SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended June 30, 1996
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ________ to _________
COMMISSION FILE NUMBER: 0-26394
ACCENT SOFTWARE INTERNATIONAL LTD.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
ISRAEL N/A
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
28 PIERRE KOENIG STREET, JERUSALEM 91530 ISRAEL
011-972-2-793-723
- --------------------------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including Area Code
of Registrant's Principal Executive Offices)
N/A
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 past 90 days. Yes [x] No [_]
On August 12, 1996, the registrant had outstanding 9,785,902 Ordinary Shares
which is the registrant's only class of common stock.
<PAGE>
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ACCENT SOFTWARE INTERNATIONAL LTD.
CONSOLIDATED BALANCE SHEETS
U.S. DOLLARS AND SHARES IN THOUSANDS
(UNAUDITED)
DECEMBER 31, JUNE 30,
1995 1996
--------------- -------------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 9,633 $ 2,674
Trade receivables, net of allowance of $1,065 in 1996
and $997 in 1995 2,661 3,093
Other receivables 696 819
Prepaid expenses 656 888
Inventories 1,659 2,212
----------- ----------
Total current assets 15,305 9,686
----------- ----------
Equipment
Cost 1,456 2,224
Less - accumulated depreciation 339 511
----------- ----------
Equipment net 1,117 1,713
----------- ----------
Other Assets, net
Capitalized software production costs, net of
accumulated amortization of $667 in 1996 and
$380 in 1995 1,228 986
--------- ----------
Total assets $ 17,650 $ 12,385
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term bank borrowings $ -- $ 999
Current maturities of long-term loans 27 391
Accounts payable and accrued expenses 4,949 7,690
--------- ---------
Total current liabilities 4,976 9,080
--------- ---------
Long-term bank loans 2,331 1,959
--------- ---------
Accrued severance pay 210 278
--------- ---------
Shareholders' equity
Share capital - Ordinary shares of NIS 0.01 par value, Authorized 30,000
shares; issued and
outstanding 9,778 in 1996 and 9,481 in 1995 21 22
Share premium 22,325 23,282
Accumulated deficit (12,213) (22,236)
--------- ---------
Total shareholders' equity 10,133 1,068
--------- ----------
Total liabilities and shareholders' equity $ 17,650 $ 12,385
========= ========
</TABLE>
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ACCENT SOFTWARE INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. DOLLARS AND SHARES IN THOUSANDS (EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
------------ ------------
JUNE 30,
--------------------------------------------------------------
1995 1996 1995 1996
------ ------ ------ -----
<S> <C> <C> <C> <C>
Net sales $ 1,518 $ 1,285 $ 2,151 $ 4,128
------- ------- ------- -------
Operating costs and expenses
Cost of sales 665 1,773 1,225 3,140
Product development costs, net 138 821 373 1,469
Marketing expenses 1,138 2,998 2,385 6,271
General and administrative expenses 586 1,735 866 3,215
------ ------- ------ -------
Total operating costs and
expenses 2,527 7,327 4,849 14,095
------- ------- ------- -------
Operating loss (1,009) (6,042) (2,698) (9,967)
Financing expenses, net 55 49 171 56
------ ------- ------- -------
Net loss $ (1,064) $ (6,091) $ (2,869) $ (10,023)
========= ========= ========= ==========
Loss per share $ (0.20) $ (0.63) $ (0.61) $ (1.05)
========= ========= ========= ==========
Weighted average number of shares 5,209 9,732 4,684 9,555
======== ======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ACCENT SOFTWARE INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
U.S. DOLLARS AND SHARES IN THOUSANDS
(UNAUDITED)
NUMBER
OF
ORDINARY Share Share Accumulated
SHARES capital premium deficit Total
------ ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance as of January 1, 1995 4,575 $ 11 $ 3,290 $ (4,365) $(1,064)
Issuance of shares 495 1 1,099 - 1,100
Net loss for the period ended
June 30, 1995 - - - (2,869) (2,869)
------- --------- --------- -------- -------
Balance as of June 30, 1995 5,070 12 4,389 (7,234) (2,833)
======= ========= ========= ======== ========
Balance as of January 1, 1996 9,481 21 22,325 (12,213) 10,133
Warrants exercised 297 1 957 - 958
Net loss for the period ended
June 30, 1996 - - - (10,023) (10,023)
------- --------- --------- -------- --------
Balance as of June 30, 1996 9,778 $ 22 $ 23,282 $ (22,236) $ 1,068
