities was $168,346 for the year ended December
31, 2001 compared to $3,408,121 for the year ended December 31, 2000. From
inception on January 1, 1999 to December 31, 2001, net cash used for investing
activities was $4,592,398.
Net cash provided by financing activities was $1,596,020 for the year ended
December 31, 2001 compared to $15,911,517 for the year ended December 31, 2000.
From inception on January 1, 1999 to December 31, 2001 net cash provided by
financing activities was $20,683,915.
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. Laurus Master Fund, Ltd. has converted $607,041 (principal
balance of $598,802) of its convertible debt security and related interest into
approximately 3.4 million shares of One Voice Technologies, Inc.'s common stock.
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). and a common stock purchase warrant for 83,333 shares of our
stock at an exercise price per share of $.515. Proceeds amounted to $444,250,
which is net of debt issue costs of $55,750. Stonestreet Limited Partnership
has converted all (principal balance of $500,000) of its convertible debt
security and related interest into approximately 3.0 million shares of One Voice
Technologies, Inc.'s common stock.
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 year ended December 31, 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.
Notes payable had a face value of $2,000,000 at December 31, 2000. Notes payable
had a face value of $550,000 at December 31, 2001 as a result of a partial
conversion to stock of the notes described below.
Nevelle Investors LLC has converted all (principal balance of $2 million) of its
convertible debt security and related interest into approximately 5.7 million
shares of One Voice Technologies, Inc.'s common stock.
Subsequent Events
In January 2002, we entered into a securities purchase agreement with the Laurus
Master Fund, Ltd. and Stonestreet Limited Partnership for the issuance of an
aggregate of $1,452,500 principal amount of 4% convertible notes and an
aggregate of 500,000 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 $.96. The commission for the transaction
was $87,500 and a 4% convertible note in the amount of $52,500.
There are no current plans to purchase or sell any significant amount of fixed
assets.
ITEM 7 FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
ONE VOICE TECHNOLOGIES, INC.
(FORMERLY KNOWN AS CONVERSIT.COM, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
CONTENTS
Page
----
Independent Auditors' Report 1
Financial Statements:
Balance Sheet 2
Statements of Operations 3
Statement of Stockholders' Equity 4-5
Statements of Cash Flows 6-7
Notes to Financial Statements 8-22
INDEPENDENT AUDITORS' REPORT
Board of Directors
One Voice Technologies, Inc.
San Diego, California
We have audited the accompanying balance sheet of One Voice Technologies, Inc.,
a Nevada Corporation (a development stage enterprise) as of December 31, 2001,
and the related statements of operations, stockholders' equity and cash flows
for the years ended December 31, 2001 and 2000, and for the period since
inception on January 1, 1999 to December 31, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of One Voice Technologies, Inc. as
of December 31, 2001, and the results of its operations and its cash flows for
the years ended December 31, 2001 and 2000 and for the period since inception on
January 1, 1999 to December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown on the financial statements,
the Company has incurred net losses from operations and has negative cash flows
from operations. These factors, among others as discussed in Note 1 to the
financial statements, raise substantial doubt about the Company's ability to
continue as a going concern. Managements plans regarding those matters also are
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
/s/ Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
January 25, 2002
1
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET - DECEMBER 31, 2001
ASSETS
Current assets:
Cash and cash equivalents $ 735,489
Accounts receivable, net of allowance for bad debt 545
Inventory 109,451
Prepaid expenses 66,639
---------------
Total current assets $ 912,124
Property and equipment, net of
accumulated depreciation and amortization 760,601
Other assets:
Software licensing, net of accumulated amortization 9,001
Software development costs, net of accumulated amortization 1,099,007
Deposits 48,302
Trademarks, net of accumulated amortization 157,110
Patents 59,018
---------------
Total other assets 1,372,438
--------------
$ 3,045,163
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities -
accounts payable and accrued expenses $ 686,445
8% convertible note payable, due September 7, 2003 $ 1,198
Less unamortized discount (424)
---------------
774
5% convertible note payable, due October 3, 2003 550,000
Less unamortized discount (292,241)
---------------
257,759
Stockholders' equity:
Preferred stock; $.001 par value, 10,000,000 shares
authorized, no shares issued and outstanding -
Common stock; $.001 par value, 100,000,000 shares
authorized, 23,080,555 shares issued and outstanding 23,080
Additional paid-in capital 22,035,219
Deficit accumulated during development stage (19,958,114)
---------------
Total stockholders' equity 2,100,185
--------------
$ 3,045,163
==============
See accompanying notes to financial statements.
2
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
From inception on
Year ended Year ended January 1, 1999 to
December 31, 2001 December 31, 2000 December 31, 2001
----------------- ----------------- -----------------
Net revenues $ 185,934 $ 51,193 $ 262,550
Cost of revenues 26,010 110,390 139,190
--------------- ----------------- ---------------
Gross profit (loss) 159,924 (59,197) 123,360
General and administrative expenses 8,938,203 9,338,423 20,081,474
--------------- ----------------- ---------------
Net loss $ (8,778,279) $ (9,397,620) $ (19,958,114)
=============== ================= ===============
Net loss per share, basic and diluted $ (0.59) $ (0.76)
=============== =================
Weighted average shares outstanding,
basic and diluted 14,823,542 12,421,172
=============== =================
See accompanying notes to financial statements.
3
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
accumulated
Common stock Additional during Total
------------ paid-in development stockholders'
Shares Amount capital stage equity
------ ------ ---------- ------------ --------------
For the period since
inception to 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 financial statements.
4
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)
Deficit
accumulated
Common stock Additional during Total
------------ paid-in development stockholders'
Shares Amount capital stage equity
------ ------ ------------ ------------ --------------
Conversion of debt to equity, net
of unamortized debt discount 3,220,765 3,220 571,867 575,087
Issuance of options in exchange
for services 58,864 58,864
Issuance of stock and warrants in
connection with settlement 110,000 110 247,940 248,050
Proceeds from sale of common stock
and warrants, net of offering costs 702,350 702 839,318 840,020
Issuance of warrants in connection
with debt financing 92,400 92,400
Beneficial conversion feature
embedded in debt securities 417,450 417,450
Conversion of debt to
equity - Laurus Master Fund 3,402,600 3,403 595,399 598,802
Conversion of debt to equity -
Stonestreet Capital 2,973,780 2,974 506,137 509,111
Net loss for the year ended
December 31, 2001 (8,778,279) (8,778,279)
---------- ------- ----------- ------------ --------------
Balance at December 31, 2001 23,080,555 $23,080 $22,035,219 $(19,958,114) $ 2,100,185
========== ======= =========== ============ ==============
See accompanying notes to financial statements.
