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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998
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[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from
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Commission File Number 0-021403
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VOXWARE, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-3934824
- ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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305 College Road East
Princeton, New Jersey 08540
609-514-4100
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(Address, including zip code, and telephone
number (including area code) of registrant's
principal executive office)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the last 90 days. YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares Outstanding at May 15, 1998
- ----------------------------- ----------------------------------
Common Stock, $.001 par value 13,200,895
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VOXWARE, INC.
INDEX
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. Financial Statements (unaudited) PAGE NO.
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Statements of Operations
Three and Nine Months Ended March 31, 1998 and 1997................. 3
Balance Sheets
March 31, 1998 and June 30, 1997.................................... 4
Statements of Cash Flows
Nine Months Ended March 31, 1998 and 1997........................... 5
Notes to Financial Statements........................................... 6
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition......................................... 7
PART II - OTHER INFORMATION
- ---------------------------
Item 5. Other Information.............................................. 15
Item 6. Exhibits and Reports on Form 8-K............................... 15
SIGNATURES.............................................................. 16
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VOXWARE, INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------- ------------------
1998 1997 1998 1997
------- ------- ------- -------
Revenues:
Product revenues:
License fees $ 608 $ 1,647 $ 2,650 $ 3,619
Royalties and recurring
revenues 305 688 1,537 1,303
------- ------- ------- -------
Total product revenues 913 2,335 4,187 4,922
Service revenues 393 77 788 205
------- ------- ------- -------
Total revenues 1,306 2,412 4,975 5,127
------- ------- ------- -------
Cost of revenues:
Cost of product revenues 10 103 107 148
Cost of service revenues 160 43 306 120
------- ------- ------- -------
Total cost of revenues 170 146 413 268
------- ------- ------- -------
Gross profit 1,136 2,266 4,562 4,859
------- ------- ------- -------
Operating expenses:
Research and development 1,064 2,104 3,839 6,042
Sales and marketing 865 1,165 2,919 3,052
General and administrative 519 778 1,669 2,513
------- ------- ------- -------
Total operating expenses 2,448 4,047 8,427 11,607
------- ------- ------- -------
Operating loss (1,312) (1,781) (3,865) (6,748)
Interest income 207 259 649 485
------- ------- ------- -------
Net loss $(1,105) $(1,522) $(3,216) $(6,263)
======= ======= ======= =======
Net loss per share (basic
and diluted) $ (0.08) $ (0.12) $ (0.25) $ (0.57)
======= ======= ======= =======
Shares used in computing
net loss per share
(basic and diluted) 13,086 12,467 12,696 11,008
======= ======= ======= =======
The accompanying notes are an integral part of these statements.
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VOXWARE, INC.
BALANCE SHEETS
(In thousands, except share and per share data)
(unaudited)
March 31, June 30,
1998 1997
----------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 9,147 $ 10,627
Short-term investments 5,586 5,842
Accounts receivable, net of
allowance for doubtful
accounts of $415 and $400 1,569 2,822
Prepaid expenses and other
current assets 342 309
-------- --------
Total current assets 16,644 19,600
Property and equipment, net 448 566
Other assets, net 64 55
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$ 17,156 $ 20,221
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $ 1,252 $ 2,312
Deferred revenues 419 477
-------- --------
Total current liabilities 1,671 2,789
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Deferred rent 316 241
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par
value, 10,000,000 shares
authorized; no shares issued and
outstanding - -
Common stock, $.001 par value,
30,000,000 shares authorized;
13,121,395 and 12,497,258 shares
issued and outstanding 13 13
Additional paid-in capital 29,677 28,488
Unrealized gain (loss) on
available-for-sale securities 3 (2)
Accumulated deficit (14,524) (11,308)
-------- --------
Total stockholders' equity 15,169 17,191
-------- --------
$ 17,156 $ 20,221
======== ========
The accompanying notes are an integral part of these statements.
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VOXWARE, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Nine Months Ended
March 31,
--------------------
1998 1997
-------- --------
Operating activities:
Net loss $(3,216) $(6,263)
Adjustments to reconcile net
loss to net cash used in operating
activities:
Depreciation and amortization 170 170
Provision for doubtful accounts 490 238
Write-offs (475) -
Non-cash directors' compensation 80 -
Changes in assets and liabilities:
Accounts receivable 1,238 (2,287)
Prepaid expenses and other current assets (33) (206)
Other assets (9) 4
Accounts payable and accrued expenses (1,060) 2,339
Deferred revenues (58) 331
Deferred rent 75 199
-------- --------
Net cash used in operating activities (2,798) (5,475)
-------- --------
Investing activities:
Purchases of short-term investments (47,783) (88,542)
Sales and maturities of short-term investments 48,044 72,212
Purchases and property and equipment (52) (161)
-------- --------
Net cash provided by (used in)
investing activities 209 (16,491)
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Financing activities:
Proceeds from issuance of common stock, net - 18,442
Proceeds from exercise of common stock warrants - 762
Proceeds from exercise of stock options 998 -
Issuance of common stock pursuant to Employee
Stock Purchase Plan 111 -
-------- --------
Net cash provided by financing activities 1,109 19,204
-------- --------
Decrease in cash and cash equivalents (1,480) (2,762)
Cash and cash equivalents, beginning of period 10,627 3,837
-------- --------
Cash and cash equivalents, end of period 9,147 1,075
Short-term investments, end of period 5,586 16,324
-------- --------
Cash, cash equivalents and short-term
investments, end of period $14,733 $17,399
======= =======
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Conversion of Redeemable Series A Convertible
Preferred Stock to Common Stock $ - $ 5,938
Accretion of redemption premium on Redeemable
Series A Convertible Preferred Stock $ - $ 4
Unrealized gain on available-for-sale securities $ 5 $ -
======= =======
The accompanying notes are an integral part of these statements.
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VOXWARE, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements as of March 31, 1998 and for the three and
nine month periods ended March 31, 1998 and 1997 are unaudited and reflect
all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim periods. The
financial statements should be read in conjunction with the financial
statements and notes thereto, together with management's discussion and
analysis of financial condition and results of operations, contained in the
Company's Annual Report on Form 10-K which was filed on September 29, 1997,
as amended on Form 10-K which was filed on Form 10-K/A on October 28, 1997,
the Company's Forms 10-Q for the quarterly periods ended September 30, 1997
and December 31, 1997, and in this report on Form 10-Q.
