<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________________
FORM 10-Q
_________________
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. For the quarterly period ended March 31, 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 May 3, 2000, the registrant had outstanding 84,878,890 Ordinary Shares
(including 2,000 Ordinary Shares included in the registrant's outstanding
Units).
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<PAGE>
Part I - Financial Information
Item 1. Financial Statements
-2-
<PAGE>
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U. S. dollars and shares in thousands
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------------------- -----------------------
<S> <C> <C>
Assets (Unaudited) (Audited)
Current Assets
Cash and cash equivalents $ 3,811 $ 249
Trade receivables, net of allowance of
$119 and $113 504 460
Other receivables - 53
Prepaid expenses 91 77
------------------------- -----------------------
Total current assets 4,406 839
Equipment
Cost 431 182
Less - accumulated depreciation 183 128
------------------------- -----------------------
Equipment, net 248 54
Intangible Assets
Completed technology 3,350 -
Other intangible assets 800 -
Goodwill 672 -
------------------------- -----------------------
4,822 -
Less - accumulated amortization 378 -
------------------------- -----------------------
Intangible assets, net 4,444 -
Other Long-Term Assets 28 16
------------------------- -----------------------
Total assets $ 9,126 $ 909
========================= =======================
Liabilities and Shareholders' Equity ( Deficit)
Current Liabilities
Accounts payable $ 1,212 $ 282
Accrued liabilities 511 139
Line-of-credit - 59
Convertible debentures - 965
------------------------- -----------------------
Total liabilities 1,723 1,445
Shareholders' Equity (Deficit)
Convertible preferred stock, par value NIS 0.01,
authorized 10,000 shares:
Series C - issued and outstanding 4 - -
Series D - Issued and outstanding 2,885 7 7
Common stock, par value NIS 0.01, authorized 130,000
shares; issued and outstanding 83,366 and 32,721 209 85
Additional paid-in capital 62,945 52,816
Common stock to be issued 1,500 -
Accumulated deficit (57,258) (53,444)
Total shareholders' equity (deficit) 7,403 (536)
------------------------- -----------------------
Total liabilities and shareholders' equity (deficit) $ 9,126 $ 909
========================= =======================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
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<PAGE>
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
March 31,
-----------------------------------------------------
2000 1999
-------------------------- -----------------------
<S> <C> <C>
(Unaudited) (Unaudited)
Net sales $ 801 $ 471
Operating costs and expenses
Professional services 514 243
Product development costs 248 21
Sales and marketing expenses 2,260 130
General and administrative expenses 1,300 505
-------------------------- -----------------------
Total operating costs and expenses 4,322 899
-------------------------- -----------------------
Operating loss (3,521) (428)
Other income (expense)
Interest expense (308) (217)
Other expense 15 (10)
-------------------------- -----------------------
Loss before extraordinary item (3,814) (655)
Extraordinary gain on debt extinguishment (less income
taxes of $0) - 885
-------------------------- -----------------------
Net income (loss) $(3,814) $ 230
========================== =======================
Basic and diluted income (loss) per common share
Loss before extraordinary item $ (0.05) $ (0.02)
Extraordinary item - 0.03
-------------------------- -----------------------
Net income (loss) per common share $ (0.05) $ 0.01
========================== =======================
Basis and diluted weighted average
number of common shares outstanding 70,222 29,292
========================== =======================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
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<PAGE>
LANGUAGEWARE.NET (COMPANY) LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars and shares in thousands
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------------------------------
2000 1999
------------------------ ----------------------
<S> <C> <C>
(Unaudited) (Unaudited)
Operating activities
Net income (loss) $(3,814) $ 230
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 438 23
Change in allowance for doubtful accounts 7 (117)
Change in realizable value of trade credits - 50
Non-cash interest 300 200
Extraordinary item - (885)
Changes in assets and liabilities, net of business combination:
(Increase) decrease in trade receivables 682 (63)
Decrease in other receivables 53 65
(Increase) decrease in prepaid expenses (13) 5
Decrease in inventories - 7
Increase (decrease) in payables & accruals 604 (2)
Increase in severance liability - 1
------------------------ ----------------------
Net cash used in operating activities (1,743) (486)
------------------------ ----------------------
Investing activities
Cash acquired in business acquisition 1,481 -
Acquisition of equipment (121) (1)
Increase in other assets (13) -
------------------------ ----------------------
Net cash provided by (used in) investing activities 1,347 (1)
------------------------ ----------------------
Financing activities
Repayment of bank loans (59) -
Net proceeds received on issuance of common stock 1,500 -
Net proceeds received from common stock to be issued 1,500 -
Net proceeds received on exercise of warrants and options 767 -
Net proceeds received on issuance of convertible debenture 250
Net proceeds received on issuance of convertible debt - 600
------------------------ ----------------------
Net cash provided by financing activities 3,958 600
------------------------ ----------------------
Increase in cash and cash equivalents 3,562 113
Cash and cash equivalents, beginning of period 249 141
------------------------ ----------------------
Cash and cash equivalents, end of period $ 3,811 $ 254
======================== ======================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-5-
<PAGE>
LANGUAGEWARE.NET (COMPANY) 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 three months ended March
31, 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 4), are being amortized over the estimated
period the assets are expected to benefit the Company as indicated in the
following table.
