-----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, ElWFVDmPJhUP4UcPWtdhH/XtBByMfgkde7bGjzzxrrlR/Di5DZMFOeLlGhj4Rd6r 4MW6S1Uvy+cCvP0Wg3BrqA== 0000890447-99-000003.txt : 19990817 0000890447-99-000003.hdr.sgml : 19990817 ACCESSION NUMBER: 0000890447-99-000003 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOICE POWERED TECHNOLOGY INTERNATIONAL INC CENTRAL INDEX KEY: 0000890447 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 953977501 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-11476 FILM NUMBER: 99690581 BUSINESS ADDRESS: STREET 1: 18425 BURBANK BLVD STE 508 CITY: TARZANA STATE: CA ZIP: 91356 BUSINESS PHONE: 8187571100 10QSB 1 FORM 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ FORM 10-QSB [X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For the transition period from __________ to __________ Commission File No. 1-11476 VOICE POWERED TECHNOLOGY INTERNATIONAL, INC. (Name of small business issuer in its charter) California 95-3977501 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) One Franklin Plaza 08016 Burlington, New Jersey (Zip Code) Registrant's telephone number, including area code: (609) 386-2500 Checkwhether the issuer (l) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _ X_ No ___ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes __X__ No ____ As of June 30, 1999 there were 90,245,360 shares of Voice Powered Technology International, Inc. Common Stock $.001 par value outstanding. Transitional Small Business Disclosure Format (check one) Yes ____ No __X__ 2 VOICE POWERED TECHNOLOGY INTERNATIONAL, INC. FORM 10-QSB TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION PAGE NUMBER ----------- Item 1. Financial Statements -- unaudited Balance Sheet as of June 30, 1999 3 Statements of Operations for the three months ended June 30, 1999 and 1998 4 Statements of Operations for the six months ended June 30, 1999 and 1998 5 Statements of Cash Flows for the six months ended June 30, 1999 and 1998 6 Notes to Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 PART II -- OTHER INFORMATION 10
3 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VOICE POWERED TECHNOLOGY INTERNATIONAL, INC. BALANCE SHEET (Amounts in Thousands, Except Share Data) (Unaudited) Assets June 30, 1999 Current assets Cash and cash equivalents $ 91 Receivables, net of allowance for doubtful accounts 56 Inventory 206 Prepaid expenses -- ------- Total current assets 353 Property and equipment Equipment 329 Other 82 ------- 411 Less accumulated depreciation 351 ------- Net property and equipment 60 Patents and technology rights, net of amortization 107 Deferred costs, net of amortization 40 Other assets 16 ------- Total assets $ 576 ======= Liabilities and Stockholders' Deficit Current liabilities Current portion, long term debt (Note 3) $ 50 Accounts payable 579 Accrued expenses 367 Deferred income 58 ------- Total current liabilities 1,054 Long term debt- loans payable (Note 3) 570 ------- Total liabilities 1,624 Stockholders' equity (deficit) Common stock, 100,000,000 shares authorized; $.001 stated value, 90,245,360 shares issued and outstanding 90 Accumulated deficit (1,139) ------- Total stockholders' equity (deficit) (1,048) ------- Total liabilities and stockholders' equity (deficit) $ 576 =======
See accompanying notes to financial statements. 4 VOICE POWERED TECHNOLOGY INTERNATIONAL, INC. STATEMENTS OF OPERATIONS (Amounts in Thousands Except Per Share) (Unaudited) Three months ended June 30, May 13- || April 1- May June 30, || 12, 1999 1998 || 1998 ---- ---- || ---- || Debtor in || Possession || Net sales $ 320 $ 360 || $ 228 || Cost of goods sold 201 195 || 111 ------------- -------------|| -------------- || Gross profit 119 165 || 117 || Costs and expenses || Marketing 57 40 || 26 General and administrative 203 113 || 119 Research and development 51 39 || 39 Warehouse 41 29 || 22 ------------- -------------|| -------------- Total costs and expenses 352 221 || 206 ------------- -------------|| -------------- || Operating loss (233) (56) || (89) || Other income (expense) (7) || 1 (12) || ------------- -------------|| -------------- || Income (Loss) before reorganization and || extraordinary items (245) (63) || (88) || Reorganization item || Professional fees - -- || (46) ------------- -------------|| -------------- || Loss before extraordinary item (245) (63) || (134) || Extraordinary item || Relocation expense (Note 4 ) - - || Forgiveness of debt - - || 1,288 ------------- -------------|| -------------- || Net income (loss) $ (245) $ (63) || $ 1,154 ============= =============|| ============== || Income (loss) per share || Before extraordinary item $ - $ - || $ (0.01) Extraordinary item $ - $ - || $ 0.08 ============= =============|| ============== Net income (loss) per share $ - $ - || $ 0.07 ============= =============|| ============== Weighted average common || shares outstanding 90,245 90,245 || 16,049 ============= =============|| ==============
