-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jdqo6OFLYOKvnVGoy+vEkIG2bTv2NeeuHJDwQbJeSMt/0A1OhRLBkou+p+ss0KD9 DaeKl2Vv0y+FoSndVIuW/A== 0001036050-97-000265.txt : 19970520 0001036050-97-000265.hdr.sgml : 19970520 ACCESSION NUMBER: 0001036050-97-000265 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOXWARE INC CENTRAL INDEX KEY: 0000933454 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 363934824 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21403 FILM NUMBER: 97607502 BUSINESS ADDRESS: STREET 1: 305 COLLEGE ROAD EAST CITY: PRINCETON STATE: NJ ZIP: 08540 BUSINESS PHONE: 6095144100 MAIL ADDRESS: STREET 1: 305 COLLEGE ROAD EAST CITY: PRINCETON STATE: NJ ZIP: 08540 10-Q 1 FORM 10-Q ================================================================================ 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, 1997 ---------------------- [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ------------------------ Commission File Number 0-021403 -------------- VOXWARE, INC. ------------- (Exact Name of Registrant as Specified in Its Charter) Delaware 36-3934824 - ------------------------------ ------------------ (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) ----------------- 305 College Road East Princeton, New Jersey 08540 609-514-4100 ---------------- (Address, including zip code, and telephone number (including area code) of registrant's principal executive office) 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 last 90 days. YES X NO --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Shares Outstanding at May 14, 1997 --------------------- ---------------------------------- Common Stock, $.001 par value 12,466,983 ================================================================================ 1 VOXWARE, INC. INDEX
PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements Page No. ------- Statements of Operations (unaudited) Three and Nine Months Ended March 31, 1997 and 1996...................... 3 Balance Sheets March 31, 1997 (unaudited) and June 30, 1996............................. 4 Statements of Cash Flows (unaudited) Nine Months Ended March 31, 1997 and 1996................................ 5 Notes to Financial Statements.............................................. 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition.................................................... 7 PART II - OTHER INFORMATION - --------------------------- Other Information.......................................................... 12 Signatures................................................................. 13
2 PART I - FINANCIAL INFORMATION - ------------------------------ ITEM 1. FINANCIAL STATEMENTS Voxware, Inc. Statements of Operations (In thousands, except per share data)
Three Months Ended Nine Months Ended March 31, March 31, ------------------------------ --------------------------------- 1997 1996 1997 1996 ------------ ----------- ------------- ------------- (unaudited) (unaudited) Revenues: Product revenues: Initial license fees $ 1,647 $ 504 $ 3,619 $ 704 Royalties and recurring license fees 688 - 1,303 - ------------ ----------- ------------- -------------- Total product revenues 2,335 504 4,922 704 Service revenues 77 2 205 3 ------------ ----------- ------------- -------------- Total revenues 2,412 506 5,127 707 ------------ ----------- ------------- -------------- Cost of revenues: Cost of product revenues 103 3 148 9 Cost of service revenues 43 5 120 10 ------------ ----------- ------------- -------------- Total cost of revenues 146 8 268 19 ------------ ----------- ------------- -------------- Gross profit 2,266 498 4,859 688 ------------ ----------- ------------- -------------- Operating expenses: Research and development 2,104 630 6,042 1,203 Sales and marketing 1,165 331 3,052 637 General and administrative 778 298 2,513 538 ------------ ----------- ------------- -------------- Total operating expenses 4,047 1,259 11,607 2,378 ------------ ----------- ------------- -------------- Operating loss (1,781) (761) (6,748) (1,690) Interest income 259 51 485 85 ------------ ----------- ------------- -------------- Net loss $ (1,522) $ (710) $ (6,263) $ (1,605) ============ =========== ============= ============== Net loss per share $ (0.12) $ (0.08) $ (0.57) $ (0.19) ============ =========== ============= ============== Shares used in computing net loss per share 12,467 8,776 11,008 8,421 ============ =========== ============= ==============
The accompanying notes are an integral part of these statements. 3 Voxware, Inc. Balance Sheets (In thousands, except share data)
March 31, June 30, 1997 1996 ------------- ------------ (unaudited) ASSETS Current assets: Cash and cash equivalents $ 1,075 $ 3,837 Short-term investments 16,324 - Accounts receivable, net of allowance for doubtful accounts of $263,200 and $25,000 2,519 470 Prepaid expenses 259 54 ---------- ---------- Total current assets 20,177 4,361 Property and equipment, net 603 611 Other assets, net 360 364 ---------- ---------- $ 21,140 $ 5,336 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable and accrued expenses $ 2,704 $ 365 Deferred revenues 440 109 ---------- ---------- Total current liabilities 3,144 474 ---------- ---------- Deferred rent 199 - ---------- ---------- Redeemable Series A Convertible Preferred Stock - 5,938 ---------- ---------- Commitments and contingencies Stockholders' equity (deficit): Preferred stock, $.001 par value, 10,000,000 shares authorized; none and 6,000,000 Redeemable Series A Convertible shares issued and outstanding - - Common stock, $.001 par value, 30,000,000 shares authorized; 12,466,983 and 5,947,496 shares issued and outstanding 12 6 Additional paid-in capital 28,317 3,177 Unrealized loss on available-for-sale securities (6) - Accumulated deficit (10,526) (4,259) ---------- ---------- Total stockholders' equity (deficit) 17,797 (1,076) ---------- ---------- $ 21,140 $ 5,336 ========== ==========
