<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 September 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 November 2, 2000, the registrant had outstanding 106,756,054 Ordinary Shares
(including 2,000 Ordinary Shares included in the registrant's outstanding
Units).
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U. S. dollars and shares in thousands
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------ -----------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,606 $ 249
Trade receivables, net of allowance of
$119 and $113 223 460
Other receivables 27 53
Prepaid expenses 41 77
-------- --------
Total current assets 1,897 839
EQUIPMENT
Cost 694 182
Less - accumulated depreciation 299 128
-------- --------
Equipment, net 395 54
INTANGIBLE ASSETS
Completed technology 3,350 --
Other intangible assets 800 --
Goodwill 672 --
-------- --------
4,822 --
Less - accumulated amortization 1,129 --
-------- --------
Intangible assets, net 3,693 --
OTHER LONG-TERM ASSETS 84 16
-------- --------
Total assets $ 6,069 $ 909
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 649 $ 282
Accrued liabilities 311 139
Line-of-credit -- 59
Convertible note 500 --
Convertible debentures -- 965
-------- --------
Total current liabilities 1,460 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 106,745 and 32,721 257 85
Additional paid-in capital 68,123 52,816
Accumulated deficit (63,771) (53,444)
-------- --------
Total shareholders' equity (deficit) 4,609 (536)
-------- --------
Total liabilities and shareholders' equity (deficit) $ 6,069 $ 909
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
-2-
<PAGE> 3
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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET SALES $ 422 $ 550 $ 1,881 $ 1,561
OPERATING COSTS AND EXPENSES
Professional services 398 432 1,371 980
Product development costs 277 83 766 137
Sales and marketing expenses 996 201 5,236 479
General and administrative expenses 1,266 288 4,105 1,177
--------- --------- --------- ---------
Total operating costs and expenses 2,937 1,004 11,478 2,773
--------- --------- --------- ---------
OPERATING LOSS (2,515) (454) (9,597) (1,212)
OTHER EXPENSE, NET (439) -- (730) (624)
--------- --------- --------- ---------
LOSS BEFORE EXTRAORDINARY ITEM (2,954) (454) (10,327) (1,836)
Extraordinary gain on debt extinguishment (less income
taxes of $0) -- -- -- 885
--------- --------- --------- ---------
$ (2,954) $ (454) $ (10,327) $ (951)
========= ========= ========= =========
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE
Loss before extraordinary item $ (0.03) $ (0.01) $ (0.11) $ (0.06)
Extraordinary item -- -- -- 0.03
--------- --------- --------- ---------
NET LOSS PER COMMON SHARE $ (0.03) $ (0.01) $ (0.11) $ (0.03)
========= ========= ========= =========
Basic and diluted weighted average
number of common shares outstanding 105,982 31,336 90,264 29,980
========= ========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
-3-
<PAGE> 4
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 Additional
------------------- --------------------- Paid-In Accumulated
Nine Months Ended September 30, 2000 (unaudited) Shares Par Value Shares Par Value Capital Deficit
------------------------------------------------ -------- ---------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1999 $ 2,889 $ 7 32,721 85 52,816 (53,444)
Issuance of common stock for
cash, net of offering costs
of $1 (Note 5)
-- -- 15,000 37 5,963 --
Issuance of common stock upon
conversion of convertible
debentures and accrued
interest (Note 5)
-- -- 8,441 21 1,244 --
Issuance of common stock
upon conversion of convertible
preferred stock (Note 5) (2,889) (7) 11,774 28 (21) --
Issuance of common stock
and stock options for business
acquisition (Note 3)
-- -- 33,673 74 6,396 --
Issuance of common stock for
cash upon exercise of stock
options (Note 5)
-- -- 916 2 210 --
Issuance of common stock for
cash upon exercise of stock
warrants (Note 5)
-- -- 4,220 10 623 --
Issuance of stock warrants for
interest expense (Note 5)
-- -- -- -- 750 --
Issuance of stock options for
services (Note 5)
-- -- -- -- 142 --
Net loss
-- -- -- -- -- (10,327)
BALANCE, September 30, 2000 -- $ -- 106,745 $ 257 $ 68,123 $(63,771)
====== ===== ======== ======== ======== ========
<CAPTION>
Total
Stockholders'
Nine Months Ended September 30, 2000 (unaudited) Equity (Deficit)
------------------------------------------------ ---------------
<S> <C>
BALANCE, December 31, 1999 (536)
Issuance of common stock for
cash, net of offering costs
of $1 (Note 5)
6,000
Issuance of common stock upon
conversion of convertible
debentures and accrued
interest (Note 5)
