UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2013

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 000-54535

 

 

 

VOICE ASSIST, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		26-1929199
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

15 Enterprise Dr, Suite 350, Aliso Viejo, CA		92656
(Address of principal executive offices)		(Zip Code)

 

(949) 655-1677

(Registrant’s telephone number, including area code)

 

Copies of Communications to:

Wilson Harvey Browndorf LLP

8815 Research Drive

Suite 200

Irvine, CA 92618

(949) 407-5013

Fax (949) 234-6254

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if a smaller reporting company)	Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

 

The number of shares of Common Stock, $0.001 par value, outstanding on November 14, 2013, was 45,059,277 shares.

 

 

 

TABLE OF CONTENTS

 

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Balance Sheets (Unaudited)		F-1
	Condensed Statements of Operations (Unaudited)		F-2
	Condensed Statements of Cash Flows (Unaudited)		F-3
	Notes to Condensed Financial Statements (Unaudited)		F-4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		3
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		7
Item 4.	Controls and Procedures		7
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		8
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		8
Item 3.	Defaults Upon Senior Securities		8
Item 4.	Mine Safety Disclosures		8
Item 5.	Other Information		8
Item 6.	Exhibits		9
	Signatures		10

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

VOICE ASSIST, INC.

CONDENSED BALANCE SHEETS

(Unaudited)

 

			9/30/2013				12/31/2012
ASSETS
CURRENT ASSETS
Cash		$	62,923			$	51,478
Accounts Receivable			28,000				80,325
Deferred Customer Activation Costs			-				1,500
Prepaid Expenses			23,095				65,688
Total Current Assets			114,018				198,991
Property & Equipment, Net			95,316				133,398
Software Development, Net			58,927				235,706
Other Assets			39,842				32,027
Total Assets		$	308,103			$	600,122
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts Payable		$	423,337			$	406,922
Accrued Expenses			414,574				307,560
Deferred Revenue			-				6,000
Deposits			10,045				20,000
Loans Payable			327,446				36,000
Convertible Loans Payable			434,845				-
Loans Payable - Related Party			192,000				192,000
Convertible Loans Payable - Related Party			13,000				-
Total Current Liabilities			1,815,247				968,482
Total Liabilities			1,815,247				968,482
STOCKHOLDERS’ DEFICIT
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 2,000,000 shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively			2,000				2,000
Common stock, $0.001 par value, 100,000,000 shares authorized, 44,993,277 and 41,839,500 shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively			44,993				41,839
Additional Paid in Capital			26,199,984				25,484,005
Shares to be Issued			-				100,000
Accumulated Deficit			(27,754,121	)			(25,996,204	)
Total Stockholders’ Deficit			(1,507,144	)			(368,360	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	308,103			$	600,122

 

The accompanying notes are an integral part of these condensed financial Statements.

 

 

VOICE ASSIST, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
OPERATING REVENUES
Total Revenues		$	45,234			$	160,877			$	186,589			$	423,500
OPERATING EXPENSES
Direct Cost of Services			57,851				80,039				261,085				230,061
Other Costs			-				2,102				768				3,877
Total Direct Cost of Services			57,851				82,141				261,853				233,938
Legal and Professional			97,999				159,899				319,255				663,256
Selling, General and Administrative			356,864				413,736				1,061,581				1,396,373
Selling, General and Administrative - Related Parties			-				7,333				-				37,171
Advertising and Marketing			8,406				-				23,006				-
Depreciation and Amortization			71,020				40,269				213,534				124,239
Total Operating Expenses			592,140				703,378				1,879,229				2,454,977
Net Loss from Operations			(546,906	)			(542,501	)			(1,692,640	)			(2,031,477	)
OTHER INCOME AND (EXPENSE)
Interest Expense			(46,609	)			(337	)			(64,242	)			(1,019	)
Other Income (Expense)			(1,328	)			312				(1,035	)			2,014
Total Other Income (Expense)			(47,937	)			(25	)			(65,277	)			995
Net Loss before Income Taxes			(594,843	)			(542,526	)			(1,757,917	)			(2,030,482	)
Income Tax Provision			-				-				-				-
NET LOSS		$	(594,843	)		$	(542,526	)		$	(1,757,917	)		$	(2,030,482	)
Weighted Average Shares Outstanding - Basic and Diluted			44,962,170				40,463,993				43,665,029				35,764,082
Net Loss Per Common Share – Basic and Diluted		$	(0.01	)		$	(0.01	)		$	(0.04	)		$	(0.06	)

 

The accompanying notes are an integral part of these condensed financial Statements.

