<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 21, 1999
Voxware, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-021403 36-3934824
- ----------------- ---------------- -------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
305 College Road East, Princeton, New Jersey 08540
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 514-4100
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Not Applicable
(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets.
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On September 21, 1999, Voxware, Inc. (the "Company" or "Voxware") sold to
Ascend Communications, Inc.(a subsidiary of Lucent Technologies, Inc.)
substantially all of the assets of Voxware's speech coding business pursuant to
an agreement, dated February 4, 1999, as amended (the "Sale Agreement"). The
assets sold to Ascend include patents, patent applications, unfiled patent
applications, inventions, trademark registrations and applications, common law
trademarks, third party software and license rights, personal computers and
monitors, network equipment and studio recording equipment. In addition, the
liabilities assigned to, and assumed by, Ascend are all of Voxware's obligations
under the contracts and registrations sold to Ascend that arise and are to be
performed after the closing of the sale, and tax obligations relating to the
transfer of the assets.
In consideration of the sale of assets to Ascend, Ascend agreed to pay
$5,100,000 in cash and to assume the liabilities described above. The purchase
price was paid or is payable in the following manner: (1) $204,000 was paid on
January 13, 1999, (2) $4,146,000 was paid at the closing on September 21, 1999
and (3) $750,000 is being held in an escrow account until March 21, 2001 (18
months from the closing date), as a reserve for any amounts that Voxware may
have to pay to Ascend pursuant to the indemnification provisions in the Sale
Agreement.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Financial Statements of Business Acquired.
Not applicable
(b) Pro Forma Financial Information.
Voxware's unaudited pro forma condensed combined statements of operations
for the year ended June 30, 1999 and unaudited pro forma condensed combined
balance sheet as of June 30, 1999, reflecting Voxware's acquisition of
substantially all of the assets of Verbex and Voxware's sale of substantially
all of its speech coding assets to Ascend are included herein.
(c) Exhibits.
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2.1 Asset Purchase Agreement, dated February 4, 1999, by and between
Ascend Communications, Inc. and Voxware, Inc., as amended*
_______________
* Filed as an exhibit to the Company's Definitive Proxy Statement on Schedule
14A, dated August 12, 1999.
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ITEM 7. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Basis of Presentation
On February 18, 1999, Voxware completed the acquisition of substantially all
of the assets of Verbex for approximately $5,200,000 in cash, of which $400,000
was placed in escrow for a period of at least six months from the closing date
and would not be paid to Verbex to the extent that the purchase price paid to
Verbex would be adjusted downward pursuant to a net asset value calculation set
forth in the agreement with Verbex. We expect that the purchase price adjustment
will approximate $250,000 and be paid from escrow in October 1999. The Verbex
transaction has been accounted for as a purchase by Voxware pursuant to
Accounting Principles Board Opinion No. 16 "Business Combinations" ("APB 16").
The presentation below also reflects the effect of the sale of substantially all
of the assets relating to Voxware's digital speech coding business to Ascend for
aggregate cash consideration of $5,100,000, of which $750,000 was placed in
escrow for a period of 18 months to secure Voxware's indemnification obligations
under the agreement to sell the assets with Ascend. On September 21, 1999, the
Ascend transaction was approved by Voxware's Stockholders, and the transaction
was closed.
The following unaudited pro forma condensed combined financial information
combines the historical statements of operations of Voxware with the historical
statements of operations of Verbex after giving effect to the Verbex
transaction and the sale to Ascend, as if the Verbex transaction and the sale
to Ascend had each occurred on July 1, 1998, and the historical balance sheet
of Voxware as if the sale to Ascend had occurred on June 30, 1999.
The pro forma amounts below are presented for informational purposes only.
These pro forma amounts are not necessarily indicative of the results of
operations of the combined Voxware-Verbex company that would have actually
occurred had the Verbex transaction and the sale to Ascend been consummated as
of July 1, 1998 or of the financial condition of the combined Voxware-Verbex
company had the sale to Ascend been consummated as of June 30, 1999, or of the
future results of operations or financial condition of the combined Voxware-
Verbex company.
