NEWS on Finances:
10KSB: VOICE MOBILITY INTERNATIONAL INC
(EDGAR Online via COMTEX) -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
You should read the following discussion of our financial condition and results
of operations together with the financial statements and the notes to financial
statements included elsewhere in this filing prepared in accordance with
accounting principles generally accepted in the United States. This discussion
contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results could differ materially from those anticipated in
these forward-looking statements.
Voice Mobility International, Inc. is a Vancouver-based unified voice
communications company focused on emergent technologies for telecommunications
providers. We are engaged in the development, sales and marketing of unified
voice communications software and introduced our first retail Unified
Communications product in July 1999.
We market our Unified Communications product both to telephone companies and
Internet service providers. Unified Communications allows subscribers to use a
single electronic mailbox to store and retrieve voicemail, faxes, and e-mail
from many types of devices, including wire-line and wireless phones, e-mail or
Web browsers.
RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED DECEMBER 31, 2000 COMPARED TO
DECEMBER 31, 1999
SALES - Sales for the fiscal year ended December 31, 2000 were $275,190 compared
to $55,997 for the fiscal year ended December 31, 1999 representing an increase
of 391%. Sales for the fiscal year ended December 31, 2000 represent the
recognition of $93,016 in deferred revenue from 1999, $98,162 for the sale of
third party computer hardware and software, $21,512 for server installation and
setup charges, and $62,500 of software license revenue based on our software
license agreement with Ikano Communications Inc. Sales for the fiscal year ended
December 31, 1999 were from the sale of a software license and third party
hardware and software.
We entered into a three year license agreement with Ikano Communications, Inc.
and received $250,000 for the installation, set up and maintenance of our
Unified Communication software. Revenue from this arrangement is recognized
ratably over the term of the agreement. $62,500 of the payment was recognized in
the fiscal year ended December 31, 2000
COST OF SALES - Cost of sales is comprised of third party software licenses,
telephony hardware, data and voice transmission costs, and installation costs.
Cost of sales were $86,498 and $51,843 for the fiscal years ended December 31,
2000 and 1999 respectively representing a 67% increase.
OPERATING EXPENSES
SALES & MARKETING - Our sales and marketing costs consist primarily of
personnel, advertising, promotions, public relations, trade shows and business
development. Total costs were $3,588,642 and $1,190,754 for the fiscal years
ended December 31, 2000 and 1999 respectively representing an increase of 201%.
These costs reflect employee stock option compensation cost of $1,178,996 and
$597,891 for the fiscal years ended December 31, 2000 and 1999 respectively.
The incremental increase of $1,816,783 (net of stock based compensation) in
sales and marketing expense between the fiscal years ended December 31, 2000 and
1999, is a result of an increase in sales and marketing personnel, advertising
and promotions, travel and participation in industry trade shows, consulting
fees, and general sales and marketing expenses. These costs have been primarily
incurred as result of market development efforts.
RESEARCH AND DEVELOPMENT - Our research and development costs consist primarily
of personnel, data and voice transmission, and related facility costs. Research
and development costs were $2,709,048 and $2,250,153 for the fiscal years ended
December 31, 2000 and 1999 respectively representing an increase of 20%. These
costs reflect employee stock option compensation cost of $964,673 and $1,023,429
for the fiscal years ended December 31, 2000 and 1999 respectively.
The incremental increase of $517,651 (net of stock based compensation) in
research and development expense between the fiscal years ended December 31,
2000 and 1999, is a result of an increase in research and development personnel
costs, leased office space and utility costs, data and voice transmission costs,
and general research and development costs.
GENERAL AND ADMINISTRATIVE - Our general and administrative costs consist
primarily of personnel costs, professional and legal costs, consulting fees,
travel, and the lease of office space. Total general and administrative costs
were $3,639,028 and $2,351,643 for the fiscal years ended December 31, 2000 and
1999 respectively, representing an increase of 55%. These costs reflect employee
stock option compensation cost of $162,089 and $1,289,260 for the fiscal years
ended December 31, 2000 and 1999 respectively. A further $880,500 of stock
option compensation cost was recorded for the fiscal year ended December 31,
2000 for stock option grants awarded to non-employees in exchange for consulting
services.