 

 

VOICE ASSIST, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Nine Months Ended September 30,
		2013				2012
Cash Flows From Operating Activities
Net Loss		$	(1,757,917	)		$	(2,030,482	)
Adjustments to reconcile from Net Loss to net cash provided by (used in) operating activities:
Depreciation and Amortization			213,533				124,239
Shares Issued for Services			65,933				149,783
Stock-Based Compensation Expense			453,200				761,357
Write-Off of Fixed Assets			1,328				-
Changes in operating assets and liabilities
Accounts Receivable			52,325				(29,367	)
Deferred Customer Activation Costs			1,500				9,976
Prepaid Expense			42,593				86,948
Other Assets			(7,815	)			8,109
Accounts Payable			16,415				40,353
Customer Deposits			(9,955	)			-
Accrued Expenses			107,014				47,745
Deferred Customer Activation Fees			(6,000	)			(39,908	)
Net cash used in operating activities			(827,846	)			(871,247	)
Cash flows from investing activities
Acquisition and Development of Software Assets			-				(90,926	)
Purchase of Equipment			-				(12,372	)
Net cash used in investing activities			-				(103,298	)
Cash flows from financing activities
Proceeds from Loans Payable			327,446				-
Proceeds from Convertible Loans Payable			398,845				-
Proceeds from Convertible Loans Payable, Related Party			13,000				102,000
Repayment of Loans Payable			-				(10,800	)
Proceeds from Issuance of Common Stock			100,000				882,926
Net cash provided by financing activities			839,291				974,126
Net Increase/(Decrease) in Cash			11,445				(419	)
Cash, Beginning of Period			51,478				5,853
Cash, End of Period		$	62,923			$	5,434
Supplemental Information:
Cash paid for:
Taxes		$	-			$	-
Interest Expense		$	-			$	1,019
Non-cash Financing Activities:
Payment of accounts payable through issuance of common stock		$	65,933			$	2,414,163

 

The accompanying notes are an integral part of these condensed financial Statements.

 

 

VOICE ASSIST, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

Voice Assist, Inc. (the “Company”) was formed as a Nevada corporation on February 4, 2008 as Musician’s Exchange. On September 29, 2010, the Company changed its name from Musician’s Exchange to Voice Assist, Inc. Effective September 30, 2010, the Company completed the acquisition of substantially all of the assets of SpeechPhone LLC, MDM Intellectual Property LLC, SpeechCard LLC, SpeechCall, LLC, SpeechPhone Direct, LLC and Voice Assist LLC, (the “Acquisitions”).

 

For accounting purposes, the acquisition of substantially all of the assets and certain liabilities of Speechphone by the Company has been recorded as a reverse acquisition of a public company and recapitalization of Speechphone based on the factors demonstrating that Speechphone represents the accounting acquirer. The historic financial statements of Speechphone and related entities, while historically presented as an LLC equity structure, have been retroactively presented as a corporation for comparability purposes. The Company changed its business direction and is now a voice recognition technology company focused on enabling access to any information through any device using speech technology.

 

Voice Assist operates a cloud-based speech recognition platform that supports speech recognition based enterprise services such as Customer Relationship Management (CRM), field force automation, as well as direct-to-enterprise services such as virtual assistants that unify communications and direct-to-consumer “safe driving” services that allow SMS, email, and social media messaging through a single personal phone number. The technology empowers mobile staff members and especially drivers to use speech commands to access data and send email or text messages by voice instead of typing.

 

Basis of presentation

 

The condensed interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

 

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these condensed interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2012 and notes thereto included in the Company’s 10-K filed on April 16, 2013. The Company follows the same accounting policies in the preparation of interim reports.

 

Results of operations for the interim periods are not indicative of annual results.

 

 

VOICE ASSIST, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Generally, matters subject to estimation and judgment include amounts related to asset impairments, useful lives of fixed assets and capitalization of costs for software developed for internal use. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

The Company considers highly liquid investments with insignificant interest rate risk and original maturities of three months or less to be cash equivalents. Cash equivalents consist primarily of interest-bearing bank accounts and money market funds. The Company’s cash positions represent cash on deposit in checking accounts. These assets are generally available on a daily basis and are highly liquid in nature.

