Sorry for the wait, guys - but here is the summary including
questions - this will also be on the website under News
and Financial (Investor Forum)
Summary of Annual and Special Meeting of Shareholders March 24, 1999
Formal Business
The Company advised shareholders that the resolution to approve a proposed private placement of $2.3 million convertible debentures and warrants with a Canadian labour-sponsored fund would be withdrawn because of one new condition introduced by the Fund that was unacceptable to BCB. With 45.4% of the votes represented either by person or by proxy, all other motions were passed unanimously with one show of opposition to the following new resolution:
BCB requested shareholder approval for the issuance of 5,584,093 shares pursuant to the engagement of Allied Corporate Services, a limited market dealer, as agent in securing a larger financing than the $2.3 million issue declined. This is intended to be equity or quasi-equity, on terms that are better for shareholders than those represented in the financing BCB recently declined.
Informal Business:
The company presented the following comprehensive update:
Digital Voice Markets
BCB continues to excel in developing products and systems that capture voice using any number of input devices including the telephone, slide switch microphone or hand-held recorders and then record, digitize and store that voice while managing the movement of the voice files through any network including the Internet. An easy way to visualize this is to think of BCB as the FedEx of voice over an Internet or Internet Protocol medium. The advantage of moving from analog to digital in voice transmission is that, ultimately, voice can be moved as easily as data; the challenge, however, is that most digital voice companies have not understood that voice cannot be sent in large chunks. A packet-streaming approach is necessary, where a voice input is split up into small, manageable packets, sends them through to the receiver, and then ensures that the end result is that the series of packets are strung together into a coherent message. The key to this, aside from BCB's patented packet-streaming architecture which sends 2kbyte packets every 2 seconds, is compression. BCB's adoption of the TrueSpeech algorithm, which Microsoft has also adopted and embedded as the kernel within its Windows operating system, gives BCB a clear advantage over the industry standard ADPCM compression, allowing BCB to compress files to roughly one quarter the size of an ADPCM file.
As trends in PC usage continue to grow (estimated from the current 330 million PCs in use in the world today to over 2 billion), the importance of voice will continue to advance. The keyboard standard is becoming untenable, given the difficulty of adapting to smaller and smaller keypads - the only answer is to graduate to talking to your PC.
Systems Development
Our compression standard and our seamless integration to a customer's PC network is allowing us to become the preferred open architecture/ open systems digital voice solution for user groups like medical clinics and hospitals, small, medium or large law firms, law enforcement bodies, courtrooms and legislative assemblies.
We see ourselves as a company engaged in continuous development. One measure of a company's productivity and commitment is its R & D spending as a percentage of revenues. In the technology sector, commitments of 15 - 20% are common with solid growth companies. BCB's R & D spending has been 92% of sales in 1996, 86% in 1997 and 70% in 1998. The number will continue to decrease as sales grow, but the absolute dollar value of revenues will continue to increase. This degree of commitment will remain a priority.
Overall Strategy - Partnerships
Our shift to software gave us two large advantages: the ability to increase margins and decrease sales cycles and the ability to partner with organizations who bring substantially more marketing muscle to sell BCB products. These partnerships are already showing results - prior to our partnership with Data General, for example, we were effectively shut out of the large hospital marketplace. Data General has now introduced proposals worth up to $6.0 million for contracts in Canada alone. And in addition to the Canadian business, Data General intends to introduce BCB to a network of 300 hospitals in the US as part of a pilot marketing program. Our partnership with Unisys has allowed us to achieve the shortlist for the Ontario Integrated Justice project as well as another teaming arrangement for an integrated medical system in Manitoba. Unisys sees this as the beginning of a relationship to penetrate the legal, courtroom and government marketplace. CareFLOW/ Net has been a valuable partner for BCB in the healthcare marketplace and finally, Lernout & Hauspie continues to work closely with BCB's engineers on a speech recognition integration strategy to integrate continuous speech recognition with BCB's VoiceFLOW.
Shift to Software
We have made a monumental change in our hardware/ software mix, going from a mainly hardware company to a mainly software company. In the past, we manufactured and sold 36 hardware components; now we sell only four. At the end of April, we intend to introduce a Software-only Slide Switch Microphone and our aspiration is to become a software-only, hardware-independent company by the end of this fiscal year.