======= ========= ======== ========== =======
</TABLE>
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ACCENT SOFTWARE INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. DOLLARS IN THOUSANDS
(UNAUDITED)
FOR THE SIX MONTHS
ENDED JUNE 30,
1995 1996
---------------- --------------
<S> <C> <C>
Cash flows from operating activities
Net loss for the period $ (2,869) $ (10,023)
Adjustments to reconcile net loss to net
cash used in operating activities (116) 1,929
-------- ----------
Net cash used in operating activities (2,985) (8,094)
-------- ----------
Cash flows from investing activities
Acquisition of equipment (141) (768)
Capitalized software development costs (328) (46)
--------- -----------
Net cash used in investing activities (469) (814)
--------- -----------
Cash flows from financing activities
Increase (decrease) in short-term bank borrowings (237) 999
Increase in short-term loans from shareholders 1,500 -
Long-term loan from bank 1,013 -
Issuance of shares 1,100 -
Warrants exercised - 958
Repayment of long-term loans - (8)
---------- -----------
Net cash provided by financing activities 3,376 1,949
---------- -----------
Decrease in cash and cash equivalents (78) (6,959)
Cash and cash equivalents at beginning of period 78 9,633
--------- -----------
Cash and cash equivalents at end of period $ - $ 2,674
========= ===========
Adjustments to reconcile net loss to
net cash used in operating activities
Items not involving cash flows:
Depreciation and amortization $ 124 $ 460
Increase in severance pay 63 68
Provision for doubtful accounts and sales returns 147 827
Changes in operating assets and liabilities:
Increase in trade receivables (1,383) (1,259)
Increase in other receivables (2) (123)
Increase in prepaid expenses (141) (232)
Increase in inventories (162) (553)
Increase in accounts payable and accrued expenses 1,238 2,741
---------- ---------
$ (116) $ 1,929
========== =========
</TABLE>
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
<PAGE>
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD.
NOTES TO THE FINANCIAL STATEMENTS
U.S. DOLLARS IN THOUSANDS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they
do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results
for the six month period ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year
ended December 31, 1996. Although the Company believes that the
disclosure presented herein is adequate to make the information
presented not misleading, it is suggested that these condensed
consolidated financial statements be read in conjunction with
the audited financial statements and footnotes included in the
Company's 1995 Annual Report on Form 10-K for the year ended
December 31, 1995.
NOTE 2 - INVENTORIES
DECEMBER 31, JUNE 30,
1995 1996
---------------- ---------------
Materials 372 667
Finished goods 1,287 1,545
----------- -----------
1,659 2,212
=========== ===========
NOTE 3 - SHARE CAPITAL
In a general shareholders' meeting held on May 22, 1996, the
shareholders approved an increase in the number of authorized
shares from 10,000,000 to 30,000,000.
On June 6, 1996, the Company effected a three-for-two stock
split. All share and per share data have been retroactively
restated in the accompanying financial statements to give effect
to this stock split.
NOTE 4 - LIQUIDITY
As of December 31, 1995 and June 30, 1996, the Company had
accumulated deficits of $12.2 million and $22.2 million,
respectively, and anticipates that it will continue to incur
losses for some time. Additionally, as of December 31, 1995 and
June 30, 1996, the Company's working capital was $10.3 million
and $0.6 million, respectively. The Company is continuing its
efforts in the product development and sales and marketing of
its products. These efforts will require substantial additional
expenditures. The Company anticipates that these additional
expenditures will be funded either through new borrowings or the
sale of equity. While management of the Company believes that
additional funding will be available as necessary, there can be
no assurance that additional financing will be available on
terms acceptable to the Company, if at all, when such financing
is required. If additional financing is not available when
needed, the Company will be required to reduce the rate of
product development, sales and marketing efforts and its
administrative cost expenditures.
5
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITIONS.