 

Revenue Recognition

 

For recognizing revenue, the Company applies the provisions of the Revenue Recognition Topic of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Revenues are generated from telephony services including activation fees, hardware fees and monthly usage fees. In most cases, the services performed do not require significant production, modification or customization of the Company’s software or services; therefore, revenues for the hardware fees and monthly usage fees are recognized when evidence of a completed transaction exists, when services have been rendered. The Company recognized revenue from sales of $186,589 and $423,500 during the nine months ended September 30, 2013 and 2012, respectively.

 

The activation fees generated from new accounts are recorded as deferred revenue and are amortized over the estimated average customer relationship period. The net unamortized activation fees were $0 and $6,000 at September 30, 2013 and December 31, 2012, respectively. The costs associated with these activation fees are recorded as deferred costs and are similarly amortized over the estimated average customer relationship period. The net unamortized costs are $0 and $1,500 at September 30, 2013 and December 31, 2012, respectively.

 

Software Development Costs

 

The Company has adopted the provisions of FASB ASC 350-40 in order to account for its software developed for internal use since the Company is dependent on the internal use automated speech recognition software to provide the enhanced services. Software development costs are capitalized for certain costs incurred during the application development stage and for upgrades and enhancements. Amortization is computed on an individual project basis using the straight-line method over the estimated economic life of the projected product, generally three to five years.

 

As of September 30, 2013, software development costs not yet amortized are $58,927. During the nine months ended September 30, 2013 and 2012, amortization was $176,779 and $82,141, respectively. During the nine months ended September 30, 2013, management determined that it was appropriate to reduce the estimated useful lives of the software development costs and thereby the remaining amortization period to one year.

 

 

VOICE ASSIST, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Impairment

 

FASB ASC 360-10-35-21 requires that long-lived assets to be held and used be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We regularly evaluate whether events or circumstances have occurred that indicate the carrying value of our long-lived assets may not be recoverable. If factors indicate the asset may not be recoverable, we compare the related undiscounted future net cash flows to the carrying value of the asset to determine if impairment exists. If the expected future net cash flows are less than the carrying value, an impairment charge is recognized based on the fair value of the asset. No impairments were indicated or recorded during the three and nine months ended September 30, 2013 and 2012.

 

Income Taxes

 

The Company accounts for income taxes under FASB ASC 740-10-30. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is “more likely than not” that some component or all of the benefits of deferred tax assets will not be realized.

 

Stock-based Payments

 

The Company records the stock-based compensation awards issued to non-employees and other external entities for goods and services at either the fair market value of the goods received or services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in FASB ASC 505-50-30.

 

Recent Pronouncements

 

From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.

 

 

VOICE ASSIST, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – GOING CONCERN

 

The financial statements have been presented on a going concern basis, which contemplates, but does not include adjustments for the realization of assets and satisfaction of liabilities in the normal course of business. The Company has a limited operating history and limited funds. As shown in the financial statements, the Company incurred a net loss of $1,757,917 and cash used by operations of $827,846 for the nine months ended September 30, 2013, and had a working capital deficit of $1,701,229 as of September 30, 2013. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company believes that it is appropriate for the financial statements to be prepared on a going concern basis. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from the outcome of this uncertainty.

 

The Company is dependent upon debt and equity financing to continue operations. It is management’s plans to raise necessary funds via private placements of its common stock to satisfy the capital requirements of the Company’s business plan. There is no assurance that the Company will be able to obtain the necessary funds through continuing debt and equity financing to have sufficient operating capital to support a level of operations to obtain a level of cash flow to sustain continuing operations. If the Company is successful in raising the necessary funds, there is no assurance that the Company will successfully implement its business plan. The Company’s continuation as a going concern is dependent on the Company’s ability to raise additional funds through a private placement of its common stock or debt sufficient to meet its obligations on a timely basis and ultimately to attain profitable operations.

 

NOTE 3 – LOANS PAYABLE AND CONVERTIBLE LOANS PAYABLE

 

The Company received cash advances totaling $327,446 during the three months ended September 30, 2013. These advances were consolidated into various notes, which are due upon demand after six months and carry 5% interest. The Company also received convertible cash advances totaling $83,000 during the three months ended September 30, 2013. These advances are recorded in a note, which is due upon demand after 90 days, carry 10% interest per ninety (90) day period, and are convertible to common stock at $0.09 per share.  The Loan is secured by 150% of the value in common stock.

