Add
IVOT.OB to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| IVOT.OB > SEC Filings for IVOT.OB > Form 10-Q on 6-Nov-2009 | All Recent SEC Filings |
6-Nov-2009
Quarterly Report
Forward Looking Statements
A number of the statements made by the Company in this report may be regarded as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include, among others, statements concerning the Company's outlook, pricing trends and forces within the industry, the completion dates of capital projects, expected sales growth, cost reduction strategies and their results, long-term goals of the Company and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.
All predictions as to future results contain a measure of uncertainty and accordingly, actual results could differ materially. Among the factors that could cause a difference are: changes in the general economy; changes in demand for the Company's products or in the cost and availability of its raw materials; the actions of its competitors; the success of our customers; technological change; changes in employee relations; government regulations; litigation, including its inherent uncertainty; difficulties in plant operations and materials; transportation, environmental matters; and other unforeseen circumstances. For a discussion of material risks and uncertainties that the Company faces. See the discussion in the Form 10-K for the fiscal year ended December 31, 2008 entitled "Risk Factors".
Results of Operations
Total revenues increased $18,935 (193.5%) and $38,805 (110.4%) for the three and nine months ended September 30, 2009 to $28,721 and $73,969, respectively, as compared to $9,786 and $35,164 for the same periods in the prior year. Maintenance services on IVR products declined 70.3% and 39.3% for the three and nine months ended September 30, 2009, respectively, as compared to the same periods in the prior year as a result of lower maintenance services, which has been a result of the reduction installations. The decreases in maintenance revenues were offset by new sales of our "green" products from B Green Innovations. There were no sales of "green" products in the prior year. The Company continues its efforts to market and sell its products through a distribution network. B Green has entered into distribution agreements with reputable distributors that have proven themselves within their territories and industry segments.
Gross profit increased $5,001 (51.1%) to $14,787 for the three months ended September 30, 2009 as compared to the same period in the prior year as a result of the increased volume for "Green" products. Maintenance services on IVR products yield a very high gross profit as a result of the limited costs needed to support these products as compared to the manufactured "Green" products. Gross profit for the nine months ended increased $4,332 (12.3%) to $39,496 as compared to the same period last year. Gross profit increased as a result of lower maintenance revenues offset by higher gross profits on the "green" products. B Green's gross profit on product sales was offset by purchases certain packaging materials that were charged directly to cost of sales.
Total operating expenses decreased $24,008 (15.7%) to $129,060 for the three months ended September 30, 2009 as compared to the three months ended September 30, 2008, primarily as a result of lower investor relations expenses partially offset by an increase in expenses associated with the operations of B Green Innovations, Inc. For the nine months ended September 30, 2009 total operating expenses decreased $19,998 (4.6%), lower investor relations expenses partially offset by an increase in expenses associated with the operations of B Green Innovations, Inc.
Total other expense was $275,341 for the three months ended September 30, 2009 as compared to an expense of $39,782 for the three months ended September 30, 2008, an increase of $235,559. This increase in other expense is primarily attributed to the loss on valuation of derivative. Total other expense was $916,416 for the nine months ended September 30, 2009 as compared to income of $238,449 for the nine months ended September 30, 2008, a decrease of $1,154,865. For the nine months ended September 30, 2008 the Company reported a gain on the valuation of derivative of $1,094,066, which was partially offset by amortization of debt discount of $624,051 as compared to a loss on valuation of derivative of $852,204 and amortization of debt discount of $40,741 for the nine months ended September 30, 2009.
Net loss for the quarter ended September 30, 2009 was $389,614 as compared to a loss of $183,064 for the quarter ended September 30, 2008. Net loss for the nine months ended September 30, 2009 was $1,296,296 as compared to a loss of $145,761 for the nine months ended September 30, 2008. The changes were the result of the factors discussed above.
As of September 30, 2009, iVoice Technology had one full-time and two part-time employees.
Liquidity and Capital Resources
To date, iVoice Technology has incurred substantial losses, and will require financing for working capital to meet its operating obligations. We anticipate that we will require financing on an ongoing basis for the foreseeable future.
