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 September 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
011-972-2-679-3723
- --------------------------------------------------------------------------------
(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 November 1, 1996, the registrant had outstanding 9,795,902 Ordinary Shares
which is the registrant's only class of common stock.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ACCENT SOFTWARE INTERNATIONAL LTD.
CONSOLIDATED BALANCE SHEETS
U.S. DOLLARS AND SHARES IN THOUSANDS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
----------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 9,633 $ 407
Trade receivables, net of allowance
of $1,176 in 1996 and $997 in 1995 2,661 1,886
Other receivables 696 172
Prepaid expenses 656 734
Inventories 1,659 1,838
-------- --------
Total current assets 15,305 5,037
-------- --------
Equipment
Cost 1,456 2,426
Less - accumulated depreciation 339 602
-------- --------
Equipment net 1,117 1,824
-------- --------
Other Assets, net
Deferred issuance costs -- 246
Capitalized software production costs,
net of accumulated amortization of $811
in 1996 and $379 in 1995 1,228 842
-------- --------
Total assets $ 17,650 $ 7,949
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term shareholder borrowings $ -- $ 415
Current maturities of long-term loans 27 1,028
Accounts payable and accrued expenses 4,949 7,950
-------- --------
Total current liabilities 4,976 9,393
-------- --------
Long-term bank loans 2,331 2,839
-------- --------
Accrued severance pay and other 210 314
-------- --------
Shareholders' equity
Share capital - Ordinary shares of NIS 0.01
par value, Authorized 30,000 shares; issued
and outstanding 9,796 in 1996 and 9,481 in 1995 21 22
Share premium 22,325 23,343
Accumulated deficit (12,213) (27,962)
-------- --------
Total shareholders' equity (deficit) 10,133 (4,597)
-------- --------
Total liabilities and shareholders' equity $ 17,650 $ 7,949
======== ========
</TABLE>
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. DOLLARS AND SHARES IN THOUSANDS (EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 1,296 $ 603 $ 3,447 $ 4,731
-------- -------- -------- --------
Operating costs and expenses
Cost of sales 937 1,705 2,162 4,845
Product development costs, net 413 979 785 2,448
Marketing expenses 875 1,838 3,261 8,109
General and administrative expenses 521 1,792 1,387 5,007
-------- -------- -------- --------
Total operating costs and
expenses 2,746 6,314 7,595 20,409
-------- -------- -------- --------
Operating loss (1,450) (5,711) (4,148) (15,678)
Financing expenses, net 11 15 182 71
-------- -------- -------- --------
Net loss $ (1,461) $ (5,726) $ (4,330) $ (15,749)
======== ======== ======== ========
Loss per share $ (0.20) $ (0.59) $ (0.78) $ (1.62)
======== ======== ======== ========
Weighted average number of shares 7,322 9,787 5,564 9,698
======== ======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
2
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
U.S. DOLLARS AND SHARES IN THOUSANDS
(UNAUDITED)
<TABLE>
<CAPTION>
Number of
Ordinary Share Share Accumulated
Shares Capital Premium Warrants Deficit Total
------ ------- ------- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance as of
January 1, 1995 4,575 $ 11 $ 3,290 -- $ (4,365) $ (1,064)
Issuance of Shares
(Private Placement
Financing) 495 1 1,099 -- -- 1,100
Issuance of Shares and
Warrants in the Initial
Public Offering 2,812 6 8,504 1,591 -- 10,101
Net loss for the
period ended
September 30, 1995 -- -- -- -- (4,330) (4,330)
-------- -------- -------- -------- -------- --------
Balance as of
September 30, 1995 7,882 18 12,893 1,591 (8,695) 5,807
======== ======== ======== ======== ======== ========
Balance as of
January 1, 1996 9,481 21 22,325 -- (12,213) 10,133
Warrants Exercised 315 1 1,018 -- -- 1,019
Net loss for the
period ended
September 30, 1996 -- -- -- -- (15,749) (15,749)
-------- -------- -------- -------- -------- --------
Balance as of
September 30, 1996 9,796 $ 22 23,343 -- (27,962) (4,597)
======== ======== ======== ======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. DOLLARS IN THOUSANDS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
---------------------------
1995 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net loss for the period $ (4,330) $ (15,749)
Adjustments to reconcile net loss to net
cash used in operating activities (953) 4,842
-------- --------
Net cash used in operating activities (5,283) (10,907)
-------- --------
Cash flows from investing activities
Acquisition of equipment (335) (970)
Capitalized software development costs (446) (46)
-------- --------
Net cash used in investing activities (781) (1,016)
-------- --------
Cash flows from financing activities
Increase (decrease) in short-term bank borrowings (335) --