The unaudited pro forma condensed combined statements of operations and the
unaudited pro forma condensed combined balance sheet do not reflect:
. any cost savings Voxware expects to achieve as a result of the Verbex
transaction, in particular the elimination of costs associated with
administrative activities and facilities; or
. any cost savings that Voxware expects to achieve as a result of the sale
to Ascend, in particular those expenses associated with Voxware's
digital speech coding business purchased by Ascend, and the costs
associated with the research, development, sales and marketing expenses
associated with Voxware's digital speech coding business purchased by
Ascend.
We will continue to have revenue from existing licensees of our speech coding
technology in the multimedia and consumer devices markets after the sale to
Ascend, in the form of periodic license renewal fees, royalties and service
fees. With the consent of Ascend, we may also license our speech coding
technologies after the sale for uses that are not competitive with Ascend.
Although we do not have any agreements or arrangements with Ascend relating to
any general or specific guidelines for obtaining Ascend's consent, we believe
that Ascend will consent to our licensing the speech coding technologies in the
multimedia and consumer devices markets. We do not believe that we will have
any revenues from new licensees in the IP telephony market. Accordingly, we have
eliminated from the accompanying pro forma financial statements the revenues and
related cost of revenues generated from the Internet Protocol ("IP") telephony
market. Voxware historically has not separated or eliminated the operating
expenses associated with the technologies sold to Ascend because Voxware did not
dedicate employees or resources exclusively to the IP telephony market or its
other target markets. For example, each of Voxware's engineers, at various
times, generally researched and developed technologies that were used in each of
the multimedia, consumer devices and IP telephony markets; Voxware did not
organize its research, development, sales or marketing teams to specifically
service and support technologies for its individual target markets. Rather,
Voxware's employees and other resources were commingled among its various target
markets. As such, there are no operating expenses whose elimination is directly
attributable to the transaction.
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Our revenue from licensing speech coding technologies and audio compression
technologies has been decreasing over the last two years. Therefore, we expect
that, even if Ascend is willing to give its consent, our new licensing activity
relating to the speech coding technologies will decrease significantly after the
sale. Further, over time, as we focus on the Verbex business, we expect that
revenues from licenses of speech coding technologies will become a less
significant part of our revenues. Therefore, the following unaudited pro forma
condensed combined statements of operations may not be indicative of our future
results of operations.
There can be no assurance that Voxware will realize any cost savings from the
Verbex transaction or the sale to Ascend.
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Voxware, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended June 30, 1999
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical(1) Adjustments Adjustments
--------------- ----------- -----------
Purchase Sale to Pro Forma
Voxware Verbex from Verbex Subtotal Ascend Combined
------- ------ ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product revenues:
License fees........ $ 705 $ -- $ -- $ 705 $(100) 4c $ 605
Royalties and
recurring
revenues........... 511 -- -- 511 (3) 4c 508
Net product sales... 791 1,630 -- 2,421 -- 2,421
------- ------ ----- ------- ----- -------
Total product
revenues......... 2,007 1,630 -- 3,637 (103) 3,534
Service revenues........ 879 214 -- 1,093 (298) 4c 795
------- ------ ----- ------- ----- -------
Total revenues...... 2,886 1,844 -- 4,730 (401) 4,329
Total cost of
revenues........... 971 602 -- 1,573 (255) 4c 1,318
------- ------ ----- ------- ----- -------
Gross profit...... 1,915 1,242 -- 3,157 (146) 3,011
------- ------ ----- ------- ----- -------
Operating expenses:
Research and
development.......... 2,058 641 -- 2,699 -- 2,699
Sales and marketing... 2,513 599 -- 3,112 -- 3,112
General and
administrative....... 1,691 286 -- 1,977 -- 1,977
Amortization of
purchased
intangibles.......... 478 -- 844 4a 1,322 -- 1,322
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Total operating
expenses........... 6,740 1,526 844 9,110 -- 9,110
------- ------ ----- ------- ----- -------
Operating loss...... (4,825) (284) (844) (5,953) (146) (6,099)
Interest income
(expense), net......... 539 (264) 268 4b 543 -- 543
------- ------ ----- ------- ----- -------
Net loss................ $(4,286) $ (548) $(576) $(5,410) $(146) $(5,556)
======= ====== ===== ======= ===== =======
Basic and diluted net
loss per common share.. $ (0.32) $ (0.42)
======= =======
Weighted average number
of common shares
outstanding............ 13,209 13,209
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</TABLE>
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(1) Verbex historical information is for the period July 1, 1998 through
February 18, 1999, the date of Voxware's acquisition of substantially all
of the assets of Verbex. All activity for the Verbex business after
February 18, 1999 is included in the Voxware column.