 

The convertible note added during the three months ended September 30, 2013 is in addition to the $351,845 in convertible loans already held by the Company. These convertible loans are due upon demand, carry 10% interest per ninety day (90) day period, and are convertible into common stock at $0.09 per share.

 

NOTE 4 – LOANS PAYABLE – RELATED PARTY AND CONVERTIBLE LOANS PAYABLE – RELATED PARTY

 

The Company entered into related party loans payable totaling $192,000. These loans payable are due upon demand, unsecured, and carry zero percent (0%) interest. The Company also entered into a convertible related party loan payable totaling $13,000. This loan is due upon demand after ninety days, convertible to common stock at eight cents ($0.08) per share, and carries ten percent (10%) interest per ninety (90) day period. The loan is secured by 150% of the value in common stock.

 

 

VOICE ASSIST, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 5 – LEASE COMMITMENT AND CONTINGENCIES

 

Lease Commitment

 

The Company leased new commercial office space during the three months ended September 30, 2013. The office space comprises approximately 6,252 square feet located at 15 Enterprise, Suite 350, Aliso Viejo, CA 92656. The lease was signed on September 27, 2013 and will expire on September 23, 2014 with a monthly cost of $7,815. The rental expense was $29,757 and $27,052 for the three months ended September 30, 2013 and 2012 and $83,860 and $79,516 for the nine months ended September 30, 2013 and 2012, respectively.

 

Contingent Liability

 

The Company has disputed invoices with a vendor over charges on invoices received in the fourth quarter of 2012 and the first and second quarters of 2013. The amount of the dispute is $442,635. The Company believes the liability is limited to the $20,000 credit limit with the vendor. The Company, through its counsel, issued a ‘notice of invoice dispute’ concerning the amounts in question together with payment of $15,000 for undisputed charges.

 

As of the date of this filing, the vendor has not responded to the Company’s notices of invoice dispute. The Company does not consider an unfavorable outcome probable. The liability, however, would be limited to $442,635, the disputed amount.

 

NOTE 6 – STOCK-BASED COMPENSATION

 

The Company has reserved for issuance an aggregate of 10,000,000 shares of common stock under our 2011 Stock Incentive Plan (“the Plan”) that was adopted in June 2011. As of September 30, 2013, 8,307,625 options have been granted under the Plan, 6,361,325 options have been cancelled, 292,475 have been exercised, and 1,653,825 options were outstanding. There were no options granted during the nine months ended September 30, 2013.

 

The purposes of the Plan are (a) to enhance the Company’s ability to attract and retain the services of qualified employees, officers, directors, contractors and other service providers upon whose judgment, initiative and efforts the successful conduct and development of the Company’s business largely depends, and (b) to provide additional incentives to such persons or entities to devote their utmost effort and skill to the advancement and betterment of the Company by providing them an opportunity to participate in the ownership of the Company and thereby have an interest in the success and increased value of the Company.

 

 

VOICE ASSIST, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 7 – PREFERRED AND COMMON STOCK

 

Preferred Stock

 

The Company is authorized to issue 10,000,000 shares of its $0.001 par value preferred stock.

 

On October 4, 2010, the Company’s board of directors authorized Series A Convertible Preferred Stock. The Series A Convertible Preferred stock has a liquidation preference of $1.25 per share and is not entitled to dividends. The Series A Convertible Preferred stock may be converted on a 1:1 basis into shares of common stock at any time at the option of the holder, subject to adjustments for stock dividends, combinations or splits. The Series A Convertible Preferred stock has protective provisions. As long as any Series A Convertible Preferred are outstanding, this Corporation shall not without first obtaining approval of the holders of at least two-thirds of the outstanding Series A Convertible Preferred which is entitled, other than solely by law, to vote with respect to the matter, and which Series Preferred represents at least two-thirds of the voting power of the then outstanding Series A Convertible Preferred: (a) sell, convey or otherwise dispose of or encumber all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Corporation is disposed of; (b) alter or change the rights, preferences or privileges of the Series A Convertible Preferred so as to affect adversely the Series A Convertible Preferred; (c) increase or decrease (other than by redemption or conversion) the total number of authorized shares of preferred stock; (d) authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security (i) having a preference over, or being on a parity with, the Series A Convertible Preferred with respect to dividends or upon liquidation, or (ii) having rights similar to any of the rights of the Preferred Stock; or amend the Corporation’s Articles of Incorporation or bylaws.

