SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
MARK ONE
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 2002
or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____ to ______
COMMISSION FILE NUMBER 0-22055
TTR TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 11-3223672
(State or other Jurisdiction of I.R.S. Employer
Incorporation or Organization) Identification Number
575 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(Address of Principal Executive Offices) (Zip Code)
212-527-7599
(Registrant's Telephone Number, Including Area Code)
--------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant: (1) filed all reports
required to be filed by Section 13 or 15(d) of the 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 is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The number of shares outstanding of the registrant's Common Stock as of
November 14, 2002, is 18,261,567 shares.
TTR INC. AND ITS SUBSIDIARY
(A Development Stage Company)
Index
PART I - FINANCIAL INFORMATION:
Forward Looking Statements (ii)
Item 1. Financial Statements *
Consolidated Balance Sheets
September 30, 2002 and December 31, 2001 1
Consolidated Statements of Operations
For the nine and three months ended September 30, 2002 and 2001 2
Consolidated Statements of Comprehensive Loss
For the nine and three months ended September 30, 2002 and 2001 3
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2002 and 2001 4
Notes to the Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
Item 4. Disclosure Controls and Procedures 12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 16
Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 17
*The Balance Sheet at December 31, 2001 has been taken from the audited
financial statements at that date. All other financial statements are unaudited.
-(i)-
FORWARD LOOKING STATEMENTS
CERTAIN STATEMENTS MADE IN THIS QUARTERLY REPORT ON FORM 10-Q ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY
TERMINOLOGY SUCH AS "MAY", "WILL", "SHOULD", "EXPECTS", "INTENDS",
"ANTICIPATES", "BELIEVES", "ESTIMATES", "PREDICTS", OR "CONTINUE" OR THE
NEGATIVE OF THESE TERMS OR OTHER COMPARABLE TERMINOLOGY AND INCLUDE, WITHOUT
LIMITATION, STATEMENTS BELOW REGARDING: THE COMPANY'S JOINT VENTURE WITH
MACROVISION; THE COMPANY'S EXPECTATIONS AS TO SOURCES OF REVENUES; THE COMPANY'S
INTENDED BUSINESS PLANS; EXPECTATIONS AS TO PRODUCT PERFORMANCE; THE COMPANY'S
INTENTIONS TO ACQUIRE OR DEVELOP OTHER TECHNOLOGIES; THE PROSPECTS FOR COMSIGN;
THE COMPANY'S COST RESTRUCTURING PLANS; THE PROPOSED ASSET SALE; THE COMPANY'S
PLANS FOLLOWING THE ASSET SALE; WIND-DOWN OF TTR LTD.; LEGAL PROCEEDING; THE
REVERSE SPLIT; THE COMPANY'S ANTICIPATED DELISTING FROM THE NASDAQ NATIONAL
MARKET AND PLANS TO EXAMINE LISTING OPTIONS ON THE NASDAQ SMALLCAP MARKET OR
ANOTHER RECOGNIZED MARKET OR EXCHANGE; AND BELIEF AS TO THE SUFFICIENCY OF ITS
CASH RESERVES. BECAUSE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES, THERE ARE IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING
STATEMENTS. THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO, THE COMPETITIVE
ENVIRONMENT GENERALLY AND IN THE COMPANY'S SPECIFIC MARKET AREAS; RAPID
TECHNOLOGICAL CHANGES; CHANGES IN TECHNOLOGY; FAILURE OF THE COMPANY'S
TECHNOLOGY TO WORK; LACK OF MARKET ACCEPTANCE FOR SAFEAUDIO; INABILITY OF
MACROVISION TO SUCCESSFULLY MARKET SAFEAUDIO; PERFORMANCE OF COMSIGN; THE
AVAILABILITY OF AND THE TERMS OF FINANCING; THE INABILITY TO SUCCESSFULLY REDUCE
COSTS; THE FAILURE TO REACH A SATISFACTORY ACCOMODATION, ARRANGEMENT OR
SETTLEMENT WITH MACROVISION; INFLATION, CHANGES IN COSTS AND AVAILABILITY OF
GOODS AND SERVICES, ECONOMIC CONDITIONS IN GENERAL AND IN THE COMPANY'S SPECIFIC
MARKET AREAS; DEMOGRAPHIC CHANGES, CHANGES IN FEDERAL, STATE AND /OR LOCAL
GOVERNMENT LAW AND REGULATIONS; CHANGES IN OPERATING STRATEGY OR DEVELOPMENT
PLANS; THE ABILITY TO ATTRACT AND RETAIN QUALIFIED PERSONNEL; AND CHANGES IN THE
COMPANY'S ACQUISITIONS AND CAPITAL EXPENDITURE PLANS. ALTHOUGH THE COMPANY
BELIEVES THAT EXPECTATIONS REFLECTED IN THE FORWARD-LOOKING STATEMENTS ARE
REASONABLE, IT CANNOT GUARANTEE FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS.
MOREOVER, NEITHER THE COMPANY NOR ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR
THE ACCURACY AND COMPLETENESS OF THESE FORWARD-LOOKING STATEMENTS. THE COMPANY
IS UNDER NO DUTY TO UPDATE ANY FORWARD-LOOKING STATEMENTS AFTER THE DATE OF THIS
REPORT TO CONFORM SUCH STATEMENTS TO ACTUAL RESULTS.
