-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SmvpiW0lOkqvrVbHWEPyGhqzw0oIx7/dh2oIzhPeaE3vy3BB7FvmGzHcHnfklmw+ HSttN3j7Mlf0619fqChNTA== 0000950134-96-004244.txt : 19960816 0000950134-96-004244.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950134-96-004244 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOICE CONTROL SYSTEMS INC /DE/ CENTRAL INDEX KEY: 0000350899 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 751707970 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-10385 FILM NUMBER: 96611573 BUSINESS ADDRESS: STREET 1: 14140 MIDWAY RD SUITE 100 CITY: DALLAS STATE: TX ZIP: 75244 BUSINESS PHONE: 2143800300 MAIL ADDRESS: STREET 1: 14140 MIDWAY ROAD STREET 2: SUITE 100 CITY: DALLAS STATE: TX ZIP: 75244 FORMER COMPANY: FORMER CONFORMED NAME: SCOTT INSTRUMENTS CORP DATE OF NAME CHANGE: 19920703 10QSB 1 FORM 10-Q QUARTER END JUNE 30, 1996 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-QSB Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 ---------------------- Quarter Ended June 30, 1996 Commission File No. 0-10385 VOICE CONTROL SYSTEMS, INC. (Name of small business issuer in its charter) DELAWARE 75-1707970 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 14140 MIDWAY ROAD DALLAS, TEXAS 75244 (214) 726-1200 (Address of principal executive (Registrant's telephone offices) number, including area code) ---------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 7,031,184 SHARES of Common Stock, $.01 par value outstanding at June 30, 1996. 2 VOICE CONTROL SYSTEMS, INC. FORM 10-QSB QUARTERLY REPORT PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to S.E.C. rules and regulations although the Company believes the disclosures made are adequate to make the information presented not misleading, and in the opinion of management, all adjustments have been reflected which are necessary for a fair statement of the information shown. 2 3 VOICE CONTROL SYSTEMS, INC. BALANCE SHEET (UNAUDITED)
ASSETS June 30, 1996 ------------ CURRENT ASSETS: Cash and cash equivalents $ 16,364,547 Accounts receivable (net of $1800 allowance for doubtful accounts) (Note 6) 1,804,561 Inventory 493,284 Prepaid expenses 79,027 ------------ TOTAL CURRENT ASSETS 18,741,419 NET PROPERTY AND EQUIPMENT 720,217 OTHER ASSETS 57,211 ------------ $ 19,518,847 ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT: Accounts payable and accrued expenses (Note 4) $ 261,418 Deferred revenue 169,115 Convertible note 1,166,584 ------------ TOTAL CURRENT LIABILITIES 1,597,117 LONG TERM DEBT -- ------------ TOTAL LIABILITIES 1,597,117 ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock; $1.00 par value; 300,000 shares authorized; none issued and outstanding -- Common stock, $.01 par value: 20,000,000 shares authorized; 7,031,184 issued and outstanding 70,312 Paid-in capital 25,484,877 Receivable from shareholders (44,068) Deficit (7,589,391) ------------ TOTAL STOCKHOLDERS' EQUITY 17,921,730 ------------ $ 19,518,847 ============
F-3 4 VOICE CONTROL SYSTEMS, INC. STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Six Months Ended June 30, Ended June 30, 1996 1995 1996 1995 ----------- ------------ ------------- ------------ SALES (NOTE 6) $ 1,718,577 2,781,210 4,044,336 4,921,903 COST OF SALES 256,289 954,381 791,526 1,609,560 ----------- ------------ ------------- ------------ GROSS PROFIT 1,462,288 1,826,829 3,252,810 3,312,343 COSTS AND EXPENSES: Research and development 713,759 615,317 1,458,887 1,234,023 Selling, general and administrative 886,762 871,552 1,761,952 1,629,147 Other interest expense (Income), net (191,997) (8,240) (275,226) (15,546) Interest, to affiliates 29,690 37,345 59,629 75,689 ----------- ------------ ------------- ------------ TOTAL COSTS AND EXPENSES 1,438,214 1,532,454 3,005,242 2,954,405 ----------- ------------ ------------- ------------ NET INCOME BEFORE TAXES 24,074 302,615 247,568 373,484 INCOME TAXES (NOTE 5) - - - - ----------- ------------ ------------- ------------ NET INCOME $ 24,074 $ 302,615 $ 247,568 $ 373,484 =========== ============ ============= ============ NET INCOME PER SHARE: Primary $ 0.00 $ 0.05 $ 0.03 $ 0.06 =========== ============ ============= ============ Fully diluted $ 0.00 $ 0.05 $ 0.03 $ 0.06 =========== ============ ============= ============ WEIGHTED AVERAGE OUTSTANDING SHARES: Primary 9,360,502 6,590,348 8,605,486 6,564,274 =========== ============ ============= ============ Fully diluted 9,360,502 6,590,348 8,610,980 6,564,274 =========== ============ ============= ============
See accompanying notes to financial statements F-4 5 VOICE CONTROL SYSTEMS, INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, -------------------------------- 1996 1995 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 247,568 $ 373,484 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 91,459 114,206 Changes in operating assets and liabilities: Accounts receivable (760,263) (63,712) Inventory 319,884 (349,179) Prepaid expenses 22,298 (41,154) Other assets 46,932 5,769 Accounts payable and accrued expenses (46,188) 92,073 Deferred revenue (97,956) 100,240 ----------- ----------- Net cash provider by operating activities (176,266) 231,727 ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES: Capital expenditures (294,331) (90,941) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of principal on notes payable (1,277) (112,795) Proceeds from sale of assets -- 150,200 Proceeds from note receivable 35,627 -- Net proceeds from common stock issuance (Note 3) 14,429,947 -- Proceeds from exercise of stock options 111,947 29,013 ----------- ----------- Net cash provided by financing activities 14,576,244 66,418 ----------- ----------- Net increase in cash and cash equivalents 14,105,647 207,204 Cash and cash equivalents at beginning of year 2,258,900 1,075,527 ----------- ----------- Cash and cash equivalents at June 30 $16,364,547 $ 1,282,731 =========== =========== Supplemental disclosures of cash flow information Interest paid $ 2,001 $ 16,002 =========== ===========
