================================================================================

                     U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                          ----------------------------

                                   FORM 10-KSB
               [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2000

                               Commission File No.
                                     1-11476

                  VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
           (Exact name of the registrant as specified in its charter)

California                                                     95-3977501
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                           Identification Number)

                               One Franklin Plaza
                        Burlington, New Jersey 08016-4907
                                 (609) 386-2500

          (Address and telephone number of principal executive offices)

Securities registered under Section 12(b) of the Exchange Act:

      Title of each class:                        Name of each exchange on which
      -------------------                         ------------------------------
                                                          Registered:
                                                          ----------
      Common Stock $.001 par value                           None

Securities registered under Section 12(g) of the Exchange Act:
             None

         Check whether the issuer (l) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 |_|

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-K contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB |X|.

         Voice Powered Technology International, Inc.'s revenues for the year
ended December 31, 2000 were $388,513.

         As of March 20, 2001, there were 90,245,360 shares of Voice Powered
Technology International, Inc. Common Stock, $.001 par value, outstanding. The
aggregate market value of the issuer's Common Stock held by non-affiliates as of
March 20, 2001, based on the closing price on that date, was approximately
$80,000.

         Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes |X| No |_|

================================================================================
<PAGE>

                                     PART I

--------------------------------------------------------------------------------
Except for the historical information contained herein, the matters discussed
throughout this report, including, but not limited to, those that are stated as
the Company's belief or expectation or preceded by the word "should" are forward
looking statements that involve risks to and uncertainties in the Company's
business, including, among other things, those related to the Company's
announcement on March 20, 2001 that it intends to discontinue its operations,
and other risks and uncertainties that may be detailed from time to time in the
Company's reports filed with the Securities and Exchange Commission.
--------------------------------------------------------------------------------

Item 1.  Description of Business

         Voice Powered Technology International, Inc. (the "Company"),
incorporated in California in June 1985, announced on March 20, 2001 that it
intends to discontinue its operations because of the lack of capital required to
make necessary revisions and updates to its products for their continued
commercial resale. When it began active operations in January 1990, the Company
focused on the development, marketing, and distribution of low-cost voice
recognition and voice activated products on a worldwide basis, both directly and
through licensing agreements. From January 1990 until July 1992, the Company
operated as a development stage enterprise.

General

            The Company's voice-recognition VoiceLogic(TM) Technology (the
"Technology"), which is now licensed from its major shareholder, Franklin
Electronic Publishers, Inc. ("Franklin), is fully developed but in very limited
commercial use. The Technology permits utilization of the human voice as a
replacement for manual controls, such as buttons, switches and dials, in
activating and controlling everyday consumer and business products and can
operate on microprocessors powered by penlight or nicad batteries. The
Technology has been included in several consumer-oriented products manufactured
for the Company under contract with third parties.

         In October 1993, the Company introduced its first voice-activated
electronic personal organizer. This product was the first personal organizer to
combine digital recording for data storage with voice recognition for easy input
and retrieval. The IQoVOICE(TM) Organizer was the Company's most successful
product. However, since the calendar quarter ended December 31, 1995, the
Company has experienced sustained significant operating losses. These losses
were the result of multiple factors, including the unsuccessful introduction of
new models of the Company's IQoVOICE Organizer, failed launches of new products,
increased competition from lower priced digital recorders, and a general decline
in domestic retail sales of hand-held electronics.
<PAGE>

         During 1996 and the first nine months of 1997, the Company attempted to
improve its financial condition by reducing fixed operating costs, liquidating
inventories, streamlining operating departments, and entering into two
significant transactions. Despite these efforts, the Company was unable to
generate sufficient revenues and gross profit to sustain its ongoing operations,
further depleting cash and working capital.

         On September 22, 1997, the Company filed a voluntary petition for
relief with the United States Bankruptcy Court, Central District of California,
under the provisions of Chapter 11 of the Bankruptcy Code (the "Bankruptcy
Proceedings"). On January 21, 1998, the Company, in conjunction with Franklin,
the Company's largest secured creditor, filed a combined Amended Disclosure
Statement and Plan of Reorganization (the "Plan") with the Bankruptcy Court. The
Plan became effective on May 12, 1998 (the "Effective Date").

         In accordance with the Plan, on or about the Effective Date, the
following occurred: 1) the Company received a loan of $350,000 from Franklin
(the "Plan Loan") to create a fund dedicated to the payment of creditor claims
and certain administrative expenses (the Plan Loan accrues interest at 8% per
annum, with interest only payable in arrears on a monthly basis and principal
due and payable in a lump sum payment five years from the Effective Date); 2)
the 500,000 shares of the Company's then outstanding convertible preferred
stock, owned by Franklin, were converted into 2,000,000 shares of the Company's
common stock; and 3) the Company's Articles of Incorporation were amended to,
among other things, increase the authorized shares of common stock to
100,000,000. Pursuant to the Plan, Franklin was issued 72,196,288 shares of the
Company's common stock, equal to an 80% equity interest in the Company, in
exchange for Franklin's pre-petition secured claim of $1,733,990.

         Since the commencement of the Bankruptcy Proceedings, the Company
discontinued shipments of its IQoVOICE Organizer products to many of its major
domestic retail customers. For the years ended December 31, 1998, 1999 and 2000,
the Company's domestic business activities consisted of sales of IQoVOICE
Organizer products to smaller retailers and wholesale accounts and through
various direct marketing programs. In March 1998, the Company expanded its
international marketing activities of its IQoVOICE Organizer products as a
result of a television direct marketing campaign, which began in Mexico.

         On March 20, 2001, the Company announced that it intends to discontinue
its operations because of the lack of capital required to make necessary
revisions and updates to its products for their continued commercial resale.


                                       2
<PAGE>

                                  RISK FACTORS

The Company intends to discontinue its operations.

         On March 20, 2001, the Company announced that it intends to discontinue
its operations because of the lack of capital required to make necessary
revisions and updates to its products for their continued commercial resale.
This will have a material adverse effect on the Company's business, results of
operations and financial condition.

The Company's majority stockholder has the ability to effectively control
substantially all actions taken by stockholders.

         Franklin owns 74,258,788 shares of the Company's common stock and
controls approximately 82.3% of the aggregate voting power of all outstanding
shares. Accordingly, Franklin can effectively control substantially all actions
taken by the Company's stockholders, including the election of directors. Such
concentration of ownership could also have the effect of delaying, deterring or
preventing a change in control of the Company that might otherwise be beneficial
to stockholders and may also discourage acquisition bids for the Company and
limit the amount certain investors may be willing to pay for shares of the
common stock.

The price of the Company's common stock has been volatile and could continue to
fluctuate in the future.

         The market price for shares of the Company's common stock has been
volatile and has fluctuated substantially. Broad market fluctuations, general
economic and political conditions and the discontinuance of the Company's
operations may also adversely affect the market price of the common stock.

A third party claims that the Company infringes on its intellectual property
rights.

         The Company has received a notice from a third party which alleges that
the Company's products infringe on the proprietary rights of such third party,
but no legal proceedings have been commenced. There can be no assurance that
proceedings claiming infringement by the Company with respect to its past,
current or future activities will not be initiated by that third party or
others. If such proceedings are initiated and the Company is unsuccessful in
defending such proceedings, there could be a material adverse effect on the
Company's business, results of operations and financial condition.


                                       3
<PAGE>

The Company does not anticipate paying cash dividends on its common stock.

         The Company does not anticipate paying any cash dividends on the common
stock in the foreseeable future.

The VoiceLogic Technology

         The Technology is proprietary technology which, since May 1997, has
been licensed by the Company from Franklin. In February 1996, the Company
acquired from the inventor of the Technology all right, title, interest, and any
future improvements in and to the Technology, subject to payment of ongoing
royalties. In May 1997, in conjunction with an omnibus transaction with Franklin
which also included the sale of a portion of the Company's product line,
licensing of the Company's patent, and financing, the Company assigned ownership
of the Technology to Franklin and Franklin granted back to the Company a
non-exclusive license for the Technology. The Technology is speaker-dependent
technology, which, though requiring training, is adaptable for use in any
language.