The accompanying notes are an integral part of these statements. 4 Voxware, Inc. Statements of Cash Flows (In thousands, except share and warrant data)
Nine Months Ended March 31, --------------------------------- 1997 1996 ----------- ------------ (unaudited) Operating activities: Net loss $ (6,263) $ (1,605) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 170 133 Provision for doubtful accounts 238 - Changes in assets and liabilities: Accounts receivable (2,287) (422) Prepaid expenses (206) 7 Other assets 4 (101) Accounts payable and accrued expenses 2,339 327 Deferred revenues 331 (42) Deferred rent 199 - ----------- ------------ Net cash used in operating activities (5,475) (1,703) ----------- ------------ Investing activities: Purchases of short-term investments (88,542) - Maturities of short-term investments 72,212 - Purchases of property and equipment (161) (240) ----------- ------------ Net cash used in investing activities (16,491) (240) ----------- ------------ Financing activities: Proceeds from issuance of common stock, net 18,442 - Proceeds from exercise of common stock warrants 762 - Proceeds from sale of Redeemable Series A Convertible Preferred Stock - 5,931 ----------- ------------ Net cash provided by financing activities 19,204 5,931 ----------- ------------ Increase (decrease) in cash and cash equivalents (2,762) 3,988 Cash and cash equivalents, beginning of period 3,837 1,523 ----------- ------------ Cash and cash equivalents, end of period 1,075 5,511 Short-term investments, end of period 16,324 - ----------- ------------ Cash and short-term investments, end of period $ 17,399 $ 5,511 =========== ============ SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS: Conversion of Redeemable Series A Convertible Preferred Stock to Common Stock $ 5,938 $ - Accretion of redemption premium on Redeemable Series A Convertible Preferred Stock $ 4 $ 3 Cashless exercise of 377,500 warrants, converted at a rate of one-half share of Common Stock per warrant (converted to 188,750 shares of Common Stock) in December 1996 $ - $ - =================================
The accompanying notes are an integral part of these statements. 5 Voxware, Inc. Notes To Financial Statements 1. BASIS OF PRESENTATION The financial statements as of March 31, 1997 and for the three and nine month periods ended March 31, 1997 and 1996 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The financial statements should be read in conjunction with the financial statements and notes thereto, together with management's discussion and analysis of financial condition and results of operations, contained in the Company's Registration Statement on Form S-1 which was declared effective on October 30, 1996, the Company's Forms 10-Q for the quarters ended December 31, 1996 and September 30, 1996, and in this report on Form 10-Q. The results of operations for the interim periods ended March 31, 1997 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 1997 or any other future periods. 2. SALE OF COMMON STOCK The Company consummated an Initial Public Offering of Common Stock which closed on November 4, 1996 and December 4, 1996. The Company offered and sold an aggregate of 2,823,237 shares of Common Stock at an initial public offering price of $7.50. The net proceeds to the Company from the initial public offering, after payment of offering expenses, were approximately $18,442,000. 3. NET LOSS PER SHARE Net loss per share was calculated by dividing net loss by the weighted average number of common shares outstanding for the respective periods adjusted for the dilutive effect of common stock equivalents, which consist of stock options and warrants, using the treasury stock method. The calculation of shares used in computing net loss per share also includes 6,000,000 shares of Redeemable Series A Convertible Preferred Stock which converted into 3,000,000 shares of Common Stock upon the consummation of the Initial Public Offering, as if they were converted to Common Stock on their original date of issuance. In March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128"). SFAS No. 128 is effective for fiscal years ending after December 15, 1997, and, when adopted, will require restatement of prior years' earnings per share. If the Company had adopted SFAS No. 128 for the period ending March 31, 1997, there would have been no effect on earnings per share, on either the basic or diluted basis. 4. REVENUE RECOGNITION The Company generates revenues from two sources: fees from product licenses and fees for services provided. Product revenues include a combination of initial license fees and recurring payments such as royalties based on a percentage of licensees' sales or units shipped, or pre-determined periodic license fees. Product revenues from initial license fees are generally recognized upon shipment, provided that there are no significant post-delivery obligations, the payment is due within one year and collection of the resulting receivable is deemed probable. Royalty revenues are recognized at the time of the customer's shipment of products incorporating the Company's technology. Recurring product license fees are generally recognized at the inception of the renewal period, provided that there are no significant post-delivery obligations (if any delivery has been made), the payment is due within one year and collection of the resulting receivable is deemed probable. Service revenues from customer support, including the amounts bundled with initial or recurring license fees, are recognized over the term of the support period, which is typically one year. Service revenues from engineering fees are recognized upon customer acceptance or over the period in which services are provided if customer acceptance is not required. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION This report contains forward-looking statements which involve risks and uncertainties. Such statements are subject to certain factors which may cause the Company's plans and results to differ. Factors that may cause such differences include, but are not limited to, the rate of progress, if any, of the Company's product development programs and the uncertainty of acceptance of the Company's products in the marketplace, the uncertain development of the Internet and its use as a means for voice communications, the highly competitive nature of the Company's industry and the Company's ability to compete successfully, the Company's ability to attract and retain qualified personnel, the Company's ability to successfully enter into and maintain relationships with third parties and the Company's dependence on such third parties to develop and market products using the Company's technology and to develop a recurring revenue stream to the Company, the Company's ability to manage its growth, the costs involved in obtaining and enforcing patents and any necessary licenses, the Company's ability to obtain additional funds, and those other risks discussed in the Company's Registration Statement on Form S-1, File No. 333-08393. Overview The Company develops, markets, licenses and supports digital speech processing and audio technologies and solutions. Voxware's MetaVoice(TM) and MetaSound(TM) coding technologies are designed to reproduce high-quality speech and audio while requiring very low communications bandwidth and processing power. Voxware's technologies enable users to create a new generation of audio-enhanced communications and interactive products for the Internet and other bandwith-constrained environments. The Company licenses its technologies, including its codecs and application-programming interfaces, to software, computing, communications, and entertainment companies. From inception (August 20, 1993) to June 30, 1995, the Company's operating activities related primarily to performing research and development, recruiting personnel, raising capital and purchasing operating assets. The Company commenced product releases in July 1995 and, for accounting purposes, emerged from the development stage commencing in July 1995. Since inception, the Company has raised net proceeds of approximately $28,329,000 as follows: approximately $8,838,000 through private placements; approximately $18,442,000 through the Initial Public Offering which was declared effective on October 30, 1996; and approximately $1,049,000 through other sales of equity securities, including exercises of all outstanding common stock warrants. The Company generates revenues from two sources: fees from product licenses and fees for services provided. Product revenues account for a majority of the Company's revenues. The Company's products are licensed primarily to software, computing and communications companies which incorporate the Company's products and technologies into their products. The Company generally negotiates contract terms with customers on a case by case basis, with arrangements that have historically included a combination of initial license fees and royalties and other recurring payments. One of the Company's objectives is to develop recurring revenue through entering into licensing agreements with third parties which provide for recurring payments such as royalties based on a percentage of licensees' sales or an agreed-upon amount per unit shipped, or pre-determined annual or other periodic payments. As a result, the timing and amount of the Company's revenues are substantially dependent on the timing and efforts of the Company's licensees in developing and marketing products incorporating the Company's products and technologies. There can be no assurance as to the timing or success of any licensee implementation or the timing or amount of recurring revenues from any licensee product. Since inception, the Company has entered into over 60 license agreements, the majority of which provide for recurring license or royalty payments. Service revenues consist of customer support and engineering fees. Customer support services include providing updates 7 and technical support to licensees of the Company's products. Engineering services include providing technical resources to support customer specific development efforts or porting the Company's technologies to specific customer platforms. Software product revenues are generally recognized upon shipment, provided that there are no significant post-delivery obligations, the payment is due within one year and collection of the resulting receivable is deemed probable. If an acceptance period is required, revenues are recognized upon customer acceptance. Royalty revenues are recognized in the period of customer shipment. For the three and nine months ended March 31, 1997, respectively, approximately $688,000 and $1,303,000 of royalties and recurring license fees have been recognized. Customer support revenues, including amounts bundled with license fees, are recognized over the term of the support period, which typically lasts for one year. Engineering fees are recognized upon customer acceptance or over the period in which services are provided if customer acceptance is not required. All research and development costs have been expensed as incurred. The Company has only a limited operating history upon which an evaluation of the Company and its prospects can be based. As of March 31, 1997, the Company had an accumulated deficit of $10,526,000. Although the Company has experienced revenue growth in recent periods, the limited operating history of the Company makes the prediction of future results of operations impossible and, therefore, the Company's recent revenue growth should not be taken as indicative of the rate of revenue growth, if any, that can be expected in the future. In addition, the Company's operating results may fluctuate significantly in the future as a result of a variety of factors, including the level of usage of the Internet, the budgeting cycles of