5
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
From inception on
Year ended Year ended January 1, 1999 to
December 31, 2001 December 31, 2000 December 31, 2001
----------------- ----------------- -----------------
Cash flows provided by (used for)
operating activities:
Net loss $ (8,778,279) $ (9,397,620) $ (19,958,114)
-------------- ---------------- ---------------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 1,168,084 1,029,990 2,324,330
Loss on disposal of assets 500,000 - 500,000
Amortization of discount on notes payable 1,191,442 63,583 1,255,025
Options issued in exchange for services 140,263 199,311 339,574
Warrants issued for settlement 166,650 55,000 221,650
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Licensing revenue receivable - (250,000) (250,000)
Advertising revenue receivable 324,455 (75,000) 249,455
Inventory 6,424 (115,875) (109,451)
Prepaid advertising 183,331 (183,331) -
Prepaid mailing lists - (750,000) (750,000)
Prepaid expenses 186,617 (253,256) (66,640)
Deposits (315) (41,091) (48,302)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (112,229) 391,780 686,445
Deferred revenue (56,250) 306,250 250,000
-------------- ---------------- ---------------
Total adjustments 3,698,472 377,361 4,602,086
-------------- ---------------- ---------------
Net cash used for operating activities (5,079,807) (9,020,259) (15,356,028)
-------------- ---------------- ---------------
Cash flows used for investing activities:
Purchase of property and equipment (75,205) (1,169,499) (1,398,666)
Software licensing - (679,314) (1,139,309)
Software development costs (262,278) (1,129,928) (1,560,224)
Trademarks (27,195) (207,986) (235,181)
Patents (3,668) (21,394) (59,018)
Loan fees - (200,000) (200,000)
Increase in escrow account 200,000 - -
-------------- ---------------- ---------------
Net cash used for investing activities (168,346) (3,408,121) (4,592,398)
-------------- ---------------- ---------------
(Continued)
See accompanying notes to financial statements.
6
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
From inception on
Year ended Year ended January 1, 1999 to
December 31, 2001 December 31, 2000 December 31, 2001
----------------- ----------------- -----------------
Cash flows provided by (used for) financing
activities:
Proceeds from issuance of common stock, net 840,020 13,926,017 17,737,915
Retirement of common stock, net - - (10,000)
Proceeds from (payments on) loan payable,
officer-stockholder (200,000) (4,500) (200,000)
Proceeds from (payments on) loan payable, officer - (10,000) -
Proceeds from loans payable - - 200,000
Proceeds from convertible note payable, net 956,000 2,000,000 2,956,000
-------------- ---------------- ---------------
Net cash provided by financing activities 1,596,020 15,911,517 20,683,915
-------------- ---------------- ---------------
Net increase (decrease) in cash (3,652,133) 3,483,137 735,489
Cash and cash equivalents, beginning of year 4,387,622 904,485 -
-------------- ---------------- ---------------
Cash and cash equivalents, end of year $ 735,489 $ 4,387,622 $ 735,489
============== ================ ===============
Supplemental disclosure of cash flow information:
Interest paid $ 1,270 $ 653 $ 19,047
============== ================ ===============
Income taxes paid $ 800 $ 1,600 $ 4,223
============== ================ ===============
Supplemental disclosure of non-cash financing
activities:
Options issued in exchange for services $ 58,863 $ 199,311 $ 258,174
============== ================ ===============
Warrants issued for settlement $ 166,650 $ 55,000 $ 221,650
============== ================ ===============
Warrants issued in connection with financing $ 92,400 $ 1,576,309 $ 1,668,709
============== ================ ===============
Conversion of debt to equity $ 1,683,000 $ $ 1,683,000
============== ================ ===============
See accompanying notes to financial statements.
7
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
(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., a Nevada Corporation.
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
$8,778,279 during 2001 and had an accumulated deficit of $19,958,114.
The Company had working capital of $225,679 at December 31, 2001. Cash
flows used for operations amounted to $5,079,807 for the year ended
December 31, 2001. 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.
See Note 13, Subsequent Events. The financial statements do not
include any adjustments that might be necessary if the Company is
unable to continue as a going concern.
8
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001 AND 2000
(2) Summary of Significant Accounting Policies:
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.
Use of Estimates:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect certain
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Development Stage Enterprise:
The Company is a development stage company as defined by Statement of
Financial Accounting Standards No. 7, "Accounting and Reporting by
Development Stage Enterprises." The Company is devoting substantially
all of its present efforts to establish a new business, which is
unrelated to the business of Dead On, and its planned principal
operations have not yet commenced. All losses accumulated since
inception of One Voice Technologies, Inc. have been considered as part
of the Company's development stage activities.
Fair Value:
The Company's financial instruments consist principally of accounts
payable and notes payable to an individual and related parties as
defined by Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Value of Financial Instruments." The carrying
value of the financial instruments approximate their fair value due to
the short-term nature of these instruments.
Inventory:
Inventory, consisting primarily of finished product, such as
headphones, is valued at lower of cost (first-in, first-out) or
market.
Cash:
Equivalents
-----------
For purposes of the statement of cash flows, cash equivalents include
all highly liquid debt instruments with original maturities of three
months or less which are not securing any corporate obligations.
9
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001 AND 2000
(2) Summary of Significant Accounting Policies, Continued:
Cash, Continued:
Concentration
-------------
The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts.
Revenue Recognition:
The Company recognizes revenues when earned in the period in which the
service is provided. 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.
Service and license fees are deferred and recognized over the life of
the agreement. Revenues from the sale of products are recognized upon
shipment of the product.
Nonmonetary Transactions:
The Company accounts for nonmonetary transactions based on the fair
values of the assets or services involved in accordance with APB No.
29, "Accounting for Nonmonetary Transactions." The cost of a
nonmonetary asset acquired in exchange for another nonmonetary asset
is the fair value of the asset surrendered to obtain it.
Advertising and Promotion Costs:
Advertising and promotion costs are expensed as incurred and
approximated $388,000 and $690,000 for the years ended December 31,
2001 and 2000, respectively.
The Company also engages in barter advertising, which they account for
in accordance with EITF 99-17, determining the fair market value of
the barter advertising based on the fair value of non-barter
advertising. The Company books the revenue and related expenses of
barter advertising up to the extent of the non-barter advertising
during the same period. During the year ended December 31, 2001, the
Company recognized $180,000 in revenues and expenses from barter
transactions. Advertising which did not qualify for recognition under
EITF 99-17, and therefore, is not reflected in these statements,
totaled $87,500.
10
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001 AND 2000
(2) Summary of Significant Accounting Policies, Continued:
Property and Equipment:
Property and equipment are valued at cost. Depreciation is being
provided by use of the straight-line method over the estimated useful
lives of the assets, ranging from three to seven years.
Debt with Stock Purchase Warrants:
The proceeds received from debt issued with stock purchase warrants is
allocated between the debt and the warrants, based upon the relative
fair values of the two securities, and the balance of the proceeds is
accounted for as additional paid-in capital. The resulting debt
discount is amortized to expense over the term of the debt instrument,
using the interest method. In the event of settlement of such debt in
advance of the maturity date, an expense is recognized based upon the
difference between the then carrying amount (i.e., face amount less
unamortized discount) and amount of payment.
Debt with Beneficial Conversion Feature:
In January 2001, the Financial Accounting Standards Board Emerging
Issues Task Force issued EITF 00-27 effective for convertible debt
instruments issued after November 16, 2000. This pronouncement
requires the use of the intrinsic value method for recognition of the
detachable and embedded equity features included with indebtedness,
and requires amortization of the amount associated with the
convertibility feature over the life of the debt instrument rather
than the period for which the instrument first becomes convertible.