 

On September 30, 2010, the Company issued 2,000,000 shares of Series A Convertible Preferred stock in exchange for extinguishment of $1,700,000 in debt.

 

As of September 30, 2013, there have been no other issuances of preferred stock.

 

Common Stock

 

The Company is authorized to issue 100,000,000 shares of its $0.001 par value common stock.

 

On March 15, 2012, the Company filed an S-8 statement for 3,000,000 shares (“S-8 Shares”) of already authorized common stock to be registered for sale to attorneys, consultants and employees pursuant to the 2012 Non-Qualified Consultant Stock Compensation Plan.

 

During the nine months ended September 30, 2013, the Company issued the following shares of $0.001 par value common stock:

 

	●	365,777 S-8 Shares of common stock for services in the amount of $40,000.
	●	209,000 144 Shares of common stock for services in the amount of $19,580.
	●	2,500,000 shares of common stock in a private sale for cash received of $200,000. The company received $100,000 in December 2012 with the other $100,000 received in January 2013.
	●	90,000 144 Shares of common stock to the three board members per their agreements for services during the three months ended March 31, 2013 and June 30, 2013 in the amount of $7,200.

 

During the nine months ended September 30, 2013, the Company cancelled 11,000 shares issued into the incorrect name in the amount of $880. The shares were already re-issued previously into the correct name.

 

 

VOICE ASSIST, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 8 – SUBSEQUENT EVENTS

 

Subsequent to September 30, 2013 and prior to this filing, the Company issued 66,000 shares of common stock for accounts payable in the amount of $5,280.

 

On November 19, 2013, the Company executed an unsecured revolving loan agreement, together with an accompanying revolving promissory note, which permits the Company to draw down up to $1,000,000, with each such drawdown (the “Drawdown Amount”) subject to an interest rate of five percent (5%) per six (6) month period from the time the drawdown occurs, on or after which, the Drawdown Amount, together with such interest accrued thereon, shall be due and payable upon demand. As of the date of this filing, $465,446 has been drawn on the loan.

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this quarterly report. References in the following discussion and throughout this quarterly report to “we”, “our”, “us”, “Voice Assist”, “the Company”, and similar terms refer to Voice Assist, Inc. unless otherwise expressly stated or the context otherwise requires. This discussion contains forward-looking statements that involve risks and uncertainties. Voice Assists’ actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this filing.

 

OVERVIEW

 

Voice Assist is a hosted speech services provider offering cloud based speech recognition technology designed to voice enable mobile applications and cloud based services. Voice Assist provides hands-free safe driving applications such as voice dialing, email by voice, text by voice and posting to social networks by voice. Voice Assist also works with 3rd party developers to voice enable mobile applications and cloud based services. Voice Assist sells direct to the public via our website at www.voiceassist.com and also through the app stores on Google Play and Apple iTunes for iPhone and also licenses technology or revenue shares and provides hosted services to enterprises, 3rd party developers, wireless and wireline service providers and value added resellers.

 

We believe that the presence of voice technology as an interface in mobile communications has real advantages in a mobile world. Voice interface technology makes portable communications more effective and safer to use. Our development efforts are currently focused on the mobile workforce and building vertical enterprise applications to, among other things, maximize employee productivity and safety while driving. Voice Assist is also focused on building tools to empower third party developers to add voice features into existing applications and/or use voice to access cloud based applications or databases.

 

Our strategy is to be a leader in cloud based speech recognition services. We want to leverage our infrastructure, technology, speech server farms, simple APIs and setup process, and expertise to provide a super easy, fast and cost effective means for developers to integrate to and deploy speech recognition technology without requiring a deep knowledge of speech application development or optimization.

 

Voice Assist and developers will build simple to use services with wide market appeal and augment this effort with vertical applications designed for specific purposes such as CRM, Healthcare, Insurance and other vertical markets. Voice Assist will monetize its Hosted Speech Platform (HSP) on a usage model or through its own services offerings built upon the HSP.