This Form 10-Q contains historical information and forward-looking
statements. Statements looking forward in time are included in this Form 10-Q
pursuant to the "safe harbor" provision of the Private Securities Litigation
Reform Act of 1995. They involve known and unknown risks and uncertainties
including, but not limited to, the timely availability of new products, market
acceptance of the Company's existing products and products under development,
the impact of competing products and pricing, the availability of sufficient
resources including short and long-term financing for the Company to carry out
its marketing plans, and quarterly fluctuations in operating results. The
Company's actual results in future periods may be materially different from any
future performance suggested herein. Further, the Company operates in an
industry sector where securities values may be volatile and may be influenced by
economic and other factors beyond the Company's control. In the context of the
forward-looking information provided in this Form 10-Q, please refer to the
discussion of risk factors detailed in, as well as the other information
contained in, the Company's Form 10-K and the Company's other filings with the
Securities and Exchange Commission.
RESULTS OF OPERATIONS
The Company achieved sales of approximately $1.3 million during the
three months ended June 30, 1996. The Company incurred an operating loss of
approximately $6.0 million in the three months ended June 30, 1996 primarily as
a result of (a) a significant expansion of operating activities including
product development and marketing activities and (b) less than anticipated OEM
revenues being recognized.
The following table sets forth for the periods indicated the percentage
of revenues represented by certain expense items reflected in the Company's
statement of operations.
<TABLE>
<CAPTION>
Percentage of Sales
------------------------------------------------
For the three months For the six months
ended June 30 ended June 30
------------- -------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses
Cost of sales 43.8% 138.0% 57.0% 76.1%
Product development costs, 9.1% 63.9% 17.3% 35.6%
Marketing expenses 75.0% 233.3% 110.9% 151.9%
General and administrative expenses. 38.6% 135.0% 40.3% 77.8%
----- ------ ----- -----
Total operating costs and expenses 166.5% 570.2% 225.5% 341.4%
----- ----- ----- -----
Operating loss -66.5% -470.2% -125.5% -241.4%
==== ===== ===== =====
</TABLE>
THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1995
Net Sales. Net sales decreased approximately 15% to $1,285,000 in the
three months ended June 30, 1996 from $1,518,000 in the three months ended June
30, 1995. The Company's revenues for both the three months ended June 30, 1996
and 1995 were all primarily derived from packaged software sales. Overall sales
activity in the retail channel was less than anticipated during the three months
ended June 30, 1996. Sales of Internet with an Accent, which was released late
in the fourth quarter of 1995 and Accent Duo, the company's translation product
introduced in the fourth quarter of 1995, accounted for most of the Company's
packaged software sales. The Company did not generate significant revenues
during the three months ended June 30, 1996 from new OEM relationships. However,
the Company did enter into new OEM relationships during the period but has not
recognized significant revenues during the period either because the OEM's are
in the process of completing their total product package which will include the
Company's products or, due to the start up nature of the OEM, the Company is
recognizing revenue based upon receipt of payment.
6
<PAGE>
<PAGE>
Cost of Sales. Cost of sales increased approximately 167% to $1,773,000
in the three months ended June 30, 1996 from $665,000 in the three months ended
June 30, 1995. This increase is attributable to fixed royalty expenses
associated with Internet with an Accent, various other fixed royalty fees and
significantly increased amortization of software development costs compared to
the three months ended June 30, 1995. In addition, the number of employees
involved in manufacturing and distribution increased to 20 at June 30, 1996
from 12 at June 30, 1995.
Product Development Costs, Net. Product development costs, net
increased approximately 495% to $821,000 in the three months ended June 30, 1996
from $138,000 in the three months ended June 30, 1995. This increase is due
primarily to an increase in the number of employees in the engineering
department to 58 at June 30, 1996 from 35 at June 30, 1995 and a significant
decrease in the percentage of costs capitalized during the three months ended
June 30, 1996 as compared to the three months ended June 30, 1995. Also included
in product development costs are the expenses related to development costs
incurred by AgentSoft Ltd. ("AgentSoft") which approximated $132,000 in the
three months ended June 30, 1996. AgentSoft is the Company's majority owned
subsidiary which focuses on the development and marketing of sophisticated agent
software products for the Internet and enterprise Intranet.