Estimated Life
In Years
--------------
Completed technology 3
Other intangible assets 3 to 4
Goodwill 5
Net Income (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 income
(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 period ended March 31, 2000 and 1999, total stock options of 7,082,680
and 3,920,750, total stock warrants of 14,894,194 and 15,353,694 and convertible
preferred stock of 11,773,763 and 8,888,889 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), however,
raises doubt about the Company's ability to continue as a going concern.
Management acknowledges that the Company's history of operating losses and
operating cash flow deficits raises legitimate concern about the Company's
longer term prospects.
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<PAGE>
LANGUAGEWARE.NET (COMPANY) AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
To enhance the Company's longer term prospects, effective January 2000
management has embarked on a new operating strategy designed to increase
revenue. In the years preceding 1999, the Company was a seller of language
technology and translation software to the consumer retail market, transforming
in calendar 1999 primarily to a provider of translation services to other
businesses. Beginning January 2000, the Company changed its focus to providing
a full range of multilingual, multicultural and multi-commerce products and
services that enable its business customers to conduct business 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. Star+Globe owns
proprietary Asian character processing technology and provides Asian languages
translation services.
The accompanying consolidated financial statements do not include any
adjustments relating to the recoverability or classification of asset carrying
amounts or the amounts and classification of liabilities that may result should
the Company be unable to continue as a going concern.
Note 3 - LIQUIDITY
As of March 31, 2000 and December 31, 1999, the Company had accumulated deficits
of $57.3 million and $53.4 million, respectively. For the three months ended
March 31, 2000, the Company incurred a loss of $3.8 million and recognizes that
it may continue to incur operating losses through the remainder of 2000 and
possibly beyond. Furthermore, the Company has 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.
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.
As of March 31, 2000 the Company's cash balance was $3.8 million compared to
$249,000 at December 31, 1999. The increase is primarily attributable to $3.0
million from the sale of common stock, approximately $1.5 of cash acquired
from the acquisition of Star+Globe Technologies Pte. Ltd., and $633,000 received
from the exercise of warrants attached to convertible debentures sold in
calendar 1999 and February 2000.
On February 2, 2000, the Company issued a $250,000 convertible debenture to an
existing shareholder of the Company bearing interest at 10.25% with principal
and accrued interest convertible into common stock of the Company at a
conversion price of $0.15 per share. The holder of the debenture also received
warrants with an exercise price of $0.15 per share to purchase a number of
shares of the Company's common stock equal to 50% of the number of shares
issuable upon conversion of principal and accrued interest. At the date of
issuance, the warrants and the beneficial conversion feature were valued at
$250,000 (the total proceeds received), which will be amortized as interest
expense over the life of the debenture. On February 15, 2000, the holder of the
debenture converted its debt plus accrued interest into 1,673,379 shares of
common stock of the Company. In addition, on February 15, 2000, the holder
exercised its warrants, and the Company issued 836,690 shares of common stock
for cash proceeds of approximately $126,000.
-7-
<PAGE>
LANGUAGEWARE.NET (COMPANY) AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Note 4 - 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. The Company
has agreed to use its best efforts to register, in calendar year 2000, all of
the common stock issued as consideration.
In connection with the transaction, the Company has also 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 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 on
January 15, 2001.