(ii)
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2002 2001
---- ----
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 1,522,767 $ 4,915,269
Note receivable, net of allowance for note loss - 130,000
Note receivable, officer 33,333 -
Prepaid expenses and other current assets 110,453 155,156
--------------- --------------
Total current assets 1,666,553 5,200,425
Property and equipment - net 54,885 201,453
Investment in ComSign, Ltd. 75,291 1,145,519
Note receivable, officer 66,667 -
Notes receivable, other 27,233 -
Other asset 6,300 3,550
--------------- --------------
Total assets $ 1,896,929 $ 6,550,947
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities
Accounts payable $ 63,503 $ 151,400
Accrued expenses 391,162 553,408
--------------- --------------
Total current liabilities 454,665 704,808
Accrued severance pay - 429,922
--------------- --------------
Total liabilities 454,665 1,134,730
--------------- --------------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value;
5,000,000 shares authorized; none issued and outstanding - -
Common stock, $.001 par value;
50,000,000 shares authorized; 17,961,567 and 17,593,896
issued and outstanding, respectively 17,961 17,594
Additional paid-in capital 40,528,199 40,526,583
Other accumulated comprehensive income 32,653 36,934
Deficit accumulated during the development stage (39,130,350) (35,125,678)
Less: deferred compensation (6,199) (39,216)
--------------- --------------
Total stockholders' equity 1,442,264 5,416,217
--------------- --------------
Total liabilities and stockholders' equity $ 1,896,929 $ 6,550,947
=============== ==============
See Notes to Consolidated Financial Statements.
-1-
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
From
Inception
Nine Months (July 14, Three Months
Ended 1994) to Ended
September 30, September 30, September 30,
2002 2001 2002 2002 2001
---- ---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue $ - $ - $ 125,724 $ - $ -
-------------- --------------- --------------- -------------- -----------------
Expenses
Research and development (1) 741,484 662,681 5,743,986 231,334 289,354
Sales and marketing (1) 238,324 301,686 4,536,295 77,005 95,758
General and administrative (1) 1,664,764 1,912,071 9,685,584 554,276 547,637
Stock-based compensation 33,017 785,215 11,397,426 810 288,387
Bad debt expense 161,000 - 161,000 31,000 -
Loss from write-down of fixed assets 159,255 - 159,255 159,255 -
-------------- --------------- --------------- -------------- -----------------
Total expenses 2,997,844 3,661,653 31,683,546 1,053,680 1,221,136
-------------- --------------- --------------- -------------- -----------------
Operating loss (2,997,844) (3,661,653) (31,557,822) (1,053,680) (1,221,136)
-------------- --------------- --------------- -------------- -----------------
Other (income) expense
Legal settlement - - 232,500 - -
Loss on investment - - 17,000 - -
Other income - - (75,000) - -
Net losses of affiliate 298,457 506,443 1,125,704 121,522 190,254
Impairment loss on investment in affiliate 742,000 - 742,000 - -
Amortization of deferred financing costs - - 4,516,775 - -
Interest income (34,658) (246,788) (897,085) (7,855) (55,812)
Interest expense 1,029 2,413 1,910,634 (612) 161
-------------- --------------- --------------- -------------- -----------------
Total other (income) expenses 1,006,828 262,068 7,572,528 113,055 134,603
-------------- --------------- --------------- -------------- -----------------
Net loss $ (4,004,672) $ (3,923,721) $ (39,130,350) $ (1,166,735) $ (1,355,739)
============== =============== =============== ============== =================
Per share data:
Basic and diluted $ (0.23) $ (0.23) $ (0.07) $ (0.08)
============== =============== ============== =================
Weighted average number
of common shares used in
basic and diluted loss per share 17,728,785 17,362,672 17,858,068 17,366,278
============== =============== ============== =================
(1) Excludes non-cash, stock-based compensation expense as follows:
Research and development $ - $ - $ 456,239 $ - $ -
Sales and marketing 30,587 139,111 5,336,558 - 122,352
General and administrative 2,430 646,104 5,604,629 810 166,035
-------------- --------------- --------------- -------------- -----------------
$ 33,017 $ 785,215 $ 11,397,426 $ 810 $ 288,387
============== =============== =============== ============== =================
See Notes to Consolidated Financial Statements.
-2-
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
From
Inception
Nine Months (July 14, Three Months
Ended 1994) to Ended
September 30, September 30, September 30,
2002 2001 2002 2002 2001
---- ---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net loss $ (4,004,672) $ (3,923,721) $ (39,130,350) $ (1,166,735) $ (1,355,739)
Other comprehensive income (loss)
Foreign currency translation adjustments (4,281) (11,835) 32,653 6,829 (10,212)
-------------- --------------- --------------- -------------- -----------------
Comprehensive loss $ (4,008,953) $ (3,935,556) $ (39,097,697) $ (1,159,906) $ (1,365,951)
============== =============== =============== ============== =================
See Notes to Consolidated Financial Statements.
