<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 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 November 9, 1998, the registrant had outstanding 28,770,004 Ordinary
Shares (including 1,800,000 Ordinary Shares included in the registrant's
outstanding Units).
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S. dollars and shares in thousands
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 480 $ 2,499
Trade receivables, net of allowance of
$50 in 1998 and $63 in 1997 966 755
Other receivables 134 117
Prepaid expenses 47 906
Inventories 39 85
-------- --------
Total current assets 1,666 4,362
EQUIPMENT
Cost 2,414 2,630
Less-Accumulated depreciation 2,009 1,220
-------- --------
Equipment, net 405 1,410
OTHER LONG TERM ASSETS 422 666
-------- --------
Total assets $ 2,493 $ 6,438
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 1,433 $ 1,886
Accounts payable and accrued expenses 917 2,367
-------- --------
Total current liabilities 2,350 4,253
LONG-TERM BANK LOANS -- 844
ACCRUED SEVERANCE LIABILITY 103 318
-------- --------
Total liabilities 2,453 5,415
-------- --------
SHAREHOLDERS' EQUITY
Preferred Shares, par value NIS 0.01, authorized
10,000 shares, issued and outstanding 4 at
September 30, 1998 and December 31, 1997 -- --
Ordinary Shares, par value NIS 0.01, authorized
65,000 shares, issued and outstanding 28,429 at
Sep. 30, 1998 and 17,410 at Dec. 31, 1997 73 43
Share premium 51,825 47,701
Accumulated deficit (51,858) (46,721)
-------- --------
Total shareholders' equity 40 1,023
-------- --------
Total liabilities and shareholders' equity $ 2,493 $ 6,438
-------- --------
-------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
BALANCE SHEETS.
2
<PAGE>
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 NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1998 1997 1998 1997
--------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $ 514 $ 1,104 $ 1,709 $ 2,553
OPERATING COSTS AND EXPENSES
Cost of sales 326 878 701 2,085
Product development costs 498 1,136 2,341 3,575
Marketing expenses 351 580 1,140 1,900
General and administrative expenses 541 718 1,944 1,917
Restructuring charge 568 -- 568 --
--------- -------- -------- --------
Total operating costs and expenses 2,284 3,312 6,694 9,477
--------- -------- -------- --------
OPERATING LOSS (1,770) (2,208) (4,985) (6,924)
Other expenses, net 61 726 152 761
--------- -------- -------- --------
NET LOSS $ (1,831) $(2,934) $(5,137) $(7,685)
--------- -------- -------- --------
--------- -------- -------- --------
NET LOSS PER SHARE $ (0.07) $ (0.25) $ (0.20) $ (0.65)
--------- -------- -------- --------
--------- -------- -------- --------
Weighted average number of shares
outstanding 28,155 11,876 25,359 11,754
--------- -------- -------- --------
--------- -------- -------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
3
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1998 1997
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(5,137) $(7,685)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 789 698
Accretion of debt for attached warrants -- 24
Accretion of debt for guaranteed return -- 667
Amortization of deferred debt issuance costs -- 40
Shares issued in payment of interest -- 20
Change in allowance for doubtful accounts (13) (554)
Change in realizable value of other long term assets 244 --
Changes in assets and liabilities
(Increase) decrease in trade receivables (198) 435
(Increase) decrease in other receivables (17) (57)
(Increase) decrease in prepaid expenses 798 478
(Increase) decrease in inventories 46 271
Increase (decrease) in accounts payable & accruals (1,008) (3,666)
Increase (decrease) in severance liability (215) (9)
---------- ----------
Net cash (used in) operating activities (4,711) (9,338)
---------- ----------
INVESTING ACTIVITIES
Disposition (acquisition) of fixed assets 216 (144)
---------- ----------
Net cash provided by (used in) investing activities 216 (144)
---------- ----------
FINANCING ACTIVITIES
Repayment of government-guaranteed loans (1,297) (1,074)
Net proceeds received on issuance of preferred shares 3,750 --
Net proceeds received on issuance of debentures and warrants -- 1,850
Net proceeds received on exercise of warrants and options 23 59
---------- ----------
Net cash provided by financing activities 2,476 835
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,019) (8,647)
Cash and cash equivalents, beginning of period 2,499 8,723
---------- ----------
Cash and cash equivalents, end of period $ 480 $ 76
---------- ----------
---------- ----------
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Ordinary shares issued in satisfaction of accounts payable $ 422 $ --
---------- ----------
---------- ----------
Cancellation of ordinary shares issued in payment for services $ (61) $ --
---------- ----------
---------- ----------
</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 nine month
periods ended September 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 - GOING CONCERN
The consolidated financial statements have been prepared assuming
the Company will continue as a going concern. The report of the
Company's Independent Auditors (included in the Company's 1997
Annual Report on Form 10-K), however, raises doubt about the
Company's ability to continue as a going concern. Management
acknowledges that the Company's history of operating losses and
operating cash flow deficits raises legitimate concern about the
Company's longer term prospects.