 

We intend to aggressively market our “safe driving” application and mobile apps and continue to form strategic alliances with value added resellers and carriers. We believe the combination of these activities will result in increased revenue over time. No assurances can be made, however.

 

We currently earn our revenues from enterprises and consumers who pay us a monthly recurring fee to use our services. We also generate revenue by hosting speech applications and providing enhanced communication services to resellers and other service providers. When the development portal is complete, we also expect to generate revenue on a pay per use basis and/or also based on revenue sharing with 3rd party application developers. Completion of the development portal is subject to available capital.

 

We are developing other strategies to bundle software and service with hardware including, but not limited to, Bluetooth speakerphones, Bluetooth headsets and other Bluetooth devices that would benefit from a hands-free voice interface. We are also working with multi-level marketing companies and other direct sales organizations that want to private label our services.

 

We previously secured a celebrity endorsement from Frankie Avalon, the first American Teen Idol, and are currently negotiating with additional celebrities to endorse and/or promote the product or service. We hope to secure additional celebrity personalities and are contemplating that future versions may include voice prompts and/or personalities to be incorporated into the software.

 

The Company continues to innovate and build new products and services which we expect to launch in the near future, subject to sufficient capital resources. Some of these include recent additional patents applications and/or patents obtained for two-way texting for hosted applications and voice to CRM. Two-way texting by voice for hosted applications may impact cloud based service providers such as Skype, Twitter, Facebook, Apple, Google & Microsoft. No assurance can be given but the issued patent may create additional value by forcing these companies to pay us a license fee if they want their cloud based services to include two-way texting by voice. Voice to CRM may become a valuable asset over time since the mobile Salesforce is growing and salespeople who drive cannot use their mobile phone because of hands-free driving laws.

 

 

Results of Operations

 

Comparison of the Three and Nine Months Ended September 30, 2013 and September 30, 2012

 

Revenues. Our revenues decreased by $115,643 to $45,234 for the three months and $236,911 to $186,589 for the nine months ended September 30, 2013 from $160,877 and $423,500 for the same periods in 2012, respectively, representing a 72% decrease quarter-over-quarter -and a 56% decrease year-over-year. The decrease is mostly due to the loss of our primary reseller who no longer markets or sells telecom products or services.

 

Total Cost of Services. Our total cost of services decreased by $24,290, or 30%, to $57,851 for the three months and increased by $27,915, or 12%, to $261,853 for the nine months ended September 30, 2013 from $80,039 and $233,938 for the same periods in 2012, respectively. The three month decrease is due to the decrease in the revenue for the same periods, and consequently, the cost for those services. The nine month increase in our total cost of services is mostly a result of increased rates and an increase in free trial accounts resulting from the distribution of our free mobile applications.

 

Legal and Professional. Our legal and professional expenses decreased by $61,900, or 39%, to $97,999 for the three months and $344,001, or 52%, to $319,255 for the nine months ended September 30, 2013 from $159,899 and $663,256 for the same periods in 2012, respectively. The decrease in legal and professional fees was mostly the result of a decrease in the use of legal and professional services from a reduction in business.

 

Selling, General and Administrative. Our selling, general and administrative expenses decreased by $56,872, or 14%, to $356,864 for the three months and $334,792, or 24%, to $1,061,581 for the nine months ended September 30, 2013 from $413,736 and $1,396,373 for the same periods in 2012, respectively. The decrease was largely due to reductions in non-cash stock option compensation expense and other non-cash expense as well as decreased payroll and travel related expenses as the Company reduced its executive staff.

 

Selling, General and Administrative – Related Parties. Our selling, general and administrative – related parties’ expenses decreased by $7,333, or 100%, to $0 for the three months and $37,171, or 100%, to $0 for the nine months ended September 30, 2013 from $7,333 and $37,171 for the same periods in 2012, respectively. The decrease was the result of elimination in related party professional staffing.

 

Depreciation and Amortization. Our depreciation and amortization expenses increased by $30,751, or 76%, to $71,020 for the three months and $89,295, or 72%, to $213,534 for the nine months ended September 30, 2013 from $40,269 and $124,239 for the same periods in 2012, respectively. The increase was the result of acceleration in the amortization period of software development costs.