The results of operations for the interim periods ended March 31, 1998
are not necessarily indicative of the results to be expected for the fiscal
year ending June 30, 1998 or any other future periods.
2. NET LOSS PER SHARE
The Company has presented net loss per share for the three and nine
months ended March 31, 1998 and 1997 pursuant to Statement of Financial
Accounting Standards (SFAS) No. 128 "Earnings per Share." Net loss per
share was computed by dividing the net loss by the weighted average number
of common shares outstanding during the three and nine months ended March
31, 1998 and 1997. Due to the Company's net losses for the three and nine
months ended March 31, 1998 and 1997, the effect of including outstanding
common stock options in the calculation of net loss per share would be
anti-dilutive. Therefore, outstanding common stock options have not been
included in the calculation of net loss per share, and as a result, basic
net loss per share is the same as diluted net loss per share for all
periods presented.
3. REVENUE RECOGNITION
The Company generates revenues from two sources: fees from product
licenses and fees for services provided. Product revenues consist of
license fees and royalties and recurring revenues. Product revenues from
license fees are generally recognized upon shipment, provided that there
are no significant post-delivery obligations, persuasive evidence of an
arrangement exists, pricing is fixed or determinable, the payment is due
within one year and collection of the resulting receivable is deemed
probable. Royalties and recurring revenues include royalties, which are
generally based on a percentage of licensees' sales or units shipped, and
pre-determined periodic license fees. Royalty revenues are recognized at
the time
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of the customer's shipment of products incorporating the Company's
technology. Recurring product license fees are generally recognized at the
inception of the renewal period, provided that there are no significant
post-delivery obligations, persuasive evidence of an arrangement exists,
pricing is fixed or determinable, the payment is due within one year and
collection of the resulting receivable is deemed probable. Service revenues
from customer maintenance support, including the amounts bundled with
initial or recurring revenues, are recognized over the term of the
maintenance support period, which is typically one year. Service revenues
from engineering fees are recognized upon customer acceptance or over the
period in which services are provided if customer acceptance is not
required.
In fiscal 1998, the Company adopted the provisions of Statement of
Position 97-2 "Software Revenue Recognition." The adoption had no
significant impact on the accompanying financial statements.
4. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130 "Reporting Comprehensive Income" ("SFAS 130"). This statement requires
companies to classify items of other comprehensive income by their nature
in a financial statement and display the accumulated balance of the other
comprehensive income separately from retained earnings and additional paid-
in capital in the equity section of a statement of financial position. The
Company is required to adopt SFAS 130 in fiscal 1999. Management believes
that SFAS 130 will not have a material effect on the Company's financial
statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS
AND UNCERTAINTIES. SUCH STATEMENTS ARE SUBJECT TO CERTAIN FACTORS WHICH MAY
CAUSE THE COMPANY'S PLANS AND RESULTS TO DIFFER. FACTORS THAT MAY CAUSE
SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THE RATE OF PROGRESS, IF
ANY, OF THE COMPANY'S PRODUCT DEVELOPMENT PROGRAMS AND THE UNCERTAINTY OF
ACCEPTANCE OF THE COMPANY'S PRODUCTS IN THE MARKETPLACE, THE HIGHLY
COMPETITIVE NATURE OF THE COMPANY'S INDUSTRY AND THE COMPANY'S ABILITY TO
COMPETE SUCCESSFULLY, THE COMPANY'S ABILITY TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL, THE COMPANY'S ABILITY TO SUCCESSFULLY ENTER INTO AND MAINTAIN
RELATIONSHIPS WITH THIRD PARTIES AND THE COMPANY'S DEPENDENCE ON SUCH THIRD
PARTIES TO DEVELOP AND MARKET PRODUCTS USING THE COMPANY'S TECHNOLOGY AND
TO DEVELOP A RECURRING REVENUE STREAM TO THE COMPANY, THE COMPANY'S ABILITY
TO MANAGE ITS GROWTH, THE COSTS INVOLVED IN OBTAINING AND ENFORCING PATENTS
AND ANY NECESSARY LICENSES, THE COMPANY'S ABILITY TO OBTAIN ADDITIONAL
FUNDS AS NECESSARY, AND THOSE OTHER RISKS DISCUSSED IN THE COMPANY'S ANNUAL
REPORT ON FORM 10-K.
OVERVIEW
Voxware develops, markets, licenses and supports digital speech and
audio technologies and solutions. MetaVoice, the Company's innovative
speech coding technology, is designed to reproduce high quality speech
while requiring very low communications bandwidth and processing power.
MetaSound, the Company's general audio coding technology built on core
technology licensed from Nippon Telegraph and Telephone Corporation is
specifically suitable for high quality music compression. The Company
licenses its technologies to software and hardware companies for a wide
range of applications and services, and primarily targets the following
four markets: electronic devices, multimedia software, Internet Protocol
(IP) telephony and wireless communications. With respect to IP telephony,
initial deployments in that market have primarily utilized standardized
codec technologies (and not Voxware's proprietary codec technologies). In
addition, initial deployments in IP telephony have been characterized by
bandwidth-rich managed networks (Intranets), which networks generally do
not benefit significantly from low bandwidth solutions such as Voxware's
technologies. Principally, in consequence of these factors, the requirement
for Voxware's technologies in the IP telephony market is not expected to
significantly arise at least for the next two years, if ever. With respect
to the wireless market, the Company is investing resources in efforts to
understand the needs of this market, if any, for its speech compression and
related technologies. There can be no assurance as to the Company's success
in the wireless market, and to date the Company has not generated any
significant revenues in this market.
Since Voxware's inception in August 1993, the Company has raised net
proceeds of approximately $29,610,000 as follows: approximately $8,838,000
through private placements; approximately $18,517,000 through the Initial
Public Offering which was declared effective on October 30, 1996; and
approximately $2,255,000 through other sales of equity securities,
including exercises of common stock options and all outstanding common
stock warrants.
