<PAGE> 1
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 June 30, 2000.
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
LANGUAGEWARE.NET (COMPANY) LTD.
--------------------------------------------------------------------------------
(Exact Name of Registrant in its Charter)
Israel N/A
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
102 South Tejon Street, Suite 320, Colorado Springs, Colorado 80903
719-955-3400
--------------------------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including Area Code
of Registrant's Principal Executive Offices.)
N/A
--------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
On August 2, 2000, the registrant had outstanding 104,116,808 Ordinary Shares
(including 2,000 Ordinary Shares included in the registrant's outstanding
Units).
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-2-
<PAGE> 3
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S. dollars and shares in thousands
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,266 $ 249
Trade receivables, net of allowance of
$119 and $113 469 460
Other receivables 1 53
Prepaid expenses 15 77
-------- --------
Total current assets 2,751 839
EQUIPMENT
Cost 689 182
Less - accumulated depreciation 231 128
-------- --------
Equipment, net 458 54
INTANGIBLE ASSETS
Completed technology 3,350 --
Other intangible assets 800 --
Goodwill 672 --
-------- --------
4,822 --
Less - accumulated amortization 772 --
-------- --------
Intangible assets, net 4,050 --
OTHER LONG-TERM ASSETS 92 16
-------- --------
Total assets $ 7,351 $ 909
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 493 $ 282
Accrued liabilities 435 139
Line-of-credit -- 59
Convertible debentures -- 965
-------- --------
Total current liabilities 928 1,445
-------- --------
SHAREHOLDERS' EQUITY (DEFICIT)
Convertible preferred stock, par value NIS 0.01,
authorized 10,000 shares:
Series C - issued and outstanding 0 and 4 -- --
Series D - issued and outstanding 0 and 2,885 -- 7
Common stock, par value NIS 0.01,
authorized 190,000 shares; issued and
outstanding 104,117 and 32,721 251 85
Additional paid-in capital 66,507 52,816
Common stock to be issued 500 --
Accumulated deficit (60,835) (53,444)
-------- --------
Total shareholders' equity (deficit) 6,423 (536)
-------- --------
Total liabilities and shareholders' equity (deficit) $ 7,351 $ 909
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
-3-
<PAGE> 4
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars and shares in thousands (except per share information)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
2000 1999 2000 1999
-------- -------- -------- --------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET SALES $ 682 $ 540 $ 1,483 $ 1,011
OPERATING COSTS AND EXPENSES
Professional services 481 305 995 548
Product development costs 269 33 517 54
Sales and marketing expenses 1,984 148 4,244 278
General and administrative expenses 1,528 384 2,828 889
-------- -------- -------- --------
Total operating costs and expenses 4,262 870 8,584 1,769
-------- -------- -------- --------
OPERATING LOSS (3,580) (330) (7,101) (758)
OTHER INCOME (EXPENSE), NET 3 (397) (290) (624)
-------- -------- -------- --------
LOSS BEFORE EXTRAORDINARY ITEM (3,577) (727) (7,391) (1,382)
Extraordinary gain on debt extinguishment (less income
taxes of $0) -- -- -- 885
-------- -------- -------- --------
NET LOSS $ (3,577) $ (727) $ (7,391) $ (497)
======== ======== ======== ========
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE
Loss before extraordinary item $ (0.04) $ (0.02) $ (0.09) $ (0.05)
Extraordinary item -- -- -- 0.03
-------- -------- -------- --------
NET LOSS PER COMMON SHARE $ (0.04) $ (0.02) $ (0.09) $ (0.02)
======== ======== ======== ========
Basic and diluted weighted average
number of common shares outstanding 94,325 29,292 82,319 29,292
======== ======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
-4-
<PAGE> 5
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
U.S. dollars and shares in thousands
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock
----------------------- ----------------------
Six Months Ended June 30, 2000 (unaudited) Shares Par Value Shares Par Value
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1999 2,889 $ 7 32,721 $ 85
Issuance of common stock for
cash, net of offering costs
of $1 (Note 5) -- -- 12,500 31
Issuance of common stock upon
conversion of convertible
debentures and accrued
interest (Note 5) -- -- 8,441 21
Issuance of common stock
upon conversion of convertible
preferred stock (Note 5) (2,889) (7) 11,774 28
Issuance of common stock
and stock options for business
acquisition (Note 3) -- -- 33,673 74
Issuance of common stock for
cash upon exercise of stock
options (Note 5) -- -- 788 2
Issuance of common stock for
cash upon exercise of stock
warrants (Note 5) -- -- 4,220 10
Issuance of stock warrants for
interest expense (Note 5) -- -- -- --
Issuance of stock options for
services (Note 5) -- -- -- --
Net loss -- -- -- --
-------- -------- -------- --------
BALANCE, June 30, 2000 -- $ -- 104,117 $ 251
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Additional Common Total
Paid-In Stock To Be Accumulated Stockholders'
Six Months Ended June 30, 2000 (unaudited) Capital Issued Deficit Equity (Deficit)
---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1999 $ 52,816 $ -- $(53,444) $ (536)
Issuance of common stock for
cash, net of offering costs
of $1 (Note 5) 4,969 500 -- 5,500
Issuance of common stock upon
conversion of convertible
debentures and accrued
interest (Note 5)` 1,244 -- -- 1,265
Issuance of common stock
upon conversion of convertible
preferred stock (Note 5) (21) -- -- --
Issuance of common stock
and stock options for business
acquisition (Note 3) 6,396 -- -- 6,470
Issuance of common stock for
cash upon exercise of stock
options (Note 5) 198 -- -- 200
Issuance of common stock for
cash upon exercise of stock
warrants (Note 5) 623 -- -- 633
Issuance of stock warrants for
interest expense (Note 5) 250 -- -- 250
Issuance of stock options for
services (Note 5) 32 -- -- 32
Net loss -- -- (7,391) (7,391)
-------- -------- -------- --------
BALANCE, June 30, 2000 $ 66,507 $ 500 $(60,835) $ 6,423
======== ======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
-5-
<PAGE> 6
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars and shares in thousands
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
2000 1999