Inasmuch as all debt instruments that were entered into prior to
November 16, 2000 and all of the debt discount relating to the
beneficial conversion feature was previously recognized as expense in
accordance with EITF 98-5, there is no impact on these financial
statements.
Software Development Costs:
The Company accounts for their software development costs in
accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed," ("SFAS No. 86"). SFAS No. 86 requires the Company
to capitalize the direct costs and allocate overhead associated with
the development of software products. Initial costs are charged to
operations as research prior to the development of a detailed program
design or a working model. Costs incurred subsequent to the product
release, and research and development performed under contract are
charged to operations. Capitalized costs are amortized over the
estimated product life of four years on the straight-line basis.
Unamortized costs are carried at the lower of book value or net
realizable value.
Amortization expense totaled $383,115 and $78,102 for the years ended
December 31, 2001 and 2000, respectively. Accumulated amortization as
of December 31, 2001 amounted to $461,217.
Comprehensive Loss:
Comprehensive loss consists of net loss only, and accordingly, a
Statement of Comprehensive Loss is not presented.
11
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001 AND 2000
(2) Summary of Significant Accounting Policies, Continued:
Trademarks and Patents:
The Company's trademark costs consist of legal fees paid in connection
with trademarks. The Company amortizes trademarks using the
straight-line method over the period of estimated benefit, generally
four years. Amortization expense charged for the years ended December
31, 2001 and 2000 totaled $53,226 and $24,845, respectively.
Accumulated amortization as of December 31, 2001 amounted to $78,071.
The Company's patent costs consist of legal fees paid in connection
with patents pending. The Company will amortize patents using the
straight-line method over the period of estimated benefit, generally
five years. There was no amortization expense charged for the year
ended December 31, 2001, as the patents are pending.
The Company periodically evaluates whether events or circumstances
have occurred that may affect the estimated useful life or the
recoverability of the remaining balance of the patent and trademarks.
Impairment of the assets is triggered when the estimated future
undiscounted cash flows do not exceed the carrying amount of the
intangible asset. If the events or circumstances indicate that the
remaining balance of the assets may be permanently impaired, such
potential impairment will be measured based upon the difference
between the carrying amount of the assets and the fair value of such
assets, determined using the estimated future discounted cash flows
generated.
Net Income (Loss) Per Share:
For the years ended December 31, 2001 and 2000, the per share data is
based on the weighted average number of common and common equivalent
shares outstanding, and are calculated in accordance with Staff
Accounting Bulletin of the Securities and Exchange Commission (SAB)
No. 98 whereby common stock, options or warrants to purchase common
stock or other potentially dilutive instruments issued for nominal
consideration must be reflected in basic and diluted per share
calculation for all periods in a manner similar to a stock split, even
if anti-dilutive. Accordingly, in computing basic earnings per share,
nominal issuances of common stock are reflected in a manner similar to
a stock split or dividend. Common stock equivalents, consisting of
2,078,625 and 916,325 stock options, 1,457,567 and 882,414 stock
warrants, and convertible debentures estimated at 2.7 million shares
(2001), using assumed conversion rate of $0.20 have not been included
in the computation of diluted weighted average number of common shares
outstanding, as their effect would be anti-dilutive for December 31,
2001 and 2000, respectively.
12
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001 AND 2000
(2) Summary of Significant Accounting Policies, Continued:
Income Taxes:
Deferred income taxes are reported using the liability method.
Deferred tax assets are recognized for deductible temporary
differences and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
New Accounting Pronouncements:
In July 2001, the FASB issued SFAS No. 141 "Business Combinations."
SFAS No. 141 supersedes Accounting Principles Board ("APB") No. 16 and
requires that any business combinations initiated after June 30, 2001
be accounted for as a purchase; therefore, eliminating the
pooling-of-interest method defined in APB 16. The statement is
effective for any business combination initiated after June 30, 2001
and shall apply to all business combinations accounted for by the
purchase method for which the date of acquisition is July 1, 2001 or
later. The adoption did not have a material impact to the Company's
financial position or results of operations, since the Company has not
participated in such activities covered under this pronouncement after
the effective date.
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangibles." SFAS No. 142 addresses the initial recognition,
measurement and amortization of intangible assets acquired
individually or with a group of other assets (but not those acquired
in a business combination) and addresses the amortization provisions
for excess cost over fair value of net assets acquired or intangibles
acquired in a business combination. The statement is effective for
fiscal years beginning after December 15, 2001, and is effective July
1, 2001 for any intangibles acquired in a business combination
initiated after June 30, 2001. The Company does not expect the
adoption to have a material impact to the Company's financial position
or results of operations.
13
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001 AND 2000
(2) Summary of Significant Accounting Policies, Continued:
New Accounting Pronouncements, Continued:
In October 2001, the FASB recently issued SFAS No. 143, "Accounting
for Asset Retirement Obligations," which requires companies to record
the fair value of a liability for asset retirement obligations in the
period in which they are incurred. The statement applies to a
company's legal obligations associated with the retirement of a
tangible long-lived asset that results from the acquisition,
construction, and development or through the normal operation of a
long-lived asset. When a liability is initially recorded, the company
would capitalize the cost, thereby increasing the carrying amount of
the related asset. The capitalized asset retirement cost is
depreciated over the life of the respective asset while the liability
is accreted to its present value. Upon settlement of the liability,
the obligation is settled at its recorded amount or the company incurs
a gain or loss. The statement is effective for fiscal years beginning
after June 30, 2002. The Company does not expect the adoption to have
a material impact to the Company's financial position or results of
operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". Statement 144 addresses
the accounting and reporting for the impairment or disposal of
long-lived assets. The statement provides a single accounting model
for long-lived assets to be disposed of. New criteria must be met to
classify the asset as an asset held-for-sale. This statement also
focuses on reporting the effects of a disposal of a segment of a
business. This statement is effective for fiscal years beginning after
December 15, 2001. The Company does not expect the adoption to have a
material impact to the Company's financial position or results of
operations.
(3) Property and Equipment:
A summary is as follows:
Web host computer equipment $ 443,868
Computer equipment 461,604
Equipment 321,756
Furniture and fixtures 120,243
Website development 35,974
Leasehold improvements 15,222
--------------
1,398,667
Less accumulated depreciation and amortization 638,066
--------------
$ 760,601
==============
Depreciation expense totaled $390,092 and $246,374 for the years ended
December 31, 2001 and 2000, respectively.
14
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001 AND 2000
(4) Software Licensing Agreements:
In September and October 1999, the Company entered into a 24-month software
licensing agreement with two software developers. The agreement can be
cancelled by either party by giving 60 days written notice. The asset is
being amortized using the straight-line method over the life of the
agreement.
In March 2000, the Company entered into a 36-month software licensing
agreement with a software developer. The agreement can be cancelled by
mutual agreement of the parties at any time. The asset is being amortized
using the straight-line method over the life of the agreement.
Amortization expense related to software licensing agreements totaled
$352,973 and $664,002 for the years ended December 31, 2001 and 2000,
respectively.
