<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended March 31, 1999
--------------
[ ] 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
VOXWARE, INC.
(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.)
305 College Road East
Princeton, New Jersey 08540
609-514-4100
(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 July 31, 1999
- ----------------------------- -----------------------------------
Common Stock, $.001 par value 13,392,617
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<PAGE>
VOXWARE, INC.
INDEX
PART I - FINANCIAL INFORMATION
- ------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Statements of Operations
Three and Nine Months Ended March 31, 1999, 1998 and 1997................. 3
Consolidated Balance Sheets
March 31, 1999, June 30, 1998, March 31, 1998 and March 31, 1997.......... 4
Consolidated Statements of Cash Flows
Nine Months Ended March 31, 1999 , 1998 and 1997.......................... 5
Notes to Consolidated Financial Statements................................... 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition........................................................ 9
PART II - OTHER INFORMATION
- ---------------------------
Item 5. Other Information..................................................... 24
Item 6. Exhibits and Reports on Form 8-K...................................... 24
SIGNATURES.................................................................................... 25
- ----------
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Voxware, Inc. and Subsidiary
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1997 1999 1998 1997
------ ----- ------ ------ ------ ------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product revenues:
Product sales...................................... $ 129 $ --- $ --- $ 129 $ --- $ ---
License fees....................................... 210 608 1,647 661 2,650 3,619
Royalties and recurring revenues................... 135 305 688 457 1,537 1,303
-------- ------ ------- ------- ------- --------
Total product revenues......................... 474 913 2,335 1,247 4,187 4,922
Service revenues..................................... 136 393 77 626 788 205
-------- ------ ------- ------- ------- --------
Total revenues..................................... 610 1,306 2,412 1,873 4,975 5,127
-------- ------ ------- ------- ------- --------
Cost of revenues:
Cost of product revenues........................... 62 10 103 62 137 148
Cost of service revenues........................... 85 160 43 322 306 120
-------- ------ ------- ------- ------- --------
Total cost of revenues......................... 147 170 146 384 443 268
-------- ------ ------- ------- ------- --------
Gross profit................................... 463 1,136 2,266 1,489 4,532 4,859
-------- ------ ------- ------- ------- --------
Operating expenses:
Research and development........................... 544 1,113 2,104 1,655 3,888 6,042
Sales and marketing................................ 514 971 1,165 1,884 3,025 2,946
General and administrative......................... 454 519 778 1,312 1,669 2,513
Amortization of purchased intangibles.............. 147 --- --- 147 --- --
-------- ------ ------- ------- ------- --------
Total operating expenses......................... 1,659 2,603 4,047 4,998 8,582 11,501
-------- ------ ------- ------- ------- --------
Operating loss................................... (1,196) (1,467) (1,781) (3,509) (4,050) (6,642)
Interest income..................................... 118 207 259 473 649 485
-------- ------ ------- ------- ------- --------
Net loss............................................ (1,078) (1,260) (1,522) (3,036) (3,401) (6,157)
Accretion of preferred stock to
redemption value............................... --- --- --- --- --- (5)
Net loss applicable to common
stockholders................................... (1,078) (1,260) (1,522) (3,036) (3,401) (6,162)
======== ====== ======= ======= ======= =========
Basic and diluted net loss
per common share................................... $ (0.08) (0.10) $(0.12) (0.23) $(0.27) $ (0.56)
======== ====== ======= ======= ======= =========
Weighted average number of
common shares outstanding........................... 13,344 13,086 12,467 13,321 12,696 10,973
======== ====== ======= ======= ======= =========
</TABLE>
The accompanying notes are an integral part of these statements
3
<PAGE>
Voxware, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, June 30, March 31, March 31,
1999 1998 1998 1997
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited)
(In thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 1,827 $ 9,149 $ 9,147 $ 1,075
Short-term investments............................................. 3,516 4,388 5,586 16,324
Accounts receivable, net........................................... 804 1,254 1,569 2,519
Inventory, net 240 --- --- ---
Prepaid expenses and other current assets 620 268 342 259
Restricted cash 604 --- --- ---
----------- ----------- ----------- -----------
Total current assets 7,611 15,059 16,644 20,177
Property and equipment, net 344 407 448 603
Intangible assets, net 5,153 --- --- ---
Other assets, net 489 91 64 360
----------- ----------- ----------- -----------
$ 13,597 $ 15,557 $ 17,156 $ 21,140
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.............................. $ 2,296 1,097 $ 1,252 $ 2,598
Deferred revenues.................................................. 91 219 419 440
----------- ----------- ----------- -----------
Total current liabilities...................................... 2,387 1,316 1,671 3,038
----------- ----------- ----------- -----------
Deferred rent 282 328 316 199
----------- ----------- ----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 10,000,000 shares authorized;
none issued and outstanding........................... --- --- --- ---
Common stock, $.001 par value, 30,000,000 shares authorized;
13,343,851, 13,292,524, 13,121,395 and,12,466,983 shares issued
and outstanding at March 31, 1999, June 30, 1998, March 31, 1998
and March 31, 1997, respectively 13 13 13 12
Additional paid-in capital 29,965 29,915 29,677 28,317
Unrealized gain (loss) on available-for-sale securities 3 2 3 (6)
Accumulated deficit (19,053) (16,017) (14,524) (10,420)
----------- ----------- ----------- -----------
Total stockholders' equity 10,928 13,913 15,169 17,903
----------- ----------- ----------- -----------
$ 13,597 $ 15,557 $ 17,156 $ 21,140
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
Voxware, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Operating Activities:
Net loss.................................................................... $ (3,036) $ (3,401) $ (6,157)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization.............................................. 302 170 170
Provision for doubtful accounts............................................ 105 490 238
Stock-based directors' compensation........................................ --- 80 ---
Changes in assets and liabilities:
Accounts receivable........................................................ 801 763 (2,287)
Inventory.................................................................. (22) ---
Prepaid expenses and other current assets.................................. (339) (33) (206)
Restricted cash-current.................................................... (604) --- ---
Other assets............................................................... (384) (9) 4
Accounts payable and accrued expenses...................................... 354 (875) 2,233
Deferred revenues.......................................................... (160) (58) 331
Deferred rent.............................................................. (49) 75 199
--------- -------- --------
Net cash used in operating activities................................... (3,032) (2,798) (5,475)
--------- -------- --------
Investing Activities:
Purchases of short-term investments......................................... (16,831) (47,783) (88,542)
Sales and maturities of short-term investments.............................. 17,704 48,044 72,212
Purchases of property and equipment......................................... (50) (52) (161)
Purchase of Verbex Voice Systems, Inc....................................... (5,163) --- ---
--------- -------- --------
Net cash used in investing activities................................... (4,340) 209 (16,491)
--------- -------- --------
Financing Activities:
Proceeds from issuance of common stock, net................................. --- --- 18,442
Proceeds from exercise of common stock warrants............................. --- --- 762
Proceeds from exercises of common stock options............................. 19 998 ---
Issuance of common stock pursuant to Employee Stock Purchase Plan........... 31 111 ---
--------- -------- --------
Net cash provided by financing activities............................... 50 1,109 19,204
--------- -------- --------
Decrease in cash and cash equivalents......................................... (7,322) (1,480) (2,762)
Cash and cash equivalents, beginning of period................................. 9,149 10,627 3,837
--------- -------- --------
Cash and cash equivalents, end of period...................................... 1,827 9,147 1,075
Short-term investments, end of period......................................... 3,516 5,586 16,324
--------- -------- --------
Cash, cash equivalents and short-term investments, end of period.............. $ 5,343 $ 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.......................................... $ --- $ --- $ 5
========= ======== ========
Unrealized gain on available-for-sale securities........................ $ 1 $ 5 $ ---
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
Voxware, Inc.