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The Company generates revenues from two sources: fees from product
licenses and fees for services provided. Product revenues consist of two
components: license fees, and royalties and recurring revenues. Voxware's
products are licensed primarily to software and hardware companies which
incorporate the Company's products and technologies into their products.
The Company generally negotiates contract terms with customers on a case by
case basis, with arrangements that have historically included one or more
of the following: initial license fees, quarterly license fees, annual
license fees or royalties based on the licensee's revenue generated or
units shipped of products incorporating the Company's technologies. One of
the Company's objectives is to develop recurring revenue through entering
into licensing agreements with third parties which provide for royalties or
other recurring payments. As a result, the timing and amount of the
Company's revenues are substantially dependent on the timing and efforts of
the Company's licensees in developing and marketing products incorporating
the Company's products and technologies. There can be no assurance as to
the timing or success of any licensee implementation or the timing or
amount of recurring revenues, if any, from any licensee product.
A majority of the Company's licensees compete in the multimedia
Internet software market, which is a relatively new market, and many of the
companies in this market are poorly capitalized, compete against much more
established companies and/or have businesses that are relatively immature.
Many of the licenses entered into in the multimedia Internet software
market have been in existence for a significant period of time and the
Company believes that a significant number of its licensees which compete
in this market have not incorporated, and may never incorporate, Voxware's
technologies into their products. Therefore, the Company may never derive
royalties or other recurring revenues from many of its existing license
agreements in the multimedia Internet software market. While the Company
does not expect the multimedia Internet software market to generate
significant recurring revenues to the Company, if any, the Company expects
to continue to pursue opportunities in that market since that market has
the potential to continue to offer non-recurring revenue opportunities to
the Company through initial license fees and service revenues.
During the three months ended March 31, 1998, the Company restructured
its workforce in connection with the revised strategy of shifting its focus
to markets other than multimedia software, including electronic devices and
wireless communications, which the Company believes have more significant
potential for recurring revenue over the long term. Over at least the next
several quarters, the Company expects to sign fewer new licensing
agreements on a per-quarter basis in comparison to the prior year
comparable periods. At the same time, the Company's objective is to form
relationships with customers that the Company believes have more
significant potential for recurring revenue over the long term than do the
Company's existing licenses, particularly those in the multimedia Internet
software market. There can be no assurance, however, as to the success of
the Company's activities in these markets, or in successfully forming
relationships with such customers.
Service revenues consist of customer support and engineering fees.
Customer support services include providing updates and technical support
to licensees of the Company's products. Engineering services include
providing technical resources and technical assistance to support
customer-specific development efforts, which include porting the Company's
technologies to specific hardware platforms and providing customized speech
and audio solutions to customers.
Software product revenues are generally recognized upon shipment,
provided that there are no significant post-delivery obligations,
persuasive evidence of an arrangement exists, pricing is fixed or
determinable, the payment is due within one year and collection of the
resulting receivable is deemed probable. If an acceptance period is
required, revenues are recognized upon customer acceptance. Royalty
revenues are recognized in the period of customer shipment. For the three
and nine month periods ended March 31, 1998, approximately $305,000 and
$1,537,000, respectively, of royalties and recurring revenues were
recognized. For the three and nine month periods ended March 31, 1997,
approximately $688,000 and $1,303,000, respectively, of royalties and
recurring revenues were recognized. Customer maintenance support revenues
are recognized over the term of the support period, which typically lasts
for one year. Engineering fees are generally recognized upon customer
acceptance or upon delivery if customer acceptance is not required. All
research and development costs are expensed as incurred.
The Company has only a limited operating history upon which an
evaluation of the Company and its prospects can be based. As of March 31,
1998, the Company had an accumulated deficit of $14,524,000. The limited
operating history of the Company makes the prediction of future results of
operations
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impossible and, therefore, the Company's historical revenues should not be
taken as indicative of future revenues. In addition, the Company's
operating results may fluctuate significantly in the future as a result of
a variety of factors, including the level of usage of the Internet, the
budgeting cycles of potential customers, the volume of, and revenues
derived from sales of products by the Company's licensees that incorporate
the Company's products, the rate of new licensing activity, as well as the
termination of existing license agreements, the introduction of new
products or services by the Company or its competitors, pricing changes in
the industry, the degree of success of the Company's efforts to penetrate
its target markets, technical difficulties with respect to the use of
products developed by the Company or its licensees, and general economic
conditions.
RESULTS OF OPERATIONS
REVENUES
Total revenues decreased $1,106,000 from $2,412,000 in the three
months ended March 31, 1997 to $1,306,000 in the three months ended March
31, 1998, reflecting a decrease in the amount of license fees recognized
and a decrease in the amount of royalties and recurring revenues recognized
from customers who licensed the Company's products in previous periods,
offset by an increase in service revenues. On a year-to-date basis, total
revenues decreased $152,000 from $5,127,000 for the nine months ended March
31, 1997 to $4,975,000 for the nine months ended March 31, 1998, reflecting
a decrease in the amount of license fees recognized, offset in part by an
increase in the amount of royalties and recurring revenues recognized from
customers who licensed the Company's products in previous periods, and an
in part by an increase in service revenues. The Company believes that a
variety of factors contributed to the overall decrease in revenues
including, among other things, the aforementioned factors and circumstances
effecting the preponderance of the Company's licensees which compete in the
multimedia Internet software market, and the aforementioned transition of
the Company's focus to markets other than multimedia software.
Specifically, with respect to that transition, in targeting customers in
the electronic devices market, and in aiming to provide customized
solutions to customers in that market, the Company has been selective in
marketing and licensing to customers which the Company believes are more
likely to provide opportunities for high quality, prosperous OEM
relationships than its existing licensees in the multimedia Internet
software market. As stated in the Overview section, over at least the next
several quarters, the Company expects to continue to sign fewer new
licensing agreements on a per-quarter basis in comparison to the prior year
comparable periods. At the same time, the Company's objective is to form
relationships with customers that the Company believes to have more
significant potential for recurring revenue over the long term than its
existing licensees in the multimedia Internet software market. There can be
no assurance however, as to the success of the Company's activities in
these markets, or in successfully forming relationships with such
customers.