Products Marketed Prior to Discontinuation of Operations

         Prior to the commencement of the Bankruptcy Proceedings, the Company
developed a variety of voice activated consumer products, including the
Company's most successful product line, the IQoVOICE Organizer, and engaged in
on-going exploratory development activities of various other voice activated
products which the Company believed would provide enhanced consumer benefits as
a result of the inclusion of voice technologies. To date, nearly all of the
Company's sales were derived from the IQoVOICE Organizer product line. In
addition to the IQoVOICE Organizers, in 1996 the Company marketed the IQoVOICE
Tell-It Phone, the IQoVOICE Message Pad and the IQoVoice Organizer/ Pager, all
of which were subsequently discontinued.

         IQoVOICE Organizer. The IQoVOICE Organizer ("Organizer") functions as a
voice-operated, palm-sized, electronic notebook, calendar, message prompter, and
telephone directory. Data entry and retrieval are largely accomplished by voice,
eliminating the need for tedious keypad data entry required by existing
electronic organizer products. The Organizer receives and stores voice messages,
then plays them back at designated dates and times. As an example, a user
wishing to calendarize an important phone call to John Jones at 10 am on the
upcoming Tuesday would say: "Call John Jones, 10 am, Tuesday." The Organizer
would beep at 10 am, Tuesday, and with the press of a button, the user would
hear the user's recorded message, "Call John Jones."


                                       4
<PAGE>

         The Organizer also functions as an appointment calendar. Appointments
are entered by voice and are automatically arranged chronologically by date and
time. The user is then able to review the calendar for a particular day merely
by saying the day or date, and listening to the stored appointments.
Appointments may be stored up to one year in advance.

         The Organizer also permits the user to create a telephone directory by
storing names and telephone numbers entirely by voice. Numbers can then be
recalled and displayed on the LCD screen by simply speaking the person's name
into the Organizer. The Organizer also verbally states the person's name to
ensure that the correct number has been recalled. The Organizer is only slightly
larger than a credit card, fits easily into a shirt pocket, purse, notebook, or
briefcase, and weighs three ounces, including batteries.

         In September 1997, the Company introduced its most recent line of the
IQoVOICE Organizer product. This line of products utilizes technology for
compression of voice data, which enables the units to store fifteen minutes of
digitally compressed audio data in 512 KB Flash memory. These models feature a
proprietary personal computer interface ("PCLink") which allows the user to
archive to a personal computer all of the voice memos, reminders, and telephone
numbers stored in the IQoVOICE Organizer. The computer interface also permits
the user, using a computer keyboard, to add limited text or numeric labels to
selected data stored in the IQoVOICE Organizer such as names of files, and names
for telephone directory entries, as well as affording the user the ability to
add more detailed text, such as addresses, which are stored on the user's PC.
These units also feature a backlit display. During 1997, the Company introduced
models within this product line with recording capacities of 15, 30, and 60
minutes, phone directories for up to 800 phone numbers for 200 names, and
storage of up to 250 memos and reminders. Also, international models of this
product line capable of displaying text information in five languages (English,
German, French, Spanish and Italian) were introduced in the second quarter of
1998.

         On March 20, 2001, the Company announced that it intends to discontinue
its operations because of the lack of capital required to make necessary
revisions and updates to its products for their continued commercial resale.

Markets for the Company's Products Prior to Discontinuation of Operations

         Domestic. Prior to the commencement of the Bankruptcy Proceedings, the
Company distributed its products through specialty electronic retailers,
catalogs, office superstores and department stores. The Company also utilized
direct response marketing to advertise and promote its products directly to
consumers through various media,


                                       5
<PAGE>

including magazines, newspapers, in-flight magazines and other periodicals.
Since the commencement of the Bankruptcy Proceedings but prior to the Company's
discontinuation of operations, because of concern on the part of the Company's
major retail customers over the Company's financial stability, the limited cash
and working capital resources available to the Company, and the potential
exposure to the Company which would result from price protection, advertising
and stock balancing commitments required by these major retail customers, the
Company discontinued shipments of its IQoVOICE Organizer products to most of its
major domestic retail customers. During the year ended December 31, 2000, the
Company engaged in limited domestic sales activities of its IQoVOICE Organizer
products through various targeted direct marketing programs and internet sales
through the Company's web site www.vpti.com.

         In June 1998, the Company purchased $457,000 of inventory from
Franklin, which included a variety of models of electronic organizers. The
Company utilized this inventory to generate additional sales and working
capital. As of December 31, 1998, sales which can be attributed to Franklin
products amounted to $370,000. During the fourth quarter of 1998, the Company
had sales to one customer of one item from the foregoing inventory, which
totaled $266,000, exceeding 10% of the Company's total sales for 1998.

         For the year ended December 31, 1999, the Company had sales to two
international customers of $257,000 and $244,000, representing 19% and 18% of
the Company's sales for this period, respectively. For the year ended December
31, 2000, the Company had sales to three international customers of $103,000,
$61,000 and $59,000 representing 26%, 16% and 15% of the Company's sales for
this period, respectively.

         On March 20, 2001, the Company announced that it intends to discontinue
its operations because of the lack of capital required to make necessary
revisions and updates to its products for their continued commercial resale.

         International. As the Company's VoiceLogic Technology is adaptable to
other languages, the Company designed and manufactured its products to be
marketed on a worldwide basis. In March 1998, the Company entered into a
distribution agreement with a television marketing company headquartered in
Mexico ("Distributor"), granting Distributor exclusive marketing rights for its
IQoVOICE Organizer products within the country of Mexico, contingent upon
Distributor's achieving certain minimum sales objectives. Distributor's primary
method of marketing was via direct sales to end users through television
advertising. Distributor, at its sole cost and expense, produced a thirty minute
television program, known as an infomercial, featuring the IQoVOICE Organizer
(the


                                       6
<PAGE>

"Infomercial"). This form of direct marketing was successful in Mexico until
September 1998, at which time sales decreased significantly as a result of
declining economic conditions in Mexico and their related impact on consumer
purchases in that country. In September 1998, the Company entered into a license
agreement with Distributor pursuant to which the Company was granted the
worldwide right (excluding Mexico, Brazil and Chile) to license to unrelated
third parties the right to broadcast the Infomercial, including the right to
reproduce, edit, modify, add voice-overs, prepare derivative works and otherwise
alter the Infomercial. In consideration of the license granted by Distributor,
the Company agreed to pay royalties to Distributor based upon the Company's
sales of its IQ?VOICE Organizer products to licensees of the Infomercial.

         Market for the VoiceLogic Technology. The Company's efforts to obtain
licensing arrangements with manufacturers in product categories for the
Technology have not been successful and have been discontinued. While the
Company recorded $38,000 in other income in the September 1999 quarter from an
arbitration relating to a license agreement, the Company had no other licensing
revenue in the 1999 or 2000 fiscal years; licensing revenues were $53,000 in the
1998 fiscal year, all of which related to that license agreement. As the Company
announced on March 20, 2001 that it intends to discontinue its operations, the
Company has no present expectation of receiving future licensing revenues.

Competition Prior to Discontinuation of Operations

         The VoiceLogic Technology competed with other voice recognition
technologies currently available and new and improved technology that was
developed by the Company's competitors over the past several years. Among the
companies that developed and marketed these technologies, several were larger
and had stronger financial resources, name recognition, and marketing
capabilities than the Company.

         The Company believes its IQoVOICE Organizer competed indirectly with
electronic personal organizers and paper bound personal organizers, both of
which developed markets of substantial size. The Organizer also competed with
lower cost digital recorders and voice managers. The Company believes that its
PC compatible product line also competed with pocket electronic devices designed
to exchange data with a PC computer.