Notes To Consolidated Financial Statements
1. BASIS OF PRESENTATION
The consolidated financial statements for Voxware, Inc. and its wholly-
owned subsidiary, Verbex Acquisition Corporation ("Voxware" or the
"Company"), as of March 31, 1999 and for the three and nine month periods
ended March 31, 1999 and 1998 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 consolidated 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 28, 1998, as amended
on Form 10-K/A which was filed on October 28, 1998.
The results of operations for the interim periods ended March 31, 1999
are not necessarily indicative of the results to be expected for the fiscal
year ending June 30, 1999 or any other future periods.
2. RESTATEMENT OF FINANCIAL STATEMENTS
During the fiscal year ended June 30, 1997, the Company had accrued
certain expenses in its reported results primarily relating to estimated
recruiting and relocation costs in connection with filling certain management
and operational positions. These accruals totaled $185,000, of which $106,000
was recorded during the nine months ended March 31, 1997. In fiscal 1998
these accrued expenses were reversed. To correct for this error, the Company
has restated the accompanying balance sheet as of March 31, 1997, and the
accompanying statements of operations for the nine months ended March 31,
1997 and for the three and nine months ended March 31, 1998 to eliminate the
unnecessary accruals in fiscal 1997 and their reversal into income in fiscal
1998. The restatement had the effect of reducing the net loss for the nine
months ended March 31, 1997 of $6,263,000 and accrued expenses as of March
31, 1997 by $106,000, which reduced the basic and diluted net loss per common
share for the nine months ended March 31, 1997 by $0.01 from $(0.57) to
$(0.56). The restatement had no impact on the net loss for the three months
ended March 31, 1997. The restatement also had the effect of increasing the
net loss of $1,105,000 for the three months ended March 31, 1998 by $155,000,
which increased the basic and diluted net loss per common share by $0.02 for
the three months ended March 31, 1998 from $(0.08) to $(0.10). For the nine
months ended March 31, 1998, the restatement had the effect of increasing the
net loss of $3,216,000 by $185,000, which increased the basic and diluted net
loss per common share by $0.02 for the nine months ended March 31, 1998 from
$(0.25) to $(0.27).
3. NET LOSS PER SHARE
The Company has presented net loss per share for the three and nine
months ended March 31, 1999 and 1998 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,
1999 and 1998. Due to the Company's net losses for the three and nine months
ended March 31, 1999 and 1998, 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.
6
<PAGE>
4. REVENUE RECOGNITION
The Company generates revenues from products and services. Product
revenues consist of product sales, license fees, and royalties and recurring
revenues. Product sales represent shipments of portable and stationary speech
recognition-based products for industrial markets. Revenues from product
sales are generally recognized upon shipment. The Company began shipping
speech-recognition based products subsequent to its acquisition of
substantially all of the assets of Verbex Voice Systems, Inc. ("Verbex"),
which occurred on February 18, 1999. License fees are generated from
licensing the Company's speech compression technologies to customers in the
multimedia and consumer devices markets and from licensing the Company's
speech recognition-based software applications acquired in the Verbex
transaction. License fees are generally recognized upon shipment of the
underlying technolgies, 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 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.
5. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENT
Effective July 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").
Comprehensive income is a more inclusive financial reporting methodology that
includes disclosure of certain financial information that historically has
not been recognized in the calculation of net income (loss). SFAS 130
requires that all items defined as comprehensive income, including changes in
the amounts of unrealized gains and losses on available-for-sale securities,
be shown as a component of comprehensive loss. In the Company's annual
financial statements, comprehensive loss will be required to be presented
either in a separate financial statement or as part of either the statement
of operations or statement of stockholders' equity. The only comprehensive
income item the Company has is unrealized gains and losses on available-for-
sale securities.
The following reconciles net loss to comprehensive net loss for the
three and nine month periods ended March 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Net loss............................... $ (1,078) $ (1,260) $ (1,522) $ (3,036) $ (3,401) $ (6,157)
Other comprehensive income:
Unrealized gain (loss) on
available-for-sale securities..... 5 2 (7) 1 5 (6)
-----------------------------------------------------------------------------------------
Comprehensive net loss................. $ (1,073) $ (1,258) $ (1,529) $ (3,035) $ (3,396) $ (6,163)
=========================================================================================
</TABLE>
7
<PAGE>
6. ACQUISITION OF ASSETS OF VERBEX VOICE SYSTEMS, INC.
On February 4, 1999, Voxware entered into a definitive agreement with
Verbex Voice Systems, Inc. ("Verbex") to acquire substantially all of the
assets of Verbex for approximately $5.2 million in cash. The Verbex
transaction was consummated on February 18, 1999. Since that time, Voxware's
primary business focus has been Verbex's business of developing and selling
speech recognition products for the warehousing and manufacturing markets as
well as other industrial markets. This will include the exploration of
strategic alternatives to augment Verbex's business, including mergers,
acquisitions and joint ventures.
7. SALE OF ASSETS TO ASCEND
On February 4, 1999, the Company entered into a definitive agreement
with Ascend Communications, Inc. ("Ascend") to sell to Ascend for
approximately $5.1 million in cash substantially all of its assets relating
to what has historically been the Company's primary business of developing
and licensing speech compression technologies and products. The Company
expects that the Ascend transaction will close in September 1999, subject
to stockholder approval. The sale does not include Voxware' rights and
obligations under its existing license agreements and, as part of the sale,
Voxware will receive a license back from Ascend to use the Voxware technology
necessary to service its existing licensees. With the consent of Ascend, the
Company may also license the speech coding technologies to new licensees for
uses that are not competitive with Ascend.
8
<PAGE>
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 approval of
the Company's sale of substantially all of the assets relating to what
has historically been its primary business of developing and licensing
speech coding technologies and products to Ascend Communications, Inc.
("Ascend"), the Company's acquisition of substantially all of the assets
of Verbex Voice Systems, Inc. ("Verbex") and the Company's ability to
compete in Verbex's business, which is a new line of business for the
Company, 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
On February 4, 1999, we entered into the agreement with Ascend to
sell to Ascend substantially all of our assets relating to what has
historically been our primary business of developing and selling speech
coding technologies and products. Also on February 4, 1999, we entered
into a definitive agreement with Verbex to acquire substantially all of
the assets of Verbex. The Verbex transaction was consummated on February
18, 1999. Voxware is now focusing its efforts on Verbex's business of
developing and selling speech recognition products for the warehousing
and manufacturing markets as well as other industrial markets.