 

Net Loss from Operations. We had $546,906 and $1,692,640 in net loss from operations for the three and nine months ended September 30, 2013, respectively, as compared to net loss from operations of $542,501 and $2,031,477 during the same periods in 2012, respectively. The increased losses for the three month period are a result of a negative gross profit and the acceleration of amortization expense. The decreased loss for the nine month period was mostly from the result of a reduction in non-cash stock option compensation expense and a decrease in professional staffing.

 

Interest Expense. Our interest expense increased by $46,272 to $46,609 for the three months and increased by $63,223 to $64,242 for the nine months ended September 30, 2013 from $337 and $1,019 in the same periods in 2012, respectively. The increase was the result of promissory notes issued during the last two quarters that bear interest at 10% per ninety days and 5% per six months.

 

Other Income/Expense. The total change in other income/expense was $1,640, which created a other expense of $1,328 for the three months and $3,049, which created a other expense of $1,035 for the nine months ended September 30, 2013 from other income of $312 and $2,014 in the same periods in 2012, respectively. The change resulting in other expense was the result of a write-off of $1,328 for disposal of fixed assets and a reduction of subleasing unused office space.

 

Net Loss. For the three and nine months ended September 30, 2013, we generated a net loss of $594,843, of which non-cash expenses include $71,020 for depreciation and amortization and $151,067 for stock compensation, and $1,757,917, of which non-cash expenses include $213,534 in depreciation and amortization and $453,200 for stock compensation, an increase of $52,317, or 10%, and a decrease of $272,565, or 13%, respectively, from a net loss of $542,526 and $2,030,482 for the same periods in 2012, respectively.

 

The increase is mostly due to the recognition of interest expense from recent interest-bearing promissory notes. The decrease was primarily attributable to a reduction in non-cash stock option compensation expense and the decrease in executive staffing.

 

 

Liquidity and Capital Resources

 

The following table summarizes total current assets, total current liabilities and working capital (deficit) at September 30, 2013 compared to December 31, 2012.

 

										Increase / (Decrease)
		September 30, 2013				December 31, 2012				$				%
Current Assets		$	114,018			$	198,991			$	(84,973	)			43	%
Current Liabilities		$	1,815,247			$	968,482			$	846,765				87	%
Working Capital (deficit)		$	(1,701,229	)		$	(769,491	)		$	(931,738	)			121	%

 

Liquidity is a measure of a company’s ability to meet potential cash requirements. We have historically met our capital requirements through the issuance of stock and by borrowings. In the future, we anticipate we will be able to provide the necessary liquidity needed from the revenues generated from operations but there is no assurance that this will happen.

 

Since inception, we have financed our cash flow requirements through issuance of common stock, notes payable, and related party notes payable. As we endeavor to expand our activities, we may, and most likely will, continue to experience net negative cash flows from operations, pending additional revenues. Additionally, we anticipate obtaining additional financing to fund operations through common stock offerings to the extent available or to obtain additional financing to the extent necessary to augment our working capital. In the future, we need to generate sufficient revenues from product and software sales in order to eliminate or reduce the need to sell additional stock or obtain additional loans. There can be no assurance we will be successful in raising the necessary funds to execute our business plan.

 

During the nine months ended September 30, 2013, the current assets decreased by $84,973 when compared to December 31, 2012 current assets of $198,991. The decrease can be attributed to a reduction in accounts receivable and prepaid expenses.

 

During the nine months ended September 30, 2013, the current liabilities increased by $846,765 when compared to December 31, 2012 current liabilities of $968,482. The increase can be attributed to increases in accounts payable, accrued expenses and loans payable.

 

We anticipate that we may incur operating losses during the next twelve months. The Company’s minimal operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets. Such risks include, but are not limited to, an evolving and unpredictable business model and the management of growth. These factors raise substantial doubt about our ability to continue as a going concern. To address these risks, we must, among other things, increase our customer base, implement and successfully execute our business and marketing strategy, continually develop and upgrade our website and speech technology, respond to competitive developments, and attract, retain and motivate qualified personnel. We also have to raise sufficient capital to create public awareness and demand for our cloud based services. We need sufficient capital to market, promote and sell our services. We need to become more efficient and effective at converting free trial accounts into paid subscriptions. We need to form additional alliances with wireless carriers, VOIP providers and mobile app providers.

 

There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.