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 5 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>
Three Months
Ended
March 31, 1999
----------------------
(Dollars and shares in thousands)
<S> <C>
Net Sales $ 602
Loss before extraordinary item $ (1,282)
Net loss $ (397)
Basic and diluted net loss per share:
Before extraordinary item $ (0.02)
Net loss per share $ (0.01)
Basic and diluted weighted average
number of common shares outstanding 62,965
</TABLE>
-8-
<PAGE>
LANGUAGEWARE.NET (COMPANY) AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Note 5 - SUPPLEMENTAL DATA TO STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------------------
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 $ 998 $ -
====================== ======================
Common stock and stock options issued in business acquisition $ 6,470 $ -
====================== ======================
Issuance of stock warrants in connection with
debt extinguishments $ - $ 306
====================== ======================
Supplemental Schedule of Non-Cash Activity in Conjunction with Acquisition
Activities
(see Note 4 above):
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 6 - 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 have been
valued at $62,000 which was amortized as additional interest expense through the
date that the holders can 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 received $250,000 from the sale to Technology
Fund II Pte. Ltd of a convertible debenture, 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
-9-
<PAGE>
LANGUAGEWARE.NET (COMPANY) AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
equal to 50% of the number of shares issuable upon conversion of the outstanding
principal and accrued interest at a $0.15 exercise price. At the date of
issuance, the warrants and the beneficial conversion feature have been valued at
$250,000 (the total proceeds received) which was amortized as additional
interest expense through the date that the holders can 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 an additional $1,500,000 (reflected as
common stock to be issued in the consolidated balance sheet at March 31, 2000)
from Technology Fund II Pte. Ltd., and in April 2000, the Company raised another
$1,000,000 from two other related party investors, for a total of $2,500,000.
Pursuant to the terms of an agreement dated effective May 5, 2000, the
Company will issue 2.5 million shares of its common stock to the above mentioned
three investors for a purchase price equal to $1.00 per share.
For the three months ended March 31, 2000, the Company issued 537,584 shares of
its common stock upon the exercise of stock options for cash proceeds of
$134,000.
Note 7 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board 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.
-10-
<PAGE>
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.
New Business Strategy
- ---------------------
The first quarter 2000 results reported here 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 today 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 provides strategic solutions designed to help businesses, their
customers, vendors, suppliers and employees around the world communicate with
each other in their native languages. Languageware operates primarily through
its wholly owned subsidiaries, WholeTree.com, Inc. in the U.S. and WholeTree.com
(Asia) Pte. Ltd. in Singapore, which enable global business over the Internet
and brings special expertise that fosters commerce between U.S. and Asian
markets.
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 its new plan 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 has embarked on an
aggressive marketing and advertising campaign and significantly increased its
staff in the administrative, sales and operations departments. At April 30,
2000, the Company had 73 full time employees compared to the 17 full time
employees it had at December 31, 1999. The
-11-
<PAGE>
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 March 31, 2000 of calendar 2000,
revenues have lagged behind the aforementioned costs and expenses.
The Company's ability to generate increased revenue 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 March 31, 2000, the Company has accumulated deficits
of $57.3 million, including a net loss of $3.8 million for the quarter ended
March 31, 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 calendar year 2000.
Through April 28, 2000 of calendar 2000, the Company obtained an additional $6.4
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 $767,000 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; and (5) the sale of $2.5 million
of common stock which has not yet been issued. The Company believes that these
accomplishments, coupled with an improved revenue outlook, will be sufficient to
meet its requirements for approximately the first six 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.
Results of Operations
The Company incurred a loss of $3.8 million during the first quarter of 2000 on
revenue of $801,000 compared to an operating loss of $655,000, before an
extraordinary gain of $885,000 from debt extinguishment, on revenue of $471,000
during the first quarter 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 in the current period of the Company's new business
operating strategy.
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.
-12-
<PAGE>
Net sales increased 70.1% to $801,000 in the first quarter of 2000 from $471,000
in the comparable period of 1999. The increase is primarily as result of the
acquisition of Star+Globe in January 2000. The three month period of 2000
includes revenues of Star+Globe whereas the 1999 comparable period does not. For
the three month periods of both 2000 and 1999 revenues were primarily derived
from sales 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 in the first quarter of 2000 of professional staff employed by
the Company to pursue its new business strategy, such costs increased $271,000,
or 111.5%, from $243,000 in the three month period of 1999 to $514,000 in the
comparable period of 2000. At March 31, 1999, the Company employed two (2) staff
members who provided such services as compared to twenty (20) employed at March
31, 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.
Product Development Costs. Product development costs are comprised primarily
of salaries of software engineers employed by the Company. Such costs increased
$227,000 from $21,000 in the first quarter of 1999 to $248,000 in the comparable
period 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 marketing expenses were
$2,260,000 during the three months ended March 31, 2000, an increase of
$2,130,000 from $130,000 during the three months ended March 31, 1999.