-3-
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
From
Nine Months Inception
Ended (July 14, 1994)
September 30, to September 30,
2002 2001 2002
---- ---- ----
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (4,004,672) $ (3,923,721) $ (39,130,350)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 56,240 67,333 921,548
Loss from write-down of fixed assets 159,469 - 159,469
Bad debt expense 161,000 - 161,000
Amortization of note discount and finance costs - - 4,666,225
Translation adjustment - - (1,528)
Beneficial conversion feature of convertible debt - - 572,505
Stock, warrants and options issued for services and legal settlement 33,017 785,214 11,570,387
Payment of common stock issued with guaranteed selling price - - (155,344)
Net losses of affiliate 298,457 506,443 1,125,704
Impairment loss on investment in affiliate 742,000 - 742,000
Increase (decrease) in cash attributable
to changes in assets and liabilities
Accounts receivable 949 (8,466) 553
Prepaid expenses and other current assets 9,284 (8,901) (140,695)
Other assets (2,750) (3,550) (6,300)
Accounts payable (293) 156,860 (46,458)
Accrued expenses (234,661) 144,748 994,126
Accrued severance pay (400,391) 85,528 (122,050)
Interest payable - - 251,019
--------------- -------------- -----------------
Net cash used by operating activities (3,182,351) (2,198,512) (18,438,189)
--------------- -------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of fixed assets - - 37,572
Purchases of property and equipment (111,620) (72,084) (986,490)
Investment in ComSign, Ltd. - - (2,000,000)
Increase in note receivable, officer (100,000) - (100,000)
Increase in note receivable - (130,000) (130,000)
Increase in organization costs - - (7,680)
--------------- -------------- -----------------
Net cash used by investing activities (211,620) (202,084) (3,186,598)
--------------- -------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 1,982 17,255 21,177,354
Stock offering costs - - (475,664)
Deferred financing costs - - (682,312)
Proceeds from short-term borrowings - - 1,356,155
Proceeds from long-term debt - - 2,751,825
Proceeds from convertible debentures - - 2,000,000
Repayment of short-term borrowings - - (1,357,082)
Repayments of long-term debt - - (1,615,825)
--------------- -------------- -----------------
Net cash provided by financing activities 1,982 17,255 23,154,451
--------------- -------------- -----------------
Effect of exchange rate changes on cash (513) (607) (6,897)
--------------- -------------- -----------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,392,502) (2,383,948) 1,522,767
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,915,269 8,234,686 -
--------------- -------------- -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,522,767 $ 5,850,738 $ 1,522,767
=============== ============== =================
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the period for interest $ 1,029 $ 2,413 $ 477,057
=============== ============== =================
Noncash financing and investing activity
Notes receivable issued in exchange for fixed assets $ 27,233 $ - $ 27,233
=============== ============== =================
See Notes to Consolidated Financial Statements.
-4-
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of TTR
Technologies, Inc. and its Subsidiary (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine months ended September 30, 2002 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2002. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Form 10K/A for the
year ended December 31, 2001 as filed with the Securities and Exchange
Commission.
NOTE 2 - INVESTMENT IN COMSIGN, LTD.
The Company has applied the equity method of accounting for this investment. At
the time of the investment the carrying value of the investment exceeded the
Company's share of the underlying net assets of ComSign. The excess was
considered to be goodwill and was being amortized on a straight-line basis over
five years. Since adoption of Statement of Financial Accounting Standards (SFAS)
No. 142, "Goodwill and Other Intangible Assets," on January 1, 2002, the Company
is no longer amortizing goodwill but rather testing it for impairment using a
fair value methodology.
In July 2000, the Company invested $2 million for a 50% equity interest in
ComSign, Ltd. ("ComSign"), a newly established subsidiary of Comda, Ltd.
("Comda"). ComSign is engaged in the distribution and delivery of digital
authentication certificates of VeriSign, Inc. ("VeriSign"). In June 2000,
ComSign entered into an agreement with VeriSign to act as VeriSign's sole
principal affiliate in Israel and the territories administered by the
Palestinian Authority. The Company disclosed in its quarterly reports on Form
10-Q for the quarters ended June 30, and March 31, 2002 that ComSign has been in
discussion with VeriSign to resolve certain issues between them, including the
contract fees payable by ComSign under the terms of the license agreement, and,
that given the decrease in market demand, if the license fees and related issues
are not satisfactorily resolved, then, in the view of management, ComSign would
not be able to continue as a going concern. To date, the license fees payable by
ComSign have not been reduced on terms mutually agreeable to ComSign and
VeriSign nor have the related issues been resolved to the satisfaction of
ComSign. Accordingly, based on information made available to the Company,
management believes that there appears to be a significant decrease in the fair
market value of the Company's investment in ComSign and that as a consequence
thereof, the Company believes the investment to have been impaired. Accordingly,
the Company wrote-off during the three months ended June 30, 2002, the amount of
$742,000, representing the remaining goodwill included in the investment.
The amount of the investment in ComSign carried on the Company's balance sheet
as of September 30, 2002 of $75,291 represents the remaining excess of its
original investment, after the goodwill write-off, over its share of Comsign's
accumulated losses to date.
-5-
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed summarized financial data for ComSign, Ltd. as of and for the three
months ended September 30, 2002, are as follows:
Condensed balance sheet data:
Current assets $ 878,744
Noncurrent assets $ 1,285,248
Current liabilities $ 1,400,905
Noncurrent liabilities $ 612,500
Condensed statement of operations data:
Revenue $ 65,709
Net loss $ (243,043)
NOTE 3 - TERMINATION AND SETTLEMENT AGREEMENTS
On September 10, 2002, the Company and its wholly owned subsidiary TTR
Technologies, Ltd. ("TTR Ltd.") entered into a termination and settlement
agreement with the former Chairman of the Board of Directors of the Company who
also served as TTR Ltd.'s General Manager pursuant to which such person resigned
from positions held with the Company and TTR Ltd. Pursuant to the agreement, TTR
Ltd. remitted to the former officer payment of all outstanding salary and
benefits due through September 10, 2002 under the agreement with TTR Ltd., in
consideration of which the former officer released TTR Ltd. and the Company from
certain other payments and claims under his employment agreement. In connection
with his resignation, the Company agreed that employee stock options heretofore
granted to such former officer shall immediately vest and continue to be
exercisable through the duration of the original grant of such options, all on
the terms and conditions applicable to the grants, including, without
limitations, the exercise price, and in accordance with each of the Company's
1996 and 2000 stock option plans and agreements. Additionally, TTR Ltd. agreed
to lease an automobile to the former officer with quarterly lease payments due
over a five-year period.