(5) Convertible Note Payable:
5% Convertible Note Payable
---------------------------
In October 2000, the Company entered into a purchase agreement with an
investment company to issue a total of $10,000,000 convertible notes
payable with interest at 5% per annum and 231,884 common stock purchase
warrants. Each warrant entitles the holder to purchase one share of the
Company's common stock at an exercise price of $9.76 per share. In October
2000, the Company issued $2,000,000 of convertible notes and the warrants.
A payment of interest only is payable on the conversion dates, as defined
in the agreement. The remaining principal balance of the note is payable in
full in October 2003, at which time the remainder of the note will be
automatically converted to shares of the Company's common stock. The note
is convertible at the option of the holder at any time at the lesser of
$9.76 per share or the average of the 7 lowest volume weighted average
sales prices of the common stock during the past 50 trading days
immediately preceding the notice of conversion. Included in accrued
expenses is approximately $36,000 of accrued interest related to this note
payable. The fair value of the associated warrant was determined based on
the Black-Scholes pricing method at the date of grant. The value of the
warrants totaled $1,576,309 and is included in paid-in capital at December
31, 2001. The discount is being amortized to interest expense over the life
of the note using the interest rate method (effective interest of 76%).
Amortization of the debt discount included in interest expense approximated
$463,000 and $64,000 for the years ended December 31, 2001 and 2000,
respectively.
Additional notes may be issued in increments of $2,000,000 provided that,
among other items, the per share market value of the Company's common stock
is not less than $10.00 per share.
In 2001, $1,450,000 of the original note balance and accrued interest
($575,087 or $0.18 per share, net of unamortized debt discount) was
converted to 3,220,765 shares of the Company's common stock at an average
conversion rate of $0.45 per share.
During January 2002, the remaining balance of $550,000 was converted into
approximately 2,468,000 common shares.
15
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001 AND 2000
(5) Convertible Note Payable, Continued:
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, which as of
December 31, 2001 amounted to $1,198.
The warrants have an exercise price of:
c) $0.82; or
d) 120% of the three lowest closing price 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 $0.58 per share or total consideration of $57,800. This amount
was 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 $207,800 has been recorded as a debt discount and is being
amortized using the effective interest rate (100%) over the life of the
debt in accordance with EITF 00-27. Unamortized debt discount and
beneficial conversion was recognized as interest expense upon conversion.
In 2001, $598,802 of the original note and related accrued interest was
converted to 3,402,600 shares of the Company's common stock at an average
conversion rate of $0.18 per share.
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.
16
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001 AND 2000
(5) Convertible Note Payable, Continued:
8% Convertible Note Payable, Continued
--------------------------------------
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 $0.42 per share or total consideration of $34,600. This amount
was recorded as debt discount against the face value of the note payable.
In addition, since this debt was convertible into equity at the option of
the note holder at conversion rates mentioned above, a beneficial
conversion feature of $209,650 had been recorded as a debt discount and was
being amortized using the effective interest rate (104%) over the life of
the debt in accordance with EITF 00-27. Unamortized debt discount and
beneficial conversion was recognized as interest expense upon conversion.
In 2001, the note balance of $500,000 and related accrued interest was
converted to 2,973,780 shares of the Company's common stock at an average
conversion rate of $0.17 per share.
(6) Common Stock:
Private Placements
------------------
In May 1999, the Company commenced a private placement of 1,500,000 shares
of the Company's common stock at a purchase price of $2.00 per share. The
Private Placement was exempt from the registration provisions of the Act by
virtue of Section 4(2) of the Act, as transactions by an issuer not
involving any public offering. The securities issued pursuant to the
Private Placement were restricted securities as defined in Rule 144. The
offering generated proceeds of approximately $2,846,000, net of offering
costs of approximately $154,000. An additional 150,000 shares of the
Company's common stock was issued for services rendered in connection with
this private placement, which was valued at $2.00 per share.
On June 22, 1999, in connection with a Merger Agreement and Plan of
Reorganization with Dead On, Inc., the Company exchanged all of its
outstanding shares of common stock for 7,000,000 newly issued shares of the
common stock of Dead On, Inc. (Note 1).
Pursuant to a plan approved by One Voice Technologies' Board of Directors
in July 1999, the Company repurchased and retired 10,000,000 shares of its
common stock, $.001 par value per share.
During December 2001, the shareholders approved the increase of authorized
number of common stock shares to 100,000,000.
17
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001 AND 2000
(6) Common Stock, Continued:
In January 2000, the Company entered into a Subscription Agreement with an
unrelated foreign party providing for the sale of 312,500 shares of the
Company's common stock at $6.40 per share and 156,250 common stock purchase
warrants. Each warrant entitles the holder to purchase one share of common
stock at an exercise price of $8.00. The warrants expired on January 5,
2001. Proceeds raised from the shares and warrants total approximately
$1,800,000, net of offering costs of approximately $200,000.
In March 2000, the Company commenced a private placement of approximately
1,000,000 units consisting of 1 share of the Company's common stock and 1/2
common stock purchase warrant for each unit purchased. The Company raised
proceeds totaling approximately $12,146,000, net of offering costs of
approximately $902,000, from the issuance of 988,560 shares of common stock
and 494,280 common stock purchase warrants. Each warrant entitles the
holder to purchase one share of common stock at an exercise price of
$18.00. The warrants expire at various times through April 2001.
In June 2001, the Company raised proceeds of approximately $840,020, 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.
Settlement
----------
During September 2001, the Company entered into an agreement with an
investment banking group to settle a dispute regarding a financial
consulting agreement dated May 30, 2000. While the management did not
believe that the claims were meritorious, the Company entered into the
Settlement Agreement, among other reasons, to avoid distracting
management's focus from operations and to minimize legal expenses. Pursuant
to the settlement, the Company issued 110,000 shares of common stock and
300,000 warrants exercisable into 300,000 shares of common stock, of which,
150,000 warrants are exercisable at $2.00 per share and 150,000 warrants
are exercisable at $1.50 per share. Total consideration given amounted to
$298,050, comprised of $50,000 paid in cash, 110,000 in common stock shares
with a fair value of $81,400 and 300,000 in warrants with a fair value
using Black Scholes model of $166,650, which was recognized into expense
during 2001.
(7) Income Taxes:
For federal income tax return purposes, the Company has available net
operating loss carryforwards of approximately $19,000,000, which includes
approximately $323,000 acquired from Dead On, Inc. The net operating loss
carryforwards expire through 2021 and are available to offset future income
tax liabilities. Temporary differences which give rise to deferred tax
assets and liabilities at December 31, 2001 are as follows:
Net operating loss carryforwards $ 7,600,000
Valuation allowance (7,600,000)
----------------
Net deferred taxes $ -
================
18
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001 AND 2000
(8) Employment Agreement:
The Company entered into an employment agreement with an officer
stockholder of the Company to pay an annual base salary of $252,000 through
July 2002. Increases are determined annually by the Board of Directors.
Under this agreement, salaries approximated $240,000 and $231,000
(including a bonus of $75,000 in 2000) for the years ended December 31,
2001 and 2000, respectively.