Prior to its acquisition of Verbex, Voxware historically generated
revenues relating to its speech and audio coding business from two
sources: fees from software product licenses and fees for services
provided. Product revenues consist of two components: software license
fees, and royalties and recurring revenues. Voxware licensed its
products primarily to software and hardware companies which incorporated
Voxware's products and technologies into their products. Arrangements
with customers, which were negotiated on a case-by-case basis,
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 Voxware's technologies. As a result, the timing and amount
of our revenues have been substantially dependent on the timing and
efforts of our licensees in developing and marketing products
incorporating our products and technologies. 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. Service revenues consist of customer maintenance
support and engineering fees. 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 sale to Ascend does not include Voxware's rights and obligations
under its existing license agreements. After the sale to Ascend, Voxware
will receive licensing revenue from its existing licensees relating to
the speech coding technologies sold to Ascend as well as licensing
revenue relating to its audio compression technologies not sold to
Ascend. Voxware will also have the ability, with the consent of Ascend,
to enter into new license agreements relating to the speech coding
technologies. We expect that new
9
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licensing activity relating to the speech coding technologies will
decrease significantly after completion of the sale and revenues from
licensees of speech coding and audio compression technologies will
become a less significant part of our revenues over time. Therefore, we
do not expect revenue from new licensing activity to materially affect
our financial position.
Verbex historically generated revenues primarily from product sales,
licenses and development services. Product sales consist of: portable
devices used for mobile industrial speech-recognition applications
(Verbex's MVP product line); stationary speech-recognition devices,
primarily used for warehouse receiving and package sorting applications;
and accessories that complemented its product offerings, including
microphones, headsets and computer hardware. Verbex also licensed its
VCORE speech recognition software application for use in embedded
applications, and provided maintenance services to customers, generally
under one- to three-year agreements. Development services consist of
providing technical resources and assistance to customer-specific
development efforts, which include porting Verbex's technology to
specific customer platforms. Revenues from product sales are generally
recognized when products are shipped.
The majority of our existing licensees of our speech coding products
compete in the multimedia Internet software market, which is a
relatively new market, and many of the companies compete against much
more established companies and/or have businesses that are relatively
immature. We believe that a significant number of our licensees which
compete in this market have not incorporated, and may never incorporate,
Voxware's technologies into their products. Therefore, we may never
derive royalties or other recurring revenues from many of our existing
license agreements in the multimedia Internet software market. With
respect to IP telephony, deployments in that market have primarily
utilized standardized codec technologies (and not Voxware's proprietary
codec technologies). In addition, 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. As a result of these factors,
demand for Voxware's technologies in the IP telephony market has not
been significant. In connection with the sale to Ascend, we expect to
discontinue our activities in the IP telephony market. As a result of
the circumstances surrounding development and status of the multimedia
and IP telephony markets, among other things, we wrote-off approximately
$688,000 in accounts receivable during the year ended June 30, 1998. We
believe that all or a portion of the written-off receivables may have
been recoverable through certain legal enforcement of the underlying
contractual arrangements. However, we made a business decision not to
sue or aggressively pursue collection of outstanding payment obligations
from these customers because (1) we believe that the impact on our
reputation for initiating certain lawsuits or other aggressive
collection actions against companies which could potentially be future
customers may be more costly than the benefit that could be derived from
recoveries of accounts receivable through these means, and (2) the costs
of pursuing legal recourse and effectuating collection efforts would
likely offset collections, if any. As a result of these factors, we
deemed certain of our accounts in multimedia and IP telephony
uncollectible, and wrote-off those accounts during fiscal 1998.
Based on our assessment regarding the multimedia Internet software
and IP telephony markets, in fiscal 1998 we shifted our business and
marketing emphasis to OEM customers in the electronic devices market.
Voxware has only a limited operating history upon which an
evaluation of Voxware and its prospects can be based. Since its
inception, Voxware has incurred significant losses and, as of March 31,
1999, Voxware had an accumulated deficit of $19,053,000. In at least the
near term quarters, we expect to incur net losses as we pursue a new
line of business. The limited operating history of Voxware makes the
prediction of future results of operations impossible, particularly in
light of the pending sale of our existing business to Ascend and recent
acquisition of the speech recognition systems business of Verbex.
Therefore, Voxware's historical revenues should not be taken as
indicative of future revenues. In addition, Voxware's operating results
may fluctuate significantly in the future as a result of a variety of
factors, including, but not limited to, the entrance into a new line of
business, the budgeting cycles of potential customers, the volume of,
and revenues derived from sales of products by our licensees that
incorporate our products, the rate of new licensing activity, as
10
<PAGE>
well as the termination of existing license agreements, the introduction
of new products or services by the Voxware or its competitors, pricing
changes in the industry, the degree of success of Voxware's efforts to
penetrate its target markets, technical difficulties with respect to the
use of products developed by Voxware or its licensees, the level of
usage of the Internet, and general economic conditions.
Based on our business plans following our purchase of the Verbex
business, as of the acquisition date we wrote down the acquired
inventory balances by $40,000 and property and equipment balances by
$40,949. We wrote down the inventories because we do not plan to
actively market and sell some of the inventories we acquired from
Verbex. We continue to carry this inventory in our Cambridge,
Massachusetts facility because a small number of our customers have
needs for some of these inventories. We have also consolidated Verbex's
Edison, New Jersey office facility into Voxware's Princeton, New Jersey
office facility, and wrote down the acquired property and equipment from
that facility which Voxware will not use in our future business
operations. The property and equipment not being used have primarily
been disposed of or donated in connection with closing the Verbex office
facility. Voxware incurred less than $5,000 in costs to dispose of these
assets.
In fiscal 1997, the Company had accrued certain expenses in its
reported results primarily relating to estimated recruiting and
relocation costs in connection with filling certain management and
operational positions. These accruals totaled $185,000. In fiscal 1998,
these accrued expenses were reversed. To correct for this error, the
Company has restated its results for the three and nine month periods
ended March 31, 1997 and 1998 to eliminate the unnecessary accruals in
fiscal 1997 and their reversal into income in fiscal 1998.
Results of Operations
Three Months Ended March 31, 1999 Versus Three Months Ended March 31,
1998
Revenues
Total revenues decreased $696,000 from $1,306,000 in the three months
ended March 31, 1998 to $610,000 in the three months ended March 31,
1999, reflecting decreases in the amounts of license fees, royalties and
recurring revenues and service revenues from our speech
coding technology products, partially offset by an increase
in Verbex product sales. During the three months ended March 31, 1998,
Voxware derived $1,142,000 (87% of total revenues) from multimedia
customers versus $263,000 (43% of total revenues) for the three months
ended March 31, 1999. The $879,000 decrease in multimedia revenues
reflects the deterioration of the multimedia Internet software market
for Voxware's speech coding products, and also reflects that
revenues earned from major customers during the three months ended March
31, 1998 were not repeated or replaced during the three months ended
March 31, 1999. In particular, the amendment of Voxware's agreement with
Netscape, under which Voxware derived $400,000 (31% of total revenues)
in revenues during the three months ended March 31, 1998 and none during
the three months ended March 31, 1999, explains a significant portion of
the reduction in Voxware's revenues. We are not currently receiving any
revenue from Netscape and we do not anticipate receiving any revenues
from Netscape in the future. Additionally, another of Voxware's major
customers provided revenues of $100,000 (8% of total revenues) during
the three months ended March 31, 1998 and none during the three months
ended March 31, 1999.
