<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM 10-Q
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[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. For the quarterly period ended June 30, 1998.
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 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 July 31, 1998, the registrant had outstanding 27,936,211 Ordinary Shares
(including 1,800,000 Ordinary Shares included in the registrant's outstanding
Units).
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ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S. dollars and shares in thousands
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- -----------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,361 $ 2,499
Trade receivables, net of allowance of
$63 in 1998 and 1997 960 755
Other receivables 194 117
Prepaid expenses 261 906
Inventories 70 85
----------- -----------
Total current assets 4,846 4,362
EQUIPMENT
Cost 2,655 2,630
Less - Accumulated depreciation 1,591 1,220
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Equipment, net 1,064 1,410
OTHER LONG TERM ASSETS 664 666
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Total assets $ 6,574 $ 6,438
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----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 1,982 $ 1,886
Accounts payable and accrued expenses 2,071 2,367
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Total current liabilities 4,053 4,253
LONG-TERM BANK LOANS 748 844
ACCRUED SEVERANCE LIABILITY 103 318
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Total liabilities 4,904 5,415
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SHAREHOLDERS' EQUITY
Preferred Shares, par value NIS 0.01, authorized
10,000 shares, issued and outstanding 4 at
June 30, 1998 and December 31, 1997 - -
Ordinary Shares, par value NIS 0.01, authorized
65,000 shares, issued and outstanding 27,917 at
June 30, 1998 and 17,410 at December 31, 1997 44 43
Share premium 51,653 47,701
Accumulated deficit (50,027) (46,721)
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Total shareholders' equity 1,670 1,023
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Total liabilities and shareholders' equity (deficit) $ 6,574 $ 6,438
----------- -----------
----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED BALANCE SHEETS.
2
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ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars and shares in thousands (except per share figures)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES $ 490 $ 722 $ 1,195 $ 1,449
OPERATING COSTS AND EXPENSES
Cost of sales 170 632 375 1,207
Product development costs 718 1,321 1,843 2,439
Marketing expenses 331 753 789 1,320
General and administrative expenses 689 687 1,403 1,199
---------- ---------- ---------- ----------
Total operating costs and expenses 1,908 3,393 4,410 6,165
---------- ---------- ---------- ----------
OPERATING LOSS (1,418) (2,671) (3,215) (4,716)
Other Income (Expense) (46) (54) (91) (36)
---------- ---------- ---------- ----------
NET LOSS $ (1,464) $ (2,725) $ (3,306) $ (4,752)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
NET LOSS PER SHARE $ (0.05) $ (0.23) $ (0.14) $ (0.41)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
WEIGHTED AVERAGE
number of shares outstanding 27,620 11,696 24,127 11,691
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED STATEMENTS.
3
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ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1998 1997
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (3,306) $ (4,752)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 371 460
Change in allowance for doubtful accounts - (132)
Changes in assets and liabilities
(Increase) decrease in trade receivables (205) 242
(Increase) decrease in other receivables (77) 32
(Increase) decrease in prepaid expenses 645 223
(Increase) decrease in inventories 15 271
Increase (decrease) in accounts payable & accruals (296) (3,158)
Increase (decrease) in severance liability (215) (51)
---------- ----------
Net cash (used in) operating activities (3,068) (6,865)
---------- ----------
INVESTING ACTIVITIES
Acquisition of equipment (25) (96)
Increase in other long term assets 2 -
---------- ----------
Net cash used in investing activities (23) (96)
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FINANCING ACTIVITIES
Repayment of government-guaranteed loans - (588)
Net proceeds received on issuance of preferred shares 3,750 -
Ordinary shares issued in satisfaction of accounts payable 264 -
Net proceeds received on exercise of warrants and options - 62
Cancellation of shares issued in payment for services (61)
---------- ----------
Net cash provided by (used in) financing activities 3,953 (526)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 862 (7,487)
Cash and cash equivalents, beginning of period 2,499 8,723
---------- ----------
Cash and cash equivalents, end of period $ 3,361 $ 1,236
---------- ----------
---------- ----------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Ordinary shares issued in satisfaction of accounts payable $ 264 $ -
---------- ----------
---------- ----------
Trade credits issued in satisfaction of accounts payable $ 2 $ -
---------- ----------
---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED STATEMENTS.
4
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except per share figures
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Accent Software International Ltd., and its subsidiaries ("Accent"
or "the Company") have been prepared in accordance with United States
generally accepted accounting principles for interim financial
information. The significant accounting policies, certain financial
information and footnote disclosures which are normally included in
financial statements prepared in accordance with generally accepted
accounting principles, but which are not required for interim
reporting purposes, have been condensed or omitted. In the opinion of
management, all adjustments (consisting of adjustments of a normal,
recurring nature) necessary for a fair presentation of these financial
statements have been reflected in the interim periods presented.
Operating results for the three and six month periods ended June 30,
1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. Although the Company
believes that the disclosures presented herein are 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 1997 Annual Report on Form 10-K for the year ended December
31, 1997.
NOTE 2 - SHARE CAPITAL
Accent executed a Preferred Share Purchase Agreement with Lernout &
Hauspie Speech Products, N.V. ("L&H") on June 4, 1998 pursuant to
which the Company issued 4,000 Series C Preferred shares in exchange
for $4,000. Fees and expenses related to the transaction totaled
approximately $250 resulting in net proceeds to the Company of $3,750.
The Series C Preferred Shares do not pay interest but do provide the
investor with a preference over Ordinary Shareholders in the event of
liquidation. The investor also has the right to vote the shares as if
they had all been converted into Ordinary Shares and has been granted
one seat on Accent's Board of Directors.