(9) Consulting Agreement:
The Company entered into a consulting agreement with a personal service
corporation owned by an officer of the Company to pay an annual consulting
fee of $180,000 through July 2002. Increases are determined annually by the
Board of Directors. Consulting fees approximated $135,000 and $240,000
(including a bonus of $75,000 in 2000) for the years ended December 31,
2001 and 2000, respectively.
(10) Commitments:
The Company leases its facilities under leases that expire at various times
through October 2005. The following is a schedule by years of future
minimum rental payments required under operating leases that have
noncancellable lease terms in excess of one year as of December 31, 2001:
Year ending December 31,
2002 $ 294,849
2003 304,615
2004 313,291
2005 266,053
----------------
1,178,808
Less sublease income 370,333
----------------
$ 808,475
================
Rent expense, net amounted to $233,974 and $183,231 for the years ended
December 31, 2001 and 2000, respectively.
(11) Incentive and Nonqualified Stock Option Plan:
On July 14, 1999, the Company enacted an Incentive and Nonqualified Stock
Option Plan (the "Plan") for its employees and consultants under which a
maximum of 3,000,000 options (Amendment to increase the available shares
from 1,500,000 to 3,000,000 approved by the shareholders in December 2001)
and approved by the shareholders may be granted to purchase common stock of
the Company.
19
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001 AND 2000
(11) Incentive and Nonqualified Stock Option Plan, Continued:
Two types of options may be granted under the Plan: (1) Incentive Stock
Options (also know as Qualified Stock Options) which may only be issued to
employees of the Company and whereby the exercise price of the option is
not less than the fair market value of the common stock on the date it was
reserved for issuance under the Plan; and (2) Nonstatutory Stock Options
which may be issued to either employees or consultants of the Company and
whereby the exercise price of the option is greater than 85% of the fair
market value of the common stock on the date it was reserved for issuance
under the plan. Grants of options may be made to employees and consultants
without regard to any performance measures. All options issued pursuant to
the Plan vest at a rate of at least 20% per year over a 5-year period from
the date of the grant or sooner if approved by the Board of Directors. All
options issued pursuant to the Plan are nontransferable and subject to
forfeiture.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under SFAS No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models. Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date
of grant, no compensation expense is recognized. The Company follows SFAS
No. 123 for stock options granted to non-employees and records a consulting
expense equal to the fair value of the options at the date of grant.
During 2000, the Company granted 53,725 stock options exercisable at an
average exercise price of $10.22 to consultants for professional services
provided to the Company. The options expire at various times through 2003.
The options were valued using the Black-Scholes method at the date of
grant.
During 2001, the Company granted 250,000 stock options exercisable at an
exercise price of $0.65 to a consultant for professional services provided
and to be provided to the Company. The options expire at various times
through 2004. The options were valued using the Black-Scholes method at the
date of grant. Compensation expense, recognized over the vesting period, to
consultants pursuant to SFAS No. 123 amounted to $140,263 and $199,311 for
the years ended December 31, 2001 and 2000, respectively.
The number and weighted average exercise prices of options granted under
the plan for the years ended December 31, 2001 and 2000 are as follows:
2001 2000
--------------------- ----------------------
Average Average
Exercise Exercise
Number Price Number Price
------ ----- ------ -----
Outstanding at beginning of the year 916,325 $ 6.51 400,500 $ 6.01
Granted during the year 1,667,920 0.99 563,825 6.86
Terminated during the year 505,620 5.47 48,000 5.85
Exercised during the year - - - -
Outstanding at end of the year 2,078,625 2.33 916,325 6.51
Exercisable at end of the year 645,525 3.94 338,395 6.76
20
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001 AND 2000
(11) Incentive and Nonqualified Stock Option Plan, Continued:
Pro forma information regarding the effect on operations is required by
SFAS 123, and 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 155%
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.
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:
December 31, 2001
-----------------
Net loss, as reported $ (8,778,279)
Pro forma net loss $ (9,840,642)
Basic and diluted historical loss per share $ (0.59)
Pro forma basic and diluted loss per share $ (0.66)
(12) Warrants:
At December 31, 2001, the Company had warrants outstanding that allow the
holders to purchase up to 1,457,567 shares of common stock, of which,
231,884 warrants had an exercise price of $9.76 expiring through October
2005 and 1,225,683 warrants had an exercise price ranging from $0.40 to
$2.00 per share, expiring through September 2006.
21
ONE VOICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001 AND 2000
(12) Warrants, Continued:
The number and weighted average exercise prices of the warrants for the
years ended December 31, 2001 and 2000 are as follows:
2001 2000
--------------------- ----------------------
Average Average
Exercise Exercise
Number Price Number Price
------ ----- ------ -----
Outstanding at beginning of the year 882,414 $ 14.06 - $ -
Granted during the year 1,225,683 1.04 882,414 14.06
Exercised during the year - - - -
Terminated during the year 650,530 15.60 - -
Outstanding at end of the year 1,457,567 2.42 882,414 14.06
Exercisable at end of the year 1,457,567 2.42 882,414 14.06
(13) Subsequent Events:
During January 2002, the Company entered into a new convertible debt
financing agreement with Stonestreet Limited Partnership and Laurus Master
Fund, Ltd. for an aggregate of $1.45 million. The stated interest rate is
4% per annum and the unpaid principal and interest balance is due in full
by January 7, 2004. Net proceeds to the Company amounted to approximately
$1.32 million, which is net of debt issue costs. The Company issued 500,000
warrants to acquire 500,000 shares of the Company's common stock at an
exercise price of $0.96. In addition, since this debt is convertible into
equity at the option of the note holder at beneficial conversion rates, an
embedded beneficial conversion feature will be recorded as a debt discount
and amortized using the effective interest rate over the life of the debt
in accordance with EITF 00-27. Total cost of beneficial conversion feature,
debt discount and cost of warrants issued exceed the face value of the
notes payable, therefore, only $1.45 million, the face amount of the note,
is recognizable as debt discount, and will be amortized over the life of
the notes payable. Any unamortized debt discount and beneficial conversion
feature will be charged to expense upon conversion, as interest expense.
During January 2002, the remaining balance of $550,000 related to the 5%
Note Payable was converted into approximately 2,468,000 common shares.
22
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINACIAL
DISCLOSURE
There have been no changes in or disagreements with accountants on accounting
and financial disclosure.
PART III
--------
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Name AGE Date Elected Position
Dean Weber 39 7/09/99 Chairman of the Board, President,
Chief Executive Officer, Director
George H. Kaelin,III 35 7/09/99 Director
Rahoul Sharan 40 7/09/99 Chief Financial Officer, Secretary,
Treasurer and Director
Bradley J. Ammon 38 6/09/00 Director
Directors serve until the next annual meeting and until their successors are
elected and qualified. Officers are appointed to serve for one year until the
meeting of the Board of Directors following the annual meeting of stockholders
and until their successors have been elected and qualified, although Dean Weber
has an employment agreement and Rahoul Sharan's company has a personal service
agreement with us. There are no family relationships between any directors or
officers of One Voice.