         The consumer electronics industry is highly competitive. Since
commencement of the Bankruptcy Proceedings but prior to the Company's
discontinuation of its operations, the Company effectively terminated its
research and development activities, and eliminated engineering and development
personnel in order to conserve cash resources. Such reduction diminished the
Company's ability to keep pace with new technologies and developments, which
impeded the Company's ability to compete. Furthermore, the Company's products
competed with those of various companies which marketed consumer and business
oriented electronics products. Many of these competitors were larger, had
greater and stronger financial resources, name recognition, and reputation, and
had more established channels of distribution and marketing capabilities than
the Company. Because of its inability to overcome these factors and lack of
sufficient capital, on March 20, 2001, the Company announced that it intends to
discontinue operations.


                                       7
<PAGE>

Manufacturing Prior to Discontinuation of Operations

         Since May 1997, the Company manufactured its IQ Voice products at a new
third party factory with headquarters in Hong Kong and manufacturing facilities
in the Peoples Republic of China. Prior to the Company's discontinuation of
operations, this factory manufactured all of the Company's products for both
domestic and international customers. All goods purchased from this manufacturer
were paid for in cash prior to shipment.

         Each of the Company's products typically utilized a sole source for
certain critical components of such products including the microprocessor and
certain chips. The Company had no agreement with such suppliers of these chips.

Patents and Copyrights

         Prior to February 1996, the Company was the licensee under three
license agreements with respect to the Technology, which together aggregated the
foundation of the Company's exclusive rights to the Technology. One of the
license agreements was with the original inventor ("Inventor") of the
Technology, who was also a director of the Company through May 1998. The other
two license agreements were with a company to whom the Inventor had assigned
certain rights with respect to the Technology. These agreements also had annual
minimum royalties payable by the Company to retain exclusivity which varied
depending upon the agreement and the product category.

         In February 1996, the Company entered into a new agreement with the
Inventor which effectively replaced the three prior licensing agreements, the
result of which was that the Company acquired all right, title, interest, and
any future improvements in and to the Technology, inclusive of an assignment of
all intellectual property rights


                                       8
<PAGE>

associated with the Technology. In consideration of this transfer, the Company
agreed to pay $100,000 in two installments to the Inventor, $50,000 of which was
paid upon execution of the agreement, and $50,000 of which was paid in July
1996. In addition, the Company granted to the Inventor an option to purchase
33,333 shares of the Company's common stock at an exercise price per share which
was cumulatively $50,000 lower than the then current market value as a means of
paying the balance of the purchase price for the rights. In addition, the
agreement required payment of royalties by the Company to the Inventor equal to:
1) $0.50 per unit for each unit of any product sold by the Company which
contains the Technology; 2) 5% of net proceeds from the sales of computer chips
which contain the Technology; and 3) 15% of licensing revenues (excluding
licensing revenues for computer chips) received by the Company as a result of
licensing agreements relating to the Technology. The foregoing royalties were
subject to a minimum of $60,000 per year payable quarterly. In May 1997, this
agreement with the Inventor was assigned to Franklin under the terms of a
Technology Transfer Agreement. Under the Technology Transfer Agreement the
Company transferred to Franklin certain rights evidenced by patent and
copyright, and assigned certain rights to the VoiceLogic Technology in exchange
for a non-refundable royalty advance, with Franklin granting back to the Company
a non-exclusive license to the Technology to utilize in Voice Organizer products
with recording times in excess of four minutes in duration, as well as to use
and/or sublicense the Technology in any other product category. With respect to
the annual minimum royalty due the Inventor by Franklin, the Company was
obligated to Franklin for the $60,000 per year less royalties due and payable to
the Inventor by Franklin. The Company has been unable to make royalty payments
to Franklin as required under the Technology Transfer Agreement. Franklin has
amended the agreement with the Inventor to eliminate the annual minimum royalty
commitment, but in consideration therefor the Company agreed to increase the
royalty rate payable to the Inventor.

         The Company has a trademark registration in the United States on the
mark IQ Voice.

         The Company has been granted a United States patent related to the
functionality of the Company's Voice Organizer. No assurance can be made that
the patent issued will provide significant proprietary protection or will not be
circumvented or invalidated. Additionally, since issuance of a patent does not
guarantee the right to practice the claimed invention, there can be no assurance
that others will not obtain patents that the Company would need to license or
design around in order to practice its patented technologies, or that licenses
that might be required to practice these technologies due to patents of others
would be available on reasonable terms. Further, there can be no


                                       9
<PAGE>

assurance that any unpatented manufacture, use, or sale of the Company's
Technology, processes, or products will not infringe on patents or proprietary
rights of others. The Company also relies on trade secret laws for the
protection of its intellectual property, and there can be no assurance that
others will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to the Company's trade
secrets or disclose such technology, or that the Company can meaningfully
protect its rights to unpatented trade secrets.

         No assurance can be given that the Company's manufacture, use, or sale
of its products will not result in challenges from other third parties claiming
patents, copyrights or other rights to such products or parts thereof in the
future. The Company has received notice from the holder of U.S. Patent 5,696,496
entitled "Portable Messaging and Scheduling Device with Homebase Station"
stating that the holder had filed suit alleging infringement of that patent in
December 1999 in United States District Court for the District of Massachusetts
(Civil Action No. 99-CV-12468) against certain companies (not including the
Company) and alleging that certain of the Company's Voice Organizer products may
also infringe that patent. No assurance can be given with respect to that
patent.

         Given the fact that the Company has assigned its rights in the
Technology to Franklin, the Company has no continuing rights to control the
disposition of the Technology. The Company is in default of the Technology
Transfer Agreement under which it was licensed by Franklin to develop,
manufacture, sell and distribute Voice Organizer products.

Employees

         Since August 1, 1999, the Company has not employed any persons. The
Company entered into a contract with Franklin for Franklin to provide the
Company with warehousing, distribution, financial and manufacturing management
services. The executive officers of the Company are employees of Franklin and
are not paid any amounts by the Company in connection with the services
performed for the Company.

Research and Development Costs

         Upon commencement of the Bankruptcy Proceedings, the Company suspended
development of new products. Subsequent to the Effective Date, the Company
resumed limited development activities related to potential improvements to its
IQ VOICE Organizer


                                       10
<PAGE>

products and the VoiceLogic Technology. In August 1999, the Company curtailed
all such development activities. Research and development expenses for the years
ended December 31, 1999 and 2000 were $154,273 and $0, respectively.

Certain Transactions

         On August 1, 1999, the Company entered into a Fulfillment Services
Agreement with Web-Ideals, LLC ("Ideals") pursuant to which Ideals provided the
Company with order entry, order processing, technical support, distribution,
inventory management and web hosting services. Mitchell B. Rubin, the Company's
former President, is an executive officer of Ideals. This agreement was
terminated in January 2001.

         In addition, the Company subleased to Ideals approximately 6,175 square
feet of office space in Simi Valley, California. This sublease ends in April
2001.

Item 2.  Description of Property

         In August 1999, the Company's operations were relocated to Franklin's
facility in Burlington, New Jersey. The Company has subleased its former
facility in California through April 2001.

Item 3.  Legal Proceedings

         The Company has received notice from the holder of U.S. Patent
5,696,496 entitled "Portable Messaging and Scheduling Device with Homebase
Station" stating that the holder had filed suit alleging infringement of that
patent in December 1999 in United States District Court for the District of
Massachusetts (Civil Action No. 99-CV-12468) against certain companies (not
including the Company) and alleging that certain of the Company's Voice
Organizer products may also infringe that patent. No assurance can be given with
respect to that patent.

Item 4.  Submission of Matters to a Vote of Security Holders - None

                                     PART II

Item 5.  Market for Common Equity and Related Stockholders Matters

         The Company's Common Stock, "VPTI," is quoted on the OTC Bulletin
Board. The following table sets forth, for the periods indicated, the high and
low closing bid prices for the Company's Common Stock on the OTC Bulletin Board,
for the quarters presented. Bid prices represent inter-dealer quotations without
adjustments for markups, markdowns, and commissions, and may not represent
actual transactions.