The Series C Preferred Shares issued to L&H are convertible at any
time into Ordinary Shares of Accent. The conversion price of $0.45 per
share represents a 10% premium over the average closing price of the
Company's Ordinary Shares during the ten trading days preceding
execution of the agreement. Conversion of all 4,000 Series C Preferred
Shares would result in the issuance of 8,888,889 Ordinary Shares and
would dilute existing shareholders by approximately 32%. Also pursuant
to this agreement, the investor will receive warrants to purchase
4,444,444 Ordinary Shares of the Company at an exercise price of $0.55
per share. The warrants are exercisable for five years. Conversion of
the warrants would dilute existing shareholders by an additional 12%.
5
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ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except per share figures
(Unaudited)
NOTE 2 - SHARE CAPITAL (CONTINUED)
Also during the second quarter of 1998, Accent reached agreement with
several of its major creditors pursuant to which these creditors
agreed to accept Ordinary Shares in the Company in payment for all or
a portion of the amounts due them. The shares were issued at their
then current market value of approximately $0.45 per share and
resulted in the issuance of 588,000 Ordinary Shares. The Company
continues to pursue similar debt-to-equity conversions with other
large vendors and, subsequent to June 30, 1998, reached agreement with
one such vendor under which the Company will issue approximately
400,000 additional Ordinary Shares.
During the fourth quarter of 1997, Accent completed a financing
arrangement in which it received approximately $5,255 in cash net of
expenses. In return for the aggregate purchase price of $5,750, the
Company issued the investors debentures in the amount of $4,000 and
Series B Preferred Shares in the amount of $1,750. Conversion of both
the debentures and the Series B Preferred Shares into a total of
12,496,160 Ordinary Shares was completed during the first quarter of
1998.
In accordance with the terms of its Preferred Share Purchase Agreement
with Lernout & Hauspie, Accent has agreed to retire its Israeli
government-guaranteed loans. Retirement of these loans will permit a
lien on the Company's assets, currently held by the government, to
pass to Lernout & Hauspie. The Company, the government of Israel and
various Israeli banking officials have reached an agreement that will
effectively permit the conversion of these loans into equity. On
August 4, 1998, the Company filed a Registration Statement on Form S-3
to register 5,000,000 Ordinary Shares, a majority of which will be
used to retire the government-guaranteed loans. The remaining shares
from the registration are designated for those creditors who have
agreed to accept Ordinary Shares in payment for all or a portion of
money due them as discussed earlier in this Note 2.
Over the next several months, Accent will issue shares of stock to the
Bank for Industrial Development in Israel, Ltd. which will cause the
shares to be sold and the net proceeds will be applied against the
outstanding debt. The Company will be responsible for various fees and
expenses associated with the transaction and will issue additional
Ordinary Shares to pay for these costs. In total, the Company
anticipates that, at current market prices, approximately 4,400,000
Ordinary Shares will need to be sold to retire $1,615 in
government-guaranteed loans and an estimated $120 in fees and
expenses. This transaction would result in the dilution of existing
shareholders by approximately 12%. If the market price of the
Company's Ordinary Shares increases or decreases as the shares are
being sold, there will be a corresponding increase or decrease in
the number of shares required to be sold and in the dilution to
existing shareholders.
NOTE 3 - LIQUIDITY
6
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ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except per share figures
(Unaudited)
As of June 30, 1998 and December 31, 1997, the Company had accumulated
deficits of $50,027 and $46,721, respectively, and recognizes that it
may continue to incur losses through the third quarter of 1998 and
possibly beyond. Furthermore, the Company has not generated
sufficient cash to finance its operations and it has been dependent
upon external sources to meet its liquidity requirements.
Accent believes the proceeds from the Preferred Share Purchase
Agreement with Lernout & Hauspie will satisfy its anticipated working
capital requirements through the end of 1998. By that time the Company
expects to have increased its revenue and be generating sufficient
cash to meet its operational requirements without reliance on external
sources of capital. There is, however, no assurance that the Company
will be successful in achieving its operating objectives and will be
able to avoid the need to raise additional external capital. Any
failure to meet its operating objectives or to raise additional
capital, if required, will have a material adverse impact on the
Company and could force it to cease operations.
At June 30, 1998, the Company had Israeli government-guaranteed loans
outstanding in the amount of $2,730, including $1,982 due within one
year. Accent paid down $1,115 of this amount on July 3, 1998.
The Preferred Share Purchase Agreement with Lernout & Hauspie provides
that the balance of the government-guaranteed loans is to be retired
within ninety days of the date of the agreement. As mentioned in Note
2, above, the Company has reached agreement with the government of
Israel and appropriate Israeli banking officials that will permit the
Company to retire the balance of these loans through the issuance of
additional equity. Retirement of the loans in this matter will allow
the Company to avoid the cash outlays that would normally have been
required to service and retire the debt and will also permit a lien on
the Company's assets, currently held by the government, to pass to
Lernout & Hauspie.
NOTE 4 - GOING CONCERN
The consolidated financial statements have been prepared assuming that
Accent will continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the
amounts and classification of liabilities that may result should the
Company be unable to continue as a going concern.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITIONS. (U.S. dollars in thousands, except per share
data.)
INTRODUCTION
This Form 10-Q for Accent Software International Ltd., and its subsidiaries
("Accent" or "the Company") 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. Such statements 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 to
carry out the Company's product development and 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 Company's most recent Form 10-K
and the Company's other filings with the Securities and Exchange Commission.
Accent is a language solutions company, founded in Jerusalem, Israel in
1988. The Company designs, develops, markets and supports software products and
services for the rapidly emerging Language Information Technology ("LIT")
industry. Accent's products address the growing need for software publishers,
corporations and content providers to produce software applications, associated
documentation, and application-specific content in any natural language.
RECENT DEVELOPMENTS
On June 9, 1998, Accent announced that Lernout & Hauspie Speech Products,
N.V. ("L&H"), had made a $4,000 investment in the Company, acquiring an
ownership position of almost 25% through the purchase of preferred shares. After
fees and expenses, Accent realized approximately $3,750 from the transaction.