1,265
Issuance of common stock
upon conversion of convertible
preferred stock (Note 5) --
Issuance of common stock
and stock options for business
acquisition (Note 3)
6,470
Issuance of common stock for
cash upon exercise of stock
options (Note 5)
212
Issuance of common stock for
cash upon exercise of stock
warrants (Note 5)
633
Issuance of stock warrants for
interest expense (Note 5)
750
Issuance of stock options for
services (Note 5)
142
Net loss
(10,327)
BALANCE, September 30, 2000 $ 4,609
========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
-4-
<PAGE> 5
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars and shares in thousands
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
2000 1999
----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(10,327) $ (951)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 1,300 37
Services paid with options 142 --
Change in allowance for doubtful accounts 6 (117)
Change in realizable value of trade credits -- 50
Write-down of property and equipment -- 13
Non-cash interest expense 800 600
Extraordinary gain -- (885)
Changes in assets and liabilities, net of business
combination:
Decrease in trade receivables 962 194
(Increase) decrease in other receivables 26 (193)
Decrease in prepaid expenses 36 5
Decrease in inventories -- 7
Increase (decrease) in payables and accruals (159) 35
Decrease in severance liability -- (15)
-------- --------
Net cash used in operating activities (7,214) (1,220)
-------- --------
INVESTING ACTIVITIES
Cash acquired in business acquisition 1,481 --
Acquisition of equipment (378) (1)
Increase in other assets (68) --
-------- --------
Net cash provided by (used in) investing activities 1,035 (1)
-------- --------
FINANCING ACTIVITIES
Repayment of bank loans (59) --
Net proceeds received on issuance of common stock 6,000 459
Net proceeds received on exercise of warrants and options 845 --
Net proceeds received on issuance of convertible debt 750 651
-------- --------
Net cash provided by financing activities 7,536 1,110
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,357 (111)
Cash and cash equivalents, beginning of period 249 141
-------- --------
Cash and cash equivalents, end of period $ 1,606 $ 30
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
-5-
<PAGE> 6
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 nine months ended September
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 nine month periods ended September 30, 2000 and 1999, total stock
options of 10,700,843 and 3,888,625, total stock warrants of 14,527,444 and
14,894,194 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.
-6-
<PAGE> 7
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As of September 30, 2000 and December 31, 1999, the Company had accumulated
deficits of $63.8 million and $53.4 million, respectively. For the nine months
ended September 30, 2000, the Company incurred a loss of $10.3 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, with such business operating
strategy being revised in September 2000 based upon the results of operations
during the first nine months of fiscal 2000. The Company 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.
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 September 30, 2000 the Company's cash balance was $1.6 million compared to
$249,000 at December 31, 1999. The increase is primarily attributable to cash
raised in the amount of $6.0 million from the sale of common stock,
approximately $1.5 million of cash acquired from the acquisition of Star+Globe
Technologies Pte. Ltd., $750,000 received upon the issuance of convertible debt
and $845,000 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
-7-
<PAGE> 8
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
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.
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>
Nine Months
Ended
September 30, 1999
------------------
<S> <C>
(Dollars and shares in thousands)
Net Sales $ 2,305
Loss before extraordinary item $ (3,746)
Net loss $ (2,861)
Basic and diluted net loss per share:
Before extraordinary item $ (0.06)
Net loss per share $ (0.04)
Basic and diluted weighted average
number of common shares outstanding 63,653
</TABLE>
NOTE 4 - SUPPLEMENTAL DATA TO STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 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 stock 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
====== ====
</TABLE>
-8-
<PAGE> 9
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITY IN CONJUNCTION WITH ACQUISITION
ACTIVITIES
<S> <C> <C>
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>
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.