                                       11
<PAGE>

<TABLE>
<CAPTION>
                                                    Bid Prices
                                                       High            Low
                                                       ----            ---
         <S>                                            <C>            <C>
         Calendar 1999
         First Quarter                                  .04            .03
         Second Quarter                                 .18            .03
         Third Quarter                                  .07            .04
         Fourth Quarter                                 .06            .015

         Calendar 2000
         First Quarter                                  .80            .03
         Second Quarter                                 .36            .05
         Third Quarter                                  .09            .05
         Fourth Quarter                                 .06            .015
</TABLE>

         At March 20, 2001, there were 90,245,360 shares of Common Stock
outstanding, which were held by approximately 671 shareholders of record.
Franklin owns 74,258,788 shares of the Common Stock.

         The Company has never paid any dividends to its common stock
shareholders. On March 20, 2001, the Company announced that it intends to
discontinue its operations and accordingly does not intend to pay or declare any
future cash dividends or special payments of cash, stock or to make any other
distributions.

Item 6.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations

Overview

         Since the calendar quarter ended December 31, 1995, the Company has
experienced sustained significant operating losses. Through 1996 and the first
nine months of 1997, the Company attempted to improve its financial condition by
reducing fixed operating costs, liquidating inventories, streamlining operating
departments, and entering into two significant transactions in an attempt to
strengthen the Company's financial position. Despite these efforts, the Company
was unable to generate sufficient revenues and gross profit to sustain its
ongoing operations, further depleting cash and working capital.

         On September 22, 1997, the Company filed a voluntary petition for
relief with the United States Bankruptcy Court, Central District of California,
under the provisions of Chapter 11 of the Bankruptcy Code. The


                                       12
<PAGE>

Company's Amended Plan of Reorganization and Disclosure Statement was approved
by the United States Bankruptcy Court, Central District of California on April
29, 1998 and became effective on May 12, 1998.

         Since the commencement of the Bankruptcy Proceedings, but prior to the
Company's discontinuation of operations, the Company's domestic business
activities consisted primarily of sales of IQ.VOICE Organizer products directly
to consumers through various direct marketing programs and to smaller retailers
and wholesale accounts. In March 1998, the Company entered into a distribution
agreement with a television marketing company headquartered in Mexico
("Distributor"). Distributor's primary method of marketing was via direct sales
to end users through television advertising. Distributor, at its sole cost and
expense, produced a thirty minute television program, known as an infomercial,
featuring the IQ.VOICE Organizer (the "Infomercial"). In September 1998, the
Company entered into a license agreement with Distributor pursuant to which the
Company was granted the worldwide right (excluding Mexico, Brazil and Chile) to
license to unrelated third parties the right to broadcast the Infomercial. In
consideration of the license granted by Distributor, the Company agreed to pay
royalties to Distributor based upon the Company's sales of its IQ.VOICE
Organizer products to licensees of the Infomercial. For the year ended December
31, 1998, sales to the Distributor in Mexico totaled $659,000, exceeding 10% of
the Company's total sales, of which $605,000 occurred after May 12, 1998, the
Effective Date of the Plan. To date, the Company has entered into agreements
with television marketing companies in Spain, France, Switzerland, Portugal and
Belgium among others. In South American markets, test airings of the Infomercial
were not successful, due, in part, to the highly unstable economic conditions in
those markets.

         On May 14, 1999, the Company announced its intention to close its
facility in Simi Valley, California. As of July 31, 1999, the Company relocated
to, and entered into a contract with, Franklin Electronic Publishers, Inc. in
Burlington, New Jersey for Franklin to provide the Company with warehousing,
distribution, financial and manufacturing management services. As of March 31,
1999, the Company had recorded a reserve in the amount of $150,000 related to
the costs associated with the closure of the California facility, inclusive of
severance for employees, moving costs and other expenses. The Company expected
this decision to result in cost savings with respect to managing the Company's
operations. On March 20, 2001, the Company announced that it intends to
discontinue its operations because of the lack of capital required to make
necessary revisions and updates to its products for their continued commercial
resale.


                                       13
<PAGE>

Results of Operations

         Sales for the year ended December 31, 2000 were approximately $389,000,
a decrease of approximately $957,000, or approximately 71%, from sales of
approximately $1,346,000 in the prior year. The decline in sales is attributable
to lower sales in the United States and abroad of Voice Organizer products.

         Cost of Goods Sold decreased from approximately $812,000, or 60% of
sales for the year ended December 31, 1999 to approximately $358,000, or
approximately 92% of sales in the current year. Gross profits for the years
ended December 31, 1999 and 2000 were approximately $534,000 (approximately 40%)
and approximately $31,000 (approximately 8%), respectively. The decrease in
gross profit margins is primarily the result of provisions of $115,000 for
slow-moving and obsolete inventory.

         Total operating costs for the twelve months ended December 31, 2000
decreased by approximately $827,000 to approximately $392,000 compared with
$1,219,000 in the prior year. In an effort to reduce its operating costs, the
Company made significant staff reductions during the year. The reduction in
expenses results from the termination of all of the Company's employees, the
subleasing of the Company's warehouse and office facilities and the Company's
contracting with Franklin for Franklin to provide the Company with warehousing,
distribution, financial and manufacturing management services. The year-to-year
reduction in operating expense also reflects the absence of research and
development expense of $154,000 and relocation expenses of $150,000 in the
current year.

         Other income (expense) was approximately ($34,000) for the twelve
months ended December 31, 2000, primarily relating to interest expense. Other
income (expense) was approximately ($101,000) for the twelve months ended
December 31, 1999, primarily relating to a write-off of approximately $88,000
for certain capitalized patent costs and interest expense on the Company's loans
payable to Franklin, partially offset by a gain of approximately $38,000 in the
September quarter from the favorable settlement of an arbitration related to a
licensing fee.

         The Company's net loss for the year ended December 31, 2000 decreased
to approximately $395,000 from approximately $786,000 in the prior year as a
result of lower expenses of $827,000 offset by reduced gross margin of $503,000.


                                       14
<PAGE>

         The following table summarizes the Company's historical results of
operations as a percentage of sales for the calendar year ended December 31,
2000 and the calendar year ended December 31, 1999.

<TABLE>
<CAPTION>
                                                  For the year ended       For the year ended
                                                   December 31, 2000       December 31, 1999
                                                   -----------------       -----------------
<S>                                                    <C>                      <C>
Net Sales                                                100.0%                   100.0%

Costs and expenses
         Cost of goods sold                               92.0%                    60.3%
         Marketing                                        19.5%                    13.9%
         General and administrative                       79.9%                    45.1%
         Research and development                          -                       11.5%
         Warehouse                                         1.3%                     9.0%
         Relocation expense                                -                       11.1%
                                                       -------                   ------
                 Total costs and expenses                192.8%                   150.8%

Operating loss                                           -92.8%                   -50.8%

Other expense                                             -8.7%                    -7.5%

Net income (Loss)                                       -101.5%                   -58.4%
                                                       =======                   ======
</TABLE>

Liquidity

         Since the calendar quarter ended December 31, 1995, the Company has
incurred significant net losses. Because of these and other factors, on
September 22, 1997, the Company filed a voluntary petition for relief with the
United States Bankruptcy Court, Central District of California, under the
provisions of Chapter 11 of the Bankruptcy Code. On January 21, 1998, the
Company, in conjunction with Franklin Electronic Publishers, Inc., the Company's
largest secured creditor, filed a combined Amended Disclosure Statement and Plan
of Reorganization with the Bankruptcy Court. At a hearing held on April 23,
1998, the Company's motion for confirmation of the Plan was granted and the
order confirming the Plan was entered by the Court on April 29,1998. The Plan
became effective on May 12, 1998. The effect of the transactions related to the
implementation of the Plan which were effected as of June 30, 1998 resulted in
an increase to long term debt in the amount of $570,000; a decrease to
liabilities subject to compromise in the amount of $3,240,000 as a result of the
settlement of such liabilities in accordance with the terms of the Plan; a
decrease in accrued expenses of $135,000 as a result of the payment of
administrative expenses of the Bankruptcy Proceedings; a decrease to preferred
stock of $500,000 resulting from its conversion to common stock; an increase to
common stock of $74,000 and an increase to additional paid-in capital of
$2,160,000 resulting from


                                       15
<PAGE>

the conversion of the preferred stock as well as the new common stock issuance
to Franklin; and a decrease to the Company's accumulated deficit of $1,288,000
resulting from forgiveness of debt.