Marketing Expenses. Marketing expenses increased approximately 163% to
$2,998,000 in the three months ended June 30, 1996 from $1,138,000 in the three
months ended June 30, 1995. The increase in marketing expenses is principally
attributable to an increase in expenditures for advertising and public relations
which reflects the Company's efforts to increase brand recognition of Accent's
products internationally and its launch of Internet with an Accent. A
significant portion of the increase in marketing expenses resulted from the
expanded activities of Accent Worldwide, the Company's U.S. sales and marketing
subsidiary. For the Company as a whole, the number of employees in marketing and
sales increased to 37 at June 30, 1996 from 22 at June 30, 1995 and the Company
contracted with several independent representatives during the three months
ended June 30, 1996. The increase in marketing expenditures is also due to
higher travel and related costs which resulted from expanded sales and marketing
efforts.
General and Administrative Expenses. General and administrative
expenses increased approximately 196% to $1,735,000 in the three months ended
June 30, 1996 from $586,000 in the three months ended June 30, 1995. This
increase was primarily due to an increase in the number of general and
administrative employees, as well as an increase in compensation for certain
management personnel. General and administrative personnel includes senior
executives, finance, legal, human resources and office administration. In
addition, the Company experienced delays in the collection of certain customer
accounts and recorded a provision for doubtful accounts of approximately
$300,000 for the three months ended June 30, 1996.
Financing Expenses, Net. Financing expenses, net (consisting of net
interest expense net of interest income) decreased approximately 11% to $49,000
in the three months ended June 30, 1996 from $55,000 in the three months ended
June 30, 1995.
Net Loss. As a result of the foregoing, the Company's net loss
increased approximately 472% to $6,094,000 in the three months ended June 30,
1996 from $1,064,000 in the three months ended June 30, 1995.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1995
Net Sales. Net sales increased approximately 92% to $4,128,000 in the
six months ended June 30, 1996 from $2,151,000 in the six months ended June 30,
1995. This increase was due to sales of Internet with an Accent, which was
released late in the fourth quarter of 1995 and Accent Duo, the company's
translation product introduced in the fourth quarter of 1995. Sales of Internet
with an Accent and Accent Duo accounted for most of the Company's packaged
software sales during the six months ended June 30, 1996. Approximately 30% or
$1,260,000 of net sales in the six months ended June 30, 1996 was attributable
to two OEM license agreements, primarily for Internet within an Accent, which
represent firm revenue commitments as well as potentially providing additional
revenue opportunities based on end-user utilization. These OEM sales occurred
primarily in the first quarter of 1996.
7
<PAGE>
<PAGE>
Cost of Sales. Cost of sales increased approximately 156% to $3,140,000
in the six months ended June 30, 1996 from $1,225,000 in the six months ended
June 30, 1995. This increase is attributable to fixed royalty expenses
associated with Internet with an Accent, various other fixed royalty fees,
an increased number of employees and significantly increased amortization of
software development costs compared to the six months ended June 30, 1995.
Product Development Costs, Net. Product development costs, net
increased approximately 294% to $1,469,000 in the six months ended June 30, 1996
from $373,000 in the six months ended June 30, 1995. This increase is due
primarily to an increase in the number of employees in the engineering
department to 58 at June 30, 1996 from 35 at June 30, 1995 and a significant
decrease in the percentage of costs capitalized during the six months ended June
30, 1996 as compared to the six months ended June 30, 1995. Also included in
product development cost are the expenses related to AgentSoft's development
costs, which approximated $132,000 in the six months ended June 30, 1996.
Marketing Expenses. Marketing expenses increased approximately 163% to
$6,271,000 in the six months ended June 30, 1996 from $2,385,000 in the six
months ended June 30, 1995. The increase in marketing expenses is principally
attributable to increased expenditures for advertising, public relations and
trade shows. The significant increase in advertising and public relations
expenditures reflects the Company's efforts to increase brand recognition of
Accent's products internationally and its launch of Internet with an Accent. A
significant portion of the increase in marketing expenses resulted from expanded
activities of Accent Worldwide, the Company's U.S. sales and marketing
subsidiary. In addition, the Company significantly increased the number of
employees in marketing and sales to 37 at June 30, 1996 from 22 at June 30,
1995. The increase in marketing expenditures was also due to higher travel and
related costs which resulted from expanded sales and marketing efforts.