------- -------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(7,391) $ (497)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 875 36
Services paid with options 32 --
Change in allowance for doubtful accounts 6 (117)
Change in realizable value of trade credits -- 50
Non-cash interest expense 300 600
Extraordinary gain
-- (885)
Changes in assets and liabilities, net of business combination:
Decrease in trade receivables 717 192
(Increase) decrease in other receivables 52 (16)
Decrease in prepaid expenses 62 5
Decrease in inventories -- 7
Decrease in payables & accruals (191) (93)
Decrease in severance liability -- (15)
------- -------
Net cash used in operating activities (5,538) (733)
------- -------
INVESTING ACTIVITIES
Cash acquired in business acquisition 1,481 --
Acquisition of equipment (374) (1)
Increase in other assets (76) --
------- -------
Net cash provided by (used in) investing activities 1,031 (1)
------- -------
FINANCING ACTIVITIES
Repayment of bank loans (59) --
Net proceeds received on issuance of common stock 5,000 --
Net proceeds received from common stock to be issued 500 --
Net proceeds received on exercise of warrants and options 833 --
Net proceeds received on issuance of convertible debt 250 600
------- -------
Net cash provided by financing activities 6,524 600
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,017 (134)
Cash and cash equivalents, beginning of period 249 141
------- -------
Cash and cash equivalents, end of period $ 2,266 $ 7
======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
-6-
<PAGE> 7
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
LanguageWare.net (Company) Ltd., and its subsidiaries ("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 six months ended June 30,
2000 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000. 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 1999 Annual Report on Form 10-K for the year
ended December 31, 1999.
INTANGIBLE ASSETS
Intangible assets, arising from the Company's acquisition of Star+Globe
Technologies Pte. Ltd. (see Note 3), are being amortized over the estimated
period the assets are expected to benefit the Company as indicated in the
following table.
<TABLE>
<CAPTION>
Estimated Life
In Years
--------------
<S> <C>
Completed technology 3
Other intangible assets 3 to 4
Goodwill 5
</TABLE>
NET LOSS PER COMMON SHARE
Statement of Financial Accounting Standards No. 128, "Earnings Per Share",
provides for the calculation of "Basic" and "Diluted" earnings per share. Basic
earnings per share includes no dilution and is computed by dividing net loss
applicable to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflect the
potential dilution of securities that could share in the earnings of an entity,
similar to fully diluted earnings per share.
For the six month periods ended June 30, 2000 and 1999, total stock options of
13,181,430 and 4,014,551, total stock warrants of 14,894,194 and 15,353,694 and
convertible preferred stock convertible into common stock of 0 and 11,773,763
were not included in the computation of diluted income (loss) per share because
their effect was anti-dilutive.
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 1999 Annual Report on Form 10-K), 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.
-7-
<PAGE> 8
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As of June 30, 2000 and December 31, 1999, the Company had accumulated deficits
of $60.8 million and $53.4 million, respectively. For the six months ended June
30, 2000, the Company incurred a loss of $7.4 million and recognizes that it may
continue to incur operating losses through the remainder of 2000 and possibly
beyond. Furthermore, the Company embarked on a new business operating strategy
commencing January 2000 and does not expect to generate sufficient cash from
such new operating strategy to finance its operations in the near term.
Consequently, the Company will be dependent upon external sources to meet its
liquidity requirements for the foreseeable future. Additionally, the Company
plans to increase revenues through the successful implementation of its new
business strategy of providing multilingual, multicultural and multi-commerce
products and services enabling business to be conducted on web sites via the
Internet.
Since its inception in 1988, the Company has developed proprietary software
serving the language information technology industry. To enhance its competitive
position under its new operating strategy, the Company intends to utilize some
of such proprietary software as tools to provide superior service to potential
customers. Additionally, the Company has entered into alliances with other
companies in the industry aimed at broadening the Company's market reach and has
expanded its translation services business.
To further enhance its competitive advantage, the Company acquired Star+Globe
Technologies Pte. Ltd. ("Star+Globe") on January 14, 2000 (see Note 3).
Star+Globe owns proprietary Asian character processing technology and provides
Asian languages translation services.
As of June 30, 2000 the Company's cash balance was $2.3 million compared to
$249,000 at December 31, 1999. The increase is primarily attributable to cash
raised in the amount of $5.5 million from the sale of common stock,
approximately $1.5 million of cash acquired from the acquisition of Star+Globe
Technologies Pte. Ltd., and $833,000 received from the exercise of stock options
and stock warrants attached to convertible debentures sold in calendar 1999 and
February 2000, net of cash used since the beginning of the fiscal year.
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 (see additional discussion
in Management's Discussion and Analysis of Results of Operations and Financial
Condition - Liquidity and Capital Resources).
NOTE 3 - BUSINESS ACQUISITION
On January 14, 2000, the Company acquired all of the capital stock of Star+Globe
Technologies Pte. Ltd. ("Star+Globe"), a privately-held Singapore company, in a
transaction valued at approximately $6.5 million. As a result of the
acquisition, Star+Globe will operate as a wholly-owned subsidiary of the
Company. The operating results of this acquisition have been included in the
accompanying consolidated financial statements from the date of acquisition.
Subsequent to the acquisition, the name of Star+Globe was changed to
WholeTree.com (Asia) Pte. Ltd.
In consideration for the Star+Globe stock, the Company issued 33,673,361 shares
of its common stock valued at $4,734,475 ($0.14 per share quoted market price).