Financing Plans
As discussed, we have entered into agreement with Allied Corporate Services, a limited market dealer, to effect a significant amount of financing for us. We need this financing to execute our business model and to ensure that we have sufficient working capital to complete our pending projects, including the integration with speech recognition technology. We also want to maintain our high level of R & D spending and we need to broaden our sales effort beyond North American borders. This process has already begun with our partners in Belgium as well as distribution partners in countries like South Africa, England and Denmark.
Share Trading
Early in January, we engaged a New York securities law firm to initiate the process of filing a 20F form with the SEC. This registration will enable us to complete the application for an OTC Bulletin Board listing. The OTC Bulletin Board is a market maker exchange administered by the National Association of Securities Dealers, the same body that regulates the NASDAQ. The company expects to file the 20F during the first week of April. Once we've filed, the SEC has a rough 60-day window to approve the application and/ or request additional information.
Questions and Answers
How do you justify the dilution which would result from a further $5 million financing?
Ken Murton, CEO: I do not see an alternative other than a financing - we have a working capital deficiency and opportunity that's better than it's ever been. We need the capital and at our stage, equity financing is the only avenue open to us. As we grow and as we become cash flow positive, we'll become eligible for other mechanisms like straight debt financing, but that's a future stage for us.
Are your larger shareholders, Lernout & Hauspie and Flanders Language Valley, in support of this financing?
Ken Murton: Yes, they've given us their full support. Note that FLV has already increased its stake in BCB by participating in the last convertible debenture issue we placed in February and the one before that last December
.
You spoke about a goal of increasing revenues for this fiscal year by 100%. Is this your sales forecast?
Ken Murton: One of our goals this year has been to adopt a much more conservative and careful approach to forecasting. In keeping with this stance, we are delivering a cautious forecast with the intention of exceeding this forecast - and this forecast is to deliver over 100% revenue growth and to show momentum quarter over quarter. Our first quarter forecast was to achieve revenue of roughly $550,000 and we booked revenue of $569,000. Our second quarter should be an improvement on this number and the third quarter we believe will represent another improvement.
How does your technology relate to the speech recognition engine embedded in Bell Canada Directory Assistance automated service?
Bob Armstrong, Executive Vice President: Bell Canada has embedded a speech recognition engine in their Directory Assistance service that works by taking samples of individual voices and comparing their data points to a benchmark. The success of the engine depends on amassing huge volumes of samples so that the engine has exposure to all the different accents, inflections and pitches and can recognize words. Because of the volume of calls that go through directory assistance, Bell has a sample base of over 50 million inputs, enabling it to become fairly proficient at the words that are most commonly used. Comparing that to BCB and Lernout & Hauspie, our speech recognition partner, it's fair to say that Bell works well because of the size of the sample base. Most speech recognition applications wouldn't have that kind of volume and as a result, the technology is not yet up to par for the majority of professional applications in the legal and medical marketplace, marketplaces where BCB provides a very valuable service.
Could BCB provide their compression technology to Bell to store the voice inputs in a more efficient manner?
Bob Armstrong: In Bell's case, they don't actually store the voice inputs, they just keep data points for comparisons. This means they don't have a need for voice storage capacity.
Could you comment on your state of readiness for Y2K?
Bob Armstrong: We are completely Y2K compatible and have been since the start of the year. One advantage of dealing with software is that you don't have to work through the problems of renovating old, legacy hardware and embedded systems, etc. Our only potential problem is that we have some customers who may not be completely compliant as they maintain a dependency on old DOS-based systems which may need upgrades, but this represents a small fraction of our customer base.
The average shareholder may have difficulty understanding your applications because of their dependency on professional marketplaces. Will you ever have a consumer product?
Peter Vanderlee, President and Bob Armstong: Yes, we do see a natural consumer product being the evolution of voice e-mail. Sending voice e-mail should become as easy and natural as sending a typed e-mail and our DH-10 product is the start of this technology. Our partnership model is the ideal distribution mechanism for a consumer product as we would, in the case of voice e-mail, sell to an Internet Service Provider (ISP) who would then re-sell the technology to the ISP's subscriber base.
When is your share price going to go up?
Ken Murton: As management of BCB, we are not in a position to speculate on the price of the stock or to make representations of specific price targets. All we can do is explain our progress with the fundamentals of the Company and the relationship between improving fundamentals and improving shareholder value. In what we've presented, I think we make a strong case for fundamentals improving significantly as we continue to expand our sales partner infrastructure to generate more revenue with shorter sales cycles and at higher margins.
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