10QSB 1 d10qsb.txt FORM 10-QSB ================================================================================ 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 March 31, 2002 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 Burlington, New Jersey 08016 (Issuer's Address) Issuer's telephone number, including area code: (609) 386-2500 Check whether 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 issuer 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 issuer 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 March 31, 2002 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 ---- 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 March 31, 2002 3 Statements of Operations for the three months ended March 31, 2002 and 2001 4 Statements of Cash Flows for the three months ended March 31, 2002 and 2001 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II -- OTHER INFORMATION 9
2 VOICE POWERED TECHNOLOGY INTERNATIONAL, INC. BALANCE SHEET (in thousands, except share data) (unaudited)
March 31, 2002 ---------- ASSETS ------ CURRENT ASSETS: Cash $ 49 Accounts receivable 5 ---------- TOTAL CURRENT ASSETS 54 ---------- PROPERTY AND EQUIPMENT Equipment 190 Less accumulated depreciation (190) ---------- - ---------- OTHER ASSETS 21 ---------- TOTAL ASSETS $ 75.00 ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Loans Payable - Franklin $ 620 Accounts payable and accrued expenses - Franklin 1,315 Accounts payable and accrued expenses - other 32 ---------- TOTAL CURRENT LIABILITIES 1,967 ---------- SHAREHOLDERS' EQUITY: Common stock, $.001 stated value - 100,000,000 shares authorized; 90,245,360 issued and outstanding 90 Accumulated deficit (1,982) ---------- TOTAL SHAREHOLDERS' EQUITY (1,892) ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 75 ==========
See acompanying notes to financial statements. 3 VOICE POWERED TECHNOLOGY INTERNATIONAL, INC. STATEMENT OF OPERATIONS (in thousands) (unaudited)
Three Months Three Months Ended Ended March 31, 2002 March 31, 2001 ---------------------- ------------------- Net sales $ - $ 20 Costs and expenses Costs of goods sold - 9 General and administrative 43 110 ---------------------- ------------------- Total costs and expenses 43 119 Operating loss (43) (99) Other income (expense): Interest expense (12) (11) Other - 11 ---------------------- ------------------- Net income (loss) $ (55) $ (99) ====================== =================== Net Income (loss) per share: $ - $ - ====================== =================== Weighted average common shares outstanding 90,245 90,245 ====================== ===================
See accompanying notes to financial statements. 4 VOICE POWERED TECHNOLOGY INTERNATIONAL, INC. STATEMENT OF CASH FLOWS (in thousands) (unaudited)
Three Months Three Months Ended Ended March 31, 2002 March 31, 2001 ------------------------- ------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: NET LOSS $ (55) $ (99) ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES Gain on sale of assets -- (11) Source (use) of cash from change in operating assets and liabilities: Accounts receivable 14 4 Inventories -- 9 Acounts payable and accrued expenses 54 137 ------------------------- ------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 13 40 INCREASE IN CASH AND CASH EQUIVALENTS 13 40 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 36 11 ------------------------- ------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 49 $ 51 ========================= =========================
See accompanying notes to financial statements. 5 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, 2001. Operating results for the three month period ended March 31, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. NOTE 2 - As part of a Plan of Reorganization, 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 and subsequently borrowed an additional $20,000 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 March 31, 2002, 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 3 - On March 20, 2001, the Company announced that it was discontinuing operations because of the lack of capital required to make necessary revisions and updates to its Voice Organizer products for their continued commercial resale. Effective March 31, 2001 the Company transferred the remaining inventory of its Voice Organizer products and provided for the transfer of certain rights related to the sale of those products, including rights relating to its website, to an individual in return for consideration approximating $75,000. The Company has received $35,000 due under the transfer agreement through March 2002 and the remaining $40,000 is due over four annual installments beginning on December 31, 2002. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -------------------------------------------------------------------------------- Except for the historical information contained herein, the matters discussed throughout this report, including, but not limited to, those that are stated as the Company's belief or expectation or preceded by the word "should" are forward looking statements that involve risks to and uncertainties in the Company's business, including, among other things, the timely availability and acceptance of new electronic products, changes in technology, the impact of competitive electronic products, the management of inventories, the Company's dependence on third party component suppliers and manufacturers, including those that provide Company -specific parts, and other risks and uncertainties that may be detailed from time to time in the Company's reports filed with the Securities and Exchange Commission. -------------------------------------------------------------------------------- RISK FACTORS On March 20, 2001, the Company announced that it was discontinuing operations because of the lack of the capital required to make necessary revisions and updates to its Voice Organizer products for their continued commercial resale. The Company is indebted to Franklin Electronic Publishers, Inc. (Franklin) in the amount of $1,935,000. The Company does not have sufficient working capital to meet its financial obligations through December 31, 2002 and has no plans to raise additional funds through the issuance of equity or convertible debt securities. If it were to do so, however, the percentage ownership of current stockholders will be reduced, stockholders would experience additional dilution and such securities would likely have rights, preferences and privileges senior to those of the Company's common stock. See the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2001 for additional Risk Factors. Results of Operations --------------------- Three months ended March 31, 2002: The Company had no sales in the quarter ended March 31, 2002. In the same quarter last year the Company had sales of $20,000 and gross margin of $11,000 or 55% of sales. Total operating costs for the quarter ended March 31, 2002 decreased by $67,000 to $43,000 compared with $110,000 in the prior year. The current year's operating expense consisted primarily of costs related to the Company's audit and annual report. For the quarters ended March 31, 2002 and 2001, interest expense consisted of interest on the Company's loans payable to Franklin. 7 Liquidity --------- At the commencement of the Bankruptcy Proceedings in 1997, the Company entered into a revolving $400,000 Loan and Security Agreement with Franklin collateralized by all of the assets of the Company. This loan was due and payable on the Effective Date. The Agreement carried an interest rate of 12% per annum on the average daily balance. The December 31, 1997 balance of $185,000 was the highest balance during 1997, and said amount was in excess of the borrowings allowed under the terms of the Agreement. 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 March 31, 2002, the principal balance due on this loan was $270,000. In accordance with the Plan, on the Effective Date 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 of the Bankruptcy Proceedings. The Plan Loan accrues interest at 8% per annum, with interest only payable in arrears on a monthly basis, with principal all due and payable in a lump sum payment five years from the Effective Date which is May 12, 2003. As discussed above, the Company was to have made a principal payment of $50,000 to Franklin on or before May 12, 1999. As the Company was unable make this payment, the Company is in default on its loans from Franklin and the entire balance of the loans has been classified as a current obligation on the Company's March 31, 2002 balance sheet. As of March 31, 2002, amounts due Franklin included the loans discussed above of $620,000, inventory purchased from Franklin in 1998 for resale in the amount of $457,000, royalties of $152,000, accrued interest of $207,000 and net expenses paid by Franklin on the Company's behalf of approximately $499,000. As of March 31, 2002, the Company had an accumulated deficit of $1,982,000 and negative working capital of $1,913,000. 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. On March 20, 2001, the Company announced that it was discontinuing operations because of the lack of capital required to make necessary revisions and updates to its products for their continued commercial resale. Effective March 31, 2001 the Company transferred the remaining inventory of its Voice Organizer products and provided for the transfer of certain rights related to the sale of those products, including rights relating to its website, to an individual in return for consideration approximating $75,000. The Company has received $35,000 due under the transfer agreement through March 2002 and the remaining $40,000 is due over four annual installments beginning on December 31, 2002. 8 Part II. OTHER INFORMATION Item 1. Legal Proceedings The Company has received notice from the holder of U.S. Patent 5,696,496 entitled "Portable Messaging and Scheduling Device with Homebase Station" stating that the holder had filed suit alleging infringement of that patent in December 1999 in United States District Court for the District of Massachusetts (Civil Action No. 99-CV-12468) against certain companies (not including the Company) and alleging that certain of the Company's Voice Organizer products may also infringe that patent. No assurance can be given with respect to that patent. .. SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the issuer caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. VOICE POWERED TECHNOLOGY INTERNATIONAL, INC. Date: May 15, 2002 By: /s/ Gregory J. Winsky ------------------------------- Gregory J. Winsky, President, and Chief Executive Officer Date: May 15, 2002 By: /s/ Arnold D. Levitt ------------------------------- Arnold D. Levitt Chief Financial Officer 9