To enhance the Company's longer term prospects, management will
continue to focus on increasing revenue, reducing expenses and
obtaining additional external financing.
To increase revenue, the Company has developed new products to
serve the language information industry, has entered into
alliances with other companies in the industry aimed at broadening
the Company's market reach, has expanded its translation services
business and has explored new market niches such as the "quick
print" industry as potential sources of customers for its products
and translation services.
To reduce expenses, the Company has reduced its staffing level
(which is its largest element of expense) from approximately 170
employees at its peak in 1996 to the 35 at September 30, 1998.
Additional reductions implemented during the fourth quarter of
1998 are expected to further reduce the number of employees to
less than 20 by the end of 1998. (A restructuring charge,
reflecting the financial impact of the most
5
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except per share figures
(Unaudited)
NOTE 2 - GOING CONCERN (CONTINUED)
recent actions, is reflected in these financial statements. See
Note 6.) Related expenses such as rent, telephone, travel and
training costs have been reduced proportionately. The shift away
from the retail market has led to reductions in production and
inventory carrying costs. Product development costs have been
reduced by narrowing the number of new products under development
and focusing on those opportunities that provide the greatest
near-term revenue potential. The Company has reduced discretionary
spending on advertising and marketing as well as the amount it
spends on exhibitions and trade shows and has closed its sales
offices in London, England, and Newport Beach, California. Accent
will also close its product development facility in Jerusalem
prior to the end of 1998. The Company plans to eventually
reestablish a product development capability in the United States
although there can be no assurance when or if it will be
successful in doing so. The recently concluded sale of the assets
of the Company's subsidiary, AgentSoft, also reduces costs with no
decrease in total revenue.
To obtain additional external financing, during both the third and
fourth quarters of 1997 and again during the second quarter of
1998, the Company sold convertible debentures and convertible
preferred stock. The Company continues to explore sources of
additional financing to satisfy its continuing operational
requirements.
The accompanying consolidated financial statements do not include
any adjustments relating to the recoverability or 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.
NOTE 3 - LIQUIDITY
As of September 30, 1998 and December 31, 1997, the Company had
accumulated deficits of $51,858 and $46,721, respectively, and
recognizes that it may continue to incur losses through the fourth
quarter of 1998 and possibly beyond. Furthermore, the Company has
not generated sufficient cash to finance its operations and has
been dependent upon external sources to meet its liquidity
requirements.
During the second quarter of 1998, Accent executed a Preferred
Share Purchase Agreement with Lernout & Hauspie Speech Products,
N.V. ("L&H") which generated net proceeds of approximately $3,750.
(The transaction is discussed in greater detail in Note 4, below.)
The proceeds were used to retire a portion of the Company's
long-term debt, to pay severance and other costs related to the
Company's restructuring efforts, to pay creditors and to finance
the Company's continuing operations. At the time of the
transaction, the Company believed the proceeds would be sufficient
to satisfy its working capital requirements through the end of
1998. Revenue during the third quarter of 1998, however, fell
short of
6
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except per share figures
(Unaudited)
NOTE 3 - LIQUIDITY (CONTINUED)
expectations and the proceeds from the Lernout & Hauspie
transaction are essentially exhausted.