The incremental increase of $1,534,056 (net of stock based compensation) in
general and administrative costs between the fiscal years ended December 31,
2000 and 1999, is a result of an increase in personnel costs, professional and
legal costs, consulting fees, depreciation and amortization, lease of office
space, and other general administrative costs. We anticipate that general and
administrative costs will continue to grow in the foreseeable future as we
implement our market growth strategies.
INTEREST EXPENSE - Our interest expense was $16,411 and $70,209 for the fiscal
years ended December 31, 2000 and 1999 respectively. The decrease in interest
expense resulted from the decrease in notes payable in 2000.
INTEREST INCOME - Interest income was $113,490 and nil for the fiscal years
ended December 31, 2000 and 1999 respectively. In 2000, we earned interest
income on cash though term deposits.
INCOME TAXES - At December 31, 2000 we have $136,000 US tax net operating losses
that expire in 2020. As at December 31, 2000 we have Canadian tax net operating
losses of approximately $9,328,000 that will expire in the years 2001 through to
2007. Non-capital losses of our Canadian operating subsidiary, Voice Mobility
Inc., are restricted by Canadian Income Tax Law and may not be available
entirely for use in future years pursuant to Section 111(4) of the Canadian
Income Tax Act.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. For fiscal years ended
December 31, 2000 and 1999 respectively, the
Company has recognized a valuation allowance equal to deferred tax assets for
which realization is uncertain.
RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED DECEMBER 31, 1999 COMPARED TO
DECEMBER 31, 1998
SALES - Sales for the fiscal year ended December 31, 1999 were $55,997 compared
to $119,248 for the fiscal year ended December 31, 1998 representing an decrease
of 53%. Sales for the fiscal year ended December 31, 1999 were from the sales of
a software license and third party hardware and software. Sales for the fiscal
year ended December 31, 1998 were from the sale of third party hardware and
software, server installation and setup charges. All sales over both periods
were sales of equipment and software that was in the beta stage of development.
COST OF SALES - Cost of sales is comprised of third party software licenses,
telephony hardware, data and voice transmission costs, and installation costs.
Cost of sales were $51,843 and $75,439 for the fiscal years ended December 31,
1999 and December 31, 1998, respectively, representing a 31% decrease.
OPERATING EXPENSES
SALES AND MARKETING - Our sales and marketing costs consist primarily of
personnel costs, stock compensation, advertising, promotions, public relations,
trade shows and business development. Total costs were $1,190,754 and $189,691
for the fiscal years ended December 31, 1999 and December 31, 1998,
respectively, representing an increase of 528%. The increase of $1,001,063
reflects employee stock option compensation cost of $597,891.
The incremental increase of $403,172 in sales and marketing expense between the
two years is a result of an increase of $167,325 in sales and marketing
personnel costs, $64,366 in promotions, $117,514 for travel and participation in
industry trade shows, and $53,967 in general sales and marketing costs. These
sales and marketing expenditures have been incurred as result of market
development efforts.
RESEARCH AND DEVELOPMENT - Our research and development costs consist primarily
of personnel costs, stock compensation, data and voice transmission, and related
facility costs. Research and development costs were $2,250,153 and $283,918, for
the fiscal years ended December 31, 1999 and December 31, 1998, respectively,
representing an increase of 693%. The increase of $1,966,235 in research and
development costs from 1998 to 1999 primarily reflects an employee stock option
compensation cost of $1,023,429.
The incremental increase of $942,806 in research and development costs between
the two years is the result of an increase of $344,928 in personnel costs,
$34,988 in leased office space and utility costs, $29,512 in data and voice
transmission costs and $33,378 in general research and development costs.
$500,000 in research and development costs was recognized in accordance with an
arrangement with Aliant Inc. dated March 26, 1999. As a result of the
acquisition of VMI, we were obligated to issue 1,428,571 shares of our common
stock valued at $500,000.