Accent and L&H also announced that they had entered into various sales,
marketing and distribution agreements which will allow Accent to benefit from
L&H's extensive sales and marketing network. The investment by L&H, combined
with various cost reduction initiatives implemented during the most recent
quarter and anticipated increases in revenue, will help Accent satisfy its
near-term working capital requirements. The sales, marketing and distribution
agreements with Lernout & Hauspie are expected to have an important, positive
impact on the Company's ability to generate revenue and on its future operating
results.
The cost reduction initiatives implemented during the second quarter of
1998 included a nearly 50% reduction in personnel and significant cost
reductions in most areas of its operations. The reduction in sales and marketing
personnel and related promotional expenses, combined with customer concerns
about the Company's continuing viability, led to a predictable decline in
revenue when compared to earlier periods. The restructuring also produced a
significant decrease in the Company's operating expenses and, as a result, the
Company was able to reduce its operating deficit from the previous quarter by
approximately $400, a 20% improvement.
8
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RISKS
Accent cautions investors that the following significant factors, among
others, in some cases have affected and in the future could affect the Company's
financial and operating results and the return that may be achieved on
investments in the Company.
GOING CONCERN. Accent has accumulated deficits in excess of $50 million
since its inception through June 30, 1998, and expects that it may continue to
incur deficits through the third quarter of 1998 and possibly beyond. Accent
also continues to generate operating cash flow deficits and its liquidity was
essentially exhausted early in the second quarter of 1998. The Company has been
successful in generating additional working capital and in reducing its
operating cash flow requirements and believes it has adequate working capital to
meet its near-term requirements. There can be no assurance, however, that the
Company's working capital will be adequate to meet its operating requirements or
that the Company will be successful in obtaining additional working capital, if
required. Any failure on the part of the Company to meet its working capital
requirements will have a material adverse impact and could force the Company to
cease operations.
REVENUE. Although the Company's products are experiencing a favorable
reception in the marketplace, revenue has fallen short of management
expectations, the Company believes, due primarily to significant concerns of
potential customers as to Accent's ability to continue to support and expand its
product offerings. Both contributing to and a result of the revenue shortfall,
the Company's recent liquidity concerns led it to reduce the size of its sales
and marketing staff and constrain its sales and marketing expenditures. Recent
investments in Accent have permitted the Company to recruit additional sales and
marketing personnel, to develop additional sales and marketing channels and to
begin to more aggressively market its products. There can be no assurance that
the Company's sales and marketing efforts will be successful in achieving
management's expectations. If future revenue does not increase from its recent
level, this will have a material adverse impact on the Company and may cause the
Company to cease operations.
LIQUIDITY/WORKING CAPITAL. Because Accent has consistently generated
operating cash flow deficits, it has been dependent on external financing to
meet its continuing cash requirements. The Company now believes, however, that
the combination of recent investments in the Company, the revenue increases it
is projecting and the cost reduction initiatives it recently implemented will be
adequate to satisfy its liquidity and working capital requirements and to
execute its business plan. There can be no assurance that the Company will be
successful in achieving its operating objectives without raising additional
working capital or that, if it is necessary to raise additional capital, that
the Company will be successful in doing so. Any failure on the part of the
Company to meet its cash flow requirements will have a material adverse impact
on the Company and may cause the Company to cease operations.
CONTINUED LISTING ON THE NASDAQ SMALLCAP MARKET. Accent's Ordinary Shares
and Units are listed on the Nasdaq SmallCap Market and the Company must meet
certain requirements in order to maintain this listing. The Company has been
notified that it no longer meets the listing requirements in that its net
tangible assets are below the threshold of $2,000. The Company has provided
Nasdaq with details of its plan to increase its net tangible assets and has been
granted an exception to the listing requirements while it executes this plan.
The exception expires on August 4, 1998, by which time the Company must make a
public filing with the SEC and Nasdaq. The filing must contain a June 30, 1998
balance sheet with pro forma adjustments for any significant transactions or
events occurring on or before the filing date. The pro forma balance sheet must
evidence a minimum $2,500 in net tangible assets. Accent believes that the
filing of this Form 10-Q, including the pro forma financial statements in
9
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Part II, satisfy the Nasdaq requirement and that its Ordinary Shares and Units
will not be delisted from the SmallCap Market. There can be no assurance that
Nasdaq will concur with the Company's position and allow the Company's shares to
remain listed on the Nasdaq SmallCap Market. In the event that the Company's
shares are delisted from the Nasdaq SmallCap Market, they could continue to
trade on the Nasdaq "Bulletin Board."
STRATEGIC ALTERNATIVES, INCLUDING DIVESTITURES AND POSSIBLE SALE OR JOINT
VENTURE. The Company's Board of Directors has been pursuing a variety of
alternatives to stabilize and, if possible, enhance the Company's financial
position and continuing viability. The Board's efforts in this regard led
directly to Lernout & Hauspie's recent $4,000 investment in the Company. In
February 1998, the Company retained a mergers, acquisitions and strategic
planning firm specializing in the software industry to seek a potential buyer
for the Company's majority-owned subsidiary, AgentSoft. Divestiture of
AgentSoft could provide working capital for the Company's continuing operations
while at the same time eliminating the subsidiary's cash flow requirement and
on-going operating losses. In the event the Company's efforts to divest
AgentSoft are not successful, it may elect to discontinue the operation of this
subsidiary.
RESULTS OF OPERATIONS
The Company's operations produced an operating loss of $1,418 during the
second quarter of 1998 on revenue of $490 compared with an operating loss of
$2,671 on revenue of $722 during the second quarter of 1997. For the first six
months of 1998, Accent's operating loss was $3,215 on revenue of $1,195 compared
to an operating loss of $4,716 on revenue of $1,449 during the comparable period
of 1997.
NET SALES. During the past eighteen months, management has shifted Accent's
product mix and customer orientation away from the retail market toward original
equipment manufacturers (OEMs) and business-to-business transactions. The
Company has also recognized increased revenue from its translation services.
Customer interest in Accent's newest product, Loc@le, has been positive and
WordPoint, Accent's "point and click" translation tool, continues to sell well,
particularly in the Middle East.