On September 10, 2002, TTR Ltd. entered into a termination and settlement
agreement with its former Vice President of Business Development pursuant to
which it paid to the former employee all outstanding salary and benefits due
through September 10, 2002. The former employee released TTR Ltd. and the
Company from any claims to other payments due under the employment agreement
with TTR Ltd. In connection with his resignation, the Company agreed that the
employee stock options heretofore granted to such former employee shall
immediately vest and continue to be exercisable through the duration of the
original grant of the options, all on the terms and conditions applicable to the
grants, including, without limitations, the exercise price, and in accordance
with each of the Company's 1996 and 2000 stock option plans and agreements.
Pursuant to the agreement, TTR Ltd. sold to the former employee an automobile at
fair market value and entered into a financing agreement with him pursuant to
which principal and interest is due and payable in one balloon payment in 2005
at a fixed market interest rate.
NOTE 4 - CONSULTING AGREEMENTS
On September 10, 2002, the Company entered into a consulting agreement with its
former Chairman of the Board to render certain services to the Company from
October 1, 2002 through December 31, 2002. In consideration of the services to
be rendered, the Company prepaid the
-6-
consultant $83,000 during the quarter ended September 30, 2002. The Company
recorded the payment as a prepaid expense on its balance sheet as of September
30, 2002.
On September 10, 2002, the Company entered into a consulting agreement with its
former Vice President of Business Development to provide certain development
services for the Company beginning October 1, 2002 through December 31, 2002. In
consideration of the services to be rendered, the Company paid a total of
$82,000 during the quarter ended September 30, 2002. Based on certain terms in
the agreement and the nature of services to be provided, the Company recorded
the payment as an operating expense during the quarter ended September 30, 2002.
NOTE 5 - SUBSEQUENT EVENTS
TERMINATION & SETTLEMENT AGREEMENTS
On October 1, 2002, TTR Ltd. entered into a termination and settlement agreement
with the Company's former Chief Technology Officer pursuant to which it remitted
to the former officer all outstanding salary and benefits due and payable under
his employment agreement with TTR Ltd., in consideration of which the former
officer released TTR Ltd. and the Company from certain other payments and claims
under his employment agreement. In connection therewith, the Company agreed that
the employee stock options heretofore granted to such former officer shall
immediately vest and continue to be exercisable through the duration of the
original grant of the options, all on the terms and conditions applicable to the
grants, including, without limitations, the exercise price, all in accordance
with the Company's 1996 and 2000 stock option plans and agreements. The former
officer purchased from TTR Ltd., at fair market value, an automobile and made
full payment in respect thereof.
On October 9, 2002, the Company entered into a consulting agreement with its
former Chief Technology Officer to provide certain services relating to, among
other things, the Asset Sale discussed below, beginning October 9, 2002 through
December 31, 2002. In consideration for the services to be rendered by the
consultant, the Company agreed to pay the consultant $196,000, all of which will
be due and payable during the quarter ended December 31, 2002. In addition,
pursuant to the agreement, the Company issued to the consultant from the
Company's 2000 Equity Incentive Plan options to purchase 50,000 shares of Common
Stock of the Company, at a per share exercise price equal to $.16, the fair
market value on the date of grant. The consultant is not entitled to exercise
the options until October 9, 2003.
WIND-DOWN OF TTR LTD.
During the quarter ended September 30, 2002, the Company began the relocation to
the United States of its research and design activities and, in consequence
thereof, terminated all such activities formerly carried out at the TTR Ltd.
facility. All related wind-down costs and expenses of TTR Ltd. have been accrued
as of September 30, 2002.
AGREEMENT TO SELL THE COMPANY'S COPY PROTECTION BUSINESS
On November 4, 2002 the Company, TTR Ltd., Macrovision Corporation
("Macrovision") and Macrovision Europe, an affiliate of Macrovision
("Macrovision Europe"), entered to an Asset Purchase Agreement (the "Asset
Purchase Agreement") pursuant to which Macrovision Europe will purchase all of
the properties, rights, interests and other tangible and intangible assets of
the Company and TTR Ltd. (the "Asset Sale") that relate in any material respect
to the copy protection and digital rights management business for audio
programs, including the technologies underlying SAFEAUDIO and the PALLADIUMCD
product line (the "Business"), for $5.25 million in cash, subject to certain
potential downward adjustments not to exceed $500,000, payable at the closing of
the Asset Sale. In addition, at closing, Macrovision will endorse and deliver to
the Company, for eventual cancellation and return to the Company's treasury, the
stock certificate representing 1,880,937 shares of the Company's Common Stock
that Macrovision purchased from the Company in January 2000 in connection with
its then concluded equity investment in the Company of $4.0 million. Upon and
subject to the closing of the Asset Sale, the agreement entered into as of
November 24, 1999, by the Company and Macrovision, as
-7-
subsequently amended, will be terminated and be of no continuing legal effect.
Accordingly, the Company will no longer be entitled to the payment from
Macrovision of a 30% royalty of the net revenues collected by Macrovision or its
affiliates from any product or component incorporating the technologies
underlying SAFEAUDIO. In addition, upon and subject to the closing of the Asset
Sale, the Company has agreed not to compete with Macrovision with respect to the
copy protection business.