-9-
<PAGE> 10
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
In June 2000, the Company entered into an agreement to sell 5,000,000 common
shares for $2.0 million, of which $1.0 million was received from Technology Fund
II Pte. Ltd. and $1.0 million was received from the brother of Mr. Thomas Denys,
LHIC's designee member to the Company's board of directors. Pursuant to the
terms of the agreement, dated effective June 30, 2000, the Company issued
2,500,000 shares of its common stock to Technology Fund II Pte. Ltd. and
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.
On September 22, 2000, the Company entered in to a convertible promissory note
agreement with Technology Fund II Pte Ltd. with a maximum amount available of
$3,000,000. The note has a maturity date of March 22, 2001, and accrues interest
at 11.5%. The agreement allows for the conversion of the unpaid principal
balance plus unpaid accrued interest at any time into common stock at a
conversion price equal to the lesser of (a) $0.20 per share; or (b) the lowest
price per share received by the Company from a sale of its common stock to a
third party in an aggregate amount in excess of $6,000,000 between the date of
the agreement and the maturity date. The note agreement provides that the
Company will issue the Lender warrants to purchase a number of shares of common
stock equal to 100% of the number of shares issuable upon conversion of the
outstanding principal and accrued interest whether or not converted. The
exercise price of the warrants equals the conversion price of the note. Such
warrants shall be exercisable upon issuance and expire on December 31, 2001. On
September 28, 2000, the Company received its first monthly disbursement under
the note agreement in the amount of $500,000. Based on the agreement, the
warrants attributable to the first advance total 2,500,000 and were valued at
$500,000 (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 $500,000 to interest expense as of the date of
issuance.
For the nine months ended September 30, 2000, the Company issued 916,240 shares
of its common stock upon the exercise of stock options for cash proceeds of
$212,104.
For the nine months ended September 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.
For the nine months ended September 30, 2000, the Company issued options in
payment of certain consulting fees, contract work and director's fees. The
Black-Scholes value of the vested portion of such options was approximately
$142,000 as of September 30, 2000.
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. 138, 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.
-10-
<PAGE> 11
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 was
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 had no material impact on the Company's
financial condition, results of operations or cash flows.
In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements" which provides additional guidance in applying generally accepted
accounting principles to revenue recognition in financial statements. SAB 101 is
effective the fourth fiscal quarter of fiscal years beginning after December 15,
1999. Management believes that the adoption of this bulletin will have no
material impact on the Company's financial statements.
-11-
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
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 net loss of $3.0 million during the third quarter of 2000
on revenue of $422,000 compared to a net loss of $454,000 on revenue of $550,000
during the third quarter of 1999. The Company incurred a net loss of $10.3
million for the nine months ended September 30, 2000 on revenue of $1.9 million,
compared to a net loss of $951,000 on revenue of $1.6 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 third 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.
Although customer interest in the Company's new services was positive as
supported by the number of requests for proposals for such services from
potential customers, the Company was not able to close significant engagements
with customers. Management believes that the weak financial condition of the
Company as compared to successful competitors was the primary reason for its
inability to effectively compete.
Net sales decreased 23.3% to $422,000 during the third quarter of 2000 from
$550,000 in the comparable period of 1999. For the first nine months of 2000,
net sales increased 20.5% to $1,881,000 from $1,561,000 in the comparable period
of 1999. The decrease in net sales for the third quarter is primarily a result
of the decrease in the volume of translation services being provided in 2000 as
compared to 1999. The increase for the first nine months of 2000 is primarily a
result of the acquisition of Star+Globe in January 2000. The three month and
nine month periods of 2000 include revenues of Star+Globe whereas the 1999
comparable periods do not. For the three month and nine month periods of both
2000 and 1999, revenues were primarily derived from sale of translation services
generated through traditional sales methods. Because of the considerable lead
time associated with the Company's focus on e-business solutions, the benefits,
if any, from such efforts have yet to be fully realized.