In addition, during the three months ended March 31, 1999, Voxware
recognized $129,000 of revenue from the sale of speech recognition
products which Voxware acquired from Verbex in February 1999. These
revenues represent Voxware's first revenues recognized from the sale of
Verbex products. We expect that over time, sales of speech recognition
products will comprise the most significant portion of our revenue.
Product revenues decreased $439,000 from $913,000 in the three months
ended March 31, 1998 to $474,000 in the three months ended March 31,
1999. The decrease in product revenues reflects a decrease in the amount
of license fees recognized during the three months ended March 31, 1999
compared to the amount of license fees recognized during the three
months ended March 31, 1998, and a decrease in the amount of royalties
and recurring revenues recognized during the period from customers who
licensed the Company's
11
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products in previous periods. These decreases were partially offset by
$129,000 in product sales attributable to shipments of speech-
recognition based products resulting from the acquisition of Verbex
during the three months ended March 31, 1999. We believe that the
factors discussed in the "Overview" above were primarily responsible for
the overall decrease in product revenues. For the three month periods
ended March 31, 1999 and 1998, 27% and none of the Company's product
revenues were attributable to product sales, respectively, 44% and 67%
were attributable to license fees, respectively, and 29% and 33% were
attributable to royalties and recurring revenues, respectively.
Service revenues were primarily attributable to customer
maintenance support and fees for engineering services. For the three
months ended March 31, 1999, service revenues totaled $136,000,
reflecting a decrease of $257,000 from service revenues of $393,000 for
the three months ended March 31, 1998. The decrease in service revenues
is primarily attributable to (i) a decline in customer maintenance
support revenues because the Company had a much smaller portfolio of
customers to which it provided maintenance support services during the
three months ended March 31, 1999 than it did for the three months ended
March 31, 1998, and (ii) a decline in development services revenues
because of the shift in focus away from a custom development-based OEM
business to the operation of Verbex's business. Service revenues for the
three months ended March 31, 1999 includes $53,000 earned pursuant to a
services agreement between Voxware and Ascend, under which ten of
Voxware's engineers performed services for Ascend at various times from
February 4, 1999 through March 31, 1999. Between June 21, 1999 and June
24, 1999, those ten employees resigned from Voxware and became employees
of Ascend.
Cost of Revenues
Cost of revenues decreased $23,000 from $170,000 for the three
months ended March 31, 1998 to $147,000 for the three months ended March
31, 1999. The decrease in cost of revenues was attributable to the
decrease in service revenues described above, partially offset by an
increase in cost of product revenues associated with the increase in
product sales. Cost of product revenues increased $52,000 from the three
months ended March 31, 1998 compared to the same period in 1999,
reflecting costs associated with shipments of speech-recognition-based
hardware products related to the Verbex business. As the Verbex
acquisition occurred during the three months ended March 31, 1999, no
such products were sold during the three months ended March 31, 1998. As
of March 31, 1999, Voxware had a manufacturing staff of three compared
to none at March 31, 1998.
Cost of services revenues consists primarily of the expenses
associated with customer maintenance support and engineering services,
including employee compensation and equipment depreciation. Cost of
service revenues decreased $75,000 from $160,000 in the three months
ended March 31, 1998 to $85,000 in the three months ended March 31,
1999. The decrease in cost of service revenues is directly attributable
to the decrease in service revenues described above.
Operating Expenses
Total operating expenses decreased by $944,000 (36%) from
$2,603,000 in the three months ended March 31, 1998 to $1,659,000 in the
three months ended March 31, 1999. The decrease primarily reflects
headcount reductions in each of research and development, sales and
marketing and administration, and other cost reductions associated with
the restructuring of Voxware's business focus over the past several
quarters prior to the Ascend and Verbex agreements. As of March 31,
1999, our headcount totaled 42, compared to total headcount of 58 as of
March 31, 1998. Additionally, during the three months ended March 31,
1998 Voxware reversed certain accruals recorded in prior periods that
were no longer deemed necessary. This reversal decreased operating
expenses and cost of revenues by a total of $194,000 during the three
months ended March 31, 1998.
Research and development expenses primarily consist of employee
compensation and equipment depreciation and lease expenditures related
to product research and development. Research and development
12
<PAGE>
expenses decreased $569,000 (51%) from $1,113,000 in the three months
ended March 31, 1998 to $544,000 in the three months ended March 31,
1999. As of March 31, 1999, we had a research and development staff of
18, including the ten engineers providing services to Ascend pursuant to
the services agreement referred to in "Services Revenues" above, and
eight engineers engaged in the research and development of Verbex's
speech recognition-based products business and in supporting Voxware's
speech coding business. In comparison , Voxware had 29 engineers in
research and development at March 31, 1998. Additionally, during the
three months ended March 31, 1998 Voxware reversed certain accruals
recorded in prior periods related to research and development that were
no longer deemed necessary. This reversal decreased research and
development expenses by $14,000 during the three months ended March 31,
1998.
Sales and marketing expenses primarily consist of employee
compensation (including direct sales commissions), travel expenses and
trade shows. Sales and marketing expenses decreased $457,000 (47%) from
$971,000 in the three months ended March 31, 1998 to $514,000 in the
three months ended March 31, 1999. As of March 31, 1999, Voxware had a
sales and marketing staff of ten compared to 15 at March 31, 1998.
Additionally, during the three months ended March 31, 1998, Voxware
reversed certain accruals recorded in prior periods related to sales and
marketing that were no longer deemed necessary. This reversal decreased
sales and marketing expenses by $32,000 during the three months ended
March 31, 1998.
General and administrative expenses consist primarily of
employee compensation and fees for insurance, rent, office expenses and
professional services. General and administrative expenses decreased
$65,000 (13%) from $519,000 in the three months ended March 31, 1998 to
$454,000 in the three months ended March 31, 1999. The decrease in
general and administrative expenses was primarily realized through
reductions in personnel, recruitment and general cost savings achieved
through expense management. As of March 31, 1999, Voxware had a general
and administrative staff of nine compared to 13 at March 31, 1998.
Additionally, during the three months ended March 31, 1998, Voxware
reversed certain accruals recorded in prior periods related to general
and administrative that were no longer deemed necessary. This reversal
decreased general and administrative expenses by $175,000 during the
three months ended March 31, 1998.
Amortization of purchased intangibles totaled $147,000 for the
three months ended March 31, 1999. These intangibles were included in
the assets acquired from Verbex in February 1999. The total amount of
intangibles capitalized from the Verbex acquisition approximated
$5,300,000, and those intangibles are being amortized over four years.
Interest Income
Interest income decreased $89,000 to $118,000 for the three
months ended March 31, 1999 from $207,000 for the three months ended
March 31, 1998. The decrease is primarily related to the decrease in
Voxware's total cash, cash equivalents and short-term investments
portfolio balance as a result of cash used for operations and the
acquisition of substantially all of the assets of Verbex for
approximately $5,200,000 plus transaction costs in February 1999. As of
March 31, 1999, Voxware's cash, cash equivalents and short-term
investments portfolio totaled $5,343,000 compared to $14,733,000 at
March 31, 1998.