One of the Company's customers accounted for 8% and 13% of total
revenues in the three and nine month periods ended March 31, 1998,
respectively, and 29% and 14% of total revenues in the three and nine month
periods ended March 31, 1997. Another of the Company's customers, Netscape
Communications Corporation ("Netscape"), accounted for 31% and 25% of total
revenues in the three and nine month periods ended March 31, 1998,
respectively, and 16% and 17% of total revenues in the three and nine month
periods ended March 31, 1997, respectively. As disclosed in the Company's
report on Form 8-K dated September 30, 1997 and in the Company's report on
Form 10-Q for the three months ended December 31, 1997 dated February 13,
1998, Netscape has discontinued certain of its products, including products
which would incorporate the Company's technologies, and consequently
Voxware and Netscape have entered into a second amendment of their software
license agreement which terminated certain of Netscape's rights pursuant to
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their software license agreement. License fee revenues for the three months
ended March 31, 1998 include a final payment of $400,000 from Netscape
pursuant to this amendment.
Product revenues decreased $1,422,000 from $2,335,000 in the three
months ended March 31, 1997 to $913,000 in the three months ended March 31,
1998. The decrease in product revenues reflects a decrease in the amount of
license fees recognized during the three months ended March 31, 1998
compared to the amount of license fees recognized during the three months
ended March 31, 1997, and a decrease in the amount of royalties and
recurring revenues recognized from customers who licensed the Company's
products in previous periods. In the nine month period ended March 31,
1998, product revenues totaled $4,187,000, representing a $735,000 decrease
from product revenues of $4,922,000 for the nine month period ended March
31, 1997. The decrease in product revenues reflects a decrease in the
amount of license fees recognized during the three months ended March 31,
1998 compared to the amount of license fees recognized during the three
months ended March 31, 1997, offset by an increase in the amount of
royalties and recurring revenues recognized from customers who licensed the
Company's products in previous periods. The Company believes that the
factors discussed in the preceding paragraphs, among other things,
contributed to the overall decreases in product revenues. For the three
month periods ended March 31, 1998 and 1997, approximately 67% and 71% of
the Company's product revenues were attributable to license fees,
respectively, and 33% and 29% were attributable to royalties and recurring
revenues, respectively. For the nine month periods ended March 31, 1998 and
1997, approximately 63% and 74% of the Company's product revenues were
attributable to license fees, respectively, and 37% and 26% were
attributable to royalties and recurring revenues, respectively.
During the three months ended March 31, 1998, the Company recognized
$608,000 in license fees related to five agreements, reflecting a decrease
of $1,039,000 compared to $1,647,000 in license fees related to sixteen
agreements for the three months ended March 31, 1997. In the nine month
period ended March 31, 1998, the Company recognized licensee fee revenues
of $2,650,000, reflecting a decrease of $969,000 from licensee fee revenues
of $3,619,000 for the nine month period ended March 31, 1997. For the three
months ended March 31, 1998, the Company recognized $305,000 in royalties
and recurring revenues, which were derived from a total of seven customers.
These amounts compare to $688,000 in royalties and recurring revenues which
were derived from seven customers during the three months ended March 31,
1997. In the nine month period ended March 31, 1998, the Company recognized
royalties and recurring revenues of $1,537,000, reflecting an increase of
$234,000 from royalties and recurring revenues of $1,303,000 for the nine
month period ended March 31, 1997.
Service revenues were primarily attributable to customer support and
fees for engineering services. For the three months ended March 31, 1998,
service revenues totaled $393,000, reflecting an increase of $316,000 over
service revenues of $77,000 for the three months ended March 31, 1997. In
the nine month period ended March 31, 1998, service revenues totaled
$788,000, reflecting an increase of $583,000 over service revenues of
$205,000 for the nine month period ended March 31, 1997. These increases in
service revenues for the three and nine month periods ended March 31, 1998
over the prior year comparable periods were primarily attributable to
increases in engineering fees earned from porting technologies to
customers' specific hardware platforms and in providing customized speech
and audio solutions to customers.
COST OF REVENUES
Cost of product revenues decreased $93,000 from $103,000 in the three
months ended March 31, 1997 to $10,000 in the three months ended March 31,
1998. In the nine month period ended March 31, 1998, cost of product
revenues were $107,000, reflecting a decrease of $41,000 from cost of
product revenues of $148,000 for the nine month period ended March 31,
1997. The decreases in cost of product revenues
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were directly attributable to the decreases in product revenues recognized
during those periods, as well as a decrease in the costs associated with
the underlying product revenues for the three and nine month periods ended
March 31, 1998 as compared to the costs associated with the underlying
product revenues for the three and nine month periods ended March 31, 1997.
Cost of service revenues consists primarily of the expenses associated
with customer support and engineering services, which consist primarily of
employee compensation and equipment depreciation. Cost of service revenues
increased $117,000 from $43,000 in the three months ended March 31, 1997 to
$160,000 in the three months ended March 31, 1998. In the nine month period
ended March 31, 1998, cost of service revenues were $306,000, reflecting an
increase of $186,000 from cost of service revenues of $120,000 for the nine
month period ended March 31, 1997. These increases in cost of service
revenues were directly attributable to the increase in service revenues
recognized during those periods.
OPERATING EXPENSES
Total operating expenses decreased by $1,599,000 from $4,047,000 in
the three months ended March 31, 1997 to $2,448,000 in the three months
ended March 31, 1998. In the nine month period ended March 31, 1998,
operating expenses were $8,427,000, reflecting a decrease of $3,180,000
from total operating expenses of $11,607,000 for the nine month period
ended March 31, 1997. These decreases in total operating expenses primarily
reflect headcount reductions in application development and support and
other cost reductions associated with the aforementioned restructuring of
the Company's business focus away from consumer application software and
toward an OEM (original equipment manufacturer) model, including reductions
in outside professional services. As of March 31, 1998, the Company's
headcount totaled 58, compared to total headcount of 82 as of December 31,
1997 and 91 as of June 30, 1997.