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Voxware, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 30, 1999
(In thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments
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Sale to Pro Forma
Voxware Ascend Combined
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<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $ 2,438 $ 4,350 4c $ 6,788
Short-term investments.................... 2,008 -- 2,008
Accounts receivable, net.................. 989 -- 989
Inventory, net............................ 249 -- 249
Prepaid expenses and other current
assets................................... 778 (325) 4c 453
Restricted cash........................... 604 (204) 4c 400
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Total current assets.................... 7,066 3,821 10,887
Property and equipment, net................. 395 (25) 4c 370
Intangibles................................. 4,680 -- 4,680
Other assets, net........................... 451 -- 451
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$ 12,592 $ 3,796 $ 16,388
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LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..... $ 2,089 $ 96 4c $ 2,185
Deferred revenues......................... 531 -- 531
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Total current liabilities............... 2,620 96 2,716
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Deferred rent............................... 263 -- 263
Commitments and contingencies
Stockholders' equity:
Preferred stock........................... -- -- --
Common stock.............................. 13 -- 13
Deferred compensation..................... -- -- --
Additional paid-in capital................ 29,995 -- 29,995
Unrealized gain on available-for-sale
securities............................... 4 -- 4
Accumulated deficit....................... (20,303) 3,700 4c (16,603)
-------- -------- --------
Total stockholders' equity.............. 9,709 3,700 13,409
-------- -------- --------
$ 12,592 $ 3,796 $ 16,388
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</TABLE>
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NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
1. SIGNIFICANT ACCOUNTING POLICIES
There were no material differences in the Voxware and Verbex (the "Companies")
significant accounting policies, and therefore, no consideration has been given
to conforming the Companies' significant accounting policies in this pro forma
presentation. For further information on the Companies' significant accounting
policies, see the notes to the financial statements included in Voxware, Inc's
10-K filed on September 28, 1999.
2. PURCHASE PRICE AND SALES PRICE
Under the terms of the sale to Ascend, Voxware sold substantially all of the
assets relating to its speech coding business to Ascend for aggregate cash
consideration of $5,100,000, of which $750,000 was placed in escrow for a period
of 18 months to secure Voxware's indemnification obligations under the agreement
with Ascend.
Under the terms of the Verbex transaction, Voxware paid $4,800,000 cash on
the date of the closing (February 18, 1999) and placed in escrow $400,000 (the
"Escrowed Price") for a period of at least six months from the date of the
closing. Voxware used hindsight six months from closing to determine which
assets and liabilities were realized, and accordingly, the purchase price
adjustment totaled $302,000. We expect the purchase price adjustment to be paid
from Escrow in October 1999. The remaining $98,000 will revert to Voxware.
3. LOSS PER COMMON SHARE
The combined Voxware-Verbex company has presented its loss per common share
for the year ended June 30, 1999 pursuant to Statement of Financial Accounting
Standards (SFAS) No. 128 "Earnings per Share" and the Securities and Exchange
Commission Staff Accounting Bulletin No. 98.
Basic loss per common share was computed by dividing net loss applicable to
common stockholders by the weighted average number of shares of common stock
outstanding during the year ended June 30, 1999. Diluted loss per common share
has not been presented, since the impact on loss per share using the treasury
stock method is anti-dilutive due to Voxware's losses.