See accompanying notes to financial statements F-5 6 VOICE CONTROL SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. BUSINESS Voice Control Systems, Inc. (the "Company" or "VCS") engages in the design of voice recognition systems that allow for the voice control of electronic machines and/or devices. Operating results for the six months ending June 30, 1996 are not necessarily indicative of the expected results for the year. The unaudited financial statements include all adjustments, consisting primarily of normal recurring accruals, which management considers necessary for a fair presentation of such information. 2. PER SHARE INFORMATION Earnings per common and common equivalent share are computed based upon the weighted average number of outstanding shares of common stock and common stock equivalents. 3. STOCK OFFERING On February 14, 1996, the Company completed the sale of 1,269,402 shares of common stock. In March 1996, the underwriters exercised their overallotment option for an additional 220,500 shares of common stock. Net proceeds to the Company from the stock offering totaled $14,430,000. 4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of the following at June 30, 1996: Accounts payable $ 118,334 Accrued expenses 143,084 --------- $ 261,418 =========
5. INCOME TAXES Net operating loss ("NOL") carry forwards expiring from 1996 to 2009 totaling approximately $14,799,000 are available at June 30, 1996 to offset future periods taxable income. Effective as of August 11, 1994 an ownership change as defined by the Internal Revenue Code Section 382 occurred. As a result of the change, the use of the Company's NOL in future years is limited to approximately $1,355,000 annually. The following reconciles income tax expense at the federal statutory rate to the actual tax expense at June 30:
1996 1995 ------------- ---------- Income taxes at the statutory rate $ 84,000 $ 127,000 State taxes based on income 11,000 17,000 Effect on taxes resulting from: Utilization of NOL carry forwards (95,000) (144,000) ------------- ---------- $ -- $ -- ============= ==========
F-6 7 VOICE CONTROL SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) The Company has provided an allowance for its entire deferred tax asset, relating primarily to NOL carry forwards of approximately $5,032,000, as its realization is dependent upon future generation of taxable income. Until such realization can be reasonably determined, management will continue to provide an allowance for the entire deferred tax asset. 6. MAJOR CUSTOMERS Three customers accounted for 42%, 17% and 17% of total sales revenue for the six months ended June 30, 1996. One customer accounted for 61% of total sales revenue for the six months ended June 30, 1995. The Company's largest customer is also the holder of its short term convertible debt. Accounts receivable from the largest customer was 7% of the total receivable balance at June 30, 1996. F-7 8 PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Six Months Ended June 30, 1996 vs. June 30, 1995 Sales decreased 18% from $4,922,000 during the six months ending June 30, 1995 to $4,044,000 during the six months ending June 30, 1996. Three customers, Dialogic, Brite Voice Systems and Periphonics, accounted for 42%, 17% and 17%, respectively, of total sales for the six months ending June 30, 1996. Dialogic accounted for 61% of total sales for the six months ending June 30, 1995. Royalty, development and license fees, which increased 43% over the six months ending June 30, 1995, were 38% of total revenues for the six months ending June 30, 1996. A one-time non-refundable fee charged to Brite Voice Systems for a license to use one of the Company's application patents accounted for approximately 21% of royalty, development and license fee revenues. Hardware sales, which decreased 38% over the six months ending June 30, 1995, were 56% of revenues in the six months ending June 30, 1996. This decrease is a result of the company's continued conversion from primarily a hardware/software supplier to become primarily a software supplier. Cost of sales includes the cost of components and subcontracted manufacturing related to hardware products. Gross profit as a percent of sales increased from 67% in the six months ending June 30, 1995 to 80% in the comparable 1996 period as a result of the decrease in hardware sales and the increase in royalty, development and license fees. Research and development expenses increased 18% from $1,234,000 in the six months ending June 30, 1995 to $1,459,000 in the six months ending June 30, 1996. This increase reflects costs associated with the retention and recruitment of highly qualified employees in research and product development. Selling, general, and administrative expenses increased 8% from $1,629,000 in the six months ending June 30, 1995 to $1,764,000 in the six months ending June 30, 1996. Net operating loss ("NOL") carryforwards expiring from 1996 to 2009 totaling approximately $14,799,000 were available as of June 30, 1996 to offset future periods taxable income. The Company has provided an allowance against its entire deferred tax asset relating primarily to NOL carry forward of approximately $5,032,000. Effective August 11, 1994, an ownership change as defined by the Internal Revenue Code Section 