General and Administrative Expenses. General and administrative
expenses increased approximately 271% to $3,215,000 in the six months ended June
30, 1996 from $866,000 in the six months ended June 30, 1995. This increase was
primarily due to an increase in the number of general and administrative
employees, as well as an increase in compensation for certain management
personnel. In addition, the Company experienced delays in the collection of
certain customer accounts and recorded a provision for doubtful accounts of
approximately $750,000 for the six months ended June 30, 1996.
Financing Expenses, Net. Financing expenses, net (consisting of net
interest expense net of interest income) decreased 67% to $56,000 in the six
months ended June 30, 1996 from $171,000 in the six months ended June 30, 1995.
Net Loss. As a result of the foregoing, the Company's net loss
increased approximately 249% to $10,023,000 in the six months ended June 30,
1996 from $2,869,000 in the six months ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company's capital requirements in connection with its
development and marketing activities have been and will continue to be
significant. The Company has been dependent upon the proceeds of sales of its
securities to private and public investors (including a May 1995 bridge
financing and a July 1995 initial public offering), as well as certain private
loans and various government guaranteed long-term loans under the Approved
Enterprise Program which is administered by the Israel Investment Center to fund
its initial development and marketing activities.
Future sales of the Company's products and proposed products will
depend principally on customer demand for multilingual software programs and
multilingual Internet products. The computer industry has historically been
volatile and, as is typically the case with newly-introduced products, the
ultimate level of demand for the Company's products is subject to a high degree
of uncertainty. Developing market acceptance, particularly worldwide, for the
Company's existing and proposed products has required, and will continue to
require, substantial marketing efforts and the expenditure of a significant
amount of funds to inform customers
8
<PAGE>
<PAGE>
of the perceived benefits and cost advantages of the Company's products. The
Company expects that its principal use of cash during the next year, apart from
general operating expenses for product development and operations, will continue
to be concentrated on significant marketing activities worldwide.
Consistent with industry practices, the Company may accept product
returns or provide other credits in the event that a distributor or retailer
holds excess inventory of the Company's products. The Company's sales are made
on credit terms which vary significantly depending on the nature of the sale and
size of the customer. In addition, the Company does not hold collateral to
secure payment from its distributors and retailers. Therefore, defaults in
payment by several of the Company's distributors or retailers have adversely
affected, and in the future could adversely affect, the Company's business,
results of operations and financial condition. The Company believes it has
established sufficient reserves to accurately reflect the amount or likelihood
of product returns or credits and uncollectible receivables. However, there can
be no assurance that actual returns or uncollected accounts receivable beyond
the reserves established would not have a material adverse effect on the
Company's business, results of operations and financial condition.
In addition, and also consistent with industry practice for packaged
software companies which are establishing their distribution channel, the
Company will, when appropriate, be transferring product through the distribution
channel on a consignment basis. In the six months ended June 30, 1996,
significant shipments were made on that basis, resulting in higher inventory
balances and working capital requirements. There can be no assurance that such
inventory consignment will result in additional sales for the Company, or that
such inventory consignment will not result in excess inventory or continued
increased working capital requirements for the Company.
Long term bank loans received as part of the Approved Enterprise
Program totaled $2.4 million as of June 30, 1996, which was comparable to the
amount at December 31, 1995. The Law for the Encouragement of Capital
Investments, 1959 provides that capital investment in certain production
facilities (or other eligible assets) may, upon application to the Israel
Investment Center which administers the program, be designated as an "Approved
Enterprise". Each certificate of approval for an Approved Enterprise relates to
a specific investment program in the Approved Enterprise, delineated both by the
financial scope of the investment and by the physical characteristics of the
facility or other asset. The Company is eligible to receive guaranteed loans of
approximately $4.4 million under the Approved Enterprise Program. During the
three months ended June 30, 1996, the Company received approval from the Israel
Investment Center to increase its outstanding borrowings from $2.4 million to
$3.4 million. Based upon this approval, the Company received a short term bank
loan for $1.0 million as shown in the June 30, 1996 financial statements.