4. PRO FORMA ADJUSTMENTS
(a) The approximate purchase price for the acquisition of Verbex was
$5,400,000, which was comprised of the cash payment of $4,800,000 on the closing
date, an estimated purchase price adjustment of $250,000 which we expect to pay
in October 1999 and
<PAGE>
transaction costs of approximately $350,000. The application of the purchase
method of accounting for the Verbex acquisition resulted in approximately
$5,138,000 in excess of purchase price over net tangible assets acquired. The
purchase price was allocated among the following items: capitalized software and
underlying intellectual property rights, value added reseller agreements and
relationships, customer lists and engineering workforce, and goodwill. These
intangibles are being amortized over 4 years which represents the estimated
economic life of these assets. The Unaudited Pro Forma Condensed Combined
Statements of Operations reflect the amortization of intangibles totaling
$1,322,000 for the year ended June 30, 1999.
(b) The Unaudited Pro Forma Condensed Combined Financial Statements also
reflect a reduction of interest expense related to Verbex's notes payable to
stockholders, which Voxware did not assume as a result of the Verbex
transaction.
(c) The Unaudited Pro Forma Condensed Combined Balance Sheet gives effect to
the sale of substantially all of the assets relating to Voxware's speech coding
business to Ascend. The Unaudited Pro Forma Condensed Combined Balance Sheet
reflects the receipt of $4,146,000 in cash from Ascend upon closing of the
transaction in September 1999, and the reclassification from restricted cash to
cash and cash equivalents of $204,000 previously paid to Voxware by Ascend. The
Unaudited Pro Forma Condensed Combined Balance Sheet also reflects the reversal
of $325,000 in deferred costs previously paid in relation to the Ascend
transaction, accrued transaction costs totaling $300,000, partially offset by
the reversal of the $204,000 previously paid by Ascend that is included in
accrued liabilities as of June 30, 1999, property and equipment transferred to
Ascend totaling $25,000, and a gain on the sale to Ascend totaling $3,700,000.
The sale to Ascend does not include our rights and obligations under our
existing license agreements. As part of the sale, we will receive a license from
Ascend to use the speech coding technologies necessary to service those existing
licensees. With the consent of Ascend, we may also license the speech coding
technologies to new licensees for uses that are not competitive with Ascend.
While we will continue to have revenue from existing and possibly new licensees
of our speech coding technology in the multimedia and consumer devices markets
after the sale to Ascend, we will not have any revenues from new licensees in
the IP telephony market. Accordingly, we have eliminated from the accompanying
pro forma financial statements the revenues and related cost of revenues
generated from the IP telephony market.
<PAGE>
The Unaudited Pro Forma Condensed Combined Statements of Operations for the
year ended June 30, 1999 reflect the elimination of revenues derived from, and
cost of revenues associated with, the licensing and sale of technology for use
in the IP telephony market. No operating expenses have been eliminated from the
pro forma statements of operations because Voxware does not separate its
operating expenses by target market, nor does Voxware dedicate employees or
resources exclusively to the IP telephony market or its other target markets.
For example, each of Voxware's engineers, at various times, generally researched
and developed technologies that were used in each of the multimedia, consumer
devices and IP telephony markets; Voxware did not organize its research,
development, sales or marketing teams to specifically service and support
technologies for its individual target markets. Rather, Voxware's employees and
other resources were commingled among employees and other resources. As such,
there are no operating expenses whose elimination is directly attributable to
the transaction.
Voxware expects to record a gain on the sale to Ascend of approximately
$3,700,000 in the year ending June 30, 2000, which gain has not been reflected
in the Unaudited Pro Forma Condensed Combined Statements of Operations
presented. Voxware may also record a gain of up to $750,000 upon receipt of the
final payment from Ascend which will be held in escrow until 18 months following
the closing to secure our indemnification obligations under the agreement with
Ascend. The gain associated with the final $750,000 payment has not been
reflected in the accompanying Unaudited Pro Forma Condensed Combined Financial
Statements.
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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 hereunto duly authorized.
VOXWARE, INC.
Date: October 5, 1999 By: /s/ Nicholas Narlis
--------------------------------------
Nicholas Narlis, Vice President,
Chief Financial Officer, Secretary
and Treasurer
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INDEX TO EXHIBITS
Exhibit Description
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2.1 Asset Purchase Agreement, dated February 4, 1999, by and between
Ascend Communications, Inc. and Voxware, Inc., as amended*
_______________
* Filed as an exhibit to the Company's Definitive Proxy Statement on Schedule
14A, dated August 12, 1999.