The liquidity challenges the Company experienced in the early months of
1998 forced it to implement large personnel reductions and to curtail most
discretionary spending, including personnel and spending in the sales and
marketing area. The Company was also challenged with significant concerns on the
part of potential customers as to the Company's ability to remain a going
concern and to continue to support and expand its product offerings.
The reductions in its sales force and marketing expenditures coupled with
customer concerns about the Company's viability led to a 30% decline in net
sales when compared to the second quarter of 1997. Revenue during the first six
months of 1998 was $1,195, an 18% decline from the $1,449 in revenue recorded
during the first six months of 1997.
COST OF SALES. Manufacturing, production, warehousing and shipping expenses
have all been reduced from the year earlier periods consistent with the
Company's shift away from the retail market and toward the OEM and
business-to-business market where manufacturing and support costs are
significantly lower. The Company's increased emphasis on translation services,
on the other hand, has a relatively higher cost of sales than its other product
offerings and tends to reduce the Company's gross margin.
10
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Cost of sales during the second quarter of 1998 declined by almost 75% to
$170 compared to $632 during the second quarter of 1997. For the first six
months of 1998, cost of sales totaled $375, almost 70% lower than the $1,207
reported during the same period of 1997.
Cost of sales during the second quarter and first six months of 1997
included $111 and $222, respectively, of capitalized software amortized during
those periods. The comparable periods of 1998 include no such costs. The Company
has accelerated its product development cycle and is currently expensing its
software development costs as part of its product development costs. The year
earlier periods also include substantial costs associated with various royalty
agreements that the Company had entered into in anticipation of achieving
substantially greater retail sales.
PRODUCT DEVELOPMENT COSTS. Product development costs during the second
quarter of 1998 were $718 compared to $1,321 during the second quarter of 1997.
For the six month period ended June 30, 1998, total product development costs
were $1,843 compared to $2,439 during the first six months of 1997. Costs within
product development consist almost entirely of salaries, benefits and other
personnel-related expenses. Staffing within the product development departments
had remained relatively constant through the first quarter of 1998 as the
Company focused its development efforts on new products for the Language
Information Technology segment of the market. As specific development efforts
were completed, staffing levels in the various product development departments
were reduced from 38 people to 20.
Product development costs also include costs incurred by the Company's
majority-owned subsidiary, AgentSoft. Staffing within AgentSoft has declined
from an average of 20 engineers during 1997 to eleven engineers at June 30,
1998, with a roughly proportional decline in costs. As mentioned above, Accent
has engaged the services of a mergers and acquisitions specialist and is
actively seeking a buyer for AgentSoft.
MARKETING EXPENSES. The Company's marketing expenses were $331 in the
three months ended June 30, 1998; a reduction of over 50% from $753 during the
three months ended June 30, 1997. Sales and marketing costs during the first six
months of 1998 were down approximately 40% to $789 compared to $1,320 during the
first half of 1997.
Full time staffing in the sales and marketing areas was reduced from nine
to four during the most recent quarter, although several former employees have
entered into distribution or representative agreements with the Company. The
Company's shift away from the retail market allows it to function with fewer
sales and marketing personnel and has also led to significant reductions in
non-personnel expenses such as participation in trade shows, advertising and
public relations costs. The Company is also placing increased reliance on the
use of commissioned sales reps.
Accent's recently announced sales, marketing and distribution agreements
with Lernout & Hauspie will allow Accent to benefit from L&H's extensive sales
and marketing capability and should provide a highly cost effective enhancement
to the Company's sales and marketing efforts.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
during the most recent quarter were $689 compared to $687 during the same
quarter of 1997. G&A costs during the first six months of 1998 totaled $1,403
compared to $1,199 during the first six months of 1997.
Staffing within the various G&A functions has been steadily reduced over
the past eighteen months to a level of eight employees as of June 30, 1998 from
19 a year earlier. As staffing has been reduced, certain G&A activities have
been out-sourced. The increase from the year earlier quarter is
11
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primarily attributable to consulting and public relations efforts that the
Company has authorized and which were paid for through the issuance of equity in
the Company.
OTHER INCOME (EXPENSE). The Company incurred $46 in other expenses during
the three months ended June 30, 1998, compared to $54 during the three months
ended June 30, 1997. For the most recent six month period, the Company's other
expenses totaled $91 compared to $36 during the year earlier period. Other
expense consists of interest and indexation expenses related to the Company's
long-term debt and income and expense arising from foreign exchange rate
fluctuations.
NET LOSS. The Company's net loss during the second quarter of 1998 was
reduced significantly from the year earlier second quarter as the large
restructuring and cost reduction initiatives implemented during the quarter more
than offset the decline in revenue. For the quarter ended June 30, 1998, the net
loss was $1,464 compared to $2,725 during the same quarter of 1997. For the
first six months of 1998, the net loss was $3,306 compared to $4,716 during the
first half of 1997.
LIQUIDITY AND CAPITAL RESOURCES
For the six month period ended June 30, 1998, the Company's operating
activities used cash of $3,068 compared to $6,865 used during the comparable
period of 1997. Approximately half the cash used during the first half of 1997
was used to reduce the Company's accounts payable and accrued expenses.
As discussed earlier, the Company has historically been dependent on
external sources of capital to fund its operating activities. Accent believes
the recent investment by Lernout & Hauspie, combined with anticipated revenue
growth (in part due to the licensing and distribution agreements with Lernout &
Hauspie) and the recently completed restructuring will provide sufficient
liquidity to finance the Company's operating activities and meet its business
objectives through the end of 1998. Beyond 1998, the Company believes it will
generate sufficient cash from its operating activities to meet its internal
requirements and will no longer be dependent on external sources of capital. The
Company's projections regarding its future liquidity and working capital
requirements assume it will be successful in significantly increasing its
revenue stream. There can, however, be no assurance that the Company will be
able to meet its revenue projections and other operating objectives and,
therefore, may require additional external capital. Any failure on the part of
the Company to raise additional capital when and if needed will have a material
adverse impact on the Company and could force it to cease operations.