At the closing, the Company issued an aggregate of 30,306,025 shares of its
common stock (the "Closing Consideration"), and was required to issue up to
3,367,336 additional shares of its common stock (the "Holdback Shares") within
ninety (90) days of January 14, 2000, which shares could have been reduced by
any indemnification claims pursuant to the provisions of the Agreement. All
Holdback Shares were issued, without reduction, on April 14, 2000.
In connection with the transaction, the Company agreed to provide a
non-qualified share option plan for employees and a director of Star+Globe
wherein stock options have been granted to such employees and director to
purchase an aggregate of 2,266,639 shares of the Company's common stock, valued
at $1,735,183 using the Black-Scholes option pricing model, at an exercise price
of $0.093 per share. The stock options are exercisable immediately and expire
ten years from the date of grant so long as the option holder remains an
employee of the Company.
-8-
<PAGE> 9
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The acquisition was recorded using the purchase method of accounting by which
the assets were valued at fair market value at the date of acquisition. The
allocation of the purchase is reflected in Note 4 below.
-9-
<PAGE> 10
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma information presents the consolidated results
of the operations of the Company as if the acquisition of Star+Globe occurred on
January 1, 1999. The unaudited pro forma financial data does not purport to be
indicative of the results which actually would have been obtained had the
purchase been effected on January 1, 1999, or the results which may be obtained
in the future.
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1999
-------------
(Dollars and shares in thousands)
<S> <C>
Net Sales $ 1,367
Loss before extraordinary item $ (2,655)
Net loss $ (1,770)
Basic and diluted net loss per share:
Before extraordinary item $ (0.04)
Net loss per share $ (0.03)
Basic and diluted weighted average
number of common shares outstanding 62,965
</TABLE>
NOTE 4 - SUPPLEMENTAL DATA TO STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
2000 1999
------- -------
<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Common stock issued in satisfaction of
convertible debentures and accrued interest $ 1,265 $ --
======= =======
Common stock and stock options issued in business acquisition $ 6,470 $ --
======= =======
Preferred converted into common stock $ 7 $ --
======= =======
Preferred stock issued in satisfaction of
convertible debt $ -- $ 625
======= =======
Issuance of stock warrants in connection with
debt extinguishment $ -- $ 306
======= =======
Issuance of stock warrants in connection with
convertible preferred stock $ -- $ 600
======= =======
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITY IN CONJUNCTION WITH ACQUISITION ACTIVITIES
Working capital less cash acquired $ 34 $ --
Property and equipment 133 --
Completed technology 3,350 --
Other intangible assets 800 --
Goodwill 672 --
Common stock and stock options issued (6,470) --
------- -------
Cash acquired in business acquisition $ 1,481 $-
======= =======
</TABLE>
-10-
<PAGE> 11
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - STOCKHOLDERS' EQUITY
On July 14, 1999, the Company entered into an agreement with a group of three
investors whereby the investors purchased for $500,000, 2.4 million shares of
common stock of the Company, which, after related fees, provided $459,000 to the
Company. Pursuant to the terms of the agreement, one of the investors, or his
assigns, was required to purchase an additional 7.1 million shares for
$1,500,000 when the Company obtained a strategic partner and entered into a
strategic alliance with such partner. In February 2000, the Company fulfilled
its obligations under the terms of the agreement, and the investor and his
assigns purchased the remaining 7.1 million shares of common stock for
$1,500,000.
On November 15, 1999, the Company sold $1,000,000 of convertible debentures to
L&H Investment Company, N.V. ("LHIC"). Pursuant to the terms of the debentures,
any time after March 1, 2000, LHIC had the right to convert all or any portion
of the unpaid principal and accrued interest into common stock of the Company at
a conversion price of $0.15 per share. Also pursuant to the terms of the
debentures, warrants were issued to LHIC to purchase a number of shares of
common stock of the Company equal to fifty percent (50%) of the number of shares
issuable upon the conversion of all the outstanding principal and accrued and
unpaid interest. The exercise price of the warrants was $0.15 per share. At the
date of issuance, the warrant and the beneficial conversion feature were valued
at $62,000 which was amortized as additional interest expense through the date
that the holders could first convert. The unamortized discount of $35,000 as of
December 31, 1999 was fully amortized to interest expense as of the date that
the holders converted their debentures. Additionally, LHIC was granted the right
to assign one-half, or $500,000, of the convertible debentures, which it elected
to do on February 3, 2000. On February 15, 2000, the Company allowed LHIC and
its assignees to convert the principal and interest into common stock and
exercise the warrants in accordance with the original terms of the debentures.
Consequently, on February 15, 2000, the Company issued 6.7 million shares of
common stock to LHIC and its assigns upon conversion of the principal and
interest; and issued 3.4 million shares of common stock upon receipt of $507,000
for the exercise of the warrants.
On February 2, 2000, the Company raised $250,000 from the sale of a convertible
debenture to Technology Fund II Pte. Ltd., which debenture contained essentially
the same terms as the LHIC convertible debentures mentioned above, including the
right of the holder of the debenture to receive warrants to purchase shares of
the Company's common stock equal to 50% of the number of shares issuable upon
conversion of the outstanding principal and accrued interest at a $0.15 per
share exercise price. At the date of issuance, the warrants and the beneficial
conversion feature were valued at $250,000 (the total proceeds received) which
was amortized as additional interest expense through the date that the holders
could first convert. The Company fully amortized the $250,000 beneficial
conversion feature to interest expense as of the date that the holders converted
their debentures. Also, under the same terms granted to LHIC and its assigns, of
which Technology Fund II Pte Ltd. was one assignee, on February 15, 2000, the
outstanding principal and accrued interest of the $250,000 debenture was
converted into 1.7 million shares of common stock of the Company. Concurrent
with the conversion of principal and accrued interest, Technology Fund II Pte.