See accompanying notes to financial statements. 5 VOICE POWERED TECHNOLOGY INTERNATIONAL, INC. STATEMENTS OF OPERATIONS (Amounts in Thousands Except Per Share) (Unaudited) Six months ended May 13- || January 1- June 30, June 30, || May 12, 1999 1998 || 1998 ---- ---- || ---- || Debtor in || Possession || Net sales $ 810 $ 360 || $ 531 || Cost of goods sold 487 196 || 299 ------------- -------------- || ---------------- || Gross profit 323 164 || 232 || Costs and expenses || Marketing 125 40 || 94 General and administrative 377 112 || 409 Research and development 106 39 || 130 Warehouse 92 29 || 77 ------------- -------------- || ---------------- Total costs and expenses 700 220 || 710 ------------- -------------- || ---------------- || Operating loss (377) (56) || (478) || Other income (expense) (25) (7) || (3) ------------- -------------- || ---------------- || Income (Loss) before reorganization and || extraordinary items (402) (63) || (481) || Reorganization item || Professional fees - -- || (70) ------------- -------------- || ---------------- || Loss before extraordinary item (402) (63) || (551) || Extraordinary item || Relocation expense (Note 4 ) (150) - || - Forgiveness of debt - - || 1,288 ------------- -------------- || ---------------- || Net income (loss) $ (552) $ (63) || $ 737 ============= ============== || ================ || Income (loss) per share || Before extraordinary item $ (0.01) $ - || $ (0.03) Extraordinary item $ - $ - || $ 0.08 ============= ============== || ================ Net income (loss) per share $ (0.01) $ - || $ 0.05 ============= ============== || ================ Weighted average common || shares outstanding 90,245 90,245 || 16,049 ============= ============== || ================
See accompanying notes to financial statements. 6 VOICE POWERED TECHNOLOGY INTERNATIONAL, INC. STATEMENTS OF CASH FLOWS (Amounts in Thousands) (Unaudited) Six months May 13 - || January 1- ended June 30, June 30, || May 12, 1999 1998 || 1998 || Debtor in || Possession ------------------ ----------------|| ------------------ || Increase (Decrease) in Cash and Cash Equivalents || || Cash flows from operating activities: || Net income (loss) $ (552) $ (63) || $ 737 Adjustments to reconcile net loss || to net cash provided by (used in) operating activities: || Depreciation and amortization 97 58 || 153 Gain on forgiveness of debt || (1,288) Changes in operating assets and liabilities: || Decrease in receivables 138 93 || 26 (Increase) decrease in inventory 108 (515) || 66 (Increase) decrease in prepaid expenses 7 (6) || 9 Decrease in other assets 8 1 || 3 Increase in post-petition accounts payable 17 456 || 2 Increase (decrease) in post-petition accrued expenses 208 (25) || 18 Increase in deferred Income (6) 33 || 70 Decrease in pre-petition liabilities subject to || compromise || (208) ------------------ ---------------- || ------------------ Net cash provided by (used in) operating activities 25 32 || (412) Cash flows from investing activities: || Capital expenditures (5) (4) || || Cash flows from financing activities: || Proceeds from post-petition loans payable || 415 ------------------ ----------------|| ------------------ || Net increase (decrease) in cash and cash equivalents 20 28 || 3 || Cash and cash equivalents at the beginning of the period 71 38 || 35 ------------------ ----------------|| ------------------ || Cash and cash equivalents at the end of the period $ 91 $ 66 || $ 38 ================== ================|| ==================