Sales and marketing staff was increased from five (5) personnel at March 31,
1999 to twenty-seven (27) at March 31, 2000, plus, marketing and advertising
costs of approximately $1.7 million were incurred in the first quarter of 2000,
whereas no such costs were incurred in the comparable period of 1999. The
significant increases in the first quarter of 2000 in the sales and marketing
staff and marketing and advertising costs reflects 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 most recent quarter were $1,300,000 compared to $505,000 during the
same quarter of 1999. The increase of $795,000, 157%, is primarily attributable
to an increase in depreciation and amortization of intangible assets,
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 Expenses. The Company incurred $293,000 in net other expenses during
the three months ended March 31, 2000, compared to $227,000 in net other
expenses during the three months ended March 31, 1999 for an increase of
$66,000, or 29%. The amounts recorded in the three month periods of both 2000
and 1999 consist primarily of amortized interest expense related to convertible
debt issued in such periods.
Extraordinary Gain on Debt Extinguishment. The Company recognized an
extraordinary gain of $885,000 in the first quarter of 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 in the first
quarter of 2000. The extraordinary gain amounted to $0.03 per share on a per
share basis.
Net Income (Loss). The Company recognized a net loss of $3,814,000, or $0.05
per share, for the three months ended March 31, 2000, compared to net income of
$230,000, or $0.01 per share, for the three months ended March 31, 1999.
-13-
<PAGE>
Liquidity and Capital Resources
For the three month period ended March 31, 2000, the Company's operating
activities used cash of $1,743,000 compared to $486,000 used during the
comparable period of 1999.
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 calendar year 2000.
The Company secured approximately $5.4 million, net of debt repayments of
$59,000, in additional working capital during the first quarter of 2000 from the
acquisition of Star+Globe, the sale of common stock, the exercise of warrants
and options, and the issuance of a convertible debenture. The Company believes
that these funds will be sufficient to meet its requirements through June, 2000.
When these funds are exhausted or if the Company's current working capital falls
short of its requirements due to revenue shortfalls or other unanticipated
contingencies, the Company will need to seek additional financing. Although
management currently is seeking additional financing, there is no assurance that
the Company will be successful in securing additional working capital and any
failure on the part of the Company to do so will have a material adverse impact
on the Company and may cause the Company to cease operations.
Management has taken additional steps in securing additional external financing.
At its next annual meeting, scheduled for June 7, 2000, shareholders will be
asked to approve an increase of 60,000,000 shares of authorized common stock.
Management believes that shareholder approval of an increase in its
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.
The Company's investing activities for the first three months of 2000 provided
cash of $1,347,000. The Company received $1,481,000 in cash from the acquisiton
of Star+Globe on January 14, 2000 and used cash of $121,000 for expenditures on
furniture and equipment necessary to implement its new business strategy. Such
amounts were immaterial in the comparable period of 1999.
Financing activities provided cash of $3,958,000 and $600,000 during the three
month periods ending March 31, 2000 and 1999, respectively. During the three
month period of 2000, the Company (1) sold common stock for $1,500,000 pursuant
to an agreement dated July 14, 1999; (2) sold another $1,500,000 of common stock
to be issued pursuant to an agreement tentatively scheduled for closing in May
2000; (3) received $633,000 from the exercise of warrants attached to
convertible debentures sold in 1999 and February 2000; (5) sold a convertible
debenture for $250,000 which was converted into common stock in February 2000;
(6) received $134,000 from the exercise of employee and non-employee share
options; and (7) repaid its bank loan of $59,000.
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.
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.
-14-
<PAGE>
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) On January 14, 2000, the Registrant acquired all of the outstanding
capital stock of Star+Globe Technologies Pte. Ltd., a Singapore corporation,
("Star+Globe") by issuing 33,673,361 unregistered ordinary shares, with a market
value of $4,734,475 on such date, to the shareholders of Star+Globe.
(2) On July 14, 1999, the Registrant entered into an agreement with a
group of investors whereby the investors purchased for $500,000, 2.4 million
ordinary shares 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 7,142,858 shares for
$1,500,000 when the Company obtained a strategic partner and entered into a
strategic alliance with such partner. In January and February 2000, the Company
fulfilled its obligations under the terms of the agreement, and the investor and
his assigns purchased the remaining 7,142,858 shares of common stock for
$1,500,000. Although none of the shares have been registered under the
Securities Act, the terms of the agreement require the Registrant to do so. The
following table sets forth 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>
Jonathan M. Thomas 1,190,476 January 14, 2000 $ 250,000
Charles Brodie Pugh 476,191 January 14, 2000 $ 100,000
British Colony Investments, LLC 714,286 January 14, 2000 $ 150,000
Dietrich & Forcart 1,190,476 January 14, 2000 $ 250,000
Barbara M. Thomas Trust 1,190,476 February 4, 2000 $ 250,000
Jack Vickers, III 1,428,572 February 4, 2000 $ 300,000
Carolyn C. Vickers 952,381 February 4, 2000 $ 200,000
------------------ ----------------
7,142,858 $1,500,000
================== ================
</TABLE>
(3) On November 15, 1999, the Registrant 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 ordinary shares
of the Registrant 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
ordinary shares of the Registrant 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.