Income Taxes
As of March 31, 1999, we had approximately $16,900,000 of
federal net operating loss carryforwards which will begin to expire in
2009 if not utilized. As of March 31, 1999, we have provided a full
valuation allowance on the net deferred tax asset because of the
uncertainty regarding realization of the deferred asset, primarily as a
result of considering such factors as our limited operating history, the
volatility of the market in which we compete, the operating losses
incurred to date and the operating losses anticipated in future periods.
We expect to utilize a total of approximately $4,450,000 of our net
operating loss carryforwards to offset the gain on the sale of assets to
Ascend, subject to stockholder approval of the sale. In the event that
the sale is approved, and our net operating loss carryforwards are
utilized to offset the gain on the transaction, we expect
13
<PAGE>
to have available approximately $12,450,000 of net operating losses
to offset future federal taxable income, if any, after the Ascend
transaction is consummated.
Nine Months Ended March 31, 1999 Versus Nine Months Ended March 31,
1998
Revenues
Total revenues decreased $3,102,000 from $4,975,000 in the nine months
ended March 31, 1998 to $1,873,000 in the nine months ended March 31,
1999, reflecting decreases in the amount of license fees, royalties and
recurring revenues and service revenues from our speech
coding technology products, partially offset by an increase
in Verbex product sales. During the nine months ended March 31, 1998,
Voxware derived $3,788,000 (76% of total revenues) from multimedia
customers versus $879,000 (47% of total revenues) for the nine months
ended March 31, 1999. The $2,909,000 decrease in multimedia revenues
reflects the deterioration of the multimedia Internet software market
for Voxware's speech coding products, and also reflects that
revenues earned from major customers during the nine months ended March
31, 1998 were not repeated or replaced during the nine months ended
March 31, 1999. In particular, the amendment of Voxware's agreement with
Netscape, under which Voxware derived $1,250,000 (25% of total revenues)
in revenues during the nine months ended March 31, 1998 and none during
the nine months ended March 31, 1999, explains a significant portion of
the reduction in Voxware's revenues. We are not currently receiving any
revenues from Netscape and we do not anticipate receiving any revenues
from Netscape in the future. Additionally, another of Voxware's major
customers provided revenues of $650,000 (13% of total revenues) during
the nine months ended March 31, 1998 and none during the nine months
ended March 31, 1999.
Voxware also experienced a $548,000 decline in revenues earned from
customers in the IP telephony market, primarily due to the factors
described in the "Overview" above concerning the decrease in demand for
speech coding products such as Voxware's in the IP telephony
market. During the nine months ended March 31, 1998, Voxware derived
$679,000 (14% of total revenues) from IP telephony customers versus
$131,000 (7% of total revenues) during the nine months ended March 31,
1999.
The declines in multimedia revenues and IP telephony revenues were
partially offset by an increase in revenues from electronic devices
manufacturers. During the nine months ended March 31, 1998, Voxware
derived $508,000 (10% of total revenues) from consumer devices
manufacturers versus $704,000 (38% of total revenues) during the nine
months ended March 31, 1999. In addition, during the nine months ended
March 31, 1999, Voxware recognized $129,000 of revenues from sales of
speech recognition products which Voxware acquired from Verbex in
February 1999. These revenues represent Voxware's first revenues
recognized from the sale of Verbex products. We expect that over time,
sales of speech recognition products will comprise the most significant
portion of our revenue.
Product revenues decreased $2,940,000 from $4,187,000 in the nine
months ended March 31, 1998 to $1,247,000 in the nine months ended March
31, 1999. The decrease in product revenues reflects a decrease in the
amount of license fees recognized during the nine months ended March 31,
1999 compared to the amount of license fees recognized during the nine
months ended March 31, 1998, and a decrease in the amount of royalties
and recurring revenues recognized during the period from customers who
licensed Voxware's products in previous periods. These decreases were
partially offset by $129,000 in product sales attributable to shipments
of speech-recognition products resulting from the acquisition of Verbex
during February 1999. For the nine month periods ended March 31, 1999
and 1998, 10% and none of our product revenues were attributable to
product sales, respectively, 53% and 63% were attributable to license
fees, respectively, and 37% and 37% were attributable to royalties and
recurring revenues, respectively.
For the nine months ended March 31, 1999, service revenues totaled
$626,000, reflecting a decrease of $162,000 from service revenues of
$788,000 for the nine months ended March 31, 1998. The decrease in
service revenues is primarily attributable to a decline in customer
maintenance support revenues because Voxware had a much smaller
portfolio of customers to which we provided maintenance support services
14
<PAGE>
during the nine months ended March 31, 1999 than we did for the nine
months ended March 31, 1998, due to the changes in business focus
described above. Service revenues for the nine months ended March 31,
1999 includes $53,000 earned pursuant to a services agreement between
Voxware and Ascend, under which ten of Voxware's engineers performed
services for Ascend at various times from February 4, 1999 through March
31, 1999. Between June 21, 1999 and June 24, 1999, those ten employees
resigned from Voxware and became employees of Ascend.
Cost Of Revenues
Cost of revenues decreased $59,000 from $443,000 for the
nine months ended March 31, 1998 to $384,000 for the nine months ended
March 31, 1999. The decrease in cost of revenues was attributable to
Voxware's discontinuance of the sale of consumer application software
products in connection with its shift to an OEM model, offset by an
increase in cost of product revenues associated with shipments of the
newly acquired Verbex speech recognition-based hardware products. As of
March 31, 1999, as a result of the Verbex acquisition, Voxware had a
manufacturing staff of three compared to none at March 31, 1998.
Cost of services revenues consists primarily of the expenses
associated with customer maintenance support and engineering services,
including employee compensation and equipment depreciation. Cost of
service revenues increased $16,000 from $306,000 in the nine months
ended March 31, 1998 to $322,000 in the nine months ended March 31,
1999. The increase in cost of service revenues is attributable to an
increase in development services performed during the nine months ended
March 31, 1999 as compared to the nine months ended March 31, 1998.
Development services in the nine months ended March 31, 1999 include
services rendered under Voxware's services agreement with Ascend. The
increase was partially offset by a decrease in maintenance support
revenues provided during the period.
Operating Expenses
Total operating expenses decreased by $3,584,000 (42%) from
$8,582,000 in the nine months ended March 31, 1998 to $4,998,000 in
the nine months ended March 31, 1999. The decrease primarily reflects
headcount reductions in each of research and development, sales and
marketing and administration, and other cost reductions associated with
the restructuring of Voxware's business focus over the past several
quarters prior to the Ascend and Verbex agreements. As of March 31,
1999, our headcount totaled 42 compared to total headcount of 58 as of
March 31, 1998. Additionally, during the nine months ended March 31,
1998, Voxware reversed certain accruals recorded in prior periods that
were no longer deemed necessary. This reversal decreased operating
expenses and cost of revenues by a total of $465,000 during the nine
months ended March 31, 1998.