potential customers, the volume of, and revenues derived from sales of products by the Company's licensees that incorporate the Company's products, the amount and timing of capital expenditures and other costs relating to the expansion of the Company's operations, the introduction of new products or services by the Company or its competitors, pricing changes in the industry, technical difficulties with respect to the use of products developed by the Company and general economic conditions. Results of Operations Revenues Total revenues increased $1,906,000 from $506,000 in the three months ended March 31, 1996 to $2,412,000 in the three months ended March 31, 1997 as a result of the Company entering into an increasing number of license agreements providing customers with the right to use the Company's products and related services, and an increase in the amount of royalties and other recurring revenues recognized from customers who licensed the Company's products in previous periods. On a year-to-date basis, total revenues increased $4,420,000 from $707,000 for the nine months ended March 31, 1996 to $5,127,000 for the nine months ended March 31, 1997. One of the Company's largest customers accounted for 16% and 17% of total revenues in the three and nine month periods ended March 31, 1997, respectively, and another of the Company's largest customers accounted for 29% and 14% of total revenues in the three and nine month periods ended March 31, 1997, respectively. Product revenues increased $1,831,000 from $504,000 in the three months ended March 31, 1996 to $2,335,000 in the three months ended March 31, 1997. For the nine months ended March 31, 1997, product revenues totaled $4,922,000 compared to $704,000 for the nine months ended March 31, 1996, reflecting an increase of $4,218,000. These dollar increases in product revenues were primarily due to the increased volume of licenses of the Company's products to new customers, and an increase in the amount of royalties and other recurring revenues recognized from customers who licensed the Company's products in previous periods. For the three and nine month periods ended March 31, 1997, approximately 71% and 74% of the Company's product revenues were attributable to initial license fees, respectively, and 29% and 26% were attributable to royalties and annual or other periodic payments, 8 respectively. For the three and nine month periods ended March 31, 1996, all of the Company's product revenues were attributable to initial license fees. During the three months ended March 31, 1997, the Company recognized $1,647,000 in initial license fees related to sixteen agreements, compared to $504,000 in initial license fees related to seven agreements for the three months ended March 31, 1996. For the nine months ended March 31, 1997, the Company recognized $3,619,000 in initial license fees related to thirty-eight agreements, compared to $704,000 in initial license fees related to fourteen agreements for the nine months ended March 31, 1996. Additionally, for the three months ended March 31, 1997, the Company recognized $688,000 in royalties and recurring product license fees, which were derived from a total of seven customers. For the nine months ended March 31, 1997, the Company recognized $1,303,000 in royalties and recurring product license fees, which were derived from a total of seven customers. Of those seven customers, one customer generated royalties or recurring product license fees in each of the three fiscal quarters during the nine months ended March 31, 1997, three customers generated royalties or recurring product license fees in the second and third fiscal quarters during the nine months ended March 31, 1997, and the remaining three customers generated royalties or recurring product license fees in the third fiscal quarter during the nine months ended March 31, 1997. No royalties or recurring product license fees were recognized during the three or nine months ended March 31, 1996. Service revenues were $77,000 for the three months ended March 31, 1997 compared to $2,000 for the three months ended March 31, 1996 and $205,000 for the nine months ended March 31, 1997 compared to $3,000 for the comparable nine month period ended March 31, 1996. Service revenues were primarily attributable to customer support and fees for engineering. Cost of Revenues Cost of product revenues increased $100,000 from $3,000 in the three months ended March 31, 1996 to $103,000 in the three months ended March 31, 1997. For the nine months ended March 31, 1997, cost of product revenues totaled $148,000 compared to $9,000 for the comparable nine month period ended March 31, 1996, reflecting an increase of $139,000. These increases in cost of product revenues were primarily due to the costs of licensed technology, product media and duplication, manuals and packaging materials related to the increased volume of licenses of the Company's products to new customers. Cost of service revenues consists primarily of the expenses associated with the staffing of a customer support group and engineering services, which consist primarily of employee compensation and equipment depreciation. Cost of service revenues increased $38,000 from $5,000 in the three months ended March 31, 1996 to $43,000 in the three months ended March 31, 1997, and increased $110,000 from $10,000 for the nine months ended March 31, 1996 to $120,000 for the nine months ended March 31, 1997. These dollar increases in cost of service revenues from the three and nine months ended March 31, 1996 to the three and nine months ended March 31, 1997 were primarily attributable to increased staffing of the Company's customer support and engineering groups. Operating Expenses The Company's operating expenses have continued to increase in each quarter since inception. This trend reflects the costs associated with the development of infrastructure, rapid growth and increased efforts to