GENERAL AND ADMINISTRATIVE - Our general and administrative costs consist
primarily of personnel costs, stock compensation, professional and legal costs,
consulting fees, travel, and the lease of office space. General and
administrative costs were $2,351,643 and $460,911 for the fiscal years ended
December 31, 1999 and December 31, 1998, respectively, representing an increase
of 410%. The increase of $1,890,732 primarily reflects an employee stock option
compensation cost of $1,289,260.
The incremental increase of $601,472 in general and administrative costs between
the two years is the result of an increase of $110,560 in personnel costs,
$247,873 in professional and legal costs, $52,208 in consulting fees, $11,167 in
lease of office space, $60,000 in accruals for interest, and $119,664 in general
administrative costs.
ACQUISITION FEE FOR RECAPITALIZATION - The acquisition fee of $200,000 was for
payments related to legal fees in the reverse acquisition of VMII. These fees
have been expensed as a fee for the recapitalization in the year ended December
31, 1999.
INTEREST EXPENSE - Our interest expense is primarily related to short-term debt.
Interest expense was $70,209 and $39,887 for the fiscal years ended December 31,
1999 and December 31, 1998, respectively. The increase of $30,322 between the
two years resulted from an increase in notes payable and shareholder advances.
INCOME TAXES - Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. For fiscal
years ended December 31, 1999 and 1998 respectively, the Company has recognized
a valuation allowance equal to deferred tax assets for which realization is
uncertain.
EXTRAORDINARY LOSS - In March 1999 VMI and Acrex agreed to a loan settlement
transaction with Ibex Investments Ltd. ("Ibex"). Pursuant to these
understandings VMII issued warrants to purchase 500,000 shares of Common Stock
to Ibex in settlement of a loan made by Ibex to VMI in the principal amount of
$167,000. The original loan agreement did not provide for the settlement of debt
with equity instruments. Consequently an extraordinary loss of $790,000 has been
recorded based on the difference between the fair value of the equity
instruments issued and the carrying value of the retired debt. The fair value of
the warrants was estimated using the Black Scholes option pricing model.
FLUCTUATIONS IN ANNUAL AND QUARTERLY RESULTS
Our annual and quarterly operating results may fluctuate significantly in the
future as a result of numerous factors, including:
1. The amount and timing of expenditures required developing strategic
relationships to enhance sales and marketing.
2. Changes in the growth rate of Internet usage and acceptance by consumers of
unified messaging systems.
3. Emergence of new services and technologies in the market in which we compete;
and fluctuations of foreign currency exchange rates.
4. Unanticipated delays in product development that could adversely affect our
revenues or results of operations.
5. The failure or unavailability of third-party technologies and services could
limit our ability to generate revenue.
LIQUIDITY AND CAPITAL RESOURCES
To date, we have funded our operations through equity financing. We currently
rely on our ability to raise money through equity financings to pursue new
business endeavors. The
majority of funds that we have raised have been allocated to the development of
our unified voice messaging software and sales and marketing initiatives. We do
not anticipate any significant sales revenue until the second quarter of 2001.
We also anticipate significant expenditures in the next twelve months as we
increase our research and development efforts.
On February 15, 2000 we completed an equity financing and raised net proceeds of
$4,241,700. On July 1, 2000 we completed a second equity financing and raised
net proceeds of $2,750,000. On December 29, 2000 we completed a third equity
financing which will make available net proceeds of $2,000,000 subject to time
based restrictions through to February 28, 2001. During the fiscal year ended
December 31, 2000 we raised $953,518 from the exercise of warrants, and $431,499
from the exercise of employee stock options.
As at December 31, 2000 we had 4,250,000 warrants outstanding that would, upon
exercise, provide us a total of $9,312,500 in equity financing. If the
outstanding warrants were exercised the related funds would be sufficient to
provide us with the liquidity necessary to fund our anticipated working capital
and capital requirements for the next twelve months. However, there can be no
assurance that the remaining warrants will be exercised.