In comparing the three months ended March 31, 1998 with the three
months ended March 31, 1997, the overall decrease in total operating
expenses was comprised of a $1,040,000 decrease in research and development
expenses, a $300,000 decrease in sales and marketing expenses, and a
$259,000 decrease in general and administrative expenses. During the three
months ended March 31, 1998, the Company decreased accrued expenses by
approximately $300,000, thus reducing operating expenses by the same
amount. This amount related to estimates accrued in previous periods for
certain liabilities and contingencies which are no longer deemed necessary.
In comparing the nine months ended March 31, 1998 with the nine months
ended March 31, 1997, the decrease in total operating expenses consisted of
a $2,203,000 decrease in research and development expenses, a $133,000
decrease in sales and marketing expenses, and an $844,000 decrease in
general and administrative expenses. During the nine months ended March 31,
1998, the Company decreased accrued expenses by approximately $650,000,
thus reducing operating expenses by the same amount. This amount related to
estimates accrued in previous periods for certain liabilities and
contingencies which are no longer deemed necessary.
Research and development expenses primarily consist of employee
compensation and equipment depreciation and lease expenditures related to
product research and development. Research and development expenses
decreased $1,040,000 from $2,104,000 in the three months ended March 31,
1997 to $1,064,000 in the three months ended March 31, 1998. In the nine
month period ended March 31, 1998, research and development expenses were
$3,839,000, reflecting a decrease of $2,203,000 from $6,042,000 incurred
during the nine month period ended March 31, 1997. These decreases in
research and development expenses primarily resulted from restructuring the
Company's business focus away from consumer application software and toward
an OEM (original equipment manufacturer) model, which
11
<PAGE>
requires fewer personnel (including employees and independent contractors)
than a consumer application software business model.
Sales and marketing expenses primarily consist of employee
compensation (including direct sales commissions), travel expenses, trade
shows and costs of promotional materials. Sales and marketing expenses
decreased $300,000 from $1,165,000 in the three months ended March 31, 1997
to $865,000 in the three months ended March 31, 1998. In the nine month
period ended March 31, 1998, sales and marketing expenses were $2,919,000,
reflecting a decrease of $133,000 from $3,052,000 incurred during the nine
month period ended March 31, 1997. These decreases in sales and marketing
expenses were primarily due to the restructuring of the Company's focus to
an OEM model, which requires less promotion and marketing than the previous
consumer application software business model, as well as a decrease in the
size of the Company's sales force and marketing staff from 17 at March 31,
1997 to 15 at March 31, 1998. The decreases realized from the business
model transition were partially offset by increases in expenses related to
the Company's sales offices in Europe and Asia which were opened during the
fourth quarter of fiscal 1997, and expenses incurred in connection with the
formation of a product management and marketing function for the purpose of
employing an OEM business model in its target markets.
General and administrative expenses consist primarily of employee
compensation and fees for insurance, rent, office expenses and professional
services. General and administrative expenses decreased $259,000 from
$778,000 in the three months ended March 31, 1997 to $519,000 in the three
months ended March 31, 1998. In the nine month period ended March 31, 1998,
general and administrative expenses were $1,669,000, reflecting a decrease
of $844,000 from $2,513,000 incurred during the nine month period ended
March 31, 1997. The decreases in general and administrative expenses were
primarily realized through reductions in personnel, recruitment and general
cost savings achieved through expense management.
INTEREST INCOME
Interest income decreased $52,000 to $207,000 for the three months
ended March 31, 1998 from $259,000 for the three months ended March 31,
1997. This decrease primarily reflects the decline in the balance of cash,
cash equivalents and short-term investments which totaled $17,399,000 as of
March 31, 1997 and $14,733,000 as of March 31, 1998. In the nine month
period ended March 31, 1998, interest income was $649,000, reflecting an
increase of $164,000 from $485,000 earned during the nine month period
ended March 31, 1997. This increase in interest income primarily relates to
the timing of the Company's Initial Public Offering ("IPO"), which closed
during November and December 1996 (see "Liquidity and Capital Resources").
As the IPO occurred approximately four months after the start of fiscal
1997, the Company earned approximately five months' interest income on the
remaining net proceeds from the IPO for the nine months ended March 31,
1997, as compared to nine months' interest income earned on the remaining
net proceeds from the IPO for the nine months March 31, 1998.
INCOME TAXES
As of March 31, 1998, the Company had approximately $11,500,000 of
federal net operating loss carryforwards which will begin to expire in 2009
if not utilized. As of March 31, 1998, the Company has provided a full
valuation allowance on the deferred tax asset because of the uncertainty
regarding realizability of these deferred assets, primarily as a result of
considering such factors as the Company's
12
<PAGE>
limited operating history, the volatility of the market in which it
competes, the operating losses incurred to date and the operating losses
anticipated in future periods.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company had a total of $14,733,000 in cash,
cash equivalents and short-term investments consisting of $9,147,000 of
cash and cash equivalents and $5,586,000 in short-term investments. The
Company's cash, cash equivalents and short-term investments portfolio is
liquid and investment grade, consisting of high-grade money-market funds,
United States Government-backed securities and commercial paper and
corporate obligations. Since inception, the Company has primarily financed
its operations through the sale of equity securities.
Cash of $2,798,000 and $5,475,000 was used to fund operations for the
nine months ended March 31, 1998 and 1997, respectively. The decrease in
cash used to fund operations was primarily attributable to the decrease in
the net loss for the nine months ended March 31, 1998 compared to the net
loss for the nine months ended March 31, 1997, offset by changes in certain
operating assets. For the nine months ended March 31, 1998, cash provided
by investing activities was $209,000, which consisted of $261,000 in net
cash proceeds related to short-term investments, offset by $52,000 in
equipment purchases. Cash used in investing activities totaled $16,491,000
for the nine months ended March 31, 1997 which reflected $16,330,000 in net
purchases of short-term investments and $161,000 in equipment purchases.
For the nine months ended March 31, 1998, cash provided by financing
activities totaled $1,109,000, which represents $998,000 in proceeds from
the exercise of common stock options and $111,000 relating to the issuance
of common stock pursuant to the Company's Employee Stock Purchase Plan.
Cash provided by financing activities totaled $19,204,000 for the nine
months ended March 31, 1997, reflecting $18,442,000 in net proceeds from
the Initial Public Offering and $762,000 in proceeds from the exercise of
common stock warrants.