The closing of the Asset Sale is subject to the approval of the holders of at
least a majority of the Company's issued and outstanding Common Stock. The
Company filed on November 8, 2002, its preliminary proxy statement (the "Proxy
Statement") seeking the approval of the Asset Sale by the holders of a majority
of the issued and outstanding shares of Common Stock at a special meeting of the
Company's stockholders that the Company has currently scheduled for December 20,
2002. The Proxy Statement will also seek approval to effect a reverse stock
split of the Company's Common Stock in a range between 1:6 to 1:10 (the "Reverse
Split"), in the discretion of the Company's Board.
In addition to the requisite stockholder approval, the closing of the Asset Sale
is subject to the prior satisfaction of certain other conditions specified in
the Asset Purchase Agreement.
For more information relating to the Asset Sale and the Asset Purchase
Agreement, reference may be made to the Company's Proxy Statement.
Upon and subject to the closing of the Asset Sale, the Company will cease to be
engaged in the field of copy protection, the only business in which it has been
actively engaged since its inception. The Company will continue to hold its 50%
equity interest in ComSign. The Board has not yet determined what the Company's
strategic direction will be following the consummation of the Asset Sale and is
considering several possible general alternatives, including, (i) liquidation
and dissolution, (ii) retention of the proceeds and subsequent acquisition,
investment in, or development of new lines of business, or (iii) a partial
distribution of cash and subsequent acquisition, investment in, or development
of new lines of business. Furthermore, the Company may not choose any of the
options described above and instead may pursue one or more other options the
Company has not yet considered. Although the Board may explore opportunities to
acquire, invest in, or develop new lines of business, to date the Board has not
adopted a new strategic direction for the Company and cannot predict what, if
any, business lines it may enter or strategies it may adopt.
SETTLEMENT
In November 2002, the Company issued 300,000 shares of Common Stock in exchange
for (and cancellation of) warrants to purchase up to 350,000 shares of Common
Stock at per share exercise prices ranging between $6.50 and $8.50, which
warrants were issued in June 2000 to a consultant (the "Previous Warrants"). The
terms of the Previous Warrants would have entitled the holder of the Previous
Warrants, upon the closing of the Asset Sale, pursuant to the cash-less exercise
provisions contained therein, to acquire additional shares of Common Stock equal
to approximately one third of the Company's issued and outstanding Common Stock.
-8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW
TTR Technologies, Inc. (hereinafter, the "Company" or "TTR") designs and
develops digital security technologies that provide copy protection for
electronic content distributed on optical media and over the Internet. Optical
media store data that may be retrieved by utilizing a laser and include compact
discs, which are commonly referred to as CDs, and digital versatile discs which
are commonly referred to as DVDs. DVDs that store software, including games and
reference material, are referred to as DVD-ROM's. In September 2002, the Company
began the relocation to the United States of its research and design activities
that were formerly conducted out of the facilities of the Company's wholly owned
Israeli based subsidiary, TTR Technologies, Ltd. ("TTR Ltd."), and, in
consequence thereof, terminated all research, design and development activities
formerly carried out of TTR Ltd.
In November 1999, the Company entered into an agreement (the "Alliance
Agreement") with Macrovision Corporation ("Macrovision") to jointly design and
develop a copy protection product designed to thwart the illegal copying of
audio content on CDs. The new product is currently marketed under the brand name
"SAFEAUDIO" and is based primarily upon the Company's proprietary MusicGuard
technology, a unique media-based technology designed to prevent the unauthorized
copying of audio content distributed on CDs, as well as related Macrovision
technology. SAFEAUDIO(TM) is owned jointly by TTR and Macrovision. Macrovision
has an exclusive world-wide royalty bearing license to market SAFEAUDIO and all
other related technologies and products jointly developed that are designed to
prevent the illicit duplication of audio programs (including the audio portion
of music videos, movies and other video or audio content) distributed on optical
media (not limited to CDs and DVDs) and technologies for Internet digital rights
management for audio applications.
The Company is entitled to royalties of 30% of the net revenues collected
by Macrovision or its affiliates from any products or components incorporating
SAFEAUDIO. However, the Company and Macrovision have entered into an asset
purchase agreement (the "Asset Purchase Agreement") pursuant to which an
affiliate of Macrovision is to purchase all the assets of the Company and TTR
Ltd. that relate in any material respect to the copy protection and digital
rights management business for audio programs, including the technologies
underlying SAFEAUDIO (the "Asset Sale"). If such transaction is approved by the
holders of a majority of the Company's outstanding Common Stock and the other
conditions to the closing specified in the Asset Purchase Agreement are
satisfied, the Alliance Agreement with Macrovision will be terminated and be of
no continuing legal force and effect and, accordingly, the Company will no
longer be entitled to such 30% royalty. See Note 5 to the Consolidated Financial
Statements.
The Company has developed proposed solutions designed to allow consumers
relative freedom and ease in utilizing copy protected discs and music files
downloaded from the Internet, which the Company calls the PALLADIUMCD product
line. These proposed solutions are currently in various stages of design,
testing and evaluation and include:
(i) PALLADIUMCD Key, a solution designed to facilitate off-line
authentication and playing of a copy-protected CD on a personal computer
using the consumer's existing Windows Media Player and to securely transfer
the content of the copy protected CD to the consumer's hard drive and to
securely record (burn) CD-R copies of the CD (a CD-R is a commercially
available blank CD);
(ii) PALLADIUMCD Online, which enables end-users to securely burn
music files downloaded from the Internet through subscription services (and
other services offering digital music) to blank CD-Rs. Once so burned, the
content on the CD-R is copy-protected; and
(iii) PALLADIUMCD Pre-Release allows labels and replicators to burn
copy-protected CD-Rs for the pre-release album market by integrating the
PalladiumCD core technology into autoloaders, CD-R duplication devices and
individual PCs.