Dean Weber, founder, CEO and Chairman of the Board of the Company is responsible
for developing our strategic vision and pioneering our products, technology and
business strategies. Mr. Weber has been instrumental in the growth and
development of One Voice, successfully raising over $20 million of institutional
funding, winning the Deloitte and Touche Technology Fast 50 award, and has been
featured in Forbes, Time, and on CNN. Prior to establishing One Voice, Mr. Weber
was the founder and President of EditPro Corporation for 8 years. Prior to that,
Mr. Weber played key roles in technology companies including United
Technologies, Northrop and Xerox, where he designed and developed real- time
software systems for NASA projects, worked on U.S. Navy projects and led an
engineering team for the B2 Stealth Bomber project. Mr. Weber received a
Bachelor of Science in Computer Science from the Central Connecticut State
University.
George H. Kaelin, III, received a B.B.A. degree summa cum laude with an emphasis
in Business Economics from the University of San Diego, California. Mr. Kaelin
also has a Juris Doctor degree from the University of California, Davis, where
he received the American Jurisprudence Award for excellence in Advanced Business
Organizations Law. Mr. Kaelin has clerked for the U.S. District Court, Eastern
District, for the Honorable Milton L. Schwartz. He also worked with the Alaska
Legislature in drafting the Alaskan Non-Profit Corporations Code. Mr. Kaelin is
a partner in the San Diego law firm of Endeman, Lincoln, Turek & Heater where he
has worked since 1994. He specializes in business and real estate issues. Mr.
Kaelin is admitted to practice before all state and federal courts in California
and has served as a member of the Enright Inn of Court. Mr. Kaelin serves as a
member of our Audit and Compensation Committees.
Mr. Sharan brings over 13 years of accounting and finance experience to One
Voice. He has been the President and Director of KJN Management Ltd., a private
company which provides a broad range of administrative, management and financial
services to both private and public companies since 1989. Mr. Sharan has been a
partner in S & P Group, a company, specializing in investment financing for
venture capital projects and real estate development and construction since
1988. Mr. Sharan worked for Coopers & Lybrand (presently Pricewaterhouse
Coopers) from 1984 to 1989. Mr. Sharan has also served as a director of Pacific
Northern Ventures, Ltd. Mr. Sharan holds a Bachelor of Commerce degree from the
University of British Columbia and is a member of the Institute of Chartered
Accountants of British Columbia.
Mr. Ammon has over 15 years of experience in domestic and international tax and
business planning. He currently is a tax attorney with the Law Offices of Ernest
S. Ryder & Associates, Inc. He previously served as the International Tax
Manager for Science Applications International Corporation where he provided
corporate and individual tax planning services to groups within the company.
Prior to joining SAIC, Mr. Ammon was a Manager in the International Corporate
Services department for KPMG, LLP, where he provided tax consultation services
to clients primarily in the information, communications, and entertainment (ICE)
industries. He has also provided corporate, partnership, and personal tax and
business planning services for Deloitte & Touche, LLP. In addition, Mr. Ammon
has several years of experience as a staff accountant where his responsibilities
included the compilation and consolidation of monthly financial statements for
numerous subsidiaries.
Brad has a Juris Doctor degree and a Masters of Law degree in Taxation (LL.M.)
from the University of San Diego. He is a member of the American Bar
Association, the State Bar of California, the Tax Section of the San Diego
County Bar Association, and the U.S. Tax Court. He is a member of our Audit and
Compensation Committees.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Form 3 filings for Dean Weber, George Kaelin and Rahoul Sharan due on December
6, 1999, and the Form 3 for Brad Ammon due on June 19, 2000, were each filed on
August 11, 2000. George Kaelin's Form 5, due on February 14, 2001, was filed on
April 10, 2001, and contained sales of our stock occurring on seven dates over a
one-month period. No other person, who, at any time during the year ended
December 31, 2001, was a director, officer or beneficial owner of more than 10
percent of any class of equity securities of the Company registered pursuant to
Section 12 of the Exchange Act failed to file on a timely basis, as disclosed in
Form 3 filings, reports required by Section 16(a) of the Exchange Act during the
year ended December 31, 2001, or any prior years ended December 31. The
foregoing is based solely upon a review of Form 3, Form 4 and Form 5 filings
furnished to the Company during the year ended December 31, 2001, certain
written representations and shareholders who, to the best of our knowledge, hold
10 percent or more of our shares.
ITEM 10 EXECUTIVE COMPENSATION
The following tables set forth certain information regarding our CEO and
each of our executive officers whose total annual salary and bonus for the
fiscal year ending December 31, 1999, 2000 and 2001 exceeded $100,000:
SUMMARY COMPENSATION TABLE
Annual Compensation
Other
Annual Restricted Options LTIP
Name & Principal Salary Bonus Compen- Stock SARs Payouts All Other
Position Year ($) ($) sation ($) awards (#)/(1)/ ($) Compensation
----------------------------------------------------------------------------------------------------------------------------
Dean Weber, 2001 246,098 0 0 0 0 0 0
CEO 2000 252,000 75,000 0 0 0 0 0
1999 180,000 0 0 0 0//(2)/ 0 0
Rahoul Sharan, 2001 137,654 0 0 0 0 0 0
CFO 2000 180,000 75,000/(3)/ 0 0 0 0 0
1999 120,000/(3)/ 0 0 0 50,000 0 0
/(1)/ Options were granted pursuant to the Company's 1999 Stock Option Plan.
/(2)/ 75,000 options previously granted to Mr. Weber were rescinded by Mr.
Weber.
/(3)/ This payment was made through KJN Management Ltd.
EMPLOYMENT AGREEMENT
We entered into a three-year employment agreement (the Weber Employment
Agreement) with Dean Weber, our Chairman, Chief Executive Officer and President,
commencing in July 1999. The Weber Employment Agreement provides that, in
consideration for Mr. Weber's services, he is to be paid an annual salary of
$180,000. His salary was increased to $252,000 annually in April 2000, with a
$75,000 bonus. Subsequently, no bonus was paid in the year 2001.
PERSONAL SERVICE AGREEMENT
We entered into a three-year personal service agreement with KJN Management
Ltd., commencing in July 1999 for the services of its CFO, Rahoul Sharan, which
provided for the payment of a fee by the Company to KJN Management Ltd. of
$120,000 per year. The service fee was increased to $180,000 per year, plus a
$75,000 bonus. Subsequently, no bonus was paid in the year 2001.
COMPENSATION OF DIRECTORS
Non-employee directors receive $1,000 for each Board of Directors meeting
attended. The Company pays all out-of-pocket expenses of attendance.
AMENDED AND RESTATED 1999 STOCK OPTION PLAN
Our Amended and Restated 1999 Stock Option Plan (the 1999 Plan) authorizes us to
grant to our directors, employees, consultants and advisors both incentive and
non-qualified stock options to purchase shares of our Common Stock. As of
December 31, 2001, our Board of Directors had reserved 3,000,000 shares for
issuance under the 1999 Plan, of which 2,078,625 shares were subject to
outstanding options and 921,375 shares remained available for future grants. Our
Board of Directors or a committee appointed by the Board (the Plan
Administrator) administers the 1999 Plan. The Plan Administrator selects the
recipients to whom options are granted and determines the number of shares to be
awarded. Options granted under the 1999 Plan are exercisable at a price
determined by the Plan Administrator at the time of the grant, but in no event
will the option price for any incentive stock option be lower than the fair
market value for our Common Stock on the date of the grant. Options become
exercisable at such times and in such installments as the Plan Administrator
provides in the terms of each individual option agreement. In general, the Plan
Administrator is given broad discretion to issue options and to accept a wide
variety of consideration (including shares of our Common Stock and promissory
notes) in payment for the exercise price of options. The 1999 Plan was
authorized by the Board of Directors and stockholders.