commercialize the Company's products and services. The Company believes that, over the long term, continued expansion of its operations would enhance the Company's products and services and ability to distribute them in targeted markets and expand the Company's installed user base. Research and development expenses primarily consist of employee compensation and equipment depreciation and lease expenditures related to product research and development. Research and development expenses increased $1,474,000 from $630,000 in the three months ended March 31, 1996 9 to $2,104,000 in the three months ended March 31, 1997. For the nine months ended March 31, 1997, research and development expenses were $6,042,000 compared to $1,203,000 for the nine months ended March 31, 1996, reflecting an increase of $4,839,000. These dollar increases in research and development expenses were primarily due to increasing the research and development staff from eleven at March 31, 1996 to fifty at March 31, 1997 and the costs associated with developing and enhancing the functionality of the Company's family of products. The Company believes that significant investments in research and development are required to establish and maintain competitive advantage and, as a result, the Company intends to increase the absolute dollar level of research and development expenditures in future periods. Sales and marketing expenses consist primarily of employee compensation (including direct sales commissions), travel expenses, trade shows and costs of promotional materials. Sales and marketing expenses increased $834,000 from $331,000 in the three months ended March 31, 1996 to $1,165,000 in the three months ended March 31, 1997. On a year-to-date basis, sales and marketing expenses increased $2,415,000 from $637,000 for the nine months ended March 31, 1996 to $3,052,000 for the nine months ended March 31, 1997. These dollar increases in sales and marketing expenses were primarily due to the expansion of the Company's sales force and marketing staff from four at March 31, 1996 to seventeen at March 31, 1997, and increased expenses associated with the promotion and marketing of the Company's products and services. The Company intends to continue to intensify and expand its direct and tele-sales efforts and, as a result, intends to increase the absolute dollar level of sales and marketing expenses in future periods. General and administrative expenses consist primarily of employee compensation and fees for insurance, rent, office expenses and professional services. General and administrative expenses increased $480,000 from $298,000 in the three months ended March 31, 1996 to $778,000 in the three months ended March 31, 1997. For the nine months ended March 31, 1997, general and administrative expenses totaled $2,513,000 compared to $538,000 for the nine months ended March 31, 1996, reflecting a year-to-date increase of $1,975,000. These dollar increases in general and administrative expenses were primarily due to increasing the administrative staff from seven at March 31, 1996 to twenty-one at March 31, 1997 and increased expenses related to insurance, rent, office expenses and professional services. The Company expects that the absolute dollar level of general and administrative expenses for the three months ended June 30, 1997 will remain fairly consistent with the absolute dollar level of general and administrative expenses for the three months ended March 31, 1997. Interest Income Interest income increased $208,000 to $259,000 for the quarter ended March 31, 1997 from $51,000 for the quarter ended March 31, 1996. On a year-to-date basis, interest income increased $400,000 to $485,000 for the nine months ended March 31, 1997 compared to $85,000 for the nine months ended March 31, 1996. These increases in interest income primarily reflect interest earned on the net proceeds from the Initial Public Offering closed during November and December 1996 (see "Liquidity and Capital Resources"). Income Taxes As of March 31, 1997, the Company had approximately $9,600,000 of federal net operating loss carryforwards which will begin to expire in 2009 if not utilized. As of March 31, 1997, the Company has provided a full valuation allowance on the deferred tax asset because of the uncertainty regarding realizability of these deferred assets, primarily as a result of considering such factors as the Company's limited operating history, the volatility of the market in which it competes, the operating losses incurred to date and the operating losses anticipated in future periods. 10 Liquidity and Capital Resources As of March 31, 1997, the Company had $1,075,000 in cash and cash equivalents and $16,324,000 in short-term investments. The Company's cash and short-term investments portfolio is liquid and investment grade, consisting of high-grade money-market funds, United States Government-backed securities and commercial paper and corporate obligations. Since inception, the Company has primarily financed its operations through the sale of equity securities. Cash of $1,703,000 and $5,475,000 was used to fund operations for the nine months ended March 31, 1996 and 1997, respectively. For the nine months ended March 31, 1996, cash used in investing activities was $240,000 and was related to purchases of equipment. For the nine months ended March 31, 1997, cash used in investing activities totaled $16,491,000 which reflects $16,330,000 in net purchases of short-term investments and $161,000 related to purchases of equipment. For the nine months ended March 31, 1997, cash provided by financing activities totaled $19,204,000, reflecting $18,442,000 in net proceeds from the Initial Public Offering and $762,000 in proceeds from the exercise of common stock warrants. For the nine months ended March 31, 1996, cash provided by financing activities totaled $5,931,000 and was attributable to the issuance of Series A Preferred Stock. All