Ltd. gave the Company $126,000 as the exercise price of the warrants contained
in the $250,000 convertible debenture agreement, causing the Company to issue an
additional 837,000 shares of common stock to Technology Fund II Pte. Ltd.
In March 2000, the Company received $1.5 million from Technology Fund II Pte.
Ltd., and in April 2000, the Company raised another $1.0 million from two other
related party investors, for a total of $2.5 million. Pursuant to the terms of
an agreement dated effective May 15, 2000, the Company issued 2,857,143 shares
of its common stock to the above mentioned three investors for a purchase price
equal to $0.875 per share.
In May 2000, Lernout & Hauspie Speech Products converted its 4,000 shares of
convertible Class C preferred stock into 8,888,889 shares of the Company's
common stock at a conversion price of $0.45 per share.
In May 2000, LHIC converted its 2,884,874 shares of convertible Class D
preferred stock into 2,884,874 shares of the Company's common stock at a
conversion rate of one common share per each preferred share converted.
-11-
<PAGE> 12
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In June 2000, the Company sold 5,000,000 common shares for $2.0 million of which
$1.0 million was received from Technology Fund II Pte. Ltd. and $500,000
(reflected as common stock to be issued in the consolidated balance sheet at
June 30, 2000) from the brother of Mr. Thomas Denys, LHIC's designee member to
the Company's board of directors. In July 2000, the Company received the
remaining amount due of $500,000 from the brother of Mr. Thomas Denys. Pursuant
to the terms of an agreement dated effective June 30, 2000, the Company issued
2,500,000 shares of its common stock to Technology Fund II Pte. Ltd. and will
issue 2,500,000 shares of its common stock to the brother of Mr. Thomas Denys,
for a purchase price equal to $0.40 per share.
For the six months ended June 30, 2000, the Company issued 787,834 shares of its
common stock upon the exercise of stock options for cash proceeds of $200,162.
For the six months ended June 30, 2000, the Company issued 4,219,784 shares of
its common stock upon the exercise of stock warrants for cash proceeds of
$632,968.
NOTE 6 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") has recently issued Statement
on Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133, amended by
SFAS No. 137, established standards for recognizing all derivative instruments
including those for hedging activities as either assets or liabilities in the
statement of financial position and measuring those instruments at fair value.
This Statement is effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. Management believes the adoption of this
statement will have no material impact on the Company's consolidated financial
statements.
In March 2000, the FASB issued Emerging Issues Task Force Issue No. 00-2,
"Accounting for Web Site Development Costs" ("EITF 00-2"), which is effective
for all such costs incurred for fiscal quarters beginning after June 30, 2000.
This issue establishes accounting and reporting standards for costs incurred to
develop a web site based on the nature of the cost. Currently, as the Company
has no web site development costs, the adoption of EITF 00-2 would have no
impact on the Company's financial condition or results of operations. To the
extent the Company begins to enter into such transactions in the future, the
Company will adopt the Issue's disclosure requirements in the quarterly and
annual financial statements for the year ending December 31, 2000.
In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation" ("FIN 44"), which is
effective July 1, 2000, except that certain conclusions in this interpretation
which cover specific events that occur after either December 15, 1998 or January
12, 2000 are recognized on a prospective basis from July 1, 2000. This
interpretation clarifies the application of APB Opinion 25 for certain issues
relating to stock issued to employees. The Company believes that its existing
stock based compensation policies and procedures are in compliance with FIN 44
and therefore, the adoption of FIN 44 will have no material impact on the
Company's financial condition, results of operations or cash flows.
-12-
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITIONS.
INTRODUCTION
This Form 10-Q for LanguageWare.net (Company) Ltd., and its subsidiaries (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 and
services, market acceptance of the Company's existing products and services, and
products and services under development, the impact of competing products,
services 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.
RESULTS OF OPERATIONS
The Company incurred a loss of $3.6 million during the second quarter of 2000 on
revenue of $682,000 compared to an operating loss of $727,000 on revenue of
$540,000 during the second quarter of 1999. The Company incurred a loss of $7.4
million for the six months ended June 30, 2000, on revenue of $1.5 million
compared to an operating loss of $1.4 million on revenue of $1.0 million for the
comparable period of 1999.
The decrease in the Company's operating results was primarily the result in
increases of all categories of operating costs and expenses, which increases are
due to the implementation of the Company's new business operating strategy,
beginning in the first quarter and continuing through the second quarter of
2000.
NET SALES. Commencing in the first quarter of calendar 2000, management
shifted the Company's focus to generating revenue from business customers for
whom the Company will develop multilingual web sites and e-business solutions.
Customer interest in the Company's new services has been positive as supported
by the number of requests for proposals for such services from potential
customers.
Net sales increased 26.3% to $682,000 during the second quarter of 2000 from
$540,000 in the comparable period of 1999. For the first six months of 2000, net
sales increased 46.7% to $1,483,000 from $1,011,000 in the comparable period of
1999. The increase is primarily a result of the acquisition of Star+Globe in
January 2000. The three month and six month periods of 2000 include revenues of
Star+Globe whereas the 1999 comparable periods do not. For the three month and
six month periods of both 2000 and 1999 revenues were primarily derived from
sale of translation services generated through traditional sales methods.
Because the Company is in the early stages of focusing its marketing and sales
efforts on e-business solutions, the benefits, if any, from such efforts have
yet to be realized.