The Company has implemented additional cost reduction initiatives
which, when completed during the fourth quarter of 1998, will
further reduce the Company's working capital requirements. For the
near-term, however, and possible beyond, Accent remains dependent
on new sources of revenue or an infusion of additional external
capital. There is no assurance that the Company will be successful
in generating new sources of revenue or obtaining additional
external capital and any failure to do so will have a material
adverse impact on the Company and could force it to cease
operations.
NOTE 4 - LONG-TERM DEBT
At the time of the Preferred Share Purchase Agreement with Lernout
& Hauspie, the Company had Israeli government-guaranteed loans
outstanding of approximately $2,730. The agreement stipulated
(although Lernout & Hauspie has thus far not enforced this
stipulation) that these loans were to be retired by September 4,
1998. During the third quarter, the Company used proceeds from the
Preferred Share Purchase Agreement to pay down a portion of the
outstanding balance. The Company also entered into an agreement
with the government of Israel and appropriate Israeli banking
officials to permit the Company to retire the remainder of the
loans through the issuance of additional equity. Subsequent to the
agreement with the government, however, there was a significant
decline in both the Company's share price and in the average
daily trading volume in the Company's stock. The combination of
the lower share price and low trading volume made it essentially
impossible to sell sufficient equity to retire the loan by the
stipulated date and as of September 30, 1998, the Company had
$1,433 in government-guaranteed loans still outstanding.
The agreement with the government of Israel and Israeli banking
officials regarding retirement of the Company's loans provides
that the loan, unless retired earlier through the sale of Ordinary
Shares as described in the preceding paragraph, is to be paid down
in four quarterly installments beginning in October of 1998. The
Company was unable to pay the installment due in October and is,
therefore, in default on these loans. Management has met with
appropriate Israeli government officials to discuss the status of
the loan but, to date, has received no assurance what action, if
any, the government intends to take with respect to the loan. The
Company plans to continue to make interest payments on the loan
until such time as it has sold enough equity or obtained other
sources of capital to allow it to become and remain current in its
obligations. There can be no assurance, however, that the Company
will be successful in its efforts to sell equity or obtain other
sources of capital or that the government of
7
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except per share figures
(Unaudited)
NOTE 4 - LONG-TERM DEBT (CONTINUED)
Israel will defer action against the Company. Failure on the part
of the Company to pay down the loan in a timely manner could
result in a material, adverse impact and could force the Company
to cease operations.
NOTE 5 - 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 Lernout & Hauspie 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%. The investor also
received 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%.
During the second and third quarters of 1998, Accent reached
agreements 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 amounts due them. Approximately
1,000,000 shares were issued to these creditors at market value
which averaged approximately $0.45 per share. Dilution to existing
shareholders from the issuance of these shares amounted to
approximately 3%.
As discussed in the preceding Note 4, the Company, the government
of Israel and various Israeli banking officials have entered into
an agreement that permits the conversion of the Company's
government-guaranteed 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 are designated for
use in retiring the 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. As of September 30,
1998, approximately 1,000,000 of the registered shares had been
issued at an average price of approximately $0.45
8
<PAGE>
ACCENT SOFTWARE INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except per share figures
(Unaudited)
NOTE 5 - SHARE CAPITAL (CAPITAL)
per share, resulting in dilution to existing shareholders of
approximately 3%. Issuance of the remaining 4,000,000 shares would
result in additional dilution of approximately 14%.
NOTE 6 - RESTRUCTURING CHARGE
On November 4, 1998, the Company announced that it would close its
Jerusalem-based product development facility effective December 4,
1998. Closing the product development facility eliminates eighteen
full time positions and reduces Accent's total employment by
almost 50%. The Company intends to reestablish a product
development capability in the United States if and when sufficient
financial resources become available. There can be no assurance
that the Company will be successful in obtaining the financial
resources necessary to establish a product development capability
in the United States.
As a direct consequence of the decision to close its Jerusalem-
based product development facility, the value of various assets
became impaired and the Company recorded a restructuring charge of
$568 to recognize the reduced value of these assets. Specifically,
the restructuring resulted in certain fixed assets located in
Jerusalem becoming excess to the Company's current requirements
and the value of these assets was, accordingly, reduced to their
realizable value. Also due to the significant reduction in the
size of the Company and, particularly, the size of its presence
within Israel, the Company concluded that it would most likely be
unable to realize the value of certain tax-related assets and,
therefore, recorded a charge to eliminate the value of these
assets as part of the restructuring charge. Finally, and also
directly related to the significant reduction in the size of the
Company, the Company recognized that it would most likely be
unable to realize the full value of certain other long term
assets, specifically barter credits, and recorded a charge to
reduce the value of these assets as part of its restructuring
charge.