On February 27, 2001, the Company entered into a three year agreement with
Innovatia Inc. ("Innovatia"), a wholly owned subsidiary of Aliant Inc.
(`Aliant"), to development a carrier-classified unified communications product.
The intent of the development agreement is that the resulting product will
become Aliant's primary hosted messaging solution for business and residential
customers. The product is scheduled to be deployed in 2002. The company will pay
US$ 5,700,000 over three years on a quarterly basis in cash or an equivalent
amount in stock for Innovatia's services. Innovatia will license certain
intellectual property to the Company on a non-exclusive, non-transferable basis
for use in the development and verification of current products and will provide
specific professional, project management, administrative and support services.
On April 3, 2001, the Company completed an offering of 6,500,000 Special
Warrants at a price of Cdn.$2.00 per Special Warrant for aggregate gross
proceeds of Cdn. $13,000,000. The agents' fees and expenses were Cdn. $1,010,000
resulting in net proceeds to the Company of Cdn. $11,990,000.
Each Special Warrant is exercisable, without payment of additional
consideration, into one Unit of the Company (a "Unit"). Each Unit consists of
one common share and one half of one non-transferable share purchase warrant of
the Company. Each whole warrant entitles the holder to acquire one common share
at a price of Cdn.$2.25 at any time on or before April 3, 2003.
The Special Warrants are exercisable by the holders at any time after their
issuance and, if not previously exercised or repurchased, will be deemed to be
exercised on the fifth business day following the "Qualification Date", which is
the latest of: (i) the date a registration statement for the underlying
securities is declared effective by the United States Securities and Exchange
Commission, and (ii) the date the last receipt is issued for a final prospectus
qualifying the issuance of the underlying securities by the Ontario, British
Columbia or Alberta securities regulatory and (iii) the day preceding the date
the listing of the Company's common shares on The Toronto Stock Exchange becomes
effective. If the Qualification Date has not occurred on or prior to August 2,
2001, each Special Warrant will be exercisable for 1.1 Units.
Cdn. $11,305,000 of the net subscription proceeds ("Escrowed Subscribers") is
held in escrow for the purpose of obtaining approval to list the Company's
common shares on The Toronto Stock Exchange ("TSE") and wasl not released to the
Company on the Closing Date. The remaining Cdn. $685,000 of the net subscription
proceeds ("Non-Escrowed Subscribers") was released to the Company on the Closing
Date. In the event a TSE listing of the Company's
common shares has not become effective by October 3, 2001 ("Listing Deadline"),
the Escrowed Subscribers shall be entitled, at their option (the "Repurchase
Option"), until the earlier of the exercise date and the date which is 30 days
following the Listing Deadline, to require the Company to repurchase their
Special Warrants at Cdn.$2.00 plus accrued interest.
The agents were paid a commission of Cdn. $910,000, representing 7% of the gross
proceeds, and were reimbursed Cdn. $100,000 in legal costs. In addition, the
agents received a special compensation option that entitles them to purchase
650,000 Units at Cdn.$2.00 per Unit at any time on or before April 3, 2003.
We currently anticipate that revenues will increase in the long-term as we
increase our sales and marketing activities and introduce new versions of our
software that are technologically feasible and of carrier class quality.
However, we also anticipate our operating expenses will increase in the
long-term as a result of the increase in sales and marketing activities,
research and development activities, as well as general and administrative
activities. To the extent that available funds from operations are insufficient
to fund our activities, we will need to raise additional funds through public
and private financing. Based on our current plans and projections, we believe
that we have the ability to raise additional funds through equity financings to
meet our current and future financial commitments until we achieve positive cash
flows from operations. Our liquidity over the next 12 months is contingent on
our ability to raise such additional funds, however, there are no assurances
that we will be successful in achieving theses objectives.
(c) 1995-2001 Cybernet Data Systems, Inc. All Rights Reserved
Received by Edgar Online Apr 11, 2001
CIK Code: 0001094816
Accession Number: 0000912057-01-508081 |