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 $2,233,000 (57%) from $3,888,000 in the nine months
ended March 31, 1998 to $1,655,000 in the nine months ended March 31,
1999. As of March 31, 1999, we had a research and development staff of
18, including the ten engineers providing services to Ascend pursuant to
the services agreement referred to in "Services Revenues" above, and
eight engineers engaged in the research and development of Verbex's
speech recognition-based products business and in supporting Voxware's
speech coding business. In comparison , Voxware had 29 engineers in
research and development at March 31, 1998. Additionally, during the
nine months ended March 31, 1998, Voxware reversed certain accruals
recorded in prior periods related to research and development that were
no longer deemed necessary. This reversal decreased research and
development expenses by $14,000 during the nine months ended March 31,
1998.
Sales and marketing expenses primarily consist of employee
compensation (including direct sales commissions), travel expenses and
trade shows. Sales and marketing expenses decreased $1,141,000
(38%) from $3,025,000 in the nine months ended March 31, 1998 to
$1,884,000 in the nine months ended March 31, 1999. As of March 31,
1999, Voxware had a sales and marketing staff of ten compared to 15 at
March 31,
15
<PAGE>
1998. Additionally, during the nine months ended March 31, 1998, Voxware
reversed certain accruals recorded in prior periods related to sales and
marketing that were no longer deemed necessary. This reversal decreased
sales and marketing expenses by $83,000 during the nine months ended
March 31, 1998.
General and administrative expenses consist primarily of
employee compensation and fees for insurance, rent, office expenses and
professional services. General and administrative expenses decreased
$357,000 (21%) from $1,669,000 in the nine months ended March 31, 1998
to $1,312,000 in the nine months ended March 31, 1999. The decrease in
general and administrative expenses was primarily realized through
reductions in personnel, recruitment and general cost savings achieved
through expense management. As of March 31, 1999, Voxware had a general
and administrative staff of nine compared to 13 at March 31, 1998.
Additionally, during the nine months ended March 31, 1998, Voxware
reversed certain accruals recorded in prior periods related to general
and administrative that were no longer deemed necessary. This reversal
decreased general and administrative expenses by $369,000 during the
nine months ended March 31, 1998.
Amortization of purchased intangibles totaled $147,000 for the
nine months ended March 31, 1999. These intangibles were included in the
assets acquired from Verbex in February 1999. The total amount of
intangibles capitalized from the Verbex acquisition approximated
$5,100,000, and those intangibles are being amortized over four years.
Interest Income
Interest income decreased $176,000 to $473,000 for the nine
months ended March 31, 1999 from $649,000 for the nine months ended
March 31, 1998. The decrease is primarily related to the decrease in
Voxware's total cash, cash equivalents and short-term investments
portfolio balance as a result of cash used for operations and the
acquisition of substantially all of the assets of Verbex for
approximately $5,200,000 plus transaction costs in February 1999. As of
March 31, 1999, Voxware's cash, cash equivalents and short-term
investments portfolio totaled $5,343,000 compared to $14,733,000 at
March 31, 1998.
Income Taxes
As of March 31, 1999, we had approximately $16,900,000 of
federal net operating loss carryforwards which will begin to expire in
2009 if not utilized. As of March 31, 1999, we have provided a full
valuation allowance on the net deferred tax asset because of the
uncertainty regarding realization of the deferred asset, primarily as a
result of considering such factors as our limited operating history, the
volatility of the market in which we compete, the operating losses
incurred to date and the operating losses anticipated in future periods.
We expect to utilize a total of approximately $4,450,000 of our net
operating loss carryforwards to offset the gain on the sale of assets to
Ascend, subject to stockholder approval of the sale. In the event that
the sale is approved, and our net operating loss carryforwards are
utilized to offset the gain on the transaction, we expect to have
available approximately $12,450,000 of net operating losses to offset
future federal taxable income, if any, after the Ascend transaction is
consummated.
Three and Nine Months Ended March 31, 1998 Versus Three and Nine
Months Ended March 31, 1997
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 in part by an
16
<PAGE>
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 affecting the
preponderance of the Company's licensees which compete in the multimedia
Internet software market, and the aforementioned transition of the
Company's strategic 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 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
17
<PAGE>
$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 $137,000, reflecting a decrease of
$11,000 from cost of product revenues of $148,000 for the nine month
period ended March 31, 1997. The decreases in cost of product
revenues 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 $1,444,000 from $4,047,000
in the three months ended March 31, 1997 to $2,603,000 in the three
months ended March 31, 1998. In the nine month period ended March 31,
1998, operating expenses were $8,582,000, reflecting a decrease of
$2,919,000 from total operating expenses of $11,501,000 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 $991,000 decrease in research
and development expenses, a $194,000 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
18
<PAGE>
decreased accrued expenses by approximately $145,000, 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
$2,154,000 decrease in research and development expenses, a $79,000
increase 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 $465,000, 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 $991,000 from $2,104,000 in the three months ended
March 31, 1997 to $1,113,000 in the three months ended March 31,
1998. In the nine month period ended March 31, 1998, research and
development expenses were $3,888,000, reflecting a decrease of
$2,154,000 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 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 $194,000 from $1,165,000 in the three months ended
March 31, 1997 to $971,000 in the three months ended March 31, 1998.
In the nine month period ended March 31, 1998, sales and marketing
expenses were $3,025,000, reflecting an increase of $79,000 from
$2,946,000 incurred during the nine month period ended March 31,
1997. In comparing the three months ended March 31, 1998 to the three
months ended March 31, 1997, the decrease in sales and marketing
expenses was 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. In
comparing the nine months ended March 31, 1998 to the nine months
ended March 31, 1997, the decrease in sales and marketing expenses
realized from the business model transition were 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
19
<PAGE>
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
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
Since Voxware's inception in August 1993, the Company has raised net
proceeds of approximately $29,898,000 as follows: approximately
$8,838,000 through private placements; approximately $18,517,000 through
our initial public offering which was declared effective on October 30,
1996; and approximately $2,543,000 through other sales of equity
securities, including exercises of common stock options and common stock
warrants, and issuances of common stock pursuant to the Company's
Employee Stock Purchase Plan.
As of March 31, 1999, we had a total of $5,343,000 in cash, cash
equivalents and short-term investments consisting of $1,827,000 of cash
and cash equivalents and $3,516,000 in short-term investments. We expect
the sale of assets to Ascend for $5,100,000 to be consummated in
September 1999, subject to stockholder approval. If the transaction
is approved by our stockholders, we will receive $4,146,000 on the date
of the closing of the transaction and $750,000 will be placed in escrow
for a period of 18 months to secure our indemnification obligations.
Voxware received a deposit of $204,000 from Ascend in January 1999,
which is included in restricted cash-current in the March 31, 1999
balance sheet because we will be required to refund that deposit to
Ascend in the event the transaction is not approved by Voxware's
stockholders. Our 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, we have
primarily financed its operations through the sale of equity securities.