 

 

Going Concern

 

The financial statements included in this filing have been prepared in conformity with generally accepted accounting principles that contemplate the continuance of Voice Assist as a going concern. Voice Assist may not have a sufficient amount of cash required to pay all of the costs associated with operating and marketing of its services. Management intends to use revenues, debt raises and sales of our common stock to mitigate the effects of cash flow deficits; however no assurance can be given that debt or equity financing, if and when required, will be available. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should Voice Assist be unable to continue existence.

 

Significant changes in the number of employees.

 

We currently have 15 full time and/or part-time employees and independent contractors. We do not anticipate a significant change in the number of employees over the next twelve months.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Critical Accounting Policies and Estimates

 

The preparation of our condensed financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions.

 

Revenue Recognition

 

For recognizing revenue, the Company applies the provisions of the Revenue Recognition Topic of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Revenues are generated from telephony services including activation fees, hardware fees and monthly usage fees. In most cases, the services performed do not require significant production, modification or customization of the Company’s software or services; therefore, revenues for the hardware fees and monthly usage fees are recognized when evidence of a completed transaction exists, generally when services have been rendered.

 

The activation fees generated from new accounts are recorded as deferred revenue and are amortized over the estimated average customer relationship period. The net unamortized activation fees were $0 at the three months ended September 30, 2013. The costs associated with these activation fees are recorded as deferred costs and are similarly amortized over the estimated average customer relationship period. The net unamortized costs are $0 at the nine months ended September 30, 2013. For both the activation fees and costs associated therewith, the estimated average customer relationship period was 24 months for the nine months ended September 30, 2013.

 

Stock-Based Compensation

 

The Company accounts for stock-based awards to employees in accordance with Financial Accounting Standards Board’s Accounting Standard Codification (ASC) 718 “Stock Compensation.” Options granted to consultants, independent representatives and other non-employees are accounted for using the fair value method as prescribed by ASC 505.

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

This item is not applicable as we are currently considered a smaller reporting company.

 

Item 4. Controls and Procedures.

 

Our Chief Executive Officer and interim Chief Financial Officer evaluated the effectiveness of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on that evaluation, it was concluded that our disclosure controls and procedures are not effective in timely alerting to material information relating to us required to be included in our periodic SEC filings and in ensuring that information required to be disclosed by us in the reports filed or submitted under the Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.

 

Management’s Quarterly Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control, as is defined in the Securities Exchange Act of 1934. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls including the possibility of human error and overriding of controls. Consequently, an ineffective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.

 

Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that, in reasonable detail, accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and that the receipts and expenditures of company assets are made and in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

 

Management has undertaken an assessment of the effectiveness of our internal control over financial reporting based on the framework and criteria established in the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based upon this evaluation, and as a result in the recent change in management, management concluded that our internal control over financial reporting was ineffective as of September 30, 2013.

 

This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this quarterly report.

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We are not a party to any material legal proceedings.

 

Item 1A. Risk Factors.

 

The risk factors listed in our 2012 Form 10-K on pages 12 to 22, filed with the Securities Exchange Commission on April 16, 2013, are hereby incorporated by reference.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

During the nine months ended September 30, 2013, the Company issued 664,777 shares of common stock for services or payables in the amount of $66,780. The Company also issued 2,500,000 shares in a private sale for $200,000 as discussed in Note 7.

 

Subsequent Events

 

The events reflected on Form 8-k filed on October 10, 2013 and November 19, 2013 are hereby incorporated by reference.

 

Issuer Purchases of Equity Securities

 

We did not repurchase any of our equity securities during the quarter covered by this report.

 

Item 3. Defaults Upon Senior Securities

 

There have been no material defaults under this Item.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

Nothing to report.

 

 

Item 6. Exhibits.

 

Exhibit No.		Description
31.1*		Certification of Chief Executive Officer and Interim Chief Financial Officer
32.1*		Certification of Chief Executive Officer and Interim Chief Financial Officer
101.INS**		XBRL Instance Document
101.SCH**		XBRL Taxonomy Extension Schema
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase
101.DEF**		XBRL Taxonomy Extension Definition Linkbase
101.LAB**		XBRL Taxonomy Extension Label Linkbase
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase

 

*		Filed Herewith
**		XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

VOICE ASSIST, INC.
By:	/s/ Michael Metcalf
	Michael Metcalf, Chief Executive Officer and Interim Chief Financial Officer
Date:	November 19, 2013