Increase in short-term loans from shareholders -- 415
Increase in deferred issuance costs -- (246)
Long-term loan from bank 1,013 1,550
Issuance of shares 11,201 --
Warrants and options exercised -- 1,019
Repayment of long-term loans -- (41)
-------- --------
Net cash provided by financing activities 11,879 2,697
-------- --------
Increase in cash and cash equivalents 5,815 (9,226)
Cash and cash equivalents at beginning of period 78 9,633
-------- --------
Cash and cash equivalents at end of period $ 5,893 $ 407
======== ========
Adjustments to reconcile net loss to
net cash used in operating activities
Items not involving cash flows:
Depreciation and amortization $ 268 $ 695
Increase in severance pay 148 104
Provision for doubtful accounts and sales returns -- 179
Changes in operating assets and liabilities:
Increase in trade receivables (1,894) 596
(Increase) decrease in other receivables -- 524
Increase in prepaid expenses (249) (78)
Increase in inventories (258) (179)
Increase in accounts payable and
accrued expenses 1,032 3,001
-------- --------
Net Adjustments $ (953) $ 4,842
======== ========
</TABLE>
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
<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
September 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, SEPTEMBER 30,
1995 1996
-------------- -------------
Materials 372 448
Finished goods 1,287 1,390
----------- ----------
1,659 1,838
=========== ==========
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 September 30, 1996, the Company had
accumulated deficits of $12.2 million and $28.0 million,
respectively, and anticipates that it will continue to incur losses
for some time. Working capital decreased from a surplus of $10.3
million on December 31, 1995 to a deficit of $4.4 million on
September 30, 1996 due to the Company's continuing operating losses,
working capital needs and capital spending.
5
<PAGE>
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. Sales activities at the retail customer level
and subsequent cash collections from the Company's customers have
been 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 September 30, 1996, the Company has large balances
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
obtaining additional financing either through new 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 October 24, 1996, the
Company filed a registration statement with the United States
Securities and Exchange Commission relating to the issuance of
additional equity. In the event the Company is not successful in
securing additional equity financing, management will evaluate
certain additional financing alternatives to allow the business to
continue to operate. There can be no assurance, however, that
additional financing will be available, if necessary, to the Company
on commercially-reasonable terms or at all. The inability to obtain
additional financing, when needed, would have a material adverse
effect on the Company including possibly requiring the Company to
curtail or cease its operations.
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 $603,000 during the three
months ended September 30, 1996. The Company incurred an operating loss of
approximately $5.7 million in the three months ended September 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.
6
<PAGE>
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 nine months
ended September 30, ended September 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 72.3% 282.8% 62.7% 102.4%
Product development costs 31.8% 162.4% 22.8% 51.7%
Marketing expenses 67.5% 304.8% 94.6% 171.4%
General and administrative expenses 40.2% 297.2% 40.2% 105.8%
-------- --------- -------- --------
Total operating costs and expenses 211.8% 1047.2% 220.3% 431.3%
-------- --------- -------- --------
Operating loss (111.8)% (947.2)% (120.3)% (331.3)%
======== ========= ======== ========
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1995
Net Sales. Net sales decreased approximately 53% to $603,000 in the three
months ended September 30, 1996 from $1,296,000 in the three months ended
September 30, 1995. The Company's revenues for both the three months ended
September 30, 1996 and 1995 were primarily derived from packaged software sales.
Overall sales activity in the retail channel was less than anticipated during
the three months ended September 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. OEM sales accounted
for 18% of total revenues for the three months ended September 30, 1996 and 10%
of total revenues for the three months ended September 30, 1995.
Cost of Sales. Cost of sales increased approximately 82% to $1,705,000 in
the three months ended September 30, 1996 from $937,000 in the three months
ended September 30, 1995. This increase is attributable to a significant
increase in 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 September 30,
1995.