NOTE 7 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
(a) SOP 97-2, regarding software revenue recognition became
effective for all transactions entered into, in fiscal years
commencing December 15, 1997. The Company recognizes revenue
in accordance with this Standard.
(b) In June 1998, the Financial Accounting Standards Board
issued SFAS 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES. The Statement establishes accounting
and reporting standards requiring that every derivative
instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its
fair value. The Statement requires that changes in the
derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allow a
derivative's gains and losses to offset related results
on the hedged item in the income statement, and requires
that a company must formally document, designate and
assess the effectiveness of transactions that receive
hedge accounting.
Statement 133 is effective for fiscal years commencing
after June 15, 1999. Statement 133 cannot be applied
retroactively. Statement 133 must be applied to (a)
derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts that were
issued, acquired, or subsequently modified after December
31, 1997.
The Company believes that the adoption of Statement 133
will not have a material effect on its financial
statements.
9
<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 need of software publishers,
corporations and content providers to produce software applications, associated
documentation, and application-specific content in any natural language.
RISKS
The management of Accent Software International believes in, and is fully
committed to, the Company's future success. The Company's history of operating
losses and cash flow deficits, however, place it in a high risk, turnaround
situation and its future success is by no means assured. Accent's directors and
management wish to provide investors and potential investors a clear
understanding of the significant risks inherent in the Company. Accent cautions
investors and potential 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 $51 million
since its inception through September 30, 1998, and expects that it may continue
to incur deficits through the remainder of 1998 and possibly beyond. Accent also
continues to generate operating cash flow deficits, its liquidity is essentially
exhausted and it is unable to make current payments on its long-term debt. To
enhance the Company's longer term prospects, management has focused on
increasing revenue, reducing expenses and obtaining additional external
financing as discussed in the following paragraphs. There can be no assurance
that the Company will be successful in reversing the trend of operating losses
and in generating sufficient working capital to meet its operating requirements
and any failure on the part of the Company to do so will have a material adverse
impact on the Company and could force it to cease operations.
REVENUE. The Company's products appear to be experiencing a favorable
reception in the marketplace. Revenue, however, has fallen considerably short of
management expectations.
10
<PAGE>
Management believes the revenue shortfall is due in part to significant
concerns of potential customers as to Accent's ability to continue to support
and expand its product offerings. Furthermore, due to liquidity concerns
earlier in 1998, the Company found it necessary to reduce the size of its
sales and marketing staff and to constrain its sales and marketing
expenditures. To improve sales, the Company has introduced new products and
product enhancements, has recruited additional sales and marketing personnel,
has entered into alliances with other companies in the industry aimed at
broadening the Company's market reach, has expanded its translation services
business and has explored new market niches such as the "quick print"
industry as potential sources of customers for its products and translation
services. 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, the Company will experience
a material adverse impact and could be forced to cease operations.
EXPENSES. To reduce expenses, the Company has reduced its staffing
level (which is its largest element of expense) from approximately 170
employees at its peak in 1996 to the current level of approximately 35.
Additional reductions are expected to further reduce this level to less than
20 employees by the end of 1998. Related expenses such as rent, telephone,
travel and training costs have been reduced proportionately. The shift away
from the retail market has led to reductions in production and inventory
carrying costs. Product development costs have been reduced by narrowing the
number of new products under development and focusing on those opportunities
that provide the greatest near-term revenue potential. Accent has also closed
its sales offices in London, England, and Newport Beach, California. Accent
will also close its product development facility in Jerusalem prior to the
end of 1998. The Company plans to eventually reestablish a product
development capability in the United States although there can be no
assurance when or if it will be successful in doing so. The recently
concluded sale of the assets of the Company's subsidiary, AgentSoft, also
reduces costs with no decrease in total revenue.