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock as of March 28, 2002 (i) by each person who is
known by us to beneficially own more than 5% of our common stock; (ii) by each
of our officers and directors; and (iii) by all of our officers and directors as
a group. Each person's address is c/o One Voice Technologies, Inc., 6333
Greenwich Drive, Suite 240, San Diego, California 92122.
Shares Beneficially Owned/(1)/
-------------------------
Name and Address of Beneficial Owner Number Percent
--------------------------------------------------------------------------------------------------------
Dean Weber, CEO, President and Chairman of the Board/(2)/ 5,558,000/(3)/ 20.8%
IVantage, Inc. /(2)/ 1,600,200 6.1%
Rahoul Sharan, CFO, Secretary, Treasurer and Director 60,000/(4)/ *
George H. Kaelin, III, Director 345,600/(5)/ 1.3%
Bradley J. Ammon, Director 75,000/(6)/ *
Total securities held by officers and directors as a group (4 people): 6,060,600/(7)/ 22.1%
/(1)/ Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options or
warrants currently exercisable or convertible, or exercisable or convertible
within 60 days of March 28, 2002 are deemed outstanding for computing the
percentage of the person holding such option or warrant but are not deemed
outstanding for computing the percentage of any other person. Percentages are
based on a total of 26,716,628 shares of common stock outstanding on March 28,
2002, and the shares issuable upon the exercise of options and warrants
exercisable on or within 60 days of March 28, 2002, as described below.
/(2)/ iVantage, Inc. is wholly owned by Dean Weber, Chairman of the Board, CEO,
and President of One Voice Technologies, Inc. Mr. Weber is the beneficial owner
of the 1,600,200 shares in the name of iVantage, Inc. and those shares are also
included in the amount presented in this table for Mr. Weber.
/(3)/ Includes 1,600,200 shares owned indirectly through iVantage, Inc.
/(4)/ Represents options to purchase (i) 50,000 shares at an exercise price of
$6.080 per share; and (ii) 10,000 shares at an exercise price of $2.00 per
share. These options are currently exercisable.
/(5)/ Includes options to purchase (i) 50,000 shares at an exercise price of
$6.080 per share; (ii) 10,000 shares at an exercise price of $2.00 per share;
and (iii) 15,000 shares at an exercise price of $1.75. These options are
currently exercisable.
/(6)/ Includes options to purchase (i) 50,000 shares at an exercise price of
$8.750 per share; and (ii) 25,000 shares at an exercise price of $2.00 per
share. These options are currently exercisable.
/(7)/ Includes options to purchase 210,000 shares as they are currently
exercisable.
* Less than 1%
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no material related transactions during the year.
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description
---------- -----------
ARTICLES OF INCORPORATION AND BYLAWS
3.1 Articles of Incorporation of Belridge Holdings Corp. filed with
the Nevada Secretary of State on August 23, 1995 (incorporated by
reference to Exhibit 3(i) to our Form 10-SB filed October 7,
1999).
3.2 Certificate of Amendment of Articles of Incorporation of Belridge
Holdings Corp. changing its name to Dead On, Inc. (incorporated
by reference to Exhibit 3(i) to our Form 10-SB filed October 7,
1999). The Certificate originally filed on September 25, 1998,
was canceled and re-filed with the Nevada Secretary of State on
June 10, 1999.
3.3 Articles of Merger for the merger of Conversational Systems, Inc.
into Dead On, Inc. filed with the Nevada Secretary of State on
July 14, 1999 with supporting documents (incorporated by
reference to Exhibit 2 to our Form 10-SB, filed October 7, 1999).
This document changed the name of the surviving entity, Dead On,
Inc., to ConversIt.com, Inc.
3.4 Certificate of Amendment of Articles of Incorporation of
ConversIt.com, Inc. changing its name to One Voice Technologies,
Inc. (incorporated by reference to Exhibit 2 to our Form 10-SB
filed October 7, 1999).
3.5 Bylaws of Belridge Holdings Corp. (incorporated by reference to
Exhibit 3(ii) of our Form 10-SB, filed October 7, 1999).
3.6 Amendment to Bylaws dated July 11, 2000 (excerpted) (incorporated
by reference to Exhibit 4.3 of our Form S-8, filed October 3,
2000).
INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS
4.1 Common Stock Purchase Warrant with Veritas SG Investments from
the January 2000 offering (incorporated by reference to Exhibit
4.1 of our Form SB-2, filed November 11, 2000).
4.2 Form of Common Stock Purchase Warrant from the March 2000
offering (incorporated by reference to Exhibit 4.1 of our Form
SB-2, filed November 11, 2000).
4.3 Securities Purchase Agreement ("SPA") with Nevelle Investors LLC
dated October 3, 2000, and Form of Debenture (Exhibit A to the
SPA), Form of Warrant (Exhibit B to the SPA), Conditional Warrant
dated October 3, 2000 (Exhibit C to the SPA) and Registration
Rights Agreement dated October 3, 2000 (Exhibit E to the SPA),
each with Nevelle Investors LLC (incorporated by reference to
Exhibit 4 to our Form 10-QSB, filed November 14, 2000).
4.4 $700,000 4% Convertible Note issued to the Laurus Master Fund,
Ltd. (incorporated by reference to our Form SB-2, filed January
29, 2002)
4.5 Common Stock Purchase Warrant issued to the Laurus Master Fund,
Ltd. (incorporated by reference to our Form SB-2, filed January
29, 2002)
4.6 Securities Purchase Agreement. (incorporated by reference to our
Form SB-2, filed January 29, 2002)
4.7 $700,000 4% Convertible Note issued to the Stonestreet Limited
Partnership. (incorporated by reference to our Form SB-2, filed
January 29, 2002)
4.8 Common Stock Purchase Warrant issued to the Stonestreet Limited
Partnership. (incorporated by reference to our Form SB-2, filed
January 29, 2002)
4.9 $52,500 4% Convertible Note issued to the Stonestreet Limited
Partnership. (incorporated by reference to our Form SB-2, filed
January 29, 2002)
4.10 Settlement Agreement with Dominick & Dominick LLC (incorporated
by reference to our Form SB-2, filed January 3, 2002).
4.11 Common Stock Purchase Warrant issued to Dominick & Dominick LLC
(incorporated by reference to our Form SB-2, filed January 3,
2002).
4.12 Agreement as to Registration Rights with Dominick & Dominick LLC
(incorporated by reference to our Form SB-2, filed January 3,
2002).