Subsequent to June 30, 1996, this short term loan was converted to a long term
loan under the Approved Enterprise Program. In order for the Company to be
eligible to receive the remainder of these guaranteed loans, the Company must
continue to comply with the various conditions of each respective approved
program, including compliance with minimum investment levels and the achievement
of certain levels of sales. The Israel Investment Center has indicated to the
Company that revenue growth will be critical to receiving the remaining $1.0
million. The Company believes it is in compliance with, and will continue to
comply with, these conditions, however, there can be no assurance that this will
continue to occur or that the Company will receive any additional loans under
the Approved Enterprise Program.
Significant increases in sales are essential to the Company's future.
The Company is not generating sufficient revenues from its operations to fund
its activities. Working capital decreased from a surplus of $10,329,000 on
December 31, 1995 to a surplus of $606,000 on June 30, 1996 due to the Company's
continuing operating losses, working capital needs and capital spending. Sales
activities at the retail customer level and subsequent cash collections from the
Company's customers are significantly slower than originally anticipated. In
addition, due to the nature of sales terms with several large distributors,
shipments to certain customers represent consignment sales. Accordingly, as of
June 30, 1996, the Company has large investments in receivables and inventory as
it continues to establish its position in the marketplace. The Company is
dependent on remaining cash and cash equivalents, the timely collection of
receivables and additional borrowings under the Approved Enterprise Program and
obtaining additional financing either through new
9
<PAGE>
<PAGE>
borrowings or the sale of equity in order to fund its current obligations and
continue the development of its technology and the marketing of its products.
The Company currently does not have sufficient funds available to
carry on its operations, including product development and marketing
expenditures, as currently being conducted. On July 3, 1996, the Company filed
a registration statement with the Securities and Exchange Commission relating
to the issuance of additional Ordinary Shares. However, due to market
conditions which existed during July and early August of this year, management
is evaluating, along with its underwriters, the timing and the feasibility of
the proposed public offering. To keep operations at their present levels, some
type of additional short term financing is necessary in the next 30 days while
longer term financing considerations are evaluated further. In the event the
Company is not successful in securing additional equity financing, management
will evaluate certain additional financing alternatives which will allow the
business to continue to expand in the marketplace at its present rate. There
can be no assurance, however, that additional financing will be available to
the Company on commercially reasonably terms or at all. In the event that
additional sources of financing prove to be insufficient to fund operations
or are not available, the Company will be required to revise its product
development and marketing spending levels and all other aspects of its
operations in order to enable available sources of funds to finance
the Company's operations.
10
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
27 - Financial Data Schedule
B. Reports on Form 8-K
None.
11
<PAGE>
<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.
ACCENT SOFTWARE INTERNATIONAL LTD.
(REGISTRANT)
Date: August 14, 1996 By: /s/ Michael Sondhelm
----------------------------------
Michael Sondhelm
Controller
(Principal Financial and Accounting
Officer)
12
<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial
information extracted from the financial
statements contained in the body of the
accompanying Form 10-Q and is qualified in its
entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Jun-30-1996
<CASH> 2,674
<SECURITIES> 0
<RECEIVABLES> 4,158
<ALLOWANCES> 1,065
<INVENTORY> 2,212
<CURRENT-ASSETS> 9,686
<PP&E> 2,224
<DEPRECIATION> 511
<TOTAL-ASSETS> 12,385
<CURRENT-LIABILITIES> 9,080
<BONDS> 1,959
0
0
<COMMON> 22
<OTHER-SE> 23,282
<TOTAL-LIABILITY-AND-EQUITY> 12,385
<SALES> 4,128
<TOTAL-REVENUES> 4,128
<CGS> 3,140
<TOTAL-COSTS> 3,140
<OTHER-EXPENSES> 10,955
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56
<INCOME-PRETAX> (10,023)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,023)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,023)
<EPS-PRIMARY> (1.05)
<EPS-DILUTED> (1.05)
</TABLE>