LIQUIDITY/WORKING CAPITAL. Because Accent has consistently generated
operating cash flow deficits, it has been dependent on external financing to
meet its continuing working capital requirements. During both the third and
fourth quarters of 1997 and again during the second quarter of 1998, the
Company sold convertible debentures and convertible preferred stock. The
proceeds from these sales have been essentially exhausted and the Company is
continuing to explore sources of additional financing to satisfy its
operational requirements. There can be no assurance that the Company will be
successful in obtaining adequate working capital to meet its requirements and
any failure on the part of the Company to do so will have a material adverse
impact on the Company and could cause the Company to cease operations.
LONG-TERM DEBT. As of September 30, 1998, the Company had $1,433 in
government-guaranteed loans outstanding. Per an agreement with the government
of Israel and Israeli banking officials, unless the loans are retired earlier
through the sale of Ordinary Shares, the loan, plus accrued interest, is be
retired in four quarterly installments beginning in October of 1998. The
Company was unable to pay the installment due in October and, therefore, is
currently in default on these loans. Management has met with appropriate
Israeli government officials to discuss the status of the loan but, to date,
has received no assurance what action, if any, the government intends to take
with respect to the loan. The Company plans to continue to make interest
payments on the loan until such time as it has sold sufficient equity or
obtained other sources of capital to become and remain current in this
obligation. There can be no assurance, however, that the Company will be
successful in its efforts to sell equity or obtain other sources of capital
or that the government of Israel will defer action against the Company.
Failure on the part of the Company to pay down the loan in a timely manner
will result in a material, adverse impact and could force the Company to
cease operations. The long-term debt is secured by a lien on the Company's
assets.
11
<PAGE>
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
requirements for continued listing include satisfying one of the following
conditions: (a) net tangible assets of at least $2,000; (b) market
capitalization of at least $35,000; or (c) net income of at least $500 in the
most recent fiscal year or in two of the last three fiscal years. The Company
does not currently satisfy any of these three requirements. The Company has
provided Nasdaq with details of its plan to increase its net tangible assets
to the threshold level and is in the process of executing that plan.
Implementation of the plan, however, has not been accomplished within the
timeframe originally envisioned. The Company has asked Nasdaq for an
extension. There can be no assurance that Nasdaq will grant the Company's
request for an extension and allow the Company's shares to remain listed
while it works to achieve compliance. Consequently, the Company's shares
could be delisted from the Nasdaq SmallCap market at any time. 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 $4,000 investment in the Company
and, more recently, to the sale of the assets of the Company's subsidiary,
AgentSoft. The Board of Directors and management are continuing to explore
merger opportunities and other strategic alternatives.
RESULTS OF OPERATIONS
The Company experienced an operating loss of $1,770 during the third
quarter of 1998, which includes a restructuring charge of $568, on revenue of
$514 compared to an operating loss of $2,208 on revenue of $1,104 during the
third quarter of 1997. For the first nine months of 1998, Accent's operating
loss was $4,985 on revenue of $1,709 compared to an operating loss of $6,924
on revenue of $2,553 during the comparable period of 1997.
The improvement in the Company's operating results (particularly
excluding the restructuring charge) has been achieved through significant
cost reduction efforts in all facets of the business. Spending cutbacks have
also indirectly contributed to depressed levels of revenue. The Company
believes it has now reduced spending to the minimum sustainable level and has
recently begun to rebuild the sales and marketing organization in the United
States. It also intends to reestablish its product development capability in
the U.S. although there is no assurance when or if this will occur.
NET SALES. Since the first quarter of 1997, 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 generate revenue.
Revenue recorded in the third quarter of 1997 included $666 from the
bartered sale of inventory which became excess as a result of the Company's
decision to largely exit the retail market. Excluding the results of this
barter sale, the $514 in revenue recorded during the third quarter of 1998
represents a 17% improvement from the year earlier quarter. Revenue during
the first nine months of 1998 was $1,709, representing a 9% decline from the
year earlier total of $1,887 (after deducting the barter transaction).
12
<PAGE>
The liquidity challenges the Company experienced in the early months
of 1998 forced it to implement personnel reductions and to curtail
discretionary spending in all phases of the business, including sales and
marketing. These cutbacks have had a predictable impact on the Company's
revenue. The Company has also been 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.