The Company reduced its investing activities, which consist primarily of
purchases of hardware and software for the product development organization, to
$25 in the first six months of 1998, compared to $96 in the comparable period of
1997. The higher level of spending during the earlier period was partially
attributable to the opening of a new office in the U.S.
Financing activities generated cash of $3,953 during the most recent six
months and used cash of $526 during the year earlier period.
During the most recent quarter, Accent executed a Preferred Share Purchase
Agreement ("Agreement") with Lernout & Hauspie pursuant to which the Company
issued 4,000 Series C Preferred shares in exchange for $4,000. Fees and expenses
related to the transaction totaled approximately $250 resulting in net proceeds
to the Company of $3,750. Also pursuant to the Agreement, Accent agreed to issue
warrants which allow the investor to purchase 4,444,444 Ordinary Shares of the
Company at an exercise price of $0.55 per share. The warrants are exercisable
for five years.
12
<PAGE>
The Series C Preferred Shares issued to Lernout & Hauspie are convertible
at any time into Ordinary Shares of Accent. The conversion price is $0.45 per
share which represents a 10% premium over the average closing price of the
Company's Ordinary Shares during the ten trading days preceding execution of the
agreement. Conversion of all 4,000 Series C Preferred Shares would result in the
issuance of 8,888,889 Ordinary Shares and would dilute existing shareholders by
approximately 32%.
The terms of its Preferred Share Purchase Agreement with Lernout & Hauspie
also require the Company to retire its Israeli government-guaranteed loans. The
outstanding balance on these loans at June 30, 1998, was $2,730. As security for
granting these loans to the Company, the government of Israel retains a lien on
all of the Company's assets. Once the loans are retired, the lien will be
transferred to Lernout & Hauspie.
On July 3, 1998, the Company paid down $1,115 of the outstanding loan
balance, leaving a balance of $1,615. Accent, the government of Israel and
various Israeli banking officials have reached an agreement that will permit the
Company to convert this balance into equity. On August 4, 1998, the Company
filed a Registration Statement on Form S-3 to register 5,000,000 Ordinary
Shares, the majority of which will be used to retire the government-guaranteed
loans. The balance of the shares in the registration have been designated for
certain large creditors in payment for all or a portion of money due them.
Over the next several months, Accent will issue shares of stock to the Bank
for Industrial Development in Israel, Ltd. which will cause the shares to be
sold and the net proceeds will be applied against the outstanding debt. The
Company will be responsible for various fees and expenses associated with the
transaction and will issue additional Ordinary Shares to pay for these costs. In
total, the Company anticipates that approximately 4,400,000 Ordinary Shares will
need to be sold at current market prices to retire $1,615 in
government-guaranteed loans and approximately $120 in fees and expenses. This
would result in the dilution of existing shareholders by approximately 12%. If
the market price of the Company's Ordinary Shares increases or decreases as the
shares are being sold, there will be a corresponding increase or decrease in the
number of shares required to be sold and in the dilution to existing
shareholders.
During the second quarter of 1998, Accent reached agreement with certain of
its major creditors pursuant to which these creditors agreed to accept Ordinary
Shares in the Company in payment for all or a portion of the amounts due them. A
total of 588,000 shares were issued at market value which approximated $0.45 per
share. The Company continues to pursue similar debt-to-equity conversions with
other large vendors and, subsequent to June 30, 1998, reached agreement with one
such vendor under which the Company will issue approximately 400,000 additional
Ordinary Shares.
During the fourth quarter of 1997, Accent completed a financing arrangement
in which it received approximately $5,255 in cash net of expenses. In return for
the aggregate purchase price of $5,750, the Company issued the investors
debentures in the amount of $4,000 and Series B Preferred Shares in the amount
of $1,750. Conversion of both the debentures and the Series B Preferred Shares
into a total of 12,496,160 Ordinary Shares was completed during the first
quarter of 1998.
Financing activities during the first six months of 1997 consisted
primarily of repayments on the Company's long-term loans.
Accent's sales are made on credit terms that 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
13
<PAGE>
its customers. Therefore, defaults on payment by several of the Company's
customers 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 likelihood of product returns or credits and uncollectable
receivables. There can be no assurance, however, 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.
PART II - OTHER INFORMATION
ITEM 5. OTHER EVENTS
Accent's Ordinary Shares and Units are listed on the Nasdaq SmallCap Market
and the Company must meet certain requirements in order to maintain this
listing. The Company has been notified that it no longer meets the listing
requirements in that its net tangible assets are below the threshold of $2,000.
The Company has provided Nasdaq with details of its plan to increase its net
tangible assets and has been granted an exception to the listing requirements
while it executes this plan.
The exception expires on August 4, 1998, by which time the Company must
make a public filing with the SEC and Nasdaq. The filing must contain a June 30,
1998 balance sheet, with pro forma adjustments for any significant transactions
or events occurring on or before the filing date. The balance sheet must
evidence a minimum $2,500 in net tangible assets. The pro forma balance sheet,
related statement of operations and appropriate notes to the pro forma
statements are provided on the following pages.
Accent is of the opinion that the filing of this Form 10-Q, including the
following pro forma balance sheet and statement of operations, satisfies the
Nasdaq requirement because it demonstrates net tangible assets of $3,550 which
is in excess of the minimum requirement of $2,500 set by the exchange. The
Company, therefore, believes that its Ordinary Shares and Units will not be
delisted from the SmallCap Market. There can be no assurance that Nasdaq will
concur with the Company's position and allow the Company's shares to remain
listed on the Nasdaq SmallCap Market. In the event that the Company's shares are
delisted from the Nasdaq SmallCap Market, they could continue to trade on the
Nasdaq "Bulletin Board."