         At the commencement of the Bankruptcy Proceedings, the Company entered
into a revolving $400,000 Loan and Security Agreement with Franklin
collateralized by all of the assets of the Company. This loan was due and
payable on the Effective Date. The agreement carried an interest rate of 12% per
annum on the average daily balance. The December 31, 1997 balance of $185,000
was the highest balance during 1997, and said amount was in excess of the
borrowings allowed under the terms of the agreement. As of the Effective Date,
the Company renegotiated the terms of its post petition, secured revolving Loan
and Security Agreement with Franklin. As of the Effective Date, the Company had
borrowed $250,000 in accordance with the terms of the prior agreement. Under the
terms of the new agreement (the "Revolving Loan"), entered into as of the
Effective Date, interest accrues at 8% per annum payable monthly in arrears and
with the principal balance payable in two installments; 1) $50,000 on or before
May 12, 1999; and 2) the balance in a lump sum payment five years from the
Effective Date, which is May 12, 2003. As of December 31, 2000, the principal
balance due on this loan was $270,000.

         As discussed above, the Company was to have made a principal payment of
$50,000 to Franklin on or before May 12, 1999. As the Company was unable make
this payment, the Company is in default on its loans from Franklin and the
entire balance of the loans has been classified as a current obligation on the
Company's December 31, 2000 balance sheet.

         As of December 31, 2000, amounts due Franklin included the loans
discussed above of $620,000, inventory purchased from Franklin in 1998 for
resale in the amount of $457,088, royalties of $152,175, accrued interest of
$144,920 and net expenses paid by Franklin on the Company's behalf of
approximately $369,747.

         As of December 31, 2000, the Company had an accumulated deficit of
$1,768,000 and negative working capital of $1,694,000. The Company's ability to
continue as a going concern was dependent, among other things, upon reaching a
satisfactory level of profitability and generating sufficient cash flow to meet
ongoing obligations. As of the Effective Date, the Company became an 82%
controlled subsidiary of Franklin, and therefore subject to Franklin's direction
and discretion regarding future business activities. On March 20, 2001, the
Company announced that it intends to discontinue operations because of the lack
of capital required to make necessary revisions and updates to its products for
their continued commercial resale.


                                       16
<PAGE>

Item 7. Financial Statements

                  VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.

                          INDEX TO FINANCIAL STATEMENTS

         Report of Independent Certified Public Accountants                  18

         Statements of Operations for the years ended
         December 31, 1999 and 2000                                          19

         Balance Sheet at December 31, 2000                                  20

         Statements of Cash Flows for the years ended
         December 31, 1999 and 2000                                          21

         Statements of Stockholders' Equity (Deficit)
         for the years ended December 31, 1999 and 2000                      22

         Summary of Significant Accounting Policies                          23

         Notes to the Financial Statements                                   25


                                       17
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

Board of Directors and Stockholders
Voice Powered Technology International, Inc.

         We have audited the accompanying balance sheets of Voice Powered
Technology International, Inc. (the "Company") as of December 31, 2000 and 1999,
and the related statements of operations, stockholders' equity (deficit), and
cash flows for each of the two years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2000 and 1999, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States.

         The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has suffered from
recurring losses from operations and has negative working capital. The Company
has also been relying on and is delinquent in paying its parent company who has
indicated that it may not be willing to continue to support the Company. These
factors raise substantial doubt about its ability to continue as a going
concern. There is no assurance that the Company will be able to realize its
recorded assets and liquidate its liabilities in the normal course of business.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

         On March 20, 2001, the Company announced that it was discontinuing
operations because of the lack of the capital required to make necessary
revisions and updates to its Voice Organizer products for their continued
commercial resale.


                                    RADIN, GLASS & CO., LLP
                                    Certified Public Accountants

New York, New York
March 14, 2001, except for Note 1 as to which the date is March 20, 2001.


                                       18
<PAGE>

                  VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
                             STATEMENT OF OPERATIONS
                      (in thousands, except for share data)
<TABLE>
<CAPTION>
                                                                      For the year ended
                                                           December 31, 2000       December 31, 1999
                                                           -----------------       -----------------
<S>                                                          <C>                       <C>
Net sales (Note 9)                                           $      389                $    1,346
                                                             ----------                ----------

Costs and expenses
         Cost of goods sold                                         358                       812
         Marketing                                                   76                       187
         General and administrative                                 311                       607
         Research and development                                  --                         154
         Warehouse                                                    5                       121
         Relocation expense                                        --                         150
                                                             ----------                ----------
                 Total costs and expenses                           750                     2,031
                                                             ----------                ----------

Operating loss                                                     (361)                     (685)

Other expense
         Interest Expense, net                                      (51)                      (50)
         Other                                                       17                       (51)
                                                             ----------                ----------

Net income (Loss)                                            $     (395)               $     (786)
                                                             ==========                ==========

Net Income (loss) per share                                  $     --                  $    (0.01)
                                                             ----------                ----------

Weighted average common shares outstanding                   90,245,360                90,245,360
                                                             ==========                ==========
</TABLE>

   See accompanying summary of accounting policies and the notes to financial
                                  statements.


                                       19
<PAGE>

                  VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
                                  BALANCE SHEET
                      (in thousands, except for share data)

<TABLE>
<CAPTION>
                                                               December 31, 2000
                                                               -----------------
<S>                                                              <C>
Assets
Current assets
       Cash                                                     $           11
       Receivables                                                           4
       Inventory (Note 4)                                                   48
                                                                ---------------
                 Total current assets                                       63
                                                                ===============

Property and equipment
       Equipment                                                           190
       Less accumulated depreciation                                       190
                                                                ---------------
Net property and equipment                                                   -
                                                                ---------------

Other assets                                                                16

                 Total assets                                   $           79
                                                                ===============

Liabilities and Stockholder's Equity
Current liabilities
       Loans payable (Note 6) - Franklin                        $          620
       Accounts payable                                                     12
       Accounts payable and accrued expenses - Franklin                  1,125
                                                                ---------------
                Total current liabilities                                1,757
                                                                ---------------

Stockholders' Equity (deficit)
Common stock, $.001 stated value - 100,000,000 shares
authorized; 90,245,360 shares issued and outstanding
                                                                            90
       Accumulated deficit                                              (1,768)
                                                                ===============
            Total stockholders' equity (deficit)                        (1,678)
                                                                ---------------

Total liabilities and stockholders' equity (deficit)            $           79
                                                                ===============
</TABLE>

   See accompanying summary of accounting policies and the notes to financial
                                  statements.


                                       20
<PAGE>

                  VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
                             STATEMENT OF CASH FLOWS

                                 (in thousands)

<TABLE>
<CAPTION>
                                                                              For the year ended
                                                                     December 31, 2000   December 31, 1999
                                                                     -----------------   -----------------
<S>                                                                       <C>                <C>
Increase (Decrease) in Cash and
Cash Equivalents Cash flows from operating activities:
        Net loss                                                          $   (395)          $   (786)
        Adjustments to reconcile net loss to net cash
        provided by (used in) operating activities:
              Depreciation and amortization                                      2                177
              Write-off of patents and leaseholds                               --                 94
        Changes in operating assets and liabilities:
              (Increase) decrease in receivables                                31                159
              (Increase) decrease in inventory                                  83                183
              (Increase) decrease in prepaid expenses                           --                  7
              Decrease in other assets                                          --                  8
              Increase (decrease) in accounts payable                          177                301
              Increase (decrease) in accrued expenses                          (21)               (42)
              Increase (decrease) in deferred income                            --                (64)
              Loss on disposition of equipment                                  --                 13
                                                                          --------           --------
                   Net cash provided by (used in) operating activities        (123)                50

Cash flows from investing activities
        Capital expenditures                                                    --                 (5)
        Proceeds from sale of equipment                                         --                 18
                                                                          --------           --------
                   Net cash provided by financing activities                    --                 13

Net increase (decrease) in cash and cash equivalents                          (123)                63

Cash and cash equivalents at the beginning of the period                       134                 71
                                                                          --------           --------

Cash and cash equivalents at the end of the period                        $     11           $    134
                                                                          ========           ========
</TABLE>

   See accompanying summary of accounting policies and the notes to financial
                                  statements.