-9-
The Company has not yet begun to commercialize these solutions and there
can be no assurance that the Company will be able to successfully commercialize
these solutions.
Under the Alliance Agreement, the Company granted to Macrovision an
exclusive right of first refusal with respect to the acquisition of all rights
in or worldwide exclusive marketing and distribution rights to any music
protection technology that the Company develops, and any Internet digital rights
management technologies developed by the Company that are applicable to music,
music video, video, software or data publishing products or markets. Macrovision
may argue that the DVD and Internet technologies and solutions noted above, or
certain components thereof, may be subject to such right of first refusal.
The Company has not had any significant revenues to date. As of September
30, 2002, the Company had an accumulated deficit of $39,130,350. The Company's
expenses related primarily to costs and expenditures on research and
development, marketing, recruiting and retention of personnel, costs of raising
capital and general and administrative operating expenses
REVENUE SOURCES
Absent the proposed Asset Sale, the Company expected, for the near-term,
that its primary source of revenue, if any, would be royalties payable to it
under the Alliance Agreement and, upon completion and commercialization of the
newly developed technologies, license fees therefrom. However, no assurance can
be provided that the SAFEAUDIO technology or any of the other technologies and
solutions developed by the Company will be commercially successful or whether
any royalties or other proceeds from the sale thereof will be generated. The
Company was also seeking to develop or acquire other technologies that may
provide other sources of revenue. However, there can be no assurance that the
Company will develop or acquire other technologies or if it does, that such
technologies will generate any revenue or profits.
If the holders of a majority of the Common Stock approve the Asset Sale and
the Asset Sale is closed, the Company will no longer be entitled to the 30%
royalty payable under the Alliance Agreement. If the Asset Sale is consummated,
it is unlikely there will be any significant revenue source other than the
anticipated net proceeds from the Asset Sale and interest thereon, unless and
until the Company acquires or develops a new business, of which there can be no
assurance. See Note 5 to the Consolidated Financial Statements.
RESULTS OF OPERATIONS
Nine months ended September 30, 2002 ("2002 Period") compared to nine
months ended September 30, 2001 ("2001 Period") and the three months ended
September 30, 2002 compared to the three months ended September 30, 2001.
There were no revenues for the 2002 Period or the 2001 Period.
Research and development costs for the 2002 Period were $741,484 compared
to $662,681 for the 2001 Period and $231,334 for the three months ended
September 30, 2002 as compared to $289,354 for the comparable period in 2001.
The relatively higher amount in the 2002 Period compared to the 2001 Period is
primarily attributable to severance pay related to the wind-down of TTR Ltd. The
decrease for the comparable three-month periods reflect the reduction in the
monthly fees due and paid to Macrovision under the Alliance Agreement between
the Company and Macrovision. The obligation to pay such fees expired in May
2002. Research and development during the 2002 Period was primarily focused on
expanding the capabilities of the existing version of SAFEAUDIO and extending
copy protection technology to CD-Rs and digital rights management. However,
since the Company has decided to shift its focus toward the potential sale of
the intellectual property related to its copy protection business, all research
and development activities at TTR Ltd. were terminated by October 2002.
Sales and marketing expenses for the 2002 Period were $238,324 compared to
$301,686 for the 2001 Period and $77,005 for the three months ended June 30,
2002 compared to $95,758 for the comparable period in 2001. This decrease is
primarily attributable to the Company's declining contribution to the sales and
marketing responsibilities associated with SAFEAUDIO that,
-10-
pursuant to the Company's Agreement with Macrovision, were assumed by
Macrovision. In addition, since the Company decided to shift its focus toward
the potential sale of the intellectual property related to its copy protection
business, all sales and marketing activities were terminated by October 2002.
General and administrative expenses for the 2002 Period were $1,664,764 as
compared to $1,912,071 for the 2001 Period and $554,276 for the three months
ended September 30, 2002 as compared to $547,637 for the comparable period in
2001. The decrease during the 2002 Period as compared to the 2001 Period is
partially attributable to personnel reductions, the non-recurring fees relating
to the Company's listing on the NASDAQ National Market System that were incurred
in the 2001 Period, government mandated increases in the reserves for holiday
and severance pay by TTR Ltd. incurred in the 2001 Period as well as a decrease
in overall investor relations, recruiting and travel related expenses during the
2002 Period resulting from cost control measures implemented by the Company.
Stock-based compensation for the 2002 Period was $33,017 as compared to
$785,215 for the 2001 Period and $810 for the three months ended September 30,
2002 as compared to $288,387 for the comparable period in 2001. The decrease in
stock-based compensation expense is attributable to a reduction in remaining
deferred compensation incurred in previous years. In addition, during the 2002
Period, the Company did not issue any significant stock options that would have
required the Company to recognize additional deferred compensation.
The Company recorded bad debt expense of $161,000 in the 2002 Period in
connection with the non-payment of a note receivable upon its maturity in July
2002 and certain uncollectible employee advances. Although management believes
collection of the full amount due under the promissory note is doubtful, it
intends to pursue recovery.
During the quarter ended September 30, 2002 the Company recorded a loss of
$159,255 for the write-down of TTR Ltd.'s fixed assets to be disposed of in
connection with the closing of TTR Ltd.'s facility.
The Company's affiliate, ComSign Ltd., commenced operations in July 2000.