14
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
WITH PRO FORMA ADJUSTMENTS
U.S. dollars and shares in thousands
<TABLE>
<CAPTION>
As of June 30, 1998
-------------------------------------------------------------
Debt Retirement Payable
-----------------------
As Reported Step 1 Step 2 Conversion Pro Forma
----------- ----------- ---------- ----------- -----------
(Unaudited) Note (1) Note (2) Note (3) Note (4)
ASSETS
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,361 (1,115) - (25) $ 2,221
Other current assets 1,485 1,485
----------- ----------- ---------- ----------- -----------
Total current assets 4,846 (1,115) - (25) 3,706
LONG-TERM ASSETS 1,728 1,728
----------- ----------- ---------- ----------- -----------
TOTAL ASSETS $ 6,574 (1,115) - (25) $ 5,434
----------- ----------- ---------- ----------- -----------
----------- ----------- ---------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 1,982 (1,115) (867) $ -
Accounts payable and accruals 2,071 (33) (57) (200) 1,781
----------- ----------- ---------- ----------- -----------
TOTAL CURRENT LIABILITIES 4,053 (1,148) (924) (200) 1,781
----------- ----------- ---------- ----------- -----------
LONG-TERM BANK LOANS 748 (748) -
ACCRUED SEVERANCE LIABILITY 103 103
----------- ----------- ---------- ----------- -----------
TOTAL LIABILITIES 4,904 (1,148) (1,672) (200) 1,884
----------- ----------- ---------- ----------- -----------
SHAREHOLDERS' EQUITY
Preferred Shares - -
Ordinary Shares 44 11 1 56
Share premium 51,653 1,604 174 53,431
Accumulated deficit (50,027) 33 57 (49,937)
----------- ----------- ---------- ----------- -----------
Total shareholders' equity 1,670 33 1,672 175 3,550
----------- ----------- ---------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,574 (1,115) - (25) $ 5,434
----------- ----------- ---------- ----------- -----------
----------- ----------- ---------- ----------- -----------
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
WITH PRO FORMA ADJUSTMENTS
U.S. dollars and shares in thousands
For the Six Months Ended June 30, 1998
-------------------------------------------------------------
Debt Retirement
----------------------- Payable
As Reported Step 1 Step 2 Conversion Pro Forma
----------- ----------- ---------- ----------- -----------
Operating loss $ (3,215) - - - $ (3,215)
Other Income (Expense) (91) 33 57 - (1)
----------- ----------- ---------- ----------- -----------
Net loss $ (3,306) 33 57 - $ (3,216)
----------- ----------- ---------- ----------- -----------
----------- ----------- ---------- ----------- -----------
Net loss per share $ (0.14) $ 0.00 $ 0.02 $ 0.00 $ (0.11)
----------- ----------- ---------- ----------- -----------
----------- ----------- ---------- ----------- -----------
Weighted average number
of shares outstanding 24,127 - 4,400 400 28,927
----------- ----------- ---------- ----------- -----------
----------- ----------- ---------- ----------- -----------
</TABLE>
15
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED BALANCE SHEET AND STATEMENT OF
OPERATIONS WITH PRO FORMA ADJUSTMENTS
U.S. dollars in thousands, except per share figures
(Unaudited)
NOTE 1 - LOAN RETIREMENT, STEP 1
Consistent with the Preferred Share Purchase Agreement between
Accent and Lernout & Hauspie, on July 3, 1998, the Company made a payment of
$1,115 against the outstanding balance on its long-term debt. The effect of the
payment was to decrease both the Company's cash balance and the loan balance by
the amount of the payment. The payment did not impact the Company's equity, net
tangible assets, or operating results other than to the extent future interest
costs on the balance paid down will be avoided. The pro forma adjustment to the
Statement of Operations reflects the interest expense incurred during the first
six months of 1998 which would not have been incurred had this portion of the
loan not been in existence. The transaction had a negligible impact on the
reported net loss per share.
NOTE 2 - LOAN RETIREMENT, STEP 2
Following the July 3, 1998, payment discussed in Note 1, above, the
balance of the Company's long-term bank loans was approximately $1,615. Accent,
the government of Israel and appropriate Israeli banking officials have reached
an agreement to permit the Company to convert this balance into equity. On
August 4, 1998, the Company filed a Registration Statement on Form S-3 to
register 5,000,000 Ordinary Shares, the majority of which will be used to retire
the loans.
Over the next several months, Accent will issue shares of stock to
the Bank for Industrial Development in Israel, Ltd. which will cause the shares
to be sold and the net proceeds will be applied against the outstanding debt.
The Company will be responsible for various fees and expenses associated with
the transaction and will issue additional Ordinary Shares to pay for these
costs. In total, the Company anticipates that approximately 4,400,000 Ordinary
Shares will need to be sold at current market prices to retire $1,615 in
government-guaranteed loans and approximately $120 in fees and expenses. This
would result in the dilution of existing shareholders by approximately 12%. If
the market price of the Company's Ordinary Shares increases or decreases as the
shares are being sold, there will be a corresponding increase or decrease in the
number of shares required to be sold and in the dilution to existing
shareholders.
Accounting for the transaction will result in a decrease of $1,615
in the outstanding loan balance ($867 of current maturities and $748 of
longer-term maturities) and an increase of the same amount in shareholders'
equity (Ordinary Shares for the par value of the shares being issued and share
premium for the difference between par value and market value). The Company
anticipates issuing approximately $120 worth of additional shares to cover costs
associated with the transaction. The increase in shareholders' equity from these
additional shares is negated by the additional expenses and there is no net
effect on the Company's equity. The pro forma adjustments to the Statement of
Operations represent the interest expense which would have been avoided had the
loans been retired by December 31 1997. The reduction in the Company's reported
net loss per share of $0.02 reflects the 4,400,000 additional shares that the
Company expects to issue as it retires the loans.