                                       21
<PAGE>

                  VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
                   STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                 For the years ended December 31, 1999 and 2000
                      (in thousands, except for share data)

<TABLE>
<CAPTION>
                                   Preferred Stock                Common Stock            Additional                  Stockholders'
                                   ---------------                ------------              Paid In      Accumulated      Equity
                                Shares         Amount        Shares           Amount        Capital        Deficit       (Deficit)
                                ------         ------        ------           ------        -------        -------       ---------
<S>                                  <C>            <C>    <C>                   <C>             <C>       <C>            <C>
Balance December 31, 1998            0              0      90,245,360            $90               0       $   (587)         $(497)
Net loss                                                                                                       (786)         (786)

                               -------         ------      ----------          -----         -------        -------       -------
Balance December 31, 1999            0              0      90,245,360            $90               0         (1,373)       (1,283)

Net loss                                                                                                       (395)         (395)
                               -------                     ----------          -----         -------        -------       -------
Balance December 31, 2000            0              0      90,245,360            $90               0        $(1,768)      $(1,678)
                               =======         ======      ==========          =====         =======        =======       =======
</TABLE>


                                       22
<PAGE>

                  VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reorganization and Basis of Presentation

         On September 22, 1997, the Company filed a petition for relief with the
United States Bankruptcy Court, Central District of California, under the
provisions of Chapter 11 of the Bankruptcy Code. From September 1997 through May
12, 1998, the Company operated as a "Debtor-In-Possession" under such code. As
of May 12, 1998, in accordance with AICPA Statement of Position 90-7 "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code", the Company
adopted "fresh-start reporting" and has reflected the effects of such adoption
in the financial statements as of May 12, 1998. There was no change to the
carrying value of the assets or liabilities as a result of the adoption of fresh
start reporting; however, the balance of the deficit was offset against paid in
capital, to the extent available.

Revenue Recognition

         The Company recognizes revenue upon shipment of product.

Cash and Cash Equivalents

         The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

Inventory

         Inventory is valued at the lower of cost or market, on a first-in,
first-out (FIFO) basis.

Property and Equipment

         Property and equipment are stated at cost and are depreciated on a
straight-line basis using estimated useful lives which range from 2-7 years.

Patents and Technology Rights

         Patents and technology rights are expensed when management believes
they provide no future benefit.


                                       23
<PAGE>

Loss Per Share

         Loss per share is based on the weighted average number of common shares
outstanding during each period presented. There were no outstanding stock
options or warrants for the year ended December 31, 2000.

Income Taxes

         The Company utilizes Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS No. 109). This standard employs an
asset and liability approach in accounting for income taxes, the objective of
which is to recognize the amount of current and deferred taxes payable or
receivable at the date of the financial statements using the provisions of
enacted tax laws.

Accounting Estimates

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues,
and expenses at the date that the financial statements are prepared. Actual
results could differ from those estimates.

Fair Value of Financial Instruments

         The carrying values of cash, cash equivalents, restricted cash,
accounts receivable, accounts payable, and loan payable approximate their fair
values because of the short maturity of these instruments.

Recent Accounting Pronouncements

         There are no issued but not yet effective accounting standards that
will have a material effect on the Company's financial statements.


                                       24
<PAGE>

                        Notes to the Financial Statements

1.  Business

       Voice Powered Technology International, Inc. (the "Company"),
incorporated in California in June 1985, began active operations in January
1990. The Company was formed to develop, market, and distribute low-cost voice
recognition and voice activated products on a worldwide basis, both directly and
through licensing agreements. From January 1990 until July 1992, the Company
operated as a development stage enterprise.

       On March 20, 2001, the Company announced that is was discontinuing
operations because of lack of capital required to make necessary revisions and
updates to its Voice Organizer products for their continued commercial resale.

       The Company does not use business line reporting in its internal
financial reporting.

2.  Petition for Relief Under Chapter 11

       On September 22, 1997, the Company filed a voluntary petition for relief
with the United States Bankruptcy Court, Central District of California
("Court"), under the provisions of Chapter 11 of the Bankruptcy Code. On January
21, 1998, the Company, in conjunction with Franklin Electronic Publishers, Inc.
("Franklin"), the Company's largest secured creditor, filed a combined Amended
Disclosure Statement and Plan of Reorganization (the "Plan") with the Bankruptcy
Court which became effective on May 12, 1998 (the "Effective Date"). The Plan
included a significant reduction of the Company's pre-petition obligations, in
addition to Franklin's waiving its pre-petition secured claim in the amount of
$1,733,990 in exchange for an additional 80% interest in the equity of the
Company.

       In accordance with the Plan, on or about May 12, 1998, the following
occurred: 1) the Company received a loan of $350,000 from Franklin (the "Plan
Loan") to create a fund to be dedicated to the payment of creditor claims and
certain administrative expenses (Note 6); 2) the 500,000 shares of outstanding
convertible preferred stock of the Company was converted into 2,000,000 shares
of the Company's common stock (Note 11(c)); and 3) the Company's Articles of
Incorporation were amended to, among other things, increase the authorized
shares of common stock to 100,000,000. Pursuant to the Plan, Franklin was issued
72,196,288 shares of the Company's


                                       25
<PAGE>

common stock, which equated to an additional 80% equity interest in the Company
in exchange for Franklin's pre-petition secured claim in the amount of
$1,733,990.

3.  Pre-Petition Agreements with Franklin Electronic Publishers, Inc.

         In May 1997, the Company consummated a transaction involving two
agreements with Franklin. The first agreement was a Purchase and Loan Agreement
in which the two companies entered into the following transactions: 1) The
Company transferred and sold to Franklin for $450,000 in cash its inventory,
rights to work in process, manufacturing assets, marketing assets, and software
and hardware design assets for the Company's IQoVOICE(TM) Organizer Models 5150
and 5160 (IQoVOICE Pocket Organizers); 2) the Company sold to Franklin for
$150,000 in cash 2,000,000 shares of the Company's common stock, par value $.001
per share, representing the approximate market price of the Company's common
stock at the time of the transaction; and 3) Franklin loaned the Company cash
equal to $1,200,000, in addition to $500,000 plus accrued interest previously
loaned to the Company in the first quarter of 1997, and restructured the
previous payment terms into a new $1,708,750 promissory note, collateralized by
the assets of the Company, with an interest rate of 10% per year. The second
agreement was a Technology Transfer Agreement in which the two companies entered
into the following transactions: 1) the Company granted to Franklin a
non-exclusive perpetual license for technology rights evidenced by the Company's
patent related to operation of Voice Organizer products as well as other
technology and software developed by the Company for a non-refundable advance
royalty of $700,000; and 2) the Company assigned the rights to the
VoiceLogic(TM) Technology to Franklin, and Franklin granted back to the Company
a non-exclusive perpetual license of the VoiceLogic Technology, including the
right to sublicense, for the development, manufacture, sale and distribution of
Voice Organizer products with recording times in excess of four minutes and any
other electronic products that are not Voice Organizers, subject to the
Company's remaining obligated to pay royalties to Franklin at the same rates for
which the Company was obligated to the inventor of the VoiceLogic Technology
prior to its assignment to Franklin. As a result of the completion of these
transactions, the Company recognized $141,527 as a gain on the sale of assets,
and $700,000 as income from the sale of the technology license.