Product Development Costs, Net. Product development costs, net increased
approximately 137% to $979,000 in the three months ended September 30, 1996 from
$413,000 in the three months ended September 30, 1995. This increase is due
primarily to an increase in the number of employees in the engineering
department to 70 at September 30, 1996 from 41 at September 30, 1995 and a
significant decrease in the percentage of costs capitalized during the three
months ended September 30, 1996 as compared to the three months ended September
30, 1995. Also included in product development costs are the expenses related to
development costs incurred by AgentSoft Ltd. ("AgentSoft") which approximated
$116,000 in the three months ended September 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 110% to
$1,838,000 in the three months ended September 30, 1996 from $875,000 in the
three months ended September 30, 1995. The increase in marketing expenses is
attributable in part 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 31 at September 30, 1996 from 21 at September 30, 1995 and
the Company contracted with several independent representatives during the three
months ended September 30, 1996.
7
<PAGE>
General and Administrative Expenses. General and administrative expenses
increased approximately 244% to $1,792,000 in the three months ended September
30, 1996 from $521,000 in the three months ended September 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
$540,000 for the three months ended September 30, 1996.
Financing Expenses, Net. Financing expenses, net (consisting of net
interest expense net of interest income) increased approximately 36% to $15,000
in the three months ended September 30, 1996 from $11,000 in the three months
ended September 30, 1995.
Net Loss. As a result of the foregoing, the Company's net loss increased
approximately 292% to $5,726,000 in the three months ended September 30, 1996
from $1,461,000 in the three months ended September 30, 1995.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1995
Net Sales. Net sales increased approximately 37% to $4,731,000 in the nine
months ended September 30, 1996 from $3,447,000 in the nine months ended
September 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 nine months ended September 30, 1996.
Approximately 27% or $1,260,000 of net sales in the nine months ended September
30, 1996 was attributable to two OEM license agreements, primarily for Internet
within an Accent, which represent 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. OEM sales accounted
for 35% of total revenues for the nine months ended September 30, 1996 and 8% of
total revenues for the nine months ended September 30, 1995.
Cost of Sales. Cost of sales increased approximately 124% to $4,845,000 in
the nine months ended September 30, 1996 from $2,162,000 in the nine months
ended September 30, 1995. This increase is attributable to a significant
increase in 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 nine months ended September 30, 1995.
Product Development Costs, Net. Product development costs, net increased
approximately 212% to $2,448,000 in the nine months ended September 30, 1996
from $785,000 in the nine months ended September 30, 1995. This increase is due
primarily to an increase in the number of employees in the engineering
department to 70 at September 30, 1996 from 41 at September 30, 1995 and a
significant decrease in the percentage of costs capitalized during the nine
months ended September 30, 1996 as compared to the nine months ended September
30, 1995. Also included in product development cost are the expenses related to
AgentSoft's development costs, which approximated $116,000 in the nine months
ended September 30, 1996.
Marketing Expenses. Marketing expenses increased approximately 149% to
$8,109,000 in the nine months ended September 30, 1996 from $3,261,000 in the
nine months ended September 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 31 at September 30, 1996 from 21
at September 30, 1995. The increase in marketing expenditures was also due to
higher travel and related costs which resulted from expanded sales and marketing
efforts.
8
<PAGE>
General and Administrative Expenses. General and administrative expenses
increased approximately 261% to $5,007,000 in the nine months ended September
30, 1996 from $1,387,000 in the nine months ended September 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 $1,176,000 for the nine months ended September 30,
1996.
Financing Expenses, Net. Financing expenses, net (consisting of net
interest expense net of interest income) decreased 61% to $71,000 in the nine
months ended September 30, 1996 from $182,000 in the nine months ended September
30, 1995.
Net Loss. As a result of the foregoing, the Company's net loss increased
approximately 264% to $15,749,000 in the nine months ended September 30, 1996
from $4,330,000 in the nine months ended September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Future sales of the Company's products and proposed products will depend
principally on customer demand for multilingual software programs, multilingual
Internet products and products utilizing intelligent agent technology. 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 substantial marketing efforts and the expenditure of a
significant amount of funds to inform customers of the perceived benefits and
cost advantages of the Company's products. The Company intends to focus its
marketing efforts in the future more narrowly so as to achieve greater sales to
users of the Company's products.
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 nine months ended September 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 not result in excess inventory or continued increased
working capital requirements for the Company.