ComSign serves as VeriSign Inc.'s sole principal affiliate in Israel and the
Palestinian Authority and exclusive marketer of VeriSign's digital
authentication certificates and related services. ComSign had been in discussion
with VeriSign to resolve certain issues between them, including the contract
fees payable by ComSign under the terms of the license agreement. As fully
described in Note 2 to the Consolidated Financial Statements, to date such
payments have not been so reduced nor have any of the related issues been
resolved to ComSign's satisfaction. Based on information available to
management, the Company deemed the investment to be impaired and, accordingly,
recorded an impairment loss of $742,000 in its statement of operations for the
2002 Period. No such loss was recorded during the comparable period in 2001.
Interest income for the 2002 Period was $34,658 as compared to $246,788 for
the 2001 Period and $7,855 for the three months ended September 30, 2002 as
compared to $55,812 for the comparable period in 2001. The decrease is
attributable to the lower cash and cash equivalent balances, primarily resulting
from the expenditure of cash to finance the Company's operations and decreased
interest rates.
The Company reported a net loss for the 2002 Period of $(4,004,672) or
$(.23) per share on a basic and diluted basis, as compared to a net loss of
$(3,923,721) or $(.23) per share for the 2001 Period and $(1,166,735) or $(.07)
per share for the three months ended September 30, 2002 as compared to
$(1,355,739) or $(.08) per share for the comparable period in 2001.
AGREEMENT TO SELL THE COMPANY'S COPY PROTECTION BUSINESS
Refer to Note 5 to the Consolidated Financial Statements for disclosure
relating to this agreement.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2002, the Company had cash of approximately $1.5 million,
representing a decrease of approximately $3.4 million from December 31, 2001.
Cash used by operating activities during the nine months ended September 30,
2002 was $3,182,351 compared to $2,198,512 for the same period in 2001.
-11-
If the Asset Sale is closed, the net proceeds thereof are expected to
result in an increase in cash of approximately $5.1 million. See Note 5 to the
Consolidated Financial Statements. If the Asset Sale is closed, the Company
believes that its cash on-hand will be sufficient to meet the Company's
requirements to maintain its business for at least the next twelve months. No
assurance however, can be provided that the Asset Sale will in fact be closed.
If the Asset Sale is not closed and it becomes necessary for the Company to
raise additional capital, there can be no assurance that additional capital will
be available to the Company on terms acceptable to it, if at all. Furthermore,
it is anticipated that any such financing, if obtained, will have a dilutive
effect on existing stockholders. The Company currently has no commitments for
any such financing. The inability to obtain such financing, if necessary, will
have a material adverse effect on the Company, its operations and future
business prospects.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to changes in interest rates and foreign currency
exchanges rates were reported in Item 7A of the Company's Annual Report on Form
10-K/A for the year ended December 31, 2001. There has been no material change
in these market risks since the end of the fiscal year 2001.
ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the Company's Exchange
Act reports is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms,
and that such information is accumulated and communicated to the Company's
management, including its Chief Executive Officer and Principal Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.
Within the 90 days prior to the date of this report on Form 10-Q, the
Company carried out an evaluation, under the supervision and with the
participation of the Company's Chief Executive Officer and Principal Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14). Based upon that evaluation, the Chief Executive Officer and Principal
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiary) required to be
included in the Company's periodic SEC filings. Subsequent to the date of that
evaluation, there have been no significant changes in internal controls or in
other factors that could significantly affect internal controls.
-12-
PART II
ITEM 1. LEGAL PROCEEDINGS
On August 14, 2002, nine purported stockholders of the Company filed a
complaint against the Company, eight of its current or former officers and
several third parties in the United States District Court for the Southern
District of New York. The action, which is known as EILENBERG ET AL. V. KRONITZ
ET AL. (02 Civ. 6502), alleges, among other things, that the Company issued a
series of false and misleading statements, including press releases, that misled
the plaintiffs' into purchasing the Company's Common Stock. The complaint seeks
relief under federal securities laws and common law, and demands compensatory
damages of $10 million or more, and punitive damages of $50 million or more. The
Company and most of its current or former officers have filed a motion based
upon the federal securities laws to dismiss the complaint for failure to state a
claim. That motion, which is expected to be argued before the court on November
19, 2002, has had the legal effect of automatically suspending any other
proceedings in the case.
Counsel for the EILENBERG plaintiffs filed a second action against the
Company and several of its current or former officers in the same court on
August 21, 2002, on behalf of three additional purported shareholders as
plaintiffs. This action, which is known as STURM ET AL. V. TOKAYER ET AL. (602
Civ. 6672), alleged, among other things, that the Company had violated the
federal securities laws by distributing false and misleading materials in
connection with the annual stockholder meeting scheduled for August 26, 2002,
and that several officers and directors had breached duties to the Company and
committed acts of waste and mismanagement by paying excessive salaries to
themselves and others. Plaintiffs moved for a temporary restraining order to
enjoin the annual stockholder meeting from being conducted on August 26, 2002.
The court denied this motion. Defendants thereafter moved to dismiss the
complaint for failure to state a claim for relief. In response, the plaintiffs
filed an amended complaint, which deleted the prior claims concerning violations
of the federal securities laws, but continued to assert derivative claims for
waste and mismanagement. The court denied defendants' motion to dismiss the
latter claim, and the STURM action is now in the beginning of the discovery
phase.