Coinciding with Lernout & Hauspie's investment in Accent earlier in
1998, the two companies also entered into licensing and distribution
agreements that the Company believed would significantly enhance its market
exposure and lead to increased revenue. The benefits from these licensing and
distribution agreements have yet to be realized.
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. At the same time, the Company has increased its emphasis
on translation services which has a relatively high cost of sales due to its
reliance on external translators to meet fluctuating demand.
Cost of sales during the third quarter of 1998 was $326, compared to
$878 in cost of sales during the same quarter of 1997. For the first nine
months of 1998, cost of sales totaled $701, roughly one-third of the $2,085
reported during the year earlier period.
Cost of sales during the third quarter and first nine months of 1997
included $111 and $333, 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. The largest
element in cost of sales during 1998 has been outside translation support.
PRODUCT DEVELOPMENT COSTS. Product development costs during the third
quarter of 1998 were $498 compared to $1,136 during the third quarter of
1997. For the nine month period ended September 30, 1998, total product
development costs were $2,341 compared to $3,575 during the first nine months
of 1997. Costs within product development consist almost entirely of
salaries, benefits, travel, training and other personnel-related expenses.
Staffing within the various product development departments had remained
relatively constant through the first quarter of 1998 as the Company
accelerated its development efforts on new products for the Language
Information Technology segment of the market. As specific development efforts
were completed, staffing levels were gradually reduced.
On November 4, 1998, the Company initiated steps to close its product
development facility in Jerusalem prior to the end of 1998. The winding down
of several important product development efforts, the need to focus greater
near-term attention on sales and marketing activities, the need to conserve
working capital, and the expiration of the lease on the rental space occupied
by the product development activity combined to make this an appropriate time
to take this action. The Company plans to eventually reestablish a product
development capability in the United States although there can be no
assurance when or if it will be successful in doing so.
13
<PAGE>
Product development costs have historically also included costs
incurred by the Company's subsidiary, AgentSoft. Founded in 1996, AgentSoft
was a Jerusalem-based start-up business focused on developing "intelligent
agent" technology for use on the Internet. Because the Company did not
anticipate near-term revenue or profit from AgentSoft and also to allow the
Company to focus all of its energies on its core competencies in the Language
Information Industry, the Board of Directors concluded earlier this year that
the divestiture of AgentSoft would be in the best interests of all concerned.
Following a seven month effort, the assets of AgentSoft were sold for $225
in September.
MARKETING EXPENSES. The Company's marketing expenses were $351 in the
three months ended September 30, 1998; a reduction of 40% from $580 during
the three months ended September 30, 1997. Sales and marketing costs during
the first nine months of 1998 were also down approximately 40% to $1,140
compared to $1,900 during the first half of 1997.
Sales and marketing personnel were eliminated from the Jerusalem
operation during the most recent quarter as the Company concluded it would be
more economical to rely on sales representatives for its Middle East activity
rather than full time employees. At the same time, the Company is gradually
expanding the sales and marketing capability at its U.S. base in Colorado
Springs. The Company's shift away from the retail market allows it to
function with fewer sales and marketing personnel and has also led to
reductions in non-personnel expenses such as participation in trade shows,
advertising and public relations costs.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses during the most recent quarter were $541 compared to $718 during the
same quarter of 1997. G&A costs during the first nine months of 1998 totaled
$1,944 compared to $1,917 during the first nine months of 1997.
Staffing within the various G&A functions was gradually reduced from
19 in the middle of 1997 to eight employees as of June 30, 1998. Recent staff
reductions have now reduced this figure to six employees and the Company has
no current plans to increase this number. As staffing has been reduced,
certain G&A activities have been out-sourced.