PROFESSIONAL SERVICES. Professional services represents third party and
internal costs of providing services to the Company's customers. Primarily due
to the increase during the second quarter and in the first six months of 2000 of
professional staff employed by the Company to pursue its new business strategy,
such costs increased $176,000, or 57.7%, and $447,000, or 81.6%, from $305,000
and $548,000 during the second quarter and the first six months of 1999 to
$481,000 and $995,000 in the comparable periods of 2000. At June 30, 1999, the
Company employed two (2)staff members who provided such services as compared to
thirteen (13) employed at June 30, 2000. The significant increase in the number
of such employees reflects the Company's anticipation of its need to service new
customers acquired as a result of its efforts to implement its new business
strategy.
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<PAGE> 14
PRODUCT DEVELOPMENT COSTS. Product development costs are comprised
primarily of salaries of software engineers employed by the Company. Such costs
increased $236,000 and $463,000 from $33,000 and $54,000 during the second
quarter and the first six months of 1999 to $269,000 and $517,000 in the
comparable periods of 2000 primarily as a result of the software engineers
acquired with the purchase of Star+Globe in January 2000.
SALES AND MARKETING EXPENSES. The Company's sales and marketing expenses
were $1,984,000 and $4,244,000 for the second quarter of 2000 and the first six
months of 2000, an increase of $1,836,000 and $3,966,000 from $148,000 and
$278,000 during the comparable periods of 1999.
Sales and marketing staff was increased from five (5) personnel at June 30, 1999
to twenty-five (25) at June 30, 2000, plus, marketing and advertising costs of
approximately $1.1 and $2.9 million were incurred in the second quarter and the
first six months of 2000, whereas no such costs were incurred in the comparable
periods of 1999. The significant increases in the second quarter and first six
months of 2000 in the sales and marketing staff and marketing and advertising
costs reflect the Company's efforts to implement its new business strategy and
the acquisition of Star+Globe in January 2000.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
during the second quarter and first six months of 2000 were $1,528,000 and
$2,828,000 compared to $384,000 and $889,000 during the same periods of 1999.
The increases of $1,144,000, or 297.9% and $1,939,000, or 218.1%, are primarily
attributable to an increase in depreciation and amortization of intangible
assets resulting from the acquisition of Star+Globe, administrative personnel
and related additional costs such as office space, telephone and supplies
resulting from the acquisition of Star+Globe in January 2000. Additionally, the
Company incurred an increase in such expenses as a result of implementing its
new business strategy.
OTHER INCOME (EXPENSE), NET. The Company recognized $3,000 in other income,
net and $290,000 in other expense, net for the three and six months ended June
30, 2000, compared to $397,000 and $624,000 in net other expenses during the
three and six months ended June 30, 1999 for a decrease of $400,000, or 100.8%
and $334,000, or 53.5%. The amounts recorded in both periods of 1999 consist
primarily of amortized interest expense related to convertible debt and
convertible preferred stock issued in such periods. The amount recorded in other
expense, for the six months ended June 30, 2000 consists primarily of amortized
interest expense related to convertible debentures.
EXTRAORDINARY GAIN ON DEBT EXTINGUISHMENT. The Company recognized an
extraordinary gain of $885,000 during the six months ended June 30, 1999 as a
result of the extinguishment of $1,180,000 of long-term debt, plus $11,000 of
accrued interest, in exchange for the issuance of a warrant to the lender to
receive 2,448,000 shares of the Company's common stock anytime after January 25,
2001, but before January 25, 2006. The warrant was valued at $306,000 using the
Black-Scholes option pricing model. No such gain or loss was reported during the
first six months of 2000. The extraordinary gain amounted to $0.03 per share on
a per share basis.
NET LOSS. The Company recognized a net loss of $3,577,000 and $7,391,000,
or $0.04 and $0.08 per share, for the three and the six months ended June 30,
2000, compared to a net loss of $727,000 and $497,000, or $0.02 per share, for
each of the three and the six months ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
NEW BUSINESS STRATEGY
The results reported here for the quarter and six months ended June 30, 2000 are
those of a company in transition. LanguageWare.net (Company) Ltd., formerly
Accent Software International Ltd., (the "Company" or "Languageware") was
restructured after recognizing that a different type of business was needed to
meet the language technology demands of today's fast-paced, Internet-based
economy. Founded in 1988, the Company currently is focused in a new direction.
In
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<PAGE> 15
October 1999, the Company changed its name to LanguageWare.net (Company) Ltd.,
recognizing that it now provides a full range of multilingual and multicultural
products and services, rather than just software, to enable the demands of
electronic business on a global scale.
The Company completed a restructuring during 1998 designed to position itself to
change its operating strategy from a consumer software products company to a
global e-commerce solutions company. The restructuring moved the Company's
operations to Colorado Springs, Colorado and eliminated its Israeli-based
product development, sales and marketing functions and various general and
administrative activities. In calendar 1999, as part of its efforts to
transition into a global e-commerce solutions company, the Company's operations
were changed to focus primarily on translation services and products offered to
other business.
Commencing in January 2000, the Company implemented a new business strategy to
become a provider of a full range of multilingual, multicultural and
multi-commerce products and services that enable customer companies to conduct
business on a global scale on web sites over the Internet. As part of its plan
to provide such services, on January 14, 2000, the Company acquired Star+Globe,
a company that provides proprietary Asian character processing technology. The
acquisition provided the Company a unique competitive advantage in developing
multilingual web sites and e-business solutions for customers serving Asian
markets.
In order to implement its new business strategy, the Company embarked on an
aggressive marketing and advertising campaign and significantly increased its
staff in the administrative, sales and operations departments. At August 2,
2000, the Company had 73 full time employees compared to the 17 full time
employees it had at December 31, 1999. The Company has experienced a significant
increase in its costs and expenditures as a result of its marketing and
advertising campaign, increase in employees and related costs such as office
lease expense, travel and entertainment, computer, furniture and other equipment
costs. Through June 30, 2000, revenues have lagged behind the aforementioned
costs and expenses.