On March 30, 2007, iVoice Technology, Inc. issued a Secured Convertible Debenture (the "Debenture") to YA Global Investments (f/k/a/ Cornell Capital Partners) for the sum of $700,000 in exchange for the previously issued note payable for the same amount (see Note 8 to the Financial Statements). On March 14, 2008, the Company and YA Global Investments agreed that the Company would redeem all amounts outstanding under the Debenture, except for the $186,557 of the outstanding interest remaining on the original notes payable that were originally exchanged for the Debenture. The amount redeemed was $691,021, consisting of the remaining balance of the Debenture of $572,815, accrued interest of $32,284, and a redemption premium of $85,922. The Debenture was amended to change the amount to $186,557 with a due date of March 14, 2009. The Debenture shall accrue interest at the rate of 15% per annum, and shall be convertible at a conversion price equal to 70% of the lowest closing bid price of the Company's common stock during the 30 trading days immediately proceeding the conversion date. No conversions can be made prior to November 1, 2008.
On November 21, 2008, the Company entered into an Amendment Agreement (the "Agreement") between the Company and YA Global Investments LP, f/k/a Cornell Capital Partners, LP. ("YA Global") which paid off in full the Secured Convertible Debenture dated March 30, 2007 (the "Debenture"). Under the terms of the Agreement, the Company paid the sum of One Hundred and Thirty-five Thousand Dollars ($135,000) in full payment of the Debenture with a remaining principal balance of $186,567, with accrued interest of $17,788. The security interest that YA Global held in the assets of the Company was terminated.
On August 5, 2005, iVoice Technology assumed an aggregate of $190,000 in liabilities from iVoice and iVoice assigned to iVoice Technology assets having an aggregate book value of $10,000. iVoice Technology believes that the fair value of these assets may be greater than the book value, although it has not undertaken an appraisal. The assumed obligations are described below.
iVoice Technology assumed from iVoice outstanding indebtedness in the amount of $190,000 payable to Jerry Mahoney. This amount is related to funds that had been loaned to iVoice in July 2000 that were used to develop the IVR software business. The amount of $190,000 includes approximately $32,110 for interest on the original loan from Jerry Mahoney to iVoice. Pursuant to the terms of the promissory note representing such obligation, iVoice Technology, for value received, will pay to Mr. Mahoney the principal sum of $190,000 that will bear interest at the prime rate plus 2% per annum on the unpaid balance until paid or until default. Interest payments will be due annually. All accrued interest becomes due on the date of any payment of the promissory note. At the time of default (if any) the interest rate shall increase to 20% until the principal balance has been paid. Under the terms of the promissory note, at the option of the note holder, principal and interest can be converted into either (i) one share of Class B Common Stock of iVoice Technology, par value $0.01, for each dollar owed, (ii) the number of shares of Class A Common Stock of iVoice Technology calculated by dividing (x) the sum of the principal and interest that the note holder has requested to have prepaid by (y) eighty percent (80%) of the lowest issue price of Class A Common Stock since the first advance of funds under this note, or (iii) payment of the principal of this note, before any repayment of interest. The Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company.
On September 22, 2005, iVoice Technology entered into a Standby Equity Distribution Agreement with YA Global Investments (f/k/a/ Cornell Capital Partners), pursuant to which iVoice Technology may, from time to time, issue and sell to YA Global Investments (f/k/a/ Cornell Capital Partners) our Class A Common Stock for a total purchase price of up to $10 million. As of September 30, 2008, the Company has sold in the aggregate 190,365,518 shares of Class A Common Stock to YA Global for net proceeds of $324,520, which are net of fees and discounts of $59,377, which was used to fund the operations of the Company. The Standby Equity Distribution Agreement expired on February 5, 2008.
On March 12, 2008, the Company sold 1,444.44 shares of Series A 10% Preferred Stock to iVoice, Inc. for net proceeds of $1,300,000. These funds were used to repay the Convertible Debenture and to fund operations and the new venture in B Green Technologies discussed above.
If the Company cannot find sources of additional financing to fund its working capital needs, the Company will be unable to obtain sufficient capital resources to operate our business. We cannot assure you that we will be able to access any financing in sufficient amounts or at all when needed. Our inability to obtain sufficient working capital funding will have an immediate material adverse effect upon our financial condition and our business.