Series A Preferred Stock converted into Common Stock upon the closing of the Initial Public Offering. The Company maintains a $5,000,000 revolving line of credit with Silicon Valley Bank. Borrowings under the revolving line of credit will bear interest at the bank's prime lending rate. As of March 31, 1997, no borrowings were outstanding. In November 1996 and December 1996, the Company closed on an initial public offering of Common Stock. The Company offered and sold 2,823,237 shares of Common Stock at an initial public offering price of $7.50. The net proceeds to the Company from the Initial Public Offering after payment of offering expenses were approximately $18,442,000. The Company has no material commitments other than those under normal building and equipment operating leases. The Company anticipates increases in its capital expenditures and operating lease arrangements beyond March 31, 1997 consistent with its anticipated growth. The Company believes that the net proceeds of $18,442,000 obtained from the initial public offering and current cash balances will be sufficient to fund its working capital and capital expenditures requirements, exclusive of cash required for possible acquisitions of, or investments in businesses, products and technologies for at least the next twelve months. 11 PART II - OTHER INFORMATION --------------------------- Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 10.1 Loan Modification Agreement dated May 5, 1997 between Silicon Valley Bank and the Company. 11.1 Statement re: Computation of Loss Per Share. 27 Financial Data Schedule. (b) Reports on Form 8-K. None. 12 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. Date: May 14, 1997 VOXWARE, INC. (Registrant) By: /s/ Michael Goldstein --------------------------------- Michael Goldstein, President and Chief Executive Officer By: /s/ Kenneth H. Traub --------------------------------- Kenneth H. Traub, Executive Vice President, Chief Financial Officer and Secretary (Principal Financial Officer) By: /s/ Nicholas Narlis --------------------------------- Nicholas Narlis, Controller, Chief Accounting Officer and Treasurer (Principal Accounting Officer) 13 EX-10.1 2 LOAN MODIFICATION AGREEMENT Exhibit 10.1 LOAN MODIFICATION AGREEMENT This Loan Modification Agreement is entered into as of May 5, 1997, by and between Voxware, Inc. ("Borrower") whose address is 305 College Road East, Princeton, NJ 08540 and Silicon Valley Bank, a California-chartered bank ("Lender"), with its principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with a loan production office located at Wellesley Office Park, 40 William Street, Suite 350, Wellesley, MA 02181, doing business under the name "Silicon Valley East". 1. Among other indebtedness which may be owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among other documents, a Promissory Note, dated October 18, 1996 in the original principal amount of Two Million and 00/100 Dollars ($2,000,000.00), as may be amended (the "Revolving Facility"), and a Promissory Note dated October 18, 1996 in the original principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) (the "Equipment Loan"). The Revolving Facility and the Equipment Loan are sometimes referred to collectively herein as the "Notes"). The Notes, together with other promissory notes from Borrower to Lender, are governed by the terms of a Letter Agreement, dated October 18, 1996, between Borrower and Lender, as such agreement may be amended from time to time (the "Loan Agreement"). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement. Hereinafter, all indebtedness owing by Borrower to Lender shall be referred to as the "Indebtedness." 2. Repayment of the Indebtedness is secured by a Commercial Security Agreement, dated October 18, 1996 (the "Security Agreement"). Concurrently herewith, Lender shall agree to release its security interest in Borrower's assets pursuant to the Security Agreement; provided that Borrower shall execute a new financing statement and security agreement which Lender shall hold and not perfect until certain events occur as described herein. Hereinafter, the above-described security documents, together with all other documents securing payment of the Indebtedness shall be referred to as the "Security Documents". Hereinafter, the Security Documents, together with all other documents evidencing or securing the Indebtedness shall be referred to as the "Existing Loan Documents." 3. With the execution of this Agreement, Borrower shall execute a Master Note evidencing a leasing facility in an amount up to One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) (the "Lease Facility"). The purpose of the Leasing Facility shall be to acquire the lease stream payments which Borrower owes to Computer Sales International, Inc. ("CSI"). 4. DESCRIPTION OF CHANGE IN TERMS. A. Modification(s) to Revolving Facility ------------------------------------- 1. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on April 5, 1998. In addition, Borrower will pay regular monthly payments of accrued unpaid interest due as of each payment date, beginning June 5, 1997, and all subsequent interest payments are due on the same day of each month thereafter. 2. The interest rate to be applied to the unpaid principal balance of the Note, effective as of this date, will be at a rate equal to Lender's current Index (as defined therein). 