Cash of $3,032,000, $2,798,000 and $5,475,000 was used to
fund operations for the nine months ended March 31, 1999, 1998 and
1997, respectively. Cash used to fund operations was attributable to
the net loss plus the effect of non cash charges for depreciation and
amortization and the provision for doubtful accounts in fiscal 1999,
1998 and 1997, a non cash charge for stock-based directors' compensation
in fiscal 1998, plus the effects of changes in operating assets and
liabilities in fiscal 1999, 1998 and 1997. For the nine months ended
March 31, 1999, cash used in investing activities was $4,340,000, which
consisted of $5,163,000 in cash paid for the Verbex business, and
$50,000 in net purchases of property and equipment, offset by $873,000
in net sales and maturities of short-term investments. Cash provided by
investing activities totaled $209,000 for the nine months ended March
31, 1998, which reflected $261,000 in net sales and maturities of
short-term investments, offset by $52,000 in equipment purchases. Cash
used in investing activities during the nine months ended March 31, 1997
totaled $16,491,000, which reflected $16,330,000 in net purchases of
short-term investments, plus $161,000 in equipment purchases. For the
nine months ended March 31, 1999, 1998 and 1997, cash provided by
financing activities totaled $50,000, $1,109,000 and $19,204,000,
respectively. These amounts reflect proceeds from exercises of common
stock options of $19,000 and $998,000, respectively, for the nine months
ended March 31, 1999 and 1998, and proceeds from the issuance
20
<PAGE>
of common stock pursuant to the Company's Employee Stock Purchase Plan
of $31,000 and $111,000, respectively, for the nine months ended March
31, 1999 and 1998. For the nine months ended March 31, 1997, cash
provided by financing activities consisted of $18,442,000 in net
proceeds from Voxware's initial public offering and $762,000 in proceeds
from the exercise of common stock warrants.
We have a $2,000,000 revolving line of credit with Silicon
Valley Bank. Borrowings under the credit facility will bear interest at
the bank's prime lending rate. As amended on February 1, 1999, the
credit facility requires Voxware to secure all indebtedness with cash
held at the bank's offices in an amount not less that 100% of the
outstanding amount of all indebtedness we owe to the bank. The credit
facility requires payment of all outstanding principal, if any, plus all
accrued interest on March 30, 2000. In connection with the lease of our
office facility, we have outstanding a $300,000 standby letter of credit
at March 31, 1998 naming the lessor of the office facility beneficiary
of the standby letter of credit in the event that we default on the
lease. As required by the credit facility, we have secured the $300,000
standby letter of credit with cash that is included in "other assets,
net" in the March 31, 1999 balance sheet. In addition to the credit
facility, the agreement with Silicon Valley Bank provides a lease
component in the amount of $1,500,000 for the purpose of providing a
facility for the financing of the lease payments that we owe to an
equipment lessor, of which approximately $48,000 was outstanding as of
March 31, 1999.
We have no material commitments for capital expenditures except for
those under operating leases for our facilities and leased equipment. At
March 31, 1999, our working capital totaled approximately $5,224,000. We
believe that our current cash, cash equivalents and short-term
investments balances, together with the approximately $4,896,000 in cash
to be received assuming consummation of the Ascend transaction, will be
sufficient to fund our 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 June 30, 1999. If the Ascend transaction does not
close, and we do not receive the purchase price for the speech coding
assets, we will need additional financing prior to that time in order to
continue the development of our technologies and products and to finance
any further acquisitions, joint ventures or other strategic
relationships. Other than the agreement with Ascend, we have no
agreements which would provide us with additional capital and we cannot
assure you that additional financing will be available or, if available,
that the financing will be on terms favorable to us or, if obtained,
that the financing will not be dilutive to our current stockholders.
Year 2000 Compliance
The efficient operation of Voxware's business is dependent in part
on computer software programs and operating systems which it uses
internally (collectively, the "Internal Programs and Systems").
Voxware's Internal Programs and Systems consist of our accounting
system, inventory system, payroll system, electronic mail system,
telephone and PBX systems, and UNIX and Microsoft Windows NT servers.
All of these systems are based in-house, with the exception of the
payroll system, which is based at the vendor's facility.
We have been evaluating our Internal Programs and Systems to
identify potential Year 2000 compliance problems. We have primarily
conducted these evaluations and assessments using Voxware's information
technology personnel, including coordinating evaluations and assessments
with the respective vendors of these computer software programs and
operating systems. We expect to complete these evaluations and
assessments by the end of Fall 1999 and take appropriate steps to
address any identified Year 2000 compliance problems by the end of 1999.
These actions are necessary to ensure that the Internal Programs and
Systems will be Year 2000 compliant. Based on present information, we
believe that we will be able to achieve Year 2000 compliance through a
combination of modification of some existing Internal Programs and
Systems and the replacement of other Internal Programs and Systems with
new programs and systems that are already Year 2000 compliant.
Our accounting system, which covers Voxware's entire business,
including the former Verbex business, is not yet Year 2000 compliant.
Issues have been identified and Voxware is assessing whether to
21
<PAGE>
modify or replace the accounting system. Voxware estimates the cost to
replace the accounting system at $25,000. Voxware will determine whether
to replace the accounting system with one that is Year 2000 compliant
after completion of the audit for the year ending June 30, 1999. Voxware
is confident that, if necessary, the new accounting system which is Year
2000 compliant will be operational long before December 31, 1999.
We have recently completed the upgrade of our inventory system to
one that is Year 2000 compliant at a cost of approximately $10,000,
which was paid for by Verbex prior to the acquisition of Verbex. Voxware
did not have, and had no need for an inventory system until the
acquisition of Verbex.
We have been informed by ADP, our outside payroll processor, that
our payroll system is Year 2000 compliant.
We have been informed by the vendor of our e-mail system that the
system is Year 2000 compliant. We are conducting our own internal
assessment of the e-mail system and we expect that assessment to be
completed by the third calendar quarter of 1999. We believe that, to the
extent that e-mail system is not Year 2000 compliant, we can receive an
upgrade from the vendor or replace the system on a timely basis at no
cost or at minimal cost.
Our telephone and PBX systems have been upgraded to be Year 2000
compliant.
We have no reason to believe that UNIX and Microsoft Windows NT
servers are not Year 2000 compliant or, to the extent that they are not
compliant, that the vendors will not make appropriate upgrades available
to all of their customers at no cost or at minimal cost.
In addition to our Internal Programs and Systems, the products we
sell and license externally to customers (collectively, the "External
Programs"), have been assessed for Year 2000 compliance. With respect to
the speech compression technologies and products historically sold by
Voxware, we are not aware of any Year 2000 issues. Verbex had assessed
its products, the MVP, Speech Commander and our stationary boards.
Verbex concluded that it could be advisable for the users of those
products to take precautions to mitigate possible Year 2000 issues, such
as not operating the product during the period of time when the calendar
changes from December 31, 1999 to January 1, 2000. We have hired the
director of engineering at Verbex in connection with the Verbex
acquisition and we have commenced our own review of the Year 2000
compliance of Voxware's External Programs. While Voxware is not yet
aware of any Year 2000 issues with our External Programs that are
expected to have a material financial impact on Voxware as a result of
our assessments to date, we continue to assess our External Programs. We
expect to complete these assessments by the end of Fall 1999 and take
appropriate steps to address any identified Year 2000 problems by the
end of 1999. In addition, should we identify any material Year
2000 problems, we are currently setting up a process that will enable us
to contact our customers promptly so that we can provide instructions to
mitigate or avert Year 2000 issues related to the External Programs. We
cannot assure you however, that in the event that we encounter Year 2000
issues, we will be able to provide adequate instructions, or that our
instructions will mitigate or avert Year 2000 issues related to our
External Programs. We may need to recall products and undertake to
modify, upgrade or replace the products. Any such undertaking could be
expensive and could have a material adverse effect on Voxware and its
financial condition.