The Company currently has no other significant sources of working capital or cash commitments. However, no assurance can be given that iVoice Technology will raise sufficient funds from such financing arrangements, or that iVoice Technology will ever produce sufficient revenues to sustain its operations, or that a market will develop for its common stock for which a significant amount of iVoice Technology's financing is dependent upon.
For the nine months ended September 30, 2009, the Company had a net decrease in cash of $207,041. The Company's principal sources and uses of funds were as follows:
Cash used by operating activities. The Company used $207,041 in cash for operating activities for the nine months ended September 30, 2009 as compared to $284,348 in the prior year. The decrease in cash used for operating activities is primarily attributed to the payment of accrued interest and the redemption fees associated with the paydown of the convertible debenture for the nine months ended September 30, 2008, which did not occur in 2009.
Net Cash used by investing activities. Net cash used in investing activities is attributed to increases in notes payable and other assets for the nine months ended September 30, 2008. There was no change in cash from investing activities for the nine months ended September 30, 2009.
Net Cash provided by financing activities. There were no proceeds from financing activities for the nine months ended September 30, 2009. The Company generated $816,368 from financing activities for the nine months ended September 30, 2008 primarily as a result of net proceeds from the sales of Series A Preferred Stock, partially offset by the payment of the convertible debenture in the amount of $572,815.
There was no significant impact on the Company's operations as a result of inflation for the nine months ended September 30, 2009.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to bad debts, inventory obsolescence, intangible assets, payroll tax obligations, and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
We have identified below the accounting policies, revenue recognition and software costs, related to what we believe are most critical to our business operations and are discussed throughout Management's Discussion and Analysis of Financial Condition or Plan of Operation where such policies affect our reported and expected financial results.
Revenue Recognition
With respect to the sale of software license fees, the Company recognizes revenue in accordance with FASB ASC 985-605, Software Revenue Recognition, and generally recognizes revenue when all of the following criteria are met: (1) persuasive evidence of an arrangement exists generally evidenced by a signed, written purchase order from the customer, (2) delivery of the software product on Compact Disk (CD) or other means to the customer has occurred, (3) the perpetual license fee is fixed or determinable and (4) collectability, which is assessed on a customer-by-customer basis, is probable.
With respect to customer support services, upon the completion of one year from the date of sale, the Company offers customers an optional annual software maintenance and support agreement for subsequent one-year periods. Sales of purchased maintenance and support agreements are recorded as deferred revenues and recognized over the respective terms of the agreements.
The Company derives its revenues from the licensing of its software product and optional customer support (maintenance) services. Presently, 100% of the revenues reported by the Company are derived from the licensing of the Company's IVR software. No revenues have been derived from the sale of optional customer support services. The Company's standard license agreement provides for a one-time fee for use of the Company's product in perpetuity for each computer or CPU in which the software will reside. The Company's software application is fully functional upon delivery and implementation and does not require any significant modification or alteration. The Company also offers customers an optional annual software maintenance and support agreement for the subsequent one-year periods. Such maintenance and support services are free for the first year the product is licensed. The software maintenance and support agreement provides free software updates, if any, and technical support the customer may need in deploying or changing the configuration of the software. Generally, the Company does not license its software in multiple element arrangements whereby the customer purchases a combination of software and maintenance. In a typical arrangement, software maintenance services are sold separately from the software product; are not considered essential to the functionality of the software and are purchased at the customer's option upon the completion of the first year licensed.
The Company does not offer any special payment terms or significant discount pricing. Normal and customary payment terms require payment for the software license fees when the product is shipped. Payment for software maintenance is due prior to the commencement of the maintenance period. It is also the Company's policy not to provide direct customers (as opposed to resellers and dealers) the right to refund any portion of its license fees. The Company accepts Visa and MasterCard as well as company checks.