See accompanying notes to financial statements 7 VOICE POWERED TECHNOLOGY INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1 -- The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes thereto, included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1998. Operating results for the six-month period ended June 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. NOTE 2 -- On September 22, 1997, the Company filed a petition for relief with the United States Bankruptcy Court, Central District of California, under the provisions of Chapter 11 of the Bankruptcy Code. From September 1997 through May 12, 1998, the Company operated as a "Debtor-In-Possession" under such code. As of May 12, 1998 (the "Effective Date"), in accordance with AICPA Statement of Position 90-7 "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code", the Company adopted "fresh-start reporting" and has reflected the effects of such adoption in the financial statements. There was no change to the carrying value of the assets or liabilities as a result of the adoption of fresh start reporting, however, the balance of the deficit was offset against paid in capital, to the extent available. NOTE 3 -- In accordance with the Plan, on or about May 12, 1998, the following occurred: 1) the Company received a loan of $350,000 from Franklin (the "Plan Loan") to create a fund to be dedicated to the payment of creditor claims and certain administrative expenses; 2) the 500,000 shares of outstanding convertible preferred stock of the Company was converted into 2,000,000 shares of the Company's common stock; and 3) the Company's Articles of Incorporation were amended to, among other things, increase the authorized shares of common stock to 100,000,000. Pursuant to the Plan, Franklin was issued 72,196,288 shares of the Company's common stock, which equated to an additional 80% equity interest in the Company in exchange for Franklin's pre-petition secured claim in the amount of $1,733,990. As of the Effective Date, the Company renegotiated the terms of its post petition, secured revolving Loan and Security Agreement with Franklin. As of the Effective Date, the Company had borrowed $250,000 in accordance with the terms of the prior agreement. Under the terms of the new agreement (the "Revolving Loan"), entered into as of the Effective Date, interest accrues at 8% per annum payable monthly in arrears and with the principal balance payable in two installments; 1) $50,000 on or before May 12, 1999 and; 2) the balance in a lump sum payment five years from the Effective Date, which is May 12, 2003. As of June 30, 1999, the principal balance due on this loan was $270,000. The Company was unable to meet its obligation with respect to the $50,000 principal payment due May 12, 1999 however no default has been declared with respect to this obligation. NOTE 4 - On May 14, 1999, the Company announced its intention to close its facility in Simi Valley, California. As of July 31, 1999, the Company relocated to, and entered into a contract with Franklin Electronic Publishers, Inc. in Burlington, New Jersey for its warehousing, distribution, financial and manufacturing management operations. As of March 31, 1999, the Company had recorded a reserve in the amount of $150,000 related to the costs associated with the closure of the California facility, inclusive of severance for employees, moving costs and other expenses. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Since the calendar quarter ended December 31, 1995, the Company has experienced sustained significant operating losses. Through 1996 and the first nine months of 1997, the Company attempted to improve its financial condition by reducing fixed operating costs, liquidating inventories, streamlining operating departments, and entering into two significant transactions in an attempt to strengthen the Company's financial position. Despite these efforts, the Company was unable to generate sufficient revenues and gross profit to sustain its ongoing operations, further depleting cash and working capital. On September 22, 1997, the Company filed a voluntary petition for relief with the United States Bankruptcy Court, Central District of California, under the provisions of Chapter 11 of the Bankruptcy Code. The Company's Amended Plan of Reorganization and Disclosure Statement was approved by the United States Bankruptcy Court, Central District of California on April 29, 1998 and became effective on May 12, 1998. Since the commencement of the Bankruptcy Proceedings, the Company's domestic business activities have consisted primarily of sales of IQo VOICEa Organizer products directly to consumers through various direct marketing programs and to smaller retailers and wholesale accounts. In March 1998, the Company entered into a distribution agreement with a television marketing company headquartered in Mexico ("Distributor"). Distributor's primary method of marketing is via direct sales to end users through television advertising. Distributor, at its sole cost and expense, produced a thirty (30) minute television program, known as an infomercial, featuring the IQo VOICE Organizer (the "Infomercial"). In September 1998, the Company entered into a license agreement with Distributor pursuant to which the Company was granted the worldwide right (excluding Mexico, Brazil and Chile) to license to unrelated third parties the right to broadcast the Infomercial. In consideration of the license granted by Distributor, the Company agreed to pay royalties to Distributor based upon the Company's sales of its IQo VOICE Organizer products to licensees of the Infomercial. To date, the Company has entered into agreements with television marketing companies in Spain, France, Switzerland, Portugal, Belgium, Italy, Argentina, Colombia and Peru. The infomercial has aired in Spain, France and Belgium with positive results, and the Company anticipates continued airings and sales in 1999 for these markets. In South American markets, test airings of the Infomercial were not successful, potentially due to the highly unstable economic conditions in those markets. The Company is actively pursuing additional licensees in countries throughout Europe, the Far East and the Middle East with experience in marketing and distributing products using television marketing. On May 14, 1999, the Company announced its intention to close its facility in Simi Valley, California. As of July 31, 1999, the Company relocated to, and entered into a contract with, Franklin Electronic Publishers, Inc. in Burlington, New Jersey for its warehousing, distribution, financial and manufacturing management operations. As of March 31, 1999, the Company had recorded a reserve in the amount of $150,000 related to the costs associated with the closure of the California facility, inclusive of severance for employees, moving costs and other expenses. The Company anticipates this decision will result in cost savings with respect to managing the Company's operations. Management of the Company is presently focused on the continued expansion of its international sales of the IQoVOICE Organizer products, the development of targeted domestic direct marketing channels for its current products, as well as pursuing licensing opportunities for its Technology. Results of Operations For the three and six month periods ended June 30, 1999, the Company reported losses before extraordinary items of $245,000 and $402,000 respectively. As of March 31, 1999, the Company accrued a Reserve for Relocation Expense in the amount of $150,000 as an extraordinary item for the costs resulting from the Company's decision to relocate its operations from Simi Valley, California to Burlington, New Jersey. Accordingly, the Company reported a net loss for the six months ended June 30, 1999 of $552,000. 9 Sales for the three and six month periods ended June 30, 1999 were $320,000 and $810,000 respectively, of which, $201,000 and $521,000 in sales were to international customers primarily as a result of the Infomercial advertising. The decline in sales for the three months ended June 30, 1999 as compared with the preceding three months was primarily due to delays in manufacturing resulting in an order backlog as of June 30, 1999 of approximately $100,000. Cost of goods for the three and six month periods ended June 30, 1999 were $201,000 and $487,000 respectively, representing 63% and 60% of sales, resulting in gross profit of $119,000 (37%) and $323,000 (40%) respectively. Gross profit margins are subject to variation as a result of changes in the mix of both products and sales by distribution channel. Total operating costs for three and six month periods ended June 30, 1999 were $352,000 and $700,000 respectively. In an effort to continue to reduce its operating costs, commencing July 31, 1999, the Company relocated to, and has contracted out for, its warehousing, distribution, financial and manufacturing management operations with Franklin. The Company anticipates this decision will result in cost savings with respect to maintaining the Company's operations. Research and development expenses for the three and six month periods ended June 30, 1999 were $51,000 and $106,000 respectively. The Company has substantively suspended development of new and existing products until such time as it can generate adequate financial resources. Other expense for the three and six month periods ended June 30, 1999 were $12,000 and $25,000 respectively, primarily relating to interest expense on the loans payable to Franklin. Liquidity The Company has incurred significant, sustained net losses for the past three years. Because of these and other factors, on