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 Registrant allowed LHIC and its assignees to convert the principal
and interest into ordinary shares and exercise the warrants in accordance with
the original terms of the debentures. The following table sets forth the names
of the investors, the number of unregistered ordinary shares issued upon
conversion of principal and accrued interest, the number of unregistered
ordinary shares issued upon exercise of warrants attached to the debentures, and
the aggregate purchase price paid by each investor upon exercise of such
warrants:
<TABLE>
<CAPTION>
Ordinary Shares
Issued Upon Ordinary Shares
Conversion of Issued Upon Aggregate
Principal and Exercise of Exercise Price
Name of Investor Interest Warrants of Warrants
- ----------------------------------- ---------------- ------------------- -----------------
<S> <C> <C> <C>
Technology Fund II Pte. Ltd. 569,498 284,749 $ 42,712.35
L&H Investment Company, N.V. 4,002,878 2,001,439 $300,215.85
Seed Ventures II Limited 393,900 196,950 $ 29,542.50
InfoTech Ventures Limited 393,900 196,950 $ 29,542.50
Vertex Technology Fund Ltd. 711,872 355,936 $ 53,390.40
NIF Asian Pre-IPO Fund Ltd. 177,968 88,984 $ 13,347.60
Asian Pacific Ventures II Ltd. 177,968 88,984 $ 13,347.60
James L. Kelley 58,195 29,098 $ 4,364.70
WIIG Global Ventures Pte. Ltd. 280,008 140,004 $ 21,000.60
---------------- ------------------- -----------------
Total 6,766,187 3,383,094 $507,464.10
================ =================== =================
</TABLE>
-15-
<PAGE>
(4) On February 2, 2000, the Registrant sold to Technology Fund II Pte.
Ltd for $250,000 a convertible debenture containing 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 ordinary shares of the
Registrant equal to 50% of the number of shares issuable upon conversion of the
outstanding principal and accrued interest at an exercise price of $0.15 per
share. Also, under the same terms granted to LHIC and its assigns, on February
15, 2000, the outstanding principal and accrued interest of the $250,000
debenture was converted into 1,673,379 unregistered ordinary shares of the
Registrant. Concurrent with the conversion of principal and accrued interest,
Technology Fund II Pte. Ltd. gave the Registrant $125,503.50 as the exercise
price of the warrants contained in the $250,000 convertible debenture agreement,
and the Registrant issued an additional 836,690 unregistered ordinary shares to
Technology Fund II Pte. Ltd.
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).*
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).*
______________
* Incorporated by reference.
-16-
<PAGE>
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.
-17-
<PAGE>
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 theCompany'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)*
______________
* Incorporated by reference.
-18-
<PAGE>
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)*
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.
-19-
<PAGE>
(b) Reports on Form 8-K
(1) On January 28, 2000, the Registrant filed a Current Report on Form
8-K as amended on March 29, 2000, reporting the acquisition of
Star+Globe Technologies Pte. Ltd., a Singapore company.
(2) On February 22, 2000, the Registrant filed a Current Report on
Form 8-K as amended on February 25, 2000, reporting a change in its
certifying accountant from Luboshitz Kasierer to BDO Seidman, LLP
for the year ended December 31, 1999 and that BDO Shlomo Ziv & Co.
had been engaged for the re-audit of the Registrant's consolidated
financial statements for the years ended December 31, 1998 and
1997.
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: May 12, 2000 by: /S/ Thomas B Foster
------------ -------------------
Thomas B. Foster
(Principal Financial Officer)
-20-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,811
<SECURITIES> 0
<RECEIVABLES> 623
<ALLOWANCES> 119
<INVENTORY> 0
<CURRENT-ASSETS> 4,406
<PP&E> 5,253
<DEPRECIATION> 561
<TOTAL-ASSETS> 9,126
<CURRENT-LIABILITIES> 1,723
<BONDS> 0
0
7
<COMMON> 209
<OTHER-SE> 7,187
<TOTAL-LIABILITY-AND-EQUITY> 9,126
<SALES> 801
<TOTAL-REVENUES> 801
<CGS> 0
<TOTAL-COSTS> 4,322
<OTHER-EXPENSES> 293
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 301
<INCOME-PRETAX> (3,814)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,814)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,814)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
</TABLE>