PROFESSIONAL SERVICES. Professional services represents third party and
internal costs of providing services to the Company's customers. Primarily due
to the decrease in translation services provided during the third quarter of
2000 and the increase in staffing levels during the first nine months of 2000 of
professional staff employed by the Company to pursue its new business strategy,
such costs decreased $34,000, or 7.9%, and increased $391,000, or 39.9%, from
$432,000 and
-12-
<PAGE> 13
$980,000 during the third quarter and the first nine months of 1999 to $398,000
and $1.4 million in the comparable periods of 2000. As a result of the increase
in professional staff during fiscal 2000, the Company employed thirteen (13)
staff members who provided such services as compared to two (2) employed during
the first nine months of 1999. 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.
PRODUCT DEVELOPMENT COSTS. Product development costs are comprised
primarily of salaries of software engineers employed by the Company. Such costs
increased $194,000 and $629,000 from $83,000 and $137,000 during the third
quarter and the first nine months of 1999 to $277,000 and $766,000 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 $996,000 and $5,236,000 for the third quarter of 2000 and the first nine
months of 2000, an increase of $795,000 and $4,757,000 from $201,000 and
$479,000 during the comparable periods of 1999.
Sales and marketing staff was increased from five (5) personnel during the first
nine months of 1999 to twenty-five (25) during the first nine months of 2000,
plus, marketing and advertising costs of approximately $425,000 and $3.6 million
were incurred in the third quarter and the first nine months of 2000, whereas no
such costs were incurred in the comparable periods of 1999. The significant
increases in the third quarter and first nine 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 in addition to the acquisition of
Star+Globe in January 2000.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
during the third quarter and first nine months of 2000 were $1,266,000 and
$4,105,000 compared to $288,000 and $1,177,000 during the same periods of 1999.
The increases of $978,000, or 339.6%, and $2,928,000, or 248.8%, 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 EXPENSE, NET. The Company recognized $439,000 and $730,000 in
other expense, net for the three and nine months ended September 30, 2000,
compared to $0 and $624,000 in net other expenses during the three and nine
months ended September 30, 1999 for an increase of $439,000, or 100% and
$106,000, or 17.0%. The amount recorded in the first nine months of 1999
consists primarily of amortized interest expense related to convertible debt and
convertible preferred stock issued in such periods. The amounts recorded in
other expense for the three and nine months ended September 30, 2000 consist
primarily of amortized interest expense related to convertible debt.
EXTRAORDINARY GAIN ON DEBT EXTINGUISHMENT. The Company recognized an
extraordinary gain of $885,000 during the nine months ended September 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 any time 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 nine 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 $2,954,000 and
$10,327,000, or $0.03 and $0.11 per share, for the three and the nine months
ended September 30, 2000, compared to a net loss of $454,000 and $951,000, or
$0.01 and $0.03 per share, for each of the three and the nine months ended
September 30, 1999.
-13-
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
NEW BUSINESS STRATEGY
The results reported here for the quarter and nine months ended September 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 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. During the second
and third quarters of fiscal 2000, the Company had approximately 70 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 September 30, 2000, revenues have
lagged behind the aforementioned costs and expenses.
Based upon the results of operations for the first nine months of fiscal 2000,
the Company's management revised its business strategy to allow it to focus on
the development and procurement of strategic alliances and partnerships as a
means of distributing its products and services rather than focusing only on
revenue growth through business-to-business sales and application of its
proprietary technology. As a result of the change in the business strategy, the
Company reduced its workforce by 18%, from 71 to 58 employees in late September
2000 in order to reduce its operating expenses to focus more effectively on the
revised business strategy. In addition, four members of the board of directors,
including the President of the Company resigned, and the Company gained two new
members to the board of directors and appointed a new CEO.