382 occurred. As a result of the change, the use of the Company's NOL in future years to approximately $1,355,000 annually. Federal income taxes and state franchise taxes based on income have been offset by net operating loss carryforwards thus far in 1996. Three Months Ended June 30, 1996 vs. June 30, 1995 Sales decreased 38% from $2,781,000 during the second three months of 1995 to $1,719,000 during the second three months of 1996. Three customers, Dialogic, Brite Voice Systems and Periphonics, accounted for 38%, 32% and 20%, respectively, of total sales for the second three months of 1996. Dialogic accounted for 64% of total sales for the second three months of 1995. Royalty, development and license fees, which increased 40% over the second three months of 1995, were 44% of total revenues for the second three months of 1996. A one-time non-refundable fee charged to Brite Voice Systems for a license to use the Company's U.S. Patent No. 5,297,183 8 9 accounted for approximately 43% of royalty, development and license fee revenues. Hardware sales, which decreased 60% over the second three months of 1995, were 50% of revenues in the second three months of 1996. This decrease is a result of the company's continued conversion from primarily a hardware company to become primarily a software company. Cost of sales includes the cost of components and subcontracted manufacturing related to hardware products. Gross profit as a percent of sales increased from 66% in the second three months of 1995 to 85% in the comparable 1996 period as a result of the decrease in hardware sales and the increase in royalty, development and license fees. Research and development expenses increased 16% from $615,000 in the second three months of 1995 to $714,000 in the second three months of 1996. This increase reflects costs associated with the retention and recruitment of highly qualified employees in research and product development. Selling, general, and administrative expenses increased 2% from $872,000 in the second three months of 1995 to $887,000 in the second three months of 1996. LIQUIDITY AND CAPITAL RESOURCES The Company's principal cash requirements to date have been to fund working capital and capital expenditures in order to support its sales growth. Net working capital at June 30, 1996 was $17,144,000. In the past, the Company's working capital needs were financed primarily through cash flow from operations and proceeds from the exercise of stock options. A stock offering was completed during the first quarter of 1996 that provided net proceeds of $14,430,000 to the Company. At June 30, 1996, the Company held $16,365,000 in cash and cash equivalents. Cash and cash equivalents are invested in institutional cash investment accounts with preservation of capital being the primary consideration. All investments currently have overnight liquidity. Historically, the Company's primary source of liquidity has been the timely collection of its accounts receivable. The average days sales in accounts receivable was 81 days as of June 30, 1996. The Company's inventory as of June 30, 1996 was $493,000 and primarily consists of the Company's Personal Voice Dialer. The Personal Voice Dialer is being sold through catalogues and other direct marketing avenues that require the Company to carry sufficient inventory to fill orders in a relatively short period of time. The Company's debt at June 30, 1996 consisted of a convertible promissory note due to Dialogic on January 1, 1997. Dialogic converted accrued interest on its note to Common Stock during 1995 and 1996. The Company's capital expenditures were $294,000 for the six months ended June 30, 1996. The expenditures were primarily for a new telephone/voice mail system, office furniture and computer equipment. VCS believes that its existing sources of liquidity, funds generated by operations and the funds received from the stock offering will be sufficient to provide the capital resources necessary to support increased operating needs and finance continued growth in the foreseeable future. 9 10 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. (a) The annual meeting of stockholders was held May 6, 1996. (b) The directors of the Company were re-elected to serve until the next annual meeting of stockholders. (c) The stockholders approved an amendment to the Company's 1992 Stock Option Plan which increased the number of shares reserved for issuance under the plan from 600,000 to 900,000. 5,464,043 votes were cast for the amendment, 493,244 were cast against the amendment and 43,442 abstained. The stockholders also approved the appointment of BDO Seidman to serve as independent auditors of the Company for 1996. 6,075,565 votes were cast for, 9,714 votes were cast against with 48,401 abstaining. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27 - Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the quarter covered by this report. 10 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VOICE CONTROL SYSTEMS, INC. Dated: August 12, 1996 By: /s/ Peter J. Foster ------------------- Peter J. Foster Chief Executive Officer and President /s/ Kim S. Terry ---------------- Kim S. Terry Principal Financial and Accounting Officer 11 12 Exhibit Index
Exhibit Number Description - ------ ----------- 27 Financial Data Schedule
12 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1996 APR-01-1996 JUN-30-1996 16,364,547 0 1,804,561 1,800 493,284 18,741,419 1,841,588 1,121,371 19,518,847 1,597,117 0 70,312 0 0 0 19,518,847 1,718,577 1,718,577 256,289 256,289 1,408,524 0 29,690 24,074 0 0 0 0 0 24,074 .00 .00
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