September 22, 1997, the Company filed a voluntary petition for relief with the United States Bankruptcy Court, Central District of California, under the provisions of Chapter 11 of the Bankruptcy Code. On January 21, 1998, the Company, in conjunction with Franklin Electronic Publishers, Inc., the Company's largest secured creditor, filed a combined Amended Disclosure Statement and Plan of Reorganization with the Bankruptcy Court. At a hearing held on April 23, 1998, the Company's motion for confirmation of the Plan was granted and the order confirming the Plan was entered by the Court on April 29,1998. The Plan became effective on May 12, 1998. The effect of the transactions related to the implementation of the Plan which were effected as of June 30, 1998 resulted in an increase to long term debt in the amount of $570,000; a decrease to liabilities subject to compromise in the amount of $3,240,000 as a result of the settlement of such liabilities in accordance with the terms of the Plan; a decrease in accrued expenses of $135,000 as a result of the payment of administrative expenses of the Bankruptcy Proceedings; a decrease to preferred stock of $500,000 resulting from its conversion to common stock; an increase to common stock of $74,000 and an increase to additional paid-in capital of $2,160,000 resulting from the conversion of the preferred stock as well as the new common stock issuance to Franklin; and a decrease to the Company's accumulated deficit of $1,288,000 resulting from forgiveness of debt. As of June 30, 1999, the Company had an accumulated deficit of $1,139,000 and negative working capital of $702,000. Future success of the Company is dependent, among other things, upon reaching a satisfactory level of profitability and generating sufficient cash flow resources to meet ongoing obligations. No assurance can be given that the Company will be able to achieve such level of profitability and thereby obtain the required working capital. Further, as of the Effective Date, the Company became an 82% controlled subsidiary of Franklin, and therefore subject to Franklin's direction and discretion regarding future business activities. The Company evaluates on a continuous basis software enhancements and updates based on new technologies to improve its information systems. The Company has finished its assessment of its current systems that support the Company's operations in conjunction with year 2000 compliance. The Company has substantially completed remediation of its existing operational software to ensure functionality and continued operations beyond the year 2000. The Company expects to complete such remediation by September 30, 1999. The cost of remediation is estimated to be approximately $25,000, to be expensed as incurred. The Company does not believe that the failure of any customer to be year 2000 compliant would have a material adverse effect on the financial condition of the Company. The Company is in the process of evaluating the progress of its major suppliers toward year 2000 compliance. The Company is developing contingency plans in this regard. 10 Except for the historical information, the matters discussed herein are forward looking statements that involve risks to and uncertainties in the Company's business, including, among other things, the availability of adequate working capital, changes in technology, the impact of competitive products, the Company's dependence on third party component supplies and manufacturers, and other risks and uncertainties that may be detailed from time to time in this and other of the Company's SEC reports. PART II. OTHER INFORMATION The Company was not required to report any matters or changes for any items of Part II except as disclosed below. Item 5. Other Information Effective as of July 31, 1999, Mitchell B. Rubin resigned his positions as President and director of the Company. Also effective as of July 31, 1999, Arnold D. Levitt was appointed as a director and to the position of Vice President and Chief Financial Officer of the Company. . SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. VOICE POWERED TECHNOLOGY INTERNATIONAL, INC. Date: August 16, 1999 By: /s/ Gregory J. Winsky ------------------------------------ Gregory J. Winsky, President, and Chief Executive Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 6-MOS DEC-31-1999 JUN-30-1999 115 0 60 0 301 481 411 333 760 994 0 0 0 90 (1048) 576 320 320 201 352 12 0 0 (245) 0 (245) 0 0 0 (245) (0.00) (0.00)
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