The Company's ability to generate increased revenue from its new strategy and to
fund planned expenditures is dependent on a number of factors, some of which are
outside its control. In particular, revenue growth and profitability, if any,
will depend on the ability of the Company to market its services, demand for the
Company's services, the level of competition, the success of the Company in
attracting and retaining motivated and qualified personnel, the ability of the
Company to control its costs and general economic conditions. There can be no
assurance that the Company will meet such challenges successfully. Any of these
or other factors could have a material adverse effect on the Company's business,
operating results or financial condition.
From its inception through June 30, 2000, the Company has accumulated deficits
of $60.8 million, including a net loss of $7.4 million for the six months ended
June 30, 2000, and it may continue to incur deficits through the remainder of
2000 and possibly beyond. Although the Company believes it has made substantial
progress in reducing its operating expenses and operating losses, its failure to
achieve its revenue plan coupled with its efforts in calendar 2000 to implement
the revised operating strategy of providing business-to-business e-commerce
solutions has significantly affected the Company's ability to generate adequate
cash flow to meet its working capital requirements. These factors create
substantial doubt about the Company's ability to continue as a going concern and
there can be no assurance that the Company will be able to continue as a going
concern.
Although the Company has been successful on several occasions during the past
three years in raising additional working capital, primarily through the sale of
convertible securities and common stock, those funds are not sufficient to meet
the expected working capital requirements of the Company for the remainder of
calendar year 2000.
Through August 2, 2000 of calendar 2000, the Company obtained an additional $8.5
million, net of debt repayments of $59,000, from (1) $1.48 million acquired from
the acquisition of Star+Globe; (2) the sale of $1.5 million of common stock
pursuant to an agreement dated July 14, 1999; (3) the receipt of $833,000 from
the exercise of options and warrants associated with convertible debentures sold
in 1999 and 2000; (4) the sale of a $250,000 convertible debenture which
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<PAGE> 16
was converted into common stock in February 2000; (5) the sale of $2.5 million
of common stock pursuant to an agreement dated May 15, 2000; and (6) the sale of
$2.0 million of common stock, $1.0 million of which has not yet been issued,
pursuant to an agreement dated June 30, 2000. The Company believes that these
accomplishments, coupled with an improved revenue outlook, will be sufficient to
meet its requirements for approximately the first nine months of calendar year
2000. Beyond that time, the Company believes it will not generate sufficient
operating cash flow to meet its needs without additional external financing.
There is no assurance that the Company's efforts to obtain such financing will
be successful. Any failure on the part of the Company to secure required
financing will have a material adverse impact on the Company and may cause the
Company to cease operations.
Management is currently pursuing various sources of equity financing. The
Company has retained an investment banking firm to pursue a private placement of
equity or equity-linked securities. However, no assurance can be given that the
Company will be able to raise sufficient funds to meet its operating needs.
Management has also taken steps to assist in securing additional external
financing. At its last annual meeting on June 7, 2000, shareholders approved an
increase of 60,000,000 shares of authorized common stock from 130,000,000 to
190,000,000 shares. Management believes that the increase in the Company's
capitalization will provide a sufficient number of unreserved and unissued
shares to pursue, among other things, equity financing transactions and
strategic alliances. To increase revenues, management is actively proceeding
with the implementation of its new business strategy of providing
business-to-business e-commerce solutions.
OPERATING ACTIVITIES
For the six month period ended June 30, 2000, the Company's operating activities
used cash of $5,538,000 compared to $733,000 used during the comparable period
of 1999. The increase in the usage of cash is primarily attributable to expenses
resulting from the acquisition of Star+Globe and expenses incurred as a result
of implementing its new business strategy.
INVESTING ACTIVITIES
The Company's investing activities for the first six months of 2000 provided
cash of $1,031,000. The Company received $1,481,000 in cash from the acquisition
of Star+Globe on January 14, 2000 and used cash of $450,000 for expenditures on
furniture, equipment and other assets necessary to implement its new business
strategy. Such amounts were immaterial in the comparable period of 1999.
FINANCING ACTIVITIES
Financing activities provided cash of $6,524,000 and $600,000 during the six
month periods ending June 30, 2000 and 1999, respectively. During the six month
period of 2000, the Company (1) sold common stock for $1,500,000 pursuant to an
agreement dated July 14, 1999; (2) sold common stock for $2,500,000 pursuant to
an agreement dated May 15, 2000; (3) received $833,000 from the exercise of
warrants and employee and non-employee options; (5) sold a convertible debenture
for $250,000 which was converted into common stock in February 2000; (6) sold
another $1,500,000 in common stock to be issued pursuant to an agreement dated
June 30, 2000; and (7) repaid its bank loan of $59,000.
There is no provision for U.S. income taxes required for the six months ended
June 30, 2000 due to the Company's operating losses. At December 31, 1999, the
Company had available U.S. net operating loss carryforwards of approximately
$8,018,000 for tax reporting purposes. These carryforwards expire through 2020.
There are no tax credits established in the statements of operations since the
Company has a 100 percent valuation allowance for the tax benefit of net
deductible temporary differences and operating loss carryforwards. Management is
not able to determine if it is more likely than not that the deferred tax assets
will be realized.
-16-
<PAGE> 17
YEAR 2000
Since the beginning of 2000, the Company did not have any interruptions of its
business due to the Year 2000 issue. During the next few months, the Company
will continue to monitor its operations and assess whether the Year 2000 issue
has an impact on the Company.
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<PAGE> 18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk through interest rates related to its
investment of current cash and cash equivalents. These funds are generally
highly liquid with short term maturities, and the related market risk is not
considered material. The Company's line of credit has a variable interest rate.