ITEM 2. CHANGE IN SECURITIES & USE OF PROCEEDS
SALE OF UNREGISTERED SECURITIES
There were no issuances for sale of any unregistered securities by the
Company during the nine months ended September 30, 2002.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on August 26, 2002 and
the stockholders voted as to the following: (i) to elect Marc D. Tokayer (who
subsequently resigned), Daniel C. Stein, Sam Brill, Richard Gottehrer, Michael
Paolucci, Joel Schoenfeld and Neil Subin, as directors to serve for a term of
one year or until a successor is duly elected; (ii) adopt the 2002 Non-Employee
Directors' Plan and (iii) ratify the appointment of Brightman Almagor & Co., a
member of Deloitte Touche Tohmatsu, as auditors for the year ending December 31,
2002.
Voting results are as follows:
For Against Abstain
1. Directors
Marc D. Tokayer 9,841,495 4,436,282 ---
Daniel C. Stein 9,868,655 4,409,122 ---
Sam Brill 9,868,655 4,409,122 ---
Richard Gottehrer, 9,868,655 4,409,122 ---
Michael Paolucci 9,868,655 4,409,122 ---
-13-
Joel Schoenfeld 9,868,655 4,409,122 ---
Neil Subin 9,868,655 4,409,122 ---
2. Adoption of the
Non-Employee Plan 9,708,077 4,527,190 42,510
4. Auditors 9,856,595 4,386,337 34,845
All Items above were approved by the Stockholders. Marc D. Tokayer resigned
from the Board of Directors on September 10, 2002.
No other matters were submitted to a vote of stockholders during the three
month period ended September 30, 2001.
ITEM 5. OTHER INFORMATION
On October 9, 2002, the Company received notice from the staff (the
"Staff") of the Nasdaq National Market System (National Market") of its decision
to delist the Common Stock from the National Market as of the opening of trading
on October 17, 2002. The Staff cited the Company's failure to meet the minimum
$10 million stockholders' equity requirement for continued listing on the
National Market. The delisting action has been stayed pending the determination
following a hearing before the Nasdaq Listing Panel scheduled for November 21,
2002. On November 7, 2002, the Company received notice from the Staff that the
Company's compliance with the required minimum bid price and market value of
publicly held shares will also be addressed at the hearing. On November 12,
2002, the Company received a subsequent notice from Nasdaq advising that the
Company's possible status as a "public shell" following the closing of the Asset
Sale, in that it has ceased to operate a business, will also be addressed at the
hearing.
In connection with the hearing, the Company submitted to Nasdaq a request,
to have the Company's securities listed on the Nasdaq SmallCap Market ("SmallCap
Market"). For continued listing on the SmallCap Market, the Company must, among
other things, maintain a per share minimum bid price of $1.00 and maintain a
minimum stockholders' equity of $2.5 million. In an effort to meet the minimum
bid price requirement and thereby increase the Company's prospects for having
its securities listed on the SmallCap Market, the Company's Board recommended
that the stockholders of the Company vote in the affirmative on the Reverse
Split proposal contained in the Proxy Statement.
No assurance can be provided that the Company will be able to successfully
transfer to the SmallCap Market. Even if the Company's request to have its
Common Stock listed on the Nasdaq SmallCap Market is granted, following the
closing of the Asset Sale the Company may be subject to delisting if Nasdaq
deems that the Company has ceased to operate a business. Additionally, if
following the Asset Sale, the Company were to acquire an operating business, it
may have to qualify for listing on either the Nasdaq SmallCap or National
Market's initial listing standards, which are more stringent than the continued
listing standards.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Termination and Settlement Agreement between TTR and Marc D. Tokayer as of
September 10, 2002*
10.2 Termination and Settlement Agreement between TTR and Gershon Tokayer as of
September 10, 2002.*
10.3 Termination and Settlement Agreement between TTR and Baruch Sollish as of
October 1, 2002.
-14-
10.4 Consulting Agreement between TTR and Marc D. Tokayer as of September 10,
2002.*
10.5 Consulting Agreement between TTR and Gershon Tokayer as of September 10,
2002.*
10.6 Consulting Agreement between TTR and Baruch Sollish as of October 9, 2002.
10.7 Asset Purchase Agreement between TTR, TTR Ltd, Macrovision and Macrovision
Europe as of November 4, 2002. **
10.8 Letter Agreement among TTR and certain parties thereto dated as of October
17, 2002.
10.9 Form of Security Exchange Agreement among TTR and certain parties thereto
dated as of October 17, 2002.
99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley act of 2002.
99.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*Attached as an Exhibit to the Report on Form 8-K filed on September 10, 2002
** Attached as an Exhibit to the Company's Preliminary Proxy Statement filed on
November 8, 2002.
(b) Reports on form 8-K
(i) Report on Form 8-K dated September 10, 2002
(ii) Report on Form 8-K dated September 9, 2002
-15-
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.
TTR TECHNOLOGIES, INC.
REGISTRANT
Date: November 14, 2002 By /s/ Sam Brill
SAM BRILL,
Chief Operating Officer (Principal
Financial Officer)
-16-
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Daniel C. Stein, Chief Executive Officer, of TTR Technologies, Inc., certify
that:
1. I have reviewed this quarterly report on Form 10-Q of TTR Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the period presented in this quarterly report;
4. The registrant's other certifying officer and I am responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiary,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions and about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons fulfilling the equivalent function):
a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the Company's ability to record, process, summarize
and report financial data and have identified for the registrant's auditors any
material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Daniel C. Stein
Daniel C. Stein
Chief Executive Officer
-17-
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Sam Brill, Chief Operating Officer, of TTR Technologies, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of TTR Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the period presented in this quarterly report;
4. The registrant's other certifying officer and I am responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiary,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions and about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons fulfilling the equivalent
function):
a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Sam Brill
Sam Brill
Chief Operating Officer
(Principal Financial Officer)
-18-