3. The following is hereby incorporated into the paragraph entitled "Default": In addition to the foregoing events of default, an event of default (as defined in Section 14 of the Master Lease (as described in the Loan Agreement) under the Equipment Schedule will also be deemed an Event of Default under the terms of this Note and the 14 Related Documents. A default under this Note shall also be deemed an Event of Default under the Equipment Schedule, which will allow Lender to exercise its remedies under Section 15 of the Master Lease Agreement and otherwise under the terms of this Note and the Related Documents. B. Modification(s) to the Equipment Loan. ------------------------------------- 1. The Equipment Loan is hereby canceled. C. Modification to Loan Agreement. ------------------------------ 1. The paragraph beginning with the words "Borrowings under the Loans..." is hereby amended to read in its entirety, as follows: Borrower shall execute a UCC Financing Statement covering all of Borrower's assets which Lender shall hold and not perfect until the earliest to occur of (i) borrowings under the Revolving Facility exceed $2,000,000.00, (ii) Borrower's breach of a Financial Covenant or (iii) a default under any Related Documents, including, without limitation, a default under the Master Lease Agreement between CSI and Borrower, as assigned to Lender. Should one or more of the foregoing occur, at any time, Borrower authorizes Lender, in Lender's sole discretion, to perfect its security interest in Borrower's assets, without notice to Borrower, by recording the executed UCC Financing Statement with the appropriate governmental agencies. 2. The paragraph beginning with the words "An amount not to exceed $500,000.00 (the "Non-Formula Portion")..." is hereby amended to read in its entirety as follows: Notwithstanding that the Non-Formula Portion shall be amended to $2,000,000.00 following Borrower's initial public offering, the "Non-Formula Portion" shall be available immediately. Accordingly, the Non-Formula Portion is hereby amended to mean $2,000,000.00. 3. The paragraph beginning with the words "Funds shall be advanced..." is hereby amended to read in its entirety as follows: Funds shall be advanced under the Revolving Facility in excess of the Non-Formula Portion according to a borrowing base formula, defined as follows: the lesser of (a) $3,000,000.00 minus the face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit) minus the Foreign Exchange Reserve or (b) the Borrowing Base Formula which is the sum of (i) 95% of cash pledged to Lender plus (ii) 60% of the proceeding 3- month's contractual payments from Netscape plus (iii) eighty percent (80%) of eligible domestic accounts receivable minus the (iv) face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit) minus (v) the Foreign Exchange Reserve. Eligible accounts receivable shall include, but not be limited to, those accounts outstanding less than 90 days from the date of invoice, excluding, foreign, government, contra, and intercompany accounts; and exclude accounts wherein 50% or more of the account is outstanding more than 90 days from the date of invoice. Any account which alone exceeds 25% of total accounts will be ineligible to the extent said account exceeds 25% of total accounts. Accounts from Netscape (including amounts referenced in item (ii) hereof) shall be eligible to the extent no single invoice from Netscape is more than 90 days past invoice date. Also exclude any credit balances which are aged past 90 days. Also ineligible are any accounts which Lender in its sole judgment excludes for valid credit reasons. 15 4. The Financial Covenants are hereby amended as follows: Quick Ratio - (Tested Quarterly) Maintain a minimum Quick ----------- Ratio of 2.50 to 1.00. Quick Ratio is defined as cash and equivalents plus accounts receivable divided by total current liabilities less deferred revenue. Tangible Net Worth - (Tested Quarterly) Maintain a minimum ------------------ Tangible Net Worth (TNW) of $15,000,000.00. TNW is defined as net worth plus Subordinated Debt (debt which is formally subordinated to the Lender) less intangibles (including but not limited to Goodwill, Capitalized Software and Excess Purchase Costs). Debt to Tangible Net Worth Ratio - (Tested Quarterly) -------------------------------- Maintain a ratio of total liabilities to tangible net worth less deferred revenue not to exceed 1.00 to 1.00. Profitability. - (Tested Quarterly) Maximum losses for ------------- Borrower's fiscal year ending June 30, 1997 of $8,000,000.00. Maximum cumulative losses for fiscal year 1997 and fiscal year 1998 not to exceed an aggregate of $9,500,000.00. Thereafter, Borrower shall achieve a positive quarterly net income of at least $1.00. Debt Service Coverage. - (Tested Quarterly, beginning --------------------- March 31, 1998 and applies to the Lease Facility) Maintain a minimum Debt Service Coverage of 1.50 to 1.00. Debt Service Coverage is defined as earnings before interest and taxes plus depreciation and amortization, less any increase in capitalized software and development costs divided by total interest plus current portion long term debt. For purposes of calculation, the Debt Service Coverage shall only become applicable in the event Borrower is utilizing the Lease Facility. 5. Borrower shall provide to Lender a Borrowing Base Certificate, together with an aged list of accounts receivable and accounts payable, to be received within 20 days after the close of each month, when borrowing in excess of $2,000,000.00. Lender shall conduct an audit of Borrower's books and records at the earlier to occur of (i) July 31, 1997 or (ii) borrowings under the Revolving Facility in excess of $2,000,000.00. Thereafter, such audits shall be conducted on a semi annual basis if borrowings under the Revolving Facility exceed $2,000,000.00 for 60 consecutive days. In the event such borrowings do not occur, the audits will be conducted on an annual basis. 6. The Letter of Credit Sublimit is hereby increased to Two Million and 00/100 Dollars ($2,000,000.00). 