The Company's management believes that fluctuations in interest rates in the
near term will not materially affect the Company's consolidated operating
results, financial position or cash flow.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
All of the securities described in this section were issued pursuant to an
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended, and Rule 506 of Regulation D promulgated thereunder. Each of the
investors to whom the securities were issued is an accredited investor under
Regulation D, and each investor was required to present the Registrant with a
written representation as to their accredited investor status.
(1) In March 2000, the Company received $1.5 million from Technology Fund
II Pte. Ltd., and in April 2000, the Company raised another $1.0 million from
two other related party investors, for a total of $2.5 million. Pursuant to the
terms of an agreement dated effective May 15, 2000, the Company issued 2,857,143
shares of its common stock to the above mentioned three investors for a purchase
price equal to $0.875 per share. Although none of the shares have been
registered under the Securities Act, the terms of the agreement require the
Company to do so. The following table sets for the names of the investors, the
number of ordinary shares purchased by each investor and the aggregate purchase
price paid by each investor.
<TABLE>
<CAPTION>
ORDINARY SHARES OFFERING
NAME OF INVESTOR PURCHASED DATE PRICE
---------------- --------------- ---- --------
<S> <C> <C> <C>
Technology Fund II Pte. Ltd. 1,714,285 May 15, 2000 $ 1,500,000
NIF Asian Pre-IPO Fund Ltd. 571,429 May 15, 2000 $ 500,000
Asian Pacific Ventures II Ltd. 571,429 May 15, 2000 $ 500,000
------------- -------------
2,857,143 $ 2,500,000
============= =============
</TABLE>
(2) In June 2000, the Company sold 5,000,000 common shares for $2.0 million
of which $1.0 million was received from Technology Fund II Pte. Ltd. and
$500,000 (reflected as common stock to be issued in the consolidated balance
sheet at June 30, 2000) from the brother of Mr. Thomas Denys, LHIC's designee
member to the Company's board of directors. In July 2000, the Company received
the remaining amount due of $500,000 from the brother of Mr. Thomas Denys.
Pursuant to the terms of an agreement dated effective June 30, 2000, the Company
issued 2,500,000 shares of its common stock to Technology Fund II Pte. Ltd. and
will issue 2,500,000 shares of its common stock to the brother of Mr. Thomas
Denys, for a purchase price equal to $0.40 per share. Although none of the
shares have been registered under the Securities Act, the terms of the agreement
require the Company to do so.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 7, 2000, the Company held its Annual Meeting of Shareholders at the
Antler's Adams Mark Hotel in Colorado Springs, Colorado. Matters voted on at the
meeting and the results of such voting are as follows:
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<PAGE> 19
1. The election of nine directors to hold office until the next Annual Meeting
of Shareholders or until their respective successors shall be elected and
qualified. The following persons were elected as directors of the Company
and received the number of votes set forth below:
<TABLE>
<CAPTION>
Director For
-------- ---
<S> <C>
Fred Snow 58,118,834
Todd A. Oseth 58,118,834
Esther Dyson 58,118,834
Thomas Denys 58,118,834
Francis Vanderhoydonck 58,118,834
Daniel Forcart 58,118,834
Harold Covert 58,118,834
Juzar Motiwalla 58,118,834
John O'Neil 58,118,834
</TABLE>
2. To increase the authorized Ordinary Shares of the Company, with nominal
value NIS 0.01 each, from 130,000,000 to 190,000,000, and to approve a
corresponding amendment to the Company's Memorandum of Association and
Articles of Association;
<TABLE>
<S> <C>
For: 57,710,409
Against: 472,342
Abstain: 111,410
</TABLE>
3. To increase the number of options to purchase Ordinary Shares which may be
granted under the Employee Share Option Plan (1995) by 7,000,000, from
2,500,000 to 9,500,000;
<TABLE>
<S> <C>
For: 57,593,416
Against: 602,920
Abstain: 97,825
</TABLE>
4. To increase the number of options to purchase Ordinary Shares which may be
granted under the CEO Share Option Plan (1999) by 3,000,000, from 2,000,000
to 5,000,000;
<TABLE>
<S> <C>
For: 57,507,071
Against: 691,040
Abstain: 96,050
</TABLE>
5. To increase the number of options to purchase Ordinary Shares which may be
granted under the Non-Employee Share Option Plan (1998) by 1,000,000, from
600,000 to 1,600,000;
<TABLE>
<S> <C>
For: 57,536,326
Against: 696,720
Abstain: 61,115
</TABLE>
6. To approve the compensation of Todd A. Oseth, the Company's Chief Executive
Officer, in the amount of $250,000 and to approve the grant of 3,000,000
options to Mr. Oseth;
<TABLE>
<S> <C>
For: 57,407,263
Against: 726,036
Abstain: 160,862
</TABLE>
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<PAGE> 20
7. To approve the compensation of Fred Snow, the Company's Chairman of the
Board of Directors, in the amount of $150,000 and to approve the grant of
2,000,000 options to Mr. Snow;
<TABLE>
<S> <C>
For: 57,279,604
Against: 719,331
Abstain: 295,226
</TABLE>
8. To appoint BDO Seidman, LLP as independent auditors to audit the Financial
Statements of the Company and its subsidiaries for the year ended December
31, 2000;
<TABLE>
<S> <C>
For: 58,130,586
Against: 97,150
Abstain: 66,425
</TABLE>
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).*
3.1(d) - Certificate of Name Change dated October 6, 1999 (filed as
Exhibit 99.1 to the Company's Form 8-K on October 18, 1999)*
3.2(a) - Articles of Association of Registrant (filed as Exhibit 3.2
to the Company's Registration Statement No. 33-92754).*
3.2(b) - Authorization of Registration of Increase in Share Capital
dated July 18, 1999 (filed as Exhibit 3.2(b) to the
Company's Form 10Q on May 12, 1999)*
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).*
----------
* Incorporated by reference.
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<PAGE> 21
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).*
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).*
4.16 - Form of Warrant to Lernout & Hauspie Speech Products, N.V.
(filed as Exhibit 4.16 to the Company's Form 10-Q on May 12,
1999)*
4.17 - Form of Warrant to L&H Investment Company, N.V. (filed as
Exhibit 4.17 to the Company's Form 10-Q on May 12, 1999)*
4.18 - Certificate of Designation for Series C Preferred Stock
(filed as Exhibit 4.18 to the Company's Form 10Q on November
12, 1999)*
4.19 - Certificate of Designation for Series D Preferred Stock
(filed as Exhibit 4.19 to the Company's Form 10Q on November
12, 1999)*
----------
* Incorporated by reference.
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<PAGE> 22
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).*
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)*
10.6(h) - CEO Share Option Plan (1999) (filed as Exhibit 10.6(f) to
the Company's Form 10-Q on August 11, 1999)*
----------
* Incorporated by reference.
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<PAGE> 23
10.6(i) - LanguageWare.net (Company) Ltd. Star+Globe Share Option Plan
(2000) (filed as Exhibit 10.6(i) to the Company's Form 10-K
on March 30, 2000)*
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).*
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, 1997, 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)*
10.13 - Stock Purchase Agreement between the Company and Gotham Bay
partners LLC dated July 14, 1999 (filed as Exhibit 10.13 to
the Company's Form 10-Q on August 11, 1999)*
10.14 - Stock Purchase Agreement, dated as of January 14, 2000, by
and among LanguageWare.net (Company) Ltd., Star+Globe
Technologies Pte. Ltd., Technology Fund Pte. Ltd., KRDL
Holdings Pte. Ltd., Technology Fund II Pte. Ltd., Seed
Ventures II Limited, Info Tech Ventures Limited, Vertex
Technology Fund Pte. Ltd., NIF Asian Pre-IPO Fund Limited,
Asia-Pacific Ventures II Ltd., Virginia Cha, James L. Kelly,
Lernout & Hauspie Investment Co., N.V. and WIIG Global
Ventures Pte. Ltd. (filed as Exhibit 2 to the Company's Form
8-K on January 28, 2000)*
21 - Subsidiaries of Registrant (filed as Exhibit 21 to the
Company's Form 10-K filed on March 30, 2000)*
27 - Financial Data Schedule
----------
* Incorporated by reference.
-23-
<PAGE> 24
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.
LANGUAGEWARE.NET (COMPANY) LTD.
(Registrant)
Date: August 4, 2000 by: /s/ Thomas B. Foster
-------------- -------------------------------
Thomas B. Foster
(Principal Financial Officer)
-24-
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
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).*
3.1(d) - Certificate of Name Change dated October 6, 1999 (filed as
Exhibit 99.1 to the Company's Form 8-K on October 18, 1999)*
3.2(a) - Articles of Association of Registrant (filed as Exhibit 3.2
to the Company's Registration Statement No. 33-92754).*
3.2(b) - Authorization of Registration of Increase in Share Capital
dated July 18, 1999 (filed as Exhibit 3.2(b) to the
Company's Form 10Q on May 12, 1999)*
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).*
</TABLE>
----------
* Incorporated by reference.
<PAGE> 26
<TABLE>
<S> <C> <C>
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).*
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).*
4.16 - Form of Warrant to Lernout & Hauspie Speech Products, N.V.
(filed as Exhibit 4.16 to the Company's Form 10-Q on May 12,
1999)*
4.17 - Form of Warrant to L&H Investment Company, N.V. (filed as
Exhibit 4.17 to the Company's Form 10-Q on May 12, 1999)*
4.18 - Certificate of Designation for Series C Preferred Stock
(filed as Exhibit 4.18 to the Company's Form 10Q on November
12, 1999)*
4.19 - Certificate of Designation for Series D Preferred Stock
(filed as Exhibit 4.19 to the Company's Form 10Q on November
12, 1999)*
</TABLE>
----------
* Incorporated by reference.
<PAGE> 27
<TABLE>
<S> <C> <C>
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).*
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)*
10.6(h) - CEO Share Option Plan (1999) (filed as Exhibit 10.6(f) to
the Company's Form 10-Q on August 11, 1999)*
</TABLE>
----------
* Incorporated by reference.
<PAGE> 28
<TABLE>
<S> <C> <C>
10.6(i) - LanguageWare.net (Company) Ltd. Star+Globe Share Option Plan
(2000) (filed as Exhibit 10.6(i) to the Company's Form 10-K
on March 30, 2000)*
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).*
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, 1997, 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)*
10.13 - Stock Purchase Agreement between the Company and Gotham Bay
partners LLC dated July 14, 1999 (filed as Exhibit 10.13 to
the Company's Form 10-Q on August 11, 1999)*
10.14 - Stock Purchase Agreement, dated as of January 14, 2000, by
and among LanguageWare.net (Company) Ltd., Star+Globe
Technologies Pte. Ltd., Technology Fund Pte. Ltd., KRDL
Holdings Pte. Ltd., Technology Fund II Pte. Ltd., Seed
Ventures II Limited, Info Tech Ventures Limited, Vertex
Technology Fund Pte. Ltd., NIF Asian Pre-IPO Fund Limited,
Asia-Pacific Ventures II Ltd., Virginia Cha, James L. Kelly,
Lernout & Hauspie Investment Co., N.V. and WIIG Global
Ventures Pte. Ltd. (filed as Exhibit 2 to the Company's Form
8-K on January 28, 2000)*
21 - Subsidiaries of Registrant (filed as Exhibit 21 to the
Company's Form 10-K filed on March 30, 2000)*
27 - Financial Data Schedule
</TABLE>
----------
* Incorporated by reference.