The Company's operating activities used cash of $301,000, $2,622,000,
$8,733,000 and $10,907,000 for the years ended December 31, 1993, 1994 and 1995
and for the nine months ended September 30, 1996, respectively. The Company's
investing activities used cash of $528,000, $949,000, $1,435,000 and $1,016,000
for the years ended December 31, 1993, 1994 and 1995 and for the nine months
ended September 30, 1996, respectively. Financing activities provided $829,000,
$3,649,000, $19,723,000 and $2,697,000 for the years ended December 31, 1993,
1994 and 1995 and for the nine months ended September 30, 1996, respectively.
9
<PAGE>
In January 1995, the Company obtained short-term bank loans amounting to
$665,000 for general working capital purposes. Such loans were repaid in May
1995 from the proceeds of the Private Placement (as defined below). In April
1995, the Company borrowed $1,000,000 from certain persons, including certain
shareholders, which borrowings were converted into units that were issued in the
Private Placement. To date, the Company's capital requirements in connection
with its development and marketing activities have been and will continue to be
significant. Since its inception, the Company has financed its operations
primarily through net proceeds from sales of equity securities, bank and other
credit facilities, various government guaranteed long-term loans under the
Approved Enterprise Program which is administered by the Israel Investment
Center, revenues from sales of its word processing and Internet software and
loans from certain affiliated parties. In addition, the Company utilized certain
of the proceeds of the IPO to bring creditors current in the amount owed to
them.
In May 1995, the Company received net proceeds of $2,600,000 from a
private placement (the "Private Placement") of units consisting of Ordinary
Shares, warrants to purchase Ordinary Shares and an unsecured promissory note.
Accent received net proceeds of $9,785,000 from the IPO of Ordinary Shares and
warrants to purchase Ordinary Shares (the "IPO Warrants") in July 1995. The
Company called the IPO Warrants for redemption in November 1995, as a result of
which substantially all of the IPO Warrants were exercised, raising proceeds to
the Company of $8,160,000.
From August 1996 to October 1996, the Company borrowed an aggregate of
$1,335,000 from IMR Fund, L.P. ("IMR Fund"), consisting of (i) a $425,000 loan
at 12% made in August 1996 and (ii) $910,000 in loans at 10% made in October
1996. IMR Fund has also committed to the Company to provide the Company with
additional loans of $165,000 at 10% during November 1996. In connection
therewith, IMR Investments V.O.F. ("IMR Investments") was issued warrants (the
"IMR Warrants") to purchase 175,000 Ordinary Shares. IMR Investments has agreed
to purchase up to 9.9% of the Units being offered in the public offering at an
aggregate purchase price not to exceed $1,500,000. The Company intends to repay
the $1,500,000 loan out of the net proceeds of the Offering; to the extent that
the gross proceeds to the Company from IMR Investments' purchase of Units
offered in the public offering are less than $1,500,000, an amount equal to the
difference between $1,500,000 and the gross proceeds to the Company from IMR
Investments' purchase of Units offered in the public offering will be converted
into Units at the public offering price per Unit less $0.10.
Long term bank loans received as part of the Approved Enterprise Program
totaled $3.9 million as of September 30, 1996, an increase from the $2.4 million
outstanding as of June 30, 1996. 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.
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.
10
<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: November 7, 1996 By: /s/ Michael Sondhelm
---------------------------------
Michael Sondhelm
Controller
(Principal Financial and
Accounting Officer)
12
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule
13
<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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 407
<SECURITIES> 0
<RECEIVABLES> 3,062
<ALLOWANCES> 1,176
<INVENTORY> 1,838
<CURRENT-ASSETS> 5,037
<PP&E> 2,426
<DEPRECIATION> 602
<TOTAL-ASSETS> 7,949
<CURRENT-LIABILITIES> 9,393
<BONDS> 3,867
0
0
<COMMON> 22
<OTHER-SE> 23,343
<TOTAL-LIABILITY-AND-EQUITY> 7,949
<SALES> 4,731
<TOTAL-REVENUES> 4,731
<CGS> 4,845
<TOTAL-COSTS> 7,293
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 71
<INCOME-PRETAX> (15,749)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,749)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,749)
<EPS-PRIMARY> (1.62)
<EPS-DILUTED> (1.62)
</TABLE>