In March 1998, the Company reduced its revolving line of credit with
Silicon Valley Bank from $5,000,000 to $2,000,000 (the "Credit Facility").
Borrowings under the Credit Facility will bear interest at the bank's prime
lending rate, which approximates the prime rate. The Credit Facility
contains certain restrictive financial covenants including a minimum quick
ratio, a minimum tangible net worth requirement, a maximum debt to tangible
net worth ratio and certain other covenants, as defined in the agreement.
In connection with the lease of the Company's office facility, the Company
has outstanding a $300,000 standby letter of credit as of March 31, 1998
naming the lessor of the office facility beneficiary of the standby letter
of credit in the event that the Company defaults on the lease. As this
letter of credit was established under the terms of the Credit Facility,
the Company has $1,700,000 available for borrowing under the Credit
Facility. As of and for the three and nine months ended March 31, 1998,
there were no amounts outstanding under the Credit Facility.
In addition to the Credit Facility, the agreement with Silicon Valley
Bank provides a lease component in the amount of $1,500,000 (the "Lease
Facility") for the purpose of providing a facility for the financing of the
lease stream of payments that the Company owes to an equipment lessor.
In November 1996 and December 1996, the Company closed on an initial
public offering of Common Stock ("Initial Public Offering"). The Company
offered and sold 2,823,237 shares of Common Stock at an initial public
offering price of $7.50 per share. The net proceeds to the Company from the
Initial Public Offering after payment of offering expenses were
approximately $18,517,000.
13
<PAGE>
The Company has no material commitments other than those under normal
building and equipment operating leases. The Company believes that its
current cash, cash equivalents and short-term investments balances will be
sufficient to fund its working capital and capital expenditures
requirements, exclusive of cash required for possible acquisitions of, or
investments in businesses, products and technologies for at least twelve
months beyond March 31, 1998.
14
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Amendment Two to the Software License Agreement by and
between the Company and Netscape Communications
Corporation.+
10.2 Loan Modification Agreement dated March 31, 1998 between
Silicon Valley Bank and the Company.
27.1 Financial Data Schedule (FDS) for current reporting periods
ended March 31, 1998.
27.2 Restated FDS for fiscal YEAR ended JUN-30-1997.
27.3 Restated FDS for fiscal QUARTER ended DEC-31-1996.
27.4 Restated FDS for fiscal QUARTER ended SEP-30-1996.
27.5 Restated FDS for fiscal YEARS ended JUN-30-1996 and 1995.
(b) Reports on Form 8-K. None.
- --------------------------------------------------------------------------------
+ A request for confidential treatment has been made for portions of such
document.
15
<PAGE>
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.
Date: May 15, 1998
VOXWARE, INC.
(Registrant)
By: /s/ Bathsheba Malsheen
--------------------------------------
Bathsheba Malsheen, President and
Chief Executive Officer
By: /s/ Nicholas Narlis
--------------------------------------
Nicholas Narlis, Vice President,
Chief Financial Officer, Treasurer
and Secretary
(Principal Financial Officer and
Principal Accounting Officer)
16
<PAGE>
Exhibit 10.1
Confidential treatment has been requested for portions of this Exhibit. The
Confidential Portions have been redacted and are denoted by [ * * * ]. The
Confidential Portions have been separately filed with the Commission.
AMENDMENT TWO
TO THE
SOFTWARE LICENSE AGREEMENT
BETWEEN
NETSCAPE COMMUNICATIONS CORPORATION
AND
VOXWARE, INC.
THIS AMENDMENT ("Amendment Two") is made and entered into as of March 19, 1998
("Effective Date"), by and between NETSCAPE COMMUNICATIONS CORPORATION, a
California corporation located at 501 East Middlefield Road, Mountain View, CA
94043 ("Netscape"), and VOXWARE, INC., a Delaware corporation located at 305
College Road East, Princeton, NJ 08540 ("Voxware").
RECITALS
The parties entered into a Software License Agreement dated January 31, 1996,
pursuant to which Netscape licensed certain Voxware products for use in Netscape
products (the "Software License Agreement");
The Software License Agreement was amended by Amendment One to the Software
License Agreement, as of December 16, 1997 ("Amendment One"). Amendment One and
the Software License Agreement are collectively referred to herein as the
"Amended Agreement."
Netscape and Voxware now desire to amend the Amended Agreement, subject to the
terms and conditions specified below.
AMENDMENT
1. In lieu of any license fees, engineering fees, royalties or other fees
which would have been due to Voxware under the Amended Agreement other than
those which have already been paid by Netscape and received by Voxware,
Netscape agrees to pay to Voxware the license fee of [ * * * ], which shall
be due in full on or before March 27, 1998. Except as provided for in this
Amendment Two or otherwise by applicable law, upon receipt of such sum,
Netscape shall have no further obligations to Voxware under the Amended
Agreement, and Voxware shall have no claims against Netscape regarding the
Amended Agreement.
17
<PAGE>
2. Except as provided for in this Amendment Two, Voxware shall have no
obligations to Netscape under the Amended Agreement, and Netscape shall
have no claims against Voxware. Netscape shall have no rights or licenses
under the Amended Agreement after the Effective Date other than as provided
for in this Amendment Two.
3. As of the Effective Date, Netscape will not release any new version of a
Netscape product incorporating any portion or derivative of the Voxware
Products (as defined in the Amended Agreement), except that (i) Netscape
may include Voxware Products which have already been delivered pursuant to
the Software License Agreement as of the Effective Date in new versions of
any such Netscape product until immediately following Netscape's first
general commercial release of Netscape Communicator 4.5 (which is currently
scheduled to be released in September 1998), and (ii) Netscape and its
distribution channels may continue to license and distribute the versions
of Netscape products existing and in commercial distribution as of the
Effective Date (including releases pursuant to (i) above) which incorporate
Voxware Products. Subject to the limitations set forth in this Section
regarding incorporation of the Voxware Products into Netscape products, all
sublicenses which are properly granted shall survive this Amendment Two and
continue in full force and effect. Sections II1., 2a., II3., II4., III, IV
and V shall survive this Amendment Two and shall continue in full force and
effect.
IN WITNESS WHEREOF, the parties indicate their agreement with and acceptance of
the terms and conditions contained in this Amendment Two, as of the Effective
Date hereof.