To date, costs incurred in evaluating our Internal Programs and
Systems and External Programs have not been material. Anticipated costs
necessary to complete evaluations of our Internal Programs and Systems
and complete modifications and/or replacements are not expected to be
material. We expect that the total cost of these efforts and upgrades
should not exceed $50,000, including the cost of a new accounting system
and the upgraded inventory system described above. Voxware further
estimates that less than than $20,000 of internal labor costs have been
incurred to date for personnel working to resolve Year 2000 issues. We
cannot assure you that our efforts and the efforts of our vendors will
be successful in making all of our systems and products Year 2000
22
<PAGE>
compliant or that the cost and time required to achieve Year 2000
compliance will not exceed our current estimates. As a result, and due
to uncertainty of the potential impact that Year 2000 issues may have on
Voxware, there can be no assurance that Year 2000 issues will not have a
material impact on our future results of operations or financial
condition.
Voxware expects to identify and resolve all Year 2000 problems
that could materially adversely affect its business operations. However,
Voxware believes that it is not possible to determine with complete
certainty that all Year 2000 problems affecting Voxware or its customers
have been identified or corrected. The number of devices that could be
affected and the interactions among these devices are simply too
numerous. In addition, no one can accurately predict how many Year 2000-
related failures will occur or the severity, duration, or financial
consequences of these perhaps inevitable failures. As a result, Voxware
believes that the following consequences are possible:
o a significant number of operational inconveniences
and inefficiencies for Voxware and its customers
that will divert management's time and attention
and financial and human resources from ordinary
business activities;
o a lesser number of serious system failures that
will require significant efforts by Voxware or its
customers to prevent or alleviate material
business disruptions;
o several routine business disputes and claims for
pricing adjustments or penalties due to Year 2000
problems by customers, which will be resolved in
the ordinary course of business; and
o a few serious business disputes alleging that
Voxware failed to comply with the terms of
contracts or industry standards of performance,
some of which could result in litigation or
contract termination.
Voxware is currently formulating contingency plans for each of its
material systems. We believe that our accounting and inventory systems
are our most important Internal Systems for which to ensure Year 2000
compliance. We believe that the inventory system is Year 2000 compliant
and that the accounting system can be made Year 2000 compliant or
replaced at a reasonable cost as set forth above. We will continue to
work closely with the vendors of these systems to assure Year 2000
compliance.
23
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 5. Other Information.
On February 4, 1999, the Company entered into a definitive
agreement with Ascend Communications, Inc. ("Ascend") to sell to Ascend
for approximately $5.1 million in cash consideration substantially all
of its assets relating to what has historically been its primary
business of developing and commercializing voice processing technologies
and products. Also on February 4, 1999, Voxware entered into a
definitive agreement with Verbex Voice Systems, Inc. ("Verbex") to
acquire substantially all of the assets of Verbex for approximately $5.2
million in cash. The Verbex transaction closed on February 18, 1999 and
the Company expects that the Ascend transaction will be consummated,
subject to stockholder approval, in JuneSeptember 1999. After
consummation of the transactions, Voxware is now focusing its efforts on
the development of Verbex's business, which is the development and
commercialization of speech recognition systems for the warehousing and
manufacturing markets and other industrial markets. This will include
the exploration of strategic alternatives to augment Verbex's business,
including mergers, acquisitions and joint ventures. In addition, the
sale to Ascend does not include Voxware's rights and obligations under
its existing license agreements and, as part of the transaction, Voxware
will receive a license back from Ascend of the Voxware technologies
necessary to service its existing licensees. The license will also allow
Voxware, with the consent of Ascend, to license those technologies to
new licensees for certain limited uses. Voxware will be precluded from
licensing the technologies licensed back from Ascend to the Internet
Protocol telephony markets, and potentially to other markets, subject to
the consent required from Ascend. After the sale to Ascend, Voxware
expects to continue to have limited licensing revenue and to engage in a
limited amount of additional licensing activity relating to the speech
compression technologies sold to Ascend, primarily from licensing
activities in the multimedia and consumer devices markets.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits:
2.1 Asset Purchase Agreement dated as of
February 4, 1999 by and between Ascend
Communications, Inc. and Voxware, Inc.*
2.2 Acquisition Agreement by and among
Voxware, Inc., Verbex Acquisition
Corporation and Verbex Voice Systems, Inc.
dated as of February 4, 1999.*
27.1 Financial Data Schedule (FDS) for current
reporting periods ended March 31, 1999.*
27.2 Restated Financial Data Schedule for
reporting periods ended March 31, 1998.
27.3 Restated Financial Data Schedule for
reporting periods ended March 31, 1997.
(b) Reports on Form 8-K. Current Report on
Form 8-K filed on February 9, 1999
(relating to the sale of the Company's
speech coding technology to Ascend
Communications, Inc. and the purchase of
certain assets and liabilities of Verbex
Voice Systems, Inc.). Amendment to
previously filed Form 8-K filed on Form 8-
K/A on May 4, 1999.*
- --------------------------------------------------------------------------------
* previously filed.
24
<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: August 11, 1999
VOXWARE, INC.
(Registrant)
By: /s/ Bathsheba J. Malsheen
----------------------------------------
Bathsheba J. 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)
25
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VOXWARE,
INC. FINANCIAL STATEMENTS FOR THE 3 AND 9 MONTHS ENDED MARCH 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1998
<PERIOD-START> JAN-01-1999 JUN-01-1997
<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> 10 137
<TOTAL-COSTS> 170 443
<OTHER-EXPENSES> 2,603 8,582
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,260) (3,401)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,260) (3,401)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,260) (3,401)
<EPS-BASIC> (0.10) (0.27)
<EPS-DILUTED> (0.10) (0.27)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VOXWARE,
INC. FINANCIAL STATEMENTS FOR THE 3 AND 9 MONTHS ENDED MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997
<PERIOD-START> JAN-01-1997 JUL-01-1996
<PERIOD-END> MAR-31-1997 MAR-31-1997
<CASH> 1,075 1,075
<SECURITIES> 16,324 16,324
<RECEIVABLES> 2,782 2,782
<ALLOWANCES> 263 263
<INVENTORY> 0 0
<CURRENT-ASSETS> 20,177 20,177
<PP&E> 992 992
<DEPRECIATION> 389 389
<TOTAL-ASSETS> 21,140 21,140
<CURRENT-LIABILITIES> 3,038 3,038
<BONDS> 0 0
0 0
0 0
<COMMON> 12 12
<OTHER-SE> 17,891 17,891
<TOTAL-LIABILITY-AND-EQUITY> 21,140 21,140
<SALES> 2,412 5,127
<TOTAL-REVENUES> 2,412 5,127
<CGS> 103 148
<TOTAL-COSTS> 146 268
<OTHER-EXPENSES> 4,047 11,501
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,522) (6,157)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,522) (6,157)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,522) (6,157)
<EPS-BASIC> (0.12) (0.56)
<EPS-DILUTED> (0.12) (0.56)
</TABLE>