                                       26
<PAGE>

4. Inventories

    Inventories consisted of the following:
         (in thousands)

<TABLE>
<CAPTION>
                                                     December 31, 2000
                                                     -----------------
                                            Gross          Reserve         Net
                                            -----          -------         ---
         <S>                                 <C>            <C>            <C>
         Finished goods                      $114           $(66)          $48
         Parts and collateral materials        61            (61)            -
                                           -------------------------------------
         Total Inventory                     $175          $(127)          $48
                                           -------------------------------------
</TABLE>

5.  Loans Payable

         As of September 22, 1997, in conjunction with the commencement of the
Bankruptcy Proceedings, the Company entered into a revolving $400,000 Loan and
Security Agreement with Franklin collateralized by all of the assets of the
Company. This loan was due and payable on the Effective Date. The agreement
carried an interest rate of 12% per annum on the average daily balance. The
December 31, 1997 balance of $185,000 was the highest balance during 1997, and
said amount was in excess of the borrowings allowed under the terms of the
agreement. As of the Effective Date, the Company renegotiated the terms of its
post petition, secured revolving Loan and Security Agreement with Franklin. As
of the Effective Date, the Company had borrowed $250,000 in accordance with the
terms of the prior agreement. Under the terms of the new agreement (the
"Revolving Loan"), entered into as of the Effective Date, interest accrues at 8%
per annum payable monthly in arrears and with the principal balance payable in
two installments; 1) $50,000 on or before May 12, 1999 and; 2) the balance in a
lump sum payment five years from the Effective Date, which is May 12, 2003. As
of December 31, 2000, the principal balance due on this loan was $270,000.

         In accordance with the Plan, on the Effective Date the Company received
a loan of $350,000 from Franklin (the "Plan Loan") to create a fund to be
dedicated to the payment of creditor claims and certain administrative expenses
of the Bankruptcy Proceedings. The Plan Loan accrues interest at 8% per annum,
with interest only payable in arrears on a monthly basis, with principal all due
and payable in a lump sum payment five years from the Effective Date which is
May 12, 2003. As discussed above, the Company was to have made a principal
payment of $50,000 to Franklin on or before May 12, 1999. As the Company was
unable to make this payment, the Company is in default on its loans from
Franklin and the entire balance of the loans has been classified as a current
obligation on the Company's December 31, 2000 balance sheet.


                                       27
<PAGE>

6.  Commitments

         (a) As of December 31, 2000, the Company has one operating lease that
requires future minimum rental payments until April 14, 2001 of $17,062.

         The operating lease pertains to a lease for the Company's prior office
facilities which are currently subleased at cost. The lease expires April 14,
2001. Franklin has provided a limited guaranty of the Company's performance
under this lease. Net rent expense was $0 and $33,980 for the years ended
December 31, 2000 and 1999, respectively.

         (b) In February 1996, the Company entered into an agreement with a
related party ("the Inventor"), inventor of an integral part of the voice
recognition technology used by the Company, which resulted in the Company's
obtaining unrestricted exclusive world wide ownership rights to the technology
subject to ongoing royalties for a total cost of $100,000 in cash and stock
options which were cumulatively $50,000 lower than market value. The royalties
were subject to a minimum of $60,000 per year, payable quarterly. In May 1997,
this agreement with the Inventor was assigned to Franklin (Note 3). However,
with respect to the annual minimum royalty due to the Inventor by Franklin, the
Company remained obligated to Franklin for the $60,000 per year. Royalty expense
incurred in 1999 amounted to $60,000. In 2000, this agreement with the Inventor
was amended to eliminate the annual minimum royalty commitment, but in
consideration thereof the Company agreed to increase the royalty rate payable to
the Inventor.

7.  Capital Stock

     Stock issuance

         In May 1998, in accordance with the Plan of Reorganization, the
Company's Articles of Incorporation were amended to increase, among other
things, the authorized shares of common stock to 100,000,000. Pursuant to the
Plan, Franklin was issued 72,196,288 shares of the Company's common stock, which
equated to an additional 80% equity interest in the Company in exchange for
Franklin's pre-petition secured claim in the amount of $1,733,990.

         In April 1999, Franklin purchased 62,500 shares of the Company's common
stock at market value, $.027 per share, from its then president.


                                       28
<PAGE>

8.  Major Customers and International Sales

         For the year ended December 31, 1999, the Company had sales to two
international customers of $257,000 and $244,000, representing 19% and 18% of
the Company's sales for this period, respectively. For the year ended December
31, 2000, the Company had sales to three international customers of $103,000,
$61,000 and $59,000 representing 26%, 16% and 15% of the Company's sales for
this period, respectively.

         For the year ended December 31, 1999, the Company's international sales
totaled $739,000 or 53% of total sales. For the year ended December 31, 2000,
the Company's international sales totaled $223,000 or 57% of total sales.
Inasmuch as all international sales are in US dollars, the Company does not
incur any gains or losses on foreign currency fluctuations. Further, the Company
does not maintain any material inventory or other assets in foreign countries
and requires payment at the time of sale on the majority of export sales.
Accordingly, there are no material identifiable assets attributable to
international sales activities.

9.  Supplemental Cash Flow Information

         For the years ended December 31, 1999 and 2000, interest expense due
Franklin totaling $49,600 and $49,600, respectively, was accrued and unpaid.



10.  Income Taxes

         Unused net operating losses of approximately $27,000,000 are available
as of December 31, 2000 to offset future years' federal taxable income, and
expire through 2012. Unused California net operating losses of approximately
$12,000,000 are available as of December 31, 2000 to offset future years'
California taxable income and expire through 2002. Under federal tax law IRC
Section 382, certain significant changes in ownership of the Company may
restrict future utilization of these carry-forwards. However, pursuant to
Internal Revenue Code Section 382(1)(5), which relates to net operating losses
of companies in bankruptcy, the acquisition by Franklin (Notes 2 and 3) is not
treated as a change of ownership. In the event the loss carry-forwards are fully
utilizable, the Company has a deferred tax asset of approximately $10,000,000 as
of December 31, 2000. In addition, the Company has research and development tax
credits of approximately $250,000 and $123,000 for Federal and California tax
purposes respectively. They will begin to expire in 2007. The Company has a
valuation allowance equal to, and which offsets, the net deferred tax asset as
the Company cannot conclude that it is more likely than not the net deferred tax
asset will be realized.

11.  Related Party Transactions

         During 1999, the Company incurred royalty expense due Franklin in the
amount of $60,000 and accrued interest due Franklin of $50,287. During 2000, the
Company incurred royalty expense due Franklin in the amount


                                       29
<PAGE>

of $17,175 and accrued interest due Franklin of $49,600. As of December 31,
2000, amounts due Franklin included loans of $620,000, inventory purchased from
Franklin in 1998 for resale in the amount of $457,088, royalties of $152,175,
accrued interest of $144,920 and net expenses paid by Franklin on the Company's
behalf of approximately $369,747.


                                       30
<PAGE>

                                    PART III

Item 9.  Directors and Executive Officers of the Registrant

         The following table sets forth certain information regarding the
Company's directors and executive officers.

<TABLE>
<CAPTION>
                                                                         Year
                                                                       Became a
Name                      Principal Occupation               Age       Director
----                      ----------------------             ---       --------
<S>                       <C>                                <C>        <C>
Barry J. Lipsky           President and Chief Operating      50         1998
                          Officer of Franklin

Gregory J. Winsky         Executive Vice President           51         1998
                          of Franklin

Arnold D. Levitt          Senior Vice President and Chief    63         2000
                          Financial Officer of Franklin

Edward H. Cohen           Partner, Rosenman & Colin LLP      62         2000
</TABLE>

         No family relationship exists between any director and executive
officer of the Company.

         Mr. Lipsky is, and for the past five years has been, an executive
officer of Franklin, a designer and developer of handheld electronic information
products. Since 1999, he has been President and Chief Operating Officer of
Franklin. Mr. Lipsky is the Vice President and Secretary of the Company.

         Mr. Winsky is, and for more than the past five years has been, an
executive officer and general counsel of Franklin. Mr. Winsky is the Chairman
and Chief Executive Officer of the Company.