7. The following paragraphs are hereby incorporated into the Loan Agreement: Lease Facility. A Lease Facility in the amount of -------------- $1,500,000.00 has been provided under the Loan Agreement for the purpose of providing a facility for the financing of the lease stream payments that Borrower owes to Computer Sales International, Inc. ("CSI"). Each lease stream of payments will be evidenced by a Schedule to that certain Master Lease Agreement dated April 25, 1996, between CSI and Borrower which CSI shall assign to Lender. The term of each lease stream under such Schedule shall not exceed 30 months. Lender will accept Schedules under the Lease Facility until December 31, 1997. D. Release of Security Interest in Borrower's assets. ------------------------------------------------- 16 As an accommodation to Borrower and for good and valuable consideration, including Lender's agreement to release its security interest in all of Borrower's assets, Lender, with this Loan Modification Agreement, has agreed to release its security interest granted under the Security Agreement and the related UCC financing statements. In consideration of such release of security interest, Borrower shall execute a Springing Lien covering all of Borrower's assets (the "Springing Lien"), which Lender shall hold and not perfect until the certain events occur (as described in the Loan Agreement). 4. PAYMENT OF LOAN FEE. Borrower shall pay Lender a fee in the amount of ------------------- Twenty Thousand and 00/100 Dollars ($20,000.00),plus all out-of-pocket expenses (the "Loan Fee"). 5. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended ------------------ wherever necessary to reflect the changes described above. 6. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has ----------------------- no defenses against the obligations to pay any amounts under the Indebtedness. 7. CONTINUING VALIDITY. Borrower understands and agrees that in modifying ------------------- the existing Indebtedness, Lender is relying upon Borrower's representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Lender's agreement to modifications to the existing Indebtedness pursuant to this Loan Modification Agreement in no way shall obligate Lender to make any future modifications to the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Indebtedness. It is the intention of Lender and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by Lender in writing. No maker, endorser, or guarantor will be released by virtue of this Loan Modification Agreement. The terms of this Paragraph apply not only to this Loan Modification Agreement, but also to all subsequent loan modification agreements. 8. JURISDICTION/VENUE. Borrower accepts for itself and in connection with ------------------ its properties, unconditionally, the non-exclusive jurisdiction of any state or federal court of competent jurisdiction in the Commonwealth of Massachusetts in any action, suit, or proceeding of any kind against it which arises out of or by reason of this Loan Modification Agreement; provided, however, that if for any reason Lender cannot avail itself of the courts of the Commonwealth of Massachusetts, then venue shall lie in Santa Clara County, California. 9. COUNTERSIGNATURE. This Loan Modification Agreement shall become ---------------- effective only when it shall have been executed by Borrower and Lender (provided, however, in no event shall this Loan Modification Agreement become effective until signed by an officer of Lender in California). 10. CONDITIONS. The effectiveness of this Loan Modification Agreement is ---------- conditioned upon payment of the Loan Fee. This Loan Modification Agreement is executed as of the date first written above. BORROWER: VOXWARE, INC. By: /s/ Nicholas Narlis ------------------- Name: Nicholas Narlis ---------------- Title: Controller, Chief Accounting Officer and Treasurer -------------------------------------------------- 17 LENDER: SILICON VALLEY BANK, doing business as SILICON VALLEY EAST By: /s/ Phillip S. Ernst ------------------------------------ Name: Phillip S. Ernst ---------------------------------- Title: Vice President --------------------------------- SILICON VALLEY BANK By: /s/ Amy Young ------------------------------------ Name: Amy Young ---------------------------------- Title: Assistant Vice President --------------------------------- (Signed at Santa Clara County, CA) 18 EX-11.1 3 COMPUTATION OF LOSS PER SHARE Exhibit 11.1 Voxware, Inc. Statements re: Computation of Loss Per Share Three and Nine Months Ended March 31, 1997 and 1996 (In thousands, except per share data)
Three Months Ended Nine Months Ended March 31, March 31, ------------------------- --------------------------- 1997 1996 1997 1996 --------- --------- --------- --------- (unaudited) (unaudited) Net Loss $ (1,522) $ (710) $ (6,263) $ (1,605) --------- --------- --------- --------- Primary and fully diluted weighted average common and common equivalent shares outstanding: Common stock 12,467 7,914 10,973 6,573 Common stock options and warrants (1) - 862 35 1,848 Total primary and fully diluted weighted average common and common equivalent shares -------- -------- -------- -------- outstanding 12,467 8,776 11,008 8,421 -------- -------- -------- -------- -------- -------- -------- -------- Loss per share $ (0.12) $ (0.08) $ (0.57) $ (0.19) ======== ======== ======== ========
(1) Pursuant to the requirements of the Securities and Exchange Commission, stock, stock options and warrants issued by the Company during the twelve months immediately preceding the initial public offering have been included in computing loss per share as if they were outstanding for all prior periods prior to the initial public offering using the treasury stock method, even though their effect is anti-dilutive. 19 EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM - VOXWARE, INC. FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 9-MOS JUN-30-1997 JUN-30-1997 JAN-01-1997 JUL-01-1996 MAR-31-1997 MAR-31-1997 1,075 1,075 16,324 16,324 2,782 2,782 263 263 0 0 20,177 20,177 992 992 389 389 21,140 21,140 3,144 3,144 0 0 0 0 0 0 12 12 17,785 17,785 21,140 21,140 2,412 5,127 2,412 5,127 103 148 146 268 4,047 11,607 0 0 0 0 (1,522) (6,263) 0 0 (1,522) (6,263) 0 0 0 0 0 0 (1,522) (6,263) (.12) (.57) (.12) (.57)
-----END PRIVACY-ENHANCED MESSAGE-----