NETSCAPE COMMUNICATIONS VOXWARE, INC.
CORPORATION
/s/ John M. Paul /s/ Kenneth Traub
- ---------------------------------- ------------------------------
Signature Signature
John M. Paul Kenneth Traub
- ---------------------------------- ------------------------------
Print Name Print Name
Senior Vice President Executive Vice President and CFO
- ---------------------------------- ------------------------------
Title Title
March 25, 1998 March 19, 1998
- ---------------------------------- ------------------------------
Date Date
18
<PAGE>
Exhibit 10.2
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of March 31, 1998,
by and between Voxware, Inc. ("Borrower") whose address is 305 College Road
East, Princeton, NJ 08540 and Silicon Valley Bank, a California-chartered bank
("Lender"), with its principal place of business at 3003 Tasman Drive, Santa
Clara, CA 95054 and with a loan production office located at Wellesley Office
Park, 40 William Street, Suite 350, Wellesley, MA 02181, doing business under
the name "Silicon Valley East".
1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other obligations which may be
owing by Borrower to Lender, Borrower has an obligation to Lender pursuant to,
among other documents executed by Borrower, a Promissory Note, dated October 18,
1996 in the original principal amount of Two Million and 00/100 Dollars
($2,000,000.00), as may be amended (the "Revolving Facility"), and a Master
Note, dated May 5, 1997 in the original principal amount of One Million Five
Hundred Thousand and 00/100 Dollars ($1,500,000.00) (the "Lease Facility"). The
Revolving Facility and the Lease Facility are sometimes referred to collectively
herein as the "Notes"). The Notes, together with other promissory notes from
Borrower to Lender, are governed by the terms of a Letter Agreement, dated
October 18, 1996, between Borrower and Lender, as such agreement may be amended
from time to time (the "Loan Agreement"). Capitalized terms used but not
otherwise defined herein shall have the same meaning as in the Loan Agreement.
As of the date hereof, there is no amount oustanding under the Revolving
Facility.
Hereinafter, all obligations owing by Borrower to Lender shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL: Repayment of the Indebtedness is secured by a
financing statement and security agreement which Lender shall hold and not
perfect until certain events occur as described therein.
Hereinafter, the above-described security documents, together with all other
documents securing payment of the Indebtedness shall be referred to as the
"Security Documents". Hereinafter, the Security Documents, together with all
other documents evidencing or securing the Indebtedness shall be referred to as
the "Existing Loan Documents."
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Revolving Facility.
1. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on March 30, 1999. In
addition, Borrower will pay regular monthly payments of accrued
unpaid interest due as of each payment date, beginning April 30,
1998, and all subsequent interest payments are due on the same
day of each month thereafter.
2. The principal amount is hereby decreased to Two Million and
00/100 Dollars ($2,000,000.00).
B. Modification to Loan Agreement.
1. The paragraph beginning with the words "Funds shall be advanced_"
is hereby amended in its entirety as follows:
$750,000.00 (the "Non-Formula Portion") shall be available under
the Revolving Facility without implementation of the borrowing
base formula, contained herein. Funds shall be advanced under the
Revolving Facility as follows: the lesser of (a) $2,000,000.00
minus the
19
<PAGE>
face amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) minus the Foreign Exchange
Reserve minus all amounts outstanding under the Lease Facility or
(b) Non-Formula Portion plus the Borrowing Base Formula which is
the sum of (i) ninety five percent (95%) of cash pledged to and
held by Lender plus (ii) eighty percent (80%) of eligible
domestic accounts receivable minus the (iii) face amount of
outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit) minus (iv) the Foreign Exchange Reserve minus
(v) all amounts outstanding under the Lease Facility. Eligible
Accounts Receivable shall include, but not be limited to, those
accounts outstanding less than 90 days from the date of invoice,
excluding, foreign, government, contra, and intercompany
accounts; and exclude accounts wherein 50% or more of the account
is outstanding more than 90 days from the date of invoice. Any
account which alone exceeds 25% of total accounts will be
ineligible to the extent said account exceeds 25% of total
accounts. Also exclude any credit balances which are aged past 90
days. Also ineligible are any accounts which Lender in its sole
judgment excludes for valid credit reasons.
3. The Financial Covenants are hereby amended in their entirety as
follows:
Quick Ratio - (Tested Monthly) Maintain a minimum Quick Ratio of
2.50 to 1.00. Quick Ratio is defined as cash and equivalents plus
accounts receivable divided by total current liabilities less
deferred revenue.
Tangible Net Worth - (Tested Monthly) Maintain a minimum Tangible
Net Worth (TNW) of $10,000,000.00. TNW is defined as net worth
plus Subordinated Debt (debt which is formally subordinated to
the Lender) less intangibles (including but not limited to
Goodwill, Capitalized Software and Excess Purchase Costs).
Debt to Tangible Net Worth Ratio - (Tested Monthly) Maintain a
ratio of total liabilities to tangible net worth less deferred
revenue not to exceed 1.00 to 1.00.
4. Borrower shall provide to Lender a Borrowing Base Certificate,
together with an aged list of accounts receivable and accounts
payable, to be received within 20 days after the close of each
month, when borrowing in excess of $750,000.00. Lender shall
conduct an audit of Borrower's books and records when borrowings
under the Revolving Facility exceed $750,000.00. Thereafter, such
audits shall be conducted on an annual basis.
4. PAYMENT OF LOAN FEE. Borrower shall pay Lender a fee in the amount of Eight
Thousand and 00/100 Dollars ($8,000.00),plus all out-of-pocket expenses (the
"Loan Fee").
5. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
6. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
defenses against the obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Indebtedness, Lender is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Lender's agreement to modifications to the existing Indebtedness pursuant to
this Loan Modification Agreement in no way shall obligate Lender to make any
future
20
<PAGE>
modifications to the Indebtedness. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Indebtedness. It is the intention of
Lender and Borrower to retain as liable parties all makers and endorsers of
Existing Loan Documents, unless the party is expressly released by Lender in
writing. No maker, endorser, or guarantor will be released by virtue of this
Loan Modification Agreement. The terms of this Paragraph apply not only to this
Loan Modification Agreement, but also to all subsequent loan modification
agreements.
8. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
properties, unconditionally, the non-exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts in
any action, suit, or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Lender cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Clara County, California.
9. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Lender (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Lender in California).
10. COUNTERPARTS. This [Loan Modification Agreement] may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
11. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first
written above.
21
<PAGE>
BORROWER:
VOXWARE, INC.
By: /s/ Kenneth Traub
------------------------------------
Name: Kenneth Traub
---------------------------------
Title: Executive VP & CFO
---------------------------------
LENDER:
SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ Jane A. Braun
------------------------------------
Name: Jane A. Braun
---------------------------------
Title: Vice President
---------------------------------
SILICON VALLEY BANK
By: /s/ Amy B. Young
------------------------------------
Name: Amy B. Young
---------------------------------
Title: Vice President
---------------------------------
(Signed at Santa Clara County, CA)
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VOXWARE,
INC. FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1998
<PERIOD-START> JAN-01-1998 JUL-01-1998
<PERIOD-END> MAR-31-1998 MAR-31-1998
<CASH> 9,147 9,147
<SECURITIES> 5,586 5,586
<RECEIVABLES> 1,984 1,984
<ALLOWANCES> 415 415
<INVENTORY> 0 0
<CURRENT-ASSETS> 16,644 16,644
<PP&E> 965 965
<DEPRECIATION> 517 517
<TOTAL-ASSETS> 17,156 17,156
<CURRENT-LIABILITIES> 1,671 1,671
<BONDS> 0 0
0 0
0 0
<COMMON> 13 13
<OTHER-SE> 15,156 15,156
<TOTAL-LIABILITY-AND-EQUITY> 17,156 17,156
<SALES> 1,306 4,975
<TOTAL-REVENUES> 1,306 4,975
<CGS> 10 107
<TOTAL-COSTS> 170 413
<OTHER-EXPENSES> 2,448 8,427
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,105) (3,216)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,105) (3,216)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,105) (3,216)
<EPS-PRIMARY> (0.08) (0.25)
<EPS-DILUTED> (0.08) (0.25)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VOXWARE,
INC. FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 10,627
<SECURITIES> 5,842
<RECEIVABLES> 3,222
<ALLOWANCES> 400
<INVENTORY> 0
<CURRENT-ASSETS> 19,600
<PP&E> 913
<DEPRECIATION> 347
<TOTAL-ASSETS> 20,221
<CURRENT-LIABILITIES> 2,789
<BONDS> 0
0
0
<COMMON> 13
<OTHER-SE> 17,178
<TOTAL-LIABILITY-AND-EQUITY> 20,221
<SALES> 7,779
<TOTAL-REVENUES> 7,779
<CGS> 208
<TOTAL-COSTS> 372
<OTHER-EXPENSES> 15,173
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,044)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,044)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,044)
<EPS-PRIMARY> (0.69)
<EPS-DILUTED> (0.69)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VOXWARE,
INC. FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31,1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997
<PERIOD-START> OCT-01-1996 JUN-01-1996
<PERIOD-END> DEC-31-1996 DEC-31-1996
<CASH> 1,038 1,038
<SECURITIES> 18,603 18,603
<RECEIVABLES> 1,354 1,354
<ALLOWANCES> 200 200
<INVENTORY> 0 0
<CURRENT-ASSETS> 20,875 20,875
<PP&E> 888 888
<DEPRECIATION> 232 232
<TOTAL-ASSETS> 21,998 21,998
<CURRENT-LIABILITIES> 2,527 2,527
<BONDS> 0 0
0 0
0 0
<COMMON> 12 12
<OTHER-SE> 19,313 19,313
<TOTAL-LIABILITY-AND-EQUITY> 21,998 21,998
<SALES> 1,512 2,715
<TOTAL-REVENUES> 1,512 2,715
<CGS> 21 45
<TOTAL-COSTS> 72 122
<OTHER-EXPENSES> 4,038 7,560
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (2,409) (4,741)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,409) (4,741)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,409) (4,741)
<EPS-PRIMARY> (0.24) (0.60)
<EPS-DILUTED> (0.24) (0.60)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VOXWARE,
INC. FINANCIAL STATEMENTS FOR THE 3 MONTHS ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,096
<SECURITIES> 0
<RECEIVABLES> 964
<ALLOWANCES> 100
<INVENTORY> 0
<CURRENT-ASSETS> 2,980
<PP&E> 872
<DEPRECIATION> 175
<TOTAL-ASSETS> 4,244
<CURRENT-LIABILITIES> 1,511
<BONDS> 0
5,942
0
<COMMON> 6
<OTHER-SE> (3,215)
<TOTAL-LIABILITY-AND-EQUITY> 4,244
<SALES> 1,203
<TOTAL-REVENUES> 1,203
<CGS> 50
<TOTAL-COSTS> 50
<OTHER-EXPENSES> 3,522
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,332)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,332)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,332)
<EPS-PRIMARY> (0.39)
<EPS-DILUTED> (0.39)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VOXWARE,INC.
FINANCIAL STATEMENTS FOR YEARS ENDED JUNE 30, 1996 AND JUNE 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1995
<PERIOD-START> JUL-01-1995 JUL-01-1994
<PERIOD-END> JUN-30-1996 JUN-30-1995
<CASH> 3,837 1,523
<SECURITIES> 0 0
<RECEIVABLES> 495 0
<ALLOWANCES> 25 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,361 1,528
<PP&E> 736 149
<DEPRECIATION> 124 21
<TOTAL-ASSETS> 5,336 1,667
<CURRENT-LIABILITIES> 474 111
<BONDS> 0 0
5,938 0
0 0
<COMMON> 12 12
<OTHER-SE> (1,087) 1,545
<TOTAL-LIABILITY-AND-EQUITY> 5,336 1,666
<SALES> 1,607 0
<TOTAL-REVENUES> 1,607 0
<CGS> 45 0
<TOTAL-COSTS> 4,561 1,234
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (2,867) (1,169)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,867) (1,169)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,867) (1,169)
<EPS-PRIMARY> (0.50) (0.24)
<EPS-DILUTED> (0.50) (0.24)
</TABLE>