         Mr. Levitt has been the Chief Financial Officer of Franklin since May
1999. Mr. Levitt has been engaged in consulting as a chief financial officer or
senior business adviser for companies in a variety of industries since 1996.
Prior to these consulting arrangements, Mr. Levitt was Executive Vice President
and Chief Operating Officer of Wico Gaming Supply Corp. Mr. Levitt has owned or
was employed as a chief financial officer of a number of companies and also
worked in public accounting.

         Mr. Cohen is, and for more than the past five years has been, a partner
in the New York City law firm of Rosenman & Colin LLP. Mr. Cohen is a director
of Franklin, Phillips-Van Heusen Corporation, a manufacturer and marketer of
apparel and footwear, Levcor International, Inc., a converter of textiles for
sale to domestic apparel


                                       31
<PAGE>

manufacturers, and Merrimac Industries, Inc., a manufacturer of passive R.F. and
microwave components for industry, government and science.

Item 10.  Executive Compensation

         Gregory J. Winsky, the Company's Chief Executive Officer since
September 1998, has never received any compensation from the Company or any of
its subsidiaries. Mr. Winsky was not employed by the Company prior to May 1998.
No employee had compensation of more than $100,000 during the last fiscal year.

         No bonuses, other annual compensation, stock appreciation rights,
long-term compensation awards, long-term incentive plan payouts or other
compensation (as defined in the proxy regulations of the Securities and Exchange
Commission) were awarded to, earned by, or paid to the Chief Executive Officer
during any of the Company's last two fiscal years.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth certain information regarding the
ownership of the Company's common stock as of March 20, 2001 by the only person
known by the Company to be the beneficial owner of more than five percent of the
Company's common stock. None of the directors or executive officers of the
Company owns any shares of the Company's common stock. Franklin has sole voting
and investment power with respect to the shares listed as beneficially owned by
it.

<TABLE>
<CAPTION>
                                                                          Amount
              Name and Address of                                      Beneficially          Percent of
                Beneficial Owner                                           Owned                Class
         ---------------------------                                   -------------         -----------
         <S>                                                            <C>                     <C>
         Franklin Electronic Publishers, Incorporated ................  74,258,788              82.3%
                  One Franklin Plaza
                  Burlington, New Jersey 08016
</TABLE>

         Based upon a review of the filings furnished to the Company pursuant to
Rule 16a-3(e) promulgated under the Securities Exchange Act of 1934 and on
representations from its executive officers and directors and Franklin, all
filing requirements of Section 16(a) of said Act were complied with in a timely
manner during 1999.

Item 12.  Certain Relationships and Related Transactions

         The Company has engaged in various transactions with Franklin. Such
transactions are more fully described elsewhere in this Form 10-KSB.


                                       32
<PAGE>

Item 13.  Exhibits and Reports on Form 8-K

(a)      Exhibits: See Exhibit Index

(b)      Reports on Form 8-K. On December 13, 2000, the Company filed a report
         on Form 8-K.


                                       33
<PAGE>

                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number            Description
--------------            -----------
<S>                       <C>
*3(a)                     Articles of Incorporation, as amended
3(aa)                     Certificate of Amendment of Articles of Incorporation dated May 12, 1998
*3(b)                     Bylaws, as amended
*4(c)                     Specimen of Common Stock Certificate of Registrant
*10(h)                    Leases for Canoga Park, California
*10(hh)                   Additional Leases for Canoga Park, California
**10(hhh)                 Additional Leases for Canoga Park and Chatsworth, California
***10(hhhh)               Lease for Executive Offices, Sherman Oaks, California
</TABLE>


                                       34
<PAGE>

<TABLE>
<CAPTION>
Exhibit Number            Description
--------------            -----------
<S>                       <C>
(1)10.6                   Letter of Intent from Franklin Electronic Publishers, Inc.
(1)10.6.1                 Security Agreement with Franklin Electronic Publishers, Inc.
(1)@10.6.2                Purchase and Loan Agreement with Franklin Electronic Publishers, Inc.
(1)@10.6.3                Technology Transfer Agreement with Franklin Electronic Publishers, Inc.
10.6.4                    Revised Loan and Security Agreement with Franklin Electronic Publishers, Inc. dated
                          September 22, 1997
10.6.5                    Letter Agreement of October 7, 1997 Regarding Post Petition Financing Agreement and Loan
                          and Security Agreement
10.6.6                    Amendment to Loan and Security Agreement with Franklin Electronic Publishers, Inc. dated
                          September 22, 1997
(1)10.7                   Lease for Executive Offices, Tarzana, California
(2)10.7.1                 Amendment Number One Lease for Executive Officers, Tarzana, California
(2)10.7.2                 Amendment Number Two to Lease for Executive Officers, Tarzana, California
(2)10.8                   Disclosure Statement and Plan of Reorganization for Voice Powered Technology
                          International, Inc. dated as of January 21, 1998
(2)10.8.1                 Order confirming Amended Disclosure Statement and Plan of Reorganization for Voice Powered
                          Technology International, Inc. dated as of April 29, 1998
(4)10.9.1                 Promissory Note dated May 12, 1998 executed by Voice Powered Technology International,
                          Inc. in favor of Franklin Electronic Publishers, Inc.
(4)10.9.2                 Promissory Note dated May 12, 1998 executed by Voice Powered Technology International,
                          Inc. in favor of Franklin Electronic Publishers, Inc.
(4)10.10.1                Management Services Agreement dated July 31, 1999 between Voice Powered Technology
                          International, Inc. and Franklin Electronic Publishers, Inc.
(4)10.10.2                Amendment to Management Services Agreement dated March 15, 2000 between Voice Powered
                          Technology International, Inc. and Franklin Electronic Publishers, Inc.
(3)16                     Letter, dated September 8, 1998, from BDO Seidman LLP to SEC re Form 8-K Statements
21                        Subsidiaries:  None
(1)23                     Consent of BDO Seidman LLP
(3)99                     Voice Powered Technology International, Inc. Press Release, dated September 11, 1998
</TABLE>


                                       35
<PAGE>

------------------------------------
*        Previously filed with, and incorporated herein by reference from,
         Registrant's Registration Statement on Form SB-2, File No. 33-50506,
         Effective October 20, 1993.

**       Previously filed with, and incorporated herein by reference from,
         Registrant's Form 10-KSB for the year ended December 31, 1993.

***      Previously filed with, and incorporated herein by reference from
         Registrant's Form 10-KSB for the year ended December 31, 1994.

@        Filed separately with the Securities and Exchange Commission with a
         request for confidential treatment.

(1)      Previously filed with, and incorporated herein by reference from
         Registrant's Form 10-KSB for the year ended December 31, 1996.

(2)      Previously filed with, and incorporated herein by reference from
         Registrant's Form 10-KSB for the year ended December 31, 1997.

(3)      Previously filed with, and incorporated herein by reference from
         Registrant's Form 8-K filed on September 11, 1998.

(4)      Previously filed with, and incorporated herein by reference from
         Registrant's Form 10-KSB for the year ended December 31, 1999.


                                       36
<PAGE>

                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

VOICE POWERED TECHNOLOGY INTERNATIONAL,
 INC.


By /s/ Gregory J. Winsky                                          March 29, 2001
  ---------------------------------
  Gregory J. Winsky
  Chairman of the Board;
  Chief Executive Officer

     In accordance  with the  Securities  Exchange Act of 1934,  this report has
been signed below by the following  persons on behalf of the  registrant  and in
the capacities and on the dates indicated.


/s/ Gregory J. Winsky                   Chairman of the Board;    March 29, 2001
------------------------------------    Chief Executive Officer;
Gregory J. Winsky                       Director


/s/ Barry J. Lipsky                     Vice President;           March 29, 2001
------------------------------------    Secretary; Director
Barry J. Lipsky


/s/ Arnold D. Levitt                    Director                  March 29, 2001
-----------------------------------
Arnold D. Levitt


/s/ Edward H. Cohen                     Director                  March 29, 2001
-----------------------------------
Edward H. Cohen


                                       37