MATERIAL CONTRACTS
10.1 Employment Agreement with Dean Weber dated July 14, 1999
(incorporated by reference to Exhibit 10 to our Form 10-SB, filed
October 7, 1999). This agreement was amended on April 10, 2000,
to increase Mr. Weber's annual salary to $252,000.
10.2 Consulting Agreement with KJN Management Ltd. For the services
of Rahoul Sharan dated July 14, 1999 (incorporated by reference
to Exhibit 10 to our Form 10-SB, filed October 7, 1999). This
agreement was amended on April 10, 2000, to increase the annual
consulting fee to $180,000.
10.3 Software Agreement with IBM/OEM dated September 21, 1999
(incorporated by reference to Exhibit 4.4 to our Form SB-2 filed
November 20, 2000).
10.4 Software License Agreement with Philips Speech Processing dated
March 3, 2000 (incorporated by reference to Exhibit 4.4 to our
Form SB-2 filed November 20, 2000).
10.5 Third Amended and Restated 1999 Stock Option Plan (incorporated
by reference to our Definitive Proxy Statement, filed November
29, 2001).
10.6 Investor Relations Group Agreement.
CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Independent Auditors.
Reports filed on Form 8-K: None
SIGNATURES
----------
Pursuant to the requirements of Section 13 and 15 (d) 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.
One Voice Technologies, Inc.
Date: April 1, 2002 By: /s/ Dean Weber
-------------------------------------
Dean Weber, President & Director
Date: April 1, 2002 By: /s/ Rahoul Sharan
-------------------------------------
Rahoul Sharan, Secretary, Treasurer &
Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Signature Title Date
/s/ Dean Weber Chief Executive Officer April 01, 2002
------------------------- and Director
Dean Weber
/s/ Rahoul Sharan Chief Financial Officer April 01, 2002
------------------------- and Director
Rahoul Sharan
/s/ George H. Kaelin, III Director April 01, 2002
-------------------------
George H. Kaelin, III
/s/ Bradley J. Ammon Director April 01, 2002
-------------------------
Bradley J. Ammon
The following exhibits are included as part of this Form 10-KSB. References to
the Company in this Exhibit List mean One Voice Technologies, Inc., a Nevada
corporation.
Exhibit No. Description
----------- ------------
ARTICLES OF INCORPORATION AND BYLAWS
3.1 Articles of Incorporation of Belridge Holdings Corp. filed with the Nevada
Secretary of State on August 23, 1995 (incorporated by reference to
Exhibit 3(i) to our Form 10-SB filed October 7, 1999).
3.2 Certificate of Amendment of Articles of Incorporation of Belridge Holdings
Corp. changing its name to Dead On, Inc. (incorporated by reference to
Exhibit 3(i) to our Form 10-SB filed October 7, 1999). The Certificate
originally filed on September 25, 1998, was canceled and re-filed with the
Nevada Secretary of State on June 10, 1999.
3.3 Articles of Merger for the merger of Conversational Systems, Inc. into Dead
On, Inc. filed with the Nevada Secretary of State on July 14, 1999 with
supporting documents (incorporated by reference to Exhibit 2 to our Form
10-SB, filed October 7, 1999). This document changed the name of the
surviving entity, Dead On, Inc., to ConversIt.com, Inc.
3.4 Certificate of Amendment of Articles of Incorporation of ConversIt.com,
Inc. changing its name to One Voice Technologies, Inc. (incorporated by
reference to Exhibit 2 to our Form 10-SB filed October 7, 1999).
3.5 Bylaws of Belridge Holdings Corp. (incorporated by reference to
Exhibit 3(ii) of our Form 10-SB, filed October 7, 1999).
3.6 Amendment to Bylaws dated July 11, 2000 (excerpted) (incorporated by
reference to Exhibit 4.3 of our Form S-8, filed October 3, 2000).
INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS
4.1 Common Stock Purchase Warrant with Veritas SG Investments from the January
2000 offering (incorporated by reference to Exhibit 4.1 of our Form SB-2,
filed November 11, 2000).
4.2 Form of Common Stock Purchase Warrant from the March 2000 offering
(incorporated by reference to Exhibit 4.1 of our Form SB-2, filed November
11, 2000).
4.3 Securities Purchase Agreement ("SPA") with Nevelle Investors LLC dated
October 3, 2000, and Form of Debenture (Exhibit A to the SPA), Form of
Warrant (Exhibit B to the SPA), Conditional Warrant dated October 3, 2000
(Exhibit C to the SPA) and Registration Rights Agreement dated October 3,
2000 (Exhibit E to the SPA), each with Nevelle Investors LLC (incorporated
by reference to Exhibit 4 to our Form 10-QSB, filed November 14, 2000).
4.4 $700,000 4% Convertible Note issued to the Laurus Master Fund, Ltd.
(incorporated by reference to our Form SB-2, filed January 29, 2002)
4.5 Common Stock Purchase Warrant issued to the Laurus Master Fund, Ltd.
(incorporated by reference to our Form SB-2, filed January 29, 2002)
4.6 Securities Purchase Agreement.
(incorporated by reference to our Form SB-2, filed January 29, 2002)
Exhibit No. Description
----------- ------------
4.7 $700,000 4% Convertible Note issued to the Stonestreet Limited Partnership.
(incorporated by reference to our Form SB-2, filed January 29, 2002)
4.8 Common Stock Purchase Warrant issued to the Stonestreet Limited
Partnership. (incorporated by reference to our Form SB-2, filed January 29,
2002)
4.9 $52,500 4% Convertible Note issued to the Stonestreet Limited Partnership.
(incorporated by reference to our Form SB-2, filed January 29, 2002)
4.10 Settlement Agreement with Dominick & Dominick LLC (incorporated by
reference to our Form SB-2, filed January 3, 2002).
4.11 Common Stock Purchase Warrant issued to Dominick & Dominick LLC
(incorporated by reference to our Form SB-2, filed January 3, 2002).
4.12 Agreement as to Registration Rights with Dominick & Dominick LLC
(incorporated by reference to our Form SB-2, filed January 3, 2002).
MATERIAL CONTRACTS
10.1 Employment Agreement with Dean Weber dated July 14, 1999 (incorporated by
reference to Exhibit 10 to our Form 10-SB, filed October 7, 1999). This
agreement was amended on April 10, 2000, to increase Mr. Weber's annual
salary to $252,000.
10.2 Consulting Agreement with KJN Management Ltd. For the services of Rahoul
Sharan dated July 14, 1999 (incorporated by reference to Exhibit 10 to our
Form 10-SB, filed October 7, 1999). This agreement was amended on
April 10, 2000, to increase the annual consulting fee to $180,000.
10.3 Software Agreement with IBM/OEM dated September 21, 1999 (incorporated by
reference to Exhibit 4.4 to our Form SB-2 filed November 20, 2000).
10.4 Software License Agreement with Philips Speech Processing dated March 3,
2000 (incorporated by reference to Exhibit 4.4 to our Form SB-2 filed
November 20, 2000).
10.5 Third Amended and Restated 1999 Stock Option Plan (incorporated by
reference to our Definitive Proxy Statement, filed November 29, 2001).
10.6 Investor Relations Group Agreement.
CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Independent Auditors.