16
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED BALANCE SHEET AND STATEMENT OF
OPERATIONS WITH PRO FORMA ADJUSTMENTS
U.S. dollars in thousands, except per share figures
(Unaudited)
Note 3 - PAYABLE CONVERSION
The company has been negotiating with several of its major
creditors, in addition to the Israeli government and banks, to restructure its
larger liabilities. Accent has attempted to restructure these liabilities
through one or a combination of the following: forgiveness of all or a portion
of the liability, long-term payment plans, the use of trade credits and the
conversion of all or a portion of the liability into equity. Several such
restructurings were completed during the second quarter and are reflected in the
Company's financial statements for the six months ended June 30, 1998.
Accent completed a restructuring arrangement with an additional
creditor during July and the results are reflected in the "Payable Conversion"
column of the Pro Forma Balance Sheet and Statement of Operations. Specifically,
the creditor agreed to accept a cash payment of $25 and Ordinary Shares with a
market value of $175. The transaction is reported as a decrease in the Company's
cash and accounts payable balances and an increase in its Ordinary Shares and
Share Premium accounts. The impact on the reported net loss per share is
negligible.
NOTE 4 - PRO FORMA
The right-hand column in the pro forma Balance Sheet and Statement
of Operations presents the combined impact of the loan and payable conversions
on the Company's June 30, 1998 financial statements.
The net effect of the loan and payable conversions on the Company's
balance sheet is to increase the Company's equity by $1,880 to a total of
$3,550. Because the Company has no intangible assets, its net tangible assets
are equal to its equity.
The net effect of the loan and payable conversions on the Company's
statement of operations is to reflect the fees and expenses associated with the
conversion of the loan into equity and to remove the interest expense that was
recorded during the first six months of 1998. The Company's net loss for the
first six months of 1998 reflects a growth of $80 for these transactions. The
combination of the lower net loss and the additional shares outstanding result
in a $0.02 reduction in the reported net loss per share.
17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1(a) - Memorandum of Association of Registrant (filed as Exhibit
3.1(a) to the Company's Registration Statement No.
33-92754).*
3.1(b) - Certificate of Name Change dated October 23, 1994 (filed as
Exhibit 3.1(b) to the Company's Registration Statement No.
33-92754).*
3.1(c) - Certificate of Name Change dated April 23, 1995 (filed as
Exhibit 3.1(c) to the Company's Registration Statement No.
33-92754).*
3.2 - Articles of Association of Registrant (filed as Exhibit 3.2
to the Company's Registration Statement No. 33-92754).*
4.1 - Form of Ordinary Share Certificate (filed as Exhibit 4.1 to
the Company's Registration Statement No. 33-92754).*
4.2 - Form of Underwriter's Warrant Agreement (filed as Exhibit
4.4 to the Company's Registration Statement No. 33-92754).*
4.3 - Form of Bridge Financing Warrant dated as of May 22, 1995
between the Company and each of the Holders (filed as
Exhibit 4.5 to the Company's Registration Statement No.
33-92754).*
4.4 - Form of Representative's Warrant Agreement, between the
Company and Sands Brothers & Co, Ltd., as representative of
the several underwriters (filed as Exhibit 4.4 to the
Company's Registration Statement No. 333-7637). *
4.5 - Form of IMR Warrant dated as of November 22, 1996 between
the Company and IMR Fund, L.P. (filed as Exhibit 4.5 to the
Company's Registration Statement No. 333-7637).*
4.6 - Form of Redeemable Warrant Agreement dated as of November
22, 1996 between the Company, Sands Brothers & Co., Ltd., as
representative of the several underwriters, and American
Stock Transfer & Trust Company (filed as Exhibit 4.6 to
the Company's Registration Statement No. 333-7637).*
4.7 - Form of Redeemable Warrant Certificate (filed as Exhibit 4.6
to the Company's Registration Statement No. 333-7637).*
4.8 - Form of Unit Certificate (filed as Exhibit 4.6 to the
Company's Registration Statement No. 333-7637).*
- ----------
* Incorporated by reference.
18
<PAGE>
4.9 - Securities Purchase Agreement dated August 5, 1997, between
CC Investments LDC and Accent Software International Ltd.,
which includes the Convertible Debenture, two Warrant
Agreements and the Registration Rights Agreement as exhibits
thereto. (filed as Exhibit 4.1 to the Company's Registration
Statement filed on August 27, 1997, Reg. No. 333-34455).*
4.10 - Warrant Agreement with The Shemano Group, Inc. (filed as
Exhibit 4.6 to the Company's Registration Statement filed on
October 16, 1997, Reg. No. 333-380043).*
4.11 - Warrant Agreement with Equity Management Partners LLP (filed
as Exhibit 4.7 to the Company's Registration Statement filed
on October 16, 1997, Reg. No. 333-38043).*
4.12 - Warrant Agreement with Brad Gillingham (filed as Exhibit 4.8
to the Company's Registration Statement filed on October 16,
1997, Reg. No. 333-38043).*
4.13 - Form of Warrant Agreement covering warrant agreements with
Robert J. Laikin, Michael Mosher and Manufacturers
Indemnity and Insurance Company of America (filed as Exhibit
4.9 to the Company's Registration Statement filed on October
16, 1997, Reg. No. 333-38043).*
4.14 - Form of Securities Purchase Agreement dated November 6,
1997, between Accent Software International Ltd., and CC
Investments LDC, Nelson Partners, Olympus Securities, Ltd.,
Marshall Companies, Profinsa Investments, which includes the
Convertible Debenture, the Warrant Agreement, Registration
Rights Agreement and Certificate of Designation as exhibits
thereto. (filed as Exhibit 4.1 to the Company's Registration
Statement filed on November 6, 1997, Reg. No. 333-39697).*
4.15 - Warrant Agreement with The Shemano Group, Inc. (filed as
Exhibit 4.1 to the Company's Form S-3 filed on November 6,
1997, Reg. No. 333-39697).*
10.1 - Stock Purchase Agreement between IMR Investments V.O.F. and
Kivun Computers Company (1988), Ltd., Robert Rosenschein,
Jeffrey Rosenschein, Accent Software Partners, Pal-Ron
Marketing, Ltd., and KZ Overseas Holding Corp., dated as of
May 11, 1994, as amended July 20, 1995 (filed as Exhibit
10.1 to the Company's Form 10-K on April 1, 1996).*
10.2 - Shareholders' Agreement by and among Kivun Computers Company
(1988) Ltd., Robert Rosenschein, Dr. Jeffrey Rosenschein,
Pal-Ron Marketing, Ltd., Accent Software Partners, KZ
Overseas Holding Corp. and IMR Investments V.O.F., dated
May 11, 1994, as amended July 20, 1995 (filed as Exhibit
10.2 to the Company's Form 10-K on April 1, 1996).*
10.3(a) - Option Agreement dated March 23, 1993 between the Company
and Robert S. Rosenschein (filed as Exhibit 10.3(a) to the
Company's Registration Statement No. 33-92754).*
- ----------
* Incorporated by reference.