Customers may license the Company's products through our telesales organization and through promotions or reseller agreements with independent third parties. iVoice Technology only permits returns from authorized dealers and resellers of unused inventory, subject to the consent of the Company and a twenty-five percent restocking fee. End users who purchaser products directly from iVoice Technology may not return such products to iVoice Technology under any circumstances. Accordingly, the Company records a provision for product returns and allowances against product revenue in the same period the revenue is recorded. The estimates are based on historical sales returns and other known data as well as market and economic conditions.
Our current products are not sold through retail distribution channels. Current reseller agreements provide for a limited contractual right of return and do not provide for future price concessions, minimum inventory commitments nor is payment contingent upon the reseller's future sales or our products. Revenues generated from products licensed through marketing channels where the right of return exists, explicitly or implicitly, is reduced by reserves for estimated product returns. Such reserves are estimates based on returns history and current economic and market trends.
Due to the nature of the business and one-time contracts, it is unlikely that one customer will impact revenues in future periods. All revenues for 2009 related to the Company's IVR operations were derived from annual maintenance and support agreements.
For B Green Innovations, Inc. revenues are recognized at the time of shipment to, or acceptance by customer, provided title and risk of loss is transferred to the customer. Provisions, when appropriate, are made where the right to return exists.
Software Costs
Software license costs are recorded at cost, which approximates fair market value as of the date of purchase. These costs represent the purchase of various exploitation rights to certain software, pre-developed codes and systems developed by a non-related third party. These costs are capitalized pursuant to FASB ASC 985-20, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed". The carrying value of software license costs are regularly reviewed by the Company and a loss would be recognized if the value of the estimated undiscounted cash flow benefit related to the asset falls below the unamortized cost. The Company develops software for licensing to its customers and capitalizes software development costs when technological feasibility has been established. Software development costs not qualifying for capitalization are expensed and classified as research and development expenses in the statements of operations. Research and development expenses and the capitalization rate will fluctuate from period to period depending upon the number and status of software development projects that are in process and the related number of people assigned to those projects.
Purchased software and capitalized software development costs are amortized using the greater of the revenue method or the straight-line method with useful lives ranging from three to five years. Amortization expense is classified in costs of revenue on the statements of operations. Our products operate on or with other third party software and operating systems. When determining the useful life of a product we consider factors such as the current state of the technology, operating systems on which our products run, competitive products and the potential use of our products by the end user. Technological advances in software operating systems and other software technologies on which our products rely may shorten the expected life cycle of our products. We make an assessment of the useful lives of our products at each balance sheet date. If that assessment determines that a shortened product life has occurred, we amortize the remaining unamortized balances over the new estimated useful life of the product and provide disclosure regarding a change in estimate in the notes to the financial statements pursuant to Accounting Principles Board Opinion No. 20 "Accounting Changes."
The Company evaluates the estimated net realizable value of each software product at each balance sheet date. The estimate is based on historical and forecasted net revenue for each product. Net revenue is the product revenue reduced by the estimated costs of revenue and, if in development, the estimated cost to complete the development of the product. When the net book value exceeds the estimate of net realizable value, the Company records a write-down to net realizable value on each product affected. Management's ability to achieve its revenue forecast is subject to judgment, competitive pressures, market and economic conditions and management's ability to successfully license its products to its customers. A change in one or more of these factors may influence management's estimates. Accordingly, currently estimated net realizable values are subject to being reduced resulting in corresponding charges for impairment in the future
Derivative Liabilities
The Company accounts for its embedded conversion features in its convertible
debentures in accordance with FASB ASC 815-10, "Accounting for Derivative
Instruments and Hedging Activities", which requires a periodic valuation of
their fair value and a corresponding recognition of liabilities associated with
such derivatives, and FASB ASC 815-40, "Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company's Own Stock. The
recognition of derivative liabilities related to the issuance of convertible
debt is applied first to the proceeds of such issuance as a debt discount, at
the date of issuance, and the excess of derivative liabilities over the proceeds
is recognized as "Loss on Valuation of Derivative" in other expense in the
accompanying financial statements. Any subsequent increase or decrease in the
fair value of the derivative liabilities is recognized as other expense or other
income, respectively. The financial statements for the period include the
recognition of the derivative liability on the underlying securities issuable
upon conversion of the Convertible Debentures with YA Global Investments
(f/k/a/Cornell Capital Partners)
|
|