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 September 30, 2000, the Company has accumulated
deficits of $63.8 million, including a net loss of $10.3 million for the nine
months ended September 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 has significantly
affected the Company's ability to generate adequate cash flow to
-14-
<PAGE> 15
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.
Through October 30, 2000 of calendar 2000, the Company obtained additional
working capital of approximately $9.0 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 $845,000 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 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; (6) the sale of $2.0 million of common stock pursuant to an
agreement dated June 30, 2000; and (7) the receipt of $500,000 pursuant to a
$3,000,000 convertible note agreement dated September 22, 2000. The Company
believes that these accomplishments, coupled with an improved revenue outlook,
will be sufficient to meet its requirements through approximately the first
three months of calendar year 2001. Beyond that time, the Company believes that,
based on its revised business plan, it may not generate sufficient operating
cash flow to meet its needs without additional external financing. There is no
assurance that the Company's efforts to reach operating profitability will be
successful. Any failure on the part of the Company to achieve such goals will
have a material adverse impact on the Company's ability to continue as a going
concern 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 delivering its products
and services primarily through alliances and partnerships.
OPERATING ACTIVITIES
For the nine month period ended September 30, 2000, the Company's operating
activities used cash of $7,214,000 compared to $1,220,000 used during the
comparable period of 1999. The increase in the useage 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 nine months of 2000 provided
cash of $1,035,000. The Company received $1,481,000 in cash from the acquisition
of Star+Globe on January 14, 2000 and used cash of $446,000 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 $7,536,000 and $1,110,000 during the nine
month periods ending September 30, 2000 and 1999, respectively. During the nine
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 $845,000 from the
exercise of warrants and employee and non-employee options; (4) sold a
convertible debenture for $250,000 which was converted into common stock in
February 2000; (5) sold another $2,000,000 in common stock to be issued pursuant
to an agreement dated June 30, 2000; (6) received $500,000 pursuant to a
$3,000,000 convertible note agreement dated September 22, 2000 and (7) repaid
its bank loan of $59,000.
-15-
<PAGE> 16
There is no provision for U.S. income taxes required for the nine months ended
September 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
and are subject to various limitations imposed by the rules and regulations of
the Internal Revenue Service. 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.
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
will have an impact on the Company.
-16-
<PAGE> 17
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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<S> <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.
-17-
<PAGE> 18
<TABLE>
<S> <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.
-18-
<PAGE> 19
<TABLE>
<S> <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.
-19-
<PAGE> 20
<TABLE>
<S> <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).*
10.15 - Stock Purchase Agreement, dated as of May 15, 2000, by and
among LanguageWare.net (Company) Ltd., Technology Fund II
Pte. Ltd., NIF Asian Pre-IPO Fund Limited and Asia-Pacific
Ventures II Ltd.
10.16 - Stock Purchase Agreement, dated as of June 8, 2000, by and
among LanguageWare.net (Company) and Bruno Denys.
</TABLE>
----------
* Incorporated by reference.
-20-
<PAGE> 21
<TABLE>
<S> <C>
10.17 - Stock Purchase Agreement, dated as of June 30, 2000, by and
among LanguageWare.net (Company) Ltd. and Technology Fund II
Pte. Ltd.
10.18 - Secured Convertible Promissory Note, dated as of September
22, 2000, by and among LanguageWare.net (Company) Ltd. and
Technology Fund II Pte. Ltd.
10.19 - Stock Option Extension Agreement, dated as of October 17,
2000, by and among LanguageWare.net (Company) Ltd. and Todd A.
Oseth.
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.
-21-
<PAGE> 22
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: November 2, 2000 by: /S/ Thomas B Foster
---------------- ---------------------
Thomas B. Foster
(Principal Financial Officer)
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.15 Stock Purchase Agreement dated 5/15/00
10.16 Stock Purchase Agreement dated 6/8/00
10.17 Stock Purchase Agreement dated 6/30/00
10.18 Secured Convertible Promissory notes
10.19 Stock Option Extension Agreement
27 Financial Data Schedule
</TABLE>