RESTRUCTURING CHARGE. As a direct consequence of the decision to close
its Jerusalem-based product development facility, discussed above, the value
to the Company of various assets was reduced and the Company recorded a
restructuring charge of $568 to recognize these reduced values. Specifically,
the restructuring resulted in certain fixed assets located in Jerusalem
becoming excess to the Company's current requirements and the value of these
assets was, accordingly, reduced to their anticipated, realizable value. Also
due to the significant reduction in the size of the Company and,
particularly, the size of its presence within Israel, the Company concluded
that it would most likely be unable to realize the value of certain
tax-related assets and, therefore, recorded a charge to eliminate the value
of these assets. Finally, and also directly related to the significant
reduction in the size of the Company, the Company recognized that it would
most likely be unable to realize the full value of certain other long term
assets, specifically barter credits, and recorded as part of its
restructuring charge, a charge to reduce the value of these assets.
OTHER EXPENSES, NET. The Company incurred $61 in net other expenses
during the three months ended September 30, 1998, compared to $726 in net
other expenses during the three months ended September 30, 1997. For the
first nine months of 1998, the Company's other expenses totaled $152 compared
to $761 during the year earlier period. The substantial "Other Expense"
incurred during the year earlier periods consisted primarily of financing
costs related to the sale of convertible debentures during the third quarter
of 1997. Other expense incurred during the current year consists primarily of
14
<PAGE>
interest and indexation expenses related to the Company's long-term debt and
income and expense arising from foreign exchange rate fluctuations.
Also included in Other expenses, net, in the current period is a net
gain of $117 from the sale of the assets of AgentSoft.
NET LOSS. Accent's net loss during the third quarter and first nine
months of 1998 of $1,831 and $5,137, respectively, were less than the year
earlier figures of $2,934 and $7,685, respectively, reflecting the impact of
the Company's cost reduction initiatives. On a per share basis, the Company
lost $0.07 per share during the third quarter of 1998 compared to a net loss
of $0.25 per share during the third quarter of 1997. For the first nine
months of 1998, the Company has lost $0.20 per share compared to a net loss
of $0.65 per share for the year earlier period.
LIQUIDITY AND CAPITAL RESOURCES
For the nine month period ended September 30, 1998, the Company's
operating activities used cash of $4,711 compared to $9,338 used during the
comparable period of 1997.
As discussed earlier, the Company has historically been dependent on
external sources of capital to fund its operating activities. Accent
originally believed the investment by Lernout & Hauspie, combined with
anticipated revenue growth and cost reduction initiatives, would be
sufficient to finance the Company's operating activities and achieve its
business objectives through the end of 1998. The Company's revenue growth has
fallen short of management expectations, however, and the Company's working
capital is essentially exhausted. The Company is actively seeking new sources
of external capital to meet its near-term operating requirements. There can
be no assurance that the Company will be successful in obtaining additional
funding and any failure to do so will have a material adverse impact on the
Company and could force it to cease operations.
The Company's investing activities provided cash of $216 during the
first nine months of 1998 and used cash of $144 during the comparable period
of 1997. The Company was also able to avoid cash outlays by using barter
credits with a value of $104 to pay certain creditors. The sale of AgentSoft
for $225 also contributed investment cash during the current period.
Financing activities provided cash of $2,476 and $835 during the nine
month periods ending September 30, 1998, and 1997, respectively. Net proceeds
from the sale of convertible preferred shares provided cash of $3,750 during
the second quarter of 1998. These proceeds were partially offset by payments
of $1,297 to retire long-term debt. During the prior year, net proceeds of
$1,850 from the sale of convertible debentures were partially offset by
payments of $1,074 to retire long-term debt.
Accent executed a Preferred Share Purchase Agreement ("Agreement")
with Lernout & Hauspie during May, 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. Also pursuant to the Agreement, Accent
issued 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.
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, representing a 10% premium over the average closing price of the
Company's Ordinary Shares during the ten trading days preceding
15
<PAGE>
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%.
At the time of the Preferred Share Purchase Agreement with Lernout &
Hauspie, the Company had Israeli government-guaranteed loans outstanding of
approximately $2,730. The agreement stipulated that these loans were to be
retired by September 4, 1998. During the third quarter, the Company used
proceeds from the Preferred Share Purchase Agreement to pay down a portion of
the outstanding balance. The Company also entered into an agreement with the
government of Israel and appropriate Israeli banking officials to permit the
Company to retire the remainder of the loans through the issuance of
additional equity. Subsequent to the agreement with the government, however,
there was a significant decline in both the Company's share price and in the
average daily trading volume in the Company's stock. The combination of the
lower share price and low trading volume made it essentially impossible to
sell sufficient equity to retire the loan by the stipulated date and as of
September 30, 1998, the Company had $1,433 in government-guaranteed loans
still outstanding.