19
<PAGE>
10.3(b) - Schedule of other option agreements substantially identical
in all material respects to the option agreement filed as
Exhibit 10.3(a) (filed as Exhibit 10.3(b) to the Company's
Registration Statement No. 33-92754).*
10.4(a) - Warrant Acquisition Agreement dated January 1, 1995 between
the Registrant and Robert S. Rosenschein (filed as Exhibit
10.4(a) to the Company's Registration Statement No.
33-92754).*
10.4(b) - Schedule of other warrant acquisition agreements
substantially identical in all material respects to the
warrant agreement (filed as Exhibit 10.4(b) to the Company's
Registration Statement No. 33-92754).*
10.5 - Form of Registration Rights Agreements dated as of May 22,
1995 between the Company and each of the Holders (filed as
Exhibit 10.5 to the Company's Registration Statement No.
33-92754).*
10.6(a) - Employee Share Option Plan (1995) (filed as Exhibit 10.7(a)
to the Company's Registration Statement No. 33-92754).*
10.6(b) - Amended and Restated Employee Share Option Plan (1995)
(filed as Exhibit 4.2 to the Company's Registration
Statement No. 333-04285).*
10.6(c) - Non-Employee Director Share Option Plan (1995) (filed as
Exhibit 10.7(b) to the Company's Registration Statement No.
33-92754).*
10.6(d) - Amended and Restated Non-Employee Share Option Plan (1995)
(filed as Exhibit 4.2 to the Company's Registration
Statement No. 333-07965).*
10.6(e) - Amended and Restated Non-Employee Share Option Plan (1995)
(filed as Exhibit 10-6(e) to the Company's Form 10-K on
March 31, 1998).*
10.6(f) - CEO Share Option Plan (1997) (filed as Exhibit 10.6(f) to
the Company's Form 10-K on March 31, 1998).*
10.6(g) - Non-Employee Share Option Plan (1998) (filed as Exhibit B to
the Company's Form 14-A on April 29, 1998)*
10.7(a) - Employment Agreement between the Company and Robert S.
Rosenschein, dated July 26, 1995 (filed as Exhibit 10-7(a)
to the Company's Form 10-K on April 1, 1996).*
10.7(b) - Employment Agreement between the Company and Todd A. Oseth,
dated February 3, 1997 (filed as exhibit 10.7(b) to the
Company's Form 10-K on March 31, 1998).*
10.7(c) - Employment Agreement between the Company and Herbert
Zlotogorski, dated July 26, 1995 (filed as Exhibit 10-7(c)
to the Company's Form 10-K on April 1, 1996).*
- ----------
* Incorporated by reference.
20
<PAGE>
10.7(d) - Employment Agreement between the Company and Jeffrey
Rosenschein, dated July 26, 1995 (filed as Exhibit 10-7(d)
to the Company's Form 10-K on April 1, 1996).*
10.8 - Consulting Agreement, dated August 4, 1997, between the
Company and Investor Resource Services, Inc. (filed as
Exhibit 4.1 to the Company's Registration Statement filed on
October 16,1 997, Reg. No. 333-38043).*
10.9 - Amendment to the Consulting Agreement, dated January 30,
1998, between Company and Investor Resource Services, Inc.
(filed as Exhibit 10-9 to the Company's Form 10-K on March
31, 1998).*
10.10 - Shareholders Agreement by and between Accent Software
International Limited and Gilad Zlotkin, dated February 21,
1996 (filed as Exhibit 10.10 to the Company's Form 10-K on
April 1, 1996).*
10.11 - Debenture between the Company and Bank Leumi (filed as
Exhibit 10.11 to the Company's Registration Statement No.
333-7637).*
10.12 - Agreement between the Company and The Bank for Industrial
Development (filed as Exhibit 4-1 to the Company's Form S-3
on August 4, 1998)*
21 - Subsidiaries of Registrant (filed as Exhibit 21 to the
Company's Form 10-K filed on April 2, 1996).*
27 - Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on June 9, 1998, to provide
information on the Preferred Share Purchase Agreement with Lernout & Hauspie
Speech Products, N.V., which was executed earlier in June.
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 4, 1998 by: /S/ Robert J. Behr
-------------- -------------------
Robert J. Behr
Chief Financial Officer
(Principal Financial and Accounting Officer)
- ----------
* Incorporated by reference.
21
<TABLE> <S> <C>
<PAGE>
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 3,361
<SECURITIES> 0
<RECEIVABLES> 1,023
<ALLOWANCES> 63
<INVENTORY> 70
<CURRENT-ASSETS> 4,846
<PP&E> 2,655
<DEPRECIATION> 1,591
<TOTAL-ASSETS> 6,574
<CURRENT-LIABILITIES> 4,053
<BONDS> 0
0
0
<COMMON> 44
<OTHER-SE> 1,626
<TOTAL-LIABILITY-AND-EQUITY> 6,574
<SALES> 490
<TOTAL-REVENUES> 490
<CGS> 170
<TOTAL-COSTS> 1,738
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> (1,464)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,464)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,464)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