The agreement with the government of Israel and Israeli banking
officials regarding retirement of the Company's loans provides that the loan,
unless retired earlier through the sale of Ordinary Shares as described in
the preceding paragraph, is to be paid down in four quarterly installments
beginning in October of 1998. The Company was unable to pay the installment
due in October and is, therefore, in default on these loans. The Company
plans to continue to make interest payments on the loan until such time as it
has sold enough equity or obtained other sources of capital to allow it to
become and remain current in its obligations. There can be no assurance,
however, that the Company will be successful in its efforts to sell equity or
obtain other sources of capital or that the government of Israel will defer
action against the Company. Failure on the part of the Company to pay down
the loan in a timely manner could result in a material, adverse impact and
could force the Company to cease operations.
During the second and third quarters 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
amounts due them. A total of approximately 1,000,000 shares were issued at
market value to these creditors in satisfaction of approximately $450 in
accounts payable.
The Company believes it has established sufficient reserves to
accurately reflect the likelihood of uncollectable receivables. There can be
no assurance, however, that 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.
YEAR 2000
The Company has reviewed its operations in relation to the Year 2000
issue and has concluded that the likelihood of this issue having a material
adverse impact on the Company is remote. Any costs incurred in relation to
the Year 2000 issue are expected to be immaterial.
Accent develops all of its software products in compliance with Year
2000 industry guidelines. The Company's software products are not date
sensitive and, therefore, are not likely to be adversely impacted by Year
2000. The Company, therefore, believes that it has minimal, if any, exposure
to contingencies related to the Year 2000 issue for the products it
manufactures and sells. The Company has reviewed the third-party
custom-written software it uses in its operations and has determined that
this software is also not date sensitive and poses minimal, if any, Year 2000
risk.
16
<PAGE>
Accent has a policy of purchasing only information technology ("IT")
hardware that is warranted to be Year 2000 compliant and, therefore, believes
its only Year 2000 exposure in this regard is if the hardware fails to
perform as warranted, which is unlikely. The Company also utilizes
"off-the-shelf" software products in its operations. Such software is issued
with frequent updates which have or which are expected to address the Year
2000 issue.
The potential impact of the Year 2000 issue on the Company's non-IT
systems that may include embedded technology, such as microprocessors, is
more difficult to assess. The Company believes, however, that its operations
are small enough that any Year 2000 issue that may arise in its non-IT
systems will amount to inconveniences, which it can work around, rather than
significant business problems.
Because the Company believes the possibility that a Year 2000 issue
significantly disrupting its operations is remote, it has not developed a
contingency plan in this regard. The Company will continue to monitor and
assess the Year 2000 issue, particularly the extent to which its operations
are vulnerable from interactions with its vendors, customers and financial
institutions.
17
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<C> <C> <S>
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).*
</TABLE>
- -------------------------
* Incorporated by reference.
18
<PAGE>
<TABLE>
<C> <C> <S>
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).*
</TABLE>
- -------------------------
* Incorporated by reference.
19
<PAGE>
<TABLE>
<C> <C> <S>
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).*
</TABLE>
- -------------------------
* Incorporated by reference.
20
<PAGE>
<TABLE>
<C> <C> <S>
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.
</TABLE>
(b) Reports on Form 8-K
None.
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 13, 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-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 480
<SECURITIES> 0
<RECEIVABLES> 1,017
<ALLOWANCES> 50
<INVENTORY> 39
<CURRENT-ASSETS> 1,667
<PP&E> 2,414
<DEPRECIATION> 2,009
<TOTAL-ASSETS> 2,493
<CURRENT-LIABILITIES> 2,350
<BONDS> 0
0
0
<COMMON> 73
<OTHER-SE> (33)
<TOTAL-LIABILITY-AND-EQUITY> 2,493
<SALES> 514
<TOTAL-REVENUES> 514
<CGS> 336
<TOTAL-COSTS> 2,284
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61
<INCOME-PRETAX